Securities Purchase Agreement


     

     

     

    

      EXECUTION
        COPY

       

      SECURITIES
        PURCHASE AGREEMENT

       

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of March 9, 2007 among Lighting Science Group Corporation, a Delaware
        corporation (the “Company”),
        and
        the purchasers identified on the signature pages hereto (each, a “Purchaser”
and
        collectively, the “Purchasers”).
        

       

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

       

      NOW,
        THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
        and for other good and valuable consideration the receipt and adequacy of
        which
        are hereby acknowledged, the Company and each of the Purchasers, severally
        and
        not jointly, agree as follows:

       

      ARTICLE
        I  

      DEFINITIONS

       

      1.1
          Definitions.
        In
        addition to the terms defined elsewhere in this Agreement, the following
        terms
        have the meanings indicated:

       

      “Additional
        Warrants”
        means,
        collectively, the Common Stock warrants issued upon exercise of the Warrant
        B,
        in the form of Exhibit
        A-3.

       

      “Affiliate”
        means
        any Person that, directly or indirectly through one or more intermediaries,
        controls or is controlled by or is under common control with a Person, as
        such
        terms are used in and construed under Rule 144 under the Securities Act.
        With
        respect to a Purchaser, any investment fund or managed account that is managed
        on a discretionary basis by the same investment manager as such Purchaser
        will
        be deemed to be an Affiliate of such Purchaser.

       

      “Business
        Day”
means
        any day other than Saturday, Sunday or other day on which the Federal Reserve
        Bank of New York is closed.

       

      “Change
        of Control”
        means
        the occurrence of any of the following in one or a series of related
        transactions: (i) an acquisition after the date hereof by an individual or
        legal
        entity or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act) of
        more than one-third of the voting rights or equity interests in the Company;
        (ii) a replacement of more than one-third of the members of the Company's
        board
        of directors that is not approved by those individuals who are members of
        the
        board of directors on the date hereof (or other directors previously approved
        by
        such individuals); (iii) a merger or consolidation of the Company or any
        significant Subsidiary or a sale of more than one-third of the assets of
        the
        Company in one or a series of related transactions, unless following such
        transaction or series of transactions, the holders of the Company's securities
        prior to the first such transaction continue to hold at least two-thirds
        of the
        voting rights and equity interests in the surviving entity or acquirer of
        such
        assets; (iv) a recapitalization, reorganization or other transaction involving
        the Company or any significant Subsidiary that constitutes or results in
        a
        transfer of more than one-half of the voting rights or equity interests in
        the
        Company; (v) consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3
        under the Exchange Act with respect to the Company, or (vi) the execution
        by the
        Company or its controlling stockholders of an agreement providing for or
        reasonably likely to result in any of the foregoing events.

       

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

       

      “Closing
        Date”
        means
        the date of the Closing.

       

      “Closing
        Price”
        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 an Eligible
        Market
        or any other national securities exchange, the closing price per share of
        the
        Common Stock for such date (or the nearest preceding date) on the primary
        Eligible Market or exchange on which the Common Stock is then listed or quoted;
        (b) if prices for the Common Stock are then quoted on the OTC Bulletin
        Board, the closing bid price per share of the Common Stock for such date
        (or the
        nearest preceding date) so quoted; (c) if prices for the Common Stock are
        then reported in the “Pink Sheets” published by the National Quotation Bureau
        Incorporated (or a similar organization or agency succeeding to its functions
        of
        reporting prices), the most recent closing bid price per share of the Common
        Stock so reported; or (d) in all other cases, the fair market value of a
        share of Common Stock as determined by an independent appraiser selected
        in good
        faith by Purchasers holding a majority of the Securities.

       

      “Commission”
        means
        the Securities and Exchange Commission.

       

      “Common
        Stock”
        means
        the common stock of the Company, par value $0.001 per share.

       

      "Common
        Stock Equivalents"
        means,
        collectively, Options and Convertible Securities. 

       

      “Company
        Counsel”
        means
        Haynes and Boone, LLP, counsel to the Company.

       

      "Convertible
        Securities"
        means
        any stock or securities (other than Options) convertible into or exercisable
        or
        exchangeable for Common Stock. 

       

      “Effective
        Date”
        means
        the date that the Registration Statement is first declared effective by the
        Commission.

       

      “Eligible
        Market”
        means
        any of the New York Stock Exchange, the American Stock Exchange, the NASDAQ
        Global Select Market, NASDAQ Global Market, the NASDAQ Capital Market or
        the OTC
        Bulletin Board.

       

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

       

      “Excluded
        Stock” means
        any
        of the following:

       

      (i) shares
        of
        capital stock of the Company issued or issuable upon conversion or exercise
        of
        any currently outstanding securities set forth in Schedule
        3.1(f)
        (provided that such exercise of conversion occurs in accordance with the
        terms
        thereof, without amendment or modification, and that the applicable exercise
        or
        conversion price or ratio is described in such schedule) or any Excluded
        Stock
        issued in accordance with this Agreement;

       

      (ii) shares
        or
        options or warrants for Common Stock granted to officers, directors and
        employees of, and consultants to, the Company pursuant to stock option or
        purchase plans or other compensatory agreements approved by the Board of
        Directors;

       

      (iii) shares
        of
        Common Stock or Preferred Stock issued in connection with any pro rata stock
        split, stock dividend (including PIK Dividend Shares) or recapitalization
        by the
        Company;

       

      (iv) shares
        of
        capital stock, or options or warrants to purchase capital stock, issued in
        connection with a strategic commercial agreement or commercial relationship
        as
        determined by the Company, the primary purpose of which is not to raise capital;
        

       

      (v) shares
        of
        capital stock, or options or warrants to purchase capital stock, issued in
        accordance with the letter dated March 7, 2007, provided by the Company to
        Iroquois Master Fund, Ltd; provided, that such financing is completed within
        30
        days following the date hereof; 

       

      (vi) shares
        of
        capital stock, or options or warrants to purchase capital stock, issued pursuant
        to the acquisition of another corporation or entity by the Company by
        consolidation, merger, purchase of all or substantially all of the assets,
        or
        other reorganization in which the Company acquires, in a single transaction
        or
        series of related transactions, all or substantially all of the assets of
        such
        other corporation or entity or fifty percent (50%) or more of the voting
        power
        of such other corporation or entity or fifty percent (50%) or more of the
        equity
        ownership of such other corporation or entity, in each case the primary purpose
        of which is not to raise capital; and

       

      (vii) shares
        of
        capital stock issued in a bona-fide underwritten public securities offering
        with
        a nationally recognized underwriter with net proceeds of at least $20 Million;
        

       

      (viii) securities
        issuable upon conversion or exercise of the securities set forth in paragraphs
        (i) - (vii) above.

       

      “Filing
        Date”
        means
        the 45th
        day
        following the Closing Date with respect to the initial Registration Statement
        required to be filed hereunder, and, with respect to any additional Registration
        Statements that may be required pursuant to Section
        6.1(f),
        the
        10th day following the date on which the Company first knows, or reasonably
        should have known, that such additional Registration Statement is required
        under
        such Section.

       

      “Lien”
means
        any lien, charge, claim, security interest, encumbrance, right of first refusal
        or other restriction.

       

      “Losses”
        means
        any and all losses, claims, damages, liabilities, settlement costs and expenses,
        including, without limitation, costs of preparation and reasonable attorneys’
fees.

       

      “Options”
means
        any rights, warrants or options to subscribe for or purchase Common Stock
        or
        Convertible Securities (including all Warrants and Additional Warrants that
        can
        be issued under the Transaction Documents).

       

      “Person”
        means
        any 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 any court
        or
        other federal, state, local or other governmental authority or other entity
        of
        any kind.

       

      “Per
        Unit Purchase Price”
means
        $0.30.

       

      “PIK
        Dividend Shares”
means
        the shares of Common Stock issued and issuable in payment of dividends on
        the
        Preferred Stock, and upon any stock split, stock dividend, recapitalization
        or
        similar event with respect to such shares of Common Stock and any other
        securities issued in exchange of or replacement of such shares of Common
        Stock;

       

      “Post-Effective
        Amendment” means
        a
        post-effective amendment to the Registration Statement.

       

      “Post-Effective
        Amendment Filing Deadline”
means
        the 10th
        Trading
        Day after the Registration Statement ceases to be effective pursuant to
        applicable securities laws due to the passage of time or the occurrence of
        an
        event requiring the Company to file a Post-Effective Amendment.

       

      “Preferred
        Stock”
means
        the 6% convertible preferred stock of the Company, par value $0.001 per
        share.

       

      “Proceeding”
        means an
        action, claim, suit, investigation or proceeding (including, without limitation,
        an investigation or partial proceeding, such as a deposition), whether commenced
        or threatened.

       

      “Prospectus”
        means
        the prospectus included in the Registration Statement (including, without
        limitation, a prospectus that includes any information previously omitted
        from a
        prospectus filed as part of an effective registration statement in reliance
        upon
        Rule 430A promulgated under the Securities Act), as amended or supplemented
        by
        any prospectus supplement, with respect to the terms of the offering of any
        portion of the Registrable Securities covered by the Registration Statement,
        and
        all other amendments and supplements to the Prospectus including post effective
        amendments, and all material incorporated by reference or deemed to be
        incorporated by reference in such Prospectus.

       

      “Purchaser
        Counsel”
        has the
        meaning set forth in Section
        6.2(a).

       

      “Registrable
        Securities”
        means
        any Common Stock (including Underlying Shares) issued or issuable pursuant
        to
        the Transaction Documents, together with any securities issued or issuable
        upon
        any stock split, dividend or other distribution, recapitalization or similar
        event with respect to the foregoing.

       

      “Registration
        Statement”
        means
        each registration statement required to be filed under Article VI, including
        (in
        each case) the Prospectus, amendments and supplements to such registration
        statement or Prospectus, including pre- and post-effective amendments, all
        exhibits thereto, and all material incorporated by reference or deemed to
        be
        incorporated by reference in such registration statement.

       

      “Required
        Effectiveness Date”
        means
        (i) with respect to the initial Registration Statement required to be filed
        hereunder, the 120th
        day
        following the Closing Date and (ii) with respect to any additional Registration
        Statements that may be required pursuant to Section
        6.1(f),
        the
        30th day following the date on which the Company first knows, or reasonably
        should have known, that such additional Registration Statement is required
        under
        such Section.

       

      “Restricted
        Person” means,
        as
        of Closing, each of the executive officers of the Company and each of the
        members of the Company’s board of directors.

       

      “Rule
        144,” “Rule
        415,”
        and
“Rule
        424”
        means
        Rule 144, Rule 415 and Rule 424, respectively, promulgated by the Commission
        pursuant to the Securities Act, as such Rules 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.

       

      “Securities”
        means
        the Shares, the Warrant A, the Warrant B, the Additional Warrant and the
        Underlying Shares.

       

      “Shares”
        means
        the shares of Common Stock, which are being issued and sold to the Purchasers
        at
        the Closing.

       

      “Subsidiary”
        means
        any Person in which the Company, directly or indirectly, owns capital stock
        or
        holds an equity or similar interest.

       

      “Trading
        Day”
        means
        (a) any day on which the Common Stock is listed or quoted and traded on its
        primary Trading Market, or (b) if the Common Stock is not then listed or
        quoted
        and traded on its primary Trading Market, then a day on which trading occurs
        on
        an Eligible Market (or any successor thereto), or (c) if trading ceases to
        occur
        on an Eligible Market (or any successor thereto), any Business Day.

       

      “Trading
        Market”
        means
        the OTC Bulletin Board or any other Eligible Market, or any national securities
        exchange, market or trading or quotation facility on which the Common Stock
        is
        then listed or quoted.

       

      “Transaction
        Documents”
        means
        this Agreement, the Warrant A, the Warrant B, the Additional Warrant, the
        Lock-Up Letters, the Transfer Agent Instructions and any other documents
        or
        agreements executed in connection with the transactions contemplated
        hereunder.

       

      "Transfer
        Agent Instructions"
        means
        the Irrevocable Transfer Agent Instructions, in the form of Exhibit
        D,
        executed by the Company and delivered to and acknowledged in writing by the
        Company's transfer agent.

       

      “Underlying
        Shares”
        means
        the shares of Common Stock issuable (i) upon exercise of the Warrants and
        (ii)
        upon exercise of the Additional Warrants issued upon exercise of the Warrant
        B.

       

      “Unit”
means
        (i) one Share, (ii) a Warrant A to acquire 0.75 shares of Common Stock, (ii)
        a
        Warrant B to acquire one share of Common Stock, and (iii) an Additional Warrant
        to acquire 0.75 shares of Common Stock upon the exercise of a Warrant
        B.

       

      “Warrant
        A”
means
        each Common Stock purchase warrant in the form of Exhibit
        A-1.

       

      “Warrant
        B”
means
        each Common Stock purchase warrant in the form of Exhibit
        A-2.

       

      “Warrants”
means,
        collectively, each of the Warrant A and Warrant B.

       

      


       

      ARTICLE
        II  

      PURCHASE
        AND SALE

       

      2.1
          Subject
        to the terms and conditions set forth in this Agreement, at the Closing the
        Company shall issue and sell to each Purchaser, and each Purchaser shall,
        severally and not jointly, purchase from the Company, the Shares, the Warrant
        A
        and the Warrant B for the purchase price set forth on Schedule
        A
        hereto
        under the heading “Purchase Price”. The Closing shall take place at the offices
        of Malhotra & Associates LLP immediately following the execution hereof, or
        at such other location or time as the parties may agree. 

       

      2.2
          Closing
        Deliveries.

       

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

       

      (i)
          one
        or
        more stock certificates, free and clear of all restrictive and other legends
        (except as expressly provided in Section 4.1(b) hereof), evidencing such
        number
        of Shares equal to the number of Units indicated on Schedule
        A
        hereto
        under the heading “Units”, registered in the name of such
        Purchaser;

       

      (ii)
          a
        Warrant
        A, registered in the name of such Purchaser, pursuant to which such Purchaser
        shall have the right to acquire such number of Underlying Shares indicated
        on
Schedule
        A
        hereto
        under the heading “Warrant Shares”.

       

      (iii)
          a
        Warrant
        B, registered in the name of such Purchaser, pursuant to which such Purchaser
        shall have the right to acquire (i) such number of Underlying Shares indicated
        on Schedule
        A
        hereto
        under the heading “Warrant B Shares”, and (ii) an Additional Warrant, pursuant
        to which such Purchaser shall have the right to acquire such number of
        Underlying Shares indicated on Schedule
        A
        hereto
        under the heading “Additional Warrant Shares”, each on the terms set forth
        therein;

       

      (iv)
          a
        lock up
        letter executed by each Restricted Person in the form of Exhibit
        E
        (the
“Lock-Up
        Letter”);

       

      (v)
          a
        legal
        opinion of Company Counsel, in the form of Exhibit
        B,
        executed by such counsel and delivered to the Purchasers; 

       

      (vi)
          duly
        executed Transfer Agent Instructions; and

       

      (vii)
          a
        certificate from a duly authorized officer certifying on behalf of the Company
        that each of the conditions set forth in Section 5.1 has been
        satisfied;

       

      (b)
          At
        the
        Closing, each Purchaser shall deliver or cause to be delivered an amount
        equal
        to the Per Unit Purchase Price multiplied by the number of Units purchased,
        in
        United States dollars and in immediately available funds, by wire transfer
        to
        the Company’s account at:

       

      Bank
        of
        Texas

      4217
        Swiss Avenue

      Dallas,
        Texas 75204

      Routing
        #: 111014325

      A/C
        #:
        8091185481

      


       

      The
        total
        purchase price payable by each Purchaser shall be set forth on Schedule
        A
        hereto
        under the heading “Purchase Price.”

       

      


      ARTICLE
        III  

      REPRESENTATIONS
        AND WARRANTIES

       

      3.1
          Representations
        and Warranties of the Company.
        The
        Company hereby represents and warrants to each of the Purchasers as
        follows:

       

      (a)
          Subsidiaries.
        The
        Company has no direct or indirect Subsidiaries other than those listed in
        Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns,
        directly or indirectly, all of the capital stock or comparable equity interests
        of each Subsidiary free and clear of any Lien and all the issued and outstanding
        shares of capital stock or comparable equity interest of each Subsidiary
        are
        validly issued and are fully paid, non-assessable and free of preemptive
        and
        similar rights.

       

      (b)
          Organization
        and Qualification.
        Each of
        the Company and the Subsidiaries is an entity duly organized, validly existing
        and in good standing under the laws of the jurisdiction of its incorporation
        or
        organization (as applicable), with the requisite power and authority to own
        and
        use its properties and assets and to carry on its business as currently
        conducted. Neither the Company nor any Subsidiary is in violation of any
        of the
        provisions of its respective certificate or articles of incorporation, bylaws
        or
        other organizational or charter documents. Each of the Company and the
        Subsidiaries is duly qualified to conduct business and is in good standing
        as a
        foreign corporation or other entity in each jurisdiction in which the nature
        of
        the business conducted or property owned by it makes such qualification
        necessary, except where the failure to be so qualified or in good standing,
        as
        the case may be, could not, individually or in the aggregate, (i) adversely
        affect the legality, validity or enforceability of any Transaction Document,
        (ii) have or result in a material adverse effect on the results of operations,
        assets, prospects, business or condition (financial or otherwise) of the
        Company
        and the Subsidiaries, taken as a whole on a consolidated basis, or (iii)
        adversely impair the Company's ability to perform fully on a timely basis
        its
        obligations under any of the Transaction Documents (any of (i), (ii) or (iii),
        a
“Material
        Adverse Effect”).

       

      (c)
          Authorization;
        Enforcement.
        The
        Company has the requisite corporate power and authority to enter into and
        to
        consummate the transactions contemplated by each of the Transaction Documents
        and otherwise to carry out its obligations hereunder and thereunder. The
        execution and delivery of each of the Transaction Documents by the Company
        and
        the consummation by it of the transactions contemplated hereby and thereby
        have
        been duly authorized by all necessary action on the part of the Company and
        no
        further consent or action is required by the Company, its Board of Directors
        or
        its stockholders. Each of the Transaction Documents has been (or upon delivery
        will be) duly executed by the Company and, assuming the due authorization,
        execution and delivery by the other parties thereto, is, or when delivered
        in
        accordance with the terms hereof, will constitute, the valid and binding
        obligation of the Company enforceable against the Company in accordance with
        its
        terms. Neither the Company nor any Subsidiary is in violation of any of the
        provisions of its certificate or articles of incorporation, bylaws or other
        organizational or charter documents.

       

      (d)
          No
        Conflicts.
        The
        execution, delivery and performance of the Transaction Documents by the Company
        and the consummation by the Company of the transactions contemplated hereby
        and
        thereby do not and will not (i) conflict with or violate any provision of
        the
        Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
        or other organizational or charter documents, (ii) conflict with, or constitute
        a default (or an event that with notice or lapse of time or both would become
        a
        default) under, or give to others any rights of termination, amendment,
        acceleration or cancellation (with or without notice, lapse of time or both)
        of,
        any agreement, credit facility, debt or other instrument (evidencing a Company
        or Subsidiary debt or otherwise) or other understanding to which the Company
        or
        any Subsidiary is a party or by which any property or asset of the Company
        or
        any Subsidiary is bound or affected, or (iii) result in a violation of any
        law,
        rule, regulation, order, judgment, injunction, decree or other restriction
        of
        any court or governmental authority to which the Company or a Subsidiary
        is
        subject (including federal and state securities laws and regulations and
        the
        rules and regulations of any self-regulatory organization to which the Company
        or its securities are subject), or by which any property or asset of the
        Company
        or a Subsidiary is bound or affected.

       

      (e)
          Issuance
        of the Securities.
        The
        Securities (including the Underlying Shares) are duly authorized and, when
        issued and paid for in accordance with the Transaction Documents, will be
        duly
        and validly issued, fully paid and nonassessable, free and clear of all Liens
        and shall not be subject to preemptive rights or similar rights of stockholders.
        The Company has reserved from its duly authorized capital stock the maximum
        number of shares of Common Stock currently issuable upon exercise of the
        Warrants.

       

      (f)
          Capitalization.
        The
        number of shares and type of all authorized, issued and outstanding capital
        stock, options and other securities of the Company (whether or not presently
        convertible into or exercisable or exchangeable for shares of capital stock
        of
        the Company), as of February 28, 2007, is set forth in Schedule 3.1(f). All
        outstanding shares of capital stock are duly authorized, validly issued,
        fully
        paid and nonassessable and have been issued in compliance with all applicable
        securities laws. No securities of the Company are entitled to preemptive
        or
        similar rights, and no Person has any right of first refusal, preemptive
        right,
        right of participation, or any similar right to participate in the transactions
        contemplated by the Transaction Documents. Except as disclosed in Schedule
        3.1(f), there are no outstanding options, warrants, 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 or any Subsidiary is or may become bound to issue additional shares
        of
        Common Stock, or securities or rights convertible or exchangeable into shares
        of
        Common Stock. Except as disclosed in Schedule 3.1(f), there are no anti-dilution
        or price adjustment provisions contained in any security issued by the Company
        (or in any agreement providing rights to security holders). The issue and
        sale
        of the Securities (including the Underlying Shares) will not obligate the
        Company to issue shares of Common Stock or other securities to any Person
        (other
        than the Purchasers) and will not result in a right of any holder of Company
        securities to adjust the exercise, conversion, exchange or reset price under
        such securities. To the knowledge of the Company, except as specifically
        disclosed in Schedule 3.1(f), no Person or group of related Persons beneficially
        owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has
        the
        right to acquire, by agreement with or by obligation binding upon the Company,
        beneficial ownership of in excess of 5% of the outstanding Common Stock,
        ignoring for such purposes any limitation on the number of shares of Common
        Stock that may be owned at any single time.

       

      (g)
          SEC
        Reports; Financial Statements; Press Releases.
        The
        Company has filed all reports required to be filed by it under the Exchange
        Act,
        including pursuant to Section 13(a) or 15(d) thereof, for the two years
        preceding the date hereof (or such shorter period as the Company was required
        by
        law to file such material) (the foregoing materials (together with any materials
        filed by the Company under the Exchange Act, whether or not required) being
        collectively referred to herein as the “SEC
        Reports”
        and,
        together with this Agreement and the Schedules to this Agreement, the
“Disclosure
        Materials”)
        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.
        The
        Company has delivered to each Purchaser true, correct and complete SEC Reports
        filed by the Company within the 10 days preceding the date hereof. As of
        their
        respective dates, the SEC Reports complied in all material respects with
        the
        requirements of the Securities Act and the Exchange Act and the rules and
        regulations of the Commission promulgated thereunder, and none of the SEC
        Reports, when filed, contained any untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or necessary
        in
        order to make the statements therein, in the light of the circumstances under
        which they were made, not misleading. The financial statements of the Company
        included in the SEC Reports comply in all material respects with applicable
        accounting requirements and the rules and regulations of the Commission with
        respect thereto as in effect at the time of filing. Such financial statements
        have been prepared in accordance with United States generally accepted
        accounting principles applied on a consistent basis during the periods involved
        (“GAAP”),
        except
        as may be otherwise specified in such financial statements or the notes thereto,
        and fairly present in all material respects the financial position of the
        Company and its consolidated subsidiaries as of and for the dates thereof
        and
        the results of operations and cash flows for the periods then ended, subject,
        in
        the case of unaudited statements, to normal, immaterial, year-end audit
        adjustments. All material agreements to which the Company or any Subsidiary
        is a
        party or to which the property or assets of the Company or any Subsidiary
        are
        subject are included as part of or specifically identified in the SEC Reports.
        Each press release disseminated during the 12 months preceding the date of
        this
        Agreement did not at the time of release contain 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 therein, in light of the circumstances
        under which they are made, not misleading..

       

      (h)
          Material
        Changes.
        Since
        the date of the latest audited financial statements included within the SEC
        Reports, except as specifically disclosed in the SEC Reports, (i) there has
        been
        no event, occurrence or development that, individually or in the aggregate,
        has
        had or that is reasonably likely to result in a Material Adverse Effect,
        (ii)
        the Company has not incurred any liabilities (contingent or otherwise) other
        than (A) trade payables and accrued expenses incurred in the ordinary course
        of
        business consistent with past practice and (B) liabilities not required to
        be
        reflected in the Company’s financial statements pursuant to GAAP or required to
        be disclosed in filings made with the Commission, (iii) the Company has not
        altered its method of accounting or the identity of its auditors, except
        as
        disclosed in its SEC Reports, (iv) the Company has not declared or made any
        dividend or distribution of cash or other property to its stockholders or
        purchased, redeemed or made any agreements to purchase or redeem any shares
        of
        its capital stock, and (v) the Company has not issued any equity securities
        to
        any officer, director or Affiliate, except pursuant to existing Company
        stock-based plans.

       

      (i)
          Absence
        of Litigation.
        There
        is no action, suit, claim, proceeding, inquiry or investigation before or
        by any
        court, public board, government agency, self-regulatory organization or body
        pending or, to the knowledge of the Company, threatened against or affecting
        the
        Company or any of its Subsidiaries that is reasonably likely to, individually
        or
        in the aggregate, have a Material Adverse Effect. Schedule 3.1(i) contains
        a
        complete list and summary description of any pending or, to the knowledge
        of the
        Company, threatened proceeding against or affecting the Company or any of
        its
        Subsidiaries, without regard to whether it could, individually or in the
        aggregate, have a Material Adverse Effect.

       

      (j)
          Compliance.
        Neither
        the Company nor any Subsidiary (i) is in default under or in violation of
        (and,
        to the knowledge of the Company, no event has occurred that has not been
        waived
        that, with notice or lapse of time or both, would result in a default by
        the
        Company or any Subsidiary under), nor has the Company or any Subsidiary received
        written notice of a claim that it is in default under or that it is in violation
        of, any indenture, loan or credit agreement or any other agreement or instrument
        to which it is a party or by which it or any of its properties is bound (whether
        or not such default or violation has been waived), (ii) is in violation of
        any
        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 relating
        to taxes, environmental protection, occupational health and safety, product
        quality and safety and employment and labor matters, except in each case
        as
        could not, individually or in the aggregate, have or result in a Material
        Adverse Effect. 

       

      (k)
          Title
        to Assets.
        The
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them that is material to the business of the Company
        and
        the Subsidiaries and good and marketable title in all personal property owned
        by
        them that is material to the business of the Company and the Subsidiaries,
        in
        each case free and clear of all Liens, except for Liens as do not materially
        affect the value of such property and do not materially interfere with the
        use
        made and proposed to be made of such property by the Company and the
        Subsidiaries. Any real property and facilities held under lease by the Company
        and the Subsidiaries are held by them under valid, subsisting and enforceable
        leases of which the Company and the Subsidiaries are in compliance.

       

      (l)
          Certain
        Fees.
        Except
        for the fees described in Schedule 3.1(l), all of which are payable to
        registered broker-dealers, no brokerage or finder’s fees or commissions are or
        will be payable by the Company to any broker, financial advisor or consultant,
        finder, placement agent, investment banker, bank or other Person with respect
        to
        the transactions contemplated by this Agreement, and the Company has not
        taken
        any action that would cause any Purchaser to be liable for any such fees
        or
        commissions.

       

      (m)
          Private
        Placement.
        Neither
        the Company nor any Person acting on the Company’s behalf has sold or offered to
        sell or solicited any offer to buy the Securities by means of any form of
        general solicitation or advertising. Neither the Company nor any of its
        Affiliates nor any Person acting on the Company's behalf has, directly or
        indirectly, at any time within the past six months, made any offer or sale
        of
        any security or solicitation of any offer to buy any security under
        circumstances that would (i) eliminate the availability of the exemption
        from
        registration under Regulation D under the Securities Act in connection with
        the
        offer and sale of the Securities as contemplated hereby or (ii) cause the
        offering of the Securities pursuant to the Transaction Documents to be
        integrated with prior offerings by the Company for purposes of any applicable
        law, regulation or stockholder approval provisions, including, without
        limitation, under the rules and regulations of any Trading Market. Assuming
        the
        accuracy of the Purchasers representations and warranties set forth in Section
        3.2, no registration under the Securities Act is required for the offer and
        sale
        of the Securities by the Company to the Purchasers as contemplated hereby.
        The
        Company is not, and is not an Affiliate of, an “investment company” within the
        meaning of the Investment Company Act of 1940, as amended. The Company is
        not a
        United States real property holding corporation within the meaning of the
        Foreign Investment in Real Property Tax Act of 1980.

       

      (n)
          Listing
        and Maintenance Requirements.
        The
        Company has not, in the two years preceding the date hereof, received notice
        (written or oral) 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.

       

      (o)
          Registration
        Rights.
        Except
        as described in Schedule 3.1(o), the Company has not granted or agreed to
        grant
        to any Person any rights (including “piggy-back” registration rights) to have
        any securities of the Company registered with the Commission or any other
        governmental authority that have not been satisfied.

       

      (p)
          Application
        of Takeover Protections.
        There
        is no control share acquisition, business combination, poison pill (including
        any distribution under a rights agreement) or other similar anti-takeover
        provision under the Company’s charter documents or the laws of its state of
        incorporation that is or could become applicable to any of the Purchasers
        as a
        result of the Purchasers and the Company fulfilling their obligations or
        exercising their rights under the Transaction Documents, including, without
        limitation, as a result of the Company's issuance of the Securities and the
        Purchasers' ownership of the Securities.

       

      (q)
          Disclosure.
        The
        Company confirms that neither it nor any other Person acting on its behalf
        has
        provided any of the Purchasers or their agents or counsel with any information
        that constitutes or might constitute material, nonpublic information (other
        than
        the existence of the transactions contemplated by this Agreement, which shall
        be
        disclosed in the press release issued pursuant to Section 4.6). The Company
        understands and confirms that each of the Purchasers will rely on the foregoing
        representations in effecting transactions in securities of the Company. To
        our
        knowledge, all disclosure materials provided to the Purchasers regarding
        the
        Company, its business and the transactions contemplated hereby, including
        the
        Schedules to this Agreement, furnished by or on behalf of the Company are
        true
        and correct and do 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 the light of the circumstances under which they were made, not
        misleading. No event or circumstance has occurred or information exists with
        respect to the Company or any of its Subsidiaries or its or their business,
        properties, prospects, operations or financial conditions, which, under
        applicable law, rule or regulation, requires public disclosure or announcement
        by the Company but which has not been so publicly announced or disclosed.
        The
        Company acknowledges and agrees that (i) no Purchaser makes or has made any
        representations or warranties with respect to the transactions contemplated
        hereby other than those specifically set forth in Section 3.2 or (ii) any
        statement, commitment or promise to the Company or, to its knowledge, any
        of its
        representatives which is or was an inducement to the Company to enter into
        this
        Agreement or otherwise. 

       

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

       

      (s)
          Patents
        and Trademarks.
        The
        Company and the Subsidiaries have, or have rights to use, all patents, patent
        applications, trademarks, trademark applications, service marks, trade names,
        copyrights, licenses and other similar rights that are necessary or material
        for
        use in connection with their respective businesses as described in the SEC
        Reports and which the failure to so have could have a Material Adverse Effect
        (collectively, the "Intellectual
        Property Rights").
        Neither the Company nor any Subsidiary has received a written notice that
        the
        Intellectual Property Rights used by the Company or any Subsidiary 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.

       

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

       

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

       

      (v)
          Transactions
        With Affiliates and Employees.
        Except
        as set forth in SEC Reports filed at least ten days prior to the date hereof,
        none of the officers or directors of the Company and, to the knowledge of
        the
        Company, none of the employees of the Company is presently a party to any
        transaction with the Company or any Subsidiary (other than for services as
        employees, officers and directors), including any contract, agreement or
        other
        arrangement providing for the furnishing of services to or by, 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.

       

      (w)
          Form
        SB-2 Eligibility.
        The
        Company is eligible to register the resale of its Common Stock for resale
        by the
        Purchasers under Form SB-2 promulgated under the Securities Act.

       

      (x)
          Solvency.
        Based
        on the financial condition of the Company as of the Closing Date, (i) the
        Company’s fair saleable value of its 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 for the current fiscal year 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
        debt
        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).

       

      (y)
          Internal
        Accounting Controls.
        The
        Company and the Subsidiaries maintain a system of internal accounting controls
        sufficient to provide reasonable assurance that (i) transactions are executed
        in
        accordance with management’s general or specific authorizations, (ii)
        transactions are recorded as necessary to permit preparation of financial
        statements in conformity with generally accepted accounting principles 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.

       

      (z)
          Sarbanes-Oxley
        Act.
        The
        Company is in compliance with applicable requirements of the Sarbanes-Oxley
        Act
        of 2002 and applicable rules and regulations promulgated by the Commission
        thereunder in effect as of the date of this Agreement, except where such
        noncompliance could not be reasonably expected to have, individually or in
        the aggregate, a Material Adverse Effect.

       

      


      3.2
          Representations
        and Warranties of the Purchasers.
        Each
        Purchaser hereby, as to itself only and for no other Purchaser, represents
        and
        warrants to the Company as follows:

       

      (a)
          Organization;
        Authority.
        Such
        Purchaser is an entity duly organized, validly existing and in good standing
        under the laws of the jurisdiction of its organization with the requisite
        corporate or partnership power and authority to enter into and to consummate
        the
        transactions contemplated by the Transaction Documents and otherwise to carry
        out its obligations hereunder and thereunder. The purchase by such Purchaser
        of
        the Shares and the Warrants hereunder has been duly authorized by all necessary
        action on the part of such Purchaser. This Agreement has been duly executed
        and
        delivered by such Purchaser and constitutes the valid and binding obligation
        of
        such Purchaser, enforceable against it in accordance with its
        terms.

       

      (b)
          No
        Conflicts.
        The
        execution and delivery of the Transaction Documents by the Purchaser and
        the
        consummation by such Purchaser of the transactions contemplated hereby and
        thereby do not and will not (i) conflict with or violate any provision of
        such
        Purchaser’s certificate or articles of incorporation, bylaws or other
        organizational or charter documents; (ii) conflict with, or constitute a
        default
        (or an event that with notice or lapse of time or both would become a default)
        under, 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 or other understanding to which
        such
        Purchaser is a party or by which any property or asset of such Purchaser
        is
        bound or affected, or (iii) result in a violation of any law, rule, regulation,
        order, judgment, injunction, decree or other restriction of any court or
        governmental authority to which such Purchaser is subject.

       

      (c)
          Purchaser
        Status.
        At the
        time such Purchaser was offered the Shares and the Warrants, it was, and
        at the
        date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
        Securities Act.

       

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

       

      3.3
          Schedules.
        For
        purposes of the Transaction Documents, disclosure of information in the
        Schedules, regardless of section references or headings, shall automatically
        constitute disclosure where such disclosure is applicable or may be
        necessary.

       

      


      ARTICLE
        IV  

      OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1
          Transfer
        Restrictions.

       

      (a)
          Securities
        may only be disposed of pursuant to an effective registration statement under
        the Securities Act or pursuant to an available exemption from the registration
        requirements of the Securities Act, and in compliance with any applicable
        state
        securities laws. In connection with any transfer of Securities other than
        pursuant to an effective registration statement or to the Company or pursuant
        to
        Rule 144, except as otherwise set forth herein, the Company may require the
        transferor to provide to the Company an opinion of counsel selected by the
        transferor, the form and substance of which opinion shall be reasonably
        satisfactory to the Company, to the effect that such transfer does not require
        registration under the Securities Act. Notwithstanding the foregoing, the
        Company hereby consents to and agrees to register on the books of the Company
        and with its transfer agent, without any such legal opinion, any transfer
        of
        Securities by a Purchaser to an Affiliate of such Purchaser, provided that
        the
        transferee certifies to the Company that it is an “accredited investor” as
        defined in Rule 501(a) under the Securities Act.

       

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

       

      [NEITHER]
        THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
        EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
        COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
        EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
        (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
        TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
        TO
        AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
        APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
        FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
        THESE
        SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
        OTHER
        LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

       

      Certificates
        evidencing Securities shall not be required to contain such legend or any
        other
        legend (i) while a Registration Statement covering the resale of such Securities
        is effective under the Securities Act, (ii) following any sale of such
        Securities pursuant to Rule 144, (iii) if such Securities 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). The Company shall
        cause
        its counsel to issue the letter included in the Transfer Agent Instructions
        to
        the Company's transfer agent on the Effective Date.
        Following the Effective Date or at such earlier time as a legend is no longer
        required for certain Securities, the Company will cause its transfer agent,
        no
        later than three Trading Days following the delivery by a Purchaser to the
        Company or the Company’s transfer agent of a legended certificate representing
        such Securities, to deliver or cause to be delivered to such Purchaser a
        certificate representing such Securities that is free from all restrictive
        and
        other legends. The Company may not make any notation on its records or give
        instructions to any transfer agent of the Company that enlarge the restrictions
        on transfer set forth in this Section. 

       

      (c)
          The
        Company acknowledges and agrees that a Purchaser may from time to time pledge
        or
        grant a security interest in some or all of the Securities in connection
        with a
        bona fide margin agreement or other loan or financing arrangement secured
        by the
        Securities and, if required under the terms of such agreement, loan or
        arrangement, such Purchaser may transfer pledged or secured Securities to
        the
        pledgees or secured parties that are accredited investors. Such a pledge
        or
        transfer would not be subject to approval of the Company and no legal opinion
        of
        the pledgee, secured party or pledgor shall be required in connection therewith.
        Further, no notice shall be required of such pledge. At the appropriate
        Purchaser’s expense, the Company will execute and deliver such reasonable
        documentation as a pledgee or secured party of Securities may reasonably
        request
        in connection with a pledge or transfer of the Securities, including the
        preparation and filing of any required prospectus supplement under Rule
        424(b)(3) of the Securities Act or other applicable provision of the Securities
        Act to appropriately amend the list of Selling Stockholders
        thereunder.

       

      4.2
          Furnishing
        of Information.
        As long
        as any 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. Upon the request of any Purchaser, the Company
        shall deliver to such Purchaser a written certification of a duly authorized
        officer as to whether it has complied with the preceding sentence. As long
        as
        any Purchaser owns Securities, if the Company is not required to file reports
        pursuant to such laws, it will prepare and furnish to the Purchasers and
        make
        publicly available in accordance with paragraph (c) of Rule 144 such information
        as is required for the Purchasers to sell the Securities under Rule 144.
        The
        Company further covenants that it will take such further action as any holder
        of
        Securities may reasonably request to satisfy the provisions of Rule 144
        applicable to the issuer of securities relating to transactions for the sale
        of
        securities pursuant to Rule 144.

       

      4.3
          Integration.
        The
        Company shall not, and shall use its commercially reasonable 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 the Purchasers or that would be integrated
        with the offer or sale of the Securities for purposes of the rules and
        regulations of any Trading Market.

       

      4.4
          Reservation
        and Listing of Securities.
        

       

      (a)
          The
        Company shall maintain a reserve from its duly authorized shares of Common
        Stock
        for issuance pursuant to the Transaction Documents in such amount as may
        be
        required to fulfill its obligations in full under the Transaction Documents.
        In
        the event that at any time the then authorized shares of Common Stock are
        insufficient for the Company to satisfy its obligations in full under the
        Transaction Documents, the Company shall promptly take such actions as may
        be
        required to increase the number of authorized shares. The Company shall in
        the
        time and manner required by its Trading Market take any steps necessary to
        cause
        such shares of Common Stock to be approved for listing on its Trading Market
        as
        soon as possible.

       

      (b)
          In
        the
        case of a breach by the Company of Section
        4.4(a),
        in
        addition to the other remedies available to the Purchasers, the Purchasers
        shall
        have the right to require the Company to either: (i) use its commercially
        reasonable efforts to obtain the required stockholder 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 60th day after such notice, or (ii) within
        five Trading Days after delivery of a written notice, pay cash to such
        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 times 115% of
        the
        average Closing Price over the five Trading Days immediately prior to the
        date
        of such notice or, if greater, the five Trading Days immediately prior to
        the
        date of payment (the “Cash
        Amount”).
        If
        the exercising or Purchaser elects the first option under the preceding sentence
        and the Company fails to obtain the required stockholder approval on or prior
        to
        the 60th day after such notice, then within three Trading Days after such
        60th
        day, the Company shall pay the Cash Amount to such Purchaser, as liquidated
        damages and not as penalty.

       

      4.5
          Subsequent
        Placements.
        

       

      (a)
          From
        the
        date hereof until the Effective Date, the Company will not, directly or
        indirectly, offer, sell, grant any option to purchase, or otherwise dispose
        of
        (or announce any offer, sale, grant or any option to purchase or other
        disposition of) any of its or the Subsidiaries’ equity or equity equivalent
        securities, including without limitation any debt, preferred stock or other
        instrument or security that is, at any time during its life and under any
        circumstances, convertible into or exchangeable or exercisable for Common
        Stock
        or Common Stock Equivalents (any such offer, sale, grant, disposition or
        announcement being referred to as a “Subsequent
        Placement”).

       

      (b)
          From
        the
        Effective Date until 30 Trading Days after the Effective Date (the “Blockout
        Period”),
        the
        Company will not, directly or indirectly, effect any Subsequent Placement
        except
        as set forth in Section 4.5(e).

       

      (c)
          
        The
        Blockout Period set forth in Section 4.5(b) above shall be extended for the
        number of Trading Days during such period in which (i) trading in the Common
        Stock is suspended by any Trading Market, (ii) the Registration Statement
        is not
        effective, or (iii) the prospectus included in the Registration Statement
        may
        not be used by the Purchasers for the resale of Registrable Securities
        thereunder.

       

      (d)
          From
        the
        end of the Blockout Period until the one year anniversary thereof, the Company
        will not, directly or indirectly, effect any Subsequent Placement unless
        the
        Company shall have first complied with this Section 4.5(d).

       

      (i)
          The
        Company shall deliver to each Purchaser a written notice (the "Offer")
        of any
        proposed or intended issuance or sale or exchange of the securities being
        offered (the “Offered
        Securities”)
        in a
        Subsequent Placement, which Offer shall (w) identify and describe the Offered
        Securities, (x) describe the price and other terms upon which they are to
        be
        issued, sold or exchanged, and the number or amount of the Offered Securities
        to
        be issued, sold or exchanged, (y) identify the Persons or entities to which
        or
        with which the Offered Securities are to be offered, issued, sold or exchanged
        and (z) offer to issue and sell to or exchange with each Purchaser (A) a
        pro
        rata portion of the Offered Securities based on such Purchaser’s pro rata
        portion of the aggregate purchase price paid by the Purchasers for all of
        the
        Shares purchased hereunder (the "Basic
        Amount"),
        and
        (B) with respect to each Purchaser that elects to purchase its Basic Amount,
        any
        additional portion of the Offered Securities attributable to the Basic Amounts
        of other Purchasers as such Purchaser shall indicate it will purchase or
        acquire
        should the other Purchasers subscribe for less than their Basic Amounts (the
        “Undersubscription
        Amount”).

       

      (ii)
          To
        accept
        an Offer, in whole or in part, a Purchaser must deliver a written notice
        to the
        Company prior to the end of the ten (10) Trading Day period of the Offer,
        setting forth the portion of the Purchaser's Basic Amount that such Purchaser
        elects to purchase and, if such Purchaser shall elect to purchase all of
        its
        Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects
        to purchase (in either case, the "Notice
        of Acceptance").
        If
        the Basic Amounts subscribed for by all Purchasers are less than the total
        of
        all of the Basic Amounts, then each Purchaser who has set forth an
        Undersubcription Amount in its Notice of Acceptance shall be entitled to
        purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
        Amount it has subscribed for; provided,
        however,
        that if
        the Undersubscription Amounts subscribed for exceed the difference between
        the
        total of all the Basic Amounts and the Basic Amounts subscribed for (the
        “Available
        Undersubscription Amount”),
        each
        Purchaser who has subscribed for any Undersubscription Amount shall be entitled
        to purchase on that portion of the Available Undersubscription Amount as
        the
        Basic Amount of such Purchaser bears to the total Basic Amounts of all
        Purchasers that have subscribed for Undersubscription Amounts, subject to
        rounding by the Board of Directors to the extent its deems reasonably
        necessary.

       

      (iii)
          The
        Company shall have five (5) Trading Days from the expiration of the period
        set
        forth in Section 4.5(d)(ii) above to issue, sell or exchange all or any part
        of
        such Offered Securities as to which a Notice of Acceptance has not been given
        by
        the Purchasers (the "Refused
        Securities"),
        but
        only to the offerees described in the Offer and only upon terms and conditions
        (including, without limitation, unit prices and interest rates) that are
        not
        more favorable to the acquiring Person or Persons or less favorable to the
        Company than those set forth in the Offer.

       

      (iv)
          In
        the
        event the Company shall propose to sell less than all the Refused Securities
        (any such sale to be in the manner and on the terms specified in Section
        4.5(d)(iii) above), then each Purchaser may, at its sole option and in its
        sole
        discretion, reduce the number or amount of the Offered Securities specified
        in
        its Notice of Acceptance to an amount that shall be not less than the number
        or
        amount of the Offered Securities that the Purchaser elected to purchase pursuant
        to Section 4.5(d)(ii) above multiplied by a fraction, (i) the numerator of
        which
        shall be the number or amount of Offered Securities the Company actually
        proposes to issue, sell or exchange (including Offered Securities to be issued
        or sold to Purchasers pursuant to Section 4.5(c)(ii) above prior to such
        reduction) and (ii) the denominator of which shall be the original amount
        of the
        Offered Securities. In the event that any Purchaser so elects to reduce the
        number or amount of Offered Securities specified in its Notice of Acceptance,
        the Company may not issue, sell or exchange more than the reduced number
        or
        amount of the Offered Securities unless and until such securities have again
        been offered to the Purchasers in accordance with Section 4.5(d)(i)
        above.

       

      (v)
          Upon
        the
        closing of the issuance, sale or exchange of all or less than all of the
        Refused
        Securities, the Purchasers shall acquire from the Company, and the Company
        shall
        issue to the Purchasers, the number or amount of Offered Securities specified
        in
        the Notices of Acceptance, as reduced pursuant to Section 4.5(d)(iv) above
        if
        the Purchasers have so elected, upon the terms and conditions specified in
        the
        Offer. The purchase by the Purchasers of any Offered Securities is subject
        in
        all cases to the preparation, execution and delivery by the Company and the
        Purchasers of a purchase agreement relating to such Offered Securities
        reasonably satisfactory in form and substance to the Purchasers and their
        respective counsel. Notwithstanding anything to the contrary contained in
        this
        Agreement, if the Company does not consummate the closing of the issuance,
        sale
        or exchange of all or less than all of the Refused Securities within seven
        (7)
        Trading Days of the expiration of the period set forth in Section
        4.5(d)(ii),
        the
        Company shall issue to the Purchasers the number or amount of Offered Securities
        specified in the Notices of Acceptance, as reduced pursuant to Section
        4.5(d)(iv)
        above if
        the Purchasers have so elected, upon the terms and conditions specified in
        the
        Offer.

       

      (vi)
          Any
        Offered Securities not acquired by the Purchasers or other persons in accordance
        with Section 4.5(d)(iii) above may not be issued, sold or exchanged until
        they
        are again offered to the Purchasers under the procedures specified in this
        Agreement.

       

      (vii)
          Notwithstanding
        anything to the contrary in this Section 4.5 and unless otherwise agreed
        to by
        the Purchasers, the Company shall either confirm in writing to the Purchasers
        that the transaction with respect to the Subsequent Placement has been abandoned
        or shall publicly disclose its intention to issue the Offered Securities,
        in
        either case in such a manner such that the Purchasers will not be in possession
        of material non-public information, by the 10th
        Trading
        Day following delivery of the Offer notice. If by the 10th
        Trading
        Day following the Offer notice no public disclosure regarding a transaction
        with
        respect to the Offered Securities has been made, and no notice regarding
        the
        abandonment of such transaction has been received by the Purchasers, such
        transaction shall be deemed to have been abandoned and the Purchasers shall
        not
        be deemed to be in possession of any material non-public information with
        respect to the Company. Should the Company decide to pursue such transaction
        with respect to the Offered Securities, the Company shall provide each Purchaser
        with another Offer notice and each Purchaser will again have the right of
        participation set forth in this Section 4.5. The Company shall not be permitted
        to deliver more than four such Offer notices to the Purchasers in any 12
        month
        period.

       

      (e)
          The
        restrictions contained in paragraphs (a), (b) and (d) of this Section 4.5
        shall
        not apply to Excluded Stock.

       

      4.6
          Securities
        Laws Disclosure; Publicity.
        The
        Company shall, on or before 8:30 a.m., New York City time on March 12, 2007,
        issue a press release acceptable to the Purchasers disclosing all material
        terms
        of the transactions contemplated hereby. Prior to the second Business Day
        after
        the Closing Date, the Company shall file a Current Report on Form 8-K with
        the
        Commission (the “8-K
        Filing”) describing
        the terms of the transactions contemplated by the Transaction Documents and
        including as exhibits to such Current Report on Form 8-K this Agreement and
        the
        form of Warrant, 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 the Purchasers promptly after filing. Except
        with respect to the 8-K Filing and the press release referenced above (a
        copy of
        which will be provided to the Purchasers for their review as early as
        practicable prior to its filing), the
        Company
        shall, at least two Trading Days prior to the filing or dissemination of
        any
        disclosure required by this paragraph that does not contain any material
        non-public information, provide a copy thereof to the Purchasers for their
        review. The Company and the Purchasers 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 any Purchaser, or include the name of any
        Purchaser in any filing with the Commission or any regulatory agency or Trading
        Market, without the prior written consent of such Purchaser, except to the
        extent such disclosure (but not any disclosure as to the controlling Persons
        thereof) is required by law or Trading Market regulations, in which case
        the
        Company shall provide the Purchasers with prior notice of such disclosure.
        The
        Company shall not, and shall cause each of its Subsidiaries and its and each
        of
        their respective officers, directors, employees and agents not to, provide
        any
        Purchaser with any material nonpublic information regarding the Company or
        any
        of its Subsidiaries from and after the filing of the 8-K Filing without the
        express written consent of such Purchaser. In the event of a breach of the
        foregoing covenant by the Company, any of its Subsidiaries, or any of its
        or
        their respective officers, directors, employees and agents, in addition to
        any
        other remedy provided herein or in the Transaction Documents, a Purchaser
        shall
        have the right to make a public disclosure, in the form of a press release,
        public advertisement or otherwise, of such material nonpublic information
        without the prior approval by the Company, its Subsidiaries, or any of its
        or
        their respective officers, directors, employees or agents. No Purchaser shall
        have any liability to the Company, its Subsidiaries, or any of its or their
        respective officers, directors, employees, stockholders or agents for any
        such
        disclosure. Subject to the foregoing, neither the Company nor any Purchaser
        shall issue any press releases or any other public statements with respect
        to
        the transactions contemplated hereby; provided, however, that the Company
        shall
        be entitled, without the prior approval of any Purchaser, to make any press
        release or other public disclosure with respect to such transactions (i)
        in
        substantial conformity with the 8-K Filing and contemporaneously therewith
        and
        (ii) as is required by applicable law and regulations (provided that in the
        case
        of clause (i) each Purchaser shall be consulted by the Company in connection
        with any such press release or other public disclosure prior to its
        release).

       

      4.7
          Use
        of
        Proceeds.
        Except
        as set forth on Schedule
        4.7,
        the
        Company shall use the net proceeds from the sale of the Securities hereunder
        for
        working capital purposes and other general corporate purposes, but not (i)
        for
        the satisfaction of any portion of the Company’s debt (other than payment of
        trade payables and accrued expenses in the ordinary course of the Company’s
        business and consistent with past practice), (ii) to redeem any Company equity
        or equity-equivalent securities, or (iii) to settle any outstanding litigation.
        

       

      4.8
          Reimbursement.
        If any
        Purchaser or any of its Affiliates or any officer, director, partner,
        controlling Person, employee or agent of a Purchaser or any of its Affiliates
        (a
“Related
        Person”)
        becomes involved in any capacity in any Proceeding brought by or against
        any
        Person in connection with or as a result of the transactions contemplated
        by the
        Transaction Documents, the Company will indemnify and hold harmless such
        Purchaser or Related Person for its reasonable legal and other expenses
        (including the costs of any investigation, preparation and travel) and for
        any
        Losses incurred in connection therewith, as such expenses or Losses are
        incurred, excluding only Losses that result directly from such Purchaser’s or
        Related Person’s gross negligence or willful misconduct. In addition, the
        Company shall indemnify and hold harmless each Purchaser and Related Person
        from
        and against any and all Losses, as incurred, arising out of or relating to
        any
        breach by the Company of any of the representations, warranties or covenants
        made by the Company in this Agreement or any other Transaction Document,
        or any
        allegation by a third party that, if true, would constitute such a breach.
        The
        conduct of any Proceedings for which indemnification is available under this
        paragraph shall be governed by Section 6.4(c) below. The indemnification
        obligations of the Company under this paragraph shall be in addition to any
        liability that the Company may otherwise have and shall be binding upon and
        inure to the benefit of any successors, assigns, heirs and personal
        representatives of the Purchasers and any such Related Persons. If the Company
        breaches its obligations under any Transaction Document, then, in addition
        to
        any other liabilities the Company may have under any Transaction Document
        or
        applicable law, the Company shall pay or reimburse the Purchasers on demand
        for
        all costs of collection and enforcement (including reasonable attorneys fees
        and
        expenses). Without limiting the generality of the foregoing, the Company
        specifically agrees to reimburse the Purchasers on demand for all costs of
        enforcing the indemnification obligations in this paragraph. To the extent
        that
        the foregoing undertaking by the Company may be unenforceable for any reason,
        the Company shall make the maximum contribution to the payment and satisfaction
        of each of the Indemnified Liabilities which is permissible under applicable
        law. Except as otherwise set forth herein, the mechanics and procedures with
        respect to the rights and obligations under this Section 4.8 shall be the
        same
        as those set forth in Section 6.4(c) below.

       

      4.9
          Acknowledgment
        of Dilution.
        The
        Company acknowledges that the issuance of the Securities (including the
        Underlying Shares) will result in dilution of the outstanding shares of Common
        Stock, which dilution may be substantial under certain market conditions.
        The
        Company further acknowledges that its obligations under the Transaction
        Documents, including without limitation its obligation to issue the Securities
        (including the Underlying Shares) pursuant to the Transaction Documents,
        are
        unconditional and absolute and not subject to any right of set off,
        counterclaim, delay or reduction, regardless of the effect of any such dilution
        or any claim that the Company may have against any Purchaser. Anything in
        this
        Agreement or elsewhere herein to the contrary notwithstanding, it is understood
        and agreed by the Company (i) that none of the Purchasers have been asked
        to
        agree, nor has any Purchaser agreed, to desist from purchasing or selling,
        long
        and/or short, securities of the Company, or “derivative” securities based on
        securities issued by the Company or to hold the Securities for any specified
        term; (ii) that future open market or other transactions by any Purchaser,
        including short sales, and specifically including, without limitation, short
        sales or “derivative” transactions, before or after the closing of this or
        future private placement transactions, may negatively impact the market price
        of
        the Company’s publicly traded securities; (iii) that any Purchaser, and counter
        parties in “derivative” transactions to which any such Purchaser is a party,
        directly or indirectly, presently may have a “short” position in the Common
        Stock; and (iv) that each Purchaser shall not be deemed to have any affiliation
        with or control over any arm’s length counter party in any “derivative”
transaction.

       

      


      


      ARTICLE
        V  

      CONDITIONS

      


      5.1
          Conditions
        Precedent to the Obligations of the Purchasers.
        The
        obligation of each Purchaser to acquire Securities at the Closing is subject
        to
        the satisfaction or waiver by such Purchaser, at or before the Closing, of
        each
        of the following conditions:

       

      (a)
          Representations
        and Warranties.
        The
        representations and warranties of the Company contained herein shall be true
        and
        correct in all material respects as of the date when made and as of the Closing
        as though made on and as of such date; 

       

      (b)
          Performance.
        The
        Company and each other Purchaser shall have performed, satisfied and complied
        in
        all material respects with all covenants, agreements and conditions required
        by
        the Transaction Documents to be performed, satisfied or complied with by
        it at
        or prior to the Closing;

       

      (c)
          No
        Injunction.
        No
        statute, rule, regulation, executive order, decree, ruling or injunction
        shall
        have been enacted, entered, promulgated or endorsed by any court or governmental
        authority of competent jurisdiction that prohibits the consummation of any
        of
        the transactions contemplated by the Transaction Documents;

       

      (d)
          Adverse
        Changes.
        Since
        the date of execution of this Agreement, no event or series of events shall
        have
        occurred that reasonably would be expected to have or result in a Material
        Adverse Effect; and

       

      (e)
          No
        Suspensions of Trading in Common Stock; Listing.
        Trading
        in the Common Stock shall not have been suspended by the Commission or any
        Trading Market (except for any suspensions of trading of not more than one
        Trading Day solely to permit dissemination of material information regarding
        the
        Company) at any time since the date of execution of this Agreement, and the
        Common Stock shall have been at all times since such date listed for trading
        on
        an Eligible Market;

       

      


      5.2
          Conditions
        Precedent to the Obligations of the Company.
        The
        obligation of the Company to sell Securities at the Closing is subject to
        the
        satisfaction or waiver by the Company, at or before the Closing, of each
        of the
        following conditions:

       

      (a)
          Representations
        and Warranties.
        The
        representations and warranties of the Purchasers contained herein shall be
        true
        and correct in all material respects as of the date when made and as of the
        Closing Date as though made on and as of such date;

       

      (b)
          Performance.
        The
        Purchasers shall have performed, satisfied and complied in all material respects
        with all covenants, agreements and conditions required by the Transaction
        Documents to be performed, satisfied or complied with by the Purchasers at
        or
        prior to the Closing; and

       

      (c)
          No
        Injunction.
        No
        statute, rule, regulation, executive order, decree, ruling or injunction
        shall
        have been enacted, entered, promulgated or endorsed by any court or governmental
        authority of competent jurisdiction that prohibits the consummation of any
        of
        the transactions contemplated by the Transaction Documents.

       

      ARTICLE
        VI  

      REGISTRATION
        RIGHTS

       

      6.1
          Shelf
        Registration

       

      (a)
          As
        promptly as possible, and in any event on or prior to the Filing Date, the
        Company shall prepare and file with the Commission a “Shelf” Registration
        Statement covering the resale of all Registrable Securities for an offering
        to
        be made on a continuous basis pursuant to Rule 415. The Registration Statement
        shall be on Form S-3 (except if the Company is not then eligible to register
        for
        resale the Registrable Securities on Form S-3, in which case such registration
        shall be on Form SB-2) and shall contain (except if otherwise directed by
        the
        Purchasers) the “Plan of Distribution” attached hereto as Exhibit
        C.

       

      (b)
          The
        Company shall use its commercially reasonable efforts to cause the Registration
        Statement to be declared effective by the Commission as promptly as possible
        after the filing thereof, but in any event prior to the Required Effectiveness
        Date, and shall use its commercially reasonable efforts to keep the Registration
        Statement continuously effective under the Securities Act until the earlier
        of
        (i) the second anniversary of the Effective Date, (ii) the date when all
        Registrable Securities covered by such Registration Statement have been sold
        publicly, or (iii) the date on which the Registrable Securities are eligible
        for
        sale without registration pursuant to subparagraph (k) of Rule 144 (the
“Effectiveness
        Period”).
        The
        Company shall notify each Purchaser in writing promptly (and in any event
        within
        one Business Day) after receiving notification from the Commission that the
        Registration Statement has been declared effective. 

       

      (c)
          As
        promptly as possible, and in any event no later than the Post-Effective
        Amendment Filing Deadline, the Company shall prepare and file with the
        Commission a Post-Effective Amendment. The Company shall use its commercially
        reasonable efforts to cause the Post-Effective Amendment to be declared
        effective by the Commission as promptly as possible after the filing thereof,
        but in any event prior to the 15th
        Trading
        Day following the Post-Effective Amendment Filing Deadline. The Company shall
        notify each Purchaser in writing promptly (and in any event within one Business
        Day) after receiving notification from the Commission that the Post-Effective
        Amendment has been declared effective. 

       

      (d)
          If:
        (i)
        any Registration Statement is not filed on or prior to the Filing Date or
        a
        Post-Effective Amendment is not filed on or prior to the Post-Effective
        Amendment Filing Deadline (if the Company files such Registration Statement
        or
        amendment without affording the Purchasers the opportunity to review and
        comment
        on the same as required by Section 6.2(a) hereof, the Company shall not be
        deemed to have satisfied this clause (i)), or (ii) the Company fails to file
        with the Commission a request for acceleration in accordance with Rule 461
        promulgated under the Securities Act, within five Trading Days after the
        date
        that the Company is notified (orally or in writing, whichever is earlier)
        by the
        Commission that a Registration Statement will not be “reviewed,” or will not be
        subject to further review, or (iii) the Company fails to respond to any comments
        made by the Commission within 10 Trading Days after the receipt of such
        comments, or (iv) a Registration Statement filed hereunder is not declared
        effective by the Commission by the Required Effectiveness Date or a
        Post-Effective Amendment is not declared effective on or prior to the
        15th
        Trading
        Day following the Post-Effective Amendment Filing Deadline, or (v) except
        as
        provided in Section 6.1(g), after a Registration Statement is filed with
        and
        declared effective by the Commission, such Registration Statement ceases
        to be
        effective as to all Registrable Securities to which it is required to relate
        at
        any time prior to the expiration of the Effectiveness Period without being
        succeeded within 10 Trading Days by an amendment to such Registration Statement
        or by a subsequent Registration Statement filed with and declared effective
        by
        the Commission, or (vi) except as provided in Section 6.1(g), an amendment
        to a
        Registration Statement is not filed by the Company with the Commission within
        ten Trading Days after the Commission’s having notified the Company that such
        amendment is required in order for such Registration Statement to be declared
        effective, or (vii) the Common Stock is not listed or quoted, or is suspended
        from trading on its Trading Market for a period of three Trading Days (which
        need not be consecutive Trading Days), or (viii) the exercise rights of the
        Purchasers pursuant to the Warrants are suspended for any reason (any such
        failure or breach being referred to as an “Event,”
and
        for purposes of clause (i), (iv) or (viii) the date on which such Event occurs,
        or for purposes of clause (ii) the date on which such five Trading Day period
        is
        exceeded, or for purposes of clauses (iii), (v) or (vi) the date which such
        ten
        Trading Day-period is exceeded, or for purposes of clause (vii) the date
        on
        which such three Trading Day period is exceeded, being referred to as
“Event
        Date”),
        then:
        (x) on each such Event Date the Company shall pay to each Purchaser an amount
        in
        cash, as partial liquidated damages and not as a penalty, equal to 1% of
        the
        aggregate purchase price paid by such Purchaser pursuant to this Agreement;
        and
        (y) on each monthly anniversary of each such Event Date thereof (if the
        applicable Event shall not have been cured by such date) until the applicable
        Event is cured, the Company shall pay to each Purchaser an amount in cash,
        as
        partial liquidated damages and not as a penalty, equal to 1% of the aggregate
        purchase price paid by such Purchaser pursuant to the Purchase Agreement;
        provided, however the maximum aggregate amount that may be assessed under
        this
        Section 6.1(d) for all Events shall not exceed 10% of the aggregate purchase
        price paid by such Purchaser pursuant to this Agreement. Such payments shall
        be
        in partial compensation to the Purchasers and shall not constitute the
        Purchaser’s exclusive remedy for such events. If the Company fails to pay any
        liquidated damages pursuant to this Section in full within seven days after
        the
        date payable, the Company will pay interest thereon at a rate of 18% per
        annum
        (or such lesser maximum amount that is permitted to be paid by applicable
        law)
        to the Purchaser, accruing daily from the date such liquidated damages are
        due
        until such amounts, plus all such interest thereon, are paid in full.
        Notwithstanding anything herein to the contrary, to the extent that the
        registration of any or all of the Registrable Securities by the Company on
        a
        registration statement is prohibited (the “Non-Registered Shares”) as a result
        of rules, regulations, positions or releases issued or actions taken by the
        Commission pursuant to its authority with respect to Rule 415 and the Company
        has registered at such time the maximum number of Registrable Securities
        permissible upon consultation with the Commission, then the liquidated damages
        described in this Section 6.1(d) shall not be applicable to such Non-Registered
        Shares.

       

      (e)
          The
        Company shall not, prior to the Effective Date of the Registration Statement,
        prepare and file with the Commission a registration statement relating to
        an
        offering for its own account or the account of others (other than as
        contemplated in the Transaction Documents) under the Securities Act of any
        of
        its equity securities.

       

      (f)
          If
        the
        Company issues to the Purchasers any Common Stock pursuant to the Transaction
        Documents that is not included in the initial Registration Statement, then
        the
        Company shall file an additional Registration Statement covering such number
        of
        shares of Common Stock on or prior to the Filing Date and shall use its
        commercially reasonable efforts to cause such additional Registration Statement
        to become effective by the Commission.

       

      (g)
          Suspension
        Period.
        Notwithstanding anything in this Agreement to the contrary, after 60 consecutive
        Trading Days of continuous effectiveness of the initial Registration Statement
        filed and declared effective pursuant to this Agreement, the Company may,
        by
        written notice to the Purchasers, suspend sales under a Registration Statement
        after the Effective Date thereof and/or require that the Purchasers immediately
        cease the sale of shares of Common Stock pursuant thereto and/or defer the
        filing of any subsequent Registration Statement if the Company is engaged
        in a
        material merger, acquisition or sale and the Board of Directors determines
        in
        good faith, by appropriate resolutions, that, as a result of such activity,
        (A)
        it would be materially detrimental to the Company (other than as relating
        solely
        to the price of the Common Stock) to file a Registration Statement at such
        time
        and (B) it is in the best interests of the Company to defer proceeding with
        such
        registration at such time. Upon receipt of such notice, each Purchaser shall
        immediately discontinue any sales of Registrable Securities pursuant to such
        registration until such Purchaser has received copies of a supplemented or
        amended Prospectus or until such Purchaser is advised in writing by the Company
        that the then-current Prospectus may be used and has received copies of any
        additional or supplemental filings that are incorporated or deemed incorporated
        by reference in such Prospectus. In no event, however, shall this right be
        exercised to suspend sales beyond the period during which (in the good faith
        determination of the Company’s Board of Directors) the failure to require such
        suspension would be materially detrimental to the Company. The Company’s rights
        under this Section 6.1(g) may not be exercised more than (2) times or 30
        days in
        the aggregate in any twelve month period; provided, further, that no such
        suspension shall be permitted for more than twenty (20) consecutive days,
        arising out of the same set of facts, circumstances or transactions. Immediately
        after the end of any suspension period under this Section 6.1(g), the Company
        shall take all necessary actions (including filing any required supplemental
        prospectus) to restore the effectiveness of the applicable Registration
        Statement and the ability of the Purchasers to publicly resell their Registrable
        Securities pursuant to such effective Registration Statement.

       

      6.2
          Registration
        Procedures.
        In
        connection with the Company's registration obligations hereunder, the Company
        shall:

       

      (a)
          Not
        less
        than three Trading Days prior to the filing of a Registration Statement or
        any
        related Prospectus or any amendment or supplement thereto (including any
        document that would be incorporated or deemed to be incorporated therein
        by
        reference), the Company shall (i) furnish to each Purchaser and any counsel
        designated by any Purchaser (each, a “Purchaser
        Counsel”,
        and
        Iroquois Master Fund Ltd. has initially designated Malhotra & Associates LLP
“LP
        Counsel”)
        copies
        of all such documents proposed to be filed, which documents (other than those
        incorporated or deemed to be incorporated by reference) will be subject to
        the
        review of each Purchaser and Purchaser Counsel upon their request and on
        a
        confidential basis strictly in accordance with Regulation FD promulgated
        pursuant to the Exchange Act, and (ii) cause its officers and directors,
        counsel
        and independent certified public accountants to respond to such inquiries
        as
        shall be necessary, in the reasonable opinion of respective counsel, to conduct
        a reasonable investigation within the meaning of the Securities Act. The
        Company
        shall not file a Registration Statement or any such Prospectus or any amendments
        or supplements thereto to which Purchasers holding a majority of the Registrable
        Securities shall reasonably object.

       

      (b)
          (i)
        Prepare and file with the Commission such amendments, including post-effective
        amendments, to each Registration Statement and the Prospectus used in connection
        therewith as may be necessary to keep the Registration Statement continuously
        effective as to the applicable Registrable Securities for the Effectiveness
        Period and prepare and file with the Commission such additional Registration
        Statements in order to register for resale under the Securities Act all of
        the
        Registrable Securities; (ii) cause the related Prospectus to be amended or
        supplemented by any required Prospectus supplement, and as so supplemented
        or
        amended to be filed pursuant to Rule 424; (iii) respond as promptly as
        reasonably possible, and in any event within ten days, to any comments received
        from the Commission with respect to the Registration Statement or any amendment
        thereto and as promptly as reasonably possible provide the Purchasers true
        and
        complete copies of all correspondence from and to the Commission relating
        to the
        Registration Statement; and (iv) comply in all material respects with the
        provisions of the Securities Act and the Exchange Act with respect to the
        disposition of all Registrable Securities covered by the Registration Statement
        during the applicable period in accordance with the intended methods of
        disposition by the Purchasers thereof set forth in the Registration Statement
        as
        so amended or in such Prospectus as so supplemented

       

      (c)
          Notify
        the Purchasers of Registrable Securities to be sold and Purchaser Counsel
        as
        promptly as reasonably possible, and (if requested by any such Person) confirm
        such notice in writing no later than one Trading Day thereafter, of any of
        the
        following events: (i) the Commission notifies the Company whether there will
        be
        a “review” of any Registration Statement; (ii) the Commission comments in
        writing on any Registration Statement (in which case the Company shall deliver
        to each Purchaser a copy of such comments and of all written responses thereto);
        (iii) any Registration Statement or any post-effective amendment is declared
        effective; (iv) the Commission or any other Federal or state governmental
        authority requests any amendment or supplement to any Registration Statement
        or
        Prospectus or requests additional information related thereto; (v) the
        Commission issues any stop order suspending the effectiveness of any
        Registration Statement or initiates any Proceedings for that purpose; (vi)
        the
        Company receives notice of any suspension of the qualification or exemption
        from
        qualification of any Registrable Securities for sale in any jurisdiction,
        or the
        initiation or threat of any Proceeding for such purpose; or (vii) the financial
        statements included in any Registration Statement become ineligible for
        inclusion therein or any statement made in any Registration Statement or
        Prospectus or any document incorporated or deemed to be incorporated therein
        by
        reference is untrue in any material respect or any revision to a Registration
        Statement, Prospectus or other document is required so that it will not contain
        any untrue statement of a material fact or omit to state any material fact
        required to be stated therein or necessary to make the statements therein,
        in
        the light of the circumstances under which they were made, not
        misleading.

       

      (d)
          Use
        its
        commercially reasonable efforts to avoid the issuance of or, if issued, obtain
        the withdrawal of (i) any order suspending the effectiveness of any Registration
        Statement, or (ii) any suspension of the qualification (or exemption from
        qualification) of any of the Registrable Securities for sale in any
        jurisdiction, as soon as possible.

       

      (e)
          Furnish
        to each Purchaser and Purchaser Counsel, without charge, at least one conformed
        copy of each Registration Statement and each amendment thereto, including
        financial statements and schedules, all documents incorporated or deemed
        to be
        incorporated therein by reference, and all exhibits to the extent requested
        by
        such Person (including those previously furnished or incorporated by reference)
        promptly after the filing of such documents with the Commission.

       

      (f)
          Promptly
        deliver to each Purchaser and Purchaser Counsel, without charge, as many
        copies
        of the Prospectus or Prospectuses (including each form of prospectus) and
        each
        amendment or supplement thereto as such Persons may reasonably request. The
        Company hereby consents to the use of such Prospectus and each amendment
        or
        supplement thereto by each of the selling Purchasers in connection with the
        offering and sale of the Registrable Securities covered by such Prospectus
        and
        any amendment or supplement thereto.

       

      (g)
          
        (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
        Registrable Securities; (ii) take all steps necessary to cause such Registrable
        Securities to be approved for listing on each Trading Market as soon as possible
        thereafter; (iii) provide to the Purchasers evidence of such listing; and
        (iv)
        maintain the listing of such Registrable Securities on each such Trading
        Market
        or another Eligible Market.

       

      (h)
          Prior
        to
        any public offering of Registrable Securities, use its reasonable commercially
        reasonable efforts to register or qualify or cooperate with the selling
        Purchasers and each applicable Purchaser Counsel in connection with the
        registration or qualification (or exemption from such registration or
        qualification) of such Registrable Securities for offer and sale under the
        securities or Blue Sky laws of such jurisdictions within the United States
        as
        any Purchaser requests in writing, to keep each such registration or
        qualification (or exemption therefrom) effective during the Effectiveness
        Period
        and to do any and all other acts or things necessary or advisable to enable
        the
        disposition in such jurisdictions of the Registrable Securities covered by
        a
        Registration Statement.

       

      (i)
          Cooperate
        with the Purchasers to facilitate the timely preparation and delivery of
        certificates representing Registrable Securities to be delivered to a transferee
        pursuant to a Registration Statement, which certificates shall be free, to
        the
        extent permitted by this Agreement, of all restrictive legends, and to enable
        such Registrable Securities to be in such denominations and registered in
        such
        names as any such Purchasers may request.

       

      (j)
          Upon
        the
        occurrence of any event described in Section 6.2(c)(vii), as promptly as
        reasonably possible, prepare a supplement or amendment, including a
        post-effective amendment, to the Registration Statement or a supplement to
        the
        related Prospectus or any document incorporated or deemed to be incorporated
        therein by reference, and file any other required document so that, as
        thereafter delivered, neither the Registration Statement nor such Prospectus
        will contain an untrue statement of a material fact or omit to state a material
        fact required to be stated therein or necessary to make the statements therein,
        in the light of the circumstances under which they were made, not
        misleading.

       

      (k)
          Cooperate
        with any due diligence investigation undertaken by the Purchasers in connection
        with the sale of Registrable Securities, including, without limitation, by
        making available any documents and information; provided that the Company
        will
        not deliver or make available to any Purchaser material, nonpublic information
        unless such Purchaser specifically requests in advance to receive material,
        nonpublic information in writing.

       

      (l)
          If
        Holders of a majority of the Registrable Securities being offered pursuant
        to a
        Registration Statement select underwriters for the offering, the Company
        shall
        enter into and perform its obligations under an underwriting agreement, in
        usual
        and customary form, including, without limitation, by providing customary
        legal
        opinions, comfort letters and indemnification and contribution
        obligations.

       

      (m)
          Comply
        with all applicable rules and regulations of the Commission.

       

      


      6.3
          Registration
        Expenses.
        The
        Company shall pay (or reimburse the Purchasers for) all fees and expenses
        incident to the performance of or compliance with this Agreement by the Company,
        including without limitation (a) all registration and filing fees and expenses,
        including without limitation those related to filings with the Commission,
        any
        Trading Market and in connection with applicable state securities or Blue
        Sky
        laws, (b) printing expenses (including without limitation expenses of printing
        certificates for Registrable Securities and of printing prospectuses requested
        by the Purchasers), (c) messenger, telephone and delivery expenses, (d) fees
        and
        disbursements of counsel for the Company, (e) fees and expenses of all other
        Persons retained by the Company in connection with the consummation of the
        transactions contemplated by this Agreement, and (f) all listing fees to
        be paid
        by the Company to the Trading Market. 

       

      6.4
          Indemnification

       

      (a)
          Indemnification
        by the Company.
        The
        Company shall, notwithstanding any termination of this Agreement, indemnify
        and
        hold harmless each Purchaser, the officers, directors, partners, members,
        agents, brokers (including brokers who offer and sell Registrable Securities
        as
        principal as a result of a pledge or any failure to perform under a margin
        call
        of Common Stock), investment advisors and employees of each of them, each
        Person
        who controls any such Purchaser (within the meaning of Section 15 of the
        Securities Act or Section 20 of the Exchange Act) and the officers, directors,
        partners, members, agents and employees of each such controlling Person,
        to the
        fullest extent permitted by applicable law, from and against any and all
        Losses,
        as incurred, arising out of or relating to any untrue or alleged untrue
        statement of a material fact contained in the Registration Statement, any
        Prospectus or any form of prospectus or in any amendment or supplement thereto
        or in any preliminary prospectus, or arising out of or relating to any omission
        or alleged omission of a material fact required to be stated therein or
        necessary to make the statements therein (in the case of any Prospectus or
        form
        of prospectus or supplement thereto, in the light of the circumstances under
        which they were made) not misleading, except to the extent, but only to the
        extent, that (i) such untrue statements, alleged untrue statements, omissions
        or
        alleged omissions are based solely upon information regarding such Purchaser
        furnished in writing to the Company by such Purchaser expressly for use therein,
        or to the extent that such information relates to such Purchaser or such
        Purchaser's proposed method of distribution of Registrable Securities and
        was
        reviewed and expressly approved in writing by such Purchaser expressly for
        use
        in the Registration Statement, such Prospectus or such form of Prospectus
        or in
        any amendment or supplement thereto or (ii) in the case of an occurrence
        of an
        event of the type specified in Section 6.2(c)(v)-(vii), the use by such
        Purchaser of an outdated or defective Prospectus after the Company has notified
        such Purchaser in writing that the Prospectus is outdated or defective and
        prior
        to the receipt by such Purchaser of the Advice contemplated in Section 6.5.
        The
        Company shall notify the Purchasers promptly of the institution, threat or
        assertion of any Proceeding of which the Company is aware in connection with
        the
        transactions contemplated by this Agreement.

       

      (b)
          Indemnification
        by Purchasers.
        Each
        Purchaser shall, severally and not jointly, indemnify and hold harmless the
        Company, its directors, officers, agents and employees, each Person who controls
        the Company (within the meaning of Section 15 of the Securities Act and Section
        20 of the Exchange Act), and the directors, officers, agents or employees
        of
        such controlling Persons, to the fullest extent permitted by applicable law,
        from and against all Losses (as determined by a court of competent jurisdiction
        in a final judgment not subject to appeal or review) arising solely out of
        any
        untrue statement of a material fact contained in the Registration Statement,
        any
        Prospectus, or any form of prospectus, or in any amendment or supplement
        thereto, or arising solely out of any omission of a material fact required
        to be
        stated therein or necessary to make the statements therein (in the case of
        any
        Prospectus or form of prospectus or supplement thereto, in the light of the
        circumstances under which they were made) not misleading to the extent, but
        only
        to the extent, that such untrue statement or omission is contained in any
        information so furnished in writing by such Purchaser to the Company
        specifically for inclusion in such Registration Statement or such Prospectus
        or
        to the extent that (i) such untrue statements or omissions are based solely
        upon
        information regarding such Purchaser furnished in writing to the Company
        by such
        Purchaser expressly for use therein, or to the extent that such information
        relates to such Purchaser or such Purchaser's proposed method of distribution
        of
        Registrable Securities and was reviewed and expressly approved in writing
        by
        such Purchaser expressly for use in the Registration Statement, such Prospectus
        or such form of Prospectus or in any amendment or supplement thereto or (ii)
        in
        the case of an occurrence of an event of the type specified in Section
        6.2(c)(v)-(vii),
        the use
        by such Purchaser of an outdated or defective Prospectus after the Company
        has
        notified such Purchaser in writing that the Prospectus is outdated or defective
        and prior to the receipt by such Purchaser of the Advice contemplated in
        Section
        6.5.
        In no
        event shall the liability of any selling Purchaser hereunder be greater in
        amount than the dollar amount of the net proceeds received by such Purchaser
        upon the sale of the Registrable Securities giving rise to such indemnification
        obligation.

       

      (c)
          Conduct
        of Indemnification Proceedings.
        If any
        Proceeding shall be brought or asserted against any Person entitled to indemnity
        hereunder (an “Indemnified
        Party”),
        such
        Indemnified Party shall promptly notify the Person from whom indemnity is
        sought
        (the “Indemnifying
        Party”)
        in
        writing, and the Indemnifying Party shall assume the defense thereof, including
        the employment of counsel reasonably satisfactory to the Indemnified Party
        and
        the payment of all fees and expenses incurred in connection with defense
        thereof; provided, that the failure of any Indemnified Party to give such
        notice
        shall not relieve the Indemnifying Party of its obligations or liabilities
        pursuant to this Agreement, except (and only) to the extent that it shall
        be
        finally determined by a court of competent jurisdiction (which determination
        is
        not subject to appeal or further review) that such failure shall have
        proximately and materially adversely prejudiced the Indemnifying
        Party.

       

      An
        Indemnified Party shall have the right to employ separate counsel in any
        such
        Proceeding and to participate in the defense thereof, but the fees and expenses
        of such counsel shall be at the expense of such Indemnified Party or Parties
        unless: (i) the Indemnifying Party has agreed in writing to pay such fees
        and
        expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
        the defense of such Proceeding and to employ counsel reasonably satisfactory
        to
        such Indemnified Party in any such Proceeding; or (iii) the named parties
        to any
        such Proceeding (including any impleaded parties) include both such Indemnified
        Party and the Indemnifying Party, and such Indemnified Party shall have been
        advised by counsel that a conflict of interest is likely to exist if the
        same
        counsel were to represent such Indemnified Party and the Indemnifying Party
        (in
        which case, if such Indemnified Party notifies the Indemnifying Party in
        writing
        that it elects to employ separate counsel at the expense of the Indemnifying
        Party, the Indemnifying Party shall not have the right to assume the defense
        thereof and such counsel shall be at the expense of the Indemnifying Party).
        The
        Indemnifying Party shall not be liable for any settlement of any such Proceeding
        effected without its written consent, which consent shall not be unreasonably
        withheld. No Indemnifying Party shall, without the prior written consent
        of the
        Indemnified Party, effect any settlement of any pending Proceeding in respect
        of
        which any Indemnified Party is a party, unless such settlement includes an
        unconditional release of such Indemnified Party from all liability on claims
        that are the subject matter of such Proceeding.

       

      All
        fees
        and expenses of the Indemnified Party (including reasonable fees and expenses
        to
        the extent incurred in connection with investigating or preparing to defend
        such
        Proceeding in a manner not inconsistent with this Section) shall be paid
        to the
        Indemnified Party, as incurred, within ten Trading Days of written notice
        thereof to the Indemnifying Party (regardless of whether it is ultimately
        determined that an Indemnified Party is not entitled to indemnification
        hereunder; provided, that the Indemnifying Party may require such Indemnified
        Party to undertake to reimburse all such fees and expenses to the extent
        it is
        finally judicially determined that such Indemnified Party is not entitled
        to
        indemnification hereunder). 

       

      (d)
          Contribution.
        If a
        claim for indemnification under Section
        6.4(a)
        or
(b)
        is
        unavailable to an Indemnified Party (by reason of public policy or otherwise),
        then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
        shall contribute to the amount paid or payable by such Indemnified Party
        as a
        result of such Losses, in such proportion as is appropriate to reflect the
        relative fault of the Indemnifying Party and Indemnified Party in connection
        with the actions, statements or omissions that resulted in such Losses as
        well
        as any other relevant equitable considerations. The relative fault of such
        Indemnifying Party and Indemnified Party shall be determined by reference
        to,
        among other things, whether any action in question, including any untrue
        or
        alleged untrue statement of a material fact or omission or alleged omission
        of a
        material fact, has been taken or made by, or relates to information supplied
        by,
        such Indemnifying Party or Indemnified Party, and the parties' relative intent,
        knowledge, access to information and opportunity to correct or prevent such
        action, statement or omission. The amount paid or payable by a party as a
        result
        of any Losses shall be deemed to include, subject to the limitations set
        forth
        in Section
        6.4(c),
        any
        reasonable attorneys' or other reasonable fees or expenses incurred by such
        party in connection with any Proceeding to the extent such party would have
        been
        indemnified for such fees or expenses if the indemnification provided for
        in
        this Section was available to such party in accordance with its
        terms.

       

      The
        parties hereto agree that it would not be just and equitable if contribution
        pursuant to this Section
        6.4(d)
        were
        determined by pro rata allocation or by any other method of allocation that
        does
        not take into account the equitable considerations referred to in the
        immediately preceding paragraph. Notwithstanding the provisions of this Section
        6.4(d), no Purchaser shall be required to contribute, in the aggregate, any
        amount in excess of the amount by which the proceeds actually received by
        such
        Purchaser from the sale of the Registrable Securities subject to the Proceeding
        exceeds the amount of any damages that such Purchaser has otherwise been
        required to pay by reason of such untrue or alleged untrue statement or omission
        or alleged omission. No Person guilty of fraudulent misrepresentation (within
        the meaning of Section 11(f) of the Securities Act) shall be entitled to
        contribution from any Person who was not guilty of such fraudulent
        misrepresentation.

       

      The
        indemnity and contribution agreements contained in this Section are in addition
        to any liability that the Indemnifying Parties may have to the Indemnified
        Parties.

       

      6.5
          Dispositions.
        Each
        Purchaser agrees that it will comply with the prospectus delivery requirements
        of the Securities Act as applicable to it in connection with sales of
        Registrable Securities pursuant to the Registration Statement. Each Purchaser
        further agrees that, upon receipt of a notice from the Company of the occurrence
        of any event of the kind described in Sections
        6.2(c)(v),
        (vi)
        or
(vii),
        such
        Purchaser will discontinue disposition of such Registrable Securities under
        the
        Registration Statement until such Purchaser's receipt of the copies of the
        supplemented Prospectus and/or amended Registration Statement contemplated
        by
Section
        6.2(j),
        or
        until it is advised in writing (the “Advice”)
        by the
        Company that the use of the applicable Prospectus may be resumed, and, in
        either
        case, has received copies of any additional or supplemental filings that
        are
        incorporated or deemed to be incorporated by reference in such Prospectus
        or
        Registration Statement. The Company may provide appropriate stop orders and
        stop
        transfer instructions to enforce the provisions of this paragraph.

       

      6.6
          No
        Piggyback on Registrations.
        Neither
        the Company nor any of its security holders (other than the Purchasers in
        such
        capacity pursuant hereto) may include securities of the Company in the
        Registration Statement other than the Registrable Securities, and the Company
        shall not after the date hereof enter into any agreement providing any such
        right to any of its security holders.

       

      6.7
          Piggy-Back
        Registrations.
        If at
        any time during the Effectiveness Period 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 stock option or other employee benefit plans, then the Company
        shall send to each Purchaser written notice of such determination and if,
        within
        fifteen days after receipt of such notice, any such Purchaser shall so request
        in writing, the Company shall include in such registration statement all
        or any
        part of such Registrable Securities such Purchaser requests to be
        registered.

       

      ARTICLE
        VII  

      MISCELLANEOUS

       

      7.1
          Termination.
        This
        Agreement may be terminated by the Company or any Purchaser, by written notice
        to the other parties, if the Closing has not been consummated by the third
        Trading Day following the date of this Agreement; provided that no such
        termination will affect the right of any party to sue for any breach by the
        other party (or parties).

       

      7.2
          Fees
        and Expenses.
        At the
        Closing, the Company shall pay to Iroquois Master Fund Ltd. an aggregate
        of
        $30,000 for their legal fees and expenses incurred in connection with the
        preparation and negotiation of this Agreement, of which amount $20,000 has
        been
        previously paid by the Company. In lieu of the foregoing remaining payment,
        Iroquois Master Fund Ltd. may retain such amount at the Closing. Except as
        expressly set forth in the Transaction Documents to the contrary, each party
        shall pay the fees and expenses of its advisers, counsel, accountants and
        other
        experts, if any, and all other expenses incurred by such party incident to
        the
        negotiation, preparation, execution, delivery and performance of this Agreement.
        The Company shall pay all transfer agent fees, stamp taxes and other taxes
        and
        duties levied in connection with the issuance of the Securities.

       

      7.3
          Entire
        Agreement.
        The
        Transaction Documents, together with the Exhibits and Schedules thereto,
        contain
        the entire understanding of the parties with respect to the subject matter
        hereof and supersede all prior agreements and understandings, oral or written,
        with respect to such matters, which the parties acknowledge have been merged
        into such documents, exhibits and schedules. At or after the Closing, and
        without further consideration, the Company will execute and deliver to the
        Purchasers such further documents as may be reasonably requested in order
        to
        give practical effect to the intention of the parties under the Transaction
        Documents.

       

      7.4
          Notices.
        Any and
        all notices or other communications or deliveries required or permitted to
        be
        provided hereunder shall be in writing and shall be deemed given and effective
        on the earliest of (a) the date of transmission, if such notice or communication
        is delivered via facsimile at the facsimile number specified in this Section
        prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading
        Day after the date of transmission, if such notice or communication is delivered
        via facsimile at the facsimile number specified in this Section on a day
        that is
        not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
        Day, (c) the Trading Day following the date of deposit with a nationally
        recognized overnight courier service, or (d) upon actual receipt by the party
        to
        whom such notice is required to be given. The addresses and facsimile numbers
        for such notices and communications are those set forth on the signature
        pages
        hereof, or such other address or facsimile number as may be designated in
        writing hereafter, in the same manner, by any such Person.

       

      7.5
          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 Purchasers
        holding a majority of the Shares or, in the case of a waiver, by the party
        against whom enforcement of any such waiver 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 either party to exercise any right hereunder
        in
        any manner impair the exercise of any such right. Notwithstanding the foregoing,
        a waiver or consent to depart from the provisions hereof with respect to
        a
        matter that relates exclusively to the rights of Purchasers under Article
        VI
        and that
        does not directly or indirectly affect the rights of other Purchasers may
        be
        given by Purchasers holding at least a majority of the Registrable Securities
        to
        which such waiver or consent relates.

       

      7.6
          Construction.
        The
        headings herein are for convenience only, do not constitute a part of this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof. The language used in this Agreement will be deemed to be the language
        chosen by the parties to express their mutual intent, and no rules of strict
        construction will be applied against any party.

       

      7.7
          Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their successors and permitted assigns. The Company may not assign this
        Agreement or any rights or obligations hereunder without the prior written
        consent of the Purchasers. Any Purchaser may assign its rights under this
        Agreement to any Person to whom such Purchaser assigns or transfers any
        Securities, provided such transferee agrees in writing to be bound, with
        respect
        to the transferred Securities, by the provisions hereof that apply to the
        “Purchasers.” Notwithstanding anything to the contrary herein, Securities may be
        assigned to any Person in connection with a bona fide margin account or other
        loan or financing arrangement secured by such Securities.

       

      7.8
          No
        Third-Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        successors and permitted assigns and is not for the benefit of, nor may any
        provision hereof be enforced by, any other Person, except that each Related
        Person is an intended third party beneficiary of Section 4.8 and each
        Indemnified Party is an intended third party beneficiary of Section 6.4 and
        (in
        each case) may enforce the provisions of such Sections directly against the
        parties with obligations thereunder.

       

      7.9
          Governing
        Law; Venue; Waiver Of Jury Trial.
        ALL
        QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
        OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
        WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY
        IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
        COURTS
        SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION
        OF
        ANY DISPUTE BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, 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 WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION
        OR
        PROCEEDING BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS
        NOT
        PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT,
        ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
        SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT,
        ACTION
        OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL
        OR
        OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS
        IN
        EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE
        SHALL
        CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
        CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
        IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL
        RIGHTS TO A TRIAL BY JURY.

       

      7.10
          Survival.
        The
        representations, warranties, agreements and covenants contained herein shall
        survive the Closing and the delivery and/or exercise of the Securities, as
        applicable. 

       

      7.11
          Execution.
        This
        Agreement may be executed in two or more counterparts, all of which when
        taken
        together shall be considered one and the same agreement and shall become
        effective when counterparts have been signed by each party and delivered
        to the
        other party, it being understood that both parties need not sign the same
        counterpart. In the event that any signature is delivered by facsimile
        transmission, 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 signature page were an original
        thereof.

       

      7.12
          Severability.
        If any
        provision of this Agreement is held to be invalid or unenforceable in any
        respect, the validity and enforceability of the remaining terms and provisions
        of this Agreement shall not in any way be affected or impaired thereby and
        the
        parties will attempt to agree upon a valid and enforceable provision that
        is a
        reasonable substitute therefor, and upon so agreeing, shall incorporate such
        substitute provision in this Agreement.

       

      7.13
          Rescission
        and Withdrawal Right.
        Notwithstanding anything to the contrary contained in (and without limiting
        any
        similar provisions of) the Transaction Documents, whenever any Purchaser
        exercises a right, election, demand or option under a Transaction Document
        and
        the Company does not timely perform its related obligations within the periods
        therein provided, then such Purchaser may rescind or withdraw, in its sole
        discretion from time to time upon written notice to the Company, any relevant
        notice, demand or election in whole or in part without prejudice to its future
        actions and rights.

       

      7.14
          Replacement
        of Securities.
        If any
        certificate or instrument evidencing any Securities is mutilated, lost, stolen
        or destroyed, the Company shall issue or cause to be issued in exchange and
        substitution for and upon cancellation thereof, 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
        customary and reasonable indemnity, if requested. The applicants for a new
        certificate or instrument under such circumstances shall also pay any reasonable
        third-party costs associated with the issuance of such replacement
        Securities.

       

      7.15
          Remedies.
        In
        addition to being entitled to exercise all rights provided herein or granted
        by
        law, including recovery of damages each of the Purchasers and the Company
        will
        be entitled to specific performance under the Transaction Documents. The
        parties
        agree that monetary damages may not be adequate compensation for any loss
        incurred by reason of any breach of obligations described in the foregoing
        sentence and hereby agrees to waive in any action for specific performance
        of
        any such obligation the defense that a remedy at law would be
        adequate.

       

      7.16
          Payment
        Set Aside.
        To the
        extent that the Company makes a payment or payments to any Purchaser hereunder
        or pursuant to the Warrants or any Purchaser enforces or exercises its rights
        hereunder or thereunder, and such payment or payments or the proceeds of
        such
        enforcement or exercise or any part thereof are subsequently invalidated,
        declared to be fraudulent or preferential, set aside, recovered from, disgorged
        by or are required to be refunded, repaid or otherwise restored to the Company
        by 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.

       

      7.17
          Usury.
        To the
        extent it may lawfully do so, the Company hereby agrees not to insist upon
        or
        plead or in any manner whatsoever claim, and will resist any and all efforts
        to
        be compelled to take the benefit or advantage of, usury laws wherever enacted,
        now or at any time hereafter in force, in connection with any claim, action
        or
        proceeding that may be brought by any Purchaser in order to enforce any right
        or
        remedy under any Transaction Document. Notwithstanding any provision to the
        contrary contained in any Transaction Document, it is expressly agreed and
        provided that the total liability of the Company under the Transaction Documents
        for payments in the nature of interest shall not exceed the maximum lawful
        rate
        authorized under applicable law (the “Maximum
        Rate”),
        and,
        without limiting the foregoing, in no event shall any rate of interest or
        default interest, or both of them, when aggregated with any other sums in
        the
        nature of interest that the Company may be obligated to pay under the
        Transaction Documents exceed such Maximum Rate. It is agreed that if the
        maximum
        contract rate of interest allowed by law and applicable to the Transaction
        Documents is increased or decreased by statute or any official governmental
        action subsequent to the date hereof, the new maximum contract rate of interest
        allowed by law will be the Maximum Rate of interest 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 any Purchaser with
        respect to indebtedness evidenced by the Transaction Documents, such excess
        shall be applied by such Purchaser to the unpaid principal balance of any
        such
        indebtedness or be refunded to the Company, the manner of handling such excess
        to be at such Purchaser’s election.

       

      7.18
          Adjustments
        in Share Numbers and Prices.
        In the
        event of any stock split, subdivision, dividend or distribution payable in
        shares of Common Stock (or other securities or rights convertible into, or
        entitling the holder thereof to receive directly or indirectly shares of
        Common
        Stock), combination or other similar recapitalization or event occurring
        after
        the date hereof, each reference in any Transaction Document to a number of
        shares or a price per share shall be amended to appropriately account for
        such
        event.

       

      7.19
          Independent
        Nature of Purchasers' Obligations and Rights.
        The
        obligations of each Purchaser under any Transaction Document are several
        and not
        joint with the obligations of any other Purchaser, and no Purchaser shall
        be
        responsible in any way for the performance of the obligations of any other
        Purchaser under any Transaction Document. The decision of each Purchaser
        to
        purchase Securities pursuant to this Agreement has been made by such Purchaser
        independently of any other Purchaser and independently of any information,
        materials, statements or opinions as to the business, affairs, operations,
        assets, properties, liabilities, results of operations, condition (financial
        or
        otherwise) or prospects of the Company or of the Subsidiary which may have
        been
        made or given by any other Purchaser or by any agent or employee of any other
        Purchaser, and no Purchaser or any of its agents or employees shall have
        any
        liability to any other Purchaser (or any other Person) relating to or arising
        from any such information, materials, statements or opinions. Nothing contained
        herein or in any Transaction Document, and no action taken by any Purchaser
        pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
        an association, a joint venture or any other kind of entity, or create a
        presumption that the Purchasers are in any way acting in concert or as a
        group
        with respect to such obligations or the transactions contemplated by the
        Transaction Document. The Company hereby confirms that it understands that
        the
        Purchasers are not acting as a “group” as that term is used in Section 13(d) of
        the Exchange Act. Each Purchaser acknowledges that no other Purchaser has
        acted
        as agent for such Purchaser in connection with making its investment hereunder
        and that no other Purchaser will be acting as agent of such Purchaser in
        connection with monitoring its investment hereunder. Each Purchaser shall
        be
        entitled to independently protect and enforce its rights, including without
        limitation the rights arising out of this Agreement or out of the other
        Transaction Documents, and it shall not be necessary for any other Purchaser
        to
        be joined as an additional party in any proceeding for such purpose. Each
        Purchaser represents that it has been represented by its own separate legal
        counsel in its review and negotiations of this Agreement and the Transaction
        Documents and each party represents and confirms that Malhotra & Associates
        LLP represents only Iroquois Master Fund Ltd. in connection with this Agreement
        and the other Transaction Documents.

       

      


      [SIGNATURE
        PAGES TO FOLLOW]

      


      


       


      
        
          
            


            securities
              purchase agreement.DOC

          

           

        

        
           

          
            

          

        

        
           

          
          

        

      



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

       

      Lighting
        Science Group Corporation

       

      By: __________________________

      Name: 

      Title: 

       

      Address
        for Notice:

       

      Lighting
        Science Group Corporation

       

      2100
        McKinney Avenue, Suite 1555

       

      Dallas,
        Texas 75201

       

      Facsimile
        No.: 214.382.3631

       

      Telephone
        No.: 214.382.3630

       

      Attn:
        Mr.
        Ron Lusk, Chairman & CEO

       

      


       

      With
        a
        copy to: 

      Haynes
        and Boone, LLP

      901
        Main
        Street

      3100
        Bank
        of America Plaza

      Dallas,
        Texas 75202

      Facsimile
        No.: 214.200.0577

      Telephone
        No.: 214.651.6545

      Attn:
        Greg. R. Samuel, Esq.

      


      


      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGES FOR PURCHASERS FOLLOW]

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      IROQUOIS
        MASTER FUND LTD.

       

      By: __________________________

      Name: 

      Title:

       

      Address
        for Notice:

      


      Iroquois
        Master Fund Ltd.

      641
        Lexington Ave, 26th
        Floor

      New
        York,
        NY 10022

      Facsimile
        No.: (212) 207-3452

      Telephone
        No.: (212) 974-3070

      Attn:
        Joshua Silverman

      


      With
        a
        copy to:

      Malhotra
        & Associates LLP

      11
        Penn
        Plaza, 5th
        Floor

      New
        York,
        New York 10001

      Facsimile
        No.: (212) 504-0863

      Telephone
        No.: (212) 593-2284

      Attn:
        Gary Malhotra, Esq.

      


       

       

       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      _______________________________________

       

      (Name
        of
        Purchaser)      

       

      By: __________________________

      Name: 

      Title: 

       

      Address
        for Notice:

      


      ___________________

      ___________________

      ___________________

      Facsimile
        No.: ___________________

      Telephone
        No.: ___________________

      Attn:
        ___________________

       

      


       


      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Exhibits:

       

      A-1
         Form
        of
        Warrant A

      A-2 Form
        of
        Warrant B

      A-3 Form
        of
        Additional Warrant

      B 
        Form of
        Opinion of Company Counsel

      C 
        Plan of
        Distribution

      D 
        Form of
        Transfer Agent Instructions

      E 
        Lock-Up
        Letter

      


      



      
        
           

        

        
           

          
            

          

        

        
           

        

      


      Schedule
        A

       

      
        	
                 

                 

                 

                 

                 

                Purchasers

              	
                 

                 

                 

                 

                 

                Units
                  

              	
                 

                 

                 

                 

                 

                Warrant
                  A Shares

              	
                 

                 

                 

                 

                 

                Warrant
                  B Shares

              	
                 

                 

                 

                 

                Additional
                  Warrant Shares

              	
                 

                 

                 

                 

                Purchase
                  Price

                 

              
	
                Iroquois
                  Master Fund, Ltd.