SECURITIES
      PURCHASE, SETTLEMENT AND RELEASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE, SETTLEMENT AND RELEASE AGREEMENT (the “Agreement”) is made
      as of the 31st
      day of
      December, 2007 by and among Long-e International, Inc., a Utah corporation
      (the
“Company”) and the investors set forth on the signature pages affixed hereto
      (each an “Investor” and collectively the “Investors”).

     

    Recitals

     

    A.
       The
      Company completed a placement of its shares of Common Stock and warrants to
      purchase its shares of Common Stock with certain purchasers in December 2006
      (the “2006 Placement”) and a placement of notes convertible into shares of its
      capital stock and warrants to purchase shares of its Common Stock with certain
      purchasers in January 2007 (the “2007 Placement,” and together with the 2006
      Placement, the “Prior Placements”); and

     

    B.
       Each
      of
      the Investors is party to that certain Amended and Restated Registration Rights
      Agreement with the Company dated January 25, 2007 (the “Senior Agreement”),
      pursuant to Section 7(f) of which the Company owes the Investors liquidated
      damages payable in cash as set forth on Schedule
      I
      hereto
      (the “Damages”) for its failure to file a registration statement on Form SB-2 by
      the specified event date of April 30, 2007, registering certain of the
      securities purchased in the Prior Placements; and

     

    C.
       The
      Company has provided notice to the Investors and other purchasers of its
      securities in the Prior Placements that it desires to convert the liquidated
      damages owed through December 31, 2007 pursuant to the Senior Agreement into
      notes convertible into shares of the Company’s Common Stock in the form attached
      hereto as Exhibit
      A
      (each a
“Note” and together the “Notes,” and, together with certain Common Stock of the
      Company into which the Notes may be converted, the “Securities”) on certain
      terms and under specified conditions (the “Conversion”); and

     

    D.
       The
      Investors have notified the Company of their desire to participate in the
      Conversion upon the terms and conditions stated in this Agreement, whereby
      the
      Investors will receive Notes in the principal amounts set forth on Schedule
      I
      hereto;
      and

     

    E.
       The
      Investors in aggregate hold (i) a majority of registrable securities subject
      to
      the Senior Agreement, allowing for waiver or amendment of terms of the Senior
      Agreement pursuant to Section 7(g) thereof; and (ii) a majority of the shares
      of
      the Company’s capital stock issuable upon exercise of the Series A and Series B
      warrants to purchase shares of the Company’s Common Stock issued in the Prior
      Placements (the “Series A and B Warrants”), allowing for waiver or amendment of
      terms of the Series A and B Warrants pursuant to Section 10 thereof;
      and

     

    F.
       Contemporaneous
      with the conversion of the Damages into the Notes, the parties hereto will
      execute and deliver a Registration Rights Agreement, in the form attached hereto
      as Exhibit
      B
      (the
“Registration Rights Agreement”), pursuant to which the Company will agree to
      provide certain registration rights under the Securities Act of 1933, as
      amended, and the rules and regulations promulgated thereunder (collectively,
      the
“1933 Act”), and applicable state securities laws, subordinate to the rights
      provided by the Senior Agreement; and

     

    G.
       The
      Company and the Investors are executing and delivering this Agreement in
      reliance upon the exemption from securities registration afforded by the
      provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
      Securities and Exchange Commission (the “SEC”) under the 1933 Act.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    In
      consideration of the mutual promises made herein and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto agree as follows:

     

    1. Definitions.
      In
      addition to those terms defined above and elsewhere in this Agreement, for
      the
      purposes of this Agreement, the following terms shall have the meanings set
      forth below:

     

    “Affiliate”
means,
      with respect to any Person, any other Person which directly or indirectly
      through one or more intermediaries Controls, is controlled by, or is under
      common control with, such Person.

     

    “Business
      Day”
means
      a
      day, other than a Saturday or Sunday, on which banks in New York City are open
      for the general transaction of business.

     

    “Common
      Stock”
means
      the Company’s common stock, par value $0.001 per share, and any securities into
      which the common stock may be reclassified.

     

    “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 exchangeable for, or otherwise entitles the holder
      thereof to receive, Common Stock.

     

    “Company’s
      Knowledge”
means
      the actual knowledge of the executive officers (as defined in Rule 405 under
      the
      1933 Act) of the Company, after due inquiry.

     

    “Confidential
      Information”
means
      trade secrets, confidential information and know-how (including but not limited
      to ideas, formulae, compositions, processes, procedures and techniques, research
      and development information, computer program code, performance specifications,
      support documentation, drawings, specifications, designs, business and marketing
      plans, and customer and supplier lists and related information).

     

    “Control”
      (including the terms “controlling”, “controlled by” or “under common control
      with”) means the possession, direct or indirect, of the power to direct or cause
      the direction of the management and policies of a Person, whether through the
      ownership of voting securities, by contract or otherwise.

     

    “Intellectual
      Property”
means
      all of the following: (i) patents, patent applications, patent disclosures
      and
      inventions (whether or not patentable and whether or not reduced to practice);
      (ii) trademarks, service marks, trade dress, trade names, corporate names,
      logos, slogans and Internet domain names, together with all goodwill associated
      with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
      registrations, applications and renewals for any of the foregoing; and (v)
      proprietary computer software (including but not limited to data, data bases
      and
      documentation).

     

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (i) the assets, liabilities, results of operations,
      condition (financial or otherwise), business, or prospects of the Company and
      its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
      its obligations under the Transaction Documents.

     

    “Person”
means
      an individual, corporation, partnership, limited liability company, trust,
      business trust, association, joint stock company, joint venture, sole
      proprietorship, unincorporated organization, governmental authority or any
      other
      form of entity not specifically listed herein.

     

    
      
         

      

      
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    “Registration
      Statement”
has
      the
      meaning set forth in the Registration Rights Agreement.

     

    “SEC
      Filings”
has
      the
      meaning set forth in Section 5.6.

     

    “Securities”
means,
      collectively, the Notes and the Common Stock issuable upon conversion of the
      Notes.

     

    “Subsidiary”
of
      any
      Person means another Person, an amount of the voting securities, other voting
      ownership or voting partnership interests of which is sufficient to elect at
      least a majority of its Board of Directors or other governing body (or, if
      there
      are no such voting interests, 50% or more of the equity interests of which)
      is
      owned directly or indirectly by such first Person.

     

    “Transaction
      Documents”
means
      this Agreement, the Notes and the Registration Rights Agreement.

     

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

     

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

     

    2. Purchase
      and Sale of the Notes and Warrants.
      Subject
      to the terms and conditions of this Agreement, on the Closing Date (and by
      any
      Subsequent Closing), each of the Investors shall severally, and not jointly,
      purchase, and the Company shall sell and issue to the Investors, the Notes
      in
      the respective amounts set forth opposite the Investors’ names on the signature
      pages and Schedule
      I
      attached
      hereto in satisfaction of the equal amount of Damages owed as specified in
      Sections 3 and 4 below.

     

    3. Closing.

     

    3.1 The
      “Closing Date” shall be the later of December 31, 2007 or the date the Company
      receives the executed signatures pages to this Agreement from the Investors
      pursuant to the terms and conditions of this Agreement. Within three (3)
      business days of the execution and delivery of this Agreement, the Company
      shall
      deliver to the Investors the Notes, registered in such name or names as the
      Investors may designate, issued as of the Closing Date. The Closing (and each
      Subsequent Closing) of the purchase and sale of the Notes shall take place
      at
      the offices of Kirkpatrick & Lockhart Preston Gates Ellis LLP, 10100 Santa
      Monica, Blvd., Seventh Floor, Los Angeles, California 90067, or at such other
      location and on such other date as the Company and the Investors shall mutually
      agree. Immediately following the Closing, the capitalization of the Company
      shall be as set forth on Exhibit
      C.

     

    3.2 At
      any
      time on or before January 11, 2008, the Company may issue up to an additional
      $57,656.67 principal amount of Notes not converted and sold as of the Closing
      to
      purchasers in the Prior Placement who did not elect to participate in the
      initial Closing of the Conversion, as set forth on Schedule
      I
      hereto
      and subject to the limitations of the following sentence. The parties
      acknowledge that such sales may be made pursuant to the exercise of rights
      described in Section 8.8 of the securities purchase agreement affecting the
      2006
      Placement and Section 7.8 of the securities purchase agreement affecting the
      2007 Placement; to the extent that such parties decline to exercise said rights,
      any such unpurchased Notes may not be reoffered by the Company to other parties.
      All such purchases of Notes shall be made on the terms and conditions set forth
      in this Agreement. Such purchases of Notes shall be made by each subsequent
      purchaser by executing counterpart signature pages to this Agreement and the
      other Transaction Documents, making such purchaser a party and bound by the
      terms and conditions of this Agreement and such Transaction Documents. Any
      Notes
      sold pursuant to this Section 3.2 shall be deemed to be “Notes” for all purposes
      under this Agreement and any purchasers thereof shall be deemed to be
“Investors” under this Agreement and each of the Transaction Documents. Each
      sale of additional Notes pursuant to this Section 3.2 shall be deemed a
“Subsequent Closing.” Exhibit
      C
      to this
      Agreement shall be updated to reflect the Notes purchased at each Subsequent
      Closing and the parties purchasing such Notes.

     

    
      
         

      

      
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    4. Settlement
      of Damages; Waiver of Anti-Dilution; Release of Claims.

     

    4.1 Settlement
      of Damages.
      The
      Company and each of the Investors hereby mutually agree to convert the Damages
      owed to such Investor through December 31, 2007 pursuant to Section 7(f) of
      the
      Senior Agreement into the Notes as described herein in lieu of cash payment
      for
      and in full satisfaction of the Damages, contingent upon and subject to the
      satisfaction of the covenants contained herein. Each Investor (on its own
      behalf) agrees that upon Closing of the transaction contemplated hereby, the
      Company will no longer owe the Investor any cash payment with respect to the
      Damages accrued or incurred from April 30, 2007 through December 31, 2007.
      The
      Company hereby acknowledges that this transaction does not affect or alter
      the
      rights of each Investor to enforce its rights to any liquidated damages accruing
      pursuant to Section 7(f) of the Senior Agreement from January 1, 2008
      onward.

     

    4.2 Waiver
      of Anti-Dilution Rights.
      In
      further consideration of the Company’s willingness to issue the Notes and the
      Investors’ willingness to accept the Notes in satisfaction of the Damages, and
      in acknowledgement of the detrimental effect enforcement of such rights could
      have on the Company, its capitalization and the value of its outstanding
      securities, each of the Investors, individually and collectively, waive the
      adjustment provisions of Section 4 of the Series A and B Warrants with respect
      to the issuance of the Notes in the Conversion and agree that upon Closing
      (including any Subsequent Closing) no adjustment will be made to the Series
      A
      and/or B Warrants held by such Investor at that time or upon the issuance of
      the
      shares of Common Stock issuable upon conversion of the Notes. The Company
      acknowledges and agrees that the waiver provided in this Section 4.2 is
      applicable and effective solely with regards to the issuance of the Notes
      hereunder and the issuance of the shares of Common Stock issuable upon
      conversion of such Notes.

     

    4.3 Non-Admission
      Of Liability.
      Each
      Investor acknowledges that, beyond those facts and circumstances giving rise
      to
      the Damages, i.e., those “Events” as defined in Section 7(f) of the Senior
      Agreement applicable to the Company as of the date hereof, the Company denies
      any wrongdoing whatsoever under the Senior Agreement and acknowledges that
      the
      Conversion and this Agreement are solely for the purpose of providing for
      settlement of the negotiated Damages and waiving potential claims and avoiding
      the time and expense of litigation related to the Senior Agreement. It is
      expressly understood and agreed by each of the Investors that nothing contained
      in this Agreement shall constitute or be treated as an admission of any
      wrongdoing or liability on the part of any of the Parties.

     

    4.4 No
      Filing Of Claims.
      Each of
      the Investors represents and warrants that it does not presently have on file,
      and further represents and agrees to the fullest extent permitted by law that
      it
      will not hereafter file, any claims, charges, grievances, actions, appeals
      or
      complaints against any other Party in or with any administrative, state, federal
      or governmental entity, agency, board or court, or before any other tribunal
      or
      panel of arbitrators, public or private, based upon any actions by the other
      occurring in connection with the Damages, its rights pursuant to the Senior
      Agreement, or otherwise related to the Company’s securities.

     

    
      
         

      

      
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    4.5 Release
      Of Certain Claims.
      In
      further consideration for the issuance by the Company of the Notes, each
      Investor, for itself and its affiliates, successors and assigns, respectively,
      does hereby waive, release, acquit and forever discharge the Company, from
      any
      and all claims, actions, charges, complaints, grievances and causes of action
      (hereinafter collectively referred to as “claims”), of whatever nature, whether
      known or unknown, which exist as of the date of this Agreements as it relates
      to
      (i) the Damages, (ii) the Company’s lack of timely filing of certain required
      reports with the SEC, and (iii) other than in relation to the further accrual
      of
      liquidated damages pursuant to Section 7(f) of the Senior Agreement, the
      Company’s failure to file a registration statement pursuant to the Senior
      Agreement, including but not limited to, any and all exclusive agency rights,
      rights to compensation (including but not limited to cash, non-cash, residual
      and fee tail compensation), statutory claims, all claims for injunctive relief,
      compensatory damages, consequential damages, incidental damages, punitive
      damages interest, costs, expenses, attorneys’ fees and/or any other type of
      damages or monetary relief cognizable in law or equity, and any and all claims
      arising under any federal, state, city and/or other governmental statute, law,
      regulation or ordinance relating to corporate governance responsibilities or
      securities; provided,
      however, that
      nothing in this Agreement shall waive, compromise or otherwise negate the
      rights, privileges and claims directly provided under this Agreement. It is
      further understood and agreed by each of the Investors, that as a condition
      of
      this Agreement, each of the Investors hereby expressly waives and relinquishes
      any and all claims, rights or benefits that it may have but of which it does
      not
      know or suspect to exist in its favor at the time of executing this Agreement
      relating solely to the items set forth in this Section 4.5(1)(i)-(iii), which
      if
      known by it must have materially affected its settlement by such Investor,
      and
      further, in connection with such waiver and relinquishment, the Investor hereby
      acknowledges that it or its attorneys may hereafter discover claims or facts
      in
      addition to, or different from, those which it now knows or believes to exist,
      but that it expressly agrees to fully, finally and forever settle and release
      any and all claims, known or unknown, suspected or unsuspected, which exist
      or
      may exist on its behalf against the other at the time of execution of this
      Agreement. . Each Investor further acknowledges, understands and agrees that
      this representation and commitment is essential to the Company and the other
      Investors, and that this Agreement would not have been entered into were it
      not
      for this representation and commitment.

     

    4.6 Ownership
      Of Claims.
      Each of
      the Investors represents and warrants that it is the sole and lawful owner
      of
      all rights, title and interest in and to all released matters, claims and
      demands referred to herein, and further represents and warrants that there
      has
      been no assignment or other transfer of any interest in any such matters, claims
      or demands which such Investor may have against the Company.

     

    4.7 No
      Other Benefits Due.
      Each of
      the investors understands and agrees that this Agreement is intended to and
      does
      bar all claims such Investor has or may have for losses, damages, costs,
      expenses, penalties, attorneys’ fees or any similar claims that such Investor
      could possibly have against the Company for the Damages and that such Investor
      is not entitled to receive and will not claim any right, benefit, or
      consideration other than what is set forth above in Section 1,
      above.

     

    5. Representations
      and Warranties of the Company.
      For
      purposes of this Section 5 only, the Company hereby represents and warrants
      to
      the Investors that, except as set forth in the schedules delivered herewith
      (collectively, the “Disclosure Schedules”):

     

    5.1 Organization,
      Good Standing and Qualification.
      Each of
      the Company and its Subsidiaries is duly organized, validly existing and in
      good
      standing under the laws of the jurisdiction of its incorporation and has all
      requisite power and authority to carry on its business as now conducted and
      to
      own its properties. Each of the Company and its Subsidiaries is duly qualified
      to do business as a foreign corporation and is in good standing in each
      jurisdiction in which the conduct of its business or its ownership or leasing
      of
      property makes such qualification or leasing necessary unless the failure to
      so
      qualify has not had and could not reasonably be expected to have a Material
      Adverse Effect. The Company’s Subsidiaries are listed in the SEC
      Filings.

     

    
      
         

      

      
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    5.2 Authorization.
      The
      Company has full power and authority and has taken all requisite action on
      the
      part of the Company, its officers, directors and stockholders necessary for
      (i)
      the authorization, execution and delivery of the Transaction Documents, (ii)
      the
      authorization of the performance of all obligations of the Company hereunder
      or
      thereunder, and (iii) the authorization, issuance (or reservation for issuance)
      and delivery of the Securities. The Transaction Documents constitute the legal,
      valid and binding obligations of the Company, enforceable against the Company
      in
      accordance with their terms, subject to bankruptcy, insolvency, fraudulent
      transfer, reorganization, moratorium and similar laws of general applicability,
      relating to or affecting creditors’ rights generally.

     

    5.3 Capitalization.
      Exhibit
      C
      hereto
      sets forth (a) the authorized capital stock of the Company on the date hereof;
      (b) the number of shares of capital stock issued and outstanding; (c) the number
      of shares of capital stock issuable pursuant to the Company’s stock plans; and
      (d) the number of shares of capital stock issuable and reserved for issuance
      pursuant to securities (other than the Securities) exercisable for, or
      convertible into or exchangeable for any shares of capital stock of the Company.
      All of the issued and outstanding shares of the Company’s capital stock have
      been duly authorized and validly issued and are fully paid, nonassessable and
      free of pre-emptive rights and were issued in compliance with applicable state
      and federal securities law and any rights of third parties. All of the issued
      and outstanding shares of capital stock of each Subsidiary have been duly
      authorized and validly issued and are fully paid, nonassessable and free of
      pre-emptive rights, were issued in compliance with applicable state and federal
      securities law and any rights of third parties and are owned by the Company,
      beneficially and of record, subject to no lien, encumbrance or other adverse
      claim. No Person is entitled to pre-emptive or similar statutory or contractual
      rights with respect to any securities of the Company. Except as described in
      the
      SEC Filings, there are no outstanding warrants, options, convertible securities
      or other rights, agreements or arrangements of any character under which the
      Company or any of its Subsidiaries is or may be obligated to issue any equity
      securities of any kind and except as contemplated by this Agreement, neither
      the
      Company nor any of its Subsidiaries is currently in negotiations for the
      issuance of any equity securities of any kind. Except as described in the SEC
      Filings and except for the Senior Agreement and the Registration Rights
      Agreement and as set forth in the securities purchase agreements for the Prior
      Placements, there are no voting agreements, buy-sell agreements, option or
      right
      of first purchase agreements or other agreements of any kind among the Company
      and any of the securityholders of the Company relating to the securities of
      the
      Company held by them. Except as described in the SEC Filings and except as
      provided in the Senior Agreement and the Registration Rights Agreement, no
      Person has the right to require the Company to register any securities of the
      Company under the 1933 Act, whether on a demand basis or in connection with
      the
      registration of securities of the Company for its own account or for the account
      of any other Person.

     

    The
      issuance and sale of the Securities hereunder will not obligate the Company
      to
      issue shares of Common Stock or other securities to any other Person (other
      than
      the Investors) and will not result in the adjustment of the exercise,
      conversion, exchange or reset price of any outstanding security.

     

    The
      Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
      any
      equity interest in the Company upon the occurrence of certain
      events.

     

    5.4 Valid
      Issuance.
      The
      Notes have been duly and validly authorized when issued and paid for pursuant
      to
      this Agreement, shall be free and clear of all encumbrances and restrictions
      (other than those created by the Investors), except for restrictions on transfer
      set forth in the Transaction Documents or imposed by applicable securities
      laws.
      Upon the conversion of the Notes, the shares of Common Stock issued upon
      conversion of the Notes will be validly issued, fully paid and non-assessable
      free and clear of all encumbrances and restrictions, except for restrictions
      on
      transfer set forth in the Transaction Documents or imposed by applicable
      securities laws and except for those created by the Investors. 

     

    
      
         

      

      
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    5.5 Consents.
      The
      execution, delivery and performance by the Company of the Transaction Documents
      and the offer, issuance and sale of the Securities require no consent of, action
      by or in respect of, or filing with, any Person, governmental body, agency,
      or
      official other than filings that have been made pursuant to applicable state
      securities laws and post-sale filings pursuant to applicable state and federal
      securities laws which the Company undertakes to file within the applicable
      time
      periods. 

     

    5.6 Delivery
      of Memorandum and SEC Filings; Business.
      The
      Company has made available to the Investors through the EDGAR system, true
      and
      complete copies of the Company’s most recent Annual Report on Form 10-KSB/A for
      the fiscal year ended December 31, 2006 (the “10-KSB”), and all other Current
      Reports filed by the Company pursuant to the 1934 Act since January 1, 2007
      and
      prior to the date hereof (collectively, the “SEC Filings”). Other than the
      Company’s Quarterly Reports on Form 10-QSB, which the Company has not filed as
      of the date hereof, the SEC Filings are the only filings required of the Company
      pursuant to the 1934 Act for such period. The Company and its Subsidiaries
      are
      engaged in all material respects only in the business described in the SEC
      Filings and the SEC Filings contain a complete and accurate description in
      all
      material respects of the business of the Company and its Subsidiaries, taken
      as
      a whole.

     

    5.7 No
      Material Adverse Change.
      Since
      December 31, 2006, except as identified and described in the SEC Filings, there
      has not been:

     

    (a) any
      change in the consolidated assets, liabilities, financial condition or operating
      results of the Company from that reflected in the financial statements included
      in the SEC Filings, except for changes in the ordinary course of business which
      have not had and could not reasonably be expected to have a Material Adverse
      Effect, individually or in the aggregate;

     

    (b) any
      declaration or payment of any dividend, or any authorization or payment of
      any
      distribution, on any of the capital stock of the Company, or any redemption
      or
      repurchase of any securities of the Company;

     

    (c) any
      material damage, destruction or loss, whether or not covered by insurance to
      any
      assets or properties of the Company or its Subsidiaries;

     

    (d) any
      waiver, not in the ordinary course of business, by the Company or any Subsidiary
      of a material right or of a material debt owed to it;

     

    (e) any
      satisfaction or discharge of any lien, claim or encumbrance or payment of any
      obligation by the Company or a Subsidiary, except as contemplated by the
      Transaction Documents or in the ordinary course of business and which is not
      material to the assets, properties, financial condition, operating results,
      business or prospects of the Company and its Subsidiaries taken as a whole
      (as
      such business is presently conducted and as it is proposed to be
      conducted);

     

    (f) any
      change or amendment to the Company’s Articles of Incorporation or Bylaws or
      other organizational documents, or material change to any material contract
      or
      arrangement by which the Company or any Subsidiary is bound or to which any
      of
      their respective assets or properties is subject;

     

    (g) any
      material labor difficulties or labor union organizing activities with respect
      to
      employees of the Company or any Subsidiary;

     

    
      
         

      

      
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    (h) any
      material transaction entered into by the Company or a Subsidiary other than
      in
      the ordinary course of business;

     

    (i) the
      loss
      of the services of any key employee, or material change in the composition
      or
      duties of the senior management of the Company or any Subsidiary;

     

    (j) the
      loss
      or threatened loss of any customer which has had or could reasonably be expected
      to have a Material Adverse Effect; or

     

    (k) any
      other
      event or condition of any character that has had or could reasonably be expected
      to have a Material Adverse Effect.

     

    5.8 SEC
      Filings.
      At the
      time of filing thereof, the SEC Filings complied as to form in all material
      respects with the requirements of the 1934 Act and did not contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements made therein, in the light of the circumstances
      under which they were made, not misleading.

     

    5.9 No
      Conflict, Breach, Violation or Default.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the issuance and sale of the Securities will not (A) result in a violation
      of any of the terms and provisions of (i) the Company’s Articles of
      Incorporation or the Company’s Bylaws, both as in effect on the date hereof, or
      (ii) any statute, rule, regulation or order of any governmental agency or body
      or any court, domestic or foreign, having jurisdiction over the Company, any
      Subsidiary or any of their respective assets or properties the violation of
      which, either individually or in the aggregate, would not have a Material
      Adverse Effect, or (B) conflict with or result in a breach or violation of
      any
      of the terms and provisions of, or constitute a default under, any agreement
      or
      instrument to which the Company or any Subsidiary is a party or by which the
      Company or a Subsidiary is bound or to which any of their respective assets
      or
      properties is subject the violation of which, either individually or in the
      aggregate, would not have a Material Adverse Effect.

     

    5.10 Tax
      Matters.
      The
      Company and each Subsidiary has timely prepared and filed all tax returns
      required to have been filed by the Company or such Subsidiary with all
      appropriate governmental agencies and timely paid all taxes shown thereon or
      otherwise owed by it. The charges, accruals and reserves on the books of the
      Company in respect of taxes for all fiscal periods are adequate in all material
      respects, and there are no material unpaid assessments against the Company
      or
      any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
      any additional taxes, penalties or interest for any fiscal period or audits
      by
      any federal, state or local taxing authority except for any assessment which
      is
      not material to the Company and its Subsidiaries, taken as a whole. All taxes
      and other assessments and levies that the Company or any Subsidiary is required
      to withhold or to collect for payment have been duly withheld and collected
      and
      paid to the proper governmental entity or third party when due. There are no
      tax
      liens or claims pending or, to the Company’s Knowledge, threatened against the
      Company or any Subsidiary or any of their respective assets or property. There
      are no outstanding tax sharing agreements or other such arrangements between
      the
      Company and any Subsidiary or other corporation or entity.

     

    5.11 Title
      to Properties.
      Except
      as disclosed in the SEC Filings, the Company and each Subsidiary has good and
      marketable title to all real properties and all other properties and assets
      owned by it, in each case free from liens, encumbrances and defects that would
      materially affect the value thereof or materially interfere with the use made
      or
      currently planned to be made thereof by them; and except as disclosed in the
      SEC
      Filings, the Company and each Subsidiary holds any leased real or personal
      property under valid and enforceable leases with no exceptions that would
      materially interfere with the use made or currently planned to be made thereof
      by them.

     

    
      
         

      

      
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    5.12 Certificates,
      Authorities and Permits.
      The
      Company and each Subsidiary possess adequate certificates, authorities or
      permits issued by appropriate governmental agencies or bodies necessary to
      conduct the business now operated by it, and neither the Company nor any
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such certificate, authority or permit that, if determined
      adversely to the Company or such Subsidiary, could reasonably be expected to
      have a Material Adverse Effect, individually or in the aggregate.

     

    5.13 Labor
      Matters.
      

     

    (a) Except
      as
      set forth in the SEC Filings, neither the Company nor any Subsidiary is a party
      to or bound by any collective bargaining agreements or other agreements with
      labor organizations. Neither the Company nor any Subsidiary has violated in
      any
      material respect any laws, regulations, orders or contract terms, affecting
      the
      collective bargaining rights of employees, labor organizations or any laws,
      regulations or orders affecting employment discrimination, equal opportunity
      employment, or employees’ health, safety, welfare, wages and hours.

     

    (b) (i)
      There
      are no labor disputes existing, or to the Company’s Knowledge, threatened,
      involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts
      or any other disruptions of or by the employees of the Company or any
      Subsidiary, (ii) there are no unfair labor practices or petitions for election
      pending or, to the Company’s Knowledge, threatened before the National Labor
      Relations Board or any other federal, state or local labor commission relating
      to the employees of the Company or any Subsidiary, (iii) no demand for
      recognition or certification heretofore made by any labor organization or group
      of employees is pending with respect to the Company or any Subsidiary and (iv)
      to the Company’s Knowledge, the Company and each of its Subsidiaries, enjoys
      good labor and employee relations with its employees and labor
      organizations.

     

    (c) The
      Company and each of its Subsidiaries is in compliance in all material respects
      with all applicable laws respecting employment (including laws relating to
      classification of employees and independent contractors) and employment
      practices, terms and conditions of employment, wages and hours, and immigration
      and naturalization. There are no claims pending or, to the Company’s Knowledge,
      threatened against the Company or any Subsidiary before the Equal Employment
      Opportunity Commission or any other administrative body or in any court
      asserting any violation of Title VII of the Civil Rights Act of 1964, the Age
      Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other foreign,
      federal, state or local law, statute or ordinance barring discrimination in
      employment.

     

    (d) Except
      as
      disclosed in the SEC Filings, neither the Company nor any Subsidiary is a party
      to, or bound by, any employment or other contract or agreement that contains
      any
      severance, termination pay or change of control liability or obligation,
      including, without limitation, any “excess parachute payment,” as defined in
      Section 280(g) of the Internal Revenue Code of 1986, as amended.

     

    5.14 Intellectual
      Property.

     

    (a) All
      Intellectual Property of the Company and its Subsidiaries is currently in
      compliance with all material legal requirements (including timely filings,
      proofs and payments of fees) and is valid and enforceable. No Intellectual
      Property of the Company or its Subsidiaries which is necessary for the conduct
      of Company’s and each of its Subsidiaries’ respective businesses as currently
      conducted or as currently proposed to be conducted has been or is now involved
      in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no
      such action is threatened. No patent of the Company or its Subsidiaries has
      been
      or is now involved in any interference, reissue, re-examination or opposition
      proceeding.

     

    
      
         

      

      
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    (b) All
      of
      the licenses and sublicenses and consent, royalty or other agreements concerning
      Intellectual Property which are necessary for the conduct of the Company’s and
      each of its Subsidiaries’ respective businesses as currently conducted or as
      currently proposed to be conducted to which the Company or any Subsidiary is
      a
      party or by which any of their assets are bound (other than generally
      commercially available, non custom, off the shelf software application programs
      having a retail acquisition price of less than $500 per license) (collectively,
      “License Agreements”) are valid and binding obligations of the Company or its
      Subsidiaries that are parties thereto and, to the Company’s Knowledge, the other
      parties thereto, enforceable in accordance with their terms, except to the
      extent that enforcement thereof may be limited by bankruptcy, insolvency,
      reorganization, moratorium, fraudulent conveyance or other similar laws
      affecting the enforcement of creditors’ rights generally, and there exists no
      event or condition which will result in a material violation or breach of or
      constitute (with or without due notice or lapse of time or both) a default
      by
      the Company or any of its Subsidiaries under any such License
      Agreement.

     

    (c) The
      Company and its Subsidiaries own or have the valid right to use all of the
      Intellectual Property that is necessary for the conduct of the Company’s and
      each of its Subsidiaries’ respective businesses as currently conducted or as
      currently proposed to be conducted and for the ownership, maintenance and
      operation of the Company’s and its Subsidiaries’ properties and assets, free and
      clear of all liens, encumbrances, adverse claims or obligations to license
      all
      such owned Intellectual Property and Confidential Information, other than
      licenses entered into in the ordinary course of the Company’s and its
      Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and
      enforceable right to use all third party Intellectual Property and Confidential
      Information used or held for use in the respective businesses of the Company
      and
      its Subsidiaries.

     

    (d) To
      the
      Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’
businesses as currently conducted does not infringe or otherwise impair or
      conflict with (collectively, “Infringe”) any Intellectual Property rights of any
      third party or any confidentiality obligation owed to a third party and the
      Intellectual Property and Confidential Information of the Company and its
      Subsidiaries which are necessary for the conduct of Company’s and each of its
      Subsidiaries’ respective businesses as currently conducted or as currently
      proposed to be conducted are not being Infringed by any third party. There
      is no
      litigation or order pending or outstanding or, to the Company’s Knowledge,
      threatened or imminent, that seeks to limit or challenge or that concerns the
      ownership, use, validity or enforceability of any Intellectual Property or
      Confidential Information of the Company and its Subsidiaries and the Company’s
      and its Subsidiaries’ use of any Intellectual Property or Confidential
      Information owned by a third party, and, to the Company’s Knowledge, there is no
      valid basis for the same.

     

    (e) The
      consummation of the transactions contemplated hereby and by the other
      Transaction Documents will not result in the alteration, loss, impairment of
      or
      restriction on the Company’s or any of its Subsidiaries’ ownership or right to
      use any of the Intellectual Property or Confidential Information which is
      necessary for the conduct of Company’s and each of its Subsidiaries’ respective
      businesses as currently conducted or as currently proposed to be
      conducted.

     

    (f) The
      Company and its Subsidiaries have taken reasonable steps to protect the
      Company’s and its Subsidiaries’ rights in their Intellectual Property and
      Confidential Information. 

     

    
      
         

      

      
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    5.15 Environmental
      Matters.
      Neither
      the Company nor any Subsidiary is in violation of any statute, rule, regulation,
      decision or order of any governmental agency or body or any court, domestic
      or
      foreign, relating to the use, disposal or release of hazardous or toxic
      substances or relating to the protection or restoration of the environment
      or
      human exposure to hazardous or toxic substances (collectively, “Environmental
      Laws”), owns or operates any real property contaminated with any substance that
      is subject to any Environmental Laws, is liable for any off-site disposal or
      contamination pursuant to any Environmental Laws, or is subject to any claim
      relating to any Environmental Laws, which violation, contamination, liability
      or
      claim has had or could reasonably be expected to have a Material Adverse Effect,
      individually or in the aggregate; and there is no pending or, to the Company’s
      Knowledge, threatened investigation that might lead to such a
      claim.

     

    5.16 Litigation.
      Except
      as described or in the SEC Filings there are no pending actions, suits or
      proceedings against the Company, its Subsidiaries or any of its or their
      properties; and to the Company’s Knowledge, no such actions, suits or
      proceedings are threatened or contemplated, except for requests for payment
      of
      Damages received from Investors prior to the notification of the proposed
      Conversion.

     

    5.17 Financial
      Statements.
      The
      financial statements included in the Company’s Annual report of Form 10-KSB/A
      filed December 26, 2007 present fairly, in all material respects, the
      consolidated financial position of the Company as of the dates shown and its
      consolidated results of operations and cash flows for the periods shown, and
      such financial statements have been prepared in conformity with United States
      generally accepted accounting principles applied on a consistent basis (“GAAP”),
      and, except as set forth in the financial statements of the Company included
      in
      the Form 10-KSB/A or otherwise disclosed in the SEC Filings, neither the Company
      nor any of its Subsidiaries has incurred any liabilities, contingent or
      otherwise, except those incurred in the ordinary course of business, consistent
      (as to amount and nature) with past practices since the date of such financial
      statements, none of which, individually or in the aggregate, have had or could
      reasonably be expected to have a Material Adverse Effect.

     

    5.18 Insurance
      Coverage.
      The
      Company and each Subsidiary maintains in full force and effect insurance
      coverage that is customary for comparably situated companies for the business
      being conducted and properties owned or leased by the Company and each
      Subsidiary, and the Company reasonably believes such insurance coverage to
      be
      adequate against all liabilities, claims and risks against which it is customary
      for comparably situated companies to insure.

     

    5.19 Brokers
      and Finders.
      No
      Person will have, as a result of the transactions contemplated by the
      Transaction Documents, any valid right, interest or claim against or upon the
      Company, any Subsidiary or an Investor for any commission, fee or other
      compensation pursuant to any agreement, arrangement or understanding entered
      into by or on behalf of the Company.

     

    5.20 No
      Directed Selling Efforts or General Solicitation.
      Neither
      the Company nor any Person acting on its behalf has conducted any general
      solicitation or general advertising (as those terms are used in Regulation
      D) in
      connection with the offer or sale of any of the Securities.

     

    5.21 No
      Integrated Offering.
      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 Company
      security or solicited any offers to buy any security, under circumstances that
      would adversely affect reliance by the Company on Section 4(2) for the exemption
      from registration for the transactions contemplated hereby or would require
      registration of the Securities under the 1933 Act.

     

    5.22 Private
      Placement.
      Subject
      to the accuracy of the representations and warranties of the Investors set
      forth
      in Section 6, the offer and sale of the Securities to the Investors as
      contemplated hereby is exempt from the registration requirements of the 1933
      Act.

     

    
      
         

      

      
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    5.23 Questionable
      Payments.
      Neither
      the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
      their respective current or former stockholders, directors, officers, employees,
      agents or other Persons acting on behalf of the Company or any Subsidiary,
      has
      on behalf of the Company or any Subsidiary or in connection with their
      respective businesses: (a) used any corporate funds for unlawful contributions,
      gifts, entertainment or other unlawful expenses relating to political activity;
      (b) made any direct or indirect unlawful payments to any governmental officials
      or employees from corporate funds; (c) established or maintained any unlawful
      or
      unrecorded fund of corporate monies or other assets; (d) made any false or
      fictitious entries on the books and records of the Company or any Subsidiary;
      or
      (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
      other unlawful payment of any nature.

     

    5.24 Transactions
      with Affiliates.
      Except
      as disclosed in the SEC Filings, none of the officers or directors of the
      Company and, to the Company’s Knowledge, none of the employees of the Company is
      presently a party to any transaction with the Company or any Subsidiary (other
      than as holders of stock options and/or warrants, and 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 Company’s Knowledge, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner.

     

    5.25 Internal
      Controls.
      The
      Company is in material compliance with the provisions of the Sarbanes-Oxley
      Act
      of 2002 currently applicable to the Company. The Company and the Subsidiaries
      maintain a system of internal accounting controls sufficient to provide
      reasonable assurance that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      GAAP and to maintain asset accountability, (iii) access to assets is permitted
      only in accordance with management’s general or specific authorization, and (iv)
      the recorded accountability for assets is compared with the existing assets
      at
      reasonable intervals and appropriate action is taken with respect to any
      differences. The Company has established disclosure controls and procedures
      (as
      defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
      such disclosure controls and procedures to ensure that material information
      relating to the Company, including the Subsidiaries, is made known to the
      certifying officers by others within those entities, particularly during the
      period in which the Company’s most recently filed period report under the 1934
      Act, as the case may be, is being prepared. The Company’s certifying officers
      have evaluated the effectiveness of the Company’s controls and procedures as of
      the end of the period covered by the most recently filed periodic report under
      the 1934 Act (such date, the “Evaluation Date”). The Company presented in its
      most recently filed periodic report under the 1934 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 significant changes in the Company’s
      internal controls (as such term is defined in Item 308 of Regulation S-K) or,
      to
      the Company’s Knowledge, in other factors that could significantly affect the
      Company’s internal controls. The Company maintains and will continue to maintain
      a standard system of accounting established and administered in accordance
      with
      GAAP and the applicable requirements of the 1934 Act.

     

    5.26 Disclosures.
      Neither
      the Company nor any Person acting on its behalf has provided the Investors
      or
      their agents or counsel with any information that constitutes or might
      constitute material, non-public information. The written materials delivered
      to
      the Investors in connection with the transactions contemplated by the
      Transaction Documents do not contain any untrue statement of a material fact
      or
      omit to state a material fact necessary in order to make the statements
      contained therein, in light of the circumstances under which they were made,
      not
      misleading.

     

    
      
         

      

      
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    6. Representations
      and Warranties of the Investors.
      Each of
      the Investors hereby severally, and not jointly, represents and warrants to
      the
      Company that:

     

    6.1 Organization
      and Existence.
      To the
      extent indicated on the signature pages hereto, such Investor either (i) an
      individual or a, (ii) corporation, (iii) limited partnership or (iv) limited
      liability company validly existing under the laws of its state of incorporation
      or formation, as applicable, and has, as applicable, all requisite corporate,
      partnership or limited liability company power and authority to invest in the
      Securities pursuant to this Agreement.

     

    6.2 Authorization.
      The
      execution, delivery and performance by such Investor of the Transaction
      Documents to which such Investor is a party have been duly authorized and will
      each constitute the valid and legally binding obligation of such Investor,
      enforceable against such Investor in accordance with their respective terms,
      subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
      moratorium and similar laws of general applicability, relating to or affecting
      creditors’ rights generally.

     

    6.3 Purchase
      Entirely for Own Account.
      The
      Securities to be received by such Investor hereunder will be acquired for such
      Investor’s own account, not as nominee or agent, and not with a view to the
      resale or distribution of any part thereof in violation of the 1933 Act, and
      such Investor has no present intention of selling, granting any participation
      in, or otherwise distributing the same in violation of the 1933 Act without
      prejudice, subject, however, to such Investor’s right at all times to sell or
      otherwise dispose of all or any part of such Securities in compliance with
      applicable federal and state securities laws. Nothing contained herein shall
      be
      deemed a representation or warranty by such Investor to hold the Securities
      for
      any period of time. Such Investor is not a broker-dealer registered with the
      SEC
      under the 1934 Act or an entity engaged in a business that would require it
      to
      be so registered.

     

    6.4 Investment
      Experience.
      Such
      Investor acknowledges that it can bear the economic risk and complete loss
      of
      its investment in the Securities and has such knowledge and experience in
      financial or business matters that it is capable of evaluating the merits and
      risks of the investment contemplated hereby.

     

    6.5 Disclosure
      of Information.
      Such
      Investor has had an opportunity to receive all information related to the
      Company requested by it and to ask questions of and receive answers from the
      Company regarding the Company, its business and the terms and conditions of
      the
      offering of the Securities. Such Investor acknowledges receipt of copies of
      the
      SEC Filings. Neither such inquiries nor any other due diligence investigation
      conducted by such Investor shall modify, limit or otherwise affect such
      Investor’s right to rely on the Company’s representations and warranties
      contained in this Agreement.

     

    6.6 Restricted
      Securities.
      Such
      Investor understands that the Securities are characterized as “restricted
      securities” under the U.S. federal securities laws inasmuch as they are being
      acquired from the Company in a transaction not involving a public offering
      and
      that under such laws and applicable regulations such securities may be resold
      without registration under the 1933 Act only in certain limited
      circumstances.

     

    6.7 Legends.
      It is
      understood that, except as provided below, certificates evidencing the
      Securities may bear the following or any similar legend:

     

    (a) “The
      securities represented hereby may not be transferred unless (i) such securities
      have been registered for sale pursuant to the Securities Act of 1933, as amended
      (the “Securities Act”), (ii) such securities may be sold pursuant to Rule
      144(k), or (iii) the Company has received an opinion of counsel reasonably
      satisfactory to it that such transfer may lawfully be made without registration
      under the Securities Act or qualification under applicable state securities
      laws.”

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (b) If
      required by the authorities of any state in connection with the issuance or
      sale
      of the Securities, the legend required by such state authority.

     

    6.8 Accredited
      Investor.
      Such
      Investor is an accredited investor as defined in Rule 501(a) of Regulation
      D, as
      amended, under the 1933 Act. The definition of “accredited investor” is annexed
      hereto.

     

    6.9 No
      General Solicitation.
      Such
      Investor did not learn of the investment in the Securities as a result of any
      general solicitation or general advertising.

     

    6.10 Brokers
      and Finders.
      No
      Person will have, as a result of the transactions contemplated by the
      Transaction Documents, any valid right, interest or claim against or upon the
      Company, any Subsidiary or an Investor for any commission, fee or other
      compensation pursuant to any agreement, arrangement or understanding entered
      into by or on behalf of such Investor.

     

    6.11 Prohibited
      Transactions.
      During
      the last thirty (30) days prior to the date hereof, neither such Investor nor
      any Affiliate of such Investor which (x) had knowledge of the transactions
      contemplated hereby, (y) has or shares discretion relating to such Investor’s
      investments or trading or information concerning such Investor’s investments,
      including in respect of the Securities, or (z) is subject to such Investor’s
      review or input concerning such Affiliate’s investments or trading
      (collectively, “Trading Affiliates”) has, directly or indirectly, effected or
      agreed to effect any short sale, whether or not against the box, established
      any
“put equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with
      respect to the shares of Common Stock, granted any other right (including,
      without limitation, any put or call option) with respect to the shares of Common
      Stock or with respect to any security that includes, relates to or derived
      any
      significant part of its value from the shares of Common Stock or otherwise
      sought to hedge its position in the Securities (each, a “Prohibited
      Transaction”). Prior to the filing by the Company of a Current Report on Form
      8-K announcing the transactions contemplated hereby, such Investor shall not,
      and shall cause its Trading Affiliates not to, engage, directly or indirectly,
      in a Prohibited Transaction. Such Investor acknowledges that the
      representations, warranties and covenants contained in this Section 6.11 are
      being made for the benefit of the Investors as well as the Company and that
      each
      of the other Investors shall have an independent right to assert any claims
      against such Investor arising out of any breach or violation of the provisions
      of this Section 6.11.

     

    7. Conditions
      to Closing.

     

    7.1 Conditions
      to the Investors’ Obligations. The obligation of each Investor to accept the
      Notes in satisfaction of the Damages and pursuant to Section 4 hereof, is
      subject to the fulfillment to such Investor’s satisfaction, on or prior to the
      Closing Date, of the following conditions, any of which may be waived by such
      Investor (as to itself only):

     

    (a) The
      representations and warranties made by the Company in Section 5 hereof qualified
      as to materiality shall be true and correct on the Closing Date, except to
      the
      extent any such representation or warranty expressly speaks as of an earlier
      date, in which case such representation or warranty shall be true and correct
      as
      of such earlier date, and, the representations and warranties made by the
      Company in Section 5 hereof not qualified as to materiality shall be true and
      correct in all material respects on the Closing Date, except to the extent
      any
      such representation or warranty expressly speaks as of an earlier date, in
      which
      case such representation or warranty shall be true and correct in all material
      respects as of such earlier date. 

     

    
      
         

      

      
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    (b) The
      Company shall have obtained any and all consents, permits, approvals,
      registrations and waivers necessary or appropriate for consummation of the
      purchase and sale of the Notes and the consummation of the other transactions
      contemplated by the Transaction Documents to be consummated on or prior to
      the
      Closing Date, all of which shall be in full force and effect.

     

    (c) No
      judgment, writ, order, injunction, award or decree of or by any court, or judge,
      justice or magistrate, including any bankruptcy court or judge, or any order
      of
      or by any governmental authority, shall have been issued, and no action or
      proceeding shall have been instituted by any governmental authority, enjoining
      or preventing the consummation of the transactions contemplated hereby or in
      the
      other Transaction Documents.

     

    (d) The
      Company shall have delivered a Certificate, executed on behalf of the Company
      by
      its Chief Executive Officer or its Chief Financial Officer, dated as of the
      Closing Date, certifying to the fulfillment of the conditions specified in
      subsections (a), (b) and (c) of this Section 7.1.

     

    (e) The
      Company shall have delivered a Certificate, executed on behalf of the Company
      by
      its Secretary, dated as of the Closing Date, certifying the resolutions adopted
      by the Board of Directors of the Company approving, as applicable, the
      transactions contemplated by this Agreement and the other Transaction Documents,
      and the issuance of the Securities, certifying the current versions of its
      Articles of Incorporation and Bylaws or other organizational documents and
      certifying as to the signatures and authority of persons signing the Transaction
      Documents and related documents on its behalf.

     

    (f) No
      stop
      order or suspension of trading shall have been imposed by the SEC or any other
      governmental or regulatory body with respect to public trading in the Common
      Stock.

     

    7.2 Conditions
      to Obligations of the Company.
      The
      Company’s obligation to sell and issue the Notes at the Closing is subject to
      the fulfillment to the satisfaction of the Company on or prior to the Closing
      Date of the following conditions, any of which may be waived by the
      Company:

     

    (a) The
      representations and warranties made by the Investors in Section 6 hereof, other
      than the representations and warranties contained in Sections 6.3, 6.4, 6.5,
      6.6, 6.7, 6.8 and 6.9 (the “Investment Representations”), shall be true and
      correct in all material respects when made, and shall be true and correct in
      all
      material respects on the Closing Date with the same force and effect as if
      they
      had been made on and as of said date. The Investment Representations shall
      be
      true and correct in all respects when made, and shall be true and correct in
      all
      respects on the Closing Date with the same force and effect as if they had
      been
      made on and as of said date. The Investors shall have performed in all material
      respects all obligations and covenants herein required to be performed by them
      on or prior to the Closing Date.

     

    (b) The
      Investors shall have executed and delivered the Registration Rights
      Agreement.

     

    7.3 Termination
      of Obligations to Effect Closing; Effects.

     

    (a) The
      outstanding obligations of the Company, on the one hand, and the Investors,
      on
      the other hand, to effect any Closing shall terminate as follows:

     

    (i) Upon
      the
      mutual written consent of the Company and the Investors;

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (ii) By
      the
      Company if any of the conditions set forth in Section 7.2 shall have become
      incapable of fulfillment, and shall not have been waived by the
      Company;

     

    (iii) By
      an
      Investor (with respect to itself only) if any of the conditions set forth in
      Section 7.1 shall have become incapable of fulfillment, and shall not have
      been
      waived by the Investor;

     

    (iv) By
      either
      the Company or any Investor (with respect to itself only) if the Closing has
      not
      occurred on or prior to January 11, 2008; or

     

    provided,
      however, that, except in the case of clause (i) above, the party seeking to
      terminate its obligation to effect a Closing shall not then be in breach of
      any
      of its representations, warranties, covenants or agreements contained in this
      Agreement or the other Transaction Documents if such breach has resulted in
      the
      circumstances giving rise to such party’s seeking to terminate its obligation to
      effect the Closing.

     

    (b) In
      the
      event of termination by any Investor of its obligations to effect a Closing
      pursuant to this Section 7.3, written notice thereof shall forthwith be given
      to
      the other Investors and the other Investors shall have the right to terminate
      their obligations to effect such Closing upon written notice to the Company
      and
      the other Investors. Nothing in this Section 7.3 shall be deemed to release
      any
      party from any liability for any breach by such party of the terms and
      provisions of this Agreement or the other Transaction Documents or to impair
      the
      right of any party to compel specific performance by any other party of its
      obligations under this Agreement or the other Transaction
      Documents.

     

    8. Covenants
      and Agreements of the Company.

     

    8.1 Reservation
      of Common Stock.
      In
      conjunction with the Company’s pending amendment of its Articles of
      Incorporation pursuant to the terms of the 2007 Placement, the Company shall
      authorize additional shares of its Common Stock such that at the time of the
      effectiveness of such amendment and at all times thereafter the Company is
      able
      to, and shall, reserve and keep available out of its authorized but unissued
      shares of Common Stock, sufficient shares solely for the purpose of providing
      for the conversion of the Notes.

     

    8.2 Reports.
      The
      Company will furnish to the Investors and/or their assignees such information
      relating to the Company and its Subsidiaries as from time to time may reasonably
      be requested by the Investors and/or their assignees; provided, however, that
      the Company shall not disclose material, non-public information to the
      Investors, or to advisors to or representatives of the Investors, unless prior
      to disclosure of such information the Company identifies such information as
      being material, non-public information and provides the Investors, such advisors
      and representatives with the opportunity to accept or refuse to accept such
      material, non-public information for review and any Investor wishing to obtain
      such information enters into an appropriate confidentiality agreement with
      the
      Company with respect thereto.

     

    8.3 No
      Conflicting Agreements.
      The
      Company will not take any action, enter into any agreement or make any
      commitment that would conflict or interfere in any material respect with the
      Company’s obligations to the Investors under the Transaction
      Documents.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    8.4 Insurance.
      The
      Company shall not materially reduce the insurance coverages described in Section
      5.18.

     

    8.5 Compliance
      with Laws.
      The
      Company will comply in all material respects with all applicable laws, rules,
      regulations, orders and decrees of all governmental authorities; provided,
      however, the
      Investors acknowledge that the Company is not current in its Quarterly Reports
      on Form 10-QSB.

     

    8.6 Termination
      of Covenants.
      The
      provisions of Sections 8.2 through 8.5 shall terminate and be of no further
      force and effect on the date on which the Company’s obligations under the
      Registration Rights Agreement to register or maintain the effectiveness of
      any
      registration covering the Registrable Securities (as such term is defined in
      the
      Registration Rights Agreement) shall terminate.

     

    8.7 Removal
      of Legends.
      Upon
      the earlier of (i) registration for resale pursuant to the Registration Rights
      Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver
      to the Company’s transfer agent for the Common Stock (the “Transfer Agent”)
      irrevocable instructions that the Transfer Agent shall reissue a certificate
      representing shares of Common Stock without legends upon receipt by such
      Transfer Agent of the legended certificates for such shares, together with
      either (1) a customary representation by the Investor that Rule 144(k) applies
      to the shares of Common Stock represented thereby or (2) a statement by the
      Investor that such Investor has sold the shares of Common Stock represented
      thereby in accordance with the Plan of Distribution contained in the
      Registration Statement, and (B) cause its counsel to deliver to the Transfer
      Agent one or more blanket opinions to the effect that the removal of such
      legends in such circumstances may be effected under the 1933 Act. From and
      after
      the earlier of such dates, upon an Investor’s written request, the Company shall
      promptly cause certificates evidencing the Investor’s Securities to be replaced
      with certificates which do not bear such restrictive legends. 

     

    9. Survival
      and Indemnification.

     

    9.1 Survival.
      The
      representations, warranties, covenants and agreements contained in this
      Agreement shall survive the Closing of the transactions contemplated by this
      Agreement for a period of 18 months following the Closing.

     

    9.2 Indemnification.
      The
      Company agrees to indemnify and hold harmless each Investor and their respective
      Affiliates and their respective directors, officers, employees and agents from
      and against any and all losses, claims, damages, liabilities and expenses
      (including without limitation reasonable attorneys’ fees and disbursements and
      other expenses incurred in connection with investigating, preparing or defending
      any action, claim or proceeding, pending or threatened and the costs of
      enforcement thereof) (collectively, “Losses”) to which such Person may become
      subject as a result of any breach of representation, warranty, covenant or
      agreement made by or to be performed on the part of the Company under the
      Transaction Documents, and will reimburse any such Person for all such amounts
      as they are incurred by such Person.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    9.3 Conduct
      of Indemnification Proceedings.
      Promptly after receipt by any Person (the “Indemnified Person”) of notice of any
      demand, claim or circumstances which would or might give rise to a claim or
      the
      commencement of any action, proceeding or investigation in respect of which
      indemnity may be sought pursuant to Section 9.2, such Indemnified Person shall
      promptly notify the Company in writing, and the Company shall assume the defense
      thereof, including the employment of counsel reasonably satisfactory to such
      Indemnified Person, and shall assume the payment of all fees and expenses;
      provided, however, that the failure of any Indemnified Person so to notify
      the
      Company shall not relieve the Company of its obligations hereunder except to
      the
      extent that the Company is materially prejudiced by such failure to notify.
      In
      any such proceeding, any Indemnified Person shall have the right to retain
      its
      own counsel, but the fees and expenses of such counsel shall be at the expense
      of such Indemnified Person unless: (i) the Company and the Indemnified Person
      shall have mutually agreed to the retention of such counsel; or (ii) in the
      reasonable judgment of counsel to such Indemnified Person representation of
      both
      parties by the same counsel would be inappropriate due to actual or potential
      differing interests between them. The Company shall not be liable for any
      settlement of any proceeding effected without its written consent, which consent
      shall not be unreasonably withheld, but if settled with such consent, or if
      there be a final judgment for the plaintiff, the Company shall indemnify and
      hold harmless such Indemnified Person from and against any loss or liability
      (to
      the extent stated above) by reason of such settlement or judgment. Without
      the
      prior written consent of the Indemnified Person, which consent shall not be
      unreasonably withheld, the Company shall not effect any settlement of any
      pending or threatened proceeding in respect of which any Indemnified Person
      is
      or could have been a party and indemnity could have been sought hereunder by
      such Indemnified Party, unless such settlement includes an unconditional release
      of such Indemnified Person from all liability arising out of such
      proceeding.

     

    10. Miscellaneous.

     

    10.1 Successors
      and Assigns.
      This
      Agreement may not be assigned by a party hereto without the prior written
      consent of the Company or the Investors, as applicable; provided, however,
      that
      an Investor may assign its rights and delegate its duties hereunder in whole
      or
      in part to an Affiliate or to a third party acquiring some or all of its
      Securities in a private transaction without the prior written consent of the
      Company or the other Investors, after notice duly given by such Investor to
      the
      Company; provided further, that no such assignment or obligation shall affect
      the obligations of such Investor hereunder. The provisions of this Agreement
      shall inure to the benefit of and be binding upon the respective permitted
      successors and assigns of the parties. Nothing in this Agreement, express or
      implied, is intended to confer upon any party other than the parties hereto
      or
      their respective successors and assigns any rights, remedies, obligations,
      or
      liabilities under or by reason of this Agreement, except as expressly provided
      in this Agreement.

     

    10.2 Counterparts;
      Faxes.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. This Agreement may also be executed via facsimile, which shall
      be
      deemed an original.

     

    10.3 Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

     

    10.4 Notices.
      Any
      notice, demand, request, waiver or other communication required or permitted
      to
      be given hereunder shall be in writing and shall be effective (a) upon hand
      delivery, telecopy, e-mail or facsimile at the address or number designated
      below (if delivered on a business day during normal business hours where such
      notice is to be received), or the first business day following such delivery
      (if
      delivered other than on a business day during normal business hours where such
      notice is to be received) or (b) on the second business day following the date
      of mailing by express courier service, fully prepaid, addressed to such address,
      or upon actual receipt of such mailing, whichever shall first occur. The
      addresses for such communications shall be:

     

    
      	
              If
                to the Company:

            	 	
              Long-E
                International, Inc.

              C-6F,
                Huhan Chuangxin Block, Keyuan Road, 

              Hi-Tech
                Industry Zone,

              Shenzhen,
                518000, Guangdong, China

              Telephone:
                (86) 755 3396 5188

              Attention:
                Chairman of the Board

              Fax:
                86-755-3396-5123

            


    

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    
      	
              with
                copies (which shall not constitute notice) to:

            	 	
              Kirkpatrick
                & Lockhart Preston Gates Ellis LLP

              10100
                Santa Monica Boulevard, Seventh Floor

              Los
                Angeles, California 90067

              Attention:
                Shoshannah D. Katz, Esq.

              E-mail:
                shoshannah.katz@klgates.com

              Fax:
                (310) 552-5001

            
	 	 	 
	
              If
                to any Purchaser:

            	 	
              At
                the address of such Purchaser set forth on Schedule I to this Agreement,
                with copies to Purchaser’s counsel as set forth on Schedule I or as
                specified in writing by such:

            


    

    


    Any
      party
      hereto may from time to time change its address for notices by giving at least
      ten (10) days written notice of such changed address to the other party hereto.
      

     

    10.5 Expenses.
      The
      parties hereto shall pay their own costs and expenses in connection
      herewith.

     

    10.6 Amendments
      and Waivers.
      Any
      term of this Agreement may be amended and the observance of any term of this
      Agreement may be waived (either generally or in a particular instance and either
      retroactively or prospectively), only with the written consent of the Company
      and Investors holding eighty five percent (85%) of the principal amount of
      Notes
      issued further to this Agreement and then outstanding. Any amendment or waiver
      effected in accordance with this paragraph shall be binding upon each holder
      of
      any Securities purchased under this Agreement at the time outstanding, each
      future holder of all such Securities, and the Company.

     

    10.7 Publicity.
      Except
      as set forth below, no public release or announcement concerning the
      transactions contemplated hereby shall be issued by the Company or the Investors
      without the prior consent of the Company (in the case of a release or
      announcement by the Investors) or the Investors (in the case of a release or
      announcement by the Company) (which consents shall not be unreasonably
      withheld), except as such release or announcement may be required by law or
      the
      applicable rules or regulations of any securities exchange or securities market,
      in which case the Company or the Investors, as the case may be, shall allow
      the
      Investors or the Company, as applicable, to the extent reasonably practicable
      in
      the circumstances, reasonable time to comment on such release or announcement
      in
      advance of such issuance. By 8:30 a.m. (New York City time) on the second
      trading day immediately following the Closing Date, the Company shall issue
      a
      press release disclosing the consummation of the transactions contemplated
      by
      this Agreement on such Closing Date. No later than the fourth trading day
      following the Closing Date, the Company will file a Current Report on Form
      8-K
      attaching the press release described in the foregoing sentence as well as
      copies of the Transaction Documents and any material, non-public information
      that was disclosed on or prior to the Closing Date to any of the Investors.
      In
      addition, the Company will make such other filings and notices in the manner
      and
      time required by the SEC. Notwithstanding the foregoing, the Company shall
      not
      publicly disclose the name of any Investor, or include the name of any Investor
      in any filing with the SEC (other than the Registration Statement and any
      exhibits to filings made in respect of this transaction in accordance with
      periodic filing requirements under the 1934 Act) or any regulatory agency,
      without the prior written consent of such Investor, except to the extent such
      disclosure is required by law or trading market regulations, in which case
      the
      Company shall provide the Investors with prior notice of such disclosure; the
      Investors acknowledge that the Schedules and Signature Pages to this Agreement
      are required to be filed by the Company with the SEC.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    10.8 Severability.
      Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof but shall be interpreted as if it were written so as to be
      enforceable to the maximum extent permitted by applicable law, and any such
      prohibition or unenforceability in any jurisdiction shall not invalidate or
      render unenforceable such provision in any other jurisdiction. To the extent
      permitted by applicable law, the parties hereby waive any provision of law
      which
      renders any provision hereof prohibited or unenforceable in any
      respect.

     

    10.9 Entire
      Agreement.
      This
      Agreement, including the Exhibits and the Disclosure Schedules, and the other
      Transaction Documents constitute the entire agreement among the parties hereof
      with respect to the subject matter hereof and thereof and supersede all prior
      agreements and understandings, both oral and written, between the parties with
      respect to the subject matter hereof and thereof.

     

    10.10 Further
      Assurances.
      The
      parties shall execute and deliver all such further instruments and documents
      and
      take all such other actions as may reasonably be required to carry out the
      transactions contemplated hereby and to evidence the fulfillment of the
      agreements herein contained.

     

    10.11 Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof to the extent that the general application of the laws of another
      jurisdiction would be required thereby. Each of the parties hereto irrevocably
      submits to the exclusive jurisdiction of the courts of the State of New York
      located in New York County and the United States District Court for the Southern
      District of New York for the purpose of any suit, action, proceeding or judgment
      relating to or arising out of this Agreement and the transactions contemplated
      hereby. Service of process in connection with any such suit, action or
      proceeding may be served on each party hereto anywhere in the world by the
      same
      methods as are specified for the giving of notices under this Agreement. Each
      of
      the parties hereto irrevocably consents to the jurisdiction of any such court
      in
      any such suit, action or proceeding and to the laying of venue in such court.
      Each party hereto irrevocably waives any objection to the laying of venue of
      any
      such suit, action or proceeding brought in such courts and irrevocably waives
      any claim that any such suit, action or proceeding brought in any such court
      has
      been brought in an inconvenient forum. EACH
      OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

     

    10.12 Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Securities pursuant to the Transaction Documents has been made by
      such
      Investor independently of any other Investor. Nothing contained herein or in
      any
      Transaction Document, and no action taken by any Investor pursuant thereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors 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
      Investor acknowledges that no other Investor has acted as agent for such
      Investor in connection with making its investment hereunder and that no Investor
      will be acting as agent of such Investor in connection with monitoring its
      investment in the Securities or enforcing its rights under the Transaction
      Documents. Each Investor 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 Investor to be joined as an additional party in any
      proceeding for such purpose. The Company acknowledges that each of the Investors
      has been provided with the same Transaction Documents for the purpose of closing
      a transaction with multiple Investors and not because it was required or
      requested to do so by any Investor.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
      authorized officers to execute this Agreement as of the date first above
      written.

     

    
      	 	 	 
	 	LONG-E
              INTERNATIONAL, INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Bu
              Shengfu                                                           
                          
              
	 	Name: Bu
              Shengfu                                               
                               
              
	 	Title:
              President
              and Chief Executive
              Officer                       
              


    

    


    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    
      	
              The
                Investors:

            	
              BARRON
                PARTNERS LP

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Andrew Worden

            
	 	 	
              Name:

            	
              Andrew
                Barron Worden

            
	 	 	
              Title:

            	
              Managing
                Partner

            
	 	 
	
              Damages
                Owed as of December 31, 2007: $555,333.33

            	 
	
              Principal
                Amount of Notes: $555,333.33

            	 
	 	 
	
              Address
                for Notice:

            	
              730
                Fifth Avenue, 25th Floor

              New
                York, NY 10019

              E-mail
                Address: abw@barronpartners.com

            


    

     

    
      
         

      

      
        
          [Signature
            page to Securities Purchase Agreement]

        

        
          

        

      

      
         

      

    

     

    
      	
              The
                Investors:

            	
              VISION
                OPPORTUNITY MASTER FUND, LTD

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Adam Benowitz

            
	 	 	
              Name:

            	
              Adam
                Benowitz

            
	 	 	
              Title:

            	
              Director

            
	 	 
	
              Damages
                Owed as of December 31, 2007: $310,333.33

            	 
	
              Principal
                Amount of Notes: $310,333.33

            	 
	 	 
	
              Address
                for Notice:

            	
              20
                W. 55th
                Street, 5th Floor

              New
                York, NY 10019

              Attn:
                Antti Uusiheimala

              E-mail
                Address: antti@visicap.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

       

    

    
      	
              The
                Investors:

            	
              JCAR
                FUNDS LTD.

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Jon Carnes

            
	 	 	
              Name:

            	
              Jon
                Carnes

            
	 	 	
              Title:

            	
              President

            
	 	 
	
              Damages
                Owed as of December 31, 2007: $65,333.33

            	 
	
              Principal
                Amount of Notes: $65,333.33

            	 
	 	 
	
              Address
                for Notice:

            	
              2560
                Highvale Dr.

              Las
                Vegas, NV 89134

              Attention:
                Jon Carnes

              E-mail
                Address: jcarnes@eosfunds.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

       

    

    
      	
              The
                Investors:

            	
              RAY
                RIVERS

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Ray Rivers

            
	 	 	
              Name:

            	
              Ray
                Rivers

            
	 	 	
              Title:

            	 
	 	 
	
              Damages
                Owed as of December 31, 2007: $16,333.33

            	 
	
              Principal
                Amount of Notes: $16,333.33

            	 
	 	 
	
              Address
                for Notice:

            	
              89
                Mayo Ave.

              Greenwich,
                CT 06830

              E-mail
                Address: rrivers@gmail.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

       

    

    
      	
              The
                Investors:

            	
              STEVE
                MAZUR

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Steve Mazur

            
	 	 	
              Name:

            	
              Steve
                Mazur

            
	 	 	
              Title:

            	 
	 	 
	
              Damages
                Owed as of December 31, 2007: $16,333.33

            	 
	
              Principal
                Amount of Notes: $16,333.33

            	 
	 	 
	
              Address
                for Notice:

            	
              200
                Broad Street #2321

              Stamford,
                CT 06901

              E-mail
                Address: smazur@crtllc.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

    

    


    
      	
              The
                Investors:

            	
              WILLIAM
                DENKIN

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                William Denkin

            
	 	 	
              Name:

            	
              William
                Denkin

            
	 	 	
              Title:

            	 
	 	 
	
              Damages
                Owed as of December 31, 2007: $16,333.33

            	 
	
              Principal
                Amount of Notes: $16,333.33

            	 
	 	 
	
              Address
                for Notice:

            	
              14
                Sandpiper Rd.

              Westport,
                CT 06880

              bdenkin@crtllc.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

       

    

    
      	
              The
                Investors:

            	
              RONALD
                NASH

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Ronald Nash

            
	 	 	
              Name:

            	
              Ronald
                Nash

            
	 	 	
              Title:

            	 
	 	 
	
              Damages
                Owed as of December 31, 2007: $16,333.33

            	 
	
              Principal
                Amount of Notes: $16,333.33

            	 
	 	 
	
              Address
                for Notice:

            	
              134
                Essex Drive3

              Tenafly,
                NJ 07670

              E-mail
                Address: ron@nashkaplove.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

    

    


    
      	
              The
                Investors:

            	
              KAGEL
                FAMILY TRUST

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                David L. Kagel, Trustee

            
	 	 	
              Name:

            	
              David
                L. Kagel

            
	 	 	
              Title:

            	
              Trustee

            
	 	 
	
              Damages
                Owed as of December 31, 2007: $8,166.67

            	 
	
              Principal
                Amount of Notes: $8,166.67

            	 
	 	 
	
              Address
                for Notice:

            	
              1801
                Century Park East #2500

              Los
                Angeles, CA 90067

              Attention:
                David L. Kagel

              E-mail
                Address: dkagel@earthlink.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

       

    

    
      	
              The
                Investors:

            	
              WestPark
                Capital Financial Services, LLC

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                R. Rappaport

            
	 	 	
              Name:

            	
              Richard
                Rappaport

            
	 	 	
              Title:

            	
              CEO

            
	 	 
	
              Damages
                Owed as of December 31, 2007: $40,833.33

            	 
	
              Principal
                Amount of Notes: $40,833.33

            	 
	 	 
	
              Address
                for Notice:

            	
              1900
                Avenue of the Stars, Suite 310

              Los
                Angeles, CA 90067

              Attention:
                Richard Rappaport

              E-mail
                Address: r@wpcapital.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

      

    

    


    
      	
              The
                Investors:

            	
              MidSouth
                Investor Fund LP

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Lyman O. Heidtke, G.P.

            
	 	 	
              Name:

            	
              Lyman
                O. Heidtke

            
	 	 	
              Title:

            	
              General
                Partner

            
	 	 
	
              Damages
                Owed as of December 31, 2007: $81,666.67

            	 
	
              Principal
                Amount of Notes: $81,666.67

            	 
	 	 
	
              Address
                for Notice:

            	
              201
                4th
                Ave. North

              Suite
                1950

              Nashville,
                TN 37219

              Attention:
                Lyman O. Heidtke (“Buzz”)

              E-mail
                Address: buzz@msifund.com

            


    

    
       

      
        
           

        

        
          
            [Signature
              page to Securities Purchase Agreement]

          

          
            

          

        

        
           

        

         

      

    

    SCHEDULE
      I


    


    
      	 	
              Amount
                Invested in Prior Placements

            	 	
              Damages
                Owed Through December 31, 2007

            	 	
              Principal
                Amount of Notes Issuable

            
	
              Initial
                Investors:

            	 	 	 	 	 
	
              Kagel
                Family Trust

            	
              $50,000

            	 	
              $8,166.67

            	 	
              $8,166.67

            
	
              WestPark
                Capital Financial Services, LLC 

            	
              $250,000

            	 	
              $40,833.33

            	 	
              $40,833.33

            
	
              Barron
                Partners, LP 

            	
              $3,400,000

            	 	
              $555,333.33

            	 	
              $555,333.33

            
	
              Vision
                Opportunity Master Fund, Ltd. 

            	
              $1,900,000

            	 	
              $310,333.33

            	 	
              $310,333.33

            
	
              JCAR
                Funds Ltd. 

            	
              $400,000

            	 	
              $65,333.33

            	 	
              $65,333.33

            
	
              Ray
                Rivers 

            	
              $100,000

            	 	
              $16,333.33

            	 	
              $16,333.33

            
	
              Steve
                Mazur 

            	
              $100,000

            	 	
              $16,333.33

            	 	
              $16,333.33

            
	
              William
                Denkin 

            	
              $100,000

            	 	
              $16,333.33

            	 	
              $16,333.33

            
	
              Ronald
                Nash 

            	
              $100,000

            	 	
              $16,333.33

            	 	
              $16,333.33

            
	
              MidSouth
                Investor Fund LP

            	
              $500,000

            	 	
              $81,666.67

            	 	
              $81,667.67

            
	 	 	 	
              $1,126,999.98

            	 	
              $1,126,999.98

            
	 	 	 	 	 	 
	 	 	 	 	 	 
	
              Possible
                Subsequent Investors:

            	 	 	 	 	 
	
              Professional
                Offshore Opportunity Fund 

            	
              $150,000

            	 	
              $24,500.00

            	 	
              $24,500.00

            
	
              Nutmeg
                Group/Mercury Fund

            	
              $203,000

            	 	
              $33,156.67

            	 	
              $33,156.67

            
	 	 	 	
              $57,656.67

            	 	
              $57,656.67

            


    

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    EXHIBIT
      A

     

    Form
      of
      Convertible Note

     

    [See
      attached]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      B


     

    Form
      of
      Registration Rights Agreement

     

    [See
      attached.]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      C


     

    Capitalization
      Pre- and Post-Closing

     

    Authorized
      share capital:50,000,000 shares of common stock, par value $0.001 per
      share*

     

    
      	
              Security

            	
              Pre-Closing

            	
              Post-Initial
                Closing

            	
              Post-Subsequent
                Closing

            
	
              Shares
                of Common Stock Outstanding

            	
              31,259,714

            	
              31,259,714

            	
              31,259,714

            
	
              Shares
                of Common Stock Issuable upon the Conversion of Outstanding Convertible
                Notes

            	
              13,382,500

            	
              20,011,908

            	
              20,351,064

            
	
              Shares
                of Common Stock Issuable upon the Exercise of Outstanding
                Warrants

            	
              20,314,641

            	
              20,314,641

            	
              20,314,641

            
	
              Total

            	
              64,956,855

            	
              71,586,263

            	
              71,925,419

            


    

    


     

    *
      The
      Company’s planned amendment of its Articles to authorize Series A Preferred
      Stock pursuant to the terms of the 2007 Placement is pending; the shares of
      Series A Preferred Stock underlying outstanding instruments convert on a 1:1
      basis to the Company’s Common Stock, and such shares of Common Stock are
      reflected in the totals above; such amendment also includes an increase of
      the
      authorized number of shares of the Company’s Common Stock. The Company’s
      adoption of an equity-based incentive plan is also pending, and thus no shares
      of Common Stock have been reserved for issuance pursuant to such plan nor are
      any options or other equity-based incentives outstanding at this time. The
      pending Company actions cannot be completed and made effective until the Company
      is current in its Quarterly Report filings, it re-files its pending preliminary
      Information Statement on Schedule 14C, it files its definitive Information
      Statement on Schedule 14C upon conclusion of the SEC waiting period or comment
      process, as applicable, and 20 calendar days have passed from the mailing date
      of the Information Statement to the Company’s shareholders.