SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of July 8, 2008 by and among QPC Lasers, Inc., a Nevada corporation
      (the “Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively, the “Purchasers”).

     

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

     

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

     

    ARTICLE
      I.

    DEFINITIONS

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchasers’ obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or
      waived.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Closing
      Statement”
means
      the Closing Statement in the form Annex
      A
      attached
      hereto.

     

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

     

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

     

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

     

    “Company
      Counsel”
means
      Morrison & Foerster LLP, with offices located at 555 West Fifth Street,
      Suite 3500, Los Angeles, California 90013.

     

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

     

    “Debentures”
means
      the 10% Original Issue Discount Secured Convertible Debentures due, subject
      to
      the terms therein, three years from their date of issuance, issued by the
      Company to the Purchasers hereunder, in the form of Exhibit
      A
      attached
      hereto.

     

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

     

    “Discussion
      Time”
shall
      have the meaning ascribed to such term in Section 3.2(f). 

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      ,
      directors or consultants (provided that no such Common Stock or options shall
      be
      issued to consultants unless such Common Stock is unregistered and subject
      to
      volume limitations under Rule 144, provided that such issuances to consultants
      shall not exceed 1,000,000 shares issued at a purchase price equal to or greater
      than the then market price, subject to adjustment for reverse and forward stock
      splits and the like, and provided that the price of such issuances of Common
      Stock, and the conversion or exercise price of such issuance of options, to
      consultants shall not be subject to any adjustments or resets after issuance)
      of
      the Company pursuant to any stock or option plan duly adopted for such purpose
      by a majority of the non-employee members of the Board of Directors or a
      majority of the members of a committee of non-employee directors established
      for
      such purpose, (b) securities upon the exercise or exchange of or conversion
      of
      any Securities issued hereunder and/or other securities exercisable or
      exchangeable for or convertible into shares of Common Stock issued and
      outstanding on the date of this Agreement, provided that such securities have
      not been amended since the date of this Agreement to increase the number of
      such
      securities or to decrease the exercise, exchange or conversion price of such
      securities (provided, however, this subsection (b) shall not include any
      downward adjustment of (i) the conversion price of the Existing Debentures,
      (ii)
      the exercise price of the Existing Warrants or (iii) the number of shares
      issuable upon exercise of the Existing Warrants), (c) securities issued pursuant
      to acquisitions or strategic transactions approved by a majority of the
      disinterested directors of the Company, provided that any such issuance shall
      only be to a Person which is, itself or through its subsidiaries, an operating
      company in a business synergistic with the business of the Company and in which
      the Company receives benefits in addition to the investment of funds, but shall
      not include a transaction in which the Company is issuing securities primarily
      for the purpose of raising capital or to an entity whose primary business is
      investing in securities, and (d) any securities the issuance of which the
      Purchasers holding at least 67% of the Principal Amount of the Debentures then
      outstanding have agreed in writing to be deemed as an Exempt Issuance under
      this
      Agreement.

     

    “Existing
      Debentures”
means,
      collectively, the Company’s 10% Secured Convertible Debentures due May 22, 2009
      and 10% Secured Convertible Debentures due April 16, 2009.

     

    “Existing
      Debenture Holders”
means
      the holders of the Existing Debentures.

     

    “Existing
      Liens”
means
      all Liens granted in favor of the Existing Debenture Holders, and all other
      Liens existing as of the date hereof as disclosed in writing to the Purchasers
      or as disclosed in any periodic reports or other securities filings made prior
      to the date hereof by the Company with the Commission.

     

    “Existing
      Warrants”
means,
      collectively, the Company’s Common Stock Purchase Warrants issued on May 29,
      2007 and April 16, 2007.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    “Lock-Up
      Agreement”
means
      the Lock-Up Agreement, dated as of the date hereof, by and among the Company
      and
      the directors and officers of the Company, in the form of Exhibit
      B
      attached
      hereto.

     

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

     

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

     

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

     

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

     

    “Permitted
      Indebtedness”
means
      (a) the indebtedness evidenced by the Debentures and the Existing Debentures,
      and (b) the Indebtedness existing on the Original Issue Date and set forth
      on
Schedule
      3.1(aa)
      attached
      hereto.

     

    “Permitted
      Liens”
means,
      collectively, (i) Liens that do not materially affect the value of the
      collateral and do not materially interfere with the use made and proposed to
      be
      made of such collateral by the Company and its subsidiaries; (ii) Liens for
      the
      payment of federal, state or other taxes, the payment of which is neither
      delinquent nor subject to penalties; and (iii) Existing Liens.

     

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

     

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

     

    “Principal
      Amount”
means,
      as to each Purchaser, the amounts set forth below such Purchaser’s signature
      block on the signature pages hereto next to the heading “Principal Amount,” in
      United States Dollars, which shall equal such Purchaser’s Subscription Amount
      multiplied by 1.111. 

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Securities”
means
      the Debentures, the Warrants, the Warrant Shares and the Underlying
      Shares.

     

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

     

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

    


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

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a)
      and
      shall, where applicable, include any direct or indirect subsidiary of the
      Company formed or acquired after the date hereof.

     

    “Subsidiary
      Guarantee”
means
      the Subsidiary Guarantee by each Subsidiary (as required pursuant to the
      Security Agreement) in favor of the Purchasers, in the form of Exhibit
      F
      attached
      hereto.

     

    “Subordination
      Agreement”
means
      the Subordination Agreement, dated as of the date hereof, among the Company,
      each of the Subsidiaries and the Purchasers, in the form of Exhibit
      G
      attached
      hereto

     

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

     

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

     

    “Transaction
      Documents”
means
      this Agreement, the Debentures, the Warrants, the Security Agreement, the
      Subsidiary Guarantee, the Subordination Agreement, the Lock-Up Agreement, the
      Voting Agreement, all exhibits and schedules thereto and hereto and any other
      documents or agreements executed in connection with the transactions
      contemplated hereunder.

     

    “Transfer
      Agent”
means
      American Stock Transfer & Trust Company the current transfer agent of the
      Company with a mailing address of 6201 15th
      Avenue,
      Brooklyn, NY 11219 and a facsimile number of (718) 921-8116 and any successor
      transfer agent of the Company.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issued and issuable upon conversion or redemption
      of
      the Debentures and upon exercise of the Warrants and issued and issuable in
      lieu
      of the cash payment of interest on the Debentures in accordance with the terms
      of the Debentures.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1 Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      substantially concurrent with the execution and delivery of this Agreement
      by
      the parties hereto, the Company agrees to sell, and the Purchasers, severally
      and not jointly, agree to purchase, up to an aggregate of $3,888,500 in
      Principal Amount ($3,500,000 in Subscription Amounts) of the Debentures. Each
      Purchaser shall deliver to the Company via wire transfer or a certified check,
      immediately available funds equal to its Subscription Amount and the Company
      shall deliver to each Purchaser its respective Debenture and a Warrant, as
      determined pursuant to Section 2.2(a), and the Company and each Purchaser shall
      deliver the other items set forth in Section 2.2 deliverable at the Closing.
      Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the
      Closing shall occur at the offices of FWS or such other location as the parties
      shall mutually agree.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    2.2 Deliveries

     

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

     

    
      
        (i) 
          this
          Agreement duly executed by the Company;

      

    

     

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

     

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

     

    (iv) a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 200% of such Purchaser’s Principal Amount divided by
      $1.05, with an exercise price equal to $1.05, subject to adjustment
      therein;

     

    (v) the
      Security Agreement, duly executed by the Company, along with all of the Security
      Documents, duly executed by the parties thereto; 

     

    (vi) the
      Subordination Agreement, duly executed by the Company and each Subsidiary;
      and


     

    (vii) the
      Lock-Up Agreements.

    


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

     

    
      
        (i) 
          this
          Agreement duly executed by such Purchaser;

      

    

     

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

     

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

     

    (iv) the
      Security Agreement duly executed by such Purchaser.

     

    2.3 Closing
      Conditions. 

     

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

     

    (i) the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Purchasers contained herein;

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

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

     

    (iii) the
      delivery by each Purchaser of the items set forth in Section 2.2(b) of this
      Agreement; and

     

    (iv) the
      execution and delivery by the Existing Debenture Holders holding at least 67%
      of
      the outstanding Existing Debentures of the Amendment and Waiver Agreement to
      the
      Company under which, among other things, the Existing Debenture Holders agree
      to
      consent to the transactions contemplated hereby and waive certain covenants
      under the Existing Debentures and other related transaction documents in
      connection therewith. 

    


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

     

    (i) the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Company contained herein;

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    (d) No
      Conflicts.
      Except
      as set forth on Schedule
      3.1(d),
      the
      execution, delivery and performance by the Company of the Transaction Documents
      and the consummation by it to which it is a party of the other 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,
      or (ii) conflict with, or constitute a default (or an event that with notice
      or
      lapse of time or both would become a default) under, result in the creation
      of
      any Lien upon any of the properties or assets of the Company or any Subsidiary,
      or give to others any rights of termination, amendment, acceleration or
      cancellation (with or without notice, lapse of time or both) of, any agreement,
      credit facility, debt or other instrument (evidencing a Company or Subsidiary
      debt or otherwise) or other understanding to which the Company or any Subsidiary
      is a party or by which any property or asset of the Company or any Subsidiary
      is
      bound or affected, (iii) subject to the Required Approvals, conflict with or
      result in a violation of any law, rule, regulation, order, judgment, injunction,
      decree or other restriction of any court or governmental authority to which
      the
      Company or a Subsidiary is subject (including federal and state securities
      laws
      and regulations), or by which any property or asset of the Company or a
      Subsidiary is bound or affected; except in the case of each of clauses (ii)
      and
      (iii), such as could not have or reasonably be expected to result in a Material
      Adverse Effect.

     

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

     

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

     

    
      
        
        

      

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

     

    
      
        
        

      

      
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    (h) SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by the Company under the Securities Act and the Exchange
      Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
      preceding the date hereof (or such shorter period as the Company was required
      by
      law or regulation to file such material) (the foregoing materials, including
      the
      exhibits thereto and documents incorporated by reference therein, being
      collectively referred to herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, except as disclosed in Schedule
      3.1(h),
      the SEC
      Reports complied in all material respects with the requirements of the
      Securities Act and the Exchange Act, as applicable, and none of the SEC Reports,
      when filed, contained any untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary in order to
      make the statements therein, in the light of the circumstances under which
      they
      were made, not misleading. Except as set forth on Schedule
      3.1(h),
      the
      Company has never been an issuer subject to Rule 144(i) under the Securities
      Act. Except as disclosed in Schedule
      3.1(h),
      the
      financial statements of the Company included in the SEC Reports comply in all
      material respects with applicable accounting requirements and the rules and
      regulations of the Commission with respect thereto as in effect at the time
      of
      filing. Such financial statements have been prepared in accordance with United
      States generally accepted accounting principles applied on a consistent basis
      during the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated Subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

    (n) Title
      to Assets.
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them and good and marketable title in all personal
      property owned by them that is material to the business of the Company and
      the
      Subsidiaries, in each case free and clear of all Liens, except for Permitted
      Liens. Any real property and facilities held under lease by the Company and
      the
      Subsidiaries are held by them under valid, subsisting and enforceable leases
      with which the Company and the Subsidiaries are in compliance.

     

    (o) Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      trade secrets, inventions, copyrights, licenses and other intellectual property
      rights and similar rights as described in the SEC Reports as necessary or
      material for use in connection with their respective businesses and which the
      failure to so have could have a Material Adverse Effect (collectively, the
      “Intellectual
      Property Rights”).
      Neither the Company nor any Subsidiary has received a notice (written or
      otherwise) that any of 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. The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their intellectual properties, except where failure to do so could
      not, individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    (aa) Bankruptcy
      Filing; Existing Indebtedness.
      The
      Company has no knowledge of any facts or circumstances which lead it to believe
      that it will file for reorganization or liquidation under the bankruptcy or
      reorganization laws of any jurisdiction within one year from the Closing Date.
      Schedule
      3.1(aa)
      sets
      forth as of the date hereof all outstanding secured and unsecured Indebtedness
      of the Company or any Subsidiary, or for which the Company or any Subsidiary
      has
      commitments. For the purposes of this Agreement, “Indebtedness”
means
      (x) any liabilities for borrowed money or amounts owed in excess of $50,000
      (other than trade accounts payable incurred in the ordinary course of business),
      (y) all guaranties, endorsements and other contingent obligations in respect
      of
      indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (z) the present value
      of
      any lease payments
      in excess of $50,000 due under leases required to be capitalized in accordance
      with GAAP. Neither
      the Company nor any Subsidiary is in default with respect to any
      Indebtedness.

     

    (bb) Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect, the Company and each
      Subsidiary has filed all necessary federal, state and foreign income and
      franchise tax returns and has paid or accrued all taxes shown as due thereon,
      and the Company has no knowledge of a tax deficiency which has been asserted
      or
      threatened against the Company or any Subsidiary.

     

    
      
        
        

      

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

     

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

     

    (ee) Accountants.
      The
      Company’s accounting firm is set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedules. To the knowledge and belief of the Company, such
      accounting firm: (i) is a registered public accounting firm as required by
      the
      Exchange Act and (ii) shall express its opinion with respect to the financial
      statements to be included in the Company’s Annual Report for the year ended
      December 31, 2007. 

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    (kk) Intentionally
      Omitted.

     

    (ll) Stock
      Option Plans.
      Each
      stock option granted by the Company under the Company’s stock option plan was
      granted (i) in accordance with the terms of the Company’s stock option plan and
      (ii) with an exercise price at least equal to the fair market value of the
      Common Stock on the date such stock option would be considered granted under
      GAAP and applicable law. No stock option granted under the Company’s stock
      option plan has been backdated. The Company has not knowingly granted, and
      there
      is no and has been no Company policy or practice to knowingly grant, stock
      options prior to, or otherwise knowingly coordinate the grant of stock options
      with, the release or other public announcement of material information regarding
      the Company or its Subsidiaries or their financial results or
      prospects.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    (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.

     

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

     

    (f) Short
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than consummating the transactions contemplated hereunder, such Purchaser has
      not directly or indirectly, nor has any Person acting on behalf of or pursuant
      to any understanding with such Purchaser, executed any purchases or sales,
      including Short Sales, of the securities of the Company during the period
      commencing from the time that such Purchaser first received a term sheet
      (written or oral) from the Company or any other Person representing the Company
      setting forth the material terms of the transactions contemplated hereunder
      until the date hereof (“Discussion
      Time”).
      Notwithstanding the foregoing, in the case of a Purchaser that is a
      multi-managed investment vehicle whereby separate portfolio managers manage
      separate portions of such Purchaser’s assets and the portfolio managers have no
      direct knowledge of the investment decisions made by the portfolio managers
      managing other portions of such Purchaser’s assets, the representation set forth
      above shall only apply with respect to the portion of assets managed by the
      portfolio manager that made the investment decision to purchase the Securities
      covered by this Agreement. Other than to other Persons party to this Agreement,
      such Purchaser has maintained the confidentiality of all disclosures made to
      it
      in connection with this transaction (including the existence and terms of this
      transaction).

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 Transfer
      Restrictions.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

    


    (d) In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
      the
      date such Securities are submitted to the Transfer Agent) delivered for removal
      of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
      (increasing to $20 per Trading Day 5 Trading Days after such damages have begun
      to accrue) for each Trading Day after the Legend Removal Date until such
      certificate is delivered without a legend. Nothing herein shall limit such
      Purchaser’s right to pursue actual damages for the Company’s failure to deliver
      certificates representing any Securities as required by the Transaction
      Documents, and such Purchaser shall have the right to pursue all remedies
      available to it at law or in equity including, without limitation, a decree
      of
      specific performance and/or injunctive relief.

     

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

     

    
      
        
        

      

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

     

    4.3 Furnishing
      of Information; Public Information.
      

     

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

     

    (b)
       At
      any
      time during the period commencing from the six (6) month anniversary of the
      date
      hereof and ending at such time that all of the Securities may be sold without
      the requirement for the Company to be in compliance with Rule 144(c)(1) and
      otherwise without restriction or limitation pursuant to Rule 144, if the Company
      shall fail for any reason to satisfy the current public information requirement
      under Rule 144(c) (a “Public
      Information Failure”)
      then,
      in addition to such Purchaser’s other available remedies, the Company shall pay
      to a Purchaser, in cash, as partial liquidated damages and not as a penalty,
      by
      reason of any such delay in or reduction of its ability to sell the Securities,
      an amount in cash equal to two percent (2.0%) of the aggregate Subscription
      Amount of such Purchaser’s Securities on the day of a Public Information Failure
      and on every thirtieth (30th)
      day
      (pro rated for periods totaling less than thirty days) thereafter until the
      earlier of (a) the date such Public Information Failure is cured and (b) such
      time that such public information is no longer required  for the Purchasers
      to transfer the Underlying Shares pursuant to Rule 144.  The payments to
      which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred
      to herein as “Public
      Information Failure Payments.” 
      Public Information Failure Payments
      shall be paid on the earlier of (i) the last day of the calendar month during
      which such Public Information Failure Payments
      are incurred and (ii) the third (3rd)
      Business Day after the event or failure giving rise to the Public Information
      Failure Payments
      is cured.  In the event the Company fails to make Public Information
      Failure Payments
      in a timely manner, such Public Information Failure Payments
      shall bear interest at the rate of 1.5% per month (prorated for partial months)
      until paid in full. Nothing herein shall limit such Purchaser’s right to pursue
      actual damages for the Public Information Failure, and such Purchaser shall
      have
      the right to pursue all remedies available to it at law or in equity including,
      without limitation, a decree of specific performance and/or injunctive
      relief.

     

    
      
        
        

      

      
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    4.4 Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities to the
      Purchasers 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.

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

      
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    4.11 Reservation
      and Listing of Securities.

     

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

     

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

     

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

     

    4.12 Participation
      in Future Financing.
      

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    (e) If
      by
      5:30 p.m. (New York City time) on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, the Company
      receives responses to a Subsequent Financing Notice from Purchasers seeking
      to
      purchase more than the aggregate amount of the Participation Maximum, each
      such
      Purchaser shall have the right to purchase its Pro Rata Portion (as defined
      below) of the Participation Maximum.  “Pro
      Rata Portion”
means
      the ratio of (x) the Subscription Amount of Securities purchased on the Closing
      Date by a Purchaser participating under this Section 4.12 and (y) the sum of
      the
      aggregate Subscription Amounts of Securities purchased on the Closing Date
      by
      all Purchasers participating under this Section 4.12.

     

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

     

    
      
        
        

      

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

     

    4.13 Subsequent
      Equity Sales.
      

     

    (a) From
      the
      date hereof until 90 days after the date hereof, without the written consent
      of
      the Purchasers holding at least 67% of the Principal Amount outstanding of
      the
      Debentures, neither the Company nor any Subsidiary shall issue shares of Common
      Stock or Common Stock Equivalents; provided,
      however,
      the 90
      day period set forth in this Section 4.13 shall be extended for the number
      of
      Trading Days during such period in which trading in the Common Stock is
      suspended by any Trading Market. 

     

    (b) From
      the
      date hereof until such time as no Purchaser holds any of the Securities, without
      the written consent of the Purchasers holding at least 67% of the Principal
      Amount outstanding of the Debentures, the Company shall be prohibited from
      effecting or entering into an agreement to effect any Subsequent Financing
      involving a Variable Rate Transaction. “Variable
      Rate Transaction”
means
      a
      transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion price, exercise price or exchange rate or other price that is based
      upon and/or varies with the trading prices of or quotations for the shares
      of
      Common Stock at any time after the initial issuance of such debt or equity
      securities or (B) with a conversion, exercise or exchange price that is subject
      to being reset at some future date after the initial issuance of such debt
      or
      equity security or upon the occurrence of specified or contingent events
      directly or indirectly related to the business of the Company or the market
      for
      the Common Stock or (ii) enters into any agreement, including, but not limited
      to, an equity line of credit, whereby the Company may sell securities at a
      future determined price. 

     

    (c) Notwithstanding
      the foregoing, this Section 4.13 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance. 

     

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

     

    
      
        
        

      

      
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    4.15 Short
      Sales and Confidentiality After The Date Hereof.
      Each
      Purchaser, severally and not jointly with the other Purchasers, covenants that
      neither it, nor any Affiliate acting on its behalf or pursuant to any
      understanding with it, will execute any Short Sales below the price of $1.50
      per
      share during the period commencing with the Discussion Time and ending at such
      time the transactions contemplated by this Agreement are first publicly
      announced as described in Section 4.6. 
      Each
      Purchaser, severally and not jointly with the other Purchasers, covenants that
      until such time as the transactions contemplated by this Agreement are publicly
      disclosed by the Company as described in Section 4.6, such Purchaser will
      maintain the confidentiality of the existence and terms of this transaction
      and
      the information included in the Transaction Documents and the Disclosure
      Schedules. Notwithstanding the foregoing, no Purchaser makes any representation,
      warranty or covenant hereby that it will not engage in Short Sales in the
      securities of the Company after the time that the transactions contemplated
      by
      this Agreement are first publicly announced as described in Section 4.6;
provided,
      however,
      each
      Purchaser agrees, severally and not jointly with any other Purchasers, that
      they
      will not enter into any Net Short Sales (as hereinafter defined) from the period
      commencing on the Closing Date and ending on the date that such Purchaser no
      longer holds any Debentures. For purposes of this Section 4.15, a “Net
      Short Sale”
by
      any
      Purchaser shall mean a sale of Common Stock by such Purchaser that is marked
      as
      a short sale and that is made at a time when there is no equivalent offsetting
      long position in Common Stock held by such Purchaser. For purposes of
      determining whether there is an equivalent offsetting long position in Common
      Stock held by the Purchaser, Underlying Shares that have not yet been converted
      pursuant to the Debentures and Warrant Shares that have not yet been exercised
      pursuant to the Warrants shall be deemed to be held long by the Purchaser,
      and
      the amount of shares of Common Stock held in a long position shall be all
      unconverted Underlying Shares and unexercised Warrant Shares (ignoring any
      exercise limitations included therein) issuable to such Purchaser on such date,
      plus any shares of Common Stock or Common Stock Equivalents otherwise then
      held
      by such Purchaser. Notwithstanding the foregoing, in the case of a Purchaser
      that is a multi-managed investment vehicle whereby separate portfolio managers
      manage separate portions of such Purchaser’s assets and the portfolio managers
      have no direct knowledge of the investment decisions made by the portfolio
      managers managing other portions of such Purchaser’s assets, the covenant set
      forth above shall only apply with respect to the portion of assets managed
      by
      the portfolio manager that made the investment decision to purchase the
      Securities covered by this Agreement.

     

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

     

    
      
        
        

      

      
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    4.17 Capital
      Changes.
      Until
      the 16 month anniversary of the date hereof, the Company shall not undertake
      a
      reverse or forward stock split or reclassification of the Common Stock without
      the prior written consent of the Purchasers holding a majority in Principal
      Amount outstanding of the Debentures; provided,
      however,
      the
      prohibition in this Section 4.17 shall not apply unless such reverse split
      is
      (a) effected in connection with a listing application for inclusion of the
      Common Stock on the American Stock Exchange, the Nasdaq Capital Market, the
      Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock
      Exchange and (b) approved by the written consent of the Purchasers holding
      at
      least 67% of the Principal Amount outstanding of the Debentures.

     

    4.18 Most
      Favored Nation Provision. 
      From the date hereof until such time that the Debentures are no longer
      outstanding, if the Company effects any Subsequent Financing, each Purchaser
      may
      elect, in its sole discretion, to (a) exchange all or some of the Debentures
      (but not the Warrants) then held by such Purchaser for any securities or units
      issued in a Subsequent Financing on a $1.00 for $1.00 basis (that is, for each
      $1.00 Principal Amount of Debentures surrendered by the Purchaser, the Purchaser
      shall receive $1.00 of units in such Subsequent Financing) based on the
      outstanding Principal Amount of such Debentures, along with any liquidated
      damages and other amounts owing thereon, and the effective price at which such
      securities are to be sold in such Subsequent Financing, or (b) to have any
      particular provisions of the Subsequent Financing legal documents apply to
      the
      Transaction Documents ex post facto; provided,
      however,
      that
      this Section 4.18 shall not apply with respect to (i) an Exempt Issuance, or
      (ii) an underwritten public offering of Common Stock. The Company shall provide
      each Purchaser with notice of any such Subsequent Financing in the manner set
      forth in Section 4.12.

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1 Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before July 11, 2008;
      provided,
      however,
      that
      such termination will not affect the right of any party to sue for any breach
      by
      the other party (or parties).

     

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

     

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

     

    
      
        
        

      

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

     

    5.5 Amendments;
      Waivers.
      No
      provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed by the Company and the Purchasers holding
      at least 67% in interest of the Securities then outstanding at the time of
      such
      waiver, modification, supplement or amendment or such lesser percentage as
      expressly provided herein. Any waiver, modification, supplement or amendment
      effected in accordance with this Section 5.5 shall be binding upon the Company
      and each Purchaser and its transferees, successors and assigns. No waiver of
      any
      default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    5.13 Rescission
      and Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) any of the other Transaction Documents, whenever any
      Purchaser exercises a right, election, demand or option under a Transaction
      Document and the Company does not timely perform its related obligations within
      the periods therein provided, then such Purchaser may rescind or withdraw,
      in
      its sole discretion from time to time upon written notice to the Company, any
      relevant notice, demand or election in whole or in part without prejudice to
      its
      future actions and rights; provided,
      however,
      that in
      the case of a rescission of a conversion of a Debenture or exercise of a
      Warrant, the Purchaser shall be required to return any shares of Common Stock
      subject to any such rescinded conversion or exercise notice.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    5.18 Independent
      Nature of Purchasers’ Obligations and Rights.
      The
      obligations of each Purchaser under any Transaction Document are several and
      not
      joint with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance or non-performance of the obligations
      of any other Purchaser under any Transaction Document. Nothing contained herein
      or in any other Transaction Document, and no action taken by any Purchaser
      pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
      an association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents. Each Purchaser shall be entitled to independently protect
      and enforce its rights, including, without limitation, the rights arising out
      of
      this Agreement or out of the other Transaction Documents, and it shall not
      be
      necessary for any other Purchaser to be joined as an additional party in any
      proceeding for such purpose. Each Purchaser has been represented by its own
      separate legal counsel in their review and negotiation of the Transaction
      Documents. For reasons of administrative convenience only, Purchasers and their
      respective counsel have chosen to communicate with the Company through FWS.
      FWS
      does not represent all of the Purchasers but only T.R. Winston. The Company
      has
      elected to provide all Purchasers with the same terms and Transaction Documents
      for the convenience of the Company and not because it was required or requested
      to do so by the Purchasers.

     

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

     

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

     

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

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

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

     

    (Signature
      Pages Follow)

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    


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

     

    
      	QPC
              LASERS, INC.	 	
              Address
                for Notice:

            
	 	 	 	 
	By:	 	 	
              Fax:

            
	 	
              Name:

              Title:

               

            	 	
               

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

            	 	 


    

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    [PURCHASER
      SIGNATURE PAGES TO QPCI SECURITIES PURCHASE AGREEMENT]

    


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

     

    Name
      of
      Purchaser: ________________________________________________________

     

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

     

    Name
      of
      Authorized Signatory:
      ____________________________________________________

     

    Title
      of
      Authorized Signatory:
      _____________________________________________________

     

    Email
      Address of Authorized Signatory:
      _____________________________________________

     

    Facsimile
      Number of Authorized Signatory:
      __________________________________________

    


    Address
      for Notice of Purchaser:

    


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

    


    Subscription
      Amount: _____________

    


    Principal
      Amount (1.111
      x Subscription Amount):
      _____________

    


    Warrant
      Shares: _________________

    


    EIN
      Number: [PROVIDE
      THIS UNDER SEPARATE COVER]

    


    [SIGNATURE
      PAGES CONTINUE]

     

    
      
        
        

      

      
        39