EXHIBIT
        10.1

    

     

    AMENDED
      AND RESTATED SECURITIES PURCHASE AGREEMENT

     

    AMENDED
      AND RESTATED SECURITIES PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of January 10, 2008, by and among MSGI Security Solutions, Inc., a Nevada
      corporation, with headquarters located at 575 Madison Avenue, New York, New
      York
      10022 (the "Company"),
      and
      the investors listed on the Schedule of Buyers attached hereto (individually,
      a
      "Buyer"
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. The
      Company and each Buyer is executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Section 4(2) of
      the
      Securities Act of 1933, as amended (the "1933
      Act"),
      and
      Rule 506 of Regulation D ("Regulation
      D")
      as
      promulgated by the United States Securities and Exchange Commission (the
      "SEC")
      under
      the 1933 Act.

     

    B. The
      Company and certain of the Buyers (the "Original
      Buyers",
      the
      Buyers other than the Original Buyers, the "New
      Buyers")
      entered into that certain Securities Purchase Agreement, dated as of January
      4,
      2008 (the "Original
      Closing Date")
      (as
      amended from time to time in accordance with its terms, the "Original
      Securities Purchase Agreement"),
      whereby the Company, among other things, issued to each Original Buyer at the
      Closing (as defined in the Original Securities Purchase Agreement) (the
      "Original
      Closing"),
      (i)
      warrants (the "Original
      Series A Warrants")
      to
      acquire up to that number of shares of common stock, par value $0.01 per
      share, of the Company (the "Common
      Stock")
      set
      forth opposite such Buyer's name in column (3) of the Schedule of Buyers
      attached thereto (as exercised, collectively, the "Original
      Series A Warrant Shares")
      and
      (ii) warrants (the "Original
      Series B Warrants",
      and
      together with the Original Series A Warrants, the "Original
      Warrants"),
      to
      acquire up to that number of shares of Common Stock set forth opposite such
      Buyer's name in column (4) of the Schedule of Buyers (as exercised,
      collectively, the "Original
      Series B Warrant
      Shares",
      and
      together with the Original Series A Warrant Shares, the "Original
      Warrant Shares").

     

    C. Contemporaneously
      with the execution and delivery of the Original Securities Purchase Agreement,
      the parties thereto executed and delivered a Put Option Agreement (the
      "Original
      Put Option Agreement")
      (any
      shares of Common Stock issued pursuant to the Original Put Option Agreement,
      the
      "Original
      Common Shares"
      and the
      put options exercisable pursuant to the Original Put Option Agreement, the
      "Original
      Put Options").

     

    D. The
      Company has authorized a new series of convertible preferred stock of the
      Company designated as Series H Convertible Preferred Stock, the terms of which
      are set forth in the certificate of designation for such series of preferred
      stock (the "Certificate
      of Designations")
      in the
      form attached hereto as Exhibit
      A-1
      (together with any convertible preferred shares issued in replacement thereof
      in
      accordance with the terms thereof, the "Preferred
      Shares"),
      which
      Preferred Shares shall be convertible into Common Stock in accordance with
      the
      terms of the Certificate of Designations. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    E. Each
      Original Buyer and the Company wishes to exchange in the Closing (as defined
      below), upon the terms and conditions stated in this Agreement, (i) the Original
      Series A Warrants for the number of Preferred Shares (the "Exchange
      Preferred Shares")
      set
      forth opposite such Buyer's name in column (10) of the Schedule of Buyers (as
      converted, collectively, the "Exchange
      Conversion Shares")
      and
      (ii) the Original Series B Warrants for warrants in substantially the form
      attached hereto as Exhibit
      A-2
      (the
      "Exchange
      Warrants")
      to
      acquire up to that number of shares of Common Stock set forth opposite such
      Buyer's name in column (11) on the Schedule of Buyers (as exercised,
      collectively, the "Exchange
      Warrant Shares").
      Each
      Buyer wishes to purchase, and the Company wishes to sell to each Buyer, upon
      the
      terms and conditions stated in this Agreement, (i) the number of Preferred
      Shares (the "New
      Preferred Shares",
      and
      together with the Exchange Preferred Shares, the "Preferred
      Shares")
      set
      forth opposite such Buyer's name in column (12) of the Schedule of Buyers (as
      converted, collectively, the "New
      Conversion Shares",
      and
      together with the Exchange Conversion Shares, the "Conversion
      Shares")
      and
      (ii) warrants in substantially the form attached hereto as Exhibit
      A-2
      (the
      "New
      Warrants",
      and
      together with the Exchange Warrants, the "Warrants"),
      to
      acquire up to that number of shares of Common Stock set forth opposite such
      Buyer's name in column (13) on the Schedule of Buyers (as exercised,
      collectively, the "New
      Warrant Shares,"
      and
      together with the Exchange Warrant Shares, the "Warrant
      Shares").

     

    F. Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a new Put Option Agreement, substantially in the form
      attached hereto as Exhibit
      B
      (the
      "Put
      Option Agreement")
      (any
      shares of Common Stock issued pursuant to the Put Option Agreement, the
      "Common
      Shares").

     

    G. The
      issuance of the Exchange Preferred Shares and the Exchange Warrants pursuant
      to
      this Agreement in exchange for the surrender (and cancellation) of the Original
      Series A Warrants and the Original Series B Warrants and issuance of 500,000
      of
      the Put Options (as defined in the Put Option Agreement) in exchange for the
      cancellation of the Original Put Option Agreement and the Original Put Options
      exercisable pursuant thereto are being issued to the Original Buyers in reliance
      upon the exemption from registration provided by Section 3(a)(9) of the
      Securities Act of 1933, as amended (the "1933
      Act").

     

    H. The
      Warrants, the Warrant Shares, the Preferred Shares, the Conversion Shares,
      the
      Put Option Agreement and the Common Shares collectively are referred to herein
      as the "Securities".

     

    NOW,
      THEREFORE,
      the
      Company and each Buyer hereby agree as follows:

     

    
      
         

      

      
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              1.

            	
              EXCHANGE
                OF THE ORIGINAL WARRANTS FOR THE WARRANTS; PURCHASE OF WARRANTS,
                ISSUANCE
                OF WARRANTS.

            


    

     

    (a) Cancellation
      of Original Warrants, Purchase of Warrants, Issuance of Warrants.
      Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, at the Closing (as defined below) (I) (i) the Company shall issue and
      deliver to each Original Buyer (A) Exchange Preferred Shares to acquire up
      to
      that number of Exchange Conversion Shares as is set forth opposite such Original
      Buyer's name in column (10) on the Schedule of Buyers and (B) Exchange Warrants
      to acquire up to that number of Exchange Warrant Shares as is set forth opposite
      such Original Buyer's name in column (11) on the Schedule of Buyers and
      (ii)
      each Original Buyer shall surrender to the Company, (A) Original Series A
      Warrants to acquire up to that number of Original Series A Warrant Shares as
      is
      set forth opposite such Original Buyer's name in column (3) on the Schedule
      of
      Buyers and (B) Original Series B Warrants to acquire up to that number of
      Original Series B Warrant Shares as is set forth opposite such Original Buyer's
      name in column (4) on the Schedule of Buyers and
      (II) the
      Company shall issue and sell to each Buyer, and each Buyer severally, but not
      jointly, agrees to purchase from the Company on the Closing Date (as defined
      below), (A) New Preferred Shares to acquire up to that number of New Conversion
      Shares as is set forth opposite such Buyer's name in column (12) on the Schedule
      of Buyers and (B) New Warrants to acquire up to that number of New Warrant
      Shares as is set forth opposite such New Buyer's name in column (13) on the
      Schedule of Buyers (the "Closing").
      The
      Closing shall occur on the Closing Date at the offices of Schulte Roth &
Zabel LLP, 919 Third Avenue, New York, New York 10022.

     

    (b) Purchase
      Price.
      The
      Exchange Preferred Shares shall be issued to each Original Buyer in exchange
      for
      such Original Buyer's Original Series A Warrants and the Exchange Warrants
      shall
      be issued to each Original Buyer in exchange for such Original Buyer's Original
      Series B Warrants and without the payment of any additional consideration.
      The
      purchase price for the Preferred Shares and related Warrants is the amount
      set
      forth opposite such Buyer’s name in column (6) of the Schedule of Buyers (the
      "Purchase
      Price")
      which
      shall be equal to the amount of $1.00 per
      Preferred Share and the related Warrant. 

     

    (c) Closing
      Date.
      The
      date and time of the Closing (the "Closing
      Date")
      shall
      be 10:00 a.m., New York City Time, on the date hereof (or such other date and
      time as is mutually agreed to by the Company and each Buyer).

     

    
      
         

      

      
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    (d) Form
      of Payment.
      On the
      Closing Date, (I) (A) each Original Buyer shall deliver, or cause to be
      delivered, for cancellation, the Original Warrants of such Original Buyer to
      the
      Company for the Exchange Preferred Shares and the Exchange Warrants to by issued
      to such Original Buyer at the Closing and (B) (i) each New Buyer shall pay
      that
      portion of its respective Purchase Price less its Buyer LC Amount (as defined
      below) (such net amount as set forth opposite such Buyer's name in column (7)
      of
      the Schedule of Buyers, its "Net
      Purchase Price")
      to the
      Company for the Preferred Shares and related New Warrants to be issued and
      sold
      to such Buyer at the Closing and (ii) each Original Buyer shall pay the price
      (the "Current
      Purchase Price")
      set
      forth on column (9) of the Schedule of Buyers, which amount is equal to such
      Original Buyer's Net Purchase Price minus the amount paid by such Buyer at
      the
      Original Closing, by wire transfer of immediately available funds in accordance
      with the Company's written wire instructions and (II) the Company shall deliver
      (i) to each Original Buyer (A) Exchange Preferred Shares (in
      such denominations
      as is
      set forth opposite such Buyer's name in column (10) on the Schedule
      of
      Buyers)
      and (B)
      an Exchange Warrant pursuant to which such Buyer shall have the right to acquire
      such number of Exchange Warrant Shares as is set forth opposite such Buyer’s
      name in column (11) of the Schedule of Buyers, in all cases duly executed on
      behalf of the Company and registered in the name of such Buyer and (ii) to
      each
      Buyer (A) New Preferred Shares (in
      such
      denominations
      as is
      set forth opposite such Buyer's name in column (12) on the Schedule
      of
      Buyers)
      and (B)
      a New Warrant pursuant to which such Buyer shall have the right to acquire
      such
      number of New Warrant Shares as is set forth opposite such Buyer’s name in
      column (13) of the Schedule of Buyers, in all cases duly executed on behalf
      of
      the Company and registered in the name of such Buyer.

     

    (e) Holding
      Period.
      For the
      purposes of Rule 144, the Company acknowledges that the holding period of the
      Exchange Preferred Shares and the Exchange Warrants (including the corresponding
      Exchange Conversion Shares and Exchange Warrant Shares in the case of Cashless
      Exercise (as defined in the Exchange Warrants)) and 500,000 of the Put Options
      held by the Original Buyers may be tacked onto the holding period of the
      Original Series A Warrants, the Original Series B Warrants and the Original
      Put
      Options, respectively, and the Company agrees not to take a position contrary
      to
      this Section 1(e), including, without limitation, with respect to the
      application of the terms and conditions set forth in Section 2(g) below.


     

    
      	 	
              2.

            	
              BUYER'S
                REPRESENTATIONS AND WARRANTIES.

            


    

     

    Each
      Buyer represents and warrants with respect to only itself that: 

     

    (a) No
      Public Sale or Distribution.
      Such
      Buyer is (i) acquiring the Preferred Shares and the Warrants and, and (ii)
      will
      acquire the Conversion Shares issuable upon conversion of the Preferred Shares
      and the Warrant Shares issuable upon exercise of the Warrants, in each case,
      in
      the ordinary course of business for its own account and not with a view towards,
      or for resale in connection with, the public sale or distribution thereof,
      except pursuant to sales registered or exempted under the 1933 Act and such
      Buyer does not have a present arrangement to effect any distribution of the
      Securities to or through any person or entity; provided,
      however,
      that by
      making the representations herein, such Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act. Such Buyer is
      acquiring the Securities hereunder in the ordinary course of its business.
      Such
      Buyer does not presently have any agreement or understanding, directly or
      indirectly, with any Person to distribute any of the Securities.

     

    (b) Accredited
      Investor Status.
      Such
      Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
      Regulation D.

     

    
      
         

      

      
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    (c) Reliance
      on Exemptions.
      Such
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and such Buyer's compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    (d) Information.
      Such
      Buyer and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of the Company and materials relating
      to the offer and sale of the Securities which have been requested by such Buyer.
      Such Buyer and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company. Neither such inquiries nor any other due diligence
      investigations conducted by such Buyer or its advisors, if any, or its
      representatives shall modify, amend or affect such Buyer's right to rely on
      the
      Company's representations and warranties contained herein. Such Buyer
      understands that its investment in the Securities involves a high degree of
      risk
      and is able to afford a complete loss of such investment. Such Buyer has sought
      such accounting, legal and tax advice as it has considered necessary to make
      an
      informed investment decision with respect to its acquisition of the
      Securities.

     

    (e) No
      Governmental Review.
      Such
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (f) Transfer
      or Resale.
      Such
      Buyer understands that except for the Common Shares: (i) the Securities have
      not
      been and are not being registered under the 1933 Act or any state securities
      laws, and may not be offered for sale, sold, assigned or transferred unless
      (A)
      subsequently registered thereunder, (B) such Buyer shall have delivered to
      the
      Company an opinion of counsel, in a generally acceptable form, to the effect
      that such Securities to be sold, assigned or transferred may be sold, assigned
      or transferred pursuant to an exemption from such registration, or (C) such
      Buyer provides the Company with reasonable assurance that such Securities can
      be
      sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
      under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
      "Rule
      144");
      (ii)
      any sale of the Securities made in reliance on Rule 144 may be made only in
      accordance with the terms of Rule 144 and further, if Rule 144 is not
      applicable, any resale of the Securities under circumstances in which the seller
      (or the Person (as defined in Section 3(s)) through whom the sale is made)
      may
      be deemed to be an underwriter (as that term is defined in the 1933 Act) may
      require compliance with some other exemption under the 1933 Act or the rules
      and
      regulations of the SEC thereunder; and (iii) neither the Company nor any other
      Person is under any obligation to register the Securities under the 1933 Act
      or
      any state securities laws or to comply with the terms and conditions of any
      exemption thereunder. Notwithstanding the foregoing, the Securities may be
      pledged in connection with a bona fide margin account or other loan secured
      by
      the Securities and such pledge of Securities shall not be deemed to be a
      transfer, sale or assignment of the Securities hereunder, and no Buyer effecting
      a pledge of Securities shall be required to provide the Company with any notice
      thereof or otherwise make any delivery to the Company pursuant to this Agreement
      or any other Transaction Document (as defined below), including, without
      limitation, this Section 2(f); provided, that in order to make any sale,
      transfer or assignment of Securities, such Buyer and its pledgee makes such
      disposition in accordance with or pursuant to a registration statement or an
      exemption under the 1933 Act. 

     

    
      
         

      

      
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    (g) Legends.
      Such
      Buyer understands that the certificates or other instruments representing the
      Preferred Shares and the Warrants and, until such time as the resale of the
      Conversion Shares and the Warrant Shares have been registered under the 1933
      Act, the stock certificates representing the Conversion Shares and the Warrant
      Shares, except as set forth below, shall bear any legend as required by the
      "blue sky" laws of any state and a restrictive legend in substantially the
      following form (and a stop-transfer order may be placed against transfer of
      such
      stock certificates):

     

    [NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
      HAVE
      BEEN][THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
      SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
      OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
      THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
      OF COUNSEL IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
      SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES.

    


    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of the Securities upon which
      it is
      stamped or issue to such holder by electronic delivery at the applicable balance
      account at The Depository Trust Company ("DTC"),
      if,
      unless otherwise required by state securities laws, (i) such Securities are
      registered for resale under the 1933 Act, (ii) in connection with a sale,
      assignment or other transfer, such holder provides the Company with an opinion
      of counsel reasonably satisfactory to the Company, in a generally acceptable
      form, to the effect that such sale, assignment or transfer of the Securities
      may
      be made without registration under the applicable requirements of the 1933
      Act
      and that such legend is no longer required, or (iii) such holder provides the
      Company with reasonable assurance that the Securities can be sold, assigned
      or
      transferred pursuant to Rule 144 or Rule 144A. The Company shall be responsible
      for the fees of its transfer agent and all DTC fees associated with such
      issuance. 

     

    
      
         

      

      
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    (h) Validity;
      Enforcement.
      This
      Agreement and the Put Option Agreement have been duly and validly authorized,
      executed and delivered on behalf of such Buyer and shall constitute the legal,
      valid and binding obligations of such Buyer enforceable against such Buyer
      in
      accordance with their respective terms, except as such enforceability may be
      limited by general principles of equity or to applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation and other similar laws relating to,
      or
      affecting generally, the enforcement of applicable creditors' rights and
      remedies. 

     

    (i) No
      Conflicts.
      The
      execution, delivery and performance by such Buyer of this Agreement and the
      Put
      Option Agreement and the consummation by such Buyer of the transactions
      contemplated hereby and thereby will not (i) result in a violation of the
      organizational documents of such Buyer or (ii) conflict with, or constitute
      a
      default (or an event which with notice or lapse of time or both would become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any agreement, indenture or instrument to
      which
      such Buyer is a party, or (iii) result in a violation of any law, rule,
      regulation, order, judgment or decree (including federal and state securities
      laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
      above, for such conflicts, defaults, rights or violations which would not,
      individually or in the aggregate, reasonably be expected to have a material
      adverse effect on the ability of such Buyer to perform its obligations
      hereunder.

     

    (j) Residency.
      Such
      Buyer is a resident of that jurisdiction specified below its address on the
      Schedule of Buyers.

     

    
      	 	
              3.

            	
              REPRESENTATIONS
                AND WARRANTIES OF THE COMPANY.

            


    

     

    The
      Company represents and warrants to each of the Buyers that:

     

    (a) Organization
      and Qualification.
      Each of
      the Company and its "Subsidiaries"
      (which
      for purposes of this Agreement means any entity in which the Company, directly
      or indirectly, owns capital stock or holds an equity or similar interest) are
      corporations duly organized and validly existing in good standing under the
      laws
      of the jurisdiction in which they are incorporated, and have the requisite
      corporate power and authorization to own their properties and to carry on their
      business as now being conducted. Each of the Company and its Subsidiaries is
      duly qualified as a foreign corporation to do business and is in good standing
      in every jurisdiction in which its ownership of property or the nature of the
      business conducted by it makes such qualification necessary, except to the
      extent that the failure to be so qualified or be in good standing would not
      have
      a Material Adverse Effect. As used in this Agreement, "Material
      Adverse Effect"
      means
      any material adverse effect on the business, properties, assets, operations,
      results of operations, condition (financial or otherwise) or prospects of the
      Company and its Subsidiaries, taken as a whole, or on the transactions
      contemplated hereby and the other Transaction Documents or by the agreements
      and
      instruments to be entered into in connection herewith or therewith, or on the
      authority or ability of the Company to perform its obligations under the
      Transaction Documents (as defined below). The Company has no Subsidiaries except
      as set forth on Schedule
      3(a).
      

     

    
      
         

      

      
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    (b) Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement, the Put Option Agreement, the
      Certificate of Designations, the Irrevocable Transfer Agent Instructions (as
      defined in Section 5), the Warrants and each of the other agreements entered
      into by the parties hereto in connection with the transactions contemplated
      by
      this Agreement (collectively, the "Transaction
      Documents")
      and to
      issue the Securities in accordance with the terms hereof and thereof. The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by the Company of the transactions contemplated hereby and thereby,
      including, without limitation, the issuance of the Preferred Shares and
      Warrants, the reservation for issuance and the issuance of the Conversion
      Shares issuable
      upon conversion of the Preferred Shares and the reservation for issuance and
      the
      issuance of the Warrant Shares issuable upon exercise of the Warrants and the
      Common Shares issuable pursuant to the Put Option Agreement have been duly
      authorized by the Company's Board of Directors and no further consent or
      authorization is required by the Company, its Board of Directors or its
      stockholders. This Agreement and the other Transaction Documents have been
      duly
      executed and delivered by the Company, and constitute the legal, valid and
      binding obligations of the Company, enforceable against the Company in
      accordance with their respective terms, except as such enforceability may be
      limited by general principles of equity or applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally, the enforcement of applicable creditors' rights and
      remedies. The Certificate of Designations in the form attached hereto as
Exhibit
      A-1
      has been
      filed with the Secretary of State of the State of Nevada and is in full force
      and effect, enforceable against the Company in accordance with its terms and
      has
      not have been amended.

     

    (c) Issuance
      of Securities.
      The
      issuance of the Preferred Shares and the Warrants are duly authorized and are
      free from all taxes, liens and charges with respect to the issue thereof and
      the
      Preferred Shares shall be entitled to the rights and preferences set forth
      in
      the Certificate of Designations. As of the Closing, a number of shares of Common
      Stock shall have been duly authorized and reserved for issuance which equals
      or
      exceeds 120% of the aggregate of the maximum number of shares of Common Stock
      (i) issuable pursuant to the Put Option Agreement, (ii) upon conversion of
      the
      Preferred Shares (assuming for purposes hereof, that the Preferred Shares are
      convertible at the Conversion Price (as defined in the Certificate of
      Designations)) and (iii) upon exercise of the Warrants, without taking into
      account any limitations on the exercise of the Warrants or the Put Option
      Agreement, set forth in the Warrants or Put Option Agreement, respectively.
      Upon
      issuance in accordance with the Put Option Agreement or conversion or exercise
      in accordance with the Certificate of Designations or Warrants, as the case
      may
      be, the Common Shares, the Conversion Shares and the Warrant Shares,
      respectively, will be validly issued, fully paid and nonassessable and free
      from
      all preemptive or similar rights, taxes, liens and charges with respect to
      the
      issue thereof, with the holders being entitled to all rights accorded to a
      holder of Common Stock. The offer and issuance by the Company of the Securities
      is exempt from registration under the 1933 Act.

     

    
      
         

      

      
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    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance of the Preferred Shares
      and
      Warrants and the reservation for issuance and issuance of the Conversion Shares,
      Warrant Shares and the Common Shares) will not (i) result in a violation of
      the
      Articles of Incorporation (as defined below) or Bylaws (as defined below) of
      the
      Company or any of its Subsidiaries or (ii) conflict with, or constitute a
      default (or an event which with notice or lapse of time or both would become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any material agreement, indenture or instrument
      to which the Company or any of its Subsidiaries is a party, or (iii) result
      in a
      violation of any law, rule, regulation, order, judgment or decree (including
      federal and state securities laws and regulations and the rules and regulations
      of the OTC Bulletin Board (the "Principal
      Market")
      applicable to the Company or any of its Subsidiaries or by which any property
      or
      asset of the Company or any of its Subsidiaries is bound or
      affected.

     

    (e) Consents.
      The
      Company is not required to obtain any consent, authorization or order of, or
      make any filing or registration with, any court, governmental agency or any
      regulatory or self-regulatory agency or any other Person in order for it to
      execute, deliver or perform any of its obligations under or contemplated by
      the
      Transaction Documents, in each case in accordance with the terms hereof or
      thereof. All consents, authorizations, orders, filings and registrations which
      the Company is required to obtain pursuant to the preceding sentence have been
      obtained or effected on or prior to the Closing Date. The Company and its
      Subsidiaries are unaware of any facts or circumstances that might prevent the
      Company from obtaining or effecting any of the registration, application or
      filings pursuant to the preceding sentence. The Company is not in violation
      of
      the listing requirements of the Principal Market and has no knowledge of any
      facts that would reasonably lead to delisting or suspension of the Common Stock
      in the foreseeable future.

     

    (f) Acknowledgment
      Regarding Buyer's Purchase of Securities.
      The
      Company acknowledges and agrees that each Buyer is acting solely in the capacity
      of arm's length purchaser with respect to the Transaction Documents and the
      transactions contemplated hereby and thereby and that no Buyer is (i) an officer
      or director of the Company, (ii) an "affiliate" of the Company (as defined
      in
      Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner" of
      more
      than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3
      of
      the Securities Exchange Act of 1934, as amended (the "1934
      Act")).
      The
      Company further acknowledges that no Buyer 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 hereby and thereby,
      and
      any advice given by a Buyer or any of its representatives or agents in
      connection with the Transaction Documents and the transactions contemplated
      hereby and thereby is merely incidental to such Buyer's purchase of the
      Securities. The Company further represents to each Buyer that the Company's
      decision to enter into the Transaction Documents has been based solely on the
      independent evaluation by the Company and its representatives.

     

    
      
         

      

      
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    (g) No
      General Solicitation; Placement Agent's Fees.
      Neither
      the Company, nor any of its affiliates, nor any Person acting on its or their
      behalf, has engaged in any form of general solicitation or general advertising
      (within the meaning of Regulation D) in connection with the offer or sale of
      the
      Securities. The Company shall be responsible for the payment of any placement
      agent's fees, financial advisory fees, or brokers' commissions (other than
      for
      persons engaged by any Buyer or its investment advisor) relating to or arising
      out of the transactions contemplated hereby. The Company shall pay, and hold
      each Buyer harmless against, any liability, loss or expense (including, without
      limitation, attorney's fees and out-of-pocket expenses) arising in connection
      with any such claim. The Company acknowledges that it has engaged Midtown
      Partners as placement agent (the "Agent")
      in
      connection with the sale of the Securities. Other than the Agent, the Company
      has not engaged any placement agent or other agent in connection with the sale
      of the Securities.

     

    (h) No
      Integrated Offering.
      None of
      the Company, its Subsidiaries, any of their affiliates, and any Person acting
      on
      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 require registration of any of the Securities under the 1933 Act or cause
      this offering of the Securities to be integrated with prior offerings by the
      Company for purposes of the 1933 Act or any applicable stockholder approval
      provisions, including, without limitation, under the rules and regulations
      of
      any exchange or automated quotation system on which any of the securities of
      the
      Company are listed or designated. None of the Company, its Subsidiaries, their
      affiliates and any Person acting on their behalf will take any action or steps
      referred to in the preceding sentence that would require registration of any
      of
      the Securities under the 1933 Act or cause the offering of the Securities to
      be
      integrated with other offerings.

     

    (i) Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Conversion Shares
      issuable upon conversion of the Preferred Shares and the number of Warrant
      Shares issuable upon exercise of the Warrants will increase in certain
      circumstances. The Company further acknowledges that its obligation to issue
      the
      Conversion Shares upon conversion of the Preferred Shares in accordance with
      this Agreement and the Certificate of Designations and its obligation to issue
      Warrant Shares upon exercise of the Warrants in accordance with this Agreement
      and the Warrants, in each case, is absolute and unconditional regardless of
      the
      dilutive effect that such issuance may have on the ownership interests of other
      stockholders of the Company.

     

    (j) Application
      of Takeover Protections; Rights Agreement.
      The
      Company and its 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 Articles of Incorporation
      or
      the laws of the State of Nevada which is or could become applicable to any
      Buyer
      as a result of the transactions contemplated by this Agreement, including,
      without limitation, the Company's issuance of the Securities and any Buyer's
      ownership of the Securities. The Company has not adopted a stockholder rights
      plan or similar arrangement relating to accumulations of beneficial ownership
      of
      Common Stock or a change in control of the Company.

     

    
      
         

      

      
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    (k) SEC
      Documents; Financial Statements.
      During
      the two (2) years prior to the date hereof, the Company has timely filed all
      reports, schedules, forms, statements and other documents required to be filed
      by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
      of the foregoing filed prior to the date hereof or prior to the date of the
      Closing, and all exhibits included therein and financial statements and
      schedules thereto and documents incorporated by reference therein being
      hereinafter referred to as the "SEC
      Documents").
      The
      Company has delivered to the Buyers or their respective representatives true,
      correct and complete copies of the SEC Documents not available on the EDGAR
      system. As of their respective dates, the SEC Documents complied in all material
      respects with the requirements of the 1934 Act and the rules and regulations
      of
      the SEC promulgated thereunder applicable to the SEC Documents, and none of
      the
      SEC Documents, at the time they were filed with the SEC, 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. As of
      their respective dates, the financial statements of the Company included in
      the
      SEC Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the SEC
      with
      respect thereto. Such financial statements have been prepared in accordance
      with
      generally accepted accounting principles, consistently applied, during the
      periods involved (except (i) as may be otherwise indicated in such financial
      statements or the notes thereto, or (ii) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements) and fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). No other
      information provided by or on behalf of the Company to the Buyers which is
      not
      included in the SEC Documents, including, without limitation, information
      referred to in Section 2(d) of this Agreement, contains any untrue statement
      of
      a material fact or omits to state any material fact necessary in order to make
      the statements therein, in the light of the circumstance under which they are
      or
      were made, not misleading.

     

    (l) Absence
      of Certain Changes.
      Except
      as disclosed in Schedule
      3(l),
      since
      June 30, 2007, there has been no material adverse change and no material adverse
      development in the business, properties, operations, condition (financial or
      otherwise), results of operations or prospects of the Company or its
      Subsidiaries. Except as disclosed in Schedule
      3(l),
      since
      June 30, 2007, the Company has not (i) declared or paid any dividends, (ii)
      sold
      any assets, individually or in the aggregate, in excess of $100,000 outside
      of
      the ordinary course of business or (iii) had capital expenditures, individually
      or in the aggregate, in excess of $100,000. The Company has not taken any steps
      to seek protection pursuant to any bankruptcy law nor does the Company have
      any
      knowledge or reason to believe that its creditors intend to initiate involuntary
      bankruptcy proceedings or any actual knowledge of any fact which would
      reasonably lead a creditor to do so. The Company is not as of the date hereof,
      and after giving effect to the transactions contemplated hereby to occur at
      the
      Closing, will not be Insolvent (as defined below). For purposes of this Section
      3(l), "Insolvent"
      means,
      with respect to any Person (as defined in Section 3(s)) (i) the present fair
      saleable value of such Person's assets is less than the amount required to
      pay
      such Person's total Indebtedness (as defined in Section 3(s)), (ii) such Person
      is unable to pay its debts and liabilities, subordinated, contingent or
      otherwise, as such debts and liabilities become absolute and matured, (iii)
      such
      Person intends to incur or believes that it will incur debts that would be
      beyond its ability to pay as such debts mature or (iv) such Person has
      unreasonably small capital with which to conduct the business in which it is
      engaged as such business is now conducted and is proposed to be
      conducted.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (m) No
      Undisclosed Events, Liabilities, Developments or Circumstances.
      No
      event, liability, development or circumstance has occurred or exists, or is
      contemplated to occur, with respect to the Company or its Subsidiaries or their
      respective business, properties, prospects, operations or financial condition,
      that would be required to be disclosed by the Company under applicable
      securities laws on a registration statement on Form S-1 filed with the SEC
      relating to an issuance and sale by the Company of its Common Stock and which
      has not been publicly announced.

     

    (n) Conduct
      of Business; Regulatory Permits.
      Neither
      the Company nor its Subsidiaries is in violation of any term of or in default
      under the Articles of Incorporation or Bylaws or their organizational charter
      or
      certificate of incorporation or bylaws, respectively. Neither the Company nor
      any of its Subsidiaries is in violation of any judgment, decree or order or
      any
      statute, ordinance, rule or regulation applicable to the Company or its
      Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
      its business in violation of any of the foregoing, except for possible
      violations which would not, individually or in the aggregate, have a Material
      Adverse Effect. Without limiting the generality of the foregoing, the Company
      is
      not in violation of any of the rules, regulations or requirements of the
      Principal Market and has no knowledge of any facts or circumstances that would
      reasonably lead to delisting or suspension of the Common Stock by the Principal
      Market in the foreseeable future. During the two (2) years prior to the date
      hereof, (i) the Common Stock has been designated for quotation or listed on
      the
      Principal Market, (ii) trading in the Common Stock has not been suspended by
      the
      SEC or the Principal Market and (iii) the Company has received no communication,
      written or oral, from the SEC or the Principal Market regarding the suspension
      or delisting of the Common Stock from the Principal Market. The Company and
      its
      Subsidiaries possess all certificates, authorizations and permits issued by
      the
      appropriate federal, state or foreign regulatory authorities necessary to
      conduct their respective businesses, except where the failure to possess such
      certificates, authorizations or permits would not have, individually or in
      the
      aggregate, a Material Adverse Effect, and neither the Company nor any such
      Subsidiary has received any notice of proceedings relating to the revocation
      or
      modification of any such certificate, authorization or permit.

     

    (o) Foreign
      Corrupt Practices.
      Neither
      the Company, nor any of its Subsidiaries, nor any director, officer, agent,
      employee or other Person acting on behalf of the Company or any of its
      Subsidiaries has, in the course of its actions for, or on behalf of, the Company
      (i) used any corporate funds for any unlawful contribution, gift, entertainment
      or other unlawful expenses relating to political activity; (ii) made any direct
      or indirect unlawful payment to any foreign or domestic government official
      or
      employee from corporate funds; (iii) violated or is in violation of any
      provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
      (iv)
      made any unlawful bribe, rebate, payoff, influence payment, kickback or other
      unlawful payment to any foreign or domestic government official or
      employee.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (p) Sarbanes-Oxley
      Act.
      The
      Company is in compliance with any and all applicable requirements of the
      Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
      and
      all applicable rules and regulations promulgated by the SEC thereunder that
      are
      effective as of the date hereof.

     

    (q) Transactions
      With Affiliates.
      None of
      the officers, directors or employees of the Company is presently a party to
      any
      transaction with the Company or any of its Subsidiaries (other than for ordinary
      course services as employees, officers or 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 such officer, director or employee or, to
      the
      knowledge of the Company, any corporation, partnership, trust or other entity
      in
      which any such officer, director, or employee has a substantial interest or
      is
      an officer, director, trustee or partner.

     

    (r) Equity
      Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of (y)
      100,000,000 shares of Common Stock, of which as of the date hereof, 19,357,522
      shares are issued and outstanding, 1,165,122 shares are reserved for issuance
      pursuant to the Company's employee incentive plan and other options and warrants
      outstanding and 7,894,833 shares are reserved for issuance pursuant to
      securities (other than the Preferred Shares, the Warrants and the Put Option
      Agreement) exercisable or exchangeable for, or convertible into, shares of
      Common Stock. All of such outstanding shares have been, or upon issuance will
      be, validly issued and are fully paid and nonassessable. Except as set forth
      on
Schedule
      3(r):
      (i) no
      shares of the Company's capital stock are subject to preemptive rights or any
      other similar rights or any liens or encumbrances suffered or permitted by
      the
      Company; (ii) there are no outstanding options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      shares of capital stock of the Company or any of its Subsidiaries, or contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      Subsidiaries is or may become bound to issue additional shares of capital stock
      of the Company or any of its Subsidiaries or options, warrants, scrip, rights
      to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      shares of capital stock of the Company or any of its Subsidiaries; (iii) there
      are no outstanding debt securities, notes, credit agreements, credit facilities
      or other agreements, documents or instruments evidencing Indebtedness (as
      defined in Section 3(s)) of the Company or any of its Subsidiaries or by which
      the Company or any of its Subsidiaries is or may become bound; (iv) there are
      no
      financing statements securing obligations in any material amounts, either singly
      or in the aggregate, filed in connection with the Company or any of its
      Subsidiaries; (v) there are no agreements or arrangements under which the
      Company or any of its Subsidiaries is obligated to register the sale of any
      of
      their securities under the 1933 Act; (vi) there are no outstanding securities
      or
      instruments of the Company or any of its Subsidiaries which contain any
      redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company or any of its Subsidiaries
      is or may become bound to redeem a security of the Company or any of its
      Subsidiaries; (vii) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities; (viii) the Company does not have any stock appreciation rights
      or "phantom stock" plans or agreements or any similar plan or agreement; and
      (ix) the Company and its Subsidiaries have no liabilities or obligations
      required to be disclosed in the SEC Documents (as defined herein) but not so
      disclosed in the SEC Documents, other than those incurred in the ordinary course
      of the Company's or any Subsidiary's respective businesses and which,
      individually or in the aggregate, do not or would not have a Material Adverse
      Effect. The Company has furnished or made available to the Buyer upon such
      Buyer's request, true, correct and complete copies of the Company's Articles
      of
      Incorporation, as amended and as in effect on the date hereof (the "Articles
      of Incorporation"),
      and
      the Company's Bylaws, as amended and as in effect on the date hereof (the
      "Bylaws"),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto. 

     

    
      
         

      

      
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    (s) Indebtedness
      and Other Contracts.
      Except
      as disclosed in Schedule
      3(s),
      neither
      the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
      (as
      defined below), (ii) is a party to any contract, agreement or instrument, the
      violation of which, or default under which, by the other party(ies) to such
      contract, agreement or instrument would result in a Material Adverse Effect,
      (iii) is in violation of any term of or in default under any contract, agreement
      or instrument relating to any Indebtedness, except where such violations and
      defaults would not result, individually or in the aggregate, in a Material
      Adverse Effect, or (iv) is a party to any contract, agreement or instrument
      relating to any Indebtedness, the performance of which, in the judgment of
      the
      Company's officers, has or is expected to have a Material Adverse Effect. For
      purposes of this Agreement: (x) "Indebtedness"
      of any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services (other than trade payables entered into in the ordinary
      course of business), (C) all reimbursement or payment obligations with respect
      to letters of credit, surety bonds and other similar instruments, (D) all
      obligations evidenced by notes, bonds, debentures or similar instruments,
      including obligations so evidenced incurred in connection with the acquisition
      of property, assets or businesses, (E) all indebtedness created or arising
      under
      any conditional sale or other title retention agreement, or incurred as
      financing, in either case with respect to any property or assets acquired with
      the proceeds of such indebtedness (even though the rights and remedies of the
      seller or bank under such agreement in the event of default are limited to
      repossession or sale of such property), (F) all monetary obligations under
      any
      leasing or similar arrangement which, in connection with generally accepted
      accounting principles, consistently applied for the periods covered thereby,
      is
      classified as a capital lease, (G) all indebtedness referred to in clauses
      (A)
      through (F) above secured by (or for which the holder of such Indebtedness
      has
      an existing right, contingent or otherwise, to be secured by) any mortgage,
      lien, pledge, charge, security interest or other encumbrance upon or in any
      property or assets (including accounts and contract rights) owned by any Person,
      even though the Person which owns such assets or property has not assumed or
      become liable for the payment of such indebtedness, and (H) all Contingent
      Obligations in respect of indebtedness or obligations of others of the kinds
      referred to in clauses (A) through (G) above; (y) "Contingent
      Obligation"
      means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto; and (z) "Person"
      means an
      individual, a limited liability company, a partnership, a joint venture, a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (t) Absence
      of Litigation.
      Except
      as set forth on Schedule
      3(t),
      there
      is no action, suit, proceeding, inquiry or investigation before or by the
      Principal Market, any court, public board, government agency, self-regulatory
      organization or body pending or, to the knowledge of the Company, threatened
      against or affecting the Company, the Common Stock or any of its Subsidiaries
      or
      any of the Company's or the Company's Subsidiaries' officers or directors,
      whether of a civil or criminal nature or otherwise. The matters set forth on
      Schedule
      3(t)
      would
      not have a Material Adverse Effect.

     

    (u) Insurance.
      The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Except as set forth
      on
Schedule
      3(u), neither
      the Company nor any Subsidiary has been refused any insurance coverage sought
      or
      applied for. 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 at a cost that would not have a Material
      Adverse Effect.

     

    (v) Employee
      Relations.
      (i)
      Neither
      the Company nor any of its Subsidiaries is a party to any collective bargaining
      agreement or employs any member of a union. The Company and its Subsidiaries
      believe that their relations with their employees are good. No executive officer
      of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
      1933
      Act) has notified the Company or any such Subsidiary that such officer intends
      to leave the Company or any such Subsidiary or otherwise terminate such
      officer's employment with the Company or any such Subsidiary. No executive
      officer of the Company, to the knowledge of the Company or any of its
      Subsidiaries, is, or is now expected to be, in violation of any material term
      of
      any employment contract, confidentiality, disclosure or proprietary information
      agreement, non-competition agreement, or any other contract or agreement or
      any
      restrictive covenant, and the continued employment of each such executive
      officer does not subject the Company or any of its Subsidiaries to any liability
      with respect to any of the foregoing matters.

     

    (ii) The
      Company and its Subsidiaries are in compliance with all federal, state, local
      and foreign laws and regulations respecting labor, employment and employment
      practices and benefits, terms and conditions of employment and wages and hours,
      except where failure to be in compliance would not, either individually or
      in
      the aggregate, reasonably be expected to result in a Material Adverse
      Effect.

     

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

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    (x) Intellectual
      Property Rights.
      The
      Company and its Subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, trade names, service marks, service mark registrations, service
      names, patents, patent rights, copyrights, inventions, licenses, approvals,
      governmental authorizations, trade secrets and other intellectual property
      rights ("Intellectual
      Property Rights")
      necessary to conduct their respective businesses as now conducted. None of
      the
      Company's Intellectual Property Rights have expired or terminated, or are
      expected to expire or terminate within three years from the date of this
      Agreement. The Company does not have any knowledge of any infringement by the
      Company or its Subsidiaries of Intellectual Property Rights of others. There
      is
      no claim, action or proceeding being made or brought, or to the knowledge of
      the
      Company, being threatened, against the Company or any of its Subsidiaries
      regarding its Intellectual Property Rights. The Company is unaware of any facts
      or circumstances which might give rise to any of the foregoing infringements
      or
      claims, actions or proceedings. The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their Intellectual Property Rights.

     

    (y) Environmental
      Laws.
      The
      Company and its Subsidiaries (i) are in compliance with any and all
      Environmental Laws (as hereinafter defined), (ii) have received all permits,
      licenses or other approvals required of them under applicable Environmental
      Laws
      to conduct their respective businesses and (iii) are in compliance with all
      terms and conditions of any such permit, license or approval where, in each
      of
      the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect. The term "Environmental
      Laws"
      means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants, contaminants, or toxic or
      hazardous substances or wastes (collectively, "Hazardous
      Materials") into
      the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (z) Subsidiary
      Rights.
      The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    (aa) Tax
      Status.
      The
      Company and each of its Subsidiaries (i) has made or filed all federal, foreign
      and state income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject, (ii) has paid all taxes and other
      governmental assessments and charges that are material in amount, shown or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and (iii) has set aside on its books provision
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply. There are no
      unpaid taxes in any material amount claimed to be due by the taxing authority
      of
      any jurisdiction, and the officers of the Company know of no basis for any
      such
      claim.

     

    (bb) Internal
      Accounting and Disclosure Controls.
      The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management's general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset and liability accountability, (iii) access to assets or
      incurrence of liabilities is permitted only in accordance with management's
      general or specific authorization and (iv) the recorded accountability for
      assets and liabilities is compared with the existing assets and liabilities
      at
      reasonable intervals and appropriate action is taken with respect to any
      difference. The Company maintains disclosure controls and procedures (as such
      term is defined in Rule 13a-15 under the 1934 Act) that are effective in
      ensuring that information required to be disclosed by the Company in the reports
      that it files or submits under the 1934 Act is recorded, processed, summarized
      and reported, within the time periods specified in the rules and forms of the
      SEC, including, without limitation, controls and procedures designed in to
      ensure that information required to be disclosed by the Company in the reports
      that it files or submits under the 1934 Act is accumulated and communicated
      to
      the Company’s management, including its principal executive officer or officers
      and its principal financial officer or officers, as appropriate, to allow timely
      decisions regarding required disclosure. During the twelve months prior to
      the
      date hereof neither the Company nor any of its Subsidiaries have received any
      notice or correspondence from any accountant relating to any potential material
      weakness in any part of the system of internal accounting controls of the
      Company or any of its Subsidiaries.

     

    (cc) Off
      Balance Sheet Arrangements.
      There
      is no transaction, arrangement, or other relationship between the Company and
      an
      unconsolidated or other off balance sheet entity that is required to be
      disclosed by the Company in its Exchange Act filings and is not so disclosed
      or
      that otherwise would be reasonably likely to have a Material Adverse
      Effect.

     

    (dd) Manipulation
      of Price.
      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) other than the
      Agent sold, bid for, purchased, or paid any compensation for soliciting
      purchases of, any of the Securities, or (iii) other than the Agent paid or
      agreed to pay to any person any compensation for soliciting another to purchase
      any other securities of the Company.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (ee) Transfer
      Taxes.
      On the
      Closing Date, all stock transfer or other taxes (other than income or similar
      taxes) which are required to be paid in connection with the sale and transfer
      of
      the Securities to be sold to each Buyer hereunder will be, or will have been,
      fully paid or provided for by the Company, and all laws imposing such taxes
      will
      be or will have been complied with.

     

    (ff) Investment
      Company Status.
      The
      Company is not, and upon consummation of the sale of the Securities will not
      be,
      an "investment company," a company controlled by an "investment company" or
      an
      "affiliated person" of, or "promoter" or "principal underwriter" for, an
      "investment company" as such terms are defined in the Investment Company Act
      of
      1940, as amended.

     

    (gg) Acknowledgement
      Regarding Buyers' Trading Activity.
      It is
      understood and acknowledged by the Company (i) that none of the Buyers have
      been
      asked by the Company or its Subsidiaries to agree, nor has any Buyer agreed
      with
      the Company or its Subsidiaries, to desist from purchasing or selling, long
      and/or short, securities of the Company, or "derivative" securities based on
      securities issued by the Company or to hold the Securities for any specified
      term; (ii) that any Buyer, and counterparties in "derivative" transactions
      to
      which any such Buyer is a party, directly or indirectly, presently may have
      a
      "short" position in the Common Stock, and (iii) that each Buyer shall not be
      deemed to have any affiliation with or control over any arm's length
      counterparty in any "derivative" transaction. The Company further understands
      and acknowledges that (a) one or more Buyers may engage in hedging and/or
      trading activities at various times during the period that the Securities are
      outstanding, including, without limitation, during the periods that the value
      of
      the Common Shares deliverable with respect to the Put Option Agreement are
      being
      determined and (b) such hedging and/or trading activities, if any, can reduce
      the value of the existing stockholders' equity interest in the Company both
      at
      and after the time the hedging and/or trading activities are being conducted.
      The Company acknowledges that such aforementioned hedging and/or trading
      activities do not constitute a breach of this Agreement or any of the documents
      executed in connection herewith. The Company is not aware of any of the
      aforementioned hedging and/or trading activities of any of the Buyers. The
      Company may not be informed of, and will not monitor, any such aforementioned
      hedging and/or trading activities by one or more Buyers in the future.


     

    (hh) U.S.
      Real Property Holding Corporation.
      The
      Company is not, has never been, and so long as any Securities remain
      outstanding, shall not become, a U.S. real property holding corporation within
      the meaning of Section 897 of the Internal Revenue Code of 1986, as amended,
      and
      the Company shall so certify upon Buyer's request.

     

    (ii) Bank
      Holding Company Act.
      Neither
      the Company nor any of its Subsidiaries or Affiliates is subject to the Bank
      Holding Company Act of 1956, as amended (the "BHCA")
      and to
      regulation by the Board of Governors of the Federal Reserve System (the
      "Federal
      Reserve").
      Neither the Company nor any of its Subsidiaries or Affiliates owns or controls,
      directly or indirectly, five percent (5%) or more of the outstanding shares
      of
      any class of voting securities or twenty-five percent or more of the total
      equity of a bank or any entity that is subject to the BHCA and to regulation
      by
      the Federal Reserve. Neither the Company nor any of its Subsidiaries or
      Affiliates exercises a controlling influence over the management or policies
      of
      a bank or any entity that is subject to the BHCA and to regulation by the
      Federal Reserve.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    (jj) No
      Additional Agreements. The
      Company does not have any agreement or understanding with any Buyer with respect
      to the transactions contemplated by the Transaction Documents other than as
      specified in the Transaction Documents.

     

    (kk) Disclosure.
      The
      Company confirms that neither it nor any other Person acting on its behalf
      has
      provided any of the Buyers or their respective agents or counsel with any
      information that constitutes or could reasonably be expected to constitute
      material, nonpublic information. The Company understands and confirms that
      each
      of the Buyers will rely on the foregoing representations in effecting
      transactions in securities of the Company. All disclosure provided to the Buyers
      regarding the Company, its business and the transactions contemplated hereby,
      including the Schedules to this Agreement, furnished by or on behalf of the
      Company are true and correct and do not contain any untrue statement of a
      material fact or omit to state any material fact necessary in order to make
      the
      statements made therein, in the light of the circumstances under which they
      were
      made, not misleading. Each press release issued by the Company during the twelve
      (12) months preceding the date of this Agreement did not at the time of release
      contain any untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they are made, not
      misleading. No event or circumstance has occurred or information exists with
      respect to the Company or any Subsidiary or either of its or their respective
      business, properties, prospects, operations or financial conditions, which,
      under applicable law, rule or regulation, requires public disclosure or
      announcement by the Company but which has not been so publicly announced or
      disclosed (assuming for this purpose that the Company's reports filed under
      the
      Exchange Act of 1934, as amended, are being incorporated into an effective
      registration statement filed by the Company under the 1933 Act). The Company
      acknowledges and agrees that no Buyer makes or has made any representations
      or
      warranties with respect to the transactions contemplated hereby other than
      those
      specifically set forth in Section 2.

     

    
      	 	
              4.

            	
              COVENANTS.

            


    

     

    (a) Best
      Efforts.
      Each
      party shall use its best efforts timely to satisfy each of the covenants and
      the
      conditions to be satisfied by it as provided in Sections 5, 6 and 7 of this
      Agreement.

     

    (b) Form
      D
      and Blue Sky.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company, on or before the Closing Date, 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 Buyers at the Closing
      pursuant to this Agreement under applicable securities or "Blue Sky" laws of
      the
      states of the United States (or to obtain an exemption from such qualification),
      and shall provide evidence of any such action so taken to the Buyers on or
      prior
      to the Closing Date. The Company shall make all filings and reports relating
      to
      the offer and sale of the Securities required under applicable securities or
      "Blue Sky" laws of the states of the United States following the Closing
      Date.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    (c) Reporting
      Status.
      Until
      the date on which the Buyers shall have sold all the Common Shares, Conversion
      Shares and Warrant Shares and
      none
      of the Warrants, the Preferred Shares or the Put Option Agreement is outstanding
      (the "Reporting
      Period"),
      the
      Company shall timely file all reports required to be filed with the SEC pursuant
      to the 1934 Act, and the Company shall not terminate its status as an issuer
      required to file reports under the 1934 Act even if the 1934 Act or the rules
      and regulations thereunder would otherwise permit such termination.

     

    (d) Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Securities as set forth
      on
Schedule
      4(d).

     

    (e) Financial
      Information.
      The
      Company agrees to send the following to each Buyer during the Reporting Period
      (i) unless the following are filed with the SEC through EDGAR and are available
      to the public through the EDGAR system, within two (2) Business Days after
      the
      filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
      Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
      registration statements (other than on Form S-8) or amendments filed pursuant
      to
      the 1933 Act, (ii) on the same day as the release thereof, facsimile copies
      or
      email copies of all press releases issued by the Company or any of its
      Subsidiaries, and (iii) copies of any notices and other information made
      available or given to the stockholders of the Company generally,
      contemporaneously with the making available or giving thereof to the
      stockholders. As used herein, "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (f) Listing.
      The
      Company shall promptly secure the listing of all of (i) the Common Shares
      issuable pursuant to the Put Option Agreement, (ii) the Conversion Shares issued
      or issuable upon conversion of the Preferred Shares, (iii) the Warrant Shares
      issued or issuable upon exercise of the Warrants, and (iv) any capital stock
      of
      the Company issued or issuable, with respect to the Common Shares, the Put
      Option Agreement, the Conversion Shares, the Warrant Shares, the Preferred
      Shares and the Warrants as a result of any stock split, stock dividend,
      recapitalization, exchange or similar event or otherwise, without regard to
      any
      limitations on conversion or exercise, as applicable, of the Preferred Shares,
      the Warrants or the Put Option Agreement (the "Listed
      Securities")
      upon
      each national securities exchange and automated quotation system, if any, upon
      which the Common Stock is then listed (subject to official notice of issuance)
      and shall maintain such listing of all Listed Securities from time to time
      issuable under the terms of the Transaction Documents. The Company shall
      maintain the Common Stock's authorization for listing on the Principal Market.
      Neither the Company nor any of its Subsidiaries shall take any action which
      would be reasonably expected to result in the delisting or suspension of the
      Common Stock on the Principal Market. The Company shall pay all fees and
      expenses in connection with satisfying its obligations under this Section
      4(f).

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (g)Fees.
      The
      Company shall reimburse Hudson
      Bay Capital Management LP
      (a
      Buyer) or its designee(s) (in addition to any other expense amounts paid to
      any
      Buyer prior to the date of this Agreement) for all reasonable costs and
      expenses, incurred in connection with the transactions contemplated by the
      Transaction Documents (including all reasonable legal fees and disbursements
      in
      connection therewith, documentation and implementation of the transactions
      contemplated by the Transaction Documents and due diligence in connection
      therewith), which amount may be withheld by such Buyer from its Current Purchase
      Price at the Closing. The Company shall be responsible for the payment of any
      placement agent's fees, financial advisory fees, or broker's commissions (other
      than for Persons engaged by any Buyer) relating to or arising out of the
      transactions contemplated hereby, including, without limitation, any fees or
      commissions payable to the Agent. The Company shall pay, and hold each Buyer
      harmless against, any liability, loss or expense (including, without limitation,
      reasonable attorney's fees and out-of-pocket expenses) arising in connection
      with any claim relating to any such payment. 

     

    (h) Pledge
      of Securities.
      The
      Company acknowledges and agrees that the Securities may be pledged by a Buyer
      in
      connection with a bona fide margin agreement or other loan or financing
      arrangement that is secured by the Securities. The pledge of Securities shall
      not be deemed to be a transfer, sale or assignment of the Securities hereunder,
      and no Buyer effecting a pledge of Securities shall be required to provide
      the
      Company with any notice thereof or otherwise make any delivery to the Company
      pursuant to this Agreement or any other Transaction Document, including, without
      limitation, Section 2(f) of this Agreement; provided that a Buyer and its
      pledgee shall be required to comply with the provisions of Section 2(f) of
      this
      Agreement in order to effect a sale, transfer or assignment of Securities to
      such pledgee. The Company hereby agrees to execute and deliver such
      documentation as a pledgee of the Securities may reasonably request in
      connection with a pledge of the Securities to such pledgee by a
      Buyer.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (i) Disclosure
      of Transactions and Other Material Information.
      The
      Company shall, on or before 8:30 a.m., New York City time, on the first (1st)
      Business Day after the date of this Agreement, (A) issue a press release (the
      "Press
      Release")
      reasonably acceptable to the Buyers disclosing all material terms of the
      transactions contemplated hereby and (B) file
      a
      Current Report on Form 8-K describing the terms of the transactions contemplated
      by the Transaction Documents in the form required by the 1934 Act, and attaching
      the material Transaction Documents (including, without limitation, this
      Agreement (and all schedules to this Agreement), the form of Put Option
      Agreement, the form of the Certificate of Designations and the form of Warrant)
      as exhibits to such filing (including all attachments, the "8-K
      Filing").
      From
      and after the issuance of the Press Release, no Buyer shall be in possession
      of
      any material, nonpublic information received from the Company, any of its
      Subsidiaries or any of its respective officers, directors, employees or agents,
      that is not disclosed in the Press Release. The Company shall not, and shall
      cause each of its Subsidiaries and each of their respective officers, directors,
      employees and agents, not to, provide any Buyer with any material, nonpublic
      information regarding the Company or any of its Subsidiaries from and after
      the
      filing of the Press Release without the express written consent of such Buyer.
      If a Buyer has, or believes it has, received any such material, nonpublic
      information regarding the Company or any of its Subsidiaries from the Company,
      any of its Subsidiaries or any of the respective officers, directors, or agents,
      other than as required in writing by such Buyer, it may provide the Company
      with
      written notice thereof. The Company shall, within five (5) Trading Days (as
      defined in the Warrants) of receipt of such notice, make public disclosure
      of
      such material, nonpublic information. In the event of a breach of the foregoing
      covenant by the Company, any of its Subsidiaries, or any of its or their
      respective officers, directors, employees and agents, in addition to any other
      remedy provided herein or in the Transaction Documents, a Buyer shall have
      the
      right to make a public disclosure, in the form of a press release, public
      advertisement or otherwise, of such material, nonpublic information without
      the
      prior approval by the Company, its Subsidiaries, or any of its or their
      respective officers, directors, employees or agents. No Buyer shall have any
      liability to the Company, its Subsidiaries, or any of its or their respective
      officers, directors, employees, stockholders or agents for any such disclosure.
      Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer
      shall issue any press releases or any other public statements with respect
      to
      the transactions contemplated hereby; provided,
      however,
      that
      the Company shall be entitled, without the prior approval of any Buyer, to
      make
      any press release or other public disclosure with respect to such transactions
      (i) in substantial conformity with the 8-K Filing and contemporaneously
      therewith and (ii) as is required by applicable law and regulations, including
      the applicable rules and regulations of the Principal Market (provided that
      in
      the case of clause (i) each Buyer shall be consulted by the Company in
      connection with any such press release or other public disclosure prior to
      its
      release). Without the prior written consent of any applicable Buyer, neither
      the
      Company nor any of its Subsidiaries or affiliates shall disclose the name of
      such Buyer in any filing, announcement, release or otherwise, unless such
      disclosure is required by law, regulation.

     

    (j) Corporate
      Existence.
      So long
      as any Buyer beneficially owns any Preferred Shares, Warrants or has any rights
      under the Put Option Agreement, the Company (x) shall maintain its corporate
      existence and shall not sell all or substantially all of the Company's assets,
      except in the event of a merger or consolidation or sale of all or substantially
      all of the Company's assets, where the surviving or successor entity in such
      transaction (i) assumes the Company's obligations hereunder and under the
      agreements and instruments entered into in connection herewith and (ii) is
      a
      publicly traded corporation whose common stock is quoted on or listed for
      trading on the Principal Market, The NASDAQ Global Market, The NASDAQ Global
      Select Market or The New York Stock Exchange, Inc. and (y) shall not be party
      to
      any Fundamental Transaction (as defined in the Certificate of Designations)
      unless the Company is in compliance with the applicable provisions governing
      Fundamental Transactions set forth in the Certificate of
      Designations.

     

    (k) Reservation
      of Shares.
      So long
      as any Buyer owns any Warrants and Preferred Shares, the Company shall take
      all
      action necessary to at all times have authorized, and reserved for the purpose
      of issuance no less than 120% of the aggregate of the maximum number of shares
      of Common Stock (i) issuable pursuant to the Put Option Agreement, (ii) issuable
      upon coversion of the Preferred Shares and (iii) issuable upon exercise of
      the
      Warrants, without taking into account any limitations on the conversion or
      exercise, as applicable of the Preferred Shares, Warrants or the Put Option
      Agreement, set forth in the Certificate of Designations, Warrants or Put Option
      Agreement, respectively).

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (l) Additional
      Issuances of Securities.

     

    (i) For
      purposes of this Section 4(l), the following definitions shall
      apply.

     

    (1) "Approved
      Stock Plan"
      means
      any employee benefit plan which has been approved by the Board of Directors
      of
      the Company, pursuant to which the Company's securities may be issued to any
      employee, officer or director for services provided to the Company as employee
      incentive and not for any other purpose, including, without limitation, for
      capital raising purposes for the Company.

    


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

    


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

     

    (3) "Excluded
      Securities"
      means
      any Common Stock issued or issuable: (i) in connection with any Approved Stock
      Plan; (ii) upon the exercise of the Warrants and upon conversion of the
      Preferred Shares; (iii) upon exercise of any Options or Convertible Securities
      which are outstanding on the day immediately preceding the date hereof, provided
      that the terms of such Options or Convertible Securities are not amended,
      modified or changed on or after the date hereof; and (iv) in connection with
      mergers, acquisitions, strategic business partnerships or equipment financing,
      manufacturing or supply contracts, the
      purpose of which is not to raise equity capital.

     

    (4) "Options"
      means
      any rights, warrants or options to subscribe for or purchase Common Stock or
      Convertible Securities.

     

    (ii)From
      the
      date hereof until the date thirty (30) days after the earlier of (i) the date
      when all of the Listed Securities are freely tradeable without the requirement
      to be in compliance with Rule 144(c)(1) and otherwise without restriction or
      limitation pursuant to Rule 144 and (ii) the date when all of the Listed
      Securities have been registered under the 1933 Act (the "Trigger
      Date"),
      the
      Company will not, directly or indirectly, file any registration statement with
      the SEC. From the date hereof until the Trigger Date, the Company will not,
      directly or indirectly, offer, sell, grant any option to purchase, or otherwise
      dispose of (or announce any offer, sale, grant or any option to purchase or
      other disposition of) any of its or its Subsidiaries' equity or equity
      equivalent securities, including without limitation any debt, preferred stock
      or
      other instrument or security that is, at any time during its life and under
      any
      circumstances, convertible into or exchangeable or exercisable for shares of
      Common Stock or Common Stock Equivalents (any such offer, sale, grant,
      disposition or announcement being referred to as a "Subsequent
      Placement").
      Notwithstanding the foregoing, the Company shall not be restricted from entering
      into any Subsequent Placement from the date hereof until the Trigger Date to
      the
      extent the Company contemporaneously with the closing of the Subsequent
      Placement increases the aggregate Letter of Credit Amount (as defined below)
      to
      an amount equal to $5,000,000, any increases thereof shall be applied pro rata
      to each Buyer's Letter of Credit.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    (iii)From
      the
      Trigger Date until the date the Buyers no longer have any put rights pursuant
      to
      the Put Option Agreement, the Company will not, directly or indirectly, effect
      any Subsequent Placement unless the Company shall have first complied with
      this
      Section 4(l)(iii).

     

    (1) The
      Company shall deliver to each Buyer an irrevocable written notice
      (the "Offer
      Notice")
      of any
      proposed or intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (w) identify and describe the
      Offered Securities, (x) describe the price and other terms upon which they
      are to be issued, sold or exchanged, and the number or amount of the Offered
      Securities to be issued, sold or exchanged, (y) identify the persons or
      entities (if known) to which or with which the Offered Securities are to be
      offered, issued, sold or exchanged and (z) offer to issue and sell to or
      exchange with such Buyers all of the Offered Securities, allocated among such
      Buyers (a) based on such Buyer's pro rata portion of the aggregate number of
      Preferred Shares purchased hereunder (the "Basic
      Amount"),
      and
      (b) with respect to each Buyer that elects to purchase its Basic Amount, any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Buyers as such Buyer shall indicate it will purchase or acquire should
      the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
      Amount"),
      which
      process shall be repeated until the Buyers shall have an opportunity to
      subscribe for any remaining Undersubscription Amount.

     

    (2) To
      accept
      an Offer, in whole or in part, such Buyer must deliver a written notice to
      the
      Company prior to the end of the tenth (10th)
      Business Day after such Buyer's receipt of the Offer Notice (the "Offer
      Period"),
      setting forth the portion of such Buyer's Basic Amount that such Buyer elects
      to
      purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
      the
      Undersubscription Amount, if any, that such Buyer elects to purchase (in either
      case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Buyers are less than the total of all
      of
      the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
      in its Notice of Acceptance shall be entitled to purchase, in addition to the
      Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
      "Available
      Undersubscription Amount"),
      each
      Buyer who has subscribed for any Undersubscription Amount shall be entitled
      to
      purchase only that portion of the Available Undersubscription Amount as the
      Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
      have subscribed for Undersubscription Amounts, subject to rounding by the
      Company to the extent its deems reasonably necessary. Notwithstanding the
      foregoing, if the Company desires to modify or amend the terms and conditions
      of
      the Offer prior to the expiration of the Offer Period, the Company may deliver
      to the Buyers a new Offer Notice and the Offer Period shall expire on the third
      (3rd)
      Business Day after such Buyer's receipt of such new Offer Notice.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (3) The
      Company shall have fifteen (15) Business Days from the expiration of the Offer
      Period above (i) to offer, issue, sell or exchange all or any part of such
      Offered Securities as to which a Notice of Acceptance has not been given by
      the
      Buyers (the "Refused
      Securities")
      pursuant to a definitive agreement(s) (the "Subsequent
      Placement Agreement"),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer Notice and
      (ii) to publicly announce (a) the execution of such Subsequent Placement
      Agreement, and (b) either (x) the consummation of the transactions contemplated
      by such Subsequent Placement Agreement or (y) the termination of such Subsequent
      Placement Agreement, which shall be filed with the SEC on a Current Report
      on
      Form 8-K with such Subsequent Placement Agreement and any documents contemplated
      therein filed as exhibits thereto.

     

    (4) In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in Section
      4(l)(iii)(3) above), then each Buyer may, at its sole option and in its sole
      discretion, reduce the number or amount of the Offered Securities specified
      in
      its Notice of Acceptance to an amount that shall be not less than the number
      or
      amount of the Offered Securities that such Buyer elected to purchase pursuant
      to
      Section 4(l)(iii)(2) above multiplied by a fraction, (i) the numerator of which
      shall be the number or amount of Offered Securities the Company actually
      proposes to issue, sell or exchange (including Offered Securities to be issued
      or sold to Buyers pursuant to Section 4(l)(iii)(3) above prior to such
      reduction) and (ii) the denominator of which shall be the original amount of
      the
      Offered Securities. In the event that any Buyer so elects to reduce the number
      or amount of Offered Securities specified in its Notice of Acceptance, the
      Company may not issue, sell or exchange more than the reduced number or amount
      of the Offered Securities unless and until such securities have again been
      offered to the Buyers in accordance with Section 4(l)(iii)(1)
      above.

     

    (5) Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Buyers shall acquire from the Company, and the Company shall
      issue to the Buyers, the number or amount of Offered Securities specified in
      the
      Notices of Acceptance, as reduced pursuant to Section 4(l)(iii)(3) above if
      the
      Buyers have so elected, upon the terms and conditions specified in the Offer.
      Notwithstanding anything to the contrary contained in this Agreement, if the
      Company does not consummate the closing of the issuance, sale or exchange of
      all
      or less than all of the Refused Securities, within fifteen (15) Business Days
      of
      the expiration of the Offer Period, the Company shall issue to the Buyers,
      the
      number or amount of Offered Securities specified in the Notices of Acceptance,
      as reduced pursuant to Section 4(l)(iii)(3) above if the Buyers have so elected,
      upon the terms and conditions specified in the Offer. The purchase by the Buyers
      of any Offered Securities is subject in all cases to the preparation, execution
      and delivery by the Company and the Buyers of a purchase agreement relating
      to
      such Offered Securities reasonably satisfactory in form and substance to the
      Buyers and their respective counsel.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    (6) Any
      Offered Securities not acquired by the Buyers or other persons in accordance
      with Section 4(l)(iii)(3) above may not be issued, sold or exchanged until
      they
      are again offered to the Buyers under the procedures specified in this
      Agreement.

     

    (7) The
      Company and the Buyers agree that if any Buyer elects to participate in the
      Offer, neither the Subsequent Placement Agreement with respect to such Offer
      nor
      any other transaction documents related thereto (collectively, the "Subsequent
      Placement Documents")
      shall
      include any term or provisions whereby any Buyer shall be required to agree
      to
      any restrictions in trading as to any securities of the Company owned by such
      Buyer prior to such Subsequent Placement.

     

    (8) Notwithstanding
      anything to the contrary in this Section 4(l) and unless otherwise agreed to
      by
      the Buyers, the Company shall either confirm in writing to the Buyers that
      the
      transaction with respect to the Subsequent Placement has been abandoned or
      shall
      publicly disclose its intention to issue the Offered Securities, in either
      case
      in such a manner such that the Buyers will not be in possession of material
      non-public information, by the fifteen (15th)
      Business Day following delivery of the Offer Notice. If by the fifteen
      (15th)
      Business Day following delivery of the Offer Notice no public disclosure
      regarding a transaction with respect to the Offered Securities has been made,
      and no notice regarding the abandonment of such transaction has been received
      by
      the Buyers, such transaction shall be deemed to have been abandoned and the
      Buyers shall not be deemed to be in possession of any material, non-public
      information with respect to the Company. Should the Company decide to pursue
      such transaction with respect to the Offered Securities, the Company shall
      provide each Buyer with another Offer Notice and each Buyer will again have
      the
      right of participation set forth in this Section 4(l)(iii). The Company shall
      not be permitted to deliver more than one such Offer Notice to the Buyers in
      any
      60 day period.

     

    (iv) The
      restrictions contained in subsections (ii) and (iii) of this Section 4(l) shall
      not apply in connection with the issuance of any Excluded
      Securities.

    


    (m) Additional
      Preferred Shares; Variable Securities; Dilutive Issuances.
      So long
      as any Buyer beneficially owns any Securities, the Company will not issue any
      Preferred Shares other than to the Buyers as contemplated hereby and the Company
      shall not issue any other securities that would cause a breach or default under
      the Certificate of Designations. For so long as any Preferred Shares or Warrants
      remain outstanding, the Company shall not, in any manner, issue or sell any
      rights, warrants or options to subscribe for or purchase Common Stock or
      directly or indirectly convertible into or exchangeable or exercisable for
      Common Stock at a price which varies or may vary with the market price of the
      Common Stock, including by way of one or more reset(s) to any fixed price unless
      the conversion, exchange or exercise price of any such security cannot be less
      than the then applicable Conversion Price (as defined in the Certificate of
      Designations) with respect to the Common Stock into which any Preferred Share
      is
      convertible or the then applicable Exercise Price (as defined in the Warrants)
      with respect to the Common Stock into which any Warrant is exercisable. This
      provision shall not prohibit the Company from issuing or selling any securities
      that contain customary anti-dilution provisions. For so long as any Preferred
      Shares or Warrants remain outstanding, the Company shall not, in any manner,
      enter into or affect any Dilutive Issuances (as defined in the Warrants) if
      the
      effect of such Dilutive Issuance is to cause the Company to be required to
      issue
      upon conversion of any Preferred Share or upon exercise of any Warrant any
      shares of Common Stock in excess of that number of shares of Common Stock which
      the Company may issue upon conversion of the Preferred Shares and upon exercise
      of the Warrants without breaching the Company's obligations under the rules
      or
      regulations of the Principal Market or any applicable Eligible Market (as
      defined in the Warrants) (without giving effect to the Exchange Cap provisions
      set forth in the Certificate of Designations and the Warrants).

     

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    (n) Conduct
      of Business.
      The
      business of the Company and its Subsidiaries shall not be conducted in violation
      of any law, ordinance or regulation of any governmental entity, except where
      such violations would not result, either individually or in the aggregate,
      in a
      Material Adverse Effect.

     

     

    (o) Public
      Information.
      At any
      time during the period commencing from the six (6) month anniversary of the
      Closing Date and ending at such time that all of the Securities can be sold
      either pursuant to a registration statement, or if a registration statement
      is
      not available for the resale of all of the Securities, may be sold without
      the
      requirement for the Company to be in compliance with Rule 144(c)(1) and
      otherwise without restriction or limitation pursuant to Rule 144, if the Company
      shall fail for any reason to satisfy the current public information requirement
      under Rule 144(c) (a "Public
      Information Failure")
      then,
      as relief for the damages to any holder of Securities by reason of any such
      delay in or reduction of its ability to sell the Securities (which remedy shall
      not be exclusive of any other remedies available at law or in equity), the
      Company shall pay to each such holder an amount in cash equal to two percent
      (2.0%) of the aggregate Purchase Price of such holder's Securities on the day
      of
      a Public Information Failure and on every thirtieth day (pro rated for periods
      totaling less than thirty days) thereafter until the earlier of (i) the date
      such Public Information Failure is cured and (ii) such time that such public
      information is no longer required pursuant to Rule 144. The payments to which
      a
      holder shall be entitled pursuant to this Section 4(o) are referred to herein
      as
      "Public
      Information Failure Payments."
      Public
      Information Failure Payments
      shall be paid on the earlier of (I) the last day of the calendar month during
      which such Public Information Failure Payments
      are incurred and (II) the third Business Day after the event or failure giving
      rise to the Public Information Failure Payments
      is cured. In the event the Company fails to make Public Information
      Failure Payments
      in a timely manner, such Public Information Failure Payments
      shall bear interest at the rate of 1.5% per month (prorated for partial months)
      until paid in full.

     

    (p) Letter
      of Credit.

     

    (i) On
      or
      prior to the date ten (10) calendar days after the Closing Date, the Company
      shall obtain irrevocable letters of credit (each a "Letter
      of Credit",
      together the Letters of Credit) issued in favor of each of the Buyers, in the
      amount of such Buyers pro rata portion of $3,000,000 (the "Buyer
      LC Amount",
      and
      collectively, the "Letter
      of Credit Amount")
      by a
      bank acceptable to the Buyers (the "Letter
      of Credit Bank")
      and in
      form and substance acceptable to the Buyers. The Letters of Credit, including
      any renewals, extensions or replacements referred to below, shall expire not
      earlier than the earlier of (x) the five (5) year anniversary of the Closing
      Date, (y) the date the Put Option Agreement has terminated in accordance with
      its terms and (z) been exercised in full by the Buyers (the "LC
      Redemption Expiration Date")
      unless
      the Letters of Credit shall have been reduced to zero in accordance with the
      terms contained in this Section 4(p) prior to such date. On the Date the Letters
      of Credit are obtained by the Company, each Buyer shall deliver to the Letter
      of
      Credit Bank, for such Buyer's Letter of Credit, the amount set forth opposite
      such Buyer's name in column (8) of the Schedule of Buyers by wire transfer
      of
      immediately available funds pursuant to the wire instructions provided by the
      Letter of Credit Bank.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    (ii) Upon
      a
      Buyer exercising its rights under the Put Option Agreement, such Buyer may
      draw
      under its Letter of Credit, including any renewals, extensions or replacements
      referred to below, such portion of the Letter of Credit not to exceed, in the
      aggregate, the Cash Payment (as defined in the Put Option Agreement) amount
      of
      the Put Price (as defined in the Put Option Agreement) due to the Buyer from
      the
      Company upon such exercise. The Company shall obtain such renewals, extensions
      or replacements of each Letter of Credit as necessary to ensure that the Letter
      of Credit shall not expire prior to the LC Redemption Expiration Date (unless
      such Letter of Credit shall have been reduced to zero in accordance with the
      terms contained in this Section 4(p) prior to such date). If, at any time,
      the
      Company cannot obtain a renewal, extension or replacement of the Letters of
      Credit such that the Letters of Credit will expire prior to the LC Redemption
      Expiration Date (a "Withdrawal
      Event"),
      the
      Company and the Letter of Credit Bank shall each give the Buyers written notice
      of the occurrence of a Withdrawal Event at least forty-five (45) days prior
      to
      the then current expiration date of the Letters of Credit. Following a
      Withdrawal Event, each Buyer shall be entitled to draw down its Buyer LC Amount
      in its entirety and hold such amount as collateral security for the obligations
      under the Put Option Agreement.

     

    (iii) At
      such
      time that the aggregate Put Price payable by the Company under the Put Option
      Agreement is less than $3,000,000 (the "Reduction
      Threshold Event"),
      the
      Company may deliver a notice to the LC Agent (the "LC
      Reduction Notice"),
      certifying as to the occurrence of the Reduction Threshold Event. Within seven
      (7) Business Days after the LC Agent's receipt of the LC Reduction Notice,
      unless the LC Agent reasonably objects to such LC Reduction Notice, the LC
      Agent
      shall issue a written instruction to the Letter of Credit Bank to request the
      reduction of the Letter of Credit Amount as set forth in the LC Reduction
      Notice, such reduction amount to equal to the difference between $3,000,000
      and
      the aggregate Put Price payable by the Company under the Put Option Agreement
      at
      the time of such Reduction Threshold Event and applied pro rata to the Letters
      of Credit.

     

    (q) Closing
      Deliverables.
      On or
      prior to ten (10) calendar days after the Closing Date, the Company shall
      deliver to the Buyers the deliverables listed in Section 7(ii) through (v)
      and
      (vii) through (x) in a form acceptable to the Buyers.

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    (r) Closing
      Documents.
      On or
      prior to fourteen (14) calendar days after the Closing Date, the Company agrees
      to deliver, or cause to be delivered, to each Buyer and Schulte Roth & Zabel
      LLP a complete closing set of the Transaction Documents, Securities and any
      other document required to be delivered to any party pursuant to Section 7
      hereof or otherwise.

     

    
      	 	
              5.

            	
              REGISTER;
                TRANSFER AGENT INSTRUCTIONS.

            


    

     

    (a) Register.
      The
      Company shall maintain at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to each holder of
      Securities), a register for the Common Shares, the Preferred Shares and the
      Warrants, in which the Company shall record the name and address of the Person
      in whose name the Common Shares, the Preferred Shares and
      the
      Warrants have been issued (including the name and address of each transferee),
      the number of Common Shares held by such Person, the number of Preferred Shares
      held by such Person, the number of Conversion Shares issuable upon conversion
      of
      the Preferred Shares, the number of Warrant Shares issuable upon exercise of
      the
      Warrants held by such Person and the number of Common Shares held by such
      Person. The Company shall keep the register open and available at all times
      during business hours for inspection of any Buyer or its legal
      representatives.

     

    (b) Transfer
      Agent Instructions.
      The
      Company shall issue irrevocable instructions to its transfer agent, and any
      subsequent transfer agent, to issue certificates or credit shares to the
      applicable balance accounts at DTC, registered in the name of each Buyer or
      its
      respective nominee(s), for the Common Shares, the Conversion Shares and the
      Warrant Shares issued at the Closing or upon conversion of the Preferred Shares
      or upon exercise of the Warrants in such amounts as specified from time to
      time
      by each Buyer to the Company upon exercise of the Warrants in the form of
Exhibit
      C
      attached
      hereto (the "Irrevocable
      Transfer Agent Instructions").
      The
      Company warrants that no instruction other than the Irrevocable Transfer Agent
      Instructions referred to in this Section 5(b), and stop transfer instructions
      to
      give effect to Section 2(g) hereof, will be given by the Company to its transfer
      agent, and that the Securities shall otherwise be freely transferable on the
      books and records of the Company as and to the extent provided in this Agreement
      and the other Transaction Documents. If a Buyer effects a sale, assignment
      or
      transfer of the Securities in accordance with Section 2(g), the Company shall
      permit the transfer and shall promptly instruct its transfer agent to issue
      one
      or more certificates or credit shares to the applicable balance accounts at
      DTC
      in such name and in such denominations as specified by such Buyer to effect
      such
      sale, transfer or assignment. In the event that such sale, assignment or
      transfer involves Common Shares, Conversion Shares or Warrant Shares sold,
      assigned or transferred pursuant to an effective registration statement or
      pursuant to Rule 144, the transfer agent shall issue such Securities to the
      Buyer, assignee or transferee, as the case may be, without any restrictive
      legend. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
      acknowledges that the remedy at law for a breach of its obligations under this
      Section 5(b) will be inadequate and agrees, in the event of a breach or
      threatened breach by the Company of the provisions of this Section 5(b), that
      a
      Buyer shall be entitled, in addition to all other available remedies, to an
      order and/or injunction restraining any breach and requiring immediate issuance
      and transfer, without the necessity of showing economic loss and without any
      bond or other security being required.

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    
      	 	
              6.

            	
              CONDITIONS
                TO THE COMPANY'S OBLIGATION TO SELL.

            


    

     

    The
      obligation of the Company hereunder to issue and sell the Preferred Shares
      and
      the Warrants to each Buyer at the Closing is subject to the satisfaction, at
      or
      before the Closing Date, of each of the following conditions, provided that
      these conditions are for the Company's sole benefit and may be waived by the
      Company at any time in its sole discretion by providing each Buyer with prior
      written notice thereof:

     

    (i) Such
      Buyer shall have executed each of the Transaction Documents to which it is
      a
      party and delivered the same to the Company.

     

    (ii) Such
      Original Buyer shall have delivered to the Company the Original Warrants for
      the
      Exchange Preferred Shares and the Exchange Warrants being delivered to such
      Original Buyer at the Closing. 

     

    (iii) Such
      Original Buyer shall have delivered to the Company its Current Purchase Price
      (less, in the case of Hudson
      Bay Capital Management LP (or its designee(s)),
      the
      amounts withheld pursuant to Section 4(g)) and such New Buyer shall have
      delivered to the Company its Net Purchase Price for the New Preferred Shares
      and
      related New Warrants being purchased by such Buyer at the Closing by wire
      transfer of immediately available funds pursuant to the wire instructions
      provided by the Company.

     

    (iv) The
      representations and warranties of such Buyer shall be true and correct in all
      material respects as of the date when made and as of the Closing Date as though
      made at that time (except for representations and warranties that speak as
      of a
      specific date which shall be true and correct as of such specified date), and
      such Buyer shall have performed, satisfied and complied in all material respects
      with the covenants, agreements and conditions required by this Agreement to
      be
      performed, satisfied or complied with by such Buyer at or prior to the Closing
      Date.

     

     

    
      	 	
              7.

            	
              CONDITIONS
                TO EACH BUYER'S OBLIGATION TO PURCHASE.

            


    

     

    The
      obligation of each Buyer hereunder to purchase the Preferred Shares and related
      Warrants at the Closing is subject to the satisfaction, at or before the Closing
      Date, of each of the following conditions, provided that these conditions are
      for each Buyer's sole benefit and may be waived by such Buyer at any time in
      its
      sole discretion by providing the Company with prior written notice
      thereof:

     

    (i) The
      Company shall have executed and delivered to such Buyer (i) each of the
      Transaction Documents and (ii) the Preferred Shares and Warrants (in such
      amounts as such Buyer shall request) to be received or purchased, as applicable,
      by such Buyer at the Closing pursuant to this Agreement.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    (ii) Such
      Buyer shall have received the opinion of Brown Rudnick Berlack Israels LLP
      the
      Company's outside counsel ("Company
      Counsel"),
      dated
      as of the Closing Date, in substantially the form of Exhibit
      D attached
      hereto.

     

    (iii) The
      Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
      Agent Instructions, in the form of Exhibit
      C
      attached
      hereto, which instructions shall have been delivered to and acknowledged in
      writing by the Company's transfer agent.

     

    (iv) The
      Company shall have delivered to such Buyer a certificate evidencing the
      incorporation and good standing of the Company and each of its operating
      Subsidiaries in such corporation's state of incorporation issued by the
      Secretary of State of such state of incorporation as of a date within 10 days
      of
      the Closing Date.

     

    (v) The
      Company shall have delivered to such Buyer a certificate evidencing the
      Company's qualification as a foreign corporation and good standing issued by
      the
      Secretary of State (or comparable office) of each jurisdiction in which the
      Company conducts business and is required to so qualify, as of a date within
      10
      days of the Closing Date.

     

    (vi) The
      Common Stock (I) shall be listed on the Principal Market and (II) shall not
      have
      been suspended, as of the Closing Date, by the SEC or the Principal Market
      from
      trading on the Principal Market nor shall suspension by the SEC or the Principal
      Market have been threatened, as of the Closing Date, either (A) in writing
      by
      the SEC or the Principal Market or (B) by falling below the minimum listing
      maintenance requirements of the Principal Market.

     

    (vii) The
      Company shall have delivered to such Buyer a certified copy of the Articles
      of
      Incorporation as certified by the Secretary of State of the State of Nevada
      within 10 days of the Closing Date.

     

    (viii) The
      Company shall have delivered to such Buyer a certificate, executed by the
      Secretary of the Company and dated as of the Closing Date, as to (i) the
      resolutions consistent with Section 3(b) as adopted by the Company's Board
      of
      Directors in a form reasonably acceptable to such Buyer, (ii) the Articles
      of
      Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
      form attached hereto as Exhibit
      E.

     

    (ix) The
      representations and warranties of the Company shall be true and correct as
      of
      the date when made and as of the Closing Date as though made at that time
      (except for representations and warranties that speak as of a specific date
      which shall be true and correct as of such specified date) and the Company
      shall
      have performed, satisfied and complied in all respects with the covenants,
      agreements and conditions required by the Transaction Documents to be performed,
      satisfied or complied with by the Company at or prior to the Closing Date.
      Such
      Buyer shall have received a certificate, executed by the Chief Executive Officer
      of the Company, dated as of the Closing Date, to the foregoing effect and as
      to
      such other matters as may be reasonably requested by such Buyer in the form
      attached hereto as Exhibit
      F.

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    (x) The
      Company shall have delivered to such Buyer a letter from the Company's transfer
      agent certifying the number of shares of Common Stock outstanding as of a date
      within five days of the Closing Date.

     

    (xi) The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities.

     

    (xii) The
      Certificate of Designations in the form attached hereto as Exhibit
      A-1
      shall
      have been filed with the Secretary of State of the State of Nevada and shall
      be
      in full force and effect, enforceable against the Company in accordance with
      its
      terms and shall not have been amended.

     

    (xiii) The
      Company shall have delivered to such Buyer such other documents relating to
      the
      transactions contemplated by this Agreement as such Buyer or its counsel may
      reasonably request.

     

    8. TERMINATION.
      In
      the
      event that the Closing shall not have occurred with respect to a Buyer on or
      before five (5) Business Days from the date hereof due to the Company's or
      such
      Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
      (and the nonbreaching party's failure to waive such unsatisfied condition(s)),
      the nonbreaching party shall have the option to terminate this Agreement with
      respect to such breaching party at the close of business on such date without
      liability of any party to any other party; provided,
      however,
      this if
      this Agreement is terminated pursuant to this Section 8, the Company shall
      remain obligated to reimburse the non-breaching Buyers for the expenses
      described in Section 4(g) above.

     

    
      	 	
              9.

            	
              MISCELLANEOUS.

            


    

     

    (a) Governing
      Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      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, 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 brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper. Each party hereby
      irrevocably waives personal service of process and consents to process being
      served in any such suit, action or proceeding by mailing a copy thereof to
      such
      party at the address for such notices to it under this Agreement and agrees
      that
      such service shall constitute good and sufficient service of process and notice
      thereof. Nothing contained herein shall be deemed to limit in any way any right
      to serve process in any manner permitted by law. EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    (b) Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      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;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    (c) Headings.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    (d) Severability.
      If any
      provision of this Agreement is prohibited by law or otherwise determined to
      be
      invalid or unenforceable by a court of competent jurisdiction, the provision
      that would otherwise be prohibited, invalid or unenforceable shall be deemed
      amended to apply to the broadest extent that it would be valid and enforceable,
      and the invalidity or unenforceability of such provision shall not affect the
      validity of the remaining provisions of this Agreement so long as this Agreement
      as so modified continues to express, without material change, the original
      intentions of the parties as to the subject matter hereof and the prohibited
      nature, invalidity or unenforceability of the provision(s) in question does
      not
      substantially impair the respective expectations or reciprocal obligations
      of
      the parties or the practical realization of the benefits that would otherwise
      be
      conferred upon the parties. The parties will endeavor in good faith negotiations
      to replace the prohibited, invalid or unenforceable provision(s) with a valid
      provision(s), the effect of which comes as close as possible to that of the
      prohibited, invalid or unenforceable provision(s).

     

    (e) Entire
      Agreement; Amendments.
      This
      Agreement supersedes all other prior oral or written agreements between the
      Buyers, the Company, their affiliates and Persons acting on their behalf with
      respect to the matters discussed herein, and this Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor any Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters. No provision
      of
      this Agreement may be amended other than by an instrument in writing signed
      by
      the Company and the holders of Preferred Shares representing at least a majority
      of the amount of the Preferred Shares then outstanding, or, if prior to the
      Closing Date, the Buyers listed on the Schedule of Buyers as being obligated
      to
      purchase at least a majority of the amount of the Preferred Shares. No provision
      hereof may be waived other than by an instrument in writing signed by the party
      against whom enforcement is sought. No such amendment shall be effective to
      the
      extent that it applies to less than all of the holders of the Preferred Shares
      then outstanding. 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 also is offered to all
      of
      the parties to the Transaction Documents, holders of the Preferred Shares.
      The
      Company has not, directly or indirectly, made any agreements with any Buyers
      relating to the terms or conditions of the transactions contemplated by the
      Transaction Documents except as set forth in the Transaction Documents. Without
      limiting the foregoing, the Company confirms that, except as set forth in this
      Agreement, no Buyer has made any commitment or promise or has any other
      obligation to provide any financing to the Company or otherwise. 

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    (f) Notices.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with an overnight courier service,
      in
      each case properly addressed to the party to receive the same. The addresses
      and
      facsimile numbers for such communications shall be:

     

    If
      to the
      Company:

     

    
      	
              MSGI
                Security Solutions, Inc.

            
	
              575
                Madison Avenue

            
	
              New
                York, New York 10022

            
	
              Telephone:

            	
              (917)
                339-7134 

            
	
              Facsimile:

            	
              (917)
                339-7166

            
	
              Attention:

            	
              Jeremy
                Barbera

            
	
              Email:

            	
              jbarbera@msgisecurity.com

            


    

    


    with
      a
      copy to:

    


    
      	
              Brown
                Rudnick Berlack Israels LLP

            
	
              7
                Times Square

            
	
              New
                York, NY 10036

            
	
              Telephone:

            	
              (212)
                209-4800

            
	
              Facsimile:

            	
              (212)
                209-4800

            
	
              Attention:

            	
              Mark
                H. Peikin,Esq.

            
	
              Email:

            	
              MPeikin@brownrudnick.com

            


    

     

    If
      to the
      Transfer Agent:

     

    
      	
              Continental
                Stock Transfer & Trust Co.

            
	
              17
                Battery Place

            
	
              New
                York, NY 10004

            
	
              Telephone:

            	
              (212)
                509-4000 ext. 301

            
	
              Facsimile:

            	
              (212)
                616-7608

            
	
              Attention:

            	
              Richard
                Viscovich

            


    

    


    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    If
      to a
      Buyer, to its address, facsimile number and email address set forth on the
      Schedule of Buyers, with copies to such Buyer's representatives as set forth
      on
      the Schedule of Buyers, 

     

    with
      a
      copy (for informational purposes only) to:

     

    
      	
              Schulte
                Roth & Zabel LLP 

            
	
              919
                Third Avenue

            
	
              New
                York, New York 10022

            
	
              Telephone:

            	
              (212)
                756-2000

            
	
              Facsimile:

            	
              (212)
                593-5955

            
	
              Attention:

            	
              Eleazer
                N. Klein, Esq.

            
	
              Email:

            	
              eleazer.klein@srz.com

            


    

    


    or
      to
      such other address, facsimile number and/or email address and/or to the
      attention of such other Person as the recipient party has specified by written
      notice given to each other party five (5) days prior to the effectiveness of
      such change. Written confirmation of receipt (A) given by the recipient of
      such
      notice, consent, waiver or other communication, (B) mechanically or
      electronically generated by the sender's facsimile machine containing the time,
      date, recipient facsimile number and an image of the first page of such
      transmission or (C) provided by an overnight courier service shall be rebuttable
      evidence of personal service, receipt by facsimile or receipt from an overnight
      courier service in accordance with clause (i), (ii) or (iii) above,
      respectively.

     

    (g) Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of the Put
      Options (as defined in the Put Option Agreement), the Preferred Shares or the
      Warrants. The Company shall not assign this Agreement or any rights or
      obligations hereunder without the prior written consent of the holders of the
      Preferred Shares representing at least a majority of the number of the Preferred
      Shares then outstanding, including by way of a Fundamental Transaction (unless
      the Company is in compliance with the applicable provisions governing
      Fundamental Transactions set forth in the Certificate of Designations and the
      Warrants). A Buyer may assign some or all of its rights hereunder without the
      consent of the Company, in which event such assignee shall be deemed to be
      a
      Buyer hereunder with respect to such assigned rights.

     

    (h) No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    (i) Survival.
      Unless
      this Agreement is terminated under Section 8, the representations and warranties
      of the Company and the Buyers contained in Sections 2 and 3, the agreements
      and
      covenants set forth in Sections 4, 5 and 9 shall survive the Closing and the
      delivery and conversion or exercise of Securities, as applicable. Each Buyer
      shall be responsible only for its own representations, warranties, agreements
      and covenants hereunder.

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    (j) Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (k) Indemnification.
      

     

    (1) In
      consideration of each Buyer's execution and delivery of the Transaction
      Documents and acquiring the Securities thereunder and in addition to all of
      the
      Company's other obligations under the Transaction Documents, the Company shall
      defend, protect, indemnify and hold harmless each Buyer and each other holder
      of
      the Securities and all of their stockholders, partners, members, officers,
      directors, employees and direct or indirect investors and any of the foregoing
      Persons' agents or other representatives (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the "Indemnitees")
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Indemnitee is a party to the action for which
      indemnification hereunder is sought), and including reasonable attorneys' fees
      and disbursements (the "Indemnified
      Liabilities"),
      incurred by any Indemnitee as a result of, or arising out of, or relating to
      (a)
      any misrepresentation or breach of any representation or warranty made by the
      Company in the Transaction Documents or any other certificate, instrument or
      document contemplated hereby or thereby, (b) any breach of any covenant,
      agreement or obligation of the Company contained in the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby
      or
      (c) any cause of action, suit or claim brought or made against such Indemnitee
      by a third party (including for these purposes a derivative action brought
      on
      behalf of the Company) and arising out of or resulting from (i) the execution,
      delivery, performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, (ii) any
      transaction financed or to be financed in whole or in part, directly or
      indirectly, with the proceeds of the issuance of the Securities, or (iii) the
      status of such Buyer or holder of the Securities as an investor in the Company.
      To the extent that the foregoing undertaking by the Company may be unenforceable
      for any reason, the Company shall make the maximum contribution to the payment
      and satisfaction of each of the Indemnified Liabilities which is permissible
      under applicable law. 

    


    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    (2) Promptly
      after receipt by an Indemnitee under this Section 9(k) of notice of the
      commencement of any action or proceeding (including any governmental action
      or
      proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
      claim for indemnification in respect thereof is to be made against any
      indemnifying party under this Section 9(k), deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnitee; provided,
      however,
      that an
      Indemnitee shall have the right to retain its own counsel with the fees and
      expenses of not more than one counsel for such Indemnitee to be paid by the
      indemnifying party, if, in the reasonable opinion of the Indemnitee, the
      representation by such counsel of the Indemnitee and the indemnifying party
      would be inappropriate due to actual or potential differing interests between
      such Indemnitee and any other party represented by such counsel in such
      proceeding. Legal counsel referred to in the immediately preceding sentence
      shall be selected by the Buyers holding at least a majority of the Securities
      issued and issuable hereunder. The Indemnitee shall cooperate fully with the
      indemnifying party in connection with any negotiation or defense of any such
      action or Indemnified Liabilities by the indemnifying party and shall furnish
      to
      the indemnifying party all information reasonably available to the Indemnitee
      that relates to such action or Indemnified Liabilities. The indemnifying party
      shall keep the Indemnitee fully apprised at all times as to the status of the
      defense or any settlement negotiations with respect thereto. No indemnifying
      party shall be liable for any settlement of any action, claim or proceeding
      effected without its prior written consent, provided,
      however,
      that
      the indemnifying party shall not unreasonably withhold, delay or condition
      its
      consent. No indemnifying party shall, without the prior written consent of
      the
      Indemnitee, which consent shall not be unreasonably withheld conditioned or
      delayed, consent to entry of any judgment or enter into any settlement or other
      compromise which (i) does not include as an unconditional term thereof the
      giving by the claimant or plaintiff to such Indemnitee of a release from all
      liability in respect to such Indemnified Liabilities or litigation, (ii)
      requires any admission of wrongdoing by such Indemnitee, or (iii) obligates
      or
      requires an Indemnitee to take, or refrain from taking, any action. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnitee with respect to all third parties,
      firms or corporations relating to the matter for which indemnification has
      been
      made. The failure to deliver written notice to the indemnifying party within
      a
      reasonable time of the commencement of any such action shall not relieve such
      indemnifying party of any liability to the Indemnitee under this Section 9(k),
      except to the extent that the indemnifying party is prejudiced in its ability
      to
      defend such action.

    


    (3) The
      indemnification required by this Section 9(k) shall be made by periodic payments
      of the amount thereof during the course of the investigation or defense, as
      and
      when bills are received or Indemnified Liabilities are incurred.

    


    (4) The
      indemnity agreements contained herein shall be in addition to (x) any cause
      of
      action or similar right of the Indemnitee against the indemnifying party or
      others, and (y) any liabilities the indemnifying party may be subject to
      pursuant to the law.

     

    (l) No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    (m) Remedies.
      Each
      Buyer and each holder of the Securities shall have all rights and remedies
      set
      forth in the Transaction Documents and all rights and remedies which such
      holders have been granted at any time under any other agreement or contract
      and
      all of the rights which such holders have under any law. Any Person having
      any
      rights under any provision of this Agreement shall be entitled to enforce such
      rights specifically (without posting a bond or other security), to recover
      damages by reason of any breach of any provision of this Agreement and to
      exercise all other rights granted by law. Furthermore, the Company recognizes
      that in the event that it fails to perform, observe, or discharge any or all
      of
      its obligations under the Transaction Documents, any remedy at law may prove
      to
      be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
      shall be entitled to seek temporary and permanent injunctive relief in any
      such
      case without the necessity of proving actual damages and without posting a
      bond
      or other security.

     

    (n) Rescission
      and
      Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever any Buyer 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 Buyer 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

     

    (o) Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to the Buyers hereunder
      or
      pursuant to any of the other Transaction Documents or the Buyers enforce or
      exercise their rights hereunder or thereunder, and such payment or payments
      or
      the proceeds of such enforcement or exercise or any part thereof are
      subsequently invalidated, declared to be fraudulent or preferential, set aside,
      recovered from, disgorged by or are required to be refunded, repaid or otherwise
      restored to the Company, a trustee, receiver or any other Person under any
      law
      (including, without limitation, any bankruptcy law, foreign, 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.

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    (p) Independent
      Nature of Buyers' Obligations and Rights.
      The
      obligations of each Buyer under any Transaction Document are several and not
      joint with the obligations of any other Buyer, and no Buyer shall be responsible
      in any way for the performance of the obligations of any other Buyer under
      any
      Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Buyer pursuant hereto or thereto, shall
      be
      deemed to constitute the Buyers as a partnership, an association, a joint
      venture or any other kind of entity, or create a presumption that the Buyers
      are
      in any way acting in concert or as a group with respect to such obligations
      or
      the transactions contemplated by the Transaction Documents and the Company
      acknowledges that the Buyers are not acting in concert or as a group with
      respect to such obligations or the transactions contemplated by the Transaction
      Documents. Each Buyer confirms that it has independently participated in the
      negotiation of the transaction contemplated hereby with the advice of its own
      counsel and advisors. Each Buyer shall be entitled to independently protect
      and
      enforce its rights, including, without limitation, the rights arising out of
      this Agreement or out of any other Transaction Documents, and it shall not
      be
      necessary for any other Buyer to be joined as an additional party in any
      proceeding for such purpose.

     

    [Signature
      Page Follows]

     

    
      
         

      

      
        39

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused its respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

    


     

    
      	
              COMPANY:

            
	 
	
              MSGI
                SECURITY SOLUTIONS, INC.

               

               

              By:     
                /s/
                Jeremy Barbera 

              
                

              

              Name:
                Jeremy Barbera

              Title:
                Chairman and CEO

            
	 


    

     

    
 

    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

     

    
      	
              BUYERS:

            
	 
	
              HUDSON
                BAY FUND, LP

               

               

              By:     
                /s/
                Yoav Roth 

              
                
                  

                

              

              Name:
                Yoav Roth

              Title:
                Principal and Portfolio Manager

            
	 


    

     

     

     

    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    


     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    


    
      	
              BUYERS:

            
	 
	
              HUDSON
                BAY OVERSEAS FUND, LTD.

               

               

              By:     
                /s/
                Yoav Roth 

              
                
                  

                

              

              Name:
                Yoav Roth

              Title:
                Principal and Portfolio Manager

            


    

     

    
 

    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    



     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    


    
      	
              BUYERS:

            
	 
	
              ENABLE
                GROWTH PARTNERS LP

               

               

              By:     
                /s/
                Brendan O’Neil 

              
                
                  

                

              

              Name:
                Brendan O’Neil

              Title:
                President & Chief Investment
                Officer

            


    

    


     

     

    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    


    
      	
              BUYERS:

            
	 
	
              PIERCE
                DIVERSIFIED STRATEGY MASTER FUND LLC, ENA

               

               

              By:     
                /s/
                Brendan O’Neil

              
                
                  

                

              

              Name:
                Brendan O’Neil

              Title:
                President & Chief Investment
                Officer

            


    

     

    
 

    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    


    
      	
              BUYERS:

            
	 
	
              JGB
                CAPITAL L.P.

               

               

              By:     
                /s/
                Brett Cohen 

              
                
                  

                

              

              Name:
                Brett Cohen

              Title:
                President

            


    

    



    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    


    
      	
              BUYERS:

            
	 
	
              JGB
                CAPITAL OFFSHORE LTD.

               

               

              By:     
                /s/
                Brett Cohen 

              
                
                  

                

              

              Name:
                Brett Cohen

              Title:
                President

            


    

     

    
 

    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    


    SCHEDULE
      OF BUYERS

    
 

    
      	
              (1)

            	
              (2)

            	
              (3)

            	
              (4)

            	
              (5)

            	
              (6)

            	
              (7)

            	
              (8)

            	
              (9)

            	
              (10)

            	
              (11)

            	
              (12)

            	
              (13)

            	
              (14)

            
	
              Buyer

            	
              Address
                and

              Facsimile
                Number

            	
              Number
                of

              Original
                Series A Warrant Shares

            	
              Number
                of

              Original
                Series B Warrant Shares

            	
              Number
                of Shares Subject to Put Option 

            	
              Purchase
                Price

            	
              Net
                Purchase Price

            	
              Remaining
                Purchase Price

            	
              Current
                Purchase Price

            	
              Number
                of

              Exchange
                Preferred Shares

            	
              Number
                of Exchange

              Warrant
                Shares

            	
              Number
                of

              New
                Preferred Shares

            	
              Number
                of New Warrant Shares

            	
              Legal
                Representative's Address and Facsimile Number

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hudson
                Bay Fund, LP

            	
              120
                Broadway, 40th Floor

              New
                York, New York 10271

              Attention:
                Yoav Roth

              May
                Lee

              Facsimile:
                212-571-1279

              Telephone:
                212-571-12444

              Residence:
                United States

              E-mail:
                investments@hudsonbaycapital.com

            	
              1,075,000

            	
              1,075,000

            	
              1,075,000

            	
              $1,075,000

            	
              $430,000

            	
              $645,00

            	
              $215,000

            	
              537,500

            	
              537,500

            	
              537,500

            	
              537,500

            	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

              Email:
                Eleazer.Klein@srz.com

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Hudson
                Bay Overseas Fund, Ltd.

            	
              120
                Broadway, 40th Floor

              New
                York, New York 10271

              Attention:
                Yoav Roth

              May
                Lee

              Facsimile:
                212-571-1279

              Telephone:
                212-571-12444

              E-mail:
                investments@hudsonbaycapital.com

            	
              1,425,000

            	
              1,425,000

            	
              1,425,000

            	
              $1,425,000

            	
              $570,000

            	
              $855,000

            	
              $285,000

            	
              712,500

            	
              712,500

            	
              712,500

            	
              712,500

            	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

              Email:
                Eleazer.Klein@srz.com

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Enable
                Growth Partners LP

            	
              One
                Ferry Building, Suite 255

              San
                Francisco, CA 94111

              Attention:
                Brendan O'Neil

              Telephone:
                415-677-1578

              Facsimile:
                415-677-1580

              Email:boneil@enablecapital.com

            	
              0

            	
              0

            	
              1,900,000

            	
              $1,900,000

            	
              $760,000

            	
              $1,140,000

            	
              0

            	
              0

            	
              0

            	
              1,900,000

            	
              1,900,000

            	 


    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

     

    
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Pierce
                Diversified Strategy Master Fund LLC, ena

            	
              One
                Ferry Building, Suite 255

              San
                Francisco, CA 94111

              Attention:
                Brendan O'Neil

              Telephone:
                415-677-1578

              Facsimile:
                415-677-1580

              Email:boneil@enablecapital.com

            	 	 	
              $100,000

            	
              $100,000

            	
              $40,000

            	
              $60,000

            	
              0

            	
              0

            	
              0

            	
              100,000

            	
              100,000

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              JGB
                Capital L.P.

            	
              660
                Madison Avenue

              21st
                Floor

              New
                York, New York 10021

              Attention:
                Brett Cohen/

              Everett
                Alexander

              Telephone:
                212-355-5771

              Facsimile:
                212-253-4093

              E-mail:
                bcohen@jgbcap.com

            	
              0

            	
              0

            	
              250,000

            	
              $250,000

            	
              $100,000

            	
              $150,000

            	
              0

            	
              0

            	
              0

            	
              250,000

            	
              250,000

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              JGB
                Capital Offshore Ltd.

            	
              660
                Madison Avenue

              21st
                Floor

              New
                York, New York 10021

              Attention:
                Brett Cohen/

              Everett
                Alexander

              Telephone:
                212-355-5771

              Facsimile:
                212-253-4093

              E-mail:
                bcohen@jgbcap.com

            	
              0

            	
              0

            	
              250,000

            	
              $250,000

            	
              $100,000

            	
              $150,000

            	
              0

            	
              0

            	
              0

            	
              250,000

            	
              250,000

            	 


    

    


    
      
        
          [Signature
            Page to Securities Purchase Agreement]

        

      

      
        
        

        
          

        

      

      
         

      

    



     

    EXHIBITS

     

    


    
      	
              Exhibit
                A-1

            	
              Form
                of Certificate of Designations

            
	
              Exhibit
                A-2

            	
              Form
                of Warrant

            
	
              Exhibit
                B

            	
              Form
                of Amended and Restated Put Option Agreement

            
	
              Exhibit
                C

            	
              Form
                of Irrevocable Transfer Agent Instructions

            
	
              Exhibit
                D

            	
              Form
                of Company Counsel Opinion

            
	
              Exhibit
                E

            	
              Form
                of Secretary's Certificate

            
	
              Exhibit
                F

            	
              Form
                of Officer's Certificate

            


    

    



    
      
         

      

      
        
        

        
          

        

      

      
         

      

    


     

    SCHEDULES

     

    


    Schedule
      3(a) - List of Subsidiaries

    Schedule
      3(l) - Absence of Certain Changes

    Schedule
      3(r) - Equity Capitalization

    Schedule
      3(s) - Indebtedness and Other Contracts

    Schedule
      3(t) - Absence of Litigation

    Schedule
      3(u) - Insurance

    Schedule
      4(d) - Use of Proceeds

    


    
      
         

      

      
        
        

        
          

        

      

      
         

      

    


    Schedule
      3(a)

    Direct
      and Indirect Subsidiaries

    


    


    Future
      Developments America, Inc., a Delaware corporation, is in good standing and
      is
      presently dormant.. The Company owns 100% of the issued and outstanding stock
      of
      Future Developments America, Inc.

     

    Innalogic,
      LLC, a Delaware limited liability company. The company holds an 82% membership
      stake in Innalogic, LLC.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    


    Schedule
      3(l)

    Material
      Adverse Changes

    


    


    NONE

     

    
 

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Schedule
      3(r)

    Capitalization
      of the Company

    


    


    
      	
              Authorized
                shares of common stock

            	 	 	
              100,000,000

            	 
	 	 	 	 	 
	
              Shares
                of common stock outstanding

            	 	 	
              19,357,522

            	 
	 	 	 	 	 
	
              Shares
                of common stock in treasury

            	 	 	
              17,662

            	 
	 	 	 	 	 
	
              Shares
                of common stock reserved for

            	 	 	 	 
	
              issuance
                pursuant to outstanding warrants

            	 	 	
              14,514,594
                

            	 
	 	 	 	 	 
	
              Shares
                of common stock reserved for 

            	 	 	 	 
	
              issuance
                pursuant to pending warrants

            	 	 	 	 
	
              committed
                to Hyundai Syscomm Corp

            	 	 	
              24,000,000

            	 
	 	 	 	 	 
	
              Shares
                of common stock reserved for 

            	 	 	 	 
	
              issuance
                committed to Hyundai Syscomm Corp

            	 	 	
              35,000

            	 
	 	 	 	 	 
	
              Shares
                of common stock reserved for 

            	 	 	 	 
	
              issuance
                pursuant to outstanding 

            	 	 	 	 
	
              convertible
                notes and debentures

            	 	 	
              7,659,883

            	 
	 	 	 	 	 
	
              Shares
                of common stock reserved for 

            	 	 	 	 
	
              issuance
                pursuant to outstanding stock

            	 	 	 	 
	
              options

            	 	 	
              975,000

            	 
	 	 	 	 	 
	
              Shares
                of common stock reserved for 

            	 	 	 	 
	
              Issuances
                to the Company CEO

            	 	 	
              200,000

            	 


    

    


    



    
      
         

      

      
        
        

        
          

        

      

      
         

      

    


    Schedule
      3(s)

    Secured
      and Unsecured Indebtedness and Other Contracts

    


    


    
      	
              6%
                callable convertible notes due and payable on

            	 	 	 	 
	
              December
                13, 2009

            	 	
              $

            	
              1,000,000

            	 
	 	 	 	 	 
	
              6%
                callable convertible notes due and payable on

            	 	 	 	 
	
              April
                4, 2010

            	 	
              $

            	
              1,000,000

            	 
	 	 	 	 	 
	
              8%
                callable convertible debentures due and payable 

            	 	 	 	 
	
              on
                May 21, 2010

            	 	
              $

            	
              5,000,000

            	 
	 	 	 	 	 
	
              Promissory
                notes due and payable on

            	 	 	 	 
	
              December
                13, 2009

            	 	
              $

            	
              600,000

            	 
	 	 	 	 	 
	
              Term
                loan notes due on April 15, 2008

            	 	
              $

            	
              2,860,000

            	 


    

    


    
      
         

      

      
        
        

        
          

        

      

      
         

      

    


    Schedule
      3(t)

    Litigation

    


    


    NONE

    


    
      
         

      

      
        
        

        
          

        

      

      
         

      

    


    Schedule
      3(u)

    Insurance

    


    


    The
      Company has prudent and customary directors and officers insurance and
      automobile insurance coverages. The Company is currently sourcing renewal
      policies for general liability, business interruption and other general business
      insurance policies

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    


    Schedule
      4(d)

    Use
      of Proceeds

    


    The
      use
      of proceeds is as follows: (i) $500,000 to be used by the Company as a deposit
      for its purchase of securities issued by Current Technology Corporation (a
      corporation formed under the laws of the Canada Business Corporations
      Act), (ii) $ 3,000,000 to be deposited with a bank to collateralize
      the Letter of Credit in accordance with Section 4(p) and (iii) the
      remainder to be used for general corporate purposes, including general and
      administrative expenses and not for (x) the repayment of any outstanding
      Indebtedness of the Company or any of its Subsidiaries or (y) the redemption
      or
      repurchase of any of its or its Subsidiaries' equity securities.