agrmnt.htm


    
      EXHIBIT
        10.1

      


      LOAN
        AND SECURITIES PURCHASE
        AGREEMENT

       

      This
        Loan
        and Securities Purchase Agreement (this “Agreement”) is dated
        as of January 15, 2008 between Industrial Enterprises of America, Inc., a
        Nevada
        corporation (the “Company”), and
        each
        purchaser identified on the signature pages hereto (each, including its
        successors and assigns, a “Purchaser”
and
        collectively the “Purchasers”).

       

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

       

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

       

       

      


      DEFINITIONS

       

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

       

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

       

      “Affiliate”
means
        any
        Person that, directly or indirectly through one or more intermediaries, controls
        or is controlled by or is under common control with a Person, as such terms
        are
        used in and construed under Rule 405 under the Securities Act.  With
        respect to a Purchaser, any investment fund or managed account that is managed
        on a discretionary basis by the same investment manager as such Purchaser
        will
        be deemed to be an Affiliate of such Purchaser.

       

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

       

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

       

      “Closing(s)”
means
        the
        closing(s) of the purchase and sale of the Securities pursuant to Section
        2.1
        and any reference to “Closing” or “Closings” shall be construed to include the
        First Closing and the Second Closing unless only one such closing is expressly
        referred to.

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      “Closing
        Dates” means,
        collectively, the First Closing Date and the Second Closing Date.

       

       “Commission”
means
        the
        Securities and Exchange Commission.

       

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

       

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

       

      “Common
        Stock
        Transaction” means the transactions contemplated by that certain Common
        Stock Purchase Agreement dated on or about the date hereof between Brandywine
        Consults, Inc. and the Purchasers, whereby the Purchasers are purchasing
        an
        aggregate of 500,000 shares of Common Stock of the Company from Brandywine
        Consultants, Inc..

       

      “Company
        Counsel”
means Holland & Knight LLP, outside counsel to the Company, with offices
        located at 195 Broadway New York, NY 10007.

       

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

       

      “Effective
        Date” means
        the date that the initial Registration Statement filed by the Company pursuant
        to Section 4.16 hereof is first declared effective by the
        Commission.

       

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

       

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

      


      “Exempt
        Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
        officers or directors of the Company pursuant to any stock or option plan
        duly
        adopted for such purpose by a majority of the non-employee members of the
        Board
        of Directors or a majority of the members of a committee of non-employee
        directors established for such purpose, (b) securities upon the exercise
        or
        exchange of or conversion of any Securities issued hereunder and/or other
        securities exercisable or exchangeable for or convertible into shares of
        Common
        Stock issued and outstanding on the date of this Agreement, provided that
        such
        securities have not been amended since the date of this Agreement to increase
        the number of such securities or to decrease the exercise, exchange
        or

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      conversion
        price of such securities, and (c) securities issued pursuant to acquisitions
        or
        strategic transactions approved by a majority of the disinterested directors
        of
        the Company, provided that any such issuance shall only be to a Person which
        is,
        itself or through its subsidiaries, an operating company in a business
        synergistic with the business of the Company and in which the Company receives
        benefits in addition to the investment of funds, but shall not include a
        transaction in which the Company is issuing securities primarily for the
        purpose
        of raising capital or to an entity whose primary business is investing in
        securities.

       

      “First
        Closing” shall
        have the meaning set forth in Section 2.1.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      “Mortgage”
means
        the
        Open-End Mortgage and Security Agreement made by Pitt Penn Oil Company, LLC
        in
        favor of the Purchasers, in the form of Exhibit E attached
        hereto.

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      “Notes”
means
        the 10%
        Senior Secured Promissory Notes due, subject to the terms therein, 6 months
        from
        their date of issuance, issued by the Company to the Purchasers hereunder,
        in
        the form of Exhibit
        A attached hereto.

       

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

       

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

       

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

       

      “Registration
        Statement” means a registration statement meeting the requirements set
        forth in Section 4.16 and covering the resale of the Shares and Warrant Shares
        by each Purchaser as provided herein.

       

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

       

      “Required
        Minimum”
means, as of any date, the maximum aggregate number of shares of Common
        Stock
        then issued or potentially issuable in the future pursuant to the Transaction
        Documents, including any Warrant Shares issuable upon exercise in full of
        all
        Warrants, ignoring any exercise limits set forth therein.

       

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

       

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

       

      “Second
        Closing” shall
        have the meaning set forth in Section 2.1.

       

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

       

       “Securities”
means
        the
        Shares, Notes, the Warrants, and the Warrant Shares.

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

      “Security
        Documents”
shall mean the Subsidiary Guarantees, the Mortgage, and any other
        documents and
        filing required thereunder in order to grant the Purchasers a first priority
        security interest in the real property as described in the
        Mortgage.

       

      “Shareholder
        Approval”
means such approval as may be required by the applicable rules and
        regulations
        of the Nasdaq Stock Market (or any successor entity) from the shareholders
        of
        the Company with respect to the transactions contemplated by the Transaction
        Documents, including the issuance of all of the Shares and Warrant Shares
        in
        excess of 19.99% of the issued and outstanding Common Stock on the Closing
        Date

       

      “Shares”
means
        the
        shares of Common Stock issued or issuable to each Purchaser pursuant to this
        Agreement.

       

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

       

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

       

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

       

       “Subsidiary
        Guarantee”
means the Subsidiary Guarantee, dated the date hereof, by each Subsidiary
        in
        favor of the Purchasers, in the form of Exhibit B attached
        hereto.

       

      “Trading
        Day” means a
        day on which the New York Stock Exchange is open for trading.

       

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

       

       “Transaction
        Documents” means this Agreement, the Notes, the Warrants,
        the  Security Documents- (including without limitation  the
        Subsidiary Guarantee and the Mortgage), all exhibits and schedules thereto
        and
        hereto and

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      any
        other
        documents or agreements executed in connection with the transactions
        contemplated hereunder.

       

      “Transfer
        Agent” means
        Computershare, the current transfer agent of the Company with a mailing address
        of PO Box 43010, Providence, RI 02940-3010, and a fax number of 303 261-0604,
        and any successor transfer agent of the Company.

       

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

       

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

       

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

       

       

      


      PURCHASE
        AND SALE

       

      Closing.  On
        each Closing Date, upon the terms and subject to the conditions set forth
        herein, the Company agrees to sell, and each Purchaser, severally and not
        jointly, agrees to purchase, up to $1,500,000 of the Notes, it being understood
        that, and as more fully described below, each Purchaser shall indicate on
        its
        signature page the aggregate Subscription Amount to be purchased hereunder
        by
        such Purchaser, and such Purchaser shall purchase Notes equal to 50% of the
        aggregate Subscription Amount on the First Closing Date and purchase
        Notes  equal to the remaining 50% of the Subscription Amount on the
        Second Closing Date, subject to the conditions set forth herein.  Each Purchaser shall
        deliver to the Company, via wire transfer or a certified check, immediately
        available funds equal to its Subscription Amount as to the
        applicable

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Closing,
        and the Company shall deliver to each Purchaser its respective Note, Shares,
        and
        a Warrant, as determined pursuant to Section 2.2(a), and the Company and
        each
        Purchaser shall deliver the other items set forth in Section 2.2 deliverable
        at
        the applicable Closing.  Upon satisfaction of the conditions set forth
        in Sections 2.2 and 2.3, the Closings shall occur at the offices of FWS or
        such
        other location as the parties shall mutually agree.

       

      (a) First
        Closing.  The First Closing shall be for $750,000 of the
        aggregate Subscription Amount by all Purchasers hereunder and shall occur
        on, or
        as soon as reasonably practicable following, the date hereof.

       

      (b) Second
        Closing.  The Second Closing shall be for $750,000 of the
        aggregate Subscription Amount subscribed for by all Purchasers hereunder
        and
        shall occur within 5 Business Days of the date which is the latest of (i)
        the
        date the Company files its Annual Report for the year ended June 30, 2007
        with
        the Commission, (ii) the date the Company files its Quarterly Report for
        the
        quarter ended September 30, 2007 with the Commission and (iii) the date the
        Company is otherwise current in its reporting obligations under the Exchange
        Act
        (and indicated compliance with such reporting obligations on the cover page
        of
        its most recent period report filed with the Commission), and in any event
        on or
        before March 15, 2008.

       

      Deliveries

       

      .

       

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

       

      (i) as
        to the
        First Closing, this Agreement duly executed by the Company;

       

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

       

      (iii) as
        to the
        First Closing, a Note with a principal amount equal to such Purchaser’s
        Subscription Amount for the First Closing as set forth on its signature page
        hereto, registered in the name of such Purchaser;

       

      (iv) as
        to the
        Second Closing, a Note with a principal amount equal to such Purchaser’s
        Subscription Amount for the Second Closing as set forth on its signature
        page
        hereto, registered in the name of such Purchaser;

       

      (v) as
        to the
        First Closing, a Warrant registered in the name of such Purchaser to purchase
        up
        to such Purchaser’s pro-rata share of 75,000 shares of Common Stock, with an
        exercise price equal to $_____1, subject to adjustment therein, it being
        understood that Warrants to purchase a total

       

      

        

      

        
        1
          110% of
          the closing price of the Common Stock on the Trading Day immediately prior
          to
          the date hereof.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      of
        75,000
        shares shall be issued at the First Closing;

       

      (vi) a
        certificate of the Secretary of the Company, dated as of the Closing Date,
        (w)
        certifying the resolutions adopted unanimously by the Board of Directors
        of the
        Company approving the transactions contemplated by this Agreement and the
        other
        Transaction Documents and the issuance of the Securities, (x) certifying
        the
        current versions of the certificate or articles of incorporation, as amended
        and
        by-laws of the Company and its Subsidiaries, (y) certifying as to the signatures
        and authority of persons signing the Transaction Documents and related documents
        on behalf of the Company and its Subsidiaries and (z) confirming that the
        representations and warranties of the Company contained herein are accurate
        in
        all material respects when made and on the applicable Closing Date;

       

      (vii) as
        to the
        First Closing, a certificate, evidencing a number of Shares equal to such
        Purchaser’s pro-rata portion of 2,000,000 shares of Common Stock (based on such
        Purchaser’s Subscription Amount hereunder and the aggregate Subscription Amount
        of all Purchasers hereunder), registered in the name of such Purchaser, it
        being
        understood that all 2,000,000 shares shall be issued at the First
        Closing;

       

      (viii) as
        to the
        Second Closing, the Mortgage, along with all of the other Security Documents,
        duly executed by the parties thereto and acknowledged where applicable;
        and

       

      (ix) as
        to the
        First Closing, the Subsidiary Guarantees, duly executed by the parties thereto
        and acknowledged where applicable.

       

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

       

      as
        to the
        First Closing, this Agreement duly executed by such Purchaser; and

       

      such
        Purchaser’s Subscription Amount for the applicable Closing by wire transfer to
        the account as specified in writing by the Company.

       

      Closing
        Conditions.

       

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

       

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

       

      all
        obligations, covenants and agreements of each Purchaser required to be performed
        at or prior to the applicable Closing Date shall

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      have
        been
        performed;

       

      the
        respective Subscription Amounts for the First and Second Closing shall be
        $750,000, for an aggregate Subscription Amount of
        $1,500,000;  and

       

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

       

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

       

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

       

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

       

      (iii) the
        aggregate Subscription Amounts for the First and Second Closing shall be
        $1,500,000;

       

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

       

      (v) as
        to the
        Second Closing only, evidence of the filing of the Mortgage in the office
        of the
        Recorder of Deeds of Allegheny County, Commonwealth of
        Pennsylvania;

       

      (vi) as
        to the
        First Closing only, the Common Stock Transaction shall have been
        consummated;

       

      (vii) as
        to the
        Second Closing only, the Company shall be current in its reporting obligations
        under the Exchange Act (and indicated compliance with such reporting obligations
        on the cover page of its most recent period report filed with the
        Commission);

       

      (viii) as
        to the
        Second Closing only, such Closing shall occur on or before March 15,
        2008;

       

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

       

      (x) from
        the
        date hereof to the applicable Closing Date, trading in the Common Stock shall
        not have been suspended by the Commission  or the Company’s principal
        Trading Market (except for any suspension of

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

       

      


      REPRESENTATIONS
        AND WARRANTIES

       

      1.2 Representations
        and Warranties of the Company.

       

      Except
        as
        set forth under the corresponding section of the disclosure schedules delivered
        to the Purchasers concurrently herewith (the “Disclosure Schedules”) which
        Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
        the
        representations and warranties set forth below to each PurchaserExcept as
        set forth in the Disclosure Schedules, which Disclosure Schedules shall be
        deemed a part hereof and shall qualify any representation or otherwise made
        herein to the extent of the disclosure contained in the corresponding section
        of
        the Disclosure Schedules, the Company hereby makes the following representations
        and warranties to each Purchaser:

       

      Subsidiaries.  All
        of the direct and indirect subsidiaries of the Company are set forth on Schedule
        3.1(a).  The Company owns, directly or indirectly, all of the
        capital stock or other equity interests of each Subsidiary free and clear
        of any
        Liens, and all of the issued and outstanding shares of capital stock of each
        Subsidiary are validly issued and are fully paid, non-assessable and free
        of
        preemptive and similar rights to subscribe for or purchase
        securities.

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      respect
        on a timely basis its obligations under any Transaction Document (any of
        (i),
        (ii) or (iii), a “Material Adverse
        Effect”) and no Proceeding has been instituted in any such jurisdiction
        revoking, limiting or curtailing or seeking to revoke, limit or curtail such
        power and authority or qualification.

       

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

       

      No
        Conflicts.  The execution, delivery and performance of the
        Transaction Documents by the Company and the consummation by the Company
        of the
        other transactions contemplated hereby and thereby do not and will not: (i)
        conflict with or violate any provision of the Company’s or any Subsidiary’s
        certificate or articles of incorporation, bylaws or other organizational
        or
        charter documents, or (ii) conflict with, or constitute a default (or an
        event
        that with notice or lapse of time or both would become a default) under,
        result
        in the creation of any Lien upon any of the properties or assets of the Company
        or any Subsidiary, or give to others any rights of termination, amendment,
        acceleration or cancellation (with or without notice, lapse of time or both)
        of,
        any agreement, credit facility, debt or other instrument (evidencing a Company
        or Subsidiary debt or otherwise) or other understanding to which the Company
        or
        any Subsidiary is a party or by which any property or asset of the Company
        or
        any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
        conflict with or result in a violation of any law, rule, regulation, order,
        judgment, injunction, decree or other restriction of any court or governmental
        authority to which the Company or a Subsidiary is subject (including federal
        and
        state securities laws and regulations), or by which any property or asset
        of the
        Company or a Subsidiary is bound or affected; except in the case of each
        of
        clauses (ii) and (iii), such as could not have or reasonably be expected
        to
        result in a Material Adverse Effect.

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

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

       

      Capitalization.  The
        capitalization of the Company is as set forth on Schedule 3.1(g),
        which Schedule
        3.1(g) shall also include the number of shares of Common Stock owned
        beneficially, and of record, by Affiliates of the Company as of the date
        hereof.
        The Company has not issued any capital stock since its most recently filed periodic
        report
        under the Exchange Act, other than pursuant to the exercise of employee
        stock options under the Company’s stock option plans, the issuance of shares of
        Common Stock to employees pursuant to the Company’s employee stock purchase
        plans and pursuant to the conversion or exercise of Common Stock Equivalents
        outstanding as of the date of the most recently filed periodic report under
        the
        Exchange Act.  No Person has any right of first refusal, preemptive
        right, right of participation, or any similar right to participate in the
        transactions contemplated by the Transaction Documents.  Except as a
        result of the purchase and sale of the Securities, there are no outstanding
        options, warrants, scrip rights to subscribe to, calls or commitments of
        any
        character whatsoever relating to, or securities, rights or obligations
        convertible into or exercisable or exchangeable for, or giving any Person
        any
        right to subscribe for or acquire, any shares of Common Stock, or contracts,
        commitments, understandings or arrangements by which the Company or any
        Subsidiary is or may become bound to issue additional shares of Common Stock
        or
        Common Stock Equivalents. The issuance and sale of the Securities will not
        obligate the Company to issue shares of Common Stock or other securities
        to any
        Person (other than the Purchasers) and will not result in a right of any
        holder
        of Company securities to adjust the

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

      SEC
        Reports; Financial
        Statements.  Except as set forth on Schedule
        3.1(h), the
        Company has filed all reports, schedules, forms, statements and other documents
        required to be filed by the Company under the Securities Act and the Exchange
        Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
        preceding the date hereof (or such shorter period as the Company was required
        by
        law or regulation to file such material) (the foregoing materials, including
        the
        exhibits thereto and documents incorporated by reference therein, being
        collectively referred to herein as the “SEC Reports”) on a
        timely basis or has received a valid extension of such time of filing and
        has
        filed any such SEC Reports prior to the expiration of any such
        extension.  As of their respective dates, the SEC Reports complied in
        all material respects with the requirements of the Securities Act and the
        Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
        any untrue statement of a material fact or omitted to state a material fact
        required to be stated therein or necessary in order to make the statements
        therein, in the light of the circumstances under which they were made, not
        misleading.  The financial statements of the Company included in the
        SEC Reports comply in all material respects with applicable accounting
        requirements and the rules and regulations of the Commission with respect
        thereto as in effect at the time of filing.  Such financial statements
        have been prepared in accordance with United States generally accepted
        accounting principles applied on a consistent basis during the periods involved
        (“GAAP”),
        except as may be otherwise specified in such financial statements or the
        notes
        thereto and except that unaudited financial statements may not contain all
        footnotes required by GAAP, and fairly present in all material respects the
        financial position of the Company and its consolidated Subsidiaries as of
        and
        for the dates thereof and the results of operations and cash flows for the
        periods then ended, subject, in the case of unaudited statements, to normal,
        immaterial, year-end audit adjustments.

       

      Material
        Changes.  Since the date of the latest audited financial
        statements included within the SEC Reports, except as specifically disclosed
        in
        a subsequent SEC Report filed prior to the date hereof, (i) there has been
        no
        event, occurrence or development that has had or that could reasonably be
        expected to result in a Material Adverse Effect, (ii) the Company has not
        incurred any liabilities (contingent or otherwise) other than (A) trade payables
        and accrued expenses incurred in the ordinary course of business consistent
        with
        past practice and (B)

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      liabilities
        not required to be reflected in the Company’s financial statements pursuant to
        GAAP or disclosed in filings made with the Commission, (iii) the Company
        has not
        altered its method of accounting, (iv) the Company has not declared or made
        any
        dividend or distribution of cash or other property to its stockholders or
        purchased, redeemed or made any agreements to purchase or redeem any shares
        of
        its capital stock and (v) the Company has not issued any equity securities
        to
        any officer, director or Affiliate, except pursuant to existing Company stock
        option plans. The Company does not have pending before the Commission any
        request for confidential treatment of information.  Except for the
        issuance of the Securities contemplated by this Agreement or as set forth
        on
Schedule
        3.1(i), no event, liability or development has occurred or exists with
        respect to the Company or its Subsidiaries or their respective business,
        properties, operations or financial condition, that would be required to
        be
        disclosed by the Company under applicable securities laws at the time this
        representation is made or deemed made that has not been publicly disclosed
        at
        least one Trading Day prior to the date that this representation is
        made.

       

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

       

      Labor
        Relations.  No material labor dispute exists or, to the
        knowledge of the Company, is imminent with respect to any of the employees
        of
        the Company which could reasonably be expected to result in a Material Adverse
        Effect.  None of the Company’s or its Subsidiaries’ employees is a
        member of a union that relates to such employee’s relationship with the Company
        or such Subsidiary, and neither the Company nor any of its Subsidiaries is
        a
        party to a collective bargaining agreement, and the Company and its Subsidiaries
        believe that their relationships with their employees are good.  No
        executive officer, to the knowledge of the Company, is, or is now expected
        to
        be, in violation of any material term of any employment contract,
        confidentiality, disclosure or proprietary information agreement or
        non-competition agreement, or any other contract or agreement or any restrictive
        covenant in favor of any third party, and

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      the
        continued employment of each such executive officer does not subject the
        Company
        or any of its Subsidiaries to any liability with respect to any of the foregoing
        matters.  The Company and its Subsidiaries are in compliance with all
        U.S. federal, state, local and foreign laws and regulations relating to
        employment and employment practices, terms and conditions of employment and
        wages and hours, except where the failure to be in compliance could not,
        individually or in the aggregate, reasonably be expected to have a Material
        Adverse Effect.

       

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

       

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

       

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

       

      Patents
        and
        Trademarks.  The Company and the Subsidiaries have, or have
        rights to use, all patents, patent applications, trademarks, trademark
        applications, service marks, trade names, trade secrets, inventions, copyrights,
        licenses and

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      other
        intellectual property rights and similar rights necessary or material for
        use in
        connection with their respective businesses as described in the SEC Reports
        and
        which the failure to so have could have a Material Adverse Effect (collectively,
        the “Intellectual
        Property Rights”).  Neither the Company nor any Subsidiary has
        received a notice (written or otherwise) that any of the Intellectual Property
        Rights used by the Company or any Subsidiary violates or infringes upon the
        rights of any Person. To the knowledge of the Company, all such Intellectual
        Property Rights are enforceable and there is no existing infringement by
        another
        Person of any of the Intellectual Property Rights.  The Company and
        its Subsidiaries have taken reasonable security measures to protect the secrecy,
        confidentiality and value of all of their intellectual properties, except
        where
        failure to do so could not, individually or in the aggregate, reasonably
        be
        expected to have a Material Adverse Effect.

       

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

       

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

       

      Sarbanes-Oxley;
        Internal
        Accounting Controls.  The Company is in material compliance
        with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable
        to it
        as of the each Closing Date.  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 Exchange Act Rules 13a-15(e) and
        15d-15(e)) for the Company and designed such disclosure controls and procedures
        to ensure that information required to be disclosed by the Company in the
        reports it files or submits under the Exchange Act is recorded, processed,
        summarized and reported, within the time periods specified in the Commission’s
        rules and forms.  The Company’s certifying officers have evaluated the
        effectiveness of the Company’s disclosure controls and procedures as of the end
        of the period covered by the Company’s most recently filed periodic report under
        the Exchange Act (such date, the “Evaluation
        Date”).  The
        Company presented in its most recently filed periodic report under the Exchange
        Act the conclusions of the certifying officers about the effectiveness of
        the
        disclosure controls and procedures based on their evaluations as of the
        Evaluation Date.  Since the Evaluation Date, there have been no
        changes in the Company’s internal control over financial reporting (as such term
        is defined in the Exchange Act) that has materially affected, or is reasonably
        likely to materially affect, the Company’s internal control over financial
        reporting.

       

      Certain
        Fees.  No brokerage or finder’s fees or commissions are or will
        be payable by the Company to any broker, financial advisor or consultant,
        finder, placement agent, investment banker, bank or other Person with respect
        to
        the transactions contemplated by the Transaction Documents.  The
        Purchasers shall have no obligation with respect to any fees or with respect
        to
        any claims made by or on behalf of other Persons for fees of a type contemplated
        in this Section that may be due in connection with the transactions contemplated
        by the Transaction Documents.

       

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

       

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

       

      Registration
        Rights.  Other than each of the Purchasers, no Person has any
        right to cause the Company to effect the registration under the Securities
        Act
        of any securities of the Company.

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

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

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

      Solvency.  Based
        on the consolidated financial condition of the Company as of the applicable
        Closing Date after giving effect to the receipt by the Company of the proceeds
        from the sale of the Securities hereunder, (i) the fair saleable value of
        the
        Company’s assets exceeds the amount that will be required to be paid on or in
        respect of the Company’s existing debts and other liabilities (including known
        contingent liabilities) as they mature, (ii) the Company’s assets do not
        constitute unreasonably small capital to carry on its business as now conducted
        and as proposed to be conducted including its capital needs taking into account
        the particular capital requirements of the business conducted by the Company,
        and projected capital requirements and capital availability thereof, and
        (iii)
        the current cash flow of the Company, together with the proceeds the Company
        would receive, were it to liquidate all of its assets, after taking into
        account
        all anticipated uses of the cash, would be sufficient to pay all amounts
        on or
        in respect of its liabilities when such amounts are required to be
        paid.  The Company does not intend to incur debts beyond its ability
        to pay such debts as they mature (taking into account the timing and amounts
        of
        cash to be payable on or in respect of its debt).  The Company has no
        knowledge of any facts or circumstances which lead it to believe that it
        will
        file for reorganization or liquidation under the bankruptcy or reorganization
        laws of any jurisdiction within one year from the applicable Closing
        Date.  Schedule 3.1(aa) sets
        forth as of the date hereof all outstanding secured and unsecured Indebtedness
        of the Company or any Subsidiary, or for which the Company or any Subsidiary
        has
        commitments.  For the purposes of this Agreement, “Indebtedness”
means
        (a) any liabilities for borrowed money or amounts owed in excess of $50,000
        (other than trade accounts payable incurred in the ordinary course of business),
        (b) all guaranties, endorsements and other contingent obligations in respect
        of
        indebtedness of others, whether or not the same are or should be reflected
        in
        the Company’s balance sheet (or the notes thereto), except guaranties by
        endorsement of negotiable instruments for deposit or collection or similar
        transactions in the ordinary course of business; and (c) the present value
        of
        any lease payments in excess of $50,000 due under leases required to be
        capitalized in accordance with GAAP.  Neither the Company nor any
        Subsidiary is in default with respect to any Indebtedness.

       

      Tax
        Status.                                
Except for matters that would not, individually or in the aggregate,
        have or
        reasonably be expected to result in a Material Adverse Effect,

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      the
        Company and each Subsidiary has filed all necessary federal, state and foreign
        income and franchise tax returns and has paid or accrued all taxes shown
        as due
        thereon, and the Company has no knowledge of a tax deficiency which has been
        asserted or threatened against the Company or any Subsidiary.

       

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

       

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

       

      Accountants.  The
        Company’s accounting firm is set forth on Schedule 3.1(ee) of
        the Disclosure Schedule.  To the knowledge and belief of the Company,
        such accounting firm (i) is a registered public accounting firm as required
        by
        the Exchange Act and (ii) shall express its opinion with respect to the
        financial statements to be included in the Company’s Annual Report for the year
        ending March 31, 2008.

       

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

       

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

       

      Acknowledgment
        Regarding
        Purchasers’ Purchase of Securities.  The Company acknowledges
        and agrees that each of the Purchasers is acting solely in

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

      Acknowledgment
        Regarding Purchasers’ Trading Activity.  Notwithstanding anything
        in
        this Agreement or elsewhere herein to the contrary (except for Sections 3.2(f)
        and 4.14 hereof), it is understood and acknowledged by the Company that (i)
        none
        of the Purchasers has been asked to agree by the Company, nor has any Purchaser
        agreed, to desist from purchasing or selling, long and/or short, securities
        of
        the Company, or “derivative” securities based on securities issued by the
        Company or to hold the Securities for any specified term, (ii) past or future
        open market or other transactions by any Purchaser, specifically including,
        without limitation, Short Sales or “derivative” transactions, before or after
        the closing of this or future private placement transactions, may negatively
        impact the market price of the Company’s publicly-traded securities, (iii) any
        Purchaser, and counter-parties in “derivative” transactions to which any such
        Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock, and (iv) each Purchaser shall not be deemed
        to
        have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and
        acknowledges that (a) one or more Purchasers may engage in hedging activities
        at
        various times during the period that the Securities are outstanding, including,
        without limitation, during the periods that the value of the Shares and Warrant
        Shares deliverable with respect to Securities are being determined and (b)
        such
        hedging activities (if any) could reduce the value of the existing stockholders'
        equity interests in the Company at and after the time that the hedging
        activities are being conducted.  The Company acknowledges that such
        aforementioned hedging activities do not constitute a breach of any of the
        Transaction Documents.

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      placement
        of the Securities.

       

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

       

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

       

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

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

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

       

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

       

       

      


      OTHER
        AGREEMENTS OF THE PARTIES

       

      Transfer
        Restrictions.

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      require
        registration of such transferred Securities under the Securities
        Act.  As a condition of transfer, any such transferee shall agree in
        writing to be bound by the terms of this Agreement and shall have the rights
        of
        a Purchaser under this Agreement.

       

      The
        Purchasers agree to the imprinting, so long as is required by this Section
        4.1,
        of a legend on any of the Shares, Warrants and Warrant Shares in the following
        form:

       

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

       

      The
        Company acknowledges and agrees that a Purchaser may from time to time pledge
        pursuant to a bona fide margin agreement with a registered broker-dealer
        or
        grant a security interest in some or all of the Securities to a financial
        institution that is an “accredited investor” as defined in Rule 501(a) under the
        Securities Act and who agrees to be bound by the provisions of this Agreement
        and, if required under the terms of such arrangement, such Purchaser may
        transfer pledged or secured Securities to the pledgees or secured
        parties.  Such a pledge or transfer would not be subject to approval
        of the Company and no legal opinion of legal counsel of the pledgee, secured
        party or pledgor shall be required in connection therewith.  Further,
        no notice shall be required of such pledge.  At the appropriate
        Purchaser’s expense, the Company will execute and deliver such reasonable
        documentation as a pledgee or secured party of Securities may reasonably
        request
        in connection with a pledge or transfer of the Securities, including, if
        the
        Securities are subject to registration pursuant to this Agreement, the
        preparation and filing of any required prospectus supplement under Rule
        424(b)(3) under the Securities Act or other applicable provision of the
        Securities Act to appropriately amend the list of Selling Stockholders
        thereunder.

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

      


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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

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

       

      Furnishing
        of
        Information.  Until the time that no Purchaser owns Securities,
        the Company covenants to timely file (or obtain extensions in respect thereof
        and file within the applicable grace period) all reports required to be filed
        by
        the Company after the date hereof pursuant to the Exchange Act even if the
        Company is not then subject to the reporting requirements of the Exchange
        Act.    As long as any Purchaser owns Securities, if the
        Company is not required to file reports pursuant to the Exchange Act, it
        will
        prepare and furnish to the Purchasers and make publicly available in accordance
        with Rule 144(c) such information as is required for the Purchasers to sell
        the
        Securities under Rule 144.  The Company further covenants that it will
        take such further action as any holder of Securities may reasonably request,
        to
        the extent required from time to time to enable such Person to sell such
        Securities without registration under the Securities Act within the requirements
        of the exemption provided by Rule 144.

       

      Integration.  The
        Company shall not sell, offer for sale or solicit offers to buy or otherwise
        negotiate in respect of any security (as defined in Section 2 of the Securities
        Act) that would be integrated with the offer or sale of the Securities to
        the
        Purchasers in a manner that would require the registration under the Securities
        Act of the sale of the Securities to the Purchasers or that would be integrated
        with the offer or sale of the Securities for purposes of the rules and
        regulations of any Trading Market.

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

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

       

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

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

      Reservation
        and Listing of
        Securities.

       

      The
        Company shall maintain a reserve from its duly authorized shares of Common
        Stock
        for issuance pursuant to the Transaction Documents in such

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      amount
        as
        may be required to fulfill its obligations in full under the Transaction
        Documents.

       

      If,
        on
        any date, the number of authorized but unissued (and otherwise unreserved)
        shares of Common Stock is less than the Required Minimum on such date, then
        the
        Board of Directors shall use commercially reasonable efforts to amend the
        Company’s certificate or articles of incorporation to increase the number of
        authorized but unissued shares of Common Stock to at least the Required Minimum
        at such time, as soon as possible and in any event not later than the 75th
        day
        after such date. In addition, the Company shall hold a special meeting of
        shareholders (which may also be at the annual meeting of shareholders) at
        the
        earliest practical date after the date the number of shares of Common Stock
        issuable pursuant to this Agreement on a fully converted or exercised basis
        (ignoring for such purposes any exercise limitations therein) exceeds 15%
        of the
        issued and outstanding shares of Common Stock on the First Closing Date for
        the
        purpose of obtaining Shareholder Approval, with the recommendation of the
        Company’s Board of Directors that such proposal be approved, and the Company
        shall solicit proxies from its shareholders in connection therewith in the
        same
        manner as all other management proposals in such proxy statement and all
        management-appointed proxyholders shall vote their proxies in favor of such
        proposal.  If the Company does not obtain Shareholder Approval at the
        first meeting, the Company shall call a meeting every four months thereafter
        to
        seek Shareholder Approval until the earlier of the date Shareholder Approval
        is
        obtained or the date the Warrants are no longer outstanding.

       

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

       

      Subsequent
        Equity
        Sales.

       

      From
        the
        date hereof until such time as no Purchaser holds any of the Securities,
        the
        Company shall be prohibited from effecting or entering into an agreement
        to
        effect any Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
        Transaction” means a transaction in which the Company issues or sells (i)
        any debt or equity securities that are convertible into, exchangeable or
        exercisable for, or include the right to receive additional shares of Common
        Stock either (A) at a conversion, exercise or exchange rate or other price
        that
        is based upon and/or varies with the trading prices of or quotations for
        the
        shares of Common Stock at any time after the initial issuance of such debt
        or
        equity securities, or (B) with a conversion, exercise or exchange price that
        is

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      subject
        to being reset at some future date after the initial issuance of such debt
        or
        equity security or upon the occurrence of specified or contingent events
        directly or indirectly related to the business of the Company or the market
        for
        the Common Stock or (ii) enters into any agreement, including, but not limited
        to, an equity line of credit, whereby the Company may sell securities at
        a
        future determined price.

       

      Unless
        Shareholder Approval has been obtained and deemed effective, neither the
        Company
        nor any Subsidiary shall make any issuance whatsoever of Common Stock or
        Common
        Stock Equivalents which would cause any adjustment of the exercise price
        of the
        Warrants to the extent the holders of the Warrants would not be permitted,
        pursuant to Section 2(d)(ii) of the Warrants to exercise their respective
        Warrants in full, ignoring for such purposes the exercise limitations
        therein.  Any Purchaser shall be entitled to obtain injunctive relief
        against the Company to preclude any such issuance, which remedy shall be
        in
        addition to any right to collect damages

       

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

       

      Short
        Sales and
        Confidentiality After The Date Hereof. Each Purchaser, severally and not
        jointly with the other Purchasers, covenants that neither it nor any Affiliate
        acting on its behalf or pursuant to any understanding with it will execute
        any
        Short Sales during the period commencing at the Discussion Time and ending
        at
        the time that the transactions contemplated by this Agreement are first publicly
        announced as described in Section 4.6.  Each Purchaser, severally and not
        jointly with the other Purchasers, covenants that until such time as the
        transactions contemplated by this Agreement are publicly disclosed by the
        Company as described in Section 4.6, such Purchaser will maintain the
        confidentiality of the existence and terms of this transaction and the
        information included in the Disclosure Schedules.  Each Purchaser severally
        and not jointly with any other Purchaser understands and acknowledges, and
        agrees, to act in a manner that will not violate the positions of the Commission
        as set forth in Item 65, Section A, of the Manual of Publicly Available
        Telephone Interpretations, dated July 1997, compiled by the Office of Chief
        Counsel, Division of Corporation Finance. Notwithstanding the foregoing,
        no
        Purchaser makes any representation, warranty or covenant hereby that it will
        not
        engage in Short Sales in the securities of the Company after the time that
        the
        transactions contemplated by this Agreement are first publicly announced
        as
        described in Section 4.6.  Notwithstanding the foregoing, in the case of
        a

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Purchaser
        that is a multi-managed investment vehicle whereby separate portfolio managers
        manage separate portions of such Purchaser’s assets and the portfolio managers
        have no direct knowledge of the investment decisions made by the portfolio
        managers managing other portions of such Purchaser’s assets, the covenant set
        forth above shall only apply with respect to the portion of assets managed
        by
        the portfolio manager that made the investment decision to purchase the
        Securities covered by this Agreement.

       

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

       

      Registration
        Rights.

       

      
        	
                (a)

              	
                Piggy-Back
                  Registration Rights. If, at any time, the Company shall determine
                  to proceed with the preparation and filing of a Registration Statement,
                  in
                  connection with the proposed offer and sale of any of its securities
                  by it
                  or any of its security holders (other than a registration statement
                  on
                  Form S-4, S-8 or other similar limited purpose form), the Company
                  will give written notice of its determination to the
                  Purchasers.  Upon receipt of a written request from the
                  Purchasers within thirty calendar days after receipt of any such
                  notice
                  from the Company, the Company will, except as herein provided,
                  cause all
                  the Shares and Warrant Shares issued or issuable to the Purchasers,
                  to the
                  extent requested by the Purchasers, to be included in such Registration
                  Statement, all to the extent required to permit the sale or other
                  disposition by the Purchasers of such shares of Common
                  Stock.  The obligation of the Company under this
                  Section 4.19(a) shall be unlimited as to the number of Registration
                  Statements to which it applies. 

              


      

       

      (b)           
        Registration
        Procedures.  In the case of each registration effected by the
        Company pursuant to Section 4.16 hereof, the Company will keep the Purchaser
        advised, in writing, as to the initiation of each registration and as to
        the
        completion thereof. At its expense, the Company will:

       

      
        	
                i.  

              	
                Keep
                  such registration effective until the earlier of (i) 24 months
                  and (ii)
                  all Registrable Securities covered by such Registration Statement
                  have
                  been sold or may be sold without volume restrictions pursuant to
                  Rule
                  144(k) as determined by the counsel to the Company pursuant to
                  a written
                  opinion letter to such effect, addressed and acceptable to the
                  Company’s
                  transfer agent and the affected Holders (the “Effectiveness
                  Period”);  provided,
however,
                  that
                  (i) such Effectiveness Period shall be extended for a period of
                  time equal
                  to the period Purchaser refrains from selling any shares of Common
                  Stock
                  included in such registration at the request of an underwriter
                  of
                  securities of the Company or at the request of
                  the

              


      

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Company
        or a Trading Market, and (ii) in the case of any registration of securities
        on
        Form S-3 or comparable successor form which are intended to be offered on
        a
        continuous or delayed basis, such Effectiveness Period shall be extended,
        if
        necessary, to keep the Registration Statement effective until all securities
        are
        sold, provided that applicable rules and regulations under the Securities
        Act
        governing the obligation to file a post-effective amendment permit, in lieu
        of
        filing a post-effective amendment which (x) includes any prospectus required
        by
        Section 10(a)(3) of the Securities Act or (y) reflects facts or events
        representing a material or fundamental change in the information set forth
        in
        the Registration Statement, the incorporation by reference of information
        required to be included in (x) and (y) hereof to be contained in periodic
        reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the
        Registration Statement;

       

      
        	
                ii.  

              	
                Prepare
                  and file with the Commission such amendments and supplements to
                  such
                  Registration Statement and the prospectus used in connection with
                  such
                  Registration Statement as may be necessary to comply with the provisions
                  of the Securities Act with respect to a disposition of all securities
                  covered by such Registration
                  Statement;

              


      

       

      
        	
                iii.  

              	
                Furnish
                  to each Purchaser and its legal counsel (i) promptly after the
                  same is
                  prepared and publicly distributed, filed with the Commission or
                  received
                  by the Company, one copy of the Registration Statement and any
                  amendment
                  thereto, each preliminary prospectus and prospectus and each amendment
                  or
                  supplement thereto in both electronic and print format, and (ii)
                  such
                  number of copies of a prospectus, including a preliminary prospectus,
                  and
                  all amendments and supplements thereto, and such other documents
                  as each
                  Purchaser may reasonably request in order to facilitate the disposition
                  of
                  the shares of Common Stock owned by such
                  Purchaser;

              


      

       

      
        	
                iv.  

              	
                Notify
                  each Purchaser at any time when a prospectus relating thereto is
                  required
                  to be delivered under the Securities Act, of the happening of any
                  event as
                  a result of which the prospectus included in such Registration
                  Statement,
                  as then in effect, includes an untrue statement of a material fact
                  or
                  omits to state a material fact required to be stated therein or
                  necessary
                  to make the statements therein not misleading or incomplete in
                  light of
                  the circumstances then existing, and at the request of such Purchaser,
                  prepare and furnish to it a reasonable number of copies of a supplement
                  to
                  or an amendment of such prospectus as may be necessary so that,
                  as
                  thereafter delivered to such Purchaser, such prospectus shall not
                  include
                  an untrue statement of a material
                  fact

              


      

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      or
        omit
        to state a material fact required to be stated therein or necessary to make
        the
        statements therein not misleading or incomplete in light of the circumstances
        then existing;

       

      
        	
                v.  

              	
                Use
                  its best efforts to prevent the issuance of any stop order or other
                  suspension of effectiveness of a Registration Statement, and, if
                  such an
                  order is issued, to obtain the withdrawal of such order at the
                  earliest
                  possible moment and to notify each Purchaser (or, in the event
                  of an
                  underwritten offering, the managing underwriters) of the issuance
                  of such
                  order and the resolution thereof;

              


      

       

      
        	
                vi.  

              	
                Cause
                  all such shares of Common Stock to be listed or included for quotation
                  on
                  a Trading Market on which the Common Stock is then listed, traded
                  or
                  included for quotation;

              


      

       

      
        	
                vii.  

              	
                Provide
                  a transfer agent and registrar for all such shares of Common Stock
                  and
                  CUSIP number for all such shares of Common Stock, in each case
                  not later
                  than the effective date of such
                  registration;

              


      

       

      
        	
                viii.  

              	
                Make
                  available for inspection by the Purchasers, any underwriter participating
                  in any disposition pursuant to such Registration Statement and
                  any
                  attorney or accountant retained by the Purchasers or underwriter,
                  all
                  financial and other records, pertinent corporate documents and
                  properties
                  of the Company and cause the Company's officers and directors to
                  supply
                  all information reasonably requested by Purchaser, any underwriter,
                  attorney or accountant in connection with such Registration
                  Statement;

              


      

       

      
        	
                ix.  

              	
                Furnish
                  to each Purchaser or its counsel a copy of all documents filed
                  with and
                  all correspondence from or to the Commission in connection with
                  any such
                  registration;

              


      

       

      
        	
                x.  

              	
                Otherwise
                  use its best efforts to comply with all applicable rules and regulations
                  of the Commission;

              


      

       

      
        	
                xi.  

              	
                In
                  connection with any underwritten offering pursuant to a Registration
                  Statement, enter into any underwriting agreement reasonably necessary
                  to
                  effect the offer and sale of securities, provided such underwriting
                  agreement contains customary underwriting provisions and provided,
                  further, that if the managing underwriter so requests, the underwriting
                  agreement will contain customary indemnification and contribution
                  provisions;

              


      

       

      
        	
                xii.  

              	
                Hold
                  in confidence and not make any disclosure of information concerning
                  each
                  Purchaser provided to the Company unless (i) disclosure of such
                  information is necessary to comply with federal or state securities
                  laws,
                  (ii) the disclosure of such information
                  is

              


      

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      necessary
        to avoid or correct a misstatement or omission in any Registration Statement,
        (iii) the release of such information is ordered pursuant to a subpoena or
        other
        order from a court or governmental body of competent jurisdiction or (iv)
        such
        information has been made generally available to the public other than by
        disclosure in violation of this or any other agreement; and, upon learning
        that
        disclosure of such information concerning the Purchaser is sought in or by
        a
        court or governmental body of competent jurisdiction or through other means,
        give prompt notice to Purchaser and, at its expense, undertake appropriate
        action to prevent disclosure of, or to obtain a protective order for, such
        information; and

       

      
        	
                xiii.  

              	
                Take
                  all other reasonable actions
                  necessary to expedite and facilitate disposition by each Purchaser
                  of the
                  shares of Common Stock pursuant to the Registration
                  Statement.

              


      

       

      4.17           
        Additional
        Shares.  In the event that the Company is not current in its
        reporting obligations under the Exchange Act for any reason on or before
        March
        1, 2008 (and indicated compliance with such reporting obligations on the
        cover
        page of its most recent period report filed with the Commission), the Company
        shall issue each Purchaser, on March 2, 2008, a certificate, evidencing a
        number
        of Shares equal to such Purchaser’s pro-rata portion of 1,500,000 shares of
        Common Stock (based on such Purchaser’s Subscription Amount hereunder and the
        aggregate Subscription Amount of all Purchasers hereunder).

      


       

      


      MISCELLANEOUS

       

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

       

      Fees
        and
        Expenses.  At the First Closing, the Company has agreed to
        reimburse Black Nickel Vision Fund, LLC the non-accountable sum of $20,000,
        for
        its legal fees and to reimburse it for all other disbursements and expenses
        in
        connection with the transactions contemplated hereby, $5,000 of which has
        been
        paid prior to First Closing.  The Company shall deliver to each
        Purchaser, prior to each Closing, a completed and executed copy of the Closing
        Statement attached hereto as Annex
        A.  Except as expressly set forth in the Transaction Documents
        to the contrary, each party shall pay the fees and expenses of its advisers,
        counsel, accountants and other experts, if any, and all other expenses incurred
        by such party incident to the negotiation, preparation, execution, delivery
        and
        performance of this Agreement.  The Company shall pay all transfer
        agent

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      fees,
        stamp taxes and other taxes and duties levied in connection with the delivery
        of
        any Securities to the Purchasers.

       

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

       

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

       

      Amendments;
        Waivers.  No provision of this Agreement may be waived,
        modified, supplemented or amended except in a written instrument signed,
        in the
        case of an amendment, by the Company and the Purchasers of at least 67% in
        interest of the Securities still held by Purchasers or, in the case of a
        waiver,
        by the party against whom enforcement of any such waived provision is
        sought.  No waiver of any default with respect to any provision,
        condition or requirement of this Agreement shall be deemed to be a continuing
        waiver in the future or a waiver of any subsequent default or a waiver of
        any
        other provision, condition or requirement hereof, nor shall any delay or
        omission of any party to exercise any right hereunder in any manner impair
        the
        exercise of any such right.

       

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

       

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

       

      No
        Third-Party
        Beneficiaries.  This Agreement is intended for the benefit of
        the parties hereto and their respective successors and permitted assigns
        and is
        not for the

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      benefit
        of, nor may any provision hereof be enforced by, any other Person, except
        as
        otherwise set forth in Section 4.10.

       

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

       

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

       

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

       

      Severability.
        If any
        term, provision, covenant or restriction of this Agreement is held by a court
        of
        competent jurisdiction to be invalid, illegal, void or unenforceable, the
        remainder of the terms, provisions, covenants and restrictions set forth
        herein
        shall remain in full force and effect and shall in no way be affected, impaired
        or invalidated,

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      and
        the
        parties hereto shall use their commercially reasonable efforts to find and
        employ an alternative means to achieve the same or substantially the same
        result
        as that contemplated by such term, provision, covenant or restriction. It
        is
        hereby stipulated and declared to be the intention of the parties that they
        would have executed the remaining terms, provisions, covenants and restrictions
        without including any of such that may be hereafter declared invalid, illegal,
        void or unenforceable.

       

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

       

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

       

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

       

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

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

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

       

      Liquidated
        Damages.  The Company’s obligations to pay any partial
        liquidated damages or other amounts owing under the Transaction Documents
        is a
        continuing obligation of the Company and shall not terminate until all unpaid
        partial liquidated

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      damages
        and other amounts have been paid notwithstanding the fact that the instrument
        or
        security pursuant to which such partial liquidated damages or other amounts
        are
        due and payable shall have been canceled.

       

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

       

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

       

      Waiver
        of Jury
        Trial.  In any action, suit or proceeding in any jurisdiction
        brought by any party against any other party, the parties each knowingly
        and
        intentionally, to the greatest extent permitted by applicable law, hereby
        absolutely, unconditionally, irrevocably and expressly waives forever trial
        by
        jury.

       

      


       

      (Signature
        Pages Follow)

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


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

       

      
        	
                INDUSTRIAL
                  ENTERPRISES OF AMERICA, INC.

                
                

                
                

              	
                Address
                  for Notice:

                
                

                711
                  Third Avenue, Suite 1505

                New
                  York, New York 10017 

              
	
                By:__________________________________________

                     Name:
                  John D. Mazzuto

                     Title:

                
                

              	
                Fax:

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

                
                

                
                

                
                

              	 


      

      


      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASER FOLLOWS]

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      [PURCHASER
        SIGNATURE PAGES TO IEAM SECURITIES PURCHASE AGREEMENT]

      


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

       

      Name
        of
        Purchaser: ________________________________________________________

      Signature
        of Authorized Signatory of
        Purchaser: __________________________________

      Name
        of
        Authorized Signatory:
        ____________________________________________________

      Title
        of
        Authorized Signatory:
        _____________________________________________________

      Email
        Address of Purchaser:
        ________________________________________________

      Facsimile
        Number of Purchaser:
        ________________________________________________

      


      Address
        for Notice of Purchaser:

      


      


      


      


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

      


      


      


      


      


      First
        Closing Subscription Amount: _____________

      


      Second
        Closing Subscription Amount: _____________

      


      Shares:
        _________________________

      


      Warrant
        Shares: _________________

      


      


      EIN
        Number:  [PROVIDE
        THIS UNDER SEPARATE COVER]

      


      [SIGNATURE
        PAGES CONTINUE]

      


      


      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Annex
        A

      


      CLOSING
        STATEMENT

      


      Pursuant
        to the attached Securities Purchase Agreement, dated as of the date hereto,
        the
        purchasers shall purchase up to $1,500,000 of Notes, Shares and Warrants
        from
        Industrial Enterprises of America, Inc. (the “Company”).  All
        funds will be disbursed in accordance with this Closing Statement.

      


      
        	
                Disbursement
                  Date:

              	
                January
                  ___, 2008 First Closing 

              


      

      


      


      
        	
                I.  PURCHASE
                  PRICE

                
                

              	 
	 	
                Gross
                  Proceeds to be Received

              	
                $750,000

              
	 	 
	
                II. DISBURSEMENTS

                
                

              	 
	 	
                Feldman
                  Weinstein
                  & Smith LLP

              	
                $
                  $15,000

              
	 	 	
                $

              
	 	 	
                $

              
	 	 	
                $

              
	 	 	
                $

              
	 	 
	
                Total
                  Amount Disbursed:

              	
                $
                  15,000

              
	 	 
	 	 
	 	 
	
                WIRE
                  INSTRUCTIONS:

                
                

                
                

              	 
	
                To:  Bank
                  Or Lending Institution

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