Exhibit 10.1


    SECURITIES
      PURCHASE AGREEMENT

     

    BY
      AND BETWEEN

     

    THEATER
      XTREME ENTERTAINMENT GROUP, INC.

     

    AND

     

    KINZER
      TECHNOLOGY, LLC

     

    


     

    


     

    MARCH
      6, 2007

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
TABLE
      OF CONTENTS

     

    
      
        
          	 	 	
                  Page            
                     

                
	 ARTICLE
                  I
                  DEFINITIONS	
                  1

                
	
                      1.1

                	
                  Definitions

                	
                  1

                
	
                  ARTICLE
                    II
                    PURCHASE AND SALE

                	
                  5

                
	
                      2.1

                	
                  Closing

                	
                  5

                
	
                  2.2

                	
                  Deliveries.

                	
                  5

                
	
                  ARTICLE
                    III
                    REPRESENTATIONS AND WARRANTIES

                	
                  5

                
	
                  3.1

                	
                  Representations
                    and Warranties of the Company

                	
                  5

                
	
                  3.2

                	
                  Representations
                    and Warranties of Purchaser

                	
                  16

                
	
                  ARTICLE
                    IV
                    OTHER AGREEMENTS OF THE PARTIES

                	
                  18

                
	
                  4.1

                	
                  Transfer
                    Restrictions.

                	
                  18

                
	
                  4.2

                	
                  Acknowledgment
                    of Dilution

                	
                  20

                
	
                  4.3

                	
                  Furnishing
                    of Information

                	
                  20

                
	
                  4.4

                	
                  Integration

                	
                  20

                
	
                  4.5

                	
                  Reservation
                    and Listing of Conversion Shares.

                	
                  20

                
	
                  4.6

                	
                  Exercise
                    Procedures

                	
                  21

                
	
                  4.7

                	
                  Securities
                    Laws Disclosure; Publicity

                	
                  21

                
	
                  4.8

                	
                  Shareholder
                    Rights Plan

                	
                  22

                
	
                  4.9

                	
                  [INTENTIONALLY
                    DELETED.]

                	
                  22

                
	
                  4.10

                	
                  No
                    Impairment

                	
                  22

                
	
                  4.11

                	
                  Indemnification
                    of Purchaser

                	
                  22

                
	
                  4.12

                	
                  Blue
                    Sky Filings

                	
                  23

                
	
                  4.13

                	
                  Piggy-Back
                    Registrations

                	
                  23

                
	
                  ARTICLE
                    V
                    MISCELLANEOUS

                	
                  23

                


        

         

         

         

        
          
            i

          

          
            
            

            
              

            

          

          
            
            

          

        

         

         

        
          	
                  5.1

                	
                  Fees
                    and Expenses

                	
                  23

                
	
                  5.2

                	
                  Entire
                    Agreement

                	
                  23

                
	
                  5.3

                	
                  Notices

                	
                  24

                
	
                  5.4

                	
                  Amendments;
                    Waivers

                	
                  24

                
	
                  5.5

                	
                  Headings

                	
                  24

                
	
                  5.6

                	
                  Successors
                    and Assigns

                	
                  24

                
	
                  5.7

                	
                  No
                    Third-Party Beneficiaries

                	
                  25

                
	
                  5.8

                	
                  Governing
                    Law

                	
                  25

                
	
                  5.9

                	
                  Survival

                	
                  25

                
	
                  5.10

                	
                  Execution

                	
                  25

                
	
                  5.11

                	
                  Severability

                	
                  26

                
	
                  5.12

                	
                  Rescission
                    and Withdrawal Right

                	
                  26

                
	
                  5.13

                	
                  Replacement
                    of Securities

                	
                  26

                
	
                  5.14

                	
                  Remedies

                	
                  26

                
	
                  5.15

                	
                  Payment
                    Set Aside

                	
                  26

                
	
                  5.16

                	
                  Usury

                	
                  27

                
	
                  5.17

                	
                  Liquidated
                    Damages

                	
                  27

                
	
                  5.18

                	
                  Construction

                	
                  27

                


        

      




    
      
        ii

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBITS:

     

    Exhibit
      A Form
      of
      Debenture

    Exhibit
      B Form
      of
      Warrant


    SCHEDULES:

    


    Schedule
      3.1(d) Conflicts

    Schedule
      3.1(e) Filings, Consents and Approvals

    Schedule
      3.1(z) Indebtedness

    Schedule
      3.1(ee) Senior Indebtedness

    

      
        
          
             

          

          iii

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      




    SECURITIES
      PURCHASE AGREEMENT

    


    This
      Securities Purchase Agreement (this “Agreement”) is dated as of March 6, 2007 by
      and between Theater Xtreme Entertainment Group, Inc., a Florida corporation
      (the
“Company”), and Kinzer Technology, LLC, a Virginia limited liability company
      (“Purchaser”).

    


    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act, the Company desires to issue and sell to
      Purchaser, and Purchaser desires to purchase from the Company, securities of
      the
      Company as more fully described in this Agreement.

    


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

    


    ARTICLE
      I

    DEFINITIONS

     

    1.1  Definitions

     

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

     

    “Affiliate”
of
      a
      Person means any other Person that, directly or indirectly through one or more
      intermediaries, controls or is controlled by or is under common control with
      the
      first such Person. 

    


    “Cancelled
      Debenture”
means
      that certain Seven Hundred Thousand Dollar ($700,000.00) debenture purchased
      by
      Purchaser pursuant to that certain Securities Purchase Agreement by and between
      the Company and Purchaser dated December 22, 2006, and which is being
      surrendered to the Company by Purchaser and cancelled pursuant to the terms
      of
      this Agreement.

    


    “Cash
      Amount”
shall
      have the meaning ascribed to such term in Section 4.5(c).

    


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

    


    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchaser’s obligations to surrender the Cancelled Debenture and pay the
      Purchase Price, and (ii) the Company’s obligations to deliver the Debenture and
      Warrant have been satisfied or waived.

    


    “Code”
means
      the Internal Revenue Code of 1986, as amended, and the rules and regulations
      promulgated thereunder.

     

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    


    “Commission”
means
      the Securities and Exchange Commission.

    


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

    


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

    


    “Company
      Counsel”
means
      Ballard Spahr Andrews and Ingersoll, LLP with offices at 1735 Market Street,
      51st
      Floor,
      Philadelphia, Pennsylvania, 19103−7599.

    


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

    


    “Debenture”
means
      the 10% Debenture to be issued by the Company to Purchaser pursuant to the
      terms
      of this Agreement at the Closing in the form of Exhibit
      A
      attached
      hereto.

    


    “Designated
      Officers”
means
      Scott R. Oglum, Kenneth D. Warren, and James J. Vincenzo, the Chief Executive
      Officer, President, and Chief Financial Officer of the Company, respectively.
      

    


    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended.

    


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

    


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

    


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

    


    “Form
      8-K Filing”
shall
      have the meaning ascribed to such term in Section 4.7.

    


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

    


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

    


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

    


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

    


    “Lien”
means
      a
      lien, charge, security interest, pledge, encumbrance, right of first refusal,
      preemptive right or other preferential arrangement or restriction.

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


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

    


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

    


    “Maximum
      Rate”
shall
      have the meaning ascribed to such term in Section 5.16.

    


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

    


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

    


    “Proceeding”
means
      an action, claim, suit, arbitration, inquiry, notice of violation, investigation
      or proceeding (including, without limitation, an investigation or partial
      proceeding, such as a deposition), whether commenced or, to the knowledge of
      the
      Designated Officers, threatened.

    


    “Purchase
      Price”
shall
      have the meaning ascribed to such term in Section 2.1.

    


    “Purchaser
      Counsel”
means
      Duane Morris LLP with offices at 1180 West Peachtree Street, Suite 700, Atlanta,
      Georgia 30309-3449.

    


    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.11.

    


    “Registrable
      Securities”
means
      (i) all Warrant Shares, (ii) any additional shares of Common Stock issuable
      in
      connection with any anti-dilution provisions in the Warrant (in each case,
      without giving effect to any limitations on exercise set forth in the Warrant),
      and (iii) any securities issued or issuable upon any stock split, dividend
      or
      other distribution, recapitalization or similar event with respect to the
      foregoing.

    


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

    


    “Required
      Minimum”
means,
      as of any date, the maximum aggregate number of shares of Common Stock then
      issued or potentially issuable in the future pursuant to the Transaction
      Documents.

    


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

    


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

    


    “Securities”
means
      the Debenture, the Warrant and the Warrant Shares.

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    


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

    


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

    “Subsidiary”
with
      respect to a Person, means another Person more than 50% of the equity and voting
      interests of which are owned, directly or indirectly, by the first such
      Person.

    


    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

    


    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
      the
      New York Stock Exchange, or the OTC Bulletin Board.

    


    “Transaction
      Documents”
means
      this Agreement, the Debenture, the Warrant, and any other documents or
      agreements executed in connection with the transactions contemplated
      hereunder.

    


    “Transfer
      Agent”
means
      Stock Trans, Inc., with a mailing address of 44 W. Lancaster Avenue, Ardmore,
      Pennsylvania 19003 and a facsimile number of (610) 649−7302, and any successor
      transfer agent of the Company.

    


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

    


    “Warrant”
means
      the Common Stock purchase warrant to be delivered to Purchaser pursuant to
      the
      terms of this Agreement at the Closing in accordance with Section 2.2(a) hereof,
      in the form of Exhibit
      B
      attached
      hereto.

    


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

     

     

    
      
        
        

      

      
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    ARTICLE
      II  

     

    PURCHASE
      AND SALE

     

    2.1  Closing.

     

     Upon
      the terms and subject to the conditions set forth herein, substantially
      concurrent with the execution and delivery of this Agreement by the parties
      hereto, the Company shall and hereby agrees to sell, and Purchaser, shall and
      hereby agrees to purchase, the Warrant and Two Million Seven Hundred Thousand
      Dollars ($2,700,000.00) in principal amount of the Debenture. On the Closing
      Date, (a) Purchaser shall (i) deliver to the Company, via wire transfer, Two
      Million Dollars ($2,000,000.00) (the “Purchase Price”) in immediately available
      funds, and (ii) surrender to the Company for cancellation the Cancelled
      Debenture, (b) the Company shall deliver to Purchaser the Debenture and Warrant,
      and (c) the Company and Purchaser shall deliver the other items set forth in
      Section 2.2 deliverable at the Closing. Upon satisfaction of the conditions
      set
      forth in Section 2.2, the Closing shall occur at the offices of Purchaser
      Counsel or such other location as the parties shall mutually agree.

     

    2.2  Deliveries.

     

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

     

    (i)  a
      legal
      opinion of Company Counsel, in a form reasonably acceptable to Purchaser
      Counsel;

     

    (ii)  the
      Debenture registered in
      the
      name of Purchaser;

     

    (iii)  the
      Warrant registered in the name of Purchaser;
      and

     

    (iv)  any
      other
      document reasonably requested by Purchaser or Purchaser Counsel in connection
      with the transactions contemplated hereunder.

     

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

     

    (i)
      the
      Purchase Price (less all accrued but unpaid interest under the Cancelled
      Debenture) by wire transfer to the account as specified in writing by the
      Company; and 

     

    (ii)
      the
      Cancelled Debenture.

     

    ARTICLE
      III  

     

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company.

     

     The
      Company hereby makes the following representations and warranties to
Purchaser:

     

    (a)  Subsidiaries.
      The
      Company does not directly or indirectly control or own any interest in any
      other
      Person.

     

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)  Organization
      and Qualification.
      The
      Company is an entity duly incorporated, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation, with the requisite
      power and authority to own, lease and use its properties and assets and to
      carry
      on its business as currently conducted. The Company is not in violation or
      default of any of the provisions of its articles of incorporation or bylaws.
      The
      Company is duly qualified to conduct business and is in good standing as a
      foreign corporation in each jurisdiction in which the nature of the business
      conducted or property owned by it makes such qualification necessary, except
      where the failure to be so qualified or in good standing, as the case may be,
      could not have or reasonably be expected to result in (i) a material adverse
      effect on the legality, validity or enforceability of any Transaction Document,
      (ii) a material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company, or (iii) a
      material adverse effect on the Company’s ability to perform fully on a timely
      basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
      a “Material Adverse Effect”), and no Proceeding has been instituted in any such
      jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
      curtail such power and authority or qualification.

     

    (c)  Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations hereunder and thereunder.
      The execution, delivery and performance of each of the Transaction Documents
      by
      the Company and the consummation by it of the transactions contemplated hereby
      and thereby have been duly authorized by all necessary corporate action on
      the
      part of the Company and no further consent or action is required by the Company,
      its Board of Directors or its stockholders in connection therewith other than
      actions necessary to satisfy the Company’s post-closing obligations under the
      Transaction Documents including, to the extent necessary, making the Required
      Filings. Each Transaction Document has been duly executed by the Company and,
      when delivered in accordance with the terms hereof and thereof, will constitute
      the valid and legally binding obligation of the Company enforceable against
      the
      Company in accordance with its terms except (i) as limited by general equitable
      principles and applicable bankruptcy, insolvency, reorganization, moratorium
      and
      other laws of general application affecting enforcement of creditors’ rights
      generally, (ii) as limited by laws relating to the availability of specific
      performance, injunctive relief or other equitable remedies, and (iii) insofar
      as
      indemnification and contribution provisions may be limited by applicable law.
      

     

    (d)  No
      Conflicts.
      Except
      as set forth on Schedule 3.1(d)
      attached
      hereto, the execution, delivery and performance of the Transaction Documents
      by
      the Company and the consummation by the Company of the other transactions
      contemplated hereby and thereby do not and will not: (i) conflict with or
      violate any provision
      of the Company’s articles of incorporation or bylaws, (ii) conflict with, or
      constitute a default (or an event that with notice or lapse of time or both
      would become a default) under, result in the creation of any Lien upon any
      of
      the properties or assets of the Company, or give to others any rights of
      termination, amendment, acceleration or cancellation (with or without notice,
      lapse of time or both) of, any agreement, credit facility, debt or other
      instrument (evidencing a Company debt or otherwise) or other understanding
      to
      which the Company is a party or by which any property or asset of the Company
      is
      bound or affected, or (iii) subject to the Required Filings, conflict with
      or
      result in a violation of any law, rule, regulation, order, judgment, injunction,
      decree or other restriction of any court or governmental authority to which
      the
      Company is subject (including federal and state 

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    securities
      laws and regulations), or by which any property or asset of the Company is
      bound
      or affected; except in the case of each of clauses (ii) and (iii), such as
      could
      not have or reasonably be expected to result in a Material Adverse
      Effect.

     

    (e)  Filings,
      Consents and Approvals.
      Except
      as set forth on Schedule
      3.1(e),
      the
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.7,
      and (ii) such filings (if any) as are required to be made under applicable
      state
      securities laws (collectively, the “Required Filings”). All filings of the
      Company required to be filed with federal, state, local or governmental
      authorities (including the Federal Trade Commission) in connection with the
      Company’s sale of franchises are current as of the date of this
      Agreement.

     

    (f)  Issuance
      of the Securities.
      The
      Debenture and Warrant are duly authorized and, when issued and paid for in
      accordance with this Agreement, will be duly and validly issued, fully paid
      and
      nonassessable, free and clear of all Liens imposed by the
      Company other than those provided for in the Transaction Documents. The Warrant
      Shares, when issued and paid for by Purchaser in accordance with the terms
      of
      the Transaction Documents, will: (i) be validly issued, fully paid and
      nonassessable; (ii)
      be
      issued in compliance with an exemption from registration under all applicable
      federal and state securities laws; and (iii) be free
      and
      clear of all Liens imposed by the Company. The Company has reserved from its
      duly authorized capital stock a number of shares of Common Stock for issuance
      of
      the Warrant Shares at least equal to the Required Minimum.

     

    (g)  Capitalization.
      The
      capitalization of the Company is as follows: 50,000,000 shares of Common Stock,
      par value $.001 per share, are authorized, of which 19,847,425 shares are issued
      and outstanding on the date hereof, and 5,000,000 shares of preferred stock,
      without
      par value, are authorized, of which no shares are issued or outstanding. No
      Person has any right of first refusal, preemptive right, right of participation,
      or any similar right to participate in the transactions contemplated by the
      Transaction Documents. In addition to the Warrant offered for sale to Purchaser
      hereunder, there are three outstanding warrants to purchase 440,000 shares
      of
      Common Stock in the aggregate at an exercise price of $1.00 per share and one
      outstanding warrant to purchase 560,000 shares of Common Stock at an exercise
      price of $1.10 per share. There are no other outstanding warrants or options,
      script rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities, rights or obligations convertible into or
      exercisable or exchangeable for, or giving any Person any right to subscribe
      for
      or acquire, any shares of Common Stock, or contracts, commitments,
      understandings or arrangements by which the Company is or may become bound
      to
      issue additional shares of Common Stock or Common Stock Equivalents other than
      pursuant to the exercise of employee stock options under the Company’s stock
      option plans or the issuance of shares of Common Stock to employees pursuant
      to
      the Company’s employee stock purchase plan or pursuant to the warrants referred
      to in the preceding sentence. The issuance and sale of the Securities will
      not
      obligate the Company to issue shares of Common Stock or other securities to
      any
      Person (other than Purchaser) and will not result in a right of any holder
      of
      Company securities to adjust the exercise, conversion, exchange or reset price
      under any of such securities. 

     

     

    
      
        
        

      

      
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    All
      of
      the outstanding shares of capital stock of the Company are validly issued,
      fully
      paid and nonassessable, have been issued in compliance with all federal and
      state securities laws, and none of such outstanding shares was issued in
      violation of any preemptive rights or similar rights to subscribe for or
      purchase securities. No further approval or authorization of any stockholder,
      the Board of Directors of the Company or others is required for the issuance
      and
      sale of the Securities. There are no stockholders’ agreements, voting agreements
      or other similar agreements with respect to the Company’s capital stock to which
      the Company is a party or, to the knowledge of the Company, between or among
      any
      holder of securities of the Company. 

     

    (h)  SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by the Company under the Securities Act and the Exchange
      Act, including pursuant to Section 13(a) or 15(d) thereof,
      for the two (2) years preceding the date hereof (or such shorter period as
      the
      Company was required by law or regulation to file such material) (the foregoing
      materials, including the exhibits thereto and documents incorporated by
      reference therein, being collectively referred to herein as the “SEC Reports”)
      on a timely basis or has received a valid extension of such time of filing
      and
      has filed any such SEC Reports prior to the expiration of any such extension.
      Except to the extent set forth in that certain letter dated February 27, 2007
      from the Commission to the Company (the “Commission’s Letter”), as of their
      respective dates of filing with the Commission, the SEC Reports, together with
      any amendments thereto, complied in all material respects with the requirements
      of the Securities Act and the Exchange Act, as applicable. Notwithstanding
      the
      Commission’s Letter, none of the SEC Reports, when filed, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they were made, not misleading. Except
      to
      the extent set forth in the Commission’s Letter, the financial statements of the
      Company included in the SEC Reports (the “Financial Statements”) comply in all
      material respects with applicable accounting requirements and the rules and
      regulations of the Commission with respect thereto as in effect at the time
      of
      filing. Except to the extent set forth in the Commission’s Letter, the Financial
      Statements have been prepared in accordance with United States generally
      accepted accounting principles applied on a consistent basis during the periods
      involved (“GAAP”), except as may be otherwise specified in the Financial
      Statements or the notes thereto and except that unaudited financial statements
      may not contain all footnotes required by GAAP and are subject to routine
      year-end adjustments which are not material in the aggregate. Notwithstanding
      the Commission’s Letter, the Financial Statements fairly present in all material
      respects the financial position of the Company as of and for the dates thereof
      and the results of operations and cash flows for the periods then ended,
      subject, in the case of unaudited statements, to normal, year-end audit
      adjustments as referred to above. The Company has never had and does not
      currently have any off-balance sheet arrangements (as defined in Item 303(c)(2)
      of Regulation S-B as promulgated by the Commission) that have had, or are
      reasonably likely to have, a current or future effect on the Company’s financial
      condition, changes in financial condition, revenues or expense, results of
      operations, liquidity, capital expenditures or capital resources. The Company
      will respond to that certain letter dated February 27, 2007 from the Commission
      to the Company in a timely manner, and the Company’s response to the Commission
      and any amendments to its SEC Reports in connection therewith will not have
      a
      Material Adverse Effect.

     

     

    
      
        
        

      

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

     

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

     

    (k)  Labor
      Relations.
      No
      labor dispute exists or, to the knowledge of the Company, is imminent with
      respect to any of the employees of the Company which could reasonably be
      expected to result in a Material Adverse Effect. None of the Company’s
employees
      is a member of a union that relates to such employee’s relationship with the
      Company, and the Company is not a party to a collective bargaining agreement,
      and the Company believes that its relationships with its employees are good.
      No
      executive officer, to the knowledge of the Company, is or is now expected to
      be,
      in violation of any material term of any employment contract, confidentiality,
      disclosure or proprietary information agreement or non-competition agreement,
      or
      any other contract or agreement or any restrictive covenant, and the continued
      employment of each such executive officer does not subject the Company to any
      liability with respect to any of the foregoing matters. The Company is in
      compliance with all U.S. federal, state, local and foreign laws and regulations
      relating to employment and employment practices, terms and conditions of
      employment and wages and hours, except where 

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    the
      failure to be in compliance could not, individually or in the aggregate,
      reasonably be expected to have a Material Adverse Effect.

     

    (l)  Compliance.
      The
      Company (i) is not in default under or in violation of (and no event has
      occurred that has not been waived that, with notice or lapse of time or both,
      would result in a default by the Company under), nor
      has
      the Company received notice of a claim that it is in default under or that
      it is
      in violation of, any indenture, loan or credit agreement or any other agreement,
      contract or instrument to which it is a party or by which it or any of its
      properties is bound (whether or not such default or violation has been waived),
      (ii) is in violation of any order of any court, arbitrator or governmental
      body,
      or (iii) is or has been in violation of any statute, rule or regulation of
      any
      governmental authority, including without limitation all foreign, federal,
      state
      and local laws applicable to its business, including franchise laws, and all
      such laws that affect the environment, except in each case as could not have
      or
      reasonably be expected to result in a Material Adverse Effect.

     

    (m)  Regulatory
      Permits.
      The
      Company possesses all certificates, authorizations and permits issued by the
      appropriate federal, state, local or foreign regulatory authorities necessary
      to
      conduct its business as described in the SEC Reports,
      except where the failure to possess such permits could not have or reasonably
      be
      expected to result in a Material Adverse Effect (“Material Permits”), and the
      Company has not received any notice of Proceedings relating to the revocation
      or
      modification of any certificates, authorizations or permits applicable to the
      Company.

     

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

     

    (o)  Patents
      and Trademarks.
      The
      Company has, or has rights to use, all patents, patent applications, trademarks,
      trademark applications, service marks, trade names, trade secrets, inventions,
      copyrights, licenses and other intellectual property rights
      and similar rights necessary for use in connection with its business as
      described in the SEC Reports and which the failure to so have would have a
      Material Adverse Effect (collectively, the “Intellectual Property Rights”). The
      Company has not received a notice (written or otherwise) that the Intellectual
      Property Rights used by the Company violates or infringes upon the rights of
      any
      Person. To the knowledge of the Company, all such Intellectual Property Rights
      are enforceable and there is no existing infringement by another Person of
      any
      of the Intellectual Property Rights. The Company has taken reasonable security
      measures to protect the secrecy, confidentiality and value of all of its
      intellectual properties, except where failure to do so could not, individually
      or in the aggregate, reasonably be expected to have a Material Adverse
      Effect.

     

     

     

    
      
        
        

      

      
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    (p)  Insurance.
      The
      Company is insured against such losses and risks and in such amounts as
      management of the Company believes to be prudent. The Company has
      no
      reason to believe that it will not be able to renew its existing insurance
      coverage as and when such coverage expires or to obtain similar coverage from
      similar insurers as may be necessary to continue its business without a
      significant increase in cost.

     

    (q)  Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is currently a party to any transaction with the Company
      (other than for services as employees, officers and directors), including any
      contract, agreement or other arrangement providing for the furnishing of
      services to or by, providing for rental of real or personal property to or
      from,
      or otherwise requiring payments to or from any officer, director or such
      employee or, to the knowledge of the Company, any entity in which any officer,
      director, or any such employee has a substantial interest or is an officer,
      director, trustee or partner, in each case in excess of $60,000 other than
      (i)
      for payment of salary or consulting fees for services rendered, (ii)
      reimbursement for expenses incurred on behalf of the Company, and (iii) for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company.

     

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

     

    (s)  Brokerage
      or Finder’s Fees.
      No
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect
      to the transactions 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

    contemplated
      by the Transaction Documents. Purchaser shall have no obligation with respect
      to
      any fees or with respect to any claims made by or on behalf of other Persons
      for
      fees of a type contemplated in this subsection (s) that may be due in connection
      with the transactions contemplated by the Transaction Documents.

     

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

     

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

     

    (v)  Registration
      Rights.
      Other
      than Purchaser, no Person has any right to cause the Company to effect the
      registration under the Securities Act of any securities of the Company, except
      for any such rights which have been satisfied by the Company.

     

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

     

    (x)  Disclosure.
      Subject
      to the limitations acknowledged by Purchaser in Section 3.2(f)(iii), all
      disclosure furnished by or on behalf of the Company to Purchaser regarding
      the
      Company, its business and the transactions contemplated hereby, is true and
      correct and does not contain any untrue statement of a material fact or omit
      to
      state any material fact necessary in order to make the statements made therein,
      in light of the circumstances under which they were made, not misleading.
The
      press
      releases disseminated by the Company during the twelve (12) months prior to
      the
      Closing Date did not contain, at the time of their respective releases, any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein or necessary in order to make the statements, in light of
      the
      circumstances under which they were made and when made, not misleading. The
      Company acknowledges and agrees that Purchaser makes no or has made no
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in Section 3.2
      hereof.

     

     

    
      
        
        

      

      
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    (y)  No
      Integrated Offering.
      Assuming the accuracy of Purchaser’s representations and warranties set forth in
      Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
      acting on its or their behalf has, directly or indirectly, made any offers
      or
      sales of
      any
      security or solicited any offers to buy any security, under circumstances that
      would cause this offering of the Securities to be integrated with prior
      offerings by the Company for purposes of the Securities Act or any applicable
      shareholder approval provision of any Trading Market on which any of the
      securities of the Company are listed or designated.

     

    (z)  Solvency.
      Based
      on the financial condition of the Company as of the Closing Date after giving
      effect to the receipt by the Company of the proceeds from the sale of the
      Securities hereunder: (i) the fair saleable value of the Company’s assets
      exceeds the amount that
      will
      be required to be paid on or in respect of the Company’s existing debts and
      other liabilities (including known contingent liabilities) as they mature;
      (ii)
      the Company’s assets do not constitute unreasonably small capital to carry on
      its business as now conducted and as proposed to be conducted including its
      capital needs taking into account the particular capital requirements of the
      business conducted by the Company, and projected capital requirements and
      capital availability thereof; and (iii) the current cash flow of the Company,
      together with the proceeds the Company would receive, were it to liquidate
      all
      of its assets, after taking into account all anticipated uses of the cash,
      would
      be sufficient to pay all amounts on or in respect of its liabilities when such
      amounts are required to be paid. The Company does not intend to incur debts
      beyond its ability to pay such debts as they mature (taking into account the
      timing and amounts of cash to be payable on or in respect of its debt). The
      Company has no knowledge of any facts or circumstances which lead it to believe
      that it will file for reorganization or liquidation under the bankruptcy or
      reorganization laws of any jurisdiction within one year from the Closing Date.
      The balance sheet of the Company at December 31, 2006, contained in the SEC
      Reports sets forth as of the date thereof all outstanding secured and unsecured
      Indebtedness of the Company, or for which the Company has any commitments.
      Since
      December 31, 2006, the Company has not incurred any Indebtedness except as
      set
      forth on Schedule
      3.1(z).
      For the
      purposes of this Agreement, “Indebtedness” shall mean: (a) any liabilities for
      borrowed money or amounts owed in excess of $50,000 (other than trade accounts
      payable incurred in the ordinary course of business); (b) all guaranties,
      endorsements and other contingent obligations in respect of Indebtedness of
      others, whether or not the same are or should be reflected in the Company’s
      balance sheet (or the notes thereto), except guaranties by endorsement of
      negotiable instruments for deposit or collection or similar transactions in
      the
      ordinary course of business; and (c) the present value of any lease payments
      in
      excess of $50,000 due under leases required to be capitalized in accordance
      with
      GAAP. The Company is not in default with respect to any Indebtedness. Except
      as
      set forth on Schedule
      3.1(z),
      there is
      no outstanding Indebtedness of the Company owed to any Person who owns directly
      or indirectly five percent (5%) or more of the issued and outstanding capital
      stock of the Company. 

     

    (aa)  Tax
      Status.
      The
      Company has properly completed and timely filed all necessary federal, state
      and
      foreign income and franchise tax returns required to be filed by it, and has
      paid all taxes shown to be payable thereon or which are otherwise due and
      payable by it or as to which claim for payment has been made. There is (i)
      no
      claim for any tax that is an encumbrance against any of the Company’s assets and
      properties, (ii) no audit of any tax return relating to the Company that is
      being conducted with respect to the Company, and (iii) no extension of any
      statute of limitations on the assessment of any tax with respect to the
      Company.

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    The
      Company has no knowledge of a tax deficiency which has been asserted or
      threatened against the Company. The Company has withheld all amounts required
      to
      be withheld by law from payment made to any Person, whether that Person is
      an
      employee, independent contractor, or otherwise.

     

    (bb)  No
      General Solicitation.
      Neither
      the Company nor any Person acting on behalf of the Company has offered or sold
      any securities of the Company by any form of general solicitation or general
      advertising. 

     

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

     

    (dd)  Accountants.
      The
      Company’s accounting firm is Morison Cogen LLP. To the knowledge and belief of
      the Company, such
      accounting firm is a registered public accounting firm as required by the
      Exchange Act.

     

    (ee)  Seniority.
      Except
      as set forth on Schedule
      3.1(ee),
      as of
      the Closing Date, no Indebtedness or other claim against the Company is senior
      to the Debenture in right of payment, whether with respect to interest or upon
      liquidation or dissolution, or otherwise, other than indebtedness secured by
      purchase money
      security interests (which is senior only as to underlying assets covered
      thereby) and capital lease obligations (which is senior only as to the property
      covered thereby).

     

    (ff)  No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind currently existing, or reasonably anticipated
      by the Company to arise, between the Company on the one hand and the accountants
      and lawyers formerly or currently engaged by the Company
      on the other hand. 

     

    (gg)  Acknowledgment
      Regarding Purchaser’s Purchase of the Securities.
      The
      Company acknowledges and agrees that Purchaser is acting solely in the capacity
      of an arm’s length purchaser with respect to the Transaction Documents and the
      transactions contemplated
      thereby. The Company further acknowledges that Purchaser is not acting as a
      financial advisor or fiduciary of the Company (or in any similar capacity)
      with
      respect to the Transaction Documents and the transactions contemplated thereby
      and any advice given by Purchaser or any of its respective representatives
      or
      agents in connection with the Transaction Documents and the transactions
      contemplated thereby is merely incidental to Purchaser’s purchase of the
      Securities. The Company further represents to Purchaser that the Company’s
      decision to enter into the Transaction Documents has been based solely on the
      independent evaluation of the transactions contemplated hereby by the Company
      and its representatives. 

     

     

    
      
        
        

      

      
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    (hh)  Acknowledgment
      Regarding Purchaser’s Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding
      (except for Section 3.2(g) hereof), it is understood and acknowledged by the
      Company: (i) that Purchaser has not been asked to agree, nor has Purchaser
      agreed, to desist from purchasing or selling, long and/or short, securities
      of
      the Company, or “derivative” securities based on securities issued by the
      Company or to hold any securities of the Company for any specified term; (ii)
      that future open market or other transactions by Purchaser with respect to
      securities of the Company after the closing of this or future private placement
      transactions, may negatively impact the market price of the Company’s
      publicly-traded securities; and (iii) that Purchaser shall not be deemed to
      have
      any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The Company further understands and acknowledges that
      (a) Purchaser may engage in hedging activities at various times during the
      period that the Securities are outstanding, including, without limitation,
      during the periods that the value of the Warrant Shares deliverable with respect
      to Securities are being determined and (b) such hedging activities (if any)
      could reduce the value of the existing stockholders’ equity interests in the
      Company at and after the time that the hedging activities are being conducted.
      The Company acknowledges that such aforementioned hedging activities do not
      constitute a breach of any of the Transaction Documents.

     

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

     

    (jj)  Contracts.
      All of
      the Company’s material contracts, agreements, understandings and arrangements,
      whether written or oral (collectively, the “Contracts”) are valid, subsisting,
      in full force and effect and binding upon the Company and the other parties
      thereto. The Company is not in default under any of the Contracts. To the
      knowledge of the Company, no other party to any such Contract is in default
      thereunder, nor does any condition exist that with notice or lapse of time
      or
      both would constitute a default by such other party thereunder, except as would
      not be reasonably expected to have a Material Adverse Effect.

     

    (kk)  Employee
      Benefit Plans.
      The SEC
      Reports describe all material employee benefit plans (including any “multiple
      employer plan” within the meaning of the Code or ERISA), arrangements, policies,
      programs, agreements or commitments maintained by the Company (collectively,
      the
“Plans”). Except as would not reasonably be expected to have a Material Adverse
      Effect, (i) each Plan (and related trust, insurance contract or fund) has been
      established and administered in accordance with its terms, and complies in
      form
      and in operation with the applicable requirements of ERISA and the Code and
      other applicable law and regulation, (ii) no claim with respect to the
      administration or the investment of the assets of any Plan (other than routine
      claims for benefits) is pending and all contributions (including all employer
      contributions and employee salary reduction contributions) which are due have
      been paid to each Plan, (iii) each Plan that is intended to be qualified under
      Section 401(a) of the Code is so qualified and has been so qualified during
      the
      period since its adoption; each trust created under any such Plan is exempt
      from
      tax under Section 501(a) of the Code and has been so 

     

     

    
      
        
        

      

      
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    exempt
      since its creation and (iv) there are no unfunded obligations under any Plan
      which are not fully reflected on the Financial Statements.

     

    (ll)  Product
      Liability Claims.
      There
      have been no: (i) product or service warranty claims made by the Company’s
      customers which were not reimbursed or assumed by the Company’s suppliers other
      than routine claims in the ordinary course of business; (ii) product recalls
      by
      the Company; or (iii) product and/or service warranties outstanding or currently
      being offered by the Company to its customers (other than those of third parties
      for which the Company has no obligation or responsibility and the Company’s
      standard quality guarantee to replace any defective product or service) other
      than 30-day installation warranties for which the Company receives no additional
      consideration and longer-term service warranties for which the Company does
      receive additional consideration. Furthermore, neither the Company nor any
      of
      its predecessors in interest have been subject to any product or service
      liability claim relating to any of the Company’s products, services, or
      operation of business of the Company and, to the knowledge of the Company,
      no
      such claim is threatened and no circumstance or condition exists that would
      reasonably be expected to give rise to such a claim.

     

    (mm)  Environmental
      Claims.
      There
      are no environmental claims, or environmental liabilities, pending or, to the
      knowledge of the Company, threatened against the Company by any Person
      (including, without limitation, any governmental entity) relating to: (i) any
      of
      the assets or properties of the Company; (ii) any property currently or formerly
      operated, occupied or leased by the Company; or (iii) any current or former
      product of the Company that has been manufactured, sold, transported or disposed
      of. In addition, the Company has not released any hazardous material. The
      Company is in compliance with all environmental laws.

     

    3.2  Representations
      and Warranties of Purchaser.

     

    Purchaser
      hereby makes the following representations and warranties to
      the
      Company:

     

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

     

    (b)  Own
      Account.
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state


     

     

    
      
        
        

      

      
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    securities
      law. Purchaser is acquiring the Securities as principal for its own account
      and
      not with a view to
      or for
      distributing or reselling such Securities or any part thereof, has no present
      intention of distributing any of such Securities in violation of the Securities
      Act or any applicable state securities law and has no direct or indirect
      arrangement or understandings with any other Person to distribute or regarding
      the distribution of such Securities (this representation and warranty not
      limiting such Purchaser’s right to sell the Securities in compliance with
      applicable federal and state securities laws) in violation of the Securities
      Act
      or any applicable state securities law. Purchaser is acquiring the Securities
      hereunder in the ordinary course of its business.

     

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

     

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

     

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

     

    (f)  Available
      Information.
      Purchaser understands and acknowledges that 

     

    (i)  Purchaser
      has been given access to, and prior to the execution of the Transaction
      Documents, an opportunity to ask questions of and receive answers from, the
      Company concerning the terms and conditions of the offering of the Securities
      and to obtain any other information that Purchaser requested with respect to
      the
      Company’s operations and Purchaser’s proposed investment in the Company in order
      to evaluate the investment and verify the accuracy of all information furnished
      to it regarding the Company;

     

    (ii)  Purchaser
      has been given access to all of the SEC Reports; and

     

    (iii)  Financial
      projections have been provided to Purchaser by the Company as part of the
      information sought by Purchaser, that such projections are based on assumptions
      made by the Designated Officers as to Company operations, that although such
      assumptions are believed by the Designated Officers to be reasonable, not all
      assumptions will actually eventuate and therefore, such projections represent
      possible but not necessarily the most likely financial results for the Company,
      and that such projections must therefore be viewed as estimates only, and there
      can be no assurance of their accuracy.

     

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (g)  Purchases,
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than the transactions contemplated hereunder, Purchaser has not, nor has any
      Affiliate of Purchaser,
      purchased or sold (including Short Sales) any securities of the Company during
      the period commencing from December 23, 2006 and ending on the date hereof.
      Purchaser and its Affiliates have used reasonable efforts to maintain the
      confidentiality of all disclosures made to it in connection with this
      transaction (including the existence and terms of this
      transaction).

     

    ARTICLE
      IV  

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions.

     

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

     

    (b)  Purchaser
      agrees to the imprinting, so long as is required by this Section 4.1, of a
      legend on any of the Securities, as applicable, in substantially the
      following form:

     

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

     

    The
      Company acknowledges and agrees that Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and which agrees to be bound by the provisions of this Agreement
      and, if required under the terms of such arrangement, Purchaser may transfer
      

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

     

    pledged
      or secured Securities to the pledgees or secured parties. Such a pledge or
      transfer would not be subject to approval of the Company and no legal opinion
      of
      legal counsel of the pledgee, secured party or pledgor shall be required in
      connection therewith. Further, no notice shall be required of such pledge.
      At
      Purchaser’s expense, the Company will execute and deliver such reasonable
      documentation as a pledgee or secured party of Securities may reasonably request
      in connection with a pledge or transfer of the Securities including, if the
      Securities are subject to registration with the Commission under the Securities
      Act, the preparation and filing of any required prospectus supplement under
      Rule
      424(b)(3) under the Securities Act or other applicable provision of the
      Securities Act to appropriately amend the list of Selling Stockholders
      thereunder.

     

    (c)  Certificates
      evidencing the Warrant Shares shall not contain any legend (including the legend
      set forth in Section 4.1(b) hereof) restricting transfer of the Warrant Shares
      under the Securities Act: (i) while a registration statement covering the resale
      of such security is effective under the Securities
      Act, (ii) following any sale of such Warrant Shares pursuant to Rule 144, (iii)
      if such Warrant Shares are eligible for sale under Rule 144(k), or (iv) if
      such
      legend is not required under applicable requirements of the Securities Act
      (including judicial interpretations and pronouncements issued by the staff
      of
      the Commission). Under any such circumstances the Company shall cause its
      counsel to issue a legal opinion to the Transfer Agent (if required by the
      Transfer Agent) to effect the removal of the legend hereunder. If all or any
      portion of a Warrant is exercised at a time when there is an effective
      registration statement to cover the resale of the Warrant Shares, or if such
      Warrant Shares may be sold under Rule 144(k) or if such legend on the Warrant
      Shares is not otherwise required under applicable requirements of the Securities
      Act (including judicial interpretations and pronouncements issued by the staff
      of the Commission) then such Warrant Shares shall be issued free of all legends.
      The Company agrees that at such time as such legend is no longer required under
      this Section 4.1(c), it will, no later than three Trading Days following the
      delivery by Purchaser to the Company or the Transfer Agent of a certificate
      representing Warrant Shares, issued with a restrictive legend (such third
      Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to
      Purchaser a certificate representing such shares that is free from all
      restrictive and other legends. The Company may not make any notation on its
      records or give instructions to the Transfer Agent that enlarge the restrictions
      on transfer set forth in this Section. If possible, certificates for Warrant
      Shares subject to legend removal hereunder shall be transmitted by the Transfer
      Agent to Purchaser by crediting the account of Purchaser’s prime broker with the
      Depository Trust Company System.

     

    (d)  In
      addition to Purchaser’s other available remedies, the Company shall pay to
      Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each
      $2,000 of Warrant Shares (based on the VWAP of the Common Stock on the date
      such
Securities
      are submitted to the Transfer Agent) delivered for removal of the restrictive
      legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20
      per
      Trading Day 5 Trading Days after such damages have begun to accrue) for each
      Trading Day after the second Trading Day following the Legend Removal Date
      until
      such certificate is delivered without a legend. Nothing herein shall limit
      Purchaser’s right to pursue actual damages for the Company’s failure to deliver
      certificates representing any Securities as required by the Transaction
      Documents, and Purchaser shall have the right to pursue all remedies available
      to it at law or in equity including, without limitation, a decree of specific
      performance and/or injunctive relief. 

     

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (e)  Purchaser
      agrees that the removal of the restrictive legend from certificates representing
      Securities as set forth in this Section 4.1 is predicated upon the Company’s
      reliance that Purchaser will sell any Securities
      pursuant
      to either the registration requirements of the Securities Act, including any
      applicable prospectus delivery requirements, or an exemption therefrom, and
      that
      if Securities are sold pursuant to a registration statement, they will be sold
      in compliance with the plan of distribution set forth therein and upon
      compliance with the prospectus delivery requirement.

     

    4.2  Acknowledgment
      of Dilution.

     

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

     

    4.3  Furnishing
      of Information.

     

     As
      long as Purchaser owns Securities, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company after the date hereof
      pursuant to the Exchange Act. As long as Purchaser owns Securities, if the
      Company is not required to file reports pursuant to the Exchange Act, it will
      prepare and furnish to Purchaser and make publicly available in accordance
      with
      Rule 144(c) such information as is required for Purchaser to sell the Securities
      under Rule 144. The Company further covenants that it will take such further
      action as Purchaser may reasonably request, to the extent required from time
      to
      time to enable Purchaser to sell such Securities without registration under
      the
      Securities Act within the requirements of the exemption provided by Rule
      144.

     

    4.4  Integration.

     

     The
      Company shall not, and shall use its best efforts to ensure that no Affiliate
      of
      the Company shall, sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section
      2
      of the Securities Act) that would be integrated with the offer or sale of the
      Securities in a manner that would require the registration under the Securities
      Act of the sale of the Securities to Purchaser or that would be integrated
      with
      the offer and sale of the Securities for purposes of the rules and regulations
      of any Trading Market.

     

    4.5  Reservation
      and Listing of Conversion Shares.

     

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

     

    (b)  The
      Company shall (i) in the time and manner required by each Trading Market,
      prepare and file with such Trading Market an additional shares listing
      application covering all of the shares of Common Stock issued or issuable under
      the Transaction Documents, (ii) take all steps necessary to cause such
      shares of Common Stock to be approved for listing on each Trading Market as
      soon
      as possible thereafter, (iii) provide to Purchaser evidence of such listing,
      and
      (iv) maintain the listing of such Common Stock on each such Trading
      Market.

     

     

     

    
      
        
        

      

      
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    (c)  In
      the
      case of a breach by the Company of Section 4.5(a), in addition to the other
      remedies available to Purchaser, Purchaser shall have the right to require
      the
      Company to either: (i) use its best efforts to obtain the required shareholder
      approval necessary to permit the issuance of such shares of Common Stock as
      soon
      as is possible, but in any event not later than the seventy-fifth
      (75th)
      day
      after such notice, or (ii) within five Trading Days after delivery of a written
      notice, pay cash to Purchaser, as liquidated damages and not as a penalty,
      in an
      amount equal to the number of shares of Common Stock not issuable by the Company
      multiplied by one hundred fifteen percent (115%) of the average VWAP over the
      ten (10) Trading Days immediately prior to the date of such notice or, if
      greater, the ten (10) Trading Days immediately prior to the date of payment
      (the
“Cash Amount”). If Purchaser elects the first option under the preceding
      sentence and the Company fails to obtain the required shareholder approval
      on or
      prior to the seventy-fifth (75th)
      day
      after such notice, then within three Trading Days after such seventy-fifth
      (75th)
      day,
      the Company shall pay the Cash Amount to such Purchaser, as liquidated damages
      and not as a penalty.

     

    4.6  Exercise
      Procedures.

     

     The
      form of Notice of Exercise included in the Warrant sets forth the totality
      of
      the procedures required of Purchaser in order to exercise the Warrant other
      than
      the payment for Warrant Shares. No additional legal opinion or other information
      or instructions shall be required of Purchaser to exercise the Warrant. The
      Company shall honor exercises of the Warrant and shall deliver Warrant Shares
      in
      accordance with the terms, conditions and time periods set forth in the
      Transaction Documents.

     

    4.7  Securities
      Laws Disclosure; Publicity.

     

     Within
      the time prescribed by law, the Company shall file a Current Report on Form
      8-K
      with the Commission (the “Form 8-K Filing”) describing the terms of the
      transactions contemplated by the Transaction Documents and including as exhibits
      to such Form 8-K Filing each of the Transaction Documents, in the form required
      by the Exchange Act. Thereafter, the Company shall timely file any filings
      and
      notices required by the Commission or applicable law with respect to the
      transactions contemplated hereby and provide copies thereof to Purchaser
      promptly after filing. The Company shall, at least two (2) Trading Days prior
      to
      the filing or dissemination of any disclosure required by this paragraph,
      provide a copy thereof to Purchaser for its review. The Company and Purchaser
      shall consult with each other in issuing any press releases or otherwise making
      public statements or filings and other communications with the Commission or
      any
      regulatory agency or Trading Market with respect to the transactions
      contemplated hereby, and neither party shall issue any such press release or
      otherwise make any such public statement, filing or other communication without
      the prior consent of the other, except if such disclosure is required by law,
      in
      which case the disclosing party shall promptly provide the other party with
      prior notice of such public statement, filing or other communication.
      Notwithstanding the foregoing, the Company shall not publicly disclose the
      name
      of Purchaser or any of its Affiliates, or include the name of Purchaser or
      any
      of its Affiliates in any filing with the Commission or any regulatory agency
      or
      Trading Market, without the prior written consent of Purchaser, except to the
      extent such disclosure is required by law or Trading Market regulations, in
      which case the Company shall provide Purchaser with prior notice of such
      disclosure. The Company shall not, and shall cause each of its officers,
      directors, employees and agents not to, provide Purchaser or any of its
      Affiliates with any material nonpublic information regarding the Company from
      and after the filing of the Form 8-K Filing without the express written consent
      of Purchaser. In the event of a breach of the foregoing covenant by the Company
      or any of its or officers, directors, employees and agents, in 

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

     

    addition
      to any other remedy provided herein or in the Transaction Documents, Purchaser
      shall have the right to require the Company to make a public disclosure, in
      the
      form of a press release, public advertisement or otherwise, of such material
      nonpublic information. Neither Purchaser nor any of its Affiliates shall have
      any liability to the Company or any of its officers, directors, employees,
      shareholders or agents for any such disclosure. Subject to the foregoing,
      neither the Company nor Purchaser shall issue any press releases or any other
      public statements with respect to the transactions contemplated hereby.


     

    4.8  Shareholder
      Rights Plan.

     

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

     

    4.9  [INTENTIONALLY
      DELETED.]

     

    4.10  No
      Impairment.

     

    At
      all
      times after the date hereof, the Company will not take or permit any action,
      or
      cause or permit any Affiliate to take or permit any action that impairs or
      adversely affects the rights of Purchaser under the Transaction
      Documents.

     

    4.11  Indemnification
      of Purchaser.

     

     Subject
      to the provisions of this Section 4.11, the Company will indemnify and hold
      Purchaser and its directors, officers, Affiliates, shareholders, members,
      partners, employees and agents (and any other Persons with a functionally
      equivalent role of a Person holding such titles notwithstanding a lack of such
      title or any other title) (each, a “Purchaser Party”) harmless from any and all
      losses, liabilities, obligations, claims, contingencies, damages, costs and
      expenses, including all judgments, amounts paid in settlements, court costs
      and
      reasonable attorneys’ fees and costs of investigation that any such Purchaser
      Party may suffer or incur as a result of or relating to (a) any breach of any
      of
      the representations, warranties, covenants or agreements made by the Company
      in
      this Agreement or in the other Transaction Documents, or (b) any Proceeding
      instituted against any Purchaser Party in connection with or as a result of
      the
      transactions contemplated by the Transaction Documents (unless such Proceeding
      is based upon a breach of Purchaser’s representations, warranties or covenants
      under the Transaction Documents or any conduct by Purchaser which constitutes
      fraud, gross negligence, willful misconduct, or malfeasance). If any Proceeding
      shall be brought against any Purchaser Party in respect of which indemnity
      may
      be sought pursuant to this Agreement, such Purchaser Party shall promptly notify
      the Company in writing, and the Company shall have the right to assume the
      defense thereof with counsel of its own choosing reasonably acceptable to the
      Purchaser Party. Any Purchaser Party shall have the right to employ separate
      counsel in any such Proceeding and participate in the defense thereof, but
      the
      fees and expenses of such counsel shall be at the expense of such Purchaser
      Party except to the extent that (i) the employment thereof has been specifically
      authorized by the Company in writing, (ii) the Company has failed after a
      reasonable period of time to assume such defense and to employ counsel, or
      (iii)
      in such Proceeding there is, in the reasonable opinion of such separate counsel,
      a material conflict on any material issue between the position of the Company
      and the position of such Purchaser Party, in which case the Company shall be
      responsible for the reasonable fees 

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    and
      expenses of no more than one such separate counsel for all Purchaser Parties.
      The Company will not be liable to any Purchaser Party under this Agreement
      (i)
      for any settlement by a Purchaser Party effected without the Company’s prior
      written consent, which shall not be unreasonably withheld or delayed; or (ii)
      to
      the extent, but only to the extent that a loss, claim, damage or liability
      is
      attributable to any Purchaser Party’s breach of any of the representations,
      warranties, covenants or agreements made by such Purchaser Party in this
      Agreement or in the other Transaction Documents.
      Purchaser’s rights to indemnification set forth herein shall not be deemed
      waived or otherwise effected by any investigation made, or any knowledge
      acquired, by Purchaser.

     

    4.12  Blue
      Sky Filings.

     

     The
      Company shall take such action as the Company shall reasonably determine is
      necessary in order to obtain an exemption for, or to qualify the Securities
      for,
      sale to Purchaser at the Closing under applicable securities or “Blue Sky” laws
      of the states of the United States, and shall provide evidence of such actions
      promptly upon request of Purchaser.

     

    4.13  Piggy-Back
      Registrations.

     

     If
      at any time there is not an effective registration statement covering all of
      the
      Registrable Securities and the Company shall determine to prepare and file
      with
      the Commission a registration statement relating to an offering for its own
      account or the account of others under the Securities Act of any of its equity
      securities, other than on Form S-4 or Form S-8 (each as promulgated under the
      Securities Act) or their then equivalents relating to equity securities to
      be
      issued solely in connection with any acquisition of any entity or business
      or
      equity securities issuable in connection with the stock option or other employee
      benefit plans, then the Company shall send to Purchaser a written notice of
      such
      determination and, if within fifteen (15) days after the date of such notice,
      Purchaser shall so request in writing, subject to customary lead underwriter
      cutbacks, the Company shall include in such registration statement all or any
      part of such Registrable Securities Purchaser requests to be registered;
provided,
      however,
      that
      the Company shall not be required to register any Registrable Securities
      pursuant to this Section 4.13 that are eligible for resale pursuant to Rule
      144
      or that are the subject of a then effective registration statement. All fees
      and
      expenses of the registration and sale shall be borne by the Company whether
      or
      not any Registrable Securities are sold pursuant to a registration statement,
      provided that the Company shall not be responsible for broker or similar
      commissions of Purchaser. The Company shall also indemnify Purchaser pursuant
      to
      customary terms.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1  Fees
      and Expenses.

     

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

     

    5.2  Entire
      Agreement.

     

    The
      Transaction Documents, together with the exhibits and schedules thereto, contain
      the entire understanding of the parties with respect to the subject


     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    matter
      hereof and supersede all prior and contemporaneous agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.
      However,
      the parties acknowledge and agree that the Transaction Documents do
      not
      supersede that certain Securities Purchase Agreement (including the definitive
      exhibits and schedules thereto) by and between the parties hereto dated December
      22, 2006, which shall survive pursuant to the terms thereof. At or after the
      Closing, and without further consideration, the Company will execute and deliver
      to Purchaser such further documents as may be reasonably requested in order
      to
      give practical effect to the intention of the parties under the Transaction
      Documents.

     

    5.3  Notices.

     

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

     

    5.4  Amendments;
      Waivers.

     

     No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by the Company and Purchaser
      or,
      in the case of a waiver, by the party against whom enforcement of any such
      waived provision is sought. No waiver of any default with respect to any
      provision, condition or requirement of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any subsequent default or a
      waiver of any other provision, condition or requirement hereof, nor shall any
      delay or omission of any party to exercise any right hereunder in any manner
      impair the exercise of any such right. 

     

    5.5  Headings.

     

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

     

    5.6  Successors
      and Assigns.

     

    This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of Purchaser. Purchaser may assign any or all of its rights under this
      Agreement to any Person to whom Purchaser assigns or transfers any Securities,
      as applicable, provided that (i) such transferee agrees in writing to be bound,
      with respect to the transferred Securities, by the provisions of the Transaction
      Documents that apply to “Purchaser,” (ii) such transferee is an “accredited
      investor” as defined in Rule 501(a) under the Securities Act or a “qualified
      institutional buyer” as defined in Rule 144A(a) under the Securities Act, or
      (iii) such transfer does not violate any representation or warranty made in
      this
      Agreement by Purchaser.

     

     

     

    
      
        
        

      

      
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    5.7  No
      Third-Party Beneficiaries.

     

     This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except as otherwise set
      forth
      in Section 4.11. 

     

    5.8  Governing
      Law.

     

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

     

    5.9  Survival.

     

     The
      representations, warranties, agreements and covenants contained herein shall
      survive the Closing and the delivery of the Securities, provided that the
      representations and warranties shall only survive for the applicable statute
      of
limitations.

     

    5.10  Execution.

     

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

     

     

     

    
      
        
        

      

      
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    5.11  Severability.

     

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

     

    5.12  Rescission
      and Withdrawal Right.

     

     Notwithstanding
      anything to the contrary contained in (and without limiting any similar
      provisions of) any of the other Transaction Documents, whenever Purchaser
      exercises a right, election, demand, or option under a Transaction Document
      and
      the Company does not timely perform its related obligations within the periods
      therein provided, then Purchaser may, prior to the performance of the Company’s
      obligations, rescind or withdraw, in its sole discretion from time to time
      upon
      written notice to the Company, any relevant exercise (as contemplated in this
      Section 5.12) in whole or in part without prejudice to its future actions and
      rights; provided,
      however,
      in the
      case of a rescission of an exercise of a Warrant, Purchaser shall be required
      to
      return any shares of Common Stock delivered in connection with any such
      rescinded exercise notice.

     

    5.13  Replacement
      of Securities.

     

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

     

    5.14  Remedies.

     

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

     

    5.15  Payment
      Set Aside.

     

     To
      the extent that the Company makes a payment or payments to Purchaser pursuant
      to
      any Transaction Document or Purchaser enforces or exercises its rights
      thereunder, and such payment or payments or the proceeds of such enforcement
      or
      exercise or any part thereof 

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    are
      subsequently invalidated, declared to be fraudulent or preferential, set aside,
      recovered from, disgorged by or are required to be refunded, repaid or otherwise
      restored to the Company, a trustee, receiver or any other person under any
      law
      (including, without limitation, any bankruptcy law, state or federal law, common
      law or equitable cause of action), then to the extent of any such restoration
      the obligation or part thereof originally intended to be satisfied shall be
      revived and continued in full force and effect as if such payment had not been
      made or such enforcement or setoff had not occurred.

     

    5.16  Usury.

     

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

     

    5.17  Liquidated
      Damages.

     

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

     

    5.18  Construction.

     

     The
      parties agree that each of them and/or their respective counsel has reviewed
      and
      had an opportunity to revise the Transaction Documents and, therefore, the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

    [Remainder
      of Page Intentionally Left Blank]

    

      
        
          
            


          

          
          

        

        
          27

          
            

          

        

        
          
          

          
          

        

      




    


     

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

     

    


     

    THEATER
      XTREME ENTERTAINMENT GROUP, INC.

     

    


     

    By:
      /s/ Scott R. Oglum

     

    Title:
      Chief Executive Officer

     

    Address:
      250 Corporate Blvd.

     

    Suites
      E
& F

     

    Newark,
      DE 19702

     

    Facsimile:
      302-455-1612

     

    


     

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

     

    Ballard
      Spahr Andrews & Ingersoll, LLP

     

    1735
      Market Street, 51st Floor

     

    Philadelphia,
      Pennsylvania 19103−7599

     

    Attention:
      Steven King

     

    Facsimile:
      215-864-9961

    


     


    
      
        
        

      

      
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    [Counterpart
      signature page to that certain Securities Purchase Agreement by and between
      Theater Xtreme Entertainment Group, Inc. and Kinzer Technology, LLC, dated
      March
      6, 2007.]

     

    


     

    KINZER
      TECHNOLOGY, LLC

     

    


     

    By:
      /s/                                               
 

     

    Title:
      Authorized Representative

    


    



    
      
        
          


        

        
        

      

      
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Exhibits and Schedules to the Securities Purchase Agreement have been intentionally omitted.