Exhibit 10.1


    Exhibit
      10.1

 

    
      	
              
                NOTE
                  PURCHASE AGREEMENT

                


                


                dated
                  as of July 21, 2006

                


                


                by
                  and between

                


                


                EMAGIN
                  CORPORATION

                


                


                and

                


                


                [NAME
                  OF INVESTOR]

                


                


                


                                                               

                


                


                


                


                6%
                  SENIOR SECURED CONVERTIBLE NOTES DUE 2007-2008

                


                AND

                


                COMMON
                  STOCK PURCHASE WARRANTS
 

               

            


    

    


     

    
 


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    EMAGIN
      CORPORATION

    


    NOTE
      PURCHASE AGREEMENT

    


    6%
      SENIOR SECURED CONVERTIBLE NOTES DUE 2007-2008

    


    AND

    


    COMMON
      STOCK PURCHASE WARRANTS

    


    


    


    TABLE
      OF CONTENTS

    


    Page

     

    

      
        	
                1.     DEFINITIONS

              	 	
                1

              
	
                2.     PURCHASE
                  AND SALE; PURCHASE PRICE.

              	 	
                10

              
	
                (a)

              	
                Purchase. 

              	 	
                10

              
	
                (b)

              	
                Form
                  of Payment. 

              	 	
                10

              
	
                (c)

              	
                Closing. 

              	 	
                10

              
	
                3.     REPRESENTATIONS,
                  WARRANTIES, COVENANTS, ETC. OF THE BUYER.

              	 	
                11

              
	
                (a)

              	
                Circumstances
                  of Purchase.

              	 	
                11

              
	
                (b)

              	
                Accredited
                  Investor; Residence.

              	 	
                11

              
	
                (c)

              	
                Reoffers
                  and Resales.

              	 	
                11

              
	
                (d)

              	
                Company
                  Reliance.

              	 	
                11

              
	
                (e)

              	
                Information
                  Provided.

              	 	
                12

              
	
                (f)

              	
                Absence
                  of Approvals.

              	 	
                12

              
	
                (g)

              	
                Note
                  Purchase Agreement.

              	 	
                12

              
	
                (h)

              	
                Buyer
                  Status.

              	 	
                13

              
	
                (i)

              	
                Experience
                  of the Buyer.

              	 	
                13

              
	
                (j))

              	
                General
                  Solicitation.

              	 	
                13

              
	
                (k)

              	
                Short
                  Sales and Confidentiality Prior To The Date Hereof.

              	 	
                13

              
	
                4.     REPRESENTATIONS,
                  WARRANTIES, COVENANTS, ETC. OF THE COMPANY.

              	 	
                13

              
	
                (a)

              	
                Organization
                  and Authority.

              	 	
                13

              
	
                (b)

              	
                Qualifications.

              	 	
                14

              
	
                (c)

              	
                Concerning
                  the Shares and the Common Stock.

              	 	
                14

              
	
                (d)

              	
                Corporate
                  Authorization.

              	 	
                14

              
	
                (e)

              	
                Non-contravention.

              	 	
                15

              
	
                (f)

              	
                Approvals,
                  Filings, Etc.

              	 	
                15

              
	
                (g)

              	
                Information
                  Provided.

              	 	
                15

              
	
                (h)

              	
                Investment
                  Company.

              	 	
                16

              


      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

       

      
        	
                (i)

              	
                Absence
                  of Brokers, Finders, Etc.

              	 	
                16

              
	
                (j)

              	
                No
                  Solicitation.

              	 	
                16

              
	
                (k)

              	
                No
                  Integrated Offering.

              	 	
                16

              
	
                (l)

              	
                Dilutive
                  Effect.

              	 	
                17

              
	
                (m)

              	
                Absence
                  of Certain Changes.

              	 	
                17

              
	
                (n)

              	
                No
                  Undisclosed Events, Liabilities, Developments or
                  Circumstances.

              	 	
                17

              
	
                (o)

              	
                Conduct
                  of Business; Regulatory Permits.

              	 	
                17

              
	
                (p)

              	
                Indebtedness
                  and Other Contracts.

              	 	
                18

              
	
                (q)

              	
                Absence
                  of Litigation.

              	 	
                18

              
	
                (r)

              	
                Insurance.

              	 	
                18

              
	
                (s)

              	
                Employee
                  Relations

              	
                .

              	
                18

              
	
                (t)

              	
                Title.

              	 	
                19

              
	
                (u)

              	
                Intellectual
                  Property.

              	 	
                19

              
	
                (v)

              	
                Environmental
                  Laws.

              	 	
                20

              
	
                (w)

              	
                Subsidiary
                  Rights.

              	 	
                20

              
	
                (x)

              	
                Tax
                  Status.

              	 	
                20

              
	
                (y)

              	
                Internal
                  Accounting Controls; Financial Statements.

              	 	
                20

              
	
                (z)

              	
                Sarbanes-Oxley
                  Act.

              	 	
                21

              
	
                (aa)

              	
                S-3
                  Eligibility.

              	 	
                21

              
	
                (bb)

              	
                Concerning
                  the Collateral.

              	 	
                21

              
	
                (cc)

              	
                Disclosures.

              	 	
                21

              
	
                (dd)

              	
                Absence
                  of Rights Agreement.

              	 	
                21

              
	
                5.     CERTAIN
                  COVENANTS.

              	 	
                21

              
	
                (a)

              	
                Transfer
                  Restrictions.

              	 	
                21

              
	
                (b)

              	
                Restrictive
                  Legends.

              	 	
                22

              
	
                (c)

              	
                Reporting
                  Status.

              	 	
                24

              
	
                (d)

              	
                Form
                  D.

              	 	
                24

              
	
                (e)

              	
                State
                  Securities Laws.

              	 	
                24

              
	
                (f)

              	
                Limitation
                  on Certain Actions.

              	 	
                25

              
	
                (g)

              	
                Use
                  of Proceeds.

              	 	
                25

              
	
                (h)

              	
                Best
                  Efforts.

              	 	
                25

              
	
                (i)

              	
                Debt
                  Obligation.

              	 	
                25

              
	
                (j)

              	
                Right
                  of the Buyer to Participate in Future Transactions

              	
                .

              	
                25

              
	
                (k)

              	
                Press
                  Releases.

              	 	
                27

              
	
                (l)

              	
                Form
                  8-K; Limitation on Information and Buyer Obligations.

              	 	
                28

              
	
                (m)

              	
                Limitation
                  on Certain Transactions.

              	 	
                28

              
	
                (n)

              	
                Debt
                  Obligation.

              	 	
                29

              
	
                (o)

              	
                Security
                  Agreement; Financing Statements, Etc.

              	 	
                29

              
	
                (p)

              	
                Stockholder
                  Approval; Reverse Stock Split.

              	 	
                29

              
	
                (q)

              	
                Short
                  Sales and Confidentiality After The Date Hereof.

              	 	
                30

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

              	 	
                31

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

              	 	
                31

              
	
                8.     REGISTRATION
                  RIGHTS.

              	 	
                33

              
	
                (a)

              	
                Mandatory
                  Registration.

              	 	
                33

              
	
                (b)

              	
                Obligations
                  of the Company.

              	 	
                34

              


      

       

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

       

      
        	
                (c)

              	
                Obligations
                  of the Buyer and other Investors.

              	 	
                38

              
	
                (d)

              	
                Rule
                  144.

              	 	
                39

              
	
                9.     INDEMNIFICATION
                  AND CONTRIBUTION.

              	 	
                39

              
	
                (a)

              	
                Indemnification.

              	 	
                39

              
	
                (b)

              	
                Contribution.

              	 	
                41

              
	
                (c)

              	
                Other
                  Rights.

              	 	
                41

              
	
                10.     MISCELLANEOUS.

              	 	
                42

              
	
                (a)
                  

              	
                Governing
                  Law.

              	 	
                42

              
	
                (b)

              	
                Headings.

              	 	
                42

              
	
                (c)

              	
                Severability.

              	 	
                42

              
	
                (d)

              	
                Notices.

              	 	
                42

              
	
                (e)

              	
                Counterparts.

              	 	
                42

              
	
                (f)

              	
                Entire
                  Agreement; Benefit.

              	 	
                42

              
	
                (g)

              	
                Waiver.

              	 	
                43

              
	
                (h)

              	
                Amendment.

              	 	
                43

              
	
                (i)

              	
                Further
                  Assurances.

              	 	
                43

              
	
                (j)

              	
                Assignment
                  of Certain Rights and Obligations

              	
                .

              	
                43

              
	
                (k)

              	
                Expenses.

              	 	
                44

              
	
                (l)

              	
                Termination.

              	 	
                44

              
	
                (m)

              	
                Survival.

              	 	
                45

              
	
                (n)

              	
                Construction;
                  Buyer Status.

              	 	
                45

              


      

      


      


      ANNEXES

      


      
        	
                Annex
                  I

              	
                Form
                  of 6% Senior Secured Convertible Note due 2007-2008

              
	
                Annex
                  II

              	
                Form
                  of Common Stock Purchase Warrant

              
	
                Annex
                  III

              	
                Form
                  of Patent and Trademark Security Agreement

              
	
                Annex
                  IV

              	
                Form
                  of Pledge and Security Agreement

              
	
                Annex
                  V

              	
                Form
                  of Lockbox Agreement

              
	
                Annex
                  VI

              	
                Form
                  of Press Release

              
	
                Annex
                  VII

              	
                Form
                  of Legal Opinion of Company Counsel

              
	
                Annex
                  VIII

              	
                Form
                  of Legal Opinion of Intellectual Property Counsel

              
	
                Annex
                  IX

              	
                Form
                  of Lockup Agreement

              


      

       

    


    
      
        
        

      

      
        iii

        
          

        

      

      
        
           

        

      

    


    


    NOTE
      PURCHASE AGREEMENT

    


    THIS
      NOTE PURCHASE AGREEMENT,
      dated as
      of July 21, 2006 (this “Agreement”), by and between eMagin
      Corporation,
      a
      Delaware corporation (the “Company”), with headquarters located at 10500 N.E.
      8th
      Street,
      Suite 1400, Bellevue,
      Washington 98004, and
      [NAME OF BUYER]
      (the
“Buyer”).

    


    W I T N E S S E T H:

    


    WHEREAS,
      upon
      the terms and subject to the conditions of this Agreement, the Buyer wishes
      to
      purchase from the Company and the Company wishes to sell to the Buyer, the
      Note
      (such capitalized term and all other capitalized terms used in this Agreement
      having the meanings provided in Section 1) of the Company to be issued by the
      Company in the principal amount set forth on the signature page of this
      Agreement, which Note will be convertible into shares of Common Stock, and
      in
      connection with the sale and issuance of the Note the Company shall issue to
      the
      Buyer a warrant to purchase shares of Common Stock; 

    


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

    


    1. DEFINITIONS

    


    (a) As
      used
      in this Agreement, the terms “Agreement”, “Buyer” and “Company” shall have the
      respective meanings assigned to such terms in the introductory paragraph of
      this
      Agreement.

    


    (b) All
      the
      agreements or instruments herein defined shall mean such agreements or
      instruments as the same may from time to time be supplemented or amended or
      the
      terms thereof waived or modified to the extent permitted by, and in accordance
      with, the terms thereof and of this Agreement.

    


    (c) The
      following terms shall have the following meanings (such meanings to be equally
      applicable to both the singular and plural forms of the terms
      defined):

    


    “Affiliate”
      means, with respect to any Person, any other Person that directly, or indirectly
      through one or more intermediaries, controls, is controlled by or is under
      common control with the subject Person. For purposes of this definition,
“control” (including, with correlative meaning, the terms “controlled by” and
“under common control with”), as used with respect to any Person, shall mean the
      possession, directly or indirectly, of the power to direct or cause the
      direction of the management and policies of such Person, whether through the
      ownership of voting securities or by contract or otherwise.

    


    “AMEX”
      means the American Stock Exchange, Inc.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    “Blackout
      Period” means the period of up to twenty Trading Days (whether or not
      consecutive) during any period of 365 consecutive days after the date the
      Company notifies the Investors that they are required, pursuant to Section
      8(c)(4), to suspend offers and sales of Registrable Securities as a result
      of an
      event or circumstance described in Section 8(b)(5)(A), during which period,
      by
      reason of Section 8(b)(5)(B), the Company is not required to amend a particular
      Registration Statement or supplement the related Prospectus.

    


    “Business
      Day” means any day other than a Saturday, Sunday or a day on which commercial
      banks in The City of New York are authorized or required by law or executive
      order to remain closed.

    


    “Claims”
      means any losses, claims, damages, liabilities or expenses, including, without
      limitation, reasonable fees and expenses of legal counsel (joint or several),
      incurred by a Person.

    


    “Closing
      Date” means 10:00 a.m., New York City time, on July 21, 2006, or such other
      mutually agreed to time.

    


    “Collateral”
      shall have the meaning to be provided or provided in each Security
      Agreement.

    


    “Collateral
      Agent” shall have the meaning to be provided or provided in each Security
      Agreement.

    


    “Common
      Stock” means the Common Stock, par value $.001 per share, of the
      Company.

    


    “Common
      Stock Equivalent” means any warrant, option, subscription or purchase right with
      respect to shares of Common Stock, any security convertible into, exchangeable
      for, or otherwise entitling the holder thereof to acquire, shares of Common
      Stock or any warrant, option, subscription or purchase right with respect to
      any
      such convertible, exchangeable or other security.

    


    “Conversion
      Price” shall have the meaning to be provided or provided in the
      Note.

    


    “Conversion
      Shares” means the shares of Common Stock or other securities issuable upon
      conversion of the Note.

    


    “Encumbrance”
      means any mortgage, deed of trust, claim, security interest, lien, pledge,
      lease, sublease, charge, escrow, option, proxy, right of occupancy, right of
      first refusal, preemptive right, covenant, conditional limitation,
      hypothecation, prior assignment, easement, title retention agreement, indenture,
      security agreement or any other encumbrance of any kind.

    


    “Environmental
      Law” means any federal, state, local or foreign law relating to pollution or
      protection of human health or the environment (including, without limitation,
      ambient air, surface water, groundwater, land surface or subsurface strata),
      including, without limitation, laws relating to emissions, discharges, releases
      or threatened releases of Hazardous Materials into the environment, or otherwise
      relating to the manufacture, processing, distribution, use, treatment, storage,
      disposal, transport or handling of Hazardous Materials, as well as all
      authorizations, codes, decrees, demands or demand letters, injunctions,
      judgments, licenses, notices or notice letters, orders, permits, plans or
      regulations issued, entered, promulgated or approved thereunder.

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “ERISA”
      means the Employee Retirement Income Security Act of 1974, as amended, and
      the
      regulations thereunder and published interpretations thereof.

    


    “Exempt
      Issuance” shall have the meaning set forth in Section 5(m) of this
      Agreement.

    


    “Event
      of
      Default” shall have the meaning to be provided or provided in the
      Note.

    


    “Generally
      Accepted Accounting Principles” means, for any Person, the United States
      generally accepted accounting principles and practices applied by such Person
      from time to time in the preparation of its audited financial
      statements.

    


    “Hazardous
      Material” means any chemical, pollutant, contaminant, or toxic or hazardous
      substance or waste.

    


    “Indebtedness”
      shall have the meaning to be provided or provided in the Note.

    


    “Indemnified
      Party” means the Company, each of its directors, each of its officers who signs
      the Registration Statement, each Person, if any, who controls the Company within
      the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
      stockholder selling securities pursuant to the Registration Statement or any
      of
      its directors or officers or any Person who controls such stockholder or
      underwriter within the meaning of the 1933 Act or the 1934 Act.

    


    “Indemnified
      Person” means the Buyer and any Investor and their respective investment
      advisers and investment managers, the directors, officers, employees and agents
      of the Buyer, any such Investor and any such investment adviser or investment
      manager, each Person, if any, who controls the Buyer, any such Investor or
      any
      such investment adviser or investment manager within the meaning of the 1933
      Act
      or the 1934 Act, any underwriter (as defined in the 1933 Act) acting on behalf
      of an Investor who participates in the offering of Registrable Securities of
      such Investor in accordance with the plan of distribution contained in the
      Prospectus, the directors, if any, of such underwriter and the officers, if
      any,
      of such underwriter, and each Person, if any, who controls any such underwriter
      within the meaning of the 1933 Act or the 1934 Act. 

    


    “Inspector”
      means any attorney, accountant or other agent retained by an Investor for the
      purposes provided in Section 8(b)(9).

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “Insolvent”
      means (i) the present fair saleable value of the Company's assets is less than
      the amount required to pay the Company's total indebtedness, contingent or
      otherwise, (ii) the Company is unable to pay its debts and liabilities,
      subordinated, contingent or otherwise, as such debts and liabilities become
      absolute and matured, (iii) the Company intends to incur debts beyond its
      ability to pay as such debts as they mature (taking into account the timing
      and
      amounts of cash to be payable on or in respect of its debt) or (iv) the Company
      has unreasonably small capital with which to conduct the business in which
      it is
      engaged for the current fiscal year as such business is now conducted and is
      proposed to be conducted.

    


    “Intellectual
      Property” means all franchises, patents, trademarks, service marks, trade names
      (whether registered or unregistered), copyrights, corporate names, licenses,
      trade secrets, proprietary software or hardware, proprietary technology,
      technical information, discoveries, designs and other proprietary rights,
      whether or not patentable, and confidential information (including, without
      limitation, know-how, processes and technology) used in the conduct of the
      business of the Company or any Subsidiary.

    


    “Investor”
      means the Buyer and any transferee or assignee who agrees to become bound by
      the
      provisions of Sections 5(a), 5(b), 8, 9, and 10 of this Agreement.

    


    “Lockbox
      Agent” means the Person from time to time serving as Lockbox Agent under the
      Lockbox Agreement.

    


    “Lockbox
      Agreement” means the Lockbox Agreement by and between the Company and the
      Lockbox Agent in the form attached as Annex
      V.

    


    “Liens”
      shall have the meaning to be provided or provided in the Note.

    


    “Margin
      Stock” shall have the meaning provided in Regulation U of the Board of Governors
      of the Federal Reserve System (12 C.F.R. Part 221).

    


    “Material
      Adverse Effect” means (i) a material adverse effect on (A) the business,
      properties, operations, condition (financial or other), results of operations
      or
      prospects of the Company and the Subsidiaries, taken as a whole; (B) the
      validity or enforceability of, or the ability of the Company to perform its
      obligations under, the Transaction Documents; (C) the existence, validity or
      priority of the Lien on and Security Interest in the Collateral granted pursuant
      to any Security Agreement; or (D) the rights and remedies of the Buyer under
      or
      in connection with the Transaction Documents or (ii) any event or circumstance
      that would cause any Registration Statement or Prospectus to contain any untrue
      statement of a material fact or omit to state any material fact necessary to
      make the statements made not misleading except if such untrue statement of
      a
      material fact in such Registration Statement or Prospectus or omission to state
      a material fact required to be stated in such Registration Statement or
      Prospectus in order to make the statements therein not misleading, results
      from
      a misstatement or omission made by the Buyer in written information it furnished
      to the Company specifically for inclusion in such Registration Statement or
      such
      Prospectus or in any amendment or supplement thereto, unless the Company shall
      have failed timely to amend or supplement such Registration Statement or
      Prospectus after the Buyer shall have corrected such misstatement or
      omission.

    


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    “Nasdaq”
      means the Nasdaq Global Market.

    


    “Nasdaq
      Capital Market” means the Nasdaq Capital Market.

    


    “1934
      Act” means the Securities Exchange Act of 1934, as amended.

    


    “1933
      Act” means the Securities Act of 1933, as amended.

    


    “Note”
      means the 6% Senior Secured Convertible Note due 2007-2008 of the Company in
      the
      form attached as Annex I.

    


    “Other
      Note Purchase Agreements” means the several Note Purchase Agreements, dated of
      even date herewith, by and between the Company and the buyers of the Other
      Notes.

    


    “Other
      Notes” shall have the meaning to be provided or provided in the
      Note.

    


    “Other
      Warrants” means the Common Stock Purchase Warrants issuable or issued pursuant
      to the Other Note Purchase Agreements.

    


    “Patent
      and Trademark Security Agreement” means the Patent and Trademark Security
      Agreement from the Company to the Collateral Agent in the form attached as
      Annex
      III.

    


    “Payment
      Event” means any of the following events:

    


    (i) the
      Company fails to file with the SEC any Registration Statement meeting the
      requirements of this Agreement on or before the date by which the Company is
      required to file such Registration Statement pursuant to Section
      8(a),

    


    (ii) the
      SEC
      Effective Date of the Registration Statement required by Section 8(a)(1)
      covering Registrable Securities does not occur within 90 days following the
      Closing Date or the SEC Effective Date of any Registration Statement required
      by
      Section 8(a)(3) covering Registrable Securities does not occur within 90 days
      following the date the Company shall become obligated to commence preparation
      of
      such Registration Statement: provided,
      however,
      that if
      any such Registration Statement shall be reviewed by the SEC staff a Payment
      Event shall not occur until 120 days following (x) the Closing Date, in the
      case
      of the Registration Statement required by Section 8(a)(1), or (y) such date
      as
      the Company becomes obligated to commence preparation of such Registration
      Statement, in the case of any Registration Statement required by Section
      8(a)(3),

    


    (iii) The
      Company fails to file with the SEC a request for acceleration of effectiveness
      of a Registration Statement within three Trading Days after the date the Company
      learns that no review of such Registration Statement will be made by the staff
      of the SEC or that the staff of the SEC has no further comments on such
      Registration Statement, as the case may be, or any such request for acceleration
      fails to request acceleration of such Registration Statement to a time and
      date
      not more than 48 hours after the submission of such request,

    


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (iv) after
      the
      SEC Effective Date of any Registration Statement, sales cannot be made pursuant
      to such Registration Statement for any reason (including, without limitation,
      by
      reason of a stop order, any untrue statement of a material fact or omission
      of a
      material fact in such Registration Statement, or the Company’s failure to update
      such Registration Statement), except to the extent permitted pursuant to Section
      8(b)(5), 

    


    (v) the
      Common Stock generally or the Registrable Securities specifically are not listed
      or included for quotation on a Trading Market, or

    


    (vi) the
      Company fails, refuses or is otherwise unable timely to issue and deliver to
      or
      upon the order of the Person entitled thereto Conversion Shares upon conversion
      of the Note or shares of Common Stock issuable upon conversion of any Other
      Note, Warrant Shares upon exercise of the Warrant or shares of Common Stock
      issuable upon exercise of any Other Warrant in accordance with the terms of
      the
      Warrant or any Other Warrant, as the case may be, as and when required under
      the
      Transaction Documents, in any such case within five Trading Days after the
      due
      date thereof in accordance with the Note, Other Note, Warrant or Other Warrant
      or the Company fails, refuses or is otherwise unable timely to transfer any
      Shares as and when required by the Transaction Documents.

    


    “Payment
      Period” means any period following the Closing Date during which any Payment
      Event occurs and is continuing.

    


    “Person”
      means any natural person, corporation, partnership, limited liability company,
      trust, incorporated organization, unincorporated association or similar entity
      or any government, governmental agency or political subdivision.

    


    “Placement
      Agent” means Roth Capital Partners.

    


    “Pledge
      and Security Agreement” means the Pledge and Security Agreement from the Company
      to the Collateral Agent in the form attached as Annex
      IV.

    


    “Pro
      Rata
      Share” means with respect to each capital raising transaction to which Section
      5(j) applies an amount equal to the product obtained by multiplying (x) an
      amount equal to one-half of the securities being issued in such capital raising
      transaction times
      (y) a
      fraction of which the numerator is the sum of (A) the total number of shares
      of
      Common Stock which would then be issuable upon conversion of the Note and upon
      exercise of the Warrant for cash plus
      (B) the
      number of outstanding Shares beneficially owned by the Buyer at the time the
      Pro
      Rata Share is being determined and the denominator is the sum of (C) the number
      of shares issuable upon conversion of the Note and the Other Notes at the time
      of original issuance thereof plus
      (D) the
      total number of shares of Common Stock issuable upon exercise of the Warrant
      and
      the Other Warrants for cash (in each case determined without regard to any
      limitation on conversion of exercise thereof), subject to adjustment of the
      amounts specified in the immediately preceding clauses (C) and (D) for stock
      splits, stock dividends and similar capital changes affecting the Common Stock
      that occur on or after the Closing Date and on or prior to the date Pro Rata
      Share is being determined.

    


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    “Prospectus”
      means the prospectus forming part of the Registration Statement at the time
      the
      Registration Statement is declared effective and any amendment or supplement
      thereto (including any information or documents incorporated therein by
      reference).

    


    “PTO”
      means the United States Patent and Trademark Office.

    


    “Purchase
      Price” means the purchase price for the Note set forth on the signature page of
      this Agreement.

    


    “QIB”
      means a “qualified institutional buyer” as defined in Rule 144A.

    


    “Record”
      means all pertinent financial and other records, pertinent corporate documents
      and properties of the Company subject to inspection for the purposes provided
      in
      Section 8(b)(9).

    


    “register,”
      “registered,” and “registration” refer to a registration effected by preparing
      and filing a Registration Statement or Statements in compliance with the 1933
      Act and pursuant to Rule 415, and the declaration or ordering of effectiveness
      of such Registration Statement by the SEC.

    


    “Registrable
      Securities” means (1) the Shares, (2) if the Common Stock is changed, converted
      or exchanged by the Company or its successor, as the case may be, into any
      other
      stock or other securities on or after the date hereof, such other stock or
      other
      securities which are issued or issuable in respect of or in lieu of the Shares
      and (3) if any other securities are issued to holders of Common Stock (or such
      other shares or other securities into which or for which the Common Stock is
      so
      changed, converted or exchanged as described in the immediately preceding clause
      (2)) upon any reclassification, share combination, share subdivision, share
      dividend, merger, consolidation or similar transaction or event, such other
      securities which are issued or issuable in respect of or in lieu of the
      Shares.

    


    “Registration
      Period” means, with respect to each Registration Statement, the period from the
      SEC Effective Date for such Registration Statement, to the earlier of (A) the
      date which is five years after
      the
      Closing Date or such date after which each Investor may sell all of its
      Registrable Securities without registration under the 1933 Act pursuant to
      Rule
      144, free of any limitation on the volume of such securities which may be sold
      in any period) and (B) the date on which the Investors no longer own any
      Registrable Securities.

    


    “Registration
      Statement” means a registration statement on Form S-3 or such other form as may
      be available to the Company to be filed with the SEC under the 1933 Act relating
      to the Registrable Securities and which names any Investor as a selling
      stockholder.

    


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    “Regulation
      D” means Regulation D under the 1933 Act.

    


    “Repurchase
      Event” shall have the meaning to be provided or provided in the
      Note.

    


    “Restricted
      Ownership Percentage” shall have the meaning provided in Section
      5(j)(2).

    


    “Reverse
      Stock Split” means a reverse split of the Common Stock of not less than one for
      each ten shares of Common Stock outstanding prior thereto.

    


    “Rule
      144” means Rule 144 promulgated under the 1933 Act or any other similar rule or
      regulation of the SEC that may at any time provide a “safe harbor” exemption
      from registration under the 1933 Act so as to permit a holder to sell securities
      of the Company to the public without registration under the 1933
      Act.

    


    “Rule
      144A” means Rule 144A under the 1933 Act or any successor rule
      thereto.

    


    “SEC”
      means the Securities and Exchange Commission.

    


    “SEC
      Effective Date” means, with respect to any Registration Statement, the date such
      Registration Statement is first declared effective by the SEC.

    


    “SEC
      Filing Date” means the date the Registration Statement is first filed with the
      SEC pursuant to Section 8.

    


    “SEC
      Reports” means the Company’s (1) Annual Report on Form 10-K for the year ended
      December 31, 2005, (2) Quarterly Report on Form 10-Q
      for the
      quarter ended March 31, 2006, and
      (3)
      all other periodic and other reports filed by the Company with the SEC pursuant
      to the 1934 Act subsequent to December 31, 2005, and prior to the date hereof,
      in each case as filed with the SEC and including the information and documents
      (other than exhibits) incorporated therein by reference.

    


    “Securities”
      means, collectively, the Note, the Shares and the Warrant.

    


    “Security
      Agreement” means either or both of the Pledge and Security Agreement and the
      Patent and Trademark Security Agreement.

    


    “Security
      Interest” shall have the meaning to be provided or provided in each Security
      Agreement.

    


    “Shares”
      means the Conversion Shares and the Warrant Shares.

    


    “Short
      Sales” shall have the meaning provided in Rule 200 of Regulation SHO under the
      1934 Act as in effect on the date of this Agreement (but shall not be deemed
      to
      include the location and/or reservation of borrowable shares of Common
      Stock).

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    “Stockholder
      Approval” shall have the meaning provided in Section 5(p).

    


    “Stockholder
      Meeting” shall have the meaning provided in Section 5(p).

    


    “Strategic
      Issuance” means the issuance by the Company for cash of Common Stock or Common
      Stock Equivalents in connection with a strategic alliance, collaboration, joint
      venture, partnership, manufacturing, marketing, distributing or similar
      arrangement of the Company with another Person which strategic alliance,
      collaboration, joint venture, partnership manufacturing, marketing, distributing
      or similar arrangement relates to the Company’s business as conducted
      immediately prior thereto and which Person is engaged in a business similar
      or
      related to the business of the Company.

    


    “Subsidiary”
      means any corporation or other entity of which a majority of the capital stock
      or other ownership interests having ordinary voting power to elect a majority
      of
      the board of directors or other persons performing similar functions are at
      the
      time directly or indirectly owned by the Company.

    


    “Trading
      Day” means at any time a day on which any of a national securities exchange,
      Nasdaq, Nasdaq
      Capital Market
      or such
      other securities market as at such time constitutes the principal securities
      market for the Common Stock is open for general trading of
      securities.

    


    “Trading
      Market” means the AMEX, the Nasdaq, the Nasdaq
      Capital Market
      or the
      New York Stock Exchange, Inc.

    


    “Transaction
      Documents” means, collectively, this Agreement, the Security Agreement, the
      Securities, the Lockbox Agreement and the other agreements, instruments and
      documents contemplated hereby and thereby.

    


    “Transaction
      Form 8-K” shall have the meaning provided in Section 5(l).

    


    “Violation”
      means 

    


    (i) any
      untrue statement or alleged untrue statement of a material fact contained in
      a
      Registration Statement or any post-effective amendment thereof or the omission
      or alleged omission to state therein a material fact required to be stated
      therein or necessary to make the statements therein not misleading,


    


    (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      Prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading, 

    


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (iii) any
      violation or alleged violation by the Company of the 1933 Act, the 1934 Act,
      any
      state securities law or any rule or regulation under the 1933 Act, the 1934
      Act
      or any state securities law, or 

    


    (iv) any
      breach or alleged breach by the Company of any representation, warranty,
      covenant, agreement or other term of any of the Transaction Documents.


    


    “Warrant”
      means the Common Stock Purchase Warrant in the form attached hereto as
Annex
      II.

    


    “Warrant
      Shares” means the shares of Common Stock and any other securities issuable upon
      exercise of the Warrant.

    


    2. PURCHASE
      AND SALE; PURCHASE PRICE.

    


    (a) Purchase. 
      Upon
      the
      terms and subject to the conditions of this Agreement, the Buyer hereby agrees
      to purchase from the Company, and the Company hereby agrees to sell to the
      Buyer, on the Closing Date, the Note in the principal amount set forth on the
      signature page of this Agreement and having the terms and conditions as set
      forth in the form of the Note attached hereto as Annex
      I
      for the
      Purchase Price. In connection with the purchase of the Note by the Buyer, the
      Company shall issue to the Buyer at the closing on the Closing Date a Warrant
      initially entitling the holder to purchase the number of shares of Common Stock
      set forth on the signature page of this Agreement.

    


    (b) Form
      of Payment.  Payment
      by the Buyer of the Purchase Price to the Company on the Closing Date shall
      be
      made by wire transfer of immediately available funds to:

     

    [INTENTIONALLY
      OMITTED]

     

    For
      credit to account No. 

    For
      credit to the account of 

    Reference:
      [Name
      of
      Buyer]

    


    (c) Closing. 
      The
      issuance and sale of the Note and the issuance of the Warrant shall occur on
      the
      Closing Date at Law Offices of Brian W Pusch, Penthouse Suite, 29 West
      57th
      Street,
      New York, New York 10019 or at such other location and time as the parties
      may
      agree. At the closing, upon the terms and subject to the conditions of this
      Agreement, (1) the Company shall issue and deliver to the Buyer the Note and
      the
      Warrant against payment by the Buyer to the Company of an amount equal to the
      Purchase Price, and (2) the Buyer shall pay to the Company an amount equal
      to
      the Purchase Price against delivery by the Company to the Buyer of the Note
      and
      the Warrant.

    


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    3. REPRESENTATIONS,
      WARRANTIES, COVENANTS, ETC. OF THE BUYER.

    


    The
      Buyer
      represents and warrants to, and covenants and agrees with, the Company as
      follows:

    


    (a) Circumstances
      of Purchase.  The
      Buyer
      is purchasing the Note and acquiring the Warrant for its own account and not
      with a view towards the public sale or distribution thereof within the meaning
      of the 1933 Act; and the Buyer will acquire any Shares issued to the Buyer
      prior
      to the SEC Effective Date of a Registration Statement covering the resale of
      such Shares by the Buyer for its own account and not with a view towards the
      public sale or distribution thereof within the meaning of the 1933 Act prior
      to
      such SEC Effective Date; and the Buyer has no intention of making any
      distribution, within the meaning of the 1933 Act, of the Shares except in
      compliance with the registration requirements of the 1933 Act or pursuant to
      an
      exemption therefrom. The Buyer is acquiring the Securities hereunder in the
      ordinary course of its business. 

    


    (b) Accredited
      Investor; Residence.  At
      the
      time the Buyer was offered the Securities, it was, and at the date hereof it
      is,
      and on each date on which it exercises any Warrants for cash it will be, an
      “accredited investor” as that term is defined in Rule 501 of Regulation D under
      the 1933 Act by reason of Rule 501(a)(3) thereof. The office or offices of
      the
      Buyer in which its investment decision was made is located at the address or
      addresses of such Investor set forth on the signature page hereto.

    


    (c) Reoffers
      and Resales.  The
      Buyer
      will not offer, sell, pledge, transfer or otherwise dispose of (or solicit
      any
      offers to buy, purchase or otherwise acquire or take a pledge of) any of the
      Securities unless registered under the 1933 Act, pursuant to an exemption from
      registration under the 1933 Act or in a transaction not requiring registration
      under the 1933 Act; provided,
      however,
      that
      the Securities may be pledged in connection with a bona fide margin account
      or
      other loan or financing arrangement secured by the Securities and such pledge
      of
      Securities shall not be deemed to be a transfer, sale or assignment of the
      Securities prohibited hereby, and in effecting any pledge of Securities the
      Buyer shall not be required to provide the Company with any notice thereof
      or
      otherwise make any delivery to the Company pursuant to this Agreement or any
      other Transaction Document, including, without limitation, this Section 3(c);
      provided,
      further,
      however,
      the
      Buyer acknowledges that in connection with any sale, transfer or assignment
      by
      the pledgee of such Securities, such pledgee may be required by applicable
      law
      to make such sale, transfer or assignment in accordance with, or pursuant to
      a
      registration statement or an exemption under, the 1933 Act.

    


    (d) Company
      Reliance.  The
      Buyer
      understands that (1) the Note is being offered and sold and the Warrant is
      being
      issued to the Buyer, (2) upon conversion of the Note prior to two years after
      the Closing Date, the Conversion Shares will be issued to the Buyer upon such
      conversion and (3) upon exercise of the Warrant for cash, or upon cashless
      exercise of the Warrant prior to two years after the Closing Date, the Warrant
      Shares issued upon such exercise will be issued to the Buyer, in each such
      case
      in reliance on one or more exemptions from the registration requirements of
      the
      1933 Act, including, without limitation, Regulation D, and exemptions from
      state
      securities laws and that the Company is relying upon the truth and accuracy
      of,
      and the Buyer’s compliance with, the representations, warranties, agreements,
      acknowledgments and understandings of the Buyer set forth herein in order to
      determine the availability of such exemptions and the eligibility of the Buyer
      to acquire or receive an offer to acquire the Securities.

    


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (e) Information
      Provided.  The
      Buyer
      and its advisors, if any, have requested, received and considered all
      information relating to the business, properties, operations, condition
      (financial or other), results of operations or prospects of the Company and
      information relating to the offer and sale of the Note and the offer of the
      Warrant deemed relevant by them (assuming the accuracy and completeness of
      the
      SEC Reports and of the Company’s responses to the Buyer’s requests); the Buyer
      and its advisors, if any, have been afforded the opportunity to ask questions
      of
      the Company concerning the terms of the offering of the Securities and the
      business, properties, operations, condition (financial or other), results of
      operations and prospects of the Company and the Subsidiaries; without limiting
      the generality of the foregoing, the Buyer has had the opportunity to obtain
      and
      to review the SEC Reports; in connection with its decision to purchase the
      Note
      and to acquire the Warrant, the Buyer has relied solely upon the SEC Reports,
      the representations, warranties, covenants and agreements of the Company set
      forth in this Agreement and to be contained in the other Transaction Documents,
      as well as any investigation of the Company completed by the Buyer or its
      advisors; the Buyer understands that its investment in the Securities involves
      a
      high degree of risk; and the Buyer understands that the offering of the Note
      is
      being made to the Buyer as part of an offering without any minimum amount of
      the
      offering but subject to a maximum amount of $7 million aggregate principal
      amount of the Note and the Other Notes (subject, however, to the right of the
      Company at any time prior to execution and delivery of this Agreement by the
      Company, in its sole discretion, to accept or reject an offer by the Buyer
      to
      purchase the Note and to acquire the Warrant).

    


    (f) Absence
      of Approvals.  The
      Buyer
      understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities. 

    


    (g) Note
      Purchase Agreement.  The
      Buyer
      has all requisite power and authority, corporate or otherwise, to execute,
      deliver and perform its obligations under this Agreement and the other
      agreements executed by the Buyer in connection herewith and to consummate the
      transactions on the Buyer’s part contemplated hereby and thereby; Buyer is an
      entity duly organized, validly existing and in good standing under the laws
      of
      the jurisdiction of its organization; and this Agreement and the Transaction
      Documents to which the Buyer is a party have been duly and validly authorized,
      duly executed and delivered by the Buyer and, assuming due execution and
      delivery by the Company, constitute valid and legally binding obligations of
      the
      Buyer enforceable in accordance with their terms, except as the enforceability
      hereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
      fraudulent conveyance or other similar laws now or hereafter in effect relating
      to or affecting creditors’ rights generally and general principles of equity,
      regardless of whether enforcement is considered in a proceeding in equity or
      at
      law.

    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (h) Buyer
      Status.  The
      Buyer
      is not a “broker” or “dealer” as those terms are defined in the 1934 Act, which
      is required to be registered with the SEC pursuant to Section 15 of the 1934
      Act.

    


    (i) Experience
      of the Buyer.  The
      Buyer,
      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. The
      Buyer 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.
      The
      Buyer has had the opportunity to ask questions of management of the
      Company.

    


    (j) General
      Solicitation. The
      Buyer did
      not
      learn of the offering of the Securities through any public advertising or
      general solicitation (as these terms are used in Regulation D).

    


    (k) Short
      Sales and Confidentiality Prior To The Date Hereof.

    Other
      than the transaction contemplated hereunder, the Buyer has not directly or
      indirectly, nor has any Person acting on behalf of or pursuant to any
      understanding with the Buyer, executed any disposition, including Short Sales
      (but not including the location and/or reservation of borrowable shares of
      Common Stock), in the securities of the Company during the period
      commencing from
      the time
      that the
      Buyer
first
      received a term sheet from the Company or any other Person setting forth the
      material terms of the transactions contemplated hereunder until the date hereof
      (the
      “Discussion Time”).
      Notwithstanding
      the foregoing, in the case of a Buyer
      that
      is a
      multi-managed investment vehicle whereby separate portfolio managers manage
      separate portions of such Buyer's
      assets
      and the portfolio managers have no direct knowledge of the investment decisions
      made by the portfolio managers managing other portions of such Buyer'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 and its professional advisors,
the
      Buyer
has
      maintained the confidentiality of all disclosures made to it in connection
      with
      this transaction (including the existence and terms of this
      transaction).

    


    4. REPRESENTATIONS,
      WARRANTIES, COVENANTS, ETC. OF THE COMPANY.

    


    The
      Company represents and warrants to, and covenants and agrees with, the Buyer
      as
      follows:

    


    (a) Organization
      and Authority.  The
      Company and each of the Subsidiaries is a corporation duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation, and (i) each of the Company and the Subsidiaries has all
      requisite corporate power and authority to own, lease and operate its properties
      and to carry on its business as described in the SEC Reports and as currently
      conducted, and (ii) the Company has all requisite corporate power and authority
      to execute, deliver and perform its obligations under this Agreement and the
      other Transaction Documents to be executed and delivered by the Company in
      connection herewith, and to consummate the transactions contemplated hereby
      and
      thereby; and the Company does not have any equity investment in any other Person
      other than (x) the Subsidiaries listed in the SEC Reports and (y) Subsidiaries
      which do not, individually or in the aggregate, have any material revenue,
      assets or liabilities.

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (b) Qualifications. 
       The
      Company and each of the Subsidiaries are duly qualified to do business as
      foreign corporations and are in good standing in all jurisdictions where such
      qualification is necessary and where failure so to qualify could have a Material
      Adverse Effect.

    


    (c) Concerning
      the Shares and the Common Stock.  The
      Shares have been duly authorized and the Conversion Shares, when issued upon
      conversion of the Note, and the Warrant Shares, when issued upon exercise of
      the
      Warrant, in each such case will be duly and validly issued, fully paid and
      non-assessable and will not subject the holder thereof to personal liability
      by
      reason of being such holder. There are no unwaived preemptive or similar rights
      of any stockholder of the Company or any other Person to acquire any of the
      Securities issued or to be issued to the Buyer. The Company has duly reserved
      40,000,000 shares of Common Stock exclusively for issuance upon conversion
      of
      the Note and the Other Notes and exercise of the Warrant and the Other Warrants,
      and such shares shall remain so reserved, and the Company shall from time to
      time reserve such additional shares of Common Stock as shall be required to
      be
      reserved pursuant to the Note, the Other Notes and the Warrant, so long as
      the
      Note, the Other Notes or the Warrant are outstanding. The Common Stock is listed
      for trading on the AMEX and, except as described on Schedule 4(c), (1) the
      Company and the Common Stock meet the criteria for continued listing and trading
      on the AMEX; (2) the Company has not been notified since December 31, 2004
      by
      the AMEX of any failure or potential failure to meet the criteria for continued
      listing and trading on the AMEX and (3) no suspension of trading in the Common
      Stock is in effect. Except as described on Schedule
      4(c),
      the
      Company knows of no reason that the Shares will not be eligible for listing
      on
      the AMEX. The Company acknowledges that the Securities may be pledged in
      connection with a bona fide margin account or other loan or financing
      arrangement secured by the Securities and such pledge of Securities shall not
      be
      deemed to be a transfer, sale or assignment of the Securities hereunder, and
      the
      Buyer shall not be required to provide the Company with any notice thereof
      or
      otherwise make any delivery to the Company pursuant to this Agreement or any
      other Transaction Document; provided,
      however,
      that in
      order to make any sale, transfer or assignment of Securities in connection
      with
      a foreclosure or realization on such pledge, the Buyer or its pledgee shall
      make
      such disposition in accordance with, or pursuant to a registration statement
      or
      an exemption under, the 1933 Act.

    


    (d) Corporate
      Authorization.  This
      Agreement and the other Transaction Documents to which the Company is or will
      be
      a party have been duly and validly authorized by the Company; this Agreement
      has
      been duly executed and delivered by the Company and, assuming due execution
      and
      delivery by the Buyer, this Agreement is, and the Note, and the Warrant will
      be,
      when executed and delivered by the Company, valid and binding obligations of
      the
      Company enforceable in accordance with their respective terms, except as the
      enforceability hereof or thereof may be limited by bankruptcy, insolvency,
      reorganization, moratorium or other similar laws now or hereafter in effect
      relating to or affecting creditors’ rights generally and general principles of
      equity, regardless of whether enforcement is considered in a proceeding in
      equity or at law.

    


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (e) Non-contravention. 
      The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by the Company of the issuance of the Securities as contemplated
      by
      this Agreement and consummation by the Company of the other transactions
      contemplated by the Transaction Documents do not and will not, with or without
      the giving of notice or the lapse of time, or both, (i) result in any violation
      of any term or provision of the Certificate of Incorporation or Bylaws of the
      Company or any Subsidiary, (ii) conflict with or result in a breach by the
      Company or any Subsidiary of any of the terms or provisions of, or constitute
      a
      default under, or result in the modification of, or result in the creation
      or
      imposition of any lien, security interest, charge or encumbrance (other than
      pursuant to the Security Agreement) upon any of the properties or assets of
      the
      Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust
      or
      other agreement or instrument to which the Company or any Subsidiary is a party
      or by which the Company or any Subsidiary or any of their respective properties
      or assets are bound or affected, in any such case which would be reasonably
      likely to have a Material Adverse Effect, (iii) violate or contravene any
      applicable law, rule or regulation or any applicable decree, judgment or order
      of any court, United States federal or state regulatory body, administrative
      agency or other governmental body having jurisdiction over the Company or any
      Subsidiary or any of their respective properties or assets, in any such case
      which could have a Material Adverse Effect, or (iv) have any material adverse
      effect on any permit, certification, registration, approval, consent, license
      or
      franchise necessary for the Company or any Subsidiary to own or lease and
      operate any of its properties and to conduct any of its business or the ability
      of the Company or any Subsidiary to make use thereof.

    


    (f) Approvals,
      Filings, Etc.  No
      authorization, approval or consent of, or filing with, any United States or
      foreign court, governmental body, regulatory agency, self-regulatory
      organization, or stock exchange or market or the stockholders of the Company
      is
      required to be obtained or made by the Company or any Subsidiary for (x) the
      execution, delivery and performance by the Company of the Transaction Documents,
      (y) the issuance and sale of the Securities as contemplated by this Agreement
      and the terms of the Note and the Warrant and (z) the performance by the Company
      of its obligations under the Transaction Documents, other than (1) registration
      of the resale of the Shares under the 1933 Act as contemplated by Section 8,
      (2)
      as may be required under applicable state securities or “blue sky” laws, (3)
      filing of one or more Forms D with respect to the Securities as required under
      Regulation D, (4) filing of financing statements as required under the
      Pledge and Security Agreement, (5) the filings with the PTO as required by
      the
      Patent and Trademark Security Agreement and (6) the filing of
      the Transaction Form 8-K.

    


    (g) Information
      Provided.  The
      SEC
      Reports (together with the press release issued by the Company), the Transaction
      Documents and the instruments delivered by the Company to the Buyer in
      connection with the execution and delivery of this Agreement and in connection
      with the closing on the Closing Date do not and will not on the date of
      execution and delivery of this Agreement, the date of delivery thereof to the
      Buyer and on the Closing Date contain any untrue statement of a material fact
      or
      omit to state any material fact necessary in order to make the statements
      therein, in the light of the circumstances under which they are made, not
      misleading, it being understood that for purposes of this Section 4(g), any
      statement contained in such information shall be deemed to be modified or
      superseded for purposes of this Section 4(g) to the extent that a statement
      in
      any document included in such information which was prepared and furnished
      to
      the Buyer on a later date (but on or before the date of this Agreement) or
      filed
      with the SEC on a later date (but on or before the date of this Agreement)
      modifies or replaces such statement, whether or not such later prepared or
      filed
      statement so states.

    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (h) Investment
      Company.   Neither
      the Company nor any Subsidiary is an “investment company” within the meaning of
      such term under the Investment Company Act of 1940, as amended, and the rules
      and regulations of the SEC thereunder.

    


    (i) Absence
      of Brokers, Finders, Etc.  No
      broker, finder or similar Person is entitled to any commission, fee or other
      compensation by reason of action taken by or on behalf of the Company in
      connection with the transactions contemplated by this Agreement other than
      the
      Placement Agent (whose commissions, fees and compensation shall be payable
      solely by the Company in accordance with a written agreement between the Company
      and the Placement Agent), and the Company shall pay, and indemnify and hold
      harmless the Buyer from, any claim made against the Buyer by any Person for
      any
      such commission, fee or other compensation.

    


    (j) No
      Solicitation.  Neither
      the Company nor, to the best of its knowledge, any other Person acting on behalf
      of the Company, used any form of general solicitation or general advertising
      in
      respect of the Securities or in connection with the offer and sale of the
      Securities. Neither the Company nor, to its knowledge, any Person acting on
      behalf of the Company has, either directly or indirectly, sold or offered for
      sale to any Person any of the Securities or, within the six months prior to
      the
      date hereof, any other similar security of the Company, except as contemplated
      by this Agreement and the Other Note Purchase Agreements; and neither the
      Company nor any Person authorized to act on its behalf will sell or offer for
      sale any promissory notes, warrants, shares of Common Stock or other securities
      to, or solicit any offers to buy any such security from, any Person so as
      thereby to cause the issuance or sale of any of the Securities to be in
      violation of any of the provisions of Section 5 of the 1933 Act.

    


    (k) No
      Integrated Offering. 
      None
      of
      the Company, any Subsidiary, any of their respective Affiliates, or any Person
      acting on behalf of any of them has, directly or indirectly, made any offers
      or
      sales of any security or solicited any offers to buy any security, under
      circumstances that would require registration of any of the Securities under
      the
      1933 Act or cause the offering of the Securities, the Other Notes and the Other
      Warrants to be integrated with prior offerings by the Company for purposes
      of
      the 1933 Act or any applicable stockholder approval provisions, including,
      without limitation, under the rules and regulations of any exchange or automated
      quotation system on which any of the securities of the Company are listed,
      quoted or designated. None of the Company, any Subsidiary, their respective
      Affiliates or any Person acting on behalf of any of them will take any action
      or
      steps referred to in the preceding sentence that would require registration
      of
      any of the Securities under the 1933 Act or cause the offering of the Securities
      to be integrated with other offerings. 

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (l) Dilutive
      Effect.  The
      Company understands and acknowledges that the number of Shares issuable upon
      conversion of the Note and the Other Notes and upon exercise of the Warrant
      and
      the Other Warrants will be substantial and may increase in certain
      circumstances. The Company further acknowledges that, subject to the terms
      and
      conditions of the Transaction Documents, its obligation to issue Shares upon
      conversion of the Note and upon exercise of the Warrant in accordance with
      this
      Agreement, the Note and the Warrant is, in each case, absolute and unconditional
      regardless of the dilutive effect that such issuance may have on the ownership
      interests of other stockholders of the Company.

    


    (m) Absence
      of Certain Changes. 
      Except
      as
      disclosed in the SEC Reports, since December 31, 2005, there has been no
      material adverse change and no material adverse development in the business,
      properties, operations, condition (financial or otherwise), results of
      operations or prospects of the Company and the Subsidiaries taken as a whole.
      Except as disclosed in the SEC Reports, since December 31, 2005, neither the
      Company nor any Subsidiary has (i) declared or paid any dividends, (ii) sold
      any
      assets, individually or in the aggregate, outside of the ordinary course of
      business, (iii) had capital expenditures outside of the ordinary course of
      business, (iv) engaged in any transaction with any Affiliate except as set
      forth
      in the SEC Reports or (v) engaged in any other transaction outside of the
      ordinary course of business. The Company has not taken any steps to seek
      protection pursuant to any bankruptcy law nor does the Company have any
      knowledge or reason to believe that its creditors intend to initiate involuntary
      bankruptcy proceedings or any actual knowledge of any fact that would reasonably
      lead a creditor to do so. The Company is not as of the date hereof, after giving
      effect to the transactions contemplated hereby to occur on the Closing Date
      and
      the transactions contemplated by the Other Note Purchase Agreements,
      Insolvent.

    


    (n) No
      Undisclosed Events, Liabilities, Developments or
      Circumstances. 
      No
      event,
      liability, development, circumstance or transaction has occurred or exists,
      with
      respect to the Company or any Subsidiary or their respective business,
      properties, operations, condition (financial or other), results of operations
      or
      prospects, that would be required to be disclosed by the Company under
      applicable securities laws (including pursuant to the anti-fraud provisions
      thereof) on a registration statement on Form S-3 filed with the SEC relating
      to
      an issuance and sale by the Company of its Common Stock and which has not been
      publicly disclosed.

    


    (o) Conduct
      of Business; Regulatory Permits. 
      Neither
      the Company nor any Subsidiary is in violation of any term of or in default
      under its Certificate of Incorporation, or its Bylaws. Neither the Company
      nor
      any Subsidiary is in violation of any judgment, decree or order or any statute,
      ordinance, rule or regulation applicable to the Company or any Subsidiary which
      violation could have a Material Adverse Effect, and neither the Company nor
      any
      Subsidiary will conduct its business in violation of any of the foregoing,
      except for possible violations which could not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse Effect. Without
      limiting the generality of the foregoing, the Company is not in violation of
      any
      of the rules, regulations or requirements of the AMEX and has no knowledge
      of
      any facts or circumstances that would be likely to lead to delisting or
      suspension of the Common Stock by the AMEX in the future. Since December 31,
      2005, (i) the Common Stock has been listed on the AMEX, (ii) trading in the
      Common Stock has not been suspended by the SEC or the AMEX and (iii) the Company
      has received no communication, written or oral, from the SEC or the AMEX
      regarding the suspension or delisting of the Common Stock from the AMEX. The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state or foreign regulatory
      authorities necessary to conduct their respective businesses, except where
      the
      failure to possess such certificates, authorizations or permits could not
      reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect, and neither the Company nor any Subsidiary has received any
      notice of proceedings relating to the revocation or modification of any such
      certificate, authorization or permit.

    


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (p) Indebtedness
      and Other Contracts. 
      Except
      as
      set forth on the SEC Reports, neither the Company nor any Subsidiary (i) has
      any
      outstanding Indebtedness, (ii) is a party to any contract, agreement or
      instrument, the violation of which, or default under which, by any other party
      to such contract, agreement or instrument could reasonably be expected to result
      in a Material Adverse Effect, (iii) is in violation of any term of or in default
      under any contract, agreement or instrument, except where such violations and
      defaults could not reasonably be expected to result, individually or in the
      aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
      agreement or instrument, the performance of which, in the judgment of the
      Company's officers, has or is expected to have a Material Adverse Effect. The
      Company has filed all material contracts required to be filed in accordance
      with
      the applicable requirements of the SEC Reports as exhibits to such reports.
      

    


    (q) Absence
      of Litigation. 
      Except
      as
      set forth in the SEC Reports, there is no action, suit, proceeding, inquiry
      or
      investigation, whether criminal, civil or otherwise, before or by the AMEX,
      any
      court, arbitrational body, public board, government agency, self-regulatory
      organization or body pending or, to the knowledge of the Company, threatened
      against or affecting the Company, the Common Stock or any of the Subsidiaries
      or
      any of the Company's or any Subsidiary's officers or directors in their
      capacities as such. To the knowledge of the Company, none of the directors
      or
      officers of the Company has been a party to any securities related litigation
      during the past ten years, other than as disclosed in the SEC
      Reports.

    


    (r) Insurance. 
      The
      Company and each Subsidiary is insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as management
      of the Company believes to be prudent and customary in the businesses in which
      the Company and the Subsidiaries are engaged. Neither the Company nor any
      Subsidiary has been refused any insurance coverage sought or applied for and
      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 at a cost that could not have a Material Adverse
      Effect.

    


    (s) Employee
      Relations. 
      Neither
      the Company nor any Subsidiary is a party to any collective bargaining agreement
      or employs any member of a union. No executive officer of the Company (as
      defined in Rule 405 under the 1933 Act) has notified the Company that such
      officer intends to leave the Company or otherwise terminate such officer's
      employment with the Company. No executive officer of the Company, 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, non-competition agreement, or any other
      contract or agreement or any restrictive covenant, and, to the knowledge of
      the
      Company, the continued employment of each such executive officer does not
      subject the Company or any Subsidiary to any material liability with respect
      to
      any of the foregoing matters. The Company and the Subsidiaries are in compliance
      with all federal, state, local and foreign laws and regulations respecting
      employment and employment practices, terms and conditions of employment and
      wages and hours, except where failure to be in compliance could not, either
      individually or in the aggregate, reasonably be expected to result in a Material
      Adverse Effect.

    


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (t) Title. 
      The
      Company and the Subsidiaries have good and marketable title to all personal
      property owned by them which is material to the business of the Company and
      the
      Subsidiaries, in each case free and clear of all Liens except (i) immaterial
      Liens for taxes not yet delinquent, (ii) immaterial carriers’, warehousemen’s,
      mechanics', materialmen's, repairmen’s, landlord’s Liens (and other similar
      Liens), and immaterial Liens under operating and similar agreements, to the
      extent the same relate to expenses incurred in the ordinary course of business
      consistent with past practice and that are not yet due, (iii) that are routine
      governmental approvals, or (iv) such as do not materially affect the value
      of
      such property and do not interfere with the use made and proposed to be made
      of
      such property by the Company and any of its Subsidiaries. Neither the Company
      nor any Subsidiary owns any real property. Any real property and facilities
      held
      under lease by the Company or any Subsidiary are held by it under valid,
      subsisting and enforceable leases with such exceptions as are not material
      and
      do not interfere with the use made and proposed to be made of such property
      and
      buildings by the Company and the Subsidiaries.

    


    (u) Intellectual
      Property.  Except
      as
      provided in the Security Agreement, (1) the Company and each Subsidiary holds
      all Intellectual Property that it owns free and clear of all Encumbrances and
      restrictions on use or transfer, whether or not recorded, and has sole title
      to
      and ownership of or has the full, exclusive (subject to the rights of its
      licensees) right to use in its field of business such Intellectual Property;
      and
      the Company and each Subsidiary holds all Intellectual Property that it uses
      but
      does not own under valid licenses or sub-licenses from others; (2) the use
      of
      the Intellectual Property by the Company or any Subsidiary does not, to the
      knowledge of the Company, violate or infringe on the rights of any other Person;
      (3) neither the Company nor any Subsidiary has received any notice of any
      conflict between the asserted rights of others and the Company or any Subsidiary
      with respect to any Intellectual Property; (4) the Company and each Subsidiary
      has used its commercially reasonable best efforts to protect its rights in
      and
      to all Intellectual Property; (5) the Company and each Subsidiary are in
      compliance with all material terms and conditions of its agreements relating
      to
      the Intellectual Property; (6) neither the Company nor any Subsidiary is, or
      since December 31, 2005 has been, a defendant in any action, suit, investigation
      or proceeding relating to infringement or misappropriation by the Company or
      any
      Subsidiary of any Intellectual Property nor has the Company or any Subsidiary
      been notified of any alleged claim of infringement or misappropriation by the
      Company or any Subsidiary of any Intellectual Property; (7) to the knowledge
      of
      the Company, none of the products or services the Company and the Subsidiaries
      are researching, developing, propose to research and develop, make, have made,
      use, or sell, infringes or misappropriates any Intellectual Property right
      of
      any third party; (8) none of the trademarks and service marks used by the
      Company or any Subsidiary, to the knowledge of the Company, infringes the
      trademark or service mark rights of any third party; and (9) to the Company’s
      knowledge none of the material processes and formulae, research and development
      results and other know-how relating to the Company's or the Subsidiaries'
      respective businesses, the value of which to the Company or any Subsidiary
      is
      contingent upon maintenance of the confidentiality thereof, has been disclosed
      to any Person other than Persons bound by written confidentiality
      agreements.

    


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (v) Environmental
      Laws. 
      To
      the
      Company’s knowledge, the Company and the Subsidiaries (i) are in compliance with
      all Environmental Laws, (ii) have received all permits, licenses or other
      approvals required of them under applicable Environmental Laws to conduct their
      respective businesses and (iii) are in compliance with all terms and conditions
      of any such permit, license or approval where, in any such case in the foregoing
      clauses (i), (ii) or (iii), the failure to so comply could be reasonably
      expected to have, individually or in the aggregate, a Material Adverse
      Effect.

    


    (w) Subsidiary
      Rights. 
      The
      Company or one of the Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by the applicable corporation or company law
      under which each Subsidiary is formed) to receive dividends and distributions
      on, all stock of the Subsidiaries that is owned by the Company or such other
      Subsidiary as owns such stock.

    


    (x) Tax
      Status. 
      The
      Company and each Subsidiary (i) has made or filed all federal and state income
      and all other 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 shown or determined to be due on such returns,
      reports and declarations, except those being contested in good faith and for
      which it has set aside on its books a provision in the amount of such taxes
      being contested in good faith and (iii) has set aside on its books provisions
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply. There are no
      unpaid taxes claimed to be due by the taxing authority of any jurisdiction,
      and
      the officers of the Company know of no basis for any such claim.

    


    (y) Internal
      Accounting Controls; Financial Statements. 
      The
      Company maintains disclosure controls and procedures (as such term is defined
      in
      Rule 13a-15 under the 1934 Act) that are effective in ensuring that information
      required to be disclosed by the Company in the reports that it files or submits
      under the 1934 Act is recorded, processed, summarized and reported, within
      the
      time periods specified in the rules and forms of the SEC, including, without
      limitation, controls and procedures designed to ensure that information required
      to be disclosed by the Company in the reports that it files or submits under
      the
      1934 Act is accumulated and communicated to the Company's management, including
      its principal executive officer or officers and its principal financial officer
      or officers, as appropriate, to allow timely decisions regarding required
      disclosure. The consolidated financial statements, if any, included in each
      SEC
      Report present fairly and accurately in all material respects the consolidated
      financial position of the Company and the Subsidiaries as of the dates reported
      and the consolidated results of operations, changes in stockholders' equity
      and
      cash flows for the periods reported, all in conformity with Generally Accepted
      Accounting Principles applied on a consistent basis and in conformity with
      the
      rules and regulations of the SEC under the 1934 Act applicable to the Company,
      subject, in the case of unaudited financial statements, to (1) normal recurring
      year-end adjustments, all of which that are necessary for a fair presentation
      of
      such financial statements have been included, and (2) the absence of all
      required notes thereto. Except as set forth in the consolidated financial
      statements of the Company included in the SEC Reports, neither the Company
      nor
      any Subsidiary has any liabilities, contingent or otherwise, except those which
      individually or in the aggregate are not material to the financial condition
      or
      operating results of the Company and the Subsidiaries, taken as a
      whole.

    


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    (z) Sarbanes-Oxley
      Act. 
      The
      Company is in compliance with any and all applicable requirements of the
      Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
      and
      all applicable rules and regulations promulgated by the SEC thereunder that
      are
      effective as of the date hereof.

    


    (aa) S-3
      Eligibility.  The
      Company meets the requirements of Form S-3 for the registration of the resale
      of
      the Registrable Securities.

    


    (bb) Concerning
      the Collateral.   Upon
      execution and delivery of the Security Agreement by the Company and the
      Collateral Agent and completion of the filings referred to in Schedule
      I to
      the
      Pledge and Security Agreement and Exhibit
      C
      to the
      Patent and Trademark Security Agreement, the Collateral Agent will have a first
      priority perfected security interest in the Collateral for the ratable benefit
      of the holders of the Note and the Other Notes.

    


    (cc) Disclosures. 
      For
      purposes of this Agreement and the transactions contemplated hereby, none of
      the
      representations or warranties made by the Company under any of the Transaction
      Documents and no written information furnished by the Company pursuant hereto,
      or in any other document, certificate or written statement furnished by the
      Company to the Buyer or any authorized representative of the Buyer, pursuant
      to
      the Transaction Documents or in connection therewith, contains any untrue
      statement of a material fact or omits to state a material fact necessary in
      order to make the statements contained herein and therein, in light of the
      circumstances under which they were made, not misleading.

    


    (dd) Absence
      of Rights Agreement.  The
      Company has not adopted a shareholder rights plan or similar arrangement
      relating to accumulations of beneficial ownership of Common Stock or a change
      of
      control in the Company.

    


    5. CERTAIN
      COVENANTS.

    


    (a) Transfer
      Restrictions.  The
      Buyer
      acknowledges and agrees that (1) the Note and the Warrant have not been and
      are
      not being registered under the provisions of the 1933 Act or any state
      securities laws and, except as provided in Section 8, the Shares have not been
      and are not being registered under the 1933 Act or any state securities laws,
      and that the Note and the Warrant may not be transferred unless the Buyer shall
      have delivered to the Company an opinion of counsel, reasonably satisfactory
      in
      form, scope and substance to the Company, to the effect that the Note or the
      Warrant to be transferred may be transferred without such registration; (2)
      no
      sale, conveyance assignment or other transfer of the Note or the Warrant or
      any
      interest therein may be made except in accordance with the terms hereof and
      thereof; (3) the Shares may not be resold by the Buyer unless the resale has
      been registered under the 1933 Act or is made pursuant to an applicable
      exemption from such registration and the Company shall have received the opinion
      of counsel provided for in the second to last sentence of this Section 5(a);
      (4)
      any sale of Shares under a Registration Statement shall be made only in
      compliance with the terms of this Section 5(a) 

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    and
      Section 8 (including, without limitation, Section 8(c)(4)); (5) any sale of
      the
      Securities made in reliance on Rule 144 may be made only in accordance with
      the
      terms of Rule 144 and further, if the exemption provided by Rule 144 is not
      available, any resale of the Securities under circumstances in which the seller,
      or the Person through whom the sale is made, may be deemed to be an underwriter,
      as that term is used in the 1933 Act, may require compliance with some other
      exemption under the 1933 Act or the rules and regulations of the SEC
thereunder;
      and (6) the Company is under no obligation to register the Securities (other
      than registration of the resale of the Registrable Securities in accordance
      with
      Section 8) under the 1933 Act or, except as provided in Section 5(d) and Section
      8, to comply with the terms and conditions of any exemption thereunder. Prior
      to
      the time particular Shares are eligible for resale under Rule 144(k), the Buyer
      may not sell the Shares in a transaction which does not constitute a sale
      thereof pursuant to the applicable Registration Statement in accordance with
      the
      plan of distribution set forth therein or in any supplement to the related
      Prospectus unless the Buyer shall have delivered to the Company an opinion
      of
      counsel, reasonably satisfactory in form, scope and substance to the Company,
      that such Shares may be so sold without registration under the 1933 Act. Nothing
      in any of the Transaction Documents shall limit the right of a holder of the
      Securities to make a bona fide pledge thereof to an institutional lender and
      the
      Company agrees to cooperate with any Investor who seeks to effect any such
      pledge by providing such information and making such confirmations as reasonably
      requested. The Buyer agrees that any sale by the Buyer of Shares pursuant to
      a
      particular Registration Statement shall be sold in a manner described in the
      plan of distribution set forth in the related Prospectus and, if the prospectus
      delivery requirement cannot be satisfied by compliance with Rule 153 or 172
      under the 1933 Act, (A) if such sale is made through a broker, the Buyer shall
      instruct its broker to deliver the Prospectus to the purchaser or purchasers
      (or
      the broker or brokers therefor) in connection with such sale, shall supply
      copies of the Prospectus to its broker or brokers and shall instruct its broker
      or brokers to deliver such Prospectus to the purchaser in such sale or such
      purchaser’s broker, (B) if such sale is made in a transaction directly with a
      purchaser and not through the facilities of any securities exchange or market,
      the Buyer shall deliver, or cause to be delivered, the Prospectus to such
      purchaser; and (C) if such sale is made by any means other than those described
      in the immediately preceding clauses (A) and (B), the Buyer shall otherwise
      use
      its best efforts to comply with the prospectus delivery requirements of the
      1933
      Act applicable to such sale.

    


    (b) Restrictive
      Legends.  (1)
      The
      Buyer acknowledges and agrees that the Note shall bear a restrictive legend
      in
      substantially the following form (and a stop-transfer order may be placed
      against transfer of the Note):

    


    NEITHER
      THE ISSUANCE OF THIS NOTE NOR THE ISSUANCE OF THE SECURITIES INTO WHICH THIS
      NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
      AS
      AMENDED (THE “1933 ACT”), AND, ACCORDINGLY, MAY NOT BE, NOR MAY ANY INTEREST
      THEREIN BE, OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR
      IN A
      TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND
      IN
      ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY, SUBJECT TO
      CERTAIN EXCEPTIONS, A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
      THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
      BY SUCH SECURITIES.

    


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    (2) The
      Buyer
      further acknowledges and agrees that the Warrant shall bear a restrictive legend
      in substantially the following form (and a stop-transfer order may be placed
      against transfer of the Warrant):

    


    NEITHER
      THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE
      BEEN
      REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      REGULATORS OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND, ACCORDINGLY, MAY
      NOT BE, NOR MAY ANY INTEREST THEREIN BE, OFFERED OR SOLD EXCEPT PURSUANT TO
      AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
      LAWS AS EVIDENCED BY, SUBJECT TO CERTAIN EXCEPTIONS, A LEGAL OPINION OF COUNSEL
      TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
      ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
      A
      BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

    


    (3) The
      Buyer
      further acknowledges and agrees that until such time as the Shares have been
      registered for resale under the 1933 Act as contemplated by Section 8 or are
      eligible for resale under Rule 144(k) under the 1933 Act, the certificates
      for
      the Shares may bear a restrictive legend in substantially the following form
      (and a stop-transfer order may be placed against transfer of the certificates
      for the Shares):

    


    The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended (the “1933 Act”). The securities have been
      acquired for investment and may not be resold, transferred or assigned in the
      absence of an effective registration statement for the securities under the
      1933
      Act or an opinion of counsel that registration is not required under the 1933
      Act.

    


    (4) Certificates
      evidencing the Shares shall not contain any legend (including the legend set
      forth in Section 5(b)(3) hereof): (i) while a registration statement (including
      the Registration Statement) covering the resale of such Security is effective
      under the 1933 Act, or (ii) following any sale of such Shares pursuant to Rule
      144, or (iii) if such Shares are eligible for sale under Rule 144(k), or (iv)
      if
      such legend is not required under applicable requirements of the 1933Act
      (including judicial interpretations and pronouncements issued by the SEC).
      The
      Company shall cause its counsel to issue a legal opinion to the Company’s
      transfer agent promptly after the SEC Effective Date if required by the
      Company’s transfer agent to effect the removal of the legend hereunder. If all
      or any portion of a Securities are converted or exercised (as applicable) at
      a
      time when there is an effective registration 

     

     

    
      
        
        

      

      
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    statement
      to cover the resale of the Shares, or if such Shares may be sold under Rule
      144(k) or if such legend is not otherwise required under applicable requirements
      of the 1933 Act (including judicial interpretations thereof) then such Shares
      shall be issued free of all legends. The Company agrees that following the
      SEC
      Effective Date or at such time as such legend is no longer required under this
      Section 5(b)(4), it will, no later than five Trading Days following the delivery
      by a Buyer to the Company or the Company’s transfer agent of a certificate
      representing Shares, as applicable, deliver or cause to be delivered to such
      Buyer 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 any transfer agent of the Company that enlarge the restrictions
      on transfer set forth in this Section. Certificates for Securities subject
      to
      legend removal hereunder shall be transmitted by the transfer agent of the
      Company to the Buyers by crediting the account of the Buyer’s prime broker with
      the Depository Trust Company System.

    


    (c) Reporting
      Status.  
      During
      the Registration Period, the Company shall timely file all reports required
      to
      be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and
      the
      Company shall not terminate its status as an issuer required to file reports
      under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
      would permit such termination.

    


    (d) Form
      D.  The
      Company agrees to file with the SEC on a timely basis one or more Forms D with
      respect to the Securities as required under Regulation D to claim the exemption
      provided by Rule 506 of Regulation D and to provide a copy thereof to the Buyer
      within five Business Days after Buyer requests in writing a copy of such
      filing.

    


    (e) State
      Securities Laws.   On
      or
      before the Closing Date, the Company shall take such action as shall be
      necessary to qualify, or to obtain an exemption for, the offer and sale of
      the
      Securities to the Buyer as contemplated by the Transaction Documents under
      such
      of the securities laws of jurisdictions in the United States as shall be
      applicable thereto. Notwithstanding the foregoing obligations of the Company
      in
      this Section 5(e), the Company shall not be required (1) to qualify to do
      business in any jurisdiction where it would not otherwise be required to qualify
      but for this Section 5(e), (2) to subject itself to general taxation in any
      such
      jurisdiction, (3) to file a general consent to service of process in any such
      jurisdiction, (4) to provide any undertakings that cause more than nominal
      expense or burden to the Company or (5) to make any change in its certificate
      or
      articles of incorporation or by-laws which the Company determines to be contrary
      to the best interests of the Company and its stockholders. The Company shall
      furnish the Buyer with copies of all filings, applications, orders and grants
      or
      confirmations of exemptions relating to such securities laws on or before the
      Closing Date.

    


    
      
        
        

      

      
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    (f) Limitation
      on Certain Actions.  From
      the
      date of execution and delivery of this Agreement by the parties hereto to the
      date of issuance of the Note, the Company (1) shall comply with Article III
      of
      the Note as if the Note were outstanding, (2) shall not take any action which,
      if the Note were outstanding, (A) would constitute an Event of Default or,
      with
      the giving of notice or the passage of time or both, would constitute an Event
      of Default or (B) would constitute a Repurchase Event or, with the giving of
      notice or the passage of time or both, would constitute a Repurchase
      Event.

    


    (g) Use
      of Proceeds.  The
      Company represents and warrants to the Buyer, and covenants and agrees with
      the
      Buyer, that: (1) it does not own or have any present intention of acquiring
      any
      Margin Stock; (2) the proceeds of sale of the Note and the Warrant Shares will
      be used for general working capital purposes and in the operation of the
      Company’s business;
      provided, however,
      that up
      to $100,000 of the proceeds of this Note and the Other Notes may be used in
      connection with the search for an additional member of senior management
      described in Section 3.17(b) of the Note; (3) none of such proceeds will be
      used, directly or indirectly (A) to pay any existing debt obligations (other
      than normal payables), (B) to make any loan to or investment in any other Person
      or (C) for the purpose, whether immediate, incidental or ultimate, of purchasing
      or carrying any margin stock or for the purpose of maintaining, reducing or
      retiring any indebtedness which was originally incurred to purchase or carry
      any
      stock that is currently a Margin Stock or for any other purpose which might
      constitute the transactions contemplated by this Agreement a “purpose credit”
within the meaning of such Regulation U of the Board of Governors of the Federal
      Reserve System; and (4) neither the Company nor any agent acting on its behalf
      has taken or will take any action which might cause this Agreement or the
      transactions contemplated hereby to violate Regulation T, Regulation U or any
      other regulation of the Board of Governors of the Federal Reserve System or
      to
      violate the 1934 Act, in each case as in effect now or as the same may hereafter
      be in effect.

    


    (h) Best
      Efforts.  Each
      of
      the Company, on the one hand, and the Buyer, on the other hand, agree to use
      their best efforts timely to satisfy each of the conditions to the other’s
      obligations to sell and purchase the Note set forth in Section 6 or 7, as the
      case may be, of this Agreement on or before the Closing Date.

    


    (i) Debt
      Obligation.  So
      long
      as any portion of the Note is outstanding, the Company shall cause its books
      and
      records to reflect the Note as a debt of the Company in its unpaid principal
      amount, shall cause its financial statements to reflect the Note as a debt
      of
      the Company in such amount as shall be the greatest amount permitted in
      accordance with Generally Accepted Accounting Principles and, whenever
      appropriate, as a valid senior debt obligation of the Company for money
      borrowed.

    


    (j) Right
      of the Buyer to Participate in Future Transactions.

    


    (1) Right
      to Participate.
      The
      Buyer will have a right to participate, on the terms and conditions set forth
      in
      this Section 5(j), in all sales by the Company of any of the Company’s equity
      securities or other securities that are convertible into or exchangeable for
      any
      of the Company’s equity securities in each capital raising transaction, if any,
      that occurs at any time when the Note, or any instrument issued upon transfer
      or
      split up thereof, remains outstanding (in whole or in part), other than any
      such
      sale that is a public offering underwritten on a firm commitment basis and
      registered with the SEC under the 1933 Act and other than a Strategic Issuance;
      provided,
      however,
      that if
      under legal requirements applicable to a particular transaction the only Persons
      eligible to purchase securities in such transaction are “accredited investors,”
as defined in Regulation D, then the Buyer must be an
      accredited investor in order to purchase securities in such transaction. For
      any
      such transaction during such period, the Company shall give at least
      four Business Days  advance 

     

     

    
      
        
        

      

      
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    written
      notice to the Buyer prior to any offer or sale of any of the Company's
      securities in such transaction by providing to the Buyer a term sheet which
      (A)
      contains all significant business terms of such proposed transaction, (B) is
      sufficiently detailed so as to reasonably permit the Buyer the opportunity
      to
      determine whether or not to exercise its rights under this Section 5(j) and
      (C)
      is at least as detailed as the term sheet or summary of such transaction as
      the
      Company shall furnish to any offeree or broker in such transaction. The Buyer
      shall have the right to participate in such proposed transaction and to purchase
      its Pro Rata Share of
      such
      securities which are the subject of such proposed transaction for the same
      consideration and on the same terms and conditions as contemplated for sales
      to
      third parties in such transaction (or such lesser portion thereof as specified
      by the Buyer). If the Buyer elects to exercise its rights hereunder for a
      particular transaction, it shall deliver written notice to the Company within
      four Business Days following receipt from the Company of the notice and term
      sheet meeting the requirements of this Section 5(j), which notice from the
      Buyer
      shall be conditional upon (A) the Buyer’s receipt of satisfactory definitive
      documents for such transaction from the Company if the Company has not furnished
      final, definitive documents for such transaction to the Buyer at or before
      the
      time the Company gives such notice of such transaction to the Buyer, and (B)
      the
      satisfaction of the other conditions precedent to the obligations of buyers
      generally in such transaction to complete such transaction. If, subsequent
      to
      the Company giving notice to the Buyer hereunder but prior to any of (i) the
      Buyer exercising its right to participate, (ii) the expiration of the four
      Business Day period without response from the Buyer or (iii) the rejection
      of
      such offer for such financing by the Buyer, the terms and conditions of the
      proposed sale to third parties in such transaction are changed from those
      disclosed in the term sheet provided to the Buyer, the Company shall be required
      to provide a new notice and term sheet meeting the requirements of this Section
      5(j), reflecting such revised terms, to the Buyer hereunder and the Buyer shall
      have the right, which must be exercised within four Business Days of the date
      the Buyer receives such new notice and such revised term sheet, to exercise
      its
      rights to purchase the securities on such changed terms and conditions and
      otherwise as provided hereunder. If the Buyer does not exercise its rights
      hereunder with respect to a proposed transaction within the period or periods
      provided, or affirmatively declines to engage in such proposed transaction
      with
      the Company, then the Company may proceed with such proposed transaction on
      the
      same terms and conditions as noticed to the Buyer (assuming the Buyer has
      consented to the transaction, if required, pursuant to Section 5(n) and such
      transaction does not violate any other term or provision of the Transaction
      Documents), provided
      that if
      such proposed transaction is not consummated within 75 days following the
      Company’s notice hereunder, then the rights hereunder shall again be afforded to
      the Buyer for such proposed transaction. The rights and obligations of this
      Section 5(j) shall in no way limit or restrict the other rights of the Buyer
      pursuant to this Section 5. Notwithstanding anything herein to the contrary,
      failure of the Buyer to affirmatively elect in writing to participate in any
      proposed transaction within the required time frames shall be deemed to be
      the
      equivalent of Buyer’s decision not to participate in such proposed transaction.
      Notwithstanding the foregoing, this Section 5(j)(1) shall not apply in respect
      of an Exempt Issuance.

    


    
      
        
        

      

      
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    (2) Limitation
      on Right of Participation.
      Notwithstanding
      anything to the contrary contained herein, the number of shares of Common Stock
      that may be acquired directly or through acquisition of Common Stock Equivalents
      by the Buyer pursuant to any transaction to which this Section 5(j) applies
      shall not at any one time exceed a number that, when added to the total number
      of shares of Common Stock deemed beneficially owned by the Buyer (other than
      by
      virtue of the ownership of securities or rights to acquire securities (including
      the Note and the Warrant) that have limitations on the Buyer’s right to convert,
      exercise or purchase similar to the limitation set forth herein (the “Excluded
      Shares”)), together with all shares of Common Stock deemed beneficially owned at
      such time (other than by virtue of ownership of Excluded Shares) by Persons
      whose beneficial ownership of Common Stock would be aggregated with the
      beneficial ownership of the Buyer for purposes of determining whether a group
      exists or for purposes of determining the Buyer’s beneficial ownership, in
      either such case for purposes of Section 13(d) of the 1934 Act and Regulation
      13D-G thereunder, would result in beneficial ownership by the Buyer or such
      group of more than 9.9% of the shares of the Company's Common Stock (the
“Restricted Ownership Percentage”), computed in accordance with Regulation
      13D-G. The Buyer shall have the right at any time and from time to time to
      reduce its Restricted Ownership Percentage immediately upon notice to the
      Company in the event and only to the extent that Section 16 of the 1934 Act
      or
      the rules promulgated thereunder (or any successor statute or rules) is changed
      to reduce the beneficial ownership percentage threshold thereunder to a
      percentage less than 10%. If the Buyer would otherwise be unable by reason
      of
      the Restricted Ownership Percentage to acquire the full amount of securities
      which the Buyer would otherwise be entitled to acquire in a particular
      transaction pursuant to this Section 5(j) then (A) the Company shall include
      in
      the terms of the securities which the Buyer is entitled to purchase in such
      transaction under this Section 5(j) a provision comparable to Section
      6.7 of
      the
      Note and (B) if, notwithstanding the inclusion of the provision required by
      the
      immediately preceding clause (1), the Buyer remains unable to acquire the full
      amount of securities which the Buyer would otherwise be entitled to acquire
      under this Section 5(j), the Buyer’s right to acquire such securities shall be
      deferred and if thereafter, at any time or from time to time the Buyer could
      acquire all or any part of such securities without exceeding its Restricted
      Ownership Percentage, then the Buyer shall be entitled to acquire such
      securities at such time or form time to time. The Buyer will provide notice
      to
      the Company when it becomes able to purchase all or any part of such securities
      and the closing of each such purchase shall occur on the date that is five
      Business Days after the Buyer gives such notice.

    


    (3) Right
      Applicable to Successive Transactions. The
      rights of the Buyer under this Section 5(j) shall apply to all capital raising
      transactions described in Section 5(j)(1) that occur during the period specified
      in Section 5(j)(1).

    


    (k) Press
      Releases.

    Any
      press
      release or other publicity concerning this Agreement or the transactions
      contemplated by this Agreement shall be submitted to the Buyer for comment
      at
      least one Business Day prior to issuance, unless the release is required to
      be
      issued within a shorter period of time pursuant to this Agreement or by law
      or
      pursuant to the rules of the securities exchange or market which at the time
      constitutes the principal market for the Common Stock.  The
      Company shall, contemporaneously with the closing on the Closing Date or as
      promptly as possible thereafter on the Closing Date, issue a press release,
      in
      the form of Annex
      VI
      hereto,
      concerning the transactions contemplated hereby. The Company's other press
      releases and other public information, to the extent concerning the Transaction
      Documents, shall contain such information as reasonably requested by the Buyer
      and be reasonably approved by the Buyer prior to issuance. 

    


    
      
        
        

      

      
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    (l) Form
      8-K; Limitation on Information and Buyer Obligations. 
(1)
      Within two Business Days after the Closing Date, the Company will publicly
      report the issue and sale of the Note and Warrant and the securities issued
      pursuant to the Other Purchase Agreements entered into on or before the Closing
      Date by filing with the SEC a Current Report on Form 8-K under the 1934 Act,
      which report shall describe the material terms of the transactions contemplated
      hereby and thereby and include copies of the forms of the Transaction Documents
      as exhibits to such report (the “Transaction Form 8-K”). The Company
      acknowledges and agrees that, upon the filing of the Transaction Form 8-K with
      the SEC, the Buyer shall not be in possession of any material nonpublic
      information received from the Company, any Subsidiary or any of their respective
      officers, directors, employees or agents.

    


    (2) The
      Company shall not provide, and shall cause each Subsidiary and the respective
      officers, directors, employees and agents of the Company and the Subsidiaries
      not to provide, the Buyer any material nonpublic information regarding the
      Company or any Subsidiary from and after the date the Company files, or is
      required by this Agreement to file, the Transaction Form 8-K with the SEC
      without the prior express written consent of the Buyer.

    


    (m) Limitation
      on Certain Transactions.  From
      the
      date of this Agreement until after the SEC Effective Date of the Registration
      Statement contemplated by Section 8(a)(1), without the prior written consent
      of
      the Buyer (which consent may be withheld in the Buyer’s sole discretion), the
      Company shall not issue or sell or agree to issue or sell any securities (aside
      from the Other Notes and the Other Warrants) in a capital raising transaction,
      unless such securities will not be, and are not, registered for sale or resale
      under the 1933 Act until on or after such SEC Effective Date; provided, however,
      that the limitation of this Section 5(m) shall not apply to (a) shares of Common
      Stock or options to employees, officers, directors or consultants of the Company
      pursuant to any stock or option plan duly adopted by a majority of the
      non-employee members of the Board of Directors of the Company 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 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, exchange or conversion price of any such securities, and (c)
      securities issued pursuant to acquisitions or strategic transactions, provided
      any such issuance shall only be to a Person which is, itself or through its
      subsidiaries, an operating company in a business synergistic with the business
      of the Company and in which the Company receives 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 (collectively, an “Exempt
      Issuance”). The Company agrees that, except for the amounts of securities to be
      purchased and the name of the buyer and the Restricted Ownership Percentage,
      the
      terms and provisions of the Other Notes and the Other Warrants shall be
      identical to the Note and the Warrant.

    


    
      
        
        

      

      
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    (n) Debt
      Obligation.   So
      long
      as any portion of the Note is outstanding, the Company shall cause its books
      and
      records to reflect the Note as a debt of the Company in its unpaid principal
      amount, shall cause its financial statements to reflect the Note as a debt
      of
      the Company in accordance with Generally Accepted Accounting Principles and
      as a
      valid senior debt obligation of the Company for money borrowed that is secured
      by the Collateral (unless all Collateral shall have been released pursuant
      to
      the Security Agreement and the security interest thereunder shall have
      terminated).

    


    (o) Security
      Agreement; Financing Statements, Etc.  The
      Company agrees to execute and deliver to the Collateral Agent at or before
      the
      closing on the Closing Date the Patent and Trademark Security Agreement in
      the
      form attached hereto as Annex
      III
      and the
      Pledge and Security Agreement in the form attached hereto as Annex
      IV.
      The
      Company shall prepare and at or before the closing on the Closing Date file
      with
      the appropriate officials, Uniform Commercial Code financing statements on
      Form
      UCC-1 relating to the Collateral in which the Company is granting a security
      interest to the Collateral Agent for the benefit of the holders of the Note
      and
      the Other Notes pursuant to the Pledge and Security Agreement and prepare and
      file with the PTO appropriate documents relating to the Collateral in which
      the
      Company is granting a security interest to the Collateral Agent for the benefit
      of the holders of the Note and the Other Note pursuant to the Patent and
      Trademark Security Agreement. Prior to the closing on the Closing Date, the
      Company shall provide to the Buyer evidence of such filings and customary,
      current search reports of the relevant Uniform Commercial Code filing offices
      and the PTO.

    


    (p) Stockholder
      Approval; Reverse
      Stock Split.

    


    (1) Stockholder
      Approval.
      The
      Company shall seek, and use its best efforts to obtain, on or before the date
      which is 90 days after the Closing Date, stockholder approval of the issuance
      of
      the Shares in accordance with the terms of the Notes and the Warrants, which
      approval shall meet the requirements of Rule 713 of the AMEX set forth in the
      AMEX Company Guide (“Stockholder Approval”). The Company shall call a meeting of
      stockholders (the “Stockholder Meeting”) to be held within 90 days after the
      Closing Date, shall prepare and file with the SEC as promptly as practical,
      but
      in no event later than 30 days after the Closing Date, preliminary proxy
      materials which set forth a proposal to seek the Stockholder Approval, and
      the
      Board of Directors shall recommend approval thereof by the Company’s
      stockholders. The Company shall mail and distribute its proxy materials for
      the
      Stockholder Meeting to its stockholders at least 30 days prior to the date
      of
      the Stockholder Meeting, shall actively solicit proxies to vote for the
      Stockholder Approval, and within 30 days after the Closing Date shall retain
      a
      proxy solicitation firm of recognized national standing to assist in the
      solicitation. The Company shall provide the Buyer an opportunity to review
      and
      comment on such proxy materials by providing (which may be by e-mail) copies
      of
      such proxy materials and any revised preliminary proxy materials to the Buyer
      a
      reasonable period of time prior to their filing with the SEC. The Company shall
      provide the Buyer (which may be by e-mail) copies of all correspondence from
      or
      to the SEC or its staff concerning the proxy materials for the Stockholder
      Meeting promptly after the same is sent or received by the Company and summaries
      of any comments of the SEC staff which the Company receives orally promptly
      after receiving such oral comments. The Company shall furnish to the Buyer
      and
      its legal counsel (which may be by e-mail) a copy of its definitive proxy
      materials for the Stockholder Meeting and any amendments or supplements thereto
      promptly after the same are first used, mailed to stockholders or filed with
      the
      SEC, shall inform the Buyer of the progress of solicitation of proxies for
      such
      meeting and shall inform the Buyer of any adjournment of the Stockholder Meeting
      and shall report the result of the vote of stockholders on such proposition
      at
      the conclusion of the Stockholder Meeting. If the Company fails to obtain such
      Stockholder Approval, the Company shall call a meeting of stockholders every
      90
      days thereafter until such Stockholder Approval is obtained, and the Company’s
      seeking of such Stockholder Approval shall be conducted in accordance with
      the
      requirements of this Section 5(p)(1).

    


    
      
        
        

      

      
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    (2) Reverse
      Stock Split.
      In
      connection with the Stockholder Meeting, the Company shall also seek, and use
      its best efforts to obtain, on or before the date that is 90 days after the
      Closing Date a reverse split of its Common Stock of not less than one for each
      ten shares of Common Stock outstanding prior thereto (the “Reverse Stock
      Split”). The Company shall include the Reverse Stock Split in the preliminary,
      revised preliminary and definitive proxy materials prepared, filed with the
      SEC
      and used for the Stockholder Approval, and the Company’s seeking of approval of
      the Reverse Stock Split shall be conducted in accordance with the requirements
      of Section 5(p)(1).

     

    (q) Short
      Sales and Confidentiality After The Date Hereof. 
The
      Buyer
      covenants that neither it nor any affiliates acting on its behalf or pursuant
      to
      any understanding with it will execute any Short Sales during the period
commencing
      from
      the time
      that the Buyer first received a term sheet from the Company or any other Person
      setting forth the material terms of the transactions contemplated hereunder
      and
      ending on the earlier of (i) the date that the transactions contemplated by
      this
      Agreement are first publicly announced as described in Section 5(k) and (ii)
      the
      date, if applicable, that this Agreement is terminated pursuant to Section
      10(l). The Buyer covenants that until such time as the transactions contemplated
      by this Agreement are publicly disclosed by the Company as described in Section
      5(k) or the earlier termination of this Agreement, the Buyer will maintain
      the
      confidentiality of all disclosures made to it in connection with this
      transaction (including the existence and terms of this transaction). The Buyer
      understands and acknowledges that the SEC currently takes the position that
      coverage of short sales of shares of the Common Stock “against the box” prior to
      the effective date of the Registration Statement with the Securities is a
      violation of Section 5 of the 1933 Act, as set forth in Item 65, Section 5
      under
      Section A, of the Manual of Publicly Available Telephone Interpretations, dated
      July 1997, compiled by the Office of Chief Counsel, Division of Corporation
      Finance. Notwithstanding the foregoing, the Buyer does not make any
      representation, warranty or covenant hereby that it will not engage in Short
      Sales in the securities of the Company after the earlier of (i) the date that
      the transactions contemplated by this Agreement are first publicly announced
      as
      described in Section 5(k) and (ii) the date, if applicable, that this Agreement
      is terminated pursuant to Section 10(l). Notwithstanding the foregoing, in
      the
      case of a Buyer that is a multi-managed investment vehicle whereby separate
      portfolio managers manage separate portions of such Buyer's assets and the
      portfolio managers have no direct knowledge of the investment decisions made
      by
      the portfolio managers managing other portions of such Buyer'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.

    


    
      
        
        

      

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

    


    The
      Buyer
      understands that the Company’s obligation to sell the Note and issue the Warrant
      to the Buyer pursuant to this Agreement is conditioned upon satisfaction of
      the
      following conditions precedent on or before the Closing Date (any or all of
      which may be waived by the Company in its sole discretion):

    


    (a) On
      the
      Closing Date, no legal action, suit or proceeding shall be pending or threatened
      which seeks to restrain or prohibit the transactions contemplated by this
      Agreement; and

    


    (b) The
      representations and warranties of the Buyer contained in this Agreement shall
      have been true and correct on the date of this Agreement and on the Closing
      Date
      as if made on the Closing Date and on or before the Closing Date the Buyer
      shall
      have performed all covenants and agreements of the Buyer contained in this
      Agreement and required to be performed by the Buyer on or before the Closing
      Date.

    


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

    


    The
      Company understands that the Buyer’s obligation to purchase the Note and acquire
      the Warrant is conditioned upon satisfaction of the following conditions
      precedent on or before the Closing Date (any or all of which may be waived
      by
      the Buyer in its sole discretion):

    


    (a) No
      legal
      action, suit or proceeding shall be pending or threatened which seeks to
      restrain or prohibit the transactions contemplated by this
      Agreement;

    


    (b) The
      representations and warranties of the Company contained in this Agreement shall
      have been true and correct on the date of this Agreement and shall be true
      and
      correct on the Closing Date as if given on and as of the Closing Date (except
      for representations given as of a specific date, which representations shall
      be
      true and correct as of such date), and on or before the Closing Date the Company
      shall have performed all covenants and agreements of the Company contained
      herein or in any of the other Transaction Documents required to be performed
      by
      the Company on or before the Closing Date;

    


    (c) No
      event
      which, if the Note were outstanding, (1) would constitute an Event of Default
      or
      which, with the giving of notice or the passage of time, or both, would
      constitute an Event of Default shall have occurred and be continuing or (2)
      would constitute a Repurchase Event or which, with the giving of notice or
      the
      passage of time, or both, would constitute a Repurchase Event shall have
      occurred and be continuing;

    


    
      
        
        

      

      
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    (d) The
      Company shall have delivered to the Buyer a certificate, dated the Closing
      Date,
      duly executed by its Chief Executive Officer or Chief Financial Officer, to
      the
      effect set forth in subparagraphs (a), (b) and (c) of this Section
      7;

    


    (e) The
      Company shall have delivered to the Buyer a certificate, dated the Closing
      Date,
      of the Secretary of the Company certifying (1) the Certificate of Incorporation
      and By-Laws of the Company as in effect on the Closing Date, (2) all resolutions
      of the Board of Directors (and committees thereof) of the Company relating
      to
      this Agreement and the other Transaction Documents and the transactions
      contemplated hereby and thereby and (3) such other matters as reasonably
      requested by the Buyer;

    


    (f) The
      Collateral Agent shall have executed and delivered to the Company the Pledge
      and
      Security Agreement and a copy thereof duly executed and delivered by the
      Company, shall have been furnished to the Buyer;

    


    (g) The
      Buyer
      shall have received from the Company customary, current search reports of the
      relevant Uniform Commercial Code filing offices, the content of which reports
      shall be satisfactory to the Buyer;

    


    (h) All
      filings of financing statements necessary or appropriate under the Uniform
      Commercial Code in connection with the Pledge and Security Agreement shall
      have
      been made, and the Buyer shall have received satisfactory evidence of such
      filings;

    


    (i) The
      Collateral Agent shall have executed and delivered to the Company the Patent
      and
      Trademark Security Agreement and
      a
      copy thereof duly executed and delivered by the Company, shall have been
      furnished to the Buyer;

    


    (j) The
      Buyer
      shall have received from the Company customary, current search reports of the
      PTO, the content of which reports shall be satisfactory to the
      Buyer;

    


    (k) All
      filings with the PTO necessary or appropriate in connection with the Patent
      and
      Trademark Security Agreement shall have been made, and the Buyer shall have
      received satisfactory evidence of such filings;

    


    (l) The
      Lockbox Agent shall have executed and delivered to the Company the Lockbox
      Agreement and a copy thereof duly executed and delivered by the Company shall
      have been furnished to the Buyer;

    


    (m) The
      Conversion Shares and the Warrant Shares shall have been approved for listing,
      subject only to official notice of issuance, by the AMEX and the Buyer shall
      have received written evidence of such approval by the AMEX; 

    


    (n) On
      the
      Closing Date, the Buyer shall have received an opinion of Sichenzia Ross
      Friedman Ference LLP, counsel for the Company, dated the Closing Date, addressed
      to the Buyer, in the form attached as Annex
      VII
      and
      otherwise in form, scope and substance reasonably satisfactory to the Buyer
      and
      an opinion of Epstein Drangel Bazerman & James, LLP, intellectual property
      counsel for the Company, dated the Closing Date, addressed to the Buyer, in
      the
      form attached as Annex
      VIII
      and
      otherwise in form, scope and substance reasonably satisfactory to the Buyer;
      and

    


    
      
        
        

      

      
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    (o) On
      the
      Closing Date, (i) trading in securities on the New York Stock Exchange, Inc.,
      the AMEX, Nasdaq or the Nasdaq Capital Market shall not have been suspended
      or
      materially limited and (ii) a general moratorium on commercial banking
      activities in the State of New York shall not have been declared by either
      federal or state authorities.

    


    (p) John
      Atherly shall have executed and delivered to the Buyers and the Company a Lockup
      Agreement in the form attached as Annex
      IX.

    


    8. REGISTRATION
      RIGHTS.

    


    (a) Mandatory
      Registration.  (1)
      The
      Company shall prepare and, as expeditiously as possible, but in no event later
      than the date which is 30 days after the Closing Date, file with the SEC a
      Registration Statement which covers the resale by the Buyer of a number of
      shares of Common Stock equal to 100% of the sum of (A) the number of Conversion
      Shares issuable upon conversion of the Note plus
      (B) the
      number of Warrant Shares issuable upon exercise of the Warrant, as Registrable
      Securities, and which Registration Statement shall state that, in accordance
      with Rule 416 under the 1933 Act, such Registration Statement also covers such
      indeterminate number of additional shares of Common Stock as may become issuable
      upon conversion of the Note or exercise of the Warrant to prevent dilution
      resulting from stock splits, stock dividends or similar transactions.


    


    (2) Prior
      to
      the earlier of the (i) SEC Effective Date, or (ii) two (2) years from the date
      hereof, the Company shall not file any other registration statement or any
      amendment thereto with the SEC under the 1933 Act or request the acceleration
      of
      the effectiveness of any other registration statement previously filed with
      the
      SEC, other than (A) any registration statement on Form S-8 and (B) any
      registration statement or amendment which the Company is required to file,
      or as
      to which the Company is required to request acceleration, pursuant to any
      obligation in effect on the date of execution and delivery of this
      Agreement.

    


    (3) If
      at any
      time or from time to time after the Closing Date any Investor shall hold or
      be
      the beneficial owner of any Registrable Securities, other than those Registrable
      Securities included in the Registration Statement that the Company is required
      to file under Section 8(a)(1), which Registrable Securities are not covered
      by a
      Registration Statement, then promptly following the written demand of any
      Investor following the issuance of such additional Registrable Securities or
      the
      issuance of any securities convertible into, exchangeable for, or otherwise
      entitling an Investor to acquire, such additional Registrable Securities, and
      in
      any event within 30 days following such demand, the Company shall prepare and
      file with the SEC a new Registration Statement on Form S-3 (or, if Form S-3
      is
      not then available to the Company, on such form of registration statement as
      is
      then available to effect a registration for resale of such additional
      Registrable Securities) covering the resale by such Investor of such additional
      Registrable Securities. Such Registration Statement also shall cover, to the
      extent permitted by the 1933 Act and the rules promulgated thereunder (including
      Rule 416), such indeterminate number of additional securities resulting from
      stock splits, stock dividends or similar transactions with respect to such
      additional Registrable Securities. Nothing herein shall limit the Company’s
      obligations or any Investor’s rights under Section 6.4 of the Note or Section 9
      of the Warrant.

    


    
      
        
        

      

      
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    (4) If
      a
      Payment Event occurs, then the Company will make payments to the Buyer, in
      immediately available funds in lawful money of the United States, as partial
      liquidated damages for the minimum amount of damages to the Buyer by reason
      thereof, and not as a penalty, which payments shall accrue at the rate of 1.0%
      per month of the principal amount of the Note at the time outstanding during
      each Payment Period. Each such payment shall be due and payable within five
      Business Days after the end of each calendar month during which any Payment
      Period occurs until the termination of such Payment Period and within five
      Business Days after such termination. Such payments shall be in partial
      compensation to the Buyer, and shall not constitute the Buyer’s exclusive remedy
      for any Payment Event. A particular Payment Period shall terminate upon (u)
      the
      filing of the applicable Registration Statement, in the case of clause (i)
      of
      the definition of “Payment Event”; (v) the applicable SEC Effective Date for the
      particular Registration Statement, in the case of clause (ii) or (iii) of the
      definition of “Payment Event”; (w) the ability of the Buyer to effect sales
      pursuant to the applicable Registration Statement, in the case of clause (iv)
      of
      the definition of “Payment Event”; (x) the listing or inclusion and/or trading
      of the Common Stock on a Trading Market, as the case may be, in the case of
      clause (v) of the definition of “Payment Event”; (y) the issuance and delivery
      of the shares, in the case of clause (vi) of the definition of “Payment Event”;
      and (z) in the case of the events described in clauses (ii), (iii) and (iv)
      of
      the definition of “Payment Event”, the earlier termination of the Registration
      Period, and in each such case in the preceding clauses (u) thorough (z), any
      Payment Period that commenced by reason of the occurrence of any Payment Event
      shall terminate if at the time (1) no other Payment Event is continuing or
      (2)
      subject to the rights of any transferee under Section 10(j), the Buyer no longer
      holds any portion of the Note or any Registrable Securities. Notwithstanding
      any
      other provision of this Section 8(a)(4) to the contrary, the Company shall
      not
      be obligated to make any payments hereunder for Payment Periods in excess of
      an
      aggregate of 548 days. If the Company fails to pay any liquidated damages
      pursuant to this Section in full within three days after the date payable,
      the
      Company will pay interest thereon at a rate of 16% per annum (or such lesser
      rate as is the highest rate permitted by applicable law) to the Buyer, accruing
      daily from the date such liquidated damages are due until such amounts, plus
      all
      such interest thereon, are paid in full.

    


    (b) Obligations
      of the Company.  In
      connection with the registration of the Registrable Securities, the Company
      shall:

    


    (1) use
      its
      best efforts to cause each Registration Statement to become effective as
      promptly as possible after the filing thereof and
      to
      keep such Registration Statement effective at all times during the Registration
      Period. The Company shall submit to the SEC, within three Business Days after
      the Company learns that no review of such Registration Statement will be made
      by
      the staff of the SEC or that the staff of the SEC has no further comments on
      such Registration Statement, as the case may be, a request for acceleration
      of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. The Company represents and
      warrants to the Investors that (a) each Registration Statement (including any
      amendment or supplement thereto and prospectus contained therein), at the time
      it is first filed with the SEC, at the time it is ordered effective by the
      SEC
      and at all times during which it is required to be effective hereunder (and
      each
      such amendment and supplement at the time it is filed with the SEC and at all
      times during which it is available for use in connection with the offer and
      sale
      of the Registrable Securities) shall not contain any untrue statement of a
      material fact or omit to state a material fact required to be stated therein
      or
      necessary to make the statements therein not misleading and (b) each Prospectus,
      at the time the related Registration Statement is declared effective by the
      SEC
      and at all times that such Prospectus is required by this Agreement to be
      available for use by any Investor and, in accordance with Section 8(c)(4),
      any
      Investor is entitled to sell Registrable Securities pursuant to such Prospectus,
      shall not contain any untrue statement of a material fact or omit to state
      a
      material fact required to be stated therein, or necessary to make the statements
      therein, in light of the circumstances in which they were made, not
      misleading;

    


    
      
        
        

      

      
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    (2) subject
      to Section 8(b)(5), prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to each Registration Statement and
      Prospectus as may be necessary to keep such Registration Statement effective,
      and such Prospectus current, at all times during the Registration Period, and,
      during the Registration Period (other than during any Blackout Period during
      which the provisions of Section 8(b)(5)(B) are applicable), comply with the
      provisions of the 1933 Act applicable to the Company in order to permit the
      disposition by the Investors of all Registrable Securities covered by such
      Registration Statement;

    


    (3) furnish
      to Investors whose Registrable Securities are included in a particular
      Registration Statement and such Investors’ respective legal counsel, promptly
      after the same is prepared and publicly distributed, filed with the SEC or
      received by the Company, (1) one conformed copy of such Registration Statement
      and any amendment thereto and the related Prospectus and each amendment or
      supplement thereto and (2) such number of copies of such Prospectus and all
      amendments and supplements thereto and such other documents, as such Investor
      may reasonably request in order to facilitate the disposition of the Registrable
      Securities owned by such Investor; and notify the Investor and its legal counsel
      within one Business Day after the same is filed with the SEC, or received by
      the
      Company, of the filing or receipt of each letter written by or on behalf on
      the
      Company to the SEC or the staff of the SEC, and each item of correspondence
      from
      the SEC or the staff of the SEC, in each case relating to such Registration
      Statement (other than any portion of any thereof which contains information
      for
      which the Company has sought confidential treatment), and permit counsel
      designed by the Investor to review letters and items of correspondence upon
      the
      request of such counsel;

    


    (4) subject
      to Section 8(b)(5), use its best efforts (i) to register and qualify the
      Registrable Securities covered by each Registration Statement under the
      securities or blue sky laws of such jurisdictions as any Investor who owns
      or
      holds any Registrable Securities reasonably requests, (ii) to prepare and to
      file in those jurisdictions such amendments (including post-effective
      amendments) and supplements to such registrations and qualifications as may
      be
      necessary to maintain the effectiveness thereof at all times during the
      Registration Period and (iii) to take all other actions reasonably necessary
      or
      advisable to qualify the Registrable Securities for sale by the Investors in
      such jurisdictions; provided,
      however,
      that the
      Company shall not be required in connection therewith or as a condition thereto
      (I) to qualify to do business in any jurisdiction where it would not otherwise
      be required to qualify but for this Section 8(b)(4), (II) to subject itself
      to
      general taxation in any such jurisdiction, (III) to file a general consent
      to
      service of process in any such jurisdiction, (IV) to provide any undertakings
      that cause more than nominal expense or burden to the Company or (V) to make
      any
      change in its certificate or article of incorporation or by-laws which the
      Board
      of Directors of the Company determines to be contrary to the best interests
      of
      the Company and its stockholders;

    


    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    (5) (A)
      as
      promptly as practicable after becoming aware of such event or circumstance,
      notify each Investor of the occurrence of any event or circumstance of which
      the
      Company has knowledge (x) as a result of which any Prospectus, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading, (y) which requires the Company to amend or supplement any
      Registration Statement due to the receipt from an Investor or any other selling
      stockholder named in the Prospectus of new or additional information about
      such
      Investor or selling stockholder or its intended plan of distribution of its
      Registrable Securities or other securities covered by such Registration
      Statement, or (z) which requires the Company to amend or supplement any
      Registration Statement pursuant to the Company’s undertakings as set forth in
      the Registration Statement and in Item 512 of Regulation S-K under the 1933
      Act,
      and use its best efforts promptly to prepare a supplement or amendment to such
      Registration Statement and Prospectus to correct such untrue statement or
      omission or to add any new or additional information, and deliver a number
      of
      copies of such supplement or amendment to each Investor as such Investor may
      reasonably request;

    


    (B) notwithstanding
      Section 8(b)(5)(A) above, if at any time the Company notifies the Investors
      as
      contemplated by Section 8(b)(5)(A) with respect to a particular Registration
      Statement or Prospectus the Company also notifies the Investors that the event
      giving rise to such notice relates to a development involving the Company which
      occurred subsequent to the later of (x) the SEC Effective Date of the applicable
      Registration Statement and (y) the latest date prior to such notice on which
      the
      Company has amended or supplemented such Registration Statement, then the
      Company shall not be required to use best efforts to make such amendment during
      a Blackout Period; provided,
      however,
      that in
      any period of 365 consecutive days the Company shall not be entitled to avail
      itself of its rights under this Section 8(b)(5)(B) with respect to more than
      two
      Blackout Periods; and provided
      further, however, that
      no
      Blackout Period may commence sooner than 90 days after the end of an earlier
      Blackout Period;

    


    (6) as
      promptly as practicable after becoming aware of such event, notify each Investor
      who holds Registrable Securities being offered or sold pursuant to a particular
      Registration Statement of the issuance by the SEC of any stop order or other
      suspension of effectiveness of such Registration Statement at the earliest
      possible time;

    


    (7) permit
      the Investors who hold Registrable Securities being included in a particular
      Registration Statement (or their designee) and their counsel to review and
      have
      a reasonable opportunity to comment on such Registration Statement and any
      related Prospectus and all amendments and supplements thereto at least two
      Business Days prior to their filing with the SEC;

    


    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    (8) make
      generally available to its security holders as soon as practical, but not later
      than 90 days after the close of the period covered thereby, an earning statement
      (in form complying with the provisions of Rule 158 under the 1933 Act) covering
      a 12-month period beginning not later than the first day of the Company’s fiscal
      quarter next following the SEC Effective Date of each Registration
      Statement;

    


    (9) make
      available for inspection by any Investor and any Inspector retained by such
      Investor, at such Investor’s sole expense, all Records as shall be reasonably
      necessary or appropriate to enable such Investor to exercise due diligence
      for
      purposes of the 1933 Act and the 1934 Act as it relates to the Registration
      Statement and cause the Company’s and the Subsidiaries officers, directors and
      employees to supply all information which such Investor or Inspector may
      reasonably request for purposes of such due diligence; provided,
      however, that
      such
      Investor shall hold in confidence and shall not make any disclosure of any
      Record or other information which the Company determines in good faith to be
      confidential, and of which determination such Investor is so notified, unless
      (i) the disclosure of such Record is necessary to avoid or correct a
      misstatement or omission in a Registration Statement or Prospectus and a
      reasonable time prior to such disclosure the Investor shall have notified the
      Company of the need to so correct such misstatement or omission and the Company
      shall have failed to correct such misstatement or omission, (ii) the release
      of
      such Record is ordered pursuant to a subpoena or other order from a court or
      governmental body of competent jurisdiction or (iii) the information in such
      Record has been made generally available to the public other than by disclosure
      in violation of this or any other agreement. The Company shall not be required
      to disclose any confidential information in such Records to any Inspector until
      and unless such Inspector shall have entered into a confidentiality agreement
      with the Company with respect thereto, substantially in the form of this Section
      8(b)(9), which agreement shall permit such Inspector to disclose Records to
      the
      Investor who has retained such Inspector. Each Investor agrees that it shall,
      upon learning that disclosure of such Records is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      notice to the Company and allow the Company, at the Company’s expense, to
      undertake appropriate action to prevent disclosure of, or to obtain a protective
      order for, the Records deemed confidential. The Company shall hold in confidence
      and shall not make any disclosure of information concerning an Investor provided
      to the Company pursuant to this Agreement unless (i) the disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in a Registration Statement or the related Prospectus,
      (iii) the release of such information is ordered pursuant to a subpoena or
      other
      order from a court or governmental body of competent jurisdiction, or (iv)
      such
      information has been made generally available to the public other than by
      disclosure in violation of this or any other agreement. The Company agrees
      that
      it shall, upon learning that disclosure of such information concerning an
      Investor is sought in or by a court or governmental body of competent
      jurisdiction or through other means, give prompt notice to such Investor and
      allow such Investor, at such Investor’s expense, to undertake appropriate action
      to prevent disclosure of, or to obtain a protective order for, such
      information;

    


    (10) use
      its
      best efforts to cause all the Registrable Securities covered by a particular
      Registration Statement as of the SEC Effective Date of such Registration
      Statement to be listed, quoted or traded on the principal securities market
      on
      which securities of the same class or series issued by the Company are then
      listed, quoted or traded;

    


    
      
        
        

      

      
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    (11) provide
      a
      transfer agent and registrar, which may be a single entity, for the Registrable
      Securities at all times;

    


    (12) cooperate
      with the Investors who hold Registrable Securities being offered pursuant to
      a
      particular Registration Statement to facilitate the timely preparation and
      delivery of certificates (not bearing any restrictive legends) representing
      Registrable Securities to be offered pursuant to such Registration Statement
      and
      enable such certificates to be in such denominations or amounts as the Investors
      may reasonably request and registered in such names as the Investors may
      request; and, not later than the SEC Effective Date of such Registration
      Statement, the Company shall cause legal counsel selected by the Company to
      deliver to the Investors whose Registrable Securities are included in the
      Registration Statement opinions of counsel in form and substance as is
      customarily given to underwriters in an underwritten public offering;


    


    (13) advise
      the Investors in writing on the date that the Registration Statement is declared
      effective by the SEC that the form of Prospectus contained in the Registration
      Statement at the time of effectiveness meets the requirements of Section 10(a)
      of the 1933 Act or that it intends to file a Prospectus pursuant to Rule 424(b)
      that meets the requirements of Section 10(a) of the 1933 Act;

    


    (14) during
      the Registration Period, the Company shall not bid for or purchase any Common
      Stock or any right to purchase Common Stock or attempt to induce any Person
      to
      purchase any such security or right if such bid, purchase or attempt would
      in
      any way limit the right of the Investors to sell Registrable Securities by
      reason of the limitations set forth in Regulation M under the 1934 Act;
      and

    


    (15) take
      all
      other reasonable actions necessary to expedite and facilitate disposition by
      the
      Investors of the Registrable Securities pursuant to the Registration Statement
      relating thereto.

    


    (c) Obligations
      of the Buyer and other Investors.  In
      connection with the registration of the Registrable Securities, the Investors
      shall have the following obligations:

    


    (1) It
      shall
      be a condition precedent to the obligations of the Company to complete the
      registration pursuant to this Agreement with respect to the Registrable
      Securities of a particular Investor that such Investor shall furnish to the
      Company completed Selling Securityholder Questionnaire in the form attached
      hereto as Exhibit
      A
      and
      shall execute such other documents in connection with such registration as
      the
      Company may reasonably request.

    


    (2) Each
      Investor by such Investor’s acceptance of the Registrable Securities agrees to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of each Registration Statement hereunder that
      covers such Registrable Securities, unless such Investor has notified the
      Company of such Investor’s election to exclude all of such Investor’s
      Registrable Securities from such Registration Statement;

    


    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    (3) Each
      Investor agrees that it will not effect any disposition of the Registrable
      Securities except as contemplated in the applicable Registration Statement
      or
      Prospectus or as otherwise is in compliance with applicable securities laws
      and
      that it will promptly notify the Company of any material changes in the
      information set forth in the Registration Statement regarding such Investor
      or
      its plan of distribution before selling any Registrable Securities pursuant
      to
      such Registration Statement or Prospectus subsequent to such material change;
      each Investor agrees (a) to notify the Company in writing in the event that
      such
      Investor enters into any material agreement with a broker or a dealer for the
      sale pursuant to a Registration Statement of Registrable Securities through
      a
      block trade, special offering, exchange distribution or a purchase by a broker
      or dealer and (b) in connection with such agreement, to provide to the Company
      in writing the information necessary to prepare any supplemental Prospectus
      pursuant to Rule 424(c) under the 1933 Act which is required with respect to
      such transaction; and

    


    (4) Each
      Investor acknowledges that there may occasionally be times as specified in
      Section 8(b)(5) or 8(b)(6) when the Company must suspend the use of a Prospectus
      until such time as an amendment to the related Registration Statement has been
      filed by the Company and declared effective by the SEC, the Company has prepared
      a supplement to such Prospectus or the Company has filed an appropriate report
      with the SEC pursuant to the 1934 Act. Each Investor hereby covenants that
      it
      will not sell any Registrable Securities pursuant to such Prospectus during
      the
      period commencing at the time at which the Company gives such Investor notice
      of
      the suspension of the use of such Prospectus in accordance with Section 8(b)(5)
      or 8(b)(6) and ending at the time the Company gives such Investor notice that
      such Investor may thereafter effect sales pursuant to the Prospectus, or until
      the Company delivers to such Investor or files with the SEC an amended or
      supplemented Prospectus.

    


    (d) Rule
      144.   With
      a
      view to making available to each Investor the benefits of Rule 144, the Company
      agrees:

    


    (1) so
      long
      as any Investor owns Registrable Securities, promptly upon request of such
      Investor, to furnish to such Investor such information as may be necessary
      to
      permit such Investor to sell Registrable Securities pursuant to Rule 144 without
      registration and otherwise reasonably to cooperate with such Investor
      and

    


    (2) if
      at any
      time the Company is not required by applicable law or this Agreement to file
      reports with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, to use
      its
      best efforts, upon the request of an Investor, to make publicly available other
      information so long as is necessary to permit publication by brokers and dealers
      of quotations for the Common Stock and sales of the Registrable Securities
      in
      accordance with Rule 15c2-11 under the 1934 Act.

    


    9. INDEMNIFICATION
      AND CONTRIBUTION.

    


    (a) Indemnification. 
      (1)
      To
      the extent not prohibited by applicable law, the Company will indemnify and
      hold
      harmless each Indemnified Person against any Claims to which any of them may
      become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such
      Claims (or actions or proceedings, whether commenced or threatened, in respect
      thereof) arise out of or are based upon any Violation. Subject to the
      restrictions set forth in Section 9(a)(3) with respect to the number of legal
      counsel, the Company shall  reimburse the

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

     Investors
      and each such controlling Person, promptly as such expenses are incurred and
      are
      due and payable, for any documented reasonable legal fees or other documented
      and reasonable expenses incurred by them in connection with investigating or
      defending any such Claim. Notwithstanding anything to the contrary contained
      herein, the indemnification agreement contained in this Section 9(a)(1) shall
      not apply to: (I) a Claim arising out of or based upon a Violation which occurs
      in reliance upon and in conformity with information relating to an Indemnified
      Person furnished in writing to the Company by such Indemnified Person or an
      underwriter for such Indemnified Person expressly for use in connection with
      the
      preparation of any Registration Statement or any such amendment thereof or
      supplement thereto; (II) any Claim arising out of or based on any statement
      or
      omission in any Prospectus, which statement or omission was corrected in any
      subsequent Prospectus that was delivered to the Indemnified Person prior to
      the
      pertinent sale or sales of Registrable Securities by such Indemnified Person;
      and (III) amounts paid in settlement of any Claim if such settlement is effected
      without the prior written consent of the Company. Such indemnity shall remain
      in
      full force and effect regardless of any investigation made by or on behalf
      of
      the Indemnified Person and shall survive the transfer of the Registrable
      Securities by the Investors.

    


    (2) In
      connection with each Registration Statement, each Investor who is named as
      a
      selling stockholder in such Registration Statement agrees to indemnify and
      hold
      harmless, to the same extent and in the same manner set forth in Section
      9(a)(1), each Indemnified Party against any Claim to which any of them may
      become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
      Claim arises out of or is based upon any Violation, in each case to the extent
      (and only to the extent) that such Violation occurs in reliance upon and in
      conformity with written information furnished to the Company by such Investor
      expressly for use in connection with such Registration Statement or any
      amendment thereof or supplement thereto; and such Investor will reimburse any
      legal or other expenses reasonably incurred by them in connection with
      investigating or defending any such Claim; provided,
      however,
      that
      the indemnity agreement contained in this Section 9(a)(2) shall not apply to
      amounts paid in settlement of any Claim if such settlement is effected without
      the prior written consent of such Investor; provided,
      further,
      however,
      that an
      Investor shall be liable under this Section 9(a)(2) for only that amount of
      all
      Claims in the aggregate as does not exceed the amount by which the proceeds
      to
      such Investor as a result of the sale of Registrable Securities pursuant to
      such
      Registration Statement exceeds the amount paid by such Investor for such
      Registrable Securities or for the Common Stock Equivalents pursuant to which
      such Registrable Securities were issued, as the case may be. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of such Indemnified Party and shall survive the transfer of the
      Registrable Securities by the Investors. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 9(a)(2) with respect to any preliminary prospectus shall not inure
      to
      the benefit of any Indemnified Party if the untrue statement or omission of
      material fact contained in such preliminary prospectus was corrected on a timely
      basis in the related Prospectus, as then amended or supplemented.

    


    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    (3) Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      9(a) of notice of the commencement of any action (including any governmental
      action), such Indemnified Person or Indemnified Party shall, if a Claim in
      respect thereof is to be made against any indemnifying party under this Section
      9(a), deliver to the indemnifying party a notice of the commencement thereof
      and
      the indemnifying party shall have the right to participate in, and, to the
      extent the indemnifying party so desires, jointly with any other indemnifying
      party similarly noticed, to assume control of the defense thereof with counsel
      reasonably satisfactory to the Indemnified Person or the Indemnified Party,
      as
      the case may be; provided,
      however,
      that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses to be paid by the indemnifying party, if,
      in
      the reasonable opinion of counsel retained by the indemnifying party, the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the indemnifying party would be inappropriate due to actual or potential
      differing interests between such Indemnified Person or Indemnified Party and
      any
      other party represented by such counsel in such proceeding, in which case the
      indemnifying party shall not be responsible for more than one such separate
      counsel, and one local counsel in each jurisdiction in which an action is
      pending, for all Indemnified Persons or Indemnified Parties, as the case may
      be.
      The failure to deliver notice to the indemnifying party within a reasonable
      time
      of the commencement of any such action shall not relieve such indemnifying
      party
      of any liability to the Indemnified Person or Indemnified Party under this
      Section 9(a), except to the extent that the indemnifying party is prejudiced
      in
      its ability to defend such action. The indemnification required by this Section
      9(a) shall be made by periodic payments of the amount thereof during the course
      of the investigation or defense, as such expense, loss, damage or liability
      is
      incurred and is due and payable.

    


    (b) Contribution.
      To
      the
      extent any indemnification by an indemnifying party as set forth in Section
      9(a)
      above is applicable by its terms but is prohibited or limited by law, the
      indemnifying party agrees to make the maximum contribution with respect to
      any
      amounts for which it would otherwise be liable under Section 9(a) to the fullest
      extent permitted by law. In determining the amount of contribution to which
      the
      respective parties are entitled, there shall be considered the relative fault
      of
      each party, the parties’ relative knowledge of and access to information
      concerning the matter with respect to which the claim was asserted, the
      opportunity to correct and prevent any statement or omission and any other
      equitable considerations appropriate under the circumstances; provided,
      however,
      that
      (a) no contribution shall be made under circumstances where the maker would
      not
      have been liable for indemnification under the fault standards set forth in
      Section 9(a), (b) no Person guilty of fraudulent misrepresentation (within
      the
      meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
      from
      any other Person who was not guilty of such fraudulent misrepresentation and
      (c)
      the aggregate contribution by any seller of Registrable Securities shall be
      limited to the amount by which the proceeds received by such seller from the
      sale of such Registrable Securities exceeds the amount paid by such Investor
      for
      such Registrable Securities or for the Common Stock Equivalents pursuant to
      which such Registrable Securities were issued, as the case may be.

    


    (c) Other
      Rights. The
      indemnification and contribution provided in this Section shall be in addition
      to any other rights and remedies available at law or in equity.

     

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    10. MISCELLANEOUS.

    


    (a)
       Governing
      Law.  THIS
      AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF NEW YORK.

    


    (b) Headings. 
       The
      headings, captions and footers of this Agreement are for convenience of
      reference and shall not form part of, or affect the interpretation of, this
      Agreement.

    


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

    


    (d) Notices. 
       Any
      notices required or permitted to be given under the terms of this Agreement
      shall be in writing and shall be sent by certified mail, personal delivery,
      telephone line facsimile transmission or courier and shall be effective five
      days after being placed in the mail, if mailed, or upon receipt, if delivered
      personally, by telephone line facsimile transmission or by courier, in each
      case
      addressed to a party at such party’s address (or telephone line facsimile
      transmission number) shown in the introductory paragraph or on the signature
      page of this Agreement or such other address (or telephone line facsimile
      transmission number) as a party shall have provided by notice to the other
      party
      in accordance with this provision. In the case of any notice to the Company,
      such notice shall be addressed to the Company at its address shown in the
      introductory paragraph of this Agreement, Attention: Chief Executive Officer
      (telephone line facsimile number (425) 749-3601).

    


    (e) Counterparts. 
      This
      Agreement may be executed in counterparts and by the parties hereto on separate
      counterparts, each of which shall be deemed to be an original and all of which
      together shall constitute one and the same instrument. A telephone line
      facsimile transmission of this Agreement bearing a signature on behalf of a
      party hereto shall be legal and binding on such party. Although this Agreement
      is dated as of the date first set forth above, the actual date of execution
      and
      delivery of this Agreement by each party is the date set forth below such
      party’s signature on the signature page hereof. Any reference in this Agreement
      or in any of the documents executed and delivered by the parties hereto in
      connection herewith to (1) the date of execution and delivery of this Agreement
      by the Buyer shall be deemed a reference to the date set forth below the Buyer’s
      signature on the signature page hereof, (2) the date of execution and delivery
      of this Agreement by the Company shall be deemed a reference to the date set
      forth below the Company’s signature on the signature page hereof and (3) the
      date of execution and delivery of this Agreement, or the date of execution
      and
      delivery of this Agreement by the Buyer and the Company, shall be deemed a
      reference to the later of the dates set forth below the signatures of the
      parties on the signature page hereof.

    


    (f) Entire
      Agreement; Benefit.  This
      Agreement, including the Annexes, Schedules and Exhibits hereto, constitutes
      the
      entire agreement between the parties hereto with respect to the subject matter
      hereof. There are no restrictions, promises, warranties, or undertakings, other
      than those set forth or referred to herein and in the Annexes and Exhibits.
      This
      Agreement, including the Annexes and Exhibits, supersedes all prior agreements
      and understandings, whether written or oral, between the parties hereto with
      respect to the subject matter hereof. This Agreement and the terms and
      provisions hereof are for the sole benefit of only the Company, the Buyer and
      their respective successors and permitted assigns.

    


    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

    (g) Waiver. 
      Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, or any course of dealing
      between the parties, shall not operate as a waiver thereof or an amendment
      hereof, nor shall any single or partial exercise of any such right or power,
      or
      any abandonment or discontinuance of steps to enforce such a right or power,
      preclude any other or further exercise thereof or exercise of any other right
      or
      power. 

    


    (h) Amendment. 
      (1)
      No
      amendment, modification, waiver, discharge or termination of any provision
      of
      this Agreement on or prior to the Closing Date nor consent to any departure
      by
      the Buyer or the Company therefrom on or prior to the Closing Date shall in
      any
      event be effective unless the same shall be in writing and signed by the party
      to be charged with enforcement, and in any such case shall be effective only
      in
      the specific instance and for the purpose for which given.

    


    (2) No
      amendment, modification, waiver, discharge or termination of any provision
      of
      this Agreement after the Closing Date nor consent to any departure by the
      Company therefrom after the Closing Date shall in any event be effective unless
      the same shall be in writing and signed (x) by the Company, if the Company
      is to
      be charged with enforcement or (y) by the Majority Holders, if the Buyer is
      to
      be charged with enforcement, and in any such case shall be effective only in
      the
      specific instance and for the purpose for which given but shall nonethless
      bind
      the Buyer and its transferees, successors and assigns; provided,
      however,
      that no
      such amendment modification, waiver, discharge or termination which (i)
      increases the Buyer’s liability, (ii) amends this Section 10(h) or (iii)
      adversely affects the Buyer’s rights under Sections 5(a), 5(b), 5(c), 5(d),
      5(e), 5(f), 5(j), 5(k), 5(l), 5(m), 8(a), 8(b) and 9, shall be effective unless
      in writing signed by the Buyer. 

    


    (3) No
      course
      of dealing between the parties hereto shall operate as an amendment of this
      Agreement.

    


    (i) Further
      Assurances.  Each
      party to this Agreement will perform any and all acts and execute any and all
      documents as may be necessary and proper under the circumstances in order to
      accomplish the intents and purposes of this Agreement and to carry out its
      provisions.

    


    (j) Assignment
      of Certain Rights and Obligations.  The
      rights of an Investor under Sections 5(a), 5(b), 8, 9, and 10 of this Agreement
      shall be automatically assigned by such Investor to any transferee of all or
      any
      portion of such Investor’s Registrable Securities (or all or any portion of the
      Note or the Warrant) if: (1) such Investor agrees in writing with such
      transferee to assign such rights, and a copy of such agreement is furnished
      to
      the Company within a reasonable time after such assignment, (2) the Company
      is,
      within a reasonable
      time after such transfer, furnished with notice of (A) the name and address
      of
      such transferee and (B) the securities with respect to which such rights and
      obligations are being
      transferred, (3) in  the case of assignment of  rights under Section
      8,  immediately following such transfer or assignment the  further
      disposition of Registrable Securities by the 

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    transferee
      or assignee is restricted under the 1933 Act and applicable state securities
      laws, (4) at or before the time the Company received the notice contemplated
      by
      clause (2) of this sentence the transferee agrees in writing with the Company
      to
      be bound with respect to such assigned securities by such of the provisions
      contained in Sections 5(a), 5(b), 8, 9, and 10 hereof as shall have been so
      assigned to such transferee and (5) if Section 5(a) shall be applicable to
      such
      transfer, such Investor shall have complied with Section 5(a). Upon any such
      transfer, the Company shall be obligated to such transferee to perform all
      of
      its covenants under Sections 5(a), 5(b), 8, 9, and 10 of this Agreement, to
      the
      extent the same have been so assigned to such transferee, as if such transferee
      were the Buyer. In connection with any such transfer the Company shall, at
      its
      sole cost and expense, promptly after such transfer take such actions as shall
      be reasonably acceptable to the transferring Investor and such transferee to
      assure that each Registration Statement and related Prospectus for which the
      transferring Investor is a selling stockholder are or become available for
      use
      by such transferee for sales of the Registrable Securities in respect of which
      such rights and obligations have been so transferred. 

    


    (k) Expenses. 
      The
      Company shall be responsible for its expenses (including, without limitation,
      the legal fees and expenses of its counsel), incurred by it in connection with
      the negotiation and execution of, and closing under, and performance of, this
      Agreement. Whether or not the closing occurs, the Company shall be obligated
      to
      pay or reimburse the legal fees and expenses and out-of-pocket due diligence
      expenses of Alexandra Global Master Fund Ltd., not in excess of $40,000, in
      connection with the negotiation and execution of, and closing under, this
      Agreement. All expenses incurred in connection with registrations, filings
      or
      qualifications pursuant to Sections 5(d), 5(e), 5(g) and
      8 of
      this Agreement shall be paid by the Company, including, without limitation,
      all
      registration, listing and qualifications fees, printers and accounting fees
      and
      the fees and disbursements of counsel for the Company but excluding (a) fees
      and
      expenses of investment bankers or other advisors retained by any Investor and
      (b) brokerage commissions incurred by any Investor. The Company shall pay
      promptly upon demand all expenses incurred by the Buyer after the Closing Date,
      including reasonable attorneys’ fees and expenses, as a consequence of, or in
      connection with (1) the negotiation, preparation or execution of any amendment,
      modification or waiver of any of the Transaction Documents, (2) any default
      or
      breach of any of the Company’s representations, warranties, covenants or
      obligations set forth in any of the Transaction Documents, and (3) the
      enforcement or restructuring of any right of, including the collection of any
      payments due, the Buyer under any of the Transaction Documents, including,
      without limitation, any action or proceeding relating to such enforcement or
      any
      order, injunction or other process seeking to restrain the Company from paying
      any amount due the Buyer. Except as otherwise provided in Section 9 and this
      Section 10(k), each of the Company and the Buyer shall bear its own expenses
      in
      connection with this Agreement and the transactions contemplated hereby.


    


    (l) Termination. 
      (1)
      The
      Buyer shall have the right to terminate this Agreement by giving notice to
      the
      Company at any time at or prior to the Closing Date if:

    


    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

    (A) the
      Company shall have failed, refused, or been unable at or prior to the date
      of
      such termination of this Agreement to perform any of its obligations hereunder
      required to be performed prior to the time of such termination;

    


    (B) any
      condition to the Buyer’s obligations hereunder is not fulfilled at or prior to
      the time such condition is required to be satisfied; or

    


    (C) the
      closing shall not have occurred on a Closing Date on or before July 21, 2006,
      other than solely by reason of a breach of this Agreement by the
      Buyer.

     

    Any
      such
      termination shall be effective upon the giving of notice thereof by the Buyer.
      Upon such termination, the Buyer shall have no further obligation to the Company
      hereunder and the Company shall remain liable for any breach of this Agreement
      or the other documents contemplated hereby which occurred on or prior to the
      date of such termination.

    


    (2) The
      Company shall have the right to terminate this Agreement by giving notice to
      the
      Buyer at any times at or prior to the Closing Date if the closing shall not
      have
      occurred on a Closing Date on or before July 21, 2006, other than solely by
      reason of a breach of this Agreement by the Company, so long as the Company
      is
      not in breach of this Agreement at the time it gives such notice. Any such
      termination shall be effective upon the giving of notice thereof by the Company.
      Upon such termination, neither the Company nor the Buyer shall have any further
      obligation to one another hereunder, except for the Company’s liability for the
      Buyer’s expenses as provided in Section 10(k).

    


    (m) Survival. 
      The
      respective representations, warranties, covenants and agreements of the Company
      and the Buyer contained in this Agreement and the documents delivered in
      connection with this Agreement shall survive the execution and delivery of
      this
      Agreement and the other Transaction Documents and the closing hereunder and
      delivery of and payment for the Note and the issuance of the Warrant, and shall
      remain in full force and effect regardless of any investigation made by or
      on
      behalf of the Buyer or any Person controlling or acting on behalf of the Buyer
      or by the Company or any Person controlling or acting on behalf of the
      Company.

    


    (n) Construction;
      Buyer Status.  The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party. The Buyer is not acting as part of a “group” (as
      that term is used in Section 13(d) of the 1934 Act) with any other Person who
      is
      or proposes to become a party to any Other Note Purchase Agreement, or who
      is
      acquiring or holds any Other Note or Other Warrant, in negotiating and entering
      into this Agreement or purchasing the Note and the Warrant or acquiring,
      disposing of or voting any of the Shares. The Company hereby confirms that
      it
      understands and agrees that the Buyer is not acting as part of any such group.
      If the Buyer is other than AGMF, such Buyer acknowledges and agrees that such
      Buyer is not relying on AGMF or AGMF’s legal counsel in making a decision to
      enter into this Agreement, purchase the Note, acquire the Warrant or otherwise
      in connection with the Transaction Documents, and such legal counsel are not
      acting as the Buyer’s legal counsel in connection therewith.

    


    


    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

     

     

    [Signature
      pages follow]

     

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Agreement to be duly executed by their
      respective officers or other representatives thereunto duly authorized on the
      respective dates set forth below their signatures hereto.

    


    Purchase
      Price: $

    Principal
      Amount of Note: $

    Initial
      Conversion Price of Note: $0.26 

    Warrant
      Shares Initially 

    Issuable
      Upon Exercise of Warrant: 

    Initial
      Exercise Price of Warrant: $0.36

     

     

    
      	 	 	 
	 	EMAGIN
              CORPORATION
	 
 	 
 	 
 
	Date: July
              21, 2006	By:  	/s/ Gary
              W.
              Jones
	 	
              
Gary
              W. Jones
	 	Chief
              Executive Officer


    

     

    With
      a
      copy to:

     

    
      	 	 	 
	 	
              Sichenzia
                Ross
                Friedman Ference LLP

              1065
                Avenue of the Americas, 21st
                Floor

              New
                York, New York 10018

              Attention:
                Richard A. Friedman, Esq.

               

              Facsimile
                No: (212) 930-9725

            
	 
 	
              
  
THE
                BUYER:

               

              [NAME]

               

               

            
	 	By:  	[NAME],
              
	 	
              its
                Investment Advisor

            
	 	 


    

     

    
      	 	 	 
	 	 
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:

	 	
              Title 

              Date:
                July 21, 2006

            


    

     

     

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

     

     

     

     

    Address
      for Notices:

    


    


    



    
      
        
        

      

      
        48

        
          

        

      

      
        
        

        
          


        

      

    



    eMagin
      Corporation

     

    Selling
      Securityholder Questionnaire

     

    The
      undersigned beneficial owner (the “Selling Securityholder”) of Common Stock, par
      value $.001 per share, of eMagin Corporation, a Delaware corporation (the
“Company”), understands that the Company intends to file with the Securities and
      Exchange Commission (the “SEC”) a registration statement (the “Registration
      Statement”) for registration of the resale under the Securities Act of 1933, as
      amended (the “Securities Act”), of such securities (the “Registrable
      Securities”). This Questionnaire is delivered pursuant to the terms of the Note
      Purchase Agreement, dated as of July 21, 2006
      (the
“Purchase Agreement”), between the Company and the Buyer named therein. All
      capitalized terms not otherwise defined herein shall have the meanings ascribed
      thereto in the Purchase Agreement.

     

    Certain
      legal consequences arise from being named as a selling securityholder in the
      Registration Statement and the related prospectus. Accordingly, the Selling
      Securityholder is advised to consult its own securities law counsel regarding
      the consequences of being named or not being named as a selling securityholder
      in the Registration Statement and the related prospectus.

     

    The
      Selling Securityholder hereby provides the following information to the Company
      in connection with the Company’s preparation of the Registration
      Statement:

     

    1.     Name.

     

    
      	 	
              (a)

            	
              Full
                Legal Name of Selling
                Securityholder

            


    

     

    
      

    

    
      	 


    

    
      	 	
              (b)

            	
              Full
                Legal Name of Registered Holder (if not the same as (a) above) through
                which Registrable Securities listed in Item 3 below are
                held:

            


    

     

    
      

    

    
      	 


    

    
      	 	
              (c)

            	
              Full
                Legal Name of the natural person who directly or indirectly has power
                to
                vote or dispose of the Registrable Securities listed in Item 3
                below:

            


    

     

    
      

    

     

    2.     Address
      for Notices to Selling Securityholder:

     

    Complete
      the following only if the Selling Securityholder wishes to receive notices
      relating to the Registration at a different address or to a different person
      than the current notice address for purposes of the Purchase
      Agreement.

     

    
      

    

    
      

    

    
      

    

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    Telephone: ________________________________________________ 

    Fax:
      ______________________________________________________

    Contact
      Person: _____________________________________________

    


    3.     Beneficial
      Ownership of Registrable Securities:

     

    
      	 	
              (a)

            	
              Number
                of Registrable Securities (all of which are shares of Common Stock)
                beneficially owned:

            


    

    
       

      
        

      

      
        

      

      
        

      

       

    

     

    4.     Broker-Dealer
      Status:

     

    
      	 	
              (a)

            	
              Are
                you a broker-dealer?

            


    

     

    Yes
      __ No
      __

     

    
      	 	
              Note:

            	
              If
                yes, the SEC staff has indicated that you should be identified as
                an
                underwriter in the Registration
                Statement.

            


    

     

    
      	 	
              (b)

            	
              Are
                you an affiliate of a
                broker-dealer?

            


    

     

    Yes
      __ No
      __

     

    
      	 	
              (c)

            	
              If
                you are an affiliate of a broker-dealer, do you certify that you
                bought
                the Registrable Securities in the ordinary course of business, and
                at the
                time of the purchase of the Registrable Securities to be resold,
                you had
                no agreements or understandings, directly or indirectly, with any
                person
                to distribute the Registrable
                Securities?

            


    

     

    Yes
      __ No
      __

     

    
      	 	
              Note:

            	
              If
                no, the SEC staff has indicated that you should be identified as
                an
                underwriter in the Registration
                Statement.

            


    

     

    
      	
              5.

            	
              Other
                Beneficial Ownership of Common Stock by the Selling
                Securityholder.

            


    

     

    Except
      as set forth below in this Item 5, the Selling Securityholder is not the
      beneficial or registered owner of any shares of Common Stock of the Company
      other than the Registrable Securities listed above in Item 3.

     

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (a)

            	
              Number
                of other shares of Common Stock held of record or beneficially owned
                by
                the Selling Securityholder:

            


    

     

    
      
        

      

      
        

      

      
        

      

    

     

    6. Relationships
      with the Company:

     

    Except
      for the Purchase Agreement and transactions related thereto and except as set
      forth below, the Selling Securityholder has not held any position or office
      or
      had any other material relationship with the Company (or its predecessors or
      affiliates) during the past three years.

     

    State
      any
      exceptions here:

     

    
      
        

      

      
        

      

    

     

    The
      Selling Securityholder’s obligations with respect to the information it provides
      in response to this Questionnaire are set forth in Section 8(c) of the Purchase
      Agreement.

     

    IN
      WITNESS WHEREOF the undersigned, by authority duly given, has caused this
      Questionnaire to be executed and delivered either in person or by its duly
      authorized agent.

     

     

     

    
      	 Dated:________________________________	
                Beneficial
                Owner:_________________________________  

            
	 	
              By:____________________________________________ 

            
	 	
               
                Name: 

            
	 	
               
                Title: 

            
	 	 


    

           

    
 

    PLEASE
      FAX OR E-MAIL THE COMPLETED

    AND
      EXECUTED QUESTIONNAIRE TO:

    


    Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas, 21st
      Floor

    New
      York,
      New York 10018

    Attention:
      Richard A. Friedman, Esq.

    e-Mail
      address: rfriedman@srff.com

     

     

    A-3