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     **“Closing”**means the closing of the acquisition and issuance of a Warrant pursuant to Article2.     **“Closing Date”**means the Business Day immediately following the date on which all of theconditions set forth in Sections 6.1 and 6.2 hereof are satisfied, or such other date as theparties may agree.     **“Commission”**means the Securities and Exchange Commission.     **“Common Stock”**means the common stock of the Company, par value $0.001 per share, and anysecurities into which such common stock may hereafter be reclassified.     **“Common Stock Equivalents”**means any securities of the Company or any Subsidiary which entitlethe holder thereof to acquire Common Stock at any time, including without limitation, any debt,preferred stock, rights, options, warrants or other instrument that is at any time convertible intoor exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or othersecurities that entitle the holder to receive, directly or indirectly, Common Stock.     **“Company Counsel”**means Cowden & Humphrey Co. LPA.     **“Company Deliverables”**has the meaning set forth in Section 2.4.     **“Effective Date”**means the date that any Registration Statement filed pursuant to Article 4 isfirst declared effective by the Commission.     **“Effectiveness Period”**has the meaning set forth in Section 4.1(b).     **“Environmental Law”**has the meaning set forth in Section 3.1(x).     **“ERISA”**means the Employee Retirement Income Security Act of 1974, as amended, and the rulesand regulations promulgated thereunder.     **“ERISA Affiliate”**means any trade or business, whether or not incorporated, that together withthe Company would be deemed to be a single employer for purposes of Section 4001 of ERISA orSections 414(b), (c), (m), (n) or (o) of the Internal Revenue Code of 1986, as amended.     **“Evaluation Date”**has the meaning set forth in Section 3.1(r).     **“Exchange Act”**means the Securities Exchange Act of 1934, as amended.     **“Exempt Issuance”**means the issuance by the Company (a) to employees, officers, directors of,and consultants to, the Company of shares of Common Stock or options for the purchase of shares ofCommon Stock pursuant to stock option or long-term incentive plans approved by the Board, (b) ofshares of Common Stock upon the exercise of Warrants issued hereunder, (c) of shares of Common Stock upon conversion of shares of Series A PreferredStock, (d) of shares of Common Stock upon exercise of Prior Warrants or conversion of Prior
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Convertible Securities, (e) of securities issued pursuant to acquisitions, licensing agreements, orother strategic transactions, (f) of securities issued in connection with equipment leases, realproperty leases, loans, credit lines, guaranties or similar transactions approved by the Board, (g)of securities issued in connection with join ventures or similar strategic relationships approvedby the Board, (h) of securities in a merger, or (i) of securities in a public offering registeredunder the Securities Act; provided that in the case of securities issued pursuant clauses (e), (f),(g) and (h), the purpose of such issuance may not be primarily to obtain cash financing.     **“Filing Date”**means the date that is six months after the Closing Date.     **“Financial Statements”**has the meaning set forth in Section 3.1(h).     **“GAAP”**means generally accepted accounting principles as in effect as of the date hereof inthe United States of America.     **“Governmental Authority”**has the meaning set forth in Section 3.1(e).     **“Hazardous Substance”**has the meaning set forth in Section 3.1(x).     **“Indemnified Party”**has the meaning set forth in Section 4.6(c).     **“Indemnified Person”**has the meaning set forth in Section 4.6(a).     **“Indemnifying Party”**has the meaning set forth in Section 4.6(c).     **“Intellectual Property Rights”**has the meaning set forth in Section 3.1(o).     **“Lien”**means any lien, charge, encumbrance, security interest, right of first refusal or otherrestrictions of any kind.     **“Material Adverse Effect”**means any of (i) a material and adverse effect on the legality,validity or enforceability of any Transaction Document, (ii) a material and adverse effect on theresults of operations, assets, prospects, business or condition (financial or otherwise) of theCompany and the Subsidiary, taken as a whole, or (iii) a material impairment of the Company’sability to perform on a timely basis its obligations under any Transaction Document.     **“OFAC”**has the meaning set forth in Section 3.1(aa).     **“Person”**means an individual or corporation, partnership, trust, incorporated orunincorporated association, joint venture, limited liability company, joint stock company,government (or an agency or subdivision thereof) or other entity of any kind.     **“Post-Effective Amendment”**means a post-effective amendment to the Registration Statement.     **“Post-Effective Amendment Filing Deadline”**means the seventh Business Day after theRegistration Statement ceases to be effective pursuant to applicable securities laws due to the
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passage of time or the occurrence of an event requiring the Company to file a Post-EffectiveAmendment.     **“Proceeding”**means an action, claim, suit, investigation or proceeding (including, withoutlimitation, an investigation or partial proceeding, such as a deposition), whether commenced orthreatened.     **“Prospectus”**has the meaning set forth in Section 4.3.     **“Registrable Securities”**means the Warrant Shares issuable to the Investor; provided, however,that the Investor shall not be required to exercise the Warrant in order to have the Shares coveredby it included in any Registration Statement.     **“Registration Period”**means the period commencing on the date hereof and ending on the date onwhich all of the Registrable Securities may be sold to the public without registration and withoutvolume or manner restrictions under the Securities Act in reliance on Rule 144.     **“Registration Statement”**means a registration statement filed on the appropriate Form with,and declared effective by, the Commission under the Securities Act and covering the resale by theInvestor of the Registrable Securities.     **“Requested Information”**has the meaning set forth in Section 4.3(a).     **“Required Effectiveness Date”**means the earlier of (i) the date that is eight months after theClosing Date without SEC review or eleven months in the event of an SEC review process, or, in thecase of the registration of Cut Back Shares (as defined in Section 4.1(a)), eleven months after theRestriction Termination Date or (ii) five Business Days after receipt by the Company from theCommission of notice of “no review” of the Registration Statement.     **“Rule 144”**means Rule 144 promulgated by the Commission pursuant to the Securities Act, assuch Rule may be amended from time to time, or any similar rule or regulation hereafter adopted bythe Commission having substantially the same effect as such Rule.     **“SEC Reports”**has the meaning set forth in Section 3.1(h).     **“Securities”**means the Warrant and the Warrant Shares.     **“Securities Act”**means the Securities Act of 1933, as amended.     **“Shares”**means the shares of Common Stock issuable to the Investor.     **“Subsidiary”**means any “significant subsidiary” as defined in Rule 1-02(w) of Regulation S Xpromulgated by the Commission under the Exchange Act.     **“Trading Day”**means (i) a day on which the Common Stock is traded on a Trading Market, or (ii)if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board,or (iii) if the Common Stock is not then listed or quoted on the OTC Bulletin Board, a day on
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which the Common Stock is quoted in the over-the-counter market as reported by the National QuotationBureau Incorporated (or any similar organization or agency succeeding to its functions of reportingprices); provided, that in the event that the Common Stock is not listed or quoted as set forth in(i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.     **“Trading Market”**means whichever of the New York Stock Exchange, the American Stock Exchange,the Nasdaq National Market, or the Nasdaq Over-the-Counter Market on which the Common Stock islisted or traded on the date in question.     **“Transaction Documents”**means this Agreement, the Warrant and any other documents oragreements executed in connection with the transactions contemplated hereunder.     **“Warrant”**means the Common Stock Purchase Warrant, in the form of Exhibit A, which isissuable to the Investor at the Closing.     **“Warrant Shares”**means the shares of Common Stock issuable upon exercise of the Warrants.**ARTICLE 2****ISSUE AND SALE**     Section 2.1. **Issuance of Securities at the Closing**. Upon the terms and subject tothe conditions set forth in this Agreement, and in accordance with applicable law, the Companyagrees to issue to the Investor, and the Investor agrees to accept from the Company, a Warrant inthe form of Exhibit A to purchase [___,000] shares of Common Stock.     Section 2.2. **Consideration**. As consideration for the issuance of the Warrant beingacquired at the Closing, the Investor shall on the Closing Date take all actions required of it.     Section 2.3. **Delivery of Warrant**. At the Closing, the Company shall take all actionsrequired of it to (i) issue to the Investor the Warrant and (ii) execute and deliver to thetransfer agent for the Common Stock irrevocable instructions to issue to the Investor the Warrant.     Section 2.4. **Additional Closing Deliveries**. At the Closing, the Company shall deliveror cause to be delivered to the Investor the following (the “**Company Deliverables**”):               (i) Irrevocable instructions to the Company’s transfer agent as to the reservation andissuance of the Warrant Shares; and               (ii) A good standing certificate of the Company issued by the Secretary of State of the Stateof Delaware dated as of a recent date.     Section 2.5. **Representations and Warranties of the Company**. The Company hereby makesthe following representations and warranties to the Investor:          (a) **Subsidiaries**. The Company has no direct or indirect Subsidiaries other than asdisclosed to Investor.
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          (b) **Organization and Qualification**. Each of the Company and each Subsidiary is dulyincorporated or otherwise organized, validly existing and in good standing under the laws of thejurisdiction of its incorporation or organization (as applicable), with the requisite power andauthority to own and use its properties and assets and to carry on its business as currentlyconducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of itsrespective certificate or articles of incorporation, bylaws or other organizational or charterdocuments. Each of the Company and each Subsidiary is duly qualified to conduct its respectivebusiness and is in good standing as a foreign corporation or other entity in each jurisdiction inwhich the nature of the business conducted or property owned by it makes such qualificationnecessary, except where the failure to be so qualified or in good standing, as the case may be,could not, individually or in the aggregate, have or reasonably be expected to result in a MaterialAdverse Effect, and no proceedings have been instituted in any such jurisdiction revoking, limitingor curtailing, or seeking to revoke, such power and authority or qualification.          (c) **Authorization; Enforcement**. The Company has the requisite corporate power andauthority to enter into and to consummate the transactions contemplated by each of the TransactionDocuments and otherwise to carry out its obligations thereunder. The execution and delivery of eachof the Transaction Documents by the Company and the consummation by it of the transactionscontemplated thereby have been duly authorized by all necessary action on the part of the Companyand no further corporate action is required by the Company in connection therewith[; provided,however, that Investor shall not have the right to exercise the Warrant unless and until theshareholders of the Company have approved this Agreement and the Warrant in 2010 at their regularannual meeting or a special meeting held for that purpose]. Each Transaction Document has been (orupon delivery will have been) duly executed by the Company and, when delivered in accordance withthe terms hereof, will constitute the valid and binding obligation of the Company enforceableagainst the Company in accordance with its terms, except as such enforceability may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relatingto, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitableprinciples of general application.          (d) **No Conflicts**. The execution, delivery and performance of the Transaction Documentsby the Company and the consummation by the Company of the transactions contemplated thereby do notand will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’scertificate or articles of incorporation, bylaws or other organizational or charter documents, or(ii) conflict with, or constitute a breach or default (or an event that with notice or lapse oftime or both would become a breach or default) under, or give to others any rights of termination,amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, orresult in the imposition of any Lien upon any of the material properties or assets of the Companyor of any Subsidiary pursuant to, any agreement, credit facility, debt or other instrument(evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Companyor any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary isbound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment,injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal andstate securities laws and regulations), or by which any property or asset of the Company or aSubsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such ascould
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not, individually or in the aggregate, have or reasonably be expected to result in a MaterialAdverse Effect.          (e) **Filings, Consents and Approvals**. The Company is not required to obtain anyconsent, waiver, authorization or order of, give any notice to, or make any filing or registrationwith, any court or other federal, state, local or other governmental authority (a “**GovernmentalAuthority**”) or other Person in connection with the execution, delivery and performance by theCompany of the Transaction Documents and the consummation of the transactions contemplated thereby,other than (i) the filing of a Notice of Sale of Securities on Form D with the Commission underRegulation D of the Securities Act, (ii) filings required under applicable state securities laws,(iii) the filing with the Commission of one or more Registration Statements in accordance with therequirements of Article 4 of this Agreement, and (iv) the submission to the NASDAQ Stock Market LLCof a Notification: Listing of Additional Shares.          (f) **Issuance of the Securities**. The Company has reserved and set aside from its dulyauthorized capital stock a sufficient number of shares of Common Stock to satisfy in full theCompany’s obligations to issue the Warrant Shares upon exercise of the Warrants. The WarrantShares are duly authorized and, when issued and paid for upon exercise of the Warrants inaccordance with their terms, will be duly and validly issued, fully paid and nonassessable, freeand clear of all Liens, other than Liens created by the Investor and those imposed by applicablesecurities laws.          (g) **Capitalization**. The authorized capital stock of the Company consists of 30,000,000shares of Common Stock and no shares of Preferred Stock, par value $.0001, of which no shares havebeen designed Series A Preferred Stock and no shares are undesignated. As of the close of businesson December 31, 2009, 21,077,859 shares of Common Stock were issued and outstanding, all of whichare validly issued, fully-paid and non-assessable. No Person has any right of first refusal,preemptive right, right of participation, or any similar right to participate in the transactionscontemplated by the Transaction Documents. Except pursuant to outstanding options granted todirectors, officers, employees, and consultants of the Company, to outstanding warrants to purchaseCommon Stock, and to the reservation of shares for sale under the Company’s Stock Purchase Plan, oras a result of transactions in Securities as contemplated by this Agreement and the Member InterestPurchase Agreement dated as of December 31, 2009 relating to the acquisition of Stones RiverCompanies, LLC, there are no outstanding options, warrants, script rights to subscribe to, calls orcommitments of any character whatsoever relating to, or securities, rights or obligationsconvertible into or exchangeable for, or giving any Person any right to subscribe for or acquire,any shares of Common Stock, or contracts, commitments, understandings or arrangements by which theCompany or any Subsidiary is or may become bound to issue additional shares of Common Stock orCommon Stock Equivalents. The issue and sale of the Securities will not obligate the Company toissue shares of Common Stock or other securities to any Person (other than the Investor) and willnot result in a right of any holder of Company securities to adjust the exercise or conversionprice under such securities. No further approval or authorization of any stockholder, the Board ofDirectors of the Company or any other Person is required for the issuance and sale of the Securities. There are nostockholders agreements, voting agreements or other similar agreements with respect to theCompany’s
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capital stock to which the Company is a party or, to the knowledge of the Company,between or among any of the Company’s stockholders.          (h) **SEC Reports; Financial Statements**. The Company has filed all reports required tobe filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a)or 15(d) thereof, for the twelve months preceding the date hereof (the foregoing materials, beingcollectively referred to herein as the “**SEC Reports**”). As of their respective dates, the SECReports complied in all material respects with the requirements of the Securities Act and theExchange Act and the rules and regulations of the Commission promulgated thereunder, and none ofthe SEC Reports, when filed, contained any untrue statement of a material fact or omitted to statea material fact required to be stated therein or necessary in order to make the statements therein,in light of the circumstances under which they were made, not misleading. The financial statementsof the Company (the “**Financial Statements**”) included in the SEC Reports comply in all materialrespects with applicable accounting requirements and the rules and regulations of the Commissionwith respect thereto as in effect at the time of filing. Such Financial Statements have beenprepared in accordance with GAAP applied on a consistent basis during the periods involved, exceptas may be otherwise specified in such Financial Statements or the notes thereto, and fairly presentin all material respects the financial position of the Company and its consolidated Subsidiaries asof and for the dates thereof and the results of operations and cash flows for the periods thenended, subject, in the case of unaudited statements, to normal year-end audit adjustments.          (i) **Material Changes**. Except as set forth in the Financial Statements, (i) there hasbeen no event, occurrence or development that has had or that could reasonably be expected toresult in a Material Adverse Effect, (ii) the Company has not incurred any liabilities orobligations (contingent or otherwise) other than (A) trade payables, accrued expenses and otherliabilities incurred in the ordinary course of business consistent with past practice incurredsince the date of the most recent Financial Statements and (B) liabilities incurred in the ordinarycourse of business not required to be reflected in the Financial Statements pursuant to GAAP orrequired to be disclosed in filings made with the Commission, (iii) the Company has not altered itsmethod of accounting or the identity of its auditors, (iv) the Company has not declared or made anydividend or distribution of cash or other property to its stockholders or purchased, redeemed ormade any agreements to purchase or redeem any shares of its capital stock, and (v) the Company hasnot issued any equity securities to any officer, director or Affiliate, except pursuant to existingCompany stock option plans or the Company Stock Options. The Company does not have pending beforethe Commission any request for confidential treatment of information. The Company maintains andwill continue to maintain a standard system of accounting established and administered inaccordance with GAAP.          (j) **Litigation and Investigations**. There is no Action which (i) challenges thelegality, validity or enforceability of any of the Transaction Documents or the Securities or (ii)except as specifically disclosed in the SEC Reports, could, if there were an unfavorable decision,individually or in the aggregate, have or reasonably be expected to result in a Material AdverseEffect. Neither the Company nor any Subsidiary, nor any director or officer thereof (in hiscapacity as such), is the subject of any pending Action involving a claim of violation of orliability under federal or state securities laws or a claim of breach of fiduciary duty,except as specifically disclosed in the SEC Reports. To the knowledge of the Company, there is not
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pending any investigation by the Commission involving the Company or any current or former directoror officer of the Company (in his or her capacity as such). The Commission has not issued any stoporder or other order suspending the effectiveness of any registration statement filed by theCompany or any Subsidiary under the Exchange Act or the Securities Act. There are no outstandingcomments by the staff of the Commission on any filing by the Company or any Subsidiary under theExchange Act or the Securities Act.          (k) **Labor Relations**. No material labor dispute exists or, to the knowledge of theCompany, is imminent with respect to any of the employees of the Company.          (l) **Compliance**. Neither the Company nor any Subsidiary (i) is in default under or inviolation of (and no event has occurred that has not been waived that, with notice or lapse of timeor both, would result in a default by the Company or any Subsidiary under), nor has the Company orany Subsidiary received notice of a claim that it is in default under or that it is in violationof, any indenture, loan or credit agreement or any other agreement or instrument to which it is aparty or by which it or any of its properties is bound (whether or not such default or violationhas been waived), (ii) is in violation of any order of any court, arbitrator or governmental body,or (iii) is or has been in violation of any statute, rule or regulation of any governmentalauthority, including without limitation all foreign, federal, state and local laws relating totaxes, environmental protection, occupational health and safety, product quality and safety andemployment and labor matters, except in each case as could not, individually or in the aggregate,have or reasonably be expected to result in a Material Adverse Effect.          (m) **Regulatory Permits**. The Company and the Subsidiary possess all certificates,authorizations and permits issued by the appropriate federal, state, local or foreign regulatoryauthorities necessary to conduct their respective businesses as described in the SEC Reports,except where the failure to possess such permits could not, individually or in the aggregate, haveor reasonably be expected to result in a Material Adverse Effect, and neither the Company nor anySubsidiary has received any notice of proceedings relating to the revocation or modification of anysuch permits.          (n) **Title to Assets**. The Company and the Subsidiary have good and marketable title infee simple to all real property owned by them that is material to their respective businesses andgood and marketable title in all personal property owned by them that is material to theirrespective businesses, in each case free and clear of all Liens, except for Liens that do notmaterially affect the value of such property and do not materially interfere with the use made andproposed to be made of such property by the Company and the Subsidiary. All real property andfacilities held under lease by the Company and the Subsidiary are held by them under leases ofwhich the Company and the Subsidiary are in material compliance, except as could not, individuallyor in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.          (o) **Patents and Trademarks**. The Company and the Subsidiary have, or have valid rightsto use, all patents, patent applications, trademarks, trademark applications, service marks, tradenames, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SECReports and which the failure to so have could, individually or in the aggregate, have orreasonably be
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expected to result in a Material Adverse Effect (collectively, the “**IntellectualProperty Rights**”). No claims or Actions have been made or filed by any Person against the Companyto the effect that Intellectual Property Rights used by the Company or any Subsidiary violate orinfringe upon the rights of such claimant. To the knowledge of the Company, after commerciallyreasonable investigation, all of the Intellectual Property Rights are enforceable and there is noexisting infringement by another Person of any of the Intellectual Property Rights or by theCompany of the Intellectual Property Rights of any other Person.          (p) **Insurance**. The Company and the Subsidiary are insured by insurers of recognizedfinancial responsibility against such losses and risks and in such amounts as the Company believesare prudent and customary in the businesses in which the Company and the Subsidiary are engaged.The Company has no reason to believe that it will not be able to renew its and the Subsidiary’sexisting insurance coverage as and when such coverage expires or to obtain similar coverage fromsimilar insurers as may be necessary to continue its business on terms consistent with the marketfor the Company’s and such Subsidiaries’ respective lines of business.          (q) **Transactions With Affiliates and Employees**. Except as set forth in the SECReports, none of the officers or directors of the Company and, to the knowledge of the Company,none of the employees of the Company is a party to any transaction with the Company or anySubsidiary (other than for services as employees, officers and directors), including any contract,agreement or other arrangement providing for the furnishing of services to or by, providing forrental of real or personal property to or from, or otherwise requiring payments to or from anyofficer, director or such employee or, to the knowledge of the Company, any entity in which anyofficer, director, or any such employee has a substantial interest or is an officer, director,trustee or partner.          (r) **Sarbanes-Oxley; Internal Accounting Controls**. The Company is in materialcompliance with all provisions of the Sarbanes-Oxley Act of 2002 (including the rules andregulations of the Commission adopted thereunder) which are applicable to it as of the ClosingDate. The Company’s certifying officers have evaluated the effectiveness of the Company’sdisclosure controls and procedures as of the filing date of the most recently filed periodic reportunder the Exchange Act (such date, the “**Evaluation Date**”). The Company presented in its mostrecently filed periodic report under the Exchange Act the conclusions of the certifying officersabout the effectiveness of the disclosure controls and procedures based on their evaluations as ofthe Evaluation Date. Since the Evaluation Date, there have been no significant changes in theCompany’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under theExchange Act), or to the Company’s knowledge, in other factors that could significantly affect theCompany’s internal controls.          (s) **Certain Fees**. No brokerage or finder’s fees or commissions are or will be payableby the Company to any broker, financial advisor or consultant, finder, placement agent, investmentbanker, bank or other Person with respect to the transactions contemplated by this Agreement. TheInvestor shall have no obligation with respect to any fees or with respect to any claims (otherthan such fees or commissions owed by the Investor pursuant to written agreementsexecuted by the Investor which fees or commissions shall be the sole responsibility of the
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Investor) made by or on behalf of any Persons for fees of a type contemplated in this Section thatmay be due in connection with the transactions contemplated by this Agreement.          (t) **Certain Registration Matters**. Assuming the accuracy of the Investor’srepresentations and warranties set forth in Section 3.2(b)-(e), no registration under theSecurities Act is required for the offer and sale of the Securities by the Company to the Investorunder the Transaction Documents and the Asset Purchase Agreement.          (u) **Investment Company**. The Company is not, and is not an Affiliate of, andimmediately following the Closing will not have become, an “investment company” within the meaningof the Investment Company Act of 1940, as amended.          (v) **No Additional Agreements**. The Company does not have any agreement or understandingwith the Investor with respect to the transactions contemplated by the Transaction Documents otherthan as specified in the Transaction Documents and the Asset Purchase Agreement.          (w) **Full Disclosure**. The SEC Reports and the Company’s representations and warrantiesset forth in this Agreement, taken together, are true and correct in all material respects and donot contain any untrue statement of a material fact or omit to state any material fact necessary inorder to make the statements made therein, in light of the circumstances under which they weremade, not misleading. Except with respect to the material terms and conditions of the transactionscontemplated by the Transaction Documents, the Company confirms that neither it nor any otherPerson acting on its behalf has provided the Investor or Investor’s agents or counsel with anyinformation that it believes constitutes or might constitute material, non-public information. TheCompany understands and confirms that the Investor will rely on the foregoing representation ineffecting transactions in securities of the Company. The Company acknowledges and agrees that theInvestor does not make or has not made any representations or warranties with respect to thetransactions contemplated hereby other than those specifically set forth in Section 3.2 hereof orin the Asset Purchase Agreement.          (x) **Environmental Matters**. To the Company’s knowledge: (i) the Company and itsSubsidiary have complied with all applicable Environmental Laws, except for such noncompliance ascould not, individually or in the aggregate, have or reasonably be expected to result in a MaterialAdverse Effect; (ii) after commercially reasonable investigation, the properties currently owned oroperated by Company (including soils, groundwater, surface water, buildings or other structures)are not contaminated with any Hazardous Substances; (iii) after commercially reasonableinvestigation, the properties formerly owned or operated by Company or its Subsidiary were notcontaminated with Hazardous Substances during the period of ownership or operation by Company andits Subsidiary; (iv) Company and its Subsidiary are not subject to any material liability for anyHazardous Substance disposal or contamination on any third party property; (v) Company and itsSubsidiary have not received any written notice, demand, letter, claim or request for informationalleging that Company and its Subsidiary may be in violation of or liable under any EnvironmentalLaw; and (vi) Company and its Subsidiary are not subject to any orders, decrees, injunctions orother arrangements with any Governmental Authority or subject to any indemnity or other agreementwith any third party relating to liability
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under any Environmental Law or relating to Hazardous Substances which could, individually orin the aggregate, have or reasonably be expected to result in a Material Adverse Effect.          As used in this Agreement, the term “**Environmental Law**” means any federal, state, local orforeign law, regulation, order, decree, permit, authorization, opinion, common law or agencyrequirement relating to: (A) the protection, investigation or restoration of the environment,health and safety, or natural resources; (B) the handling, use, presence, disposal, release orthreatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution,contamination or any injury or threat of injury to persons or property.          As used in this Agreement, the term “**Hazardous Substance**” means any substance that is: (i)listed, classified or regulated pursuant to any Environmental Law; (ii) any petroleum product orby-product, asbestos-containing material, polychlorinated biphenyls, radioactive materials orradon; or (iii) any other substance which is the subject of regulatory action by any GovernmentalAuthority pursuant to any Environmental Law.          (y) **Taxes**. The Company and its Subsidiary have filed all necessary federal, state andforeign income and franchise tax returns when due (or obtained appropriate extensions for filing)and have paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a taxdeficiency which has been or might be asserted or threatened against it or any Subsidiary whichwould have a Material Adverse Effect.          (z) **ERISA**. Neither the Company nor any ERISA Affiliate maintains, contributes to orhas any liability or contingent liability with respect to any employee benefit plan subject toERISA.          (aa) **Foreign Assets Control Regulations and Anti-Money Laundering**.               (i) **OFAC**. Neither the issuance of the Warrants and Warrant Shares to the Investor,nor the use of the respective proceeds thereof, shall cause the Investor to violate the U.S. BankSecrecy Act, as amended, and any applicable regulations thereunder or any of the sanctions programsadministered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“**OFAC**”) ofthe United States Department of Treasury, any regulations promulgated thereunder by OFAC or underany affiliated or successor governmental or quasi-governmental office, bureau or agency and anyenabling legislation or executive order relating thereto. Without limiting the foregoing, neitherthe Company nor the Subsidiary (i) is a person whose property or interests in property are blockedor subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 200lBlocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, orSupport Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactionsprohibited by Section 2 of such executive order, or is otherwise associated with any such person inany manner violative of Section 2, or (iii) is a person on the list of Specially DesignatedNationals and Blocked Persons or subject to the limitations or prohibitions under any other OFACregulation or executive order.               (ii) **Patriot Act**. The Company and the Subsidiary are in compliance, in all materialrespects, with the USA PATRIOT Act. No part of the proceeds of the sale of the Warrant Shareshereunder will be used, directly or indirectly, for any payments to any
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governmental official or employee, political party, official of a political party, candidatefor political office, or anyone else acting in an official capacity, in order to obtain, retain ordirect business or obtain any improper advantage, in violation of the United States Foreign CorruptPractices Act of 1977, as amended.          (bb) **Acknowledgment Regarding Investor’s Trading Activity**. Except as expressly setforth herein, it is understood and acknowledged by the Company that, except to the extent requiredby applicable law: (i) the Investor has not been asked by the Company to agree, nor has theInvestor agreed, to desist from purchasing or selling, long and/or short, securities of theCompany, or “derivative” securities based on securities issued by the Company or to hold theSecurities for any specified term; (ii) that past or future open market or other transactions bythe Investor, specifically including, without limitation, short sales or “derivative” transactions,before or after the closing of this or future private placement transactions, may negatively impactthe market price of the Company’s publicly-traded securities; (iii) that the Investor, andcounter-parties in “derivative” transactions to which the Investor is a party, directly orindirectly, presently may have a “short” position in the Common Stock; and (iv) that the Investorshall not be deemed to have any affiliation with or control over any arm’s length counter-party inany “derivative” transaction. The Company further understands and acknowledges that, to the extentpermitted by applicable law (y) the Investor may engage in hedging activities at various timesduring the period that the Securities are outstanding, including, without limitation, during theperiods that the value of the Warrant Shares deliverable with respect to Securities are beingdetermined, and (z) such hedging activities (if any) could reduce the value of the existingstockholders’ equity interests in the Company at and after the time that the hedging activities arebeing conducted. The Company acknowledges that such aforementioned hedging activities do notconstitute a breach of any of the Transaction Documents, except to the extent that any suchactivities violate the provisions of applicable law.          (cc) **Regulation M Compliance**. The Company has not, and to its knowledge no one actingon its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result inthe stabilization or manipulation of the price of any security of the Company to facilitate thesale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensationfor soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Personany compensation for soliciting another to purchase any other securities of the Company.          (dd) **Form S-3 Eligibility**. The Company is eligible to register the resale of theWarrant Shares for resale by the Investor on Form S-3 promulgated under the Securities Act;provided, however, that no violation of this Section 3.1(dd) shall be deemed to have occurred inthe event that the SEC imposes any restriction on the registration of the Warrant Shares pursuantto Rule 415 as contemplated in Section 4.1(a) below.     Section 2.6. **Representations and Warranties of the Investor**. The Investor herebyrepresents and warrants to the Company as follows:          (a) **Authority**. This Agreement has been duly executed by the Investor, and whendelivered by the Investor in accordance with terms hereof, will constitute the valid and legallybinding obligation of the Investor, enforceable against Investor in accordance with its terms,except as such enforceability may be limited by applicable bankruptcy, insolvency,
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reorganization, moratorium, liquidation or similar laws relating to, or affecting generallythe enforcement of, creditors’ rights and remedies or by other equitable principles of generalapplication.          (b) **Own Account**. The Investor is acquiring the Securities as principal for Investor’sown account and not with a view to or for distributing or reselling such Securities or any partthereof, without prejudice, however, to the Investor’s right at all times to sell or otherwisedispose of all or any part of such Securities in compliance with applicable federal and statesecurities laws. The Investor does not have any agreement or understanding, directly or indirectly,with any Person to distribute any of the Securities.          (c) **Investor Status**. The Investor is an “accredited investor” as defined in Rule501(a) under the Securities Act. The Investor is not a registered broker-dealer under Section 15of the Exchange Act or associated or affiliated with such a broker-dealer. The Investor has aprincipal place of business at the address listed for Investor on the signature pages hereto.          (d) **Access to Information**. The Investor acknowledges that the Investor has reviewedthe SEC Reports and has been afforded: (i) the opportunity to ask such questions as the Investorhas deemed necessary of, and to receive answers from, representatives of the Company concerning theterms and conditions of the offering of the Securities and the merits and risks of investing in theSecurities; (ii) access to information about the Company and the Subsidiary and their respectivefinancial condition, results of operations, business, properties, management and prospectssufficient to enable Investor to evaluate Investor’s investment; and (iii) the opportunity toobtain such additional information that the Company possesses or can acquire without unreasonableeffort or expense that is necessary to make an informed investment decision with respect to theinvestment.          (e) **General Solicitation**. The Investor is not purchasing the Securities as a resultof any advertisement, article, notice or other communication regarding the Securities published inany newspaper, magazine or similar media or broadcast over television or radio or presented at anyseminar or any other general solicitation or general advertisement.          (f) **Disclosure**. The Investor acknowledges and agrees that the Company neither makesnor has made any representations or warranties with respect to the transactions contemplated herebyother than those specifically set forth in Section 3.1.          (g) **Regulation M Compliance**. The Investor has not, and to Investor’s knowledge no oneacting on Investor’s behalf has, (i) taken, directly or indirectly, any action designed to cause orto result in the stabilization or manipulation of the price of any security of the Company tofacilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid anycompensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay toany Person any compensation for soliciting another to purchase any other securities of the Company.
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**ARTICLE 3****REGISTRATION RIGHTS**     Section 3.1. **Shelf Registration**.          (a) As promptly as possible, and in any event on or prior to the Filing Date, the Companyshall prepare and file with the Commission a “shelf” Registration Statement covering the resale ofall Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415.If for any reason (including, without limitation, the Commission’s interpretation of Rule 415) theCommission does not permit all of the Registrable Securities to be included in such RegistrationStatement, then the Company shall prepare and file with the Commission one or more separateRegistration Statements with respect to any such Registrable Securities not included with theinitial Registration Statements, as soon as allowed under SEC Regulations and is commerciallypracticable. The Registration Statement shall be on a Form S-3; in the event Form S-3 is notavailable for the registration of the resale of Registrable Securities hereunder, the Company shall(i) register the resale of the Registrable Securities on another appropriate form in accordanceherewith and (ii) attempt to register the Registrable Securities on Form S-3 as soon as such formis available, provided that the Company shall maintain the effectiveness of the RegistrationStatements then in effect until such time as a Registration Statement on Form S-3 covering theRegistrable Securities has been declared effective by the Commission. If at any time the SEC takesthe position that the offering of some or all of the Registrable Securities in a RegistrationStatement is not eligible to be made on a delayed or continuous basis under the provisions of Rule415 under the 1933 Act or requires the Investor to be named as an “underwriter”, the Company shalluse its commercially reasonable best efforts to persuade the SEC that the offering contemplated bythe Registration Statement is a valid secondary offering and not an offering “by or on behalf ofthe issuer” as defined in Rule 415 and that the Investor is not an “underwriter”. The Investorshall have the right to participate or have their counsel participate in any meetings ordiscussions with the SEC regarding the SEC’s position and to comment or have Investor’s counselcomment on any written submission made to the SEC with respect thereto, and to have such commentsrelayed to the SEC with the consent of the Company, not to be unreasonably withheld. No suchwritten submission shall be made to the SEC to which the Investor’s counsel reasonably objects. Inthe event that, despite the Company’s commercially reasonable efforts and compliance with the termsof this Section 2(e), the SEC refuses to alter its position, the Company shall (i) remove from theRegistration Statement such portion of the Registrable Securities (the “**Cut Back Shares**”) and/or(ii) with the consent of the Investor’s counsel, not to be unreasonably withheld, agree to suchrestrictions and limitations on the registration and resale of the Registrable Securities as theSEC may require to assure the Company’s compliance with the requirements of Rule 415; provided,however, that the Company shall not agree to name the Investor as an “underwriter” in suchRegistration Statement without the prior written consent of the Investor (collectively, the “**SECRestrictions**”). No liquidated damages shall accrue on or as to any Cut Back Shares until such timeas the Company is able, using commercially reasonable efforts, to effect the filing of anadditional Registration Statement with respect to the Cut Back Shares in accordance with any SECRestrictions (such date, the “**Restriction Termination Date**”). From and after the RestrictionTermination Date, all of the provisions of this Article 4 (including the liquidated damagesprovisions) shall again be applicable to the Cut BackShares; provided, however, that
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for such purposes, references to the Filing Date shall be deemed to be the RestrictionTermination Date.          (b) The Company shall use its best efforts to cause each Registration Statement filedhereunder to be declared effective by the Commission as promptly as possible after the filingthereof, but in any event prior to the Required Effectiveness Date, and shall use its best effortsto keep the Registration Statement continuously effective under the Securities Act until theearlier of (i) the fifth anniversary of the Effective Date, (ii) the date when all RegistrableSecurities covered by such Registration Statement have been sold publicly, or (iii) the date onwhich the Registrable Securities are eligible for sale without volume limitation within athree-month period pursuant to Rule 144 or any successor thereto (the “**Effectiveness Period**”). TheCompany shall notify the Investor in writing promptly (and in any event within one Business Day)after receiving notification from the Commission that the Registration Statement has been declaredeffective.          (c) As promptly as possible, and in any event no later than the Post-Effective AmendmentFiling Deadline, the Company shall prepare and file with the Commission a Post-Effective Amendment.The Company shall use its best efforts to cause the Post-Effective Amendment to be declaredeffective by the Commission as promptly as possible after the filing thereof. The Company shallnotify the Investor in writing promptly (and in any event within one Business Day) after receivingnotification from the Commission that the Post-Effective Amendment has been declared effective.          (d) If the Company issues to the Investor any Common Stock pursuant to the TransactionDocuments that is not included in the initial Registration Statement, then the Company shall filean additional Registration Statement covering such number of shares of Common Stock on or prior tothe Filing Date and shall use it best efforts, but in no event later than the RequiredEffectiveness Date, to cause such additional Registration Statement to be declared effective by theCommission.          (e) The Registration Statement shall not include any securities other than the RegistrableSecurities without the prior written consent of the Investor.     Section 3.2. **Registration Process**. In connection with the registration of theRegistrable Securities pursuant to Section 4.1, the Company shall:          (a) Prepare and file with the Commission the Registration Statement and such amendments(including post effective amendments) to the Registration Statement and supplements to theprospectus included therein (a “**Prospectus**”) as the Company may deem necessary or appropriate andtake all lawful action such that the Registration Statement and any amendment thereto does not,when it becomes effective, contain an untrue statement of a material fact or omit to state amaterial fact required to be stated therein or necessary to make the statements therein, notmisleading and that the Prospectus forming part of the Registration Statement, and any amendment orsupplement thereto, does not at any time during the Registration Period include an untrue statementof a material fact or omit to state a material fact required to be stated therein or necessary tomake the statements therein, in light of the circumstances under which they were made, notmisleading.;
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          (b) Comply with the provisions of the Securities Act with respect to the RegistrableSecurities covered by the Registration Statement until the end of the Effectiveness Period;          (c) Prior to the filing with the Commission of the Registration Statement (including anyamendments thereto) and the distribution or delivery of any Prospectus (including any supplementsthereto), provide draft copies thereof to the Investor and reflect in such documents all suchcomments as the Investor (and Investor’s counsel) reasonably may propose and furnish to theInvestor and Investor’s legal counsel identified to the Company (i) promptly after the same isprepared and publicly distributed, filed with the Commission, or received by the Company, one copyof the Registration Statement, each Prospectus, and each amendment or supplement thereto, and (ii)such number of copies of the Prospectus and all amendments and supplements thereto and such otherdocuments, as the Investor may reasonably request in order to facilitate the disposition of theRegistrable Securities;          (d) (i) register or qualify the Registrable Securities covered by the Registration Statementunder such securities or “blue sky” laws of such jurisdictions as the Investor reasonably requests,(ii) prepare and file in such jurisdictions such amendments (including post effective amendments)and supplements to such registrations and qualifications as may be necessary to maintain theeffectiveness thereof at all times during the Registration Period, (iii) take all such other lawfulactions as may be necessary to maintain such registrations and qualifications in effect at alltimes during the Registration Period, and (iv) take all such other lawful actions reasonablynecessary or advisable to qualify the Registrable Securities for sale in such jurisdictions;provided, however, that the Company shall not be required in connection therewith or as a conditionthereto to (A) qualify to do business in any jurisdiction where it would not otherwise be requiredto qualify, (B) subject itself to general taxation in any such jurisdiction or (C) file a generalconsent to service of process in any such jurisdiction;          (e) As promptly as practicable after becoming aware of such event, notify the Investor of theoccurrence of any event, as a result of which the Prospectus included in the RegistrationStatement, as then in effect, includes an untrue statement of a material fact or omits to state amaterial fact required to be stated therein or necessary to make the statements therein, in lightof the circumstances under which they were made, not misleading, and promptly prepare an amendmentto the Registration Statement and supplement to the Prospectus to correct such untrue statement oromission, and deliver a number of copies of such supplement and amendment to the Investor as theInvestor may reasonably request;          (f) As promptly as practicable after becoming aware of such event, notify the Investor (or, inthe event of an underwritten offering, the managing underwriters) of the issuance by the Commissionof any stop order or other suspension of the effectiveness of the Registration Statement and takeall lawful action to effect the withdrawal, rescission or removal of such stop order or othersuspension;          (g) Take all such other lawful actions reasonably necessary to expedite and facilitate thedisposition by the Investor of his Registrable Securities in accordance with the intended methodstherefor provided in the Prospectus which are customary under the circumstances;
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          (h) Make generally available to its security holders as soon as practicable, but in any eventnot later than 18 months after the Effective Date of the Registration Statement, an earningsstatement of the Company and its Subsidiary complying with Section 11(a) of the Securities Act andthe rules and regulations of the Commission thereunder;          (i) In the event of an underwritten offering, promptly include or incorporate in a Prospectussupplement or post effective amendment to the Registration Statement such information as theunderwriters reasonably agree should be included therein and to which the Company does notreasonably object and make all required filings of such Prospectus supplement or post effectiveamendment as soon as practicable after it is notified of the matters to be included or incorporatedin such Prospectus supplement or post effective amendment;          (j) Make reasonably available for inspection by the Investor, any underwriter participating inany disposition pursuant to the Registration Statement, and any attorney, accountant or other agentretained by the Investor or any such underwriter all relevant financial and other records,pertinent corporate documents and properties of the Company and its Subsidiary, and cause theCompany’s officers, directors and employees to supply all information reasonably requested by theInvestor or any such underwriter, attorney, accountant or agent in connection with the RegistrationStatement, in each case, as is customary for similar due diligence examinations; provided, however,that all records, information and documents that are designated in writing by the Company, in goodfaith, as confidential, proprietary or containing any nonpublic information shall be keptconfidential by the Investor and any such underwriter, attorney, accountant or agent (pursuant toan appropriate confidentiality agreement in the case of any such holder or agent), unless suchdisclosure is made pursuant to judicial process in a court proceeding (after first giving theCompany an opportunity promptly to seek a protective order or otherwise limit the scope of theinformation sought to be disclosed) or is required by law, or such records, information ordocuments become available to the public generally or through a third party not in violation of anaccompanying obligation of confidentiality; and provided, further, that, if the foregoinginspection and information gathering would otherwise disrupt the Company’s conduct of its business,such inspection and information gathering shall, to the maximum extent possible, be coordinated onbehalf of the Investor and the other parties entitled thereto by one firm of counsel designated byand on behalf of the majority in interest of the Investor and other parties;          (k) In connection with any offering, make such representations and warranties to the Investorand to the underwriters if an underwritten offering, in form, substance and scope as arecustomarily made by a company to underwriters in secondary underwritten offerings;          (l) In connection with any underwritten offering, deliver such documents and certificates asmay be reasonably required by the underwriters;          (m) Cooperate with the Investor to facilitate the timely preparation and delivery ofcertificates representing Registrable Securities to be sold pursuant to the Registration Statement,which certificates shall, if required under the terms of this Agreement, be free of all restrictivelegends, and to enable such Registrable Securities to be in such denominations and registered insuch names as the Investor may request and maintain a transfer agent for the Common Stock;
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          (n) Use its commercially reasonable efforts to cause all Registrable Securities covered by theRegistration Statement to be listed or qualified for trading on the principal Trading Market, ifany, on which the Common Stock is traded or listed on the Effective Date of the RegistrationStatement; and          (o) Unless and to the extent that such Plan of Distribution requires modification due toinaccuracy due to changes in the plan of distribution of Investor, or due to a change in SECregulations, to use the Plan of Distribution attached hereto as Exhibit B in eachProspectus and Registration Statement.     Section 3.3. **Obligations and Acknowledgements of the Investor**. In connection with theregistration of the Registrable Securities, the Investor shall have the following obligations andhereby make the following acknowledgements:          (a) It shall be a condition precedent to the obligations of the Company to include theRegistrable Securities in the Registration Statement that the Investor (i) shall furnish to theCompany such information regarding itself, the Registrable Securities held by it and the intendedmethod of disposition of the Registrable Securities held by it as shall be reasonably required toeffect the registration of such Registrable Securities and (ii) shall execute such documents inconnection with such registration as the Company may reasonably request. At least five BusinessDays prior to the first anticipated filing date of a Registration Statement, the Company shallnotify the Investor of the information the Company requires from the Investor (the “**RequestedInformation**”) if the Investor elects to have any of its Registrable Securities included in theRegistration Statement. If at least two Business Days prior to the anticipated filing date theCompany has not received the Requested Information from the Investor, then the Company may file theRegistration Statement without including any Registrable Securities of the Investor and the Companyshall have no further obligations under this Article 4 to the Investor after such RegistrationStatement has been declared effective. If the Investor notifies the Company and provides theCompany the information required hereby prior to the time the Registration Statement is declaredeffective, the Company will file an amendment to the Registration Statement that includes theRegistrable Securities of the Investor; provided, however, that the Company shall not be requiredto file such amendment to the Registration Statement at any time less than five Business Days priorto the Effectiveness Date.          (b) The Investor agrees to cooperate with the Company in connection with the preparation andfiling of a Registration Statement hereunder, unless the Investor has notified the Company inwriting of Investor’s election to exclude all of its Registrable Securities from such RegistrationStatement;          (c) The Investor agrees that, upon receipt of any notice from the Company of the occurrence ofany event of the kind described in Section 4.2(e) or 4.2(f), the Investor shall immediatelydiscontinue Investor’s disposition of Registrable Securities pursuant to the Registration Statementcovering such Registrable Securities until the Investor’s receipt of the copies of the supplementedor amended Prospectus contemplated by Section 4.2(e) and, if so directed by the Company, theInvestor shall deliver to the Company (at the expense of the Company) or destroy (and deliver tothe Company a certificate of destruction) all copies in the Investor’s possession (other than onecopy of any documents not filed with the SEC for
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evidentiary purposes), of the Prospectus covering such Registrable Securities current at thetime of receipt of such notice; and     Section 3.4. **Expenses of Registration**. All expenses (other than underwritingdiscounts and commissions and the fees and expenses of the Investor’s counsel) incurred inconnection with registrations, filings or qualifications pursuant to this Article 4, including,without limitation, all registration, listing, and qualifications fees, printing and engravingfees, accounting fees, and the fees and disbursements of counsel for the Company, shall be borne bythe Company.     Section 3.5. **Accountant’s Letter**. If the Investor proposes to engage in anunderwritten offering, the Company shall deliver to the Investor, at the Company’s expense, aletter dated as of the effective date of each Registration Statement or Post-Effective Amendmentthereto, from the independent public accountants retained by the Company, addressed to theunderwriters and to the Investor, in form and substance as is customarily given in an underwrittenpublic offering, provided that such seller has made such representations and furnished suchundertakings as the independent public accountants may reasonably require;     Section 3.6. **Indemnification and Contribution**          (a) **Indemnification by the Company**. The Company shall indemnify and hold harmless theInvestor and each underwriter, if any, which facilitates the disposition of Registrable Securities,and each of their respective officers and directors and each Person who controls such underwriterwithin the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each suchPerson being sometimes hereinafter referred to as an “**Indemnified Person**”) from and against anylosses, claims, damages or liabilities, joint or several, to which such Indemnified Person maybecome subject under the Securities Act or otherwise, insofar as such losses, claims, damages orliabilities (or actions in respect thereof) arise out of or are based upon an untrue statement oralleged untrue statement of a material fact contained in any Registration Statement or an omissionor alleged omission to state therein a material fact required to be stated therein or necessary tomake the statements therein, not misleading, or arise out of or are based upon an untrue statementor alleged untrue statement of a material fact contained in any Prospectus or an omission oralleged omission to state therein a material fact required to be stated therein or necessary tomake the statements therein, in the light of the circumstances under which they were made, notmisleading; and the Company hereby agrees to reimburse such Indemnified Person for all reasonablelegal and other expenses incurred by them in connection with investigating or defending any suchaction or claim as and when such expenses are incurred; provided, however, that the Company shallnot be liable to any such Indemnified Person in any such case to the extent that any such loss,claim, damage or liability arises out of or is based upon (i) an untrue statement or alleged untruestatement made in, or an omission or alleged omission from, such Registration Statement orProspectus in reliance upon and in conformity with written information furnished to the Company bysuch Indemnified Person expressly for use therein or (ii) in the case of the occurrence of an eventof the type specified in Section 4.2(e), the use by the Indemnified Person of an outdated ordefective Prospectus after the Company has provided to such Indemnified Person an updatedProspectus correcting the untrue statement or alleged untrue statement or omission or allegedomission giving rise to such loss, claim, damage or liability.
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          (b) **Indemnification by Investor**. The Investor agrees, as a consequence of theinclusion of any of Investor Registrable Securities in a Registration Statement to (i) indemnifyand hold harmless the Company, its directors (including any person who, with his or her consent, isnamed in the Registration Statement as a director nominee of the Company), its officers who signany Registration Statement and each Person, if any, who controls the Company within the meaning ofeither Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses,claims, damages or liabilities to which the Company or such other persons may become subject, underthe Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actionsin respect thereof) arise out of or are based upon (A) an untrue statement or alleged untruestatement of a material fact contained in such Registration Statement or Prospectus or arise out ofor are based upon the omission or alleged omission to state therein a material fact required to bestated therein or necessary to make the statements therein (in light of the circumstances underwhich they were made, in the case of the Prospectus), not misleading, in each case to the extent,but only to the extent, that such untrue statement or alleged untrue statement or omission oralleged omission was made in reliance upon and in conformity with written information furnished tothe Company by the Investor expressly for use therein or (B) the use by the Investor of an outdatedProspectus from and after receipt by the Investor of a notice pursuant to Section 4.2(e), and (ii)reimburse the Company for any legal or other expenses incurred by the Company in connection withinvestigating or defending any such action or claim as such expenses are incurred; provided,however, that the Investor shall not be liable under this Section 4.6(b) for any amount in excessof the net proceeds paid to the Investor in respect of Registrable Securities sold by it.          (c) **Notice of Claims, etc**. Promptly after receipt by a Person seeking indemnificationpursuant to this Section 4.6 (an “**Indemnified Party**”) of written notice of any investigation,claim, proceeding or other action in respect of which indemnification is being sought (each, a“**Claim**”), the Indemnified Party promptly shall notify the Person against whom indemnificationpursuant to this Section 4.6 is being sought (the “**Indemnifying Party**”) of the commencementthereof; but the omission to so notify the Indemnifying Party shall not relieve it from anyliability that it otherwise may have to the Indemnified Party, except to the extent that theIndemnifying Party is materially prejudiced and forfeits substantive rights and defenses by reasonof such failure. In connection with any Claim as to which both the Indemnifying Party and theIndemnified Party are parties, the Indemnifying Party shall be entitled to assume the defensethereof. Notwithstanding the assumption of the defense of any Claim by the Indemnifying Party, theIndemnified Party shall have the right to employ separate legal counsel and to participate in thedefense of such Claim, and the Indemnifying Party shall bear the reasonable fees, out of pocketcosts and expenses of such separate legal counsel to the Indemnified Party if (and only if): (i)the Indemnifying Party shall have agreed to pay such fees, costs and expenses, (ii) the IndemnifiedParty shall reasonably have concluded that representation of the Indemnified Party by theIndemnifying Party by the same legal counsel would not be appropriate due to actual or, asreasonably determined by legal counsel to the Indemnified Party, potentially differing interestsbetween such parties in the conduct of the defense of such Claim, or if there may be legal defensesavailable to the Indemnified Party that are in addition to or disparate from those available to theIndemnifying Party (other than that the Indemnified Party is entitled to be indemnified by theIndemnifying Party), or (iii) the Indemnifying Party shall have failed to employ legal counselreasonably satisfactory to the Indemnified Party within a reasonable period of time after notice ofthe commencement of such
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Claim. If the Indemnified Party employs separate legal counsel in circumstances other than asdescribed in the preceding sentence, the fees, costs and expenses of such legal counsel shall beborne exclusively by the Indemnified Party. Except as provided above, the Indemnifying Party shallnot, in connection with any Claim in the same jurisdiction, be liable for the fees and expenses ofmore than one firm of counsel for the Indemnified Party (together with appropriate local counsel).The Indemnified Party shall not, without the prior written consent of the Indemnifying Party (whichconsent shall not unreasonably be withheld), settle or compromise any Claim or consent to the entryof any judgment that does not include an unconditional release of the Indemnifying Party from allliabilities with respect to such Claim or judgment or contain any admission of wrongdoing.          (d) **Contribution**. If the indemnification provided for in this Section 4.6 isunavailable to or insufficient to hold harmless an Indemnified Party in respect of any losses,claims, damages or liabilities (or actions in respect thereof) referred to therein, then eachIndemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as aresult of such losses, claims, damages or liabilities (or actions in respect thereof) in suchproportion as is appropriate to reflect the relative fault of the Indemnifying Party and theIndemnified Party in connection with the statements or omissions or alleged statements or omissionswhich resulted in such losses, claims, damages or liabilities (or actions in respect thereof), aswell as any other relevant equitable considerations. The relative fault of such Indemnifying Partyand Indemnified Party shall be determined by reference to, among other things, whether the untrueor alleged untrue statement of a material fact or omission or alleged omission to state a materialfact relates to information supplied by such Indemnifying Party or by such Indemnified Party, andthe parties’ relative intent, knowledge, access to information and opportunity to correct orprevent such statement or omission. The parties hereto agree that it would not be just andequitable if contribution pursuant to this Section 4.6(d) were determined by pro rata allocation(even if the Investor or any underwriters were treated as one entity for such purpose) or by anyother method of allocation which does not take account of the equitable considerations referred toin this Section 4.6(d). The amount paid or payable by an Indemnified Party as a result of thelosses, claims, damages or liabilities (or actions in respect thereof) referred to above shall bedeemed to include any legal or other fees or expenses reasonably incurred by such Indemnified Partyin connection with investigating or defending any such action or claim. No person guilty offraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall beentitled to contribution from any person who was not guilty of such fraudulent misrepresentation.          (e) **Limitation on Investor’s Obligations**. Notwithstanding any other provision of thisSection 4.6, in no event shall the Investor have any liability under this Section 4.6 for anyamounts in excess of the dollar amount of the proceeds actually received by the Investor from thesale of Registrable Securities (after deducting any fees, discounts and commissions applicablethereto) pursuant to any Registration Statement under which such Registrable Securities areregistered under the Securities Act.          (f) **Other Liabilities**. The obligations of the parties under this Section 4.6 shall bein addition to any liability which such party may otherwise have to any Indemnified Person and theobligations of any Indemnified Person under this Section 4.6 shall be in addition to any liabilitywhich such Indemnified Person may otherwise have to any other party. The
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remedies provided in this Section 4.6 are not exclusive and shall not limit any rights orremedies which may otherwise be available to an indemnified party at law or in equity.     Section 3.7. **Rule 144**. With a view to making available to the Investor the benefitsof Rule 144 or any successor thereto, until the shares are eligible for sale without volumelimitations, the Company agrees to use its best efforts to:               (i) comply with the provisions of paragraph (c)(1) of Rule 144 or any successor thereto; and               (ii) file with the Commission in a timely manner all reports and other documents required tobe filed by the Company pursuant to Section 13 or 15(d) under the Exchange Act; and, if at any timeit is not required to file such reports but in the past had been required to or did file suchreports, it will, upon the request of the Investor, make available other information as requiredby, and so long as necessary to permit sales of, its Registrable Securities pursuant to Rule 144 orany successor thereto.     Section 3.8. **Common Stock Issued Upon Stock Split, etc**. The provisions of thisArticle 4 shall apply to any shares of Common Stock or any other securities issued as a dividend ordistribution in respect of the Warrant Shares or the Shares covered by the Asset PurchaseAgreement.**ARTICLE 4****OTHER AGREEMENTS OF THE PARTIES**     Section 4.1. **Certificates; Legends**.          (a) The Securities may only be transferred in compliance with state and federal securitieslaws. In connection with any transfer of the Securities other than (i) pursuant to an effectiveregistration statement, (ii) to the Company, or (iii) to an Affiliate of the Investor, the Companymay require the transferor thereof to provide to the Company an opinion of counsel selected by thetransferor and reasonably acceptable to the Company, the form and substance of which opinion shallbe reasonably satisfactory to the Company, to the effect that such transfer does not requireregistration of such transferred Securities under the Securities Act or applicable state securitieslaws. In the event of a private transfer of the Securities the Transferee shall be required toexecute a counterpart to this Agreement, agreeing to be bound by (and shall have the benefits of)the terms hereof other than those set forth in Article 2 hereof, and such Transferee shall bedeemed to be an “Investor” for purposes of this Agreement.          (b) The certificate representing the Warrant to be delivered at the Closing and thecertificates evidencing the Warrant Shares to be delivered upon exercise of the Warrant willcontain appropriate legends referring to restrictions on transfer relating to the registrationrequirements of the Securities Act and applicable state securities laws.          (c) In connection with any sale or disposition of the Securities by the Investor pursuant toRule 144 or pursuant to any other exemption under the 1933 Act such that the purchaser acquiresfreely tradable shares and upon compliance by the Investor with the
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requirements of this Agreement, the Company shall or, in the case of Common Stock, shall causethe transfer agent for the Common Stock (the “**Transfer Agent**”) to issue replacement certificatesrepresenting the Securities sold or disposed of without restrictive legends. Upon the earlier of(i) registration for resale pursuant to the Registration Rights Agreement or (ii) the WarrantShares becoming freely tradable without restriction pursuant to Rule 144 the Company shall (A)deliver to the Transfer Agent irrevocable instructions that the Transfer Agent shall reissue acertificate representing shares of Common Stock without legends upon receipt by such Transfer Agentof the legended certificates for such shares, and, in the case of a proposed sale pursuant to Rule144, a customary representation by the Investor that the conditions required to freely sell theshares of Common Stock represented thereby without restriction pursuant to Rule 144 have beensatisfied, and (B) cause its counsel to deliver to the Transfer Agent one or more opinions to theeffect that the removal of such legends in such circumstances may be effected under the 1933 Act.From and after the earlier of such dates, upon the Investor’s written request, the Company shallpromptly cause certificates evidencing the Investor’s Securities to be replaced with certificateswhich do not bear such restrictive legends, and Warrant Shares subsequently issued upon dueexercise of the Warrants shall not bear such restrictive legends, provided the provisions of eitherclause (i) or clause (ii) above, as applicable, are satisfied with respect to such Warrant Shares.When the Company is required to cause an unlegended certificate to replace a previously issuedlegended certificate, if: (1) the unlegended certificate is not delivered to the Investor withinthree (3) Business Days of submission by the Investor of a legended certificate and supportingdocumentation to the Transfer Agent as provided above and (2) prior to the time such unlegendedcertificate is received by the Investor, the Investor, or any third party on behalf of the Investoror for the Investor’s account, purchases (in an open market transaction or otherwise) shares ofCommon Stock to deliver in satisfaction of a sale by the Investor of shares represented by suchcertificate (a “**Buy-In**”), then the Company shall pay in cash to the Investor (for costs incurredeither directly by such Purchaser or on behalf of a third party) the amount by which the totalpurchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, ifany) exceeds the proceeds received by the Investor as a result of the sale to which such Buy-Inrelates. The Investor shall provide the Company written notice indicating the amounts payable tothe Investor in respect of the Buy-In.     Section 4.2. **Integration**. The Company has not and shall not, and shall use its bestefforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers tobuy or otherwise negotiate in respect of any security (as defined in Section 2 of the SecuritiesAct) that would be integrated with the offer or sale of the Securities in a manner that wouldrequire the registration under the Securities Act of the issuance of the Securities to theInvestor, or that would be integrated with the offer or sale of the Securities for purposes of therules and regulations of any Trading Market in a manner that would require stockholder approval ofthe sale of the securities to the Investor.     Section 4.3. **Securities Laws Disclosure; Publicity**. By 5:00 p.m. (New York time) onthe Trading Day following the execution of this Agreement, and by 5:00 p.m. (New York time) on theTrading Day following the Closing Date, the Company shall issue press releases disclosing thematerial terms of the transactions contemplated hereby and the Closing, and the Company shall fileCurrent Reports on Form 8-K disclosing the material terms of the Transaction Documents and theClosing. In addition, the Company will make such other filings
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and notices in the manner and time required by the Commission and the Trading Market on whichthe Common Stock is listed.     Section 4.4. **Use of Proceeds**. The Company shall use the net proceeds from the sale ofthe Securities hereunder (i) for working capital purposes, (ii) for use in the Company’s business,or (iii) for investment in new technologies related to the Company’s business (including withoutlimitation through the acquisition of other companies).     Section 4.5. **Prospectus Delivery Requirements**. The Investor agrees that the Investorwill not effect any sale, transfer or other disposition of any Securities except pursuant to eitherthe registration requirements of the Securities Act, including any applicable prospectus deliveryrequirements, or an exemption therefrom, and that if Securities are sold pursuant to a RegistrationStatement, they will be sold in compliance with the plan of distribution set forth therein, andacknowledges that the removal of the restrictive legend from certificates representing Securitiesas set forth in Section 4.1 is predicated upon the Company’s reliance upon this understanding.     Section 4.6. **Reservation of Common Stock**. From and after the Closing Date, the Companyshall reserve and keep available at all times, free of preemptive rights, a sufficient number ofshares of Common Stock for the purpose of enabling the Company to issue the Warrant Shares pursuantto any exercise of the Warrants.     Section 4.7. **Disclosure of Information**. Except upon the prior written consent of theInvestor, the Company shall not disclose any material non-public information to the Investor orInvestor’s counsel. Any such disclosure shall be made pursuant to an in accordance with acustomary non-disclosure agreement between the Company and the Investor.     Section 4.8. **Agreement not to Exercise Rights; Reduction in Shares****.**(a) The Warrantis not exercisable unless and until approved by the Company’s shareholders at its annual meeting in2010 or at a special shareholder meeting in 2010 called for that purpose. If shareholders do notapprove the Warrant in 2010 at a special or the annual meeting, the Warrant and this Agreementshall terminate.     (b) The Investor agrees that the Investor will not exercise any rights under this Agreement,including without limitation the right to exercise the Warrant or the right to assign thisAgreement or the Warrant, without first having received written notice from the Company that thisAgreement and the Warrant have been approved by the Company’s Board of Directors or a committee ofthe Board, and by the Company’s shareholders in 2010 at a special or the annual meeting.     (c) If the Company replaces and releases, or simply releases, the Deposit or the Letter ofCredit by June 30, 2010, the number of shares covered by the Warrant shall reduce to a number ofshares equal to the product of (i) the number of full months elapsed in 2010 times (ii) [___][total number of shares divided by twelve].
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**ARTICLE 5****CONDITIONS PRECEDENT TO CLOSING**     Section 5.1. **Conditions Precedent to the Obligations of the Investor to AcquireSecurities**. The obligation of the Investor to acquire Securities is subject to thesatisfaction or waiver by the Investor, at or before the Closing, of each of the followingconditions:          (a) **Representations and Warranties**. The representations and warranties of the Companycontained herein are true and correct in all material respects as of the date when made and as ofthe Closing Date as though made on and as of such Closing Date;          (b) **Performance**. The Company shall have performed, satisfied and complied in allmaterial respects with all covenants, agreements and conditions required by the TransactionDocuments to be performed, satisfied or complied with by it at or prior to the Closing;          (c) **No Injunction**. No statute, rule, regulation, executive order, decree, ruling orinjunction shall have been enacted, entered, promulgated or endorsed by any court or governmentalauthority of competent jurisdiction that prohibits the consummation of any of the transactionscontemplated by the Transaction Documents;          (d) **No Adverse Changes**. Since the date of execution of this Agreement, no event orseries of events shall have occurred that reasonably could have or result in a Material AdverseEffect;          (e) **Company Deliverables**. The Company shall have delivered the Company Deliverables inaccordance with Section 2.4.     Section 5.2. **Conditions Precedent to the Obligations of the Company to IssueSecurities**. The obligation of the Company to issue Securities is subject to the satisfactionor waiver by the Company, at or before the Closing, of each of the following conditions:          (a) **Representations and Warranties**. The representations and warranties of the Investorcontained herein shall be true and correct in all material respects as of the date when made and asof the Closing Date as though made on and as of such date;          (b) **Performance**. The Investor shall have performed, satisfied and complied in allmaterial respects with all covenants, agreements and conditions required by the TransactionDocuments to be performed, satisfied or complied with by the Investor at or prior to the Closing;          (c) **No Injunction**. No statute, rule, regulation, executive order, decree, ruling orinjunction shall have been enacted, entered, promulgated or endorsed by any court or governmentalauthority of competent jurisdiction that prohibits the consummation of any of the transactionscontemplated by the Transaction Documents.
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**ARTICLE 6****MISCELLANEOUS**     Section 6.1. **Fees and Expenses**. Each party shall pay the fees and expenses of itsadvisers, counsel, accountants and other experts, if any, and all other expenses incurred by suchparty incident to the negotiation, preparation, execution, delivery and performance of theTransaction Documents.     Section 6.2. **Entire Agreement**. The Transaction Documents, together with the Exhibitsthereto, contain the entire understanding of the parties with respect to the subject matter hereofand supersede all prior agreements, understandings, discussions and representations, oral orwritten, with respect to such matters, which the parties acknowledge have been merged into suchdocuments and exhibits.     Section 6.3. **Notices**. Any and all notices or other communications or deliveriesrequired or permitted to be provided hereunder shall be in writing and shall be deemed given andeffective on the earliest of (a) the date of transmission, if such notice or communication isdelivered via facsimile (provided the sender receives a machine-generated confirmation ofsuccessful transmission) at the facsimile number specified in this Section prior to 6:30 p.m. on aBusiness Day, (b) the next Business Day after the date of transmission, if such notice orcommunication is delivered via facsimile at the facsimile number specified in this Section on a daythat is not a Business Day or later than 6:30 p.m. on any Business Day, (c) the Business Dayfollowing the date of transmission, if sent by a nationally recognized overnight courier service,or (d) upon actual receipt by the party to whom such notice is required to be given. The addressesfor such notices and communications shall be as follows:   If to the Company: Energy Focus, Inc.  32000 Aurora Road  Solon, Ohio 44139  Facsimile: 440.519.1038  Attention: Mr. Joseph G. Kaveski, Chief Executive Officer   With a copy to: Cowden & Humphrey Co. LPA  4600 Euclid Avenue, Suite 400  Cleveland, Ohio 44103-3758  Facsimile: 216.241.2881  Attention: Mr. Gerald W. Cowden   If to the Investor: [                                                                                                                                               ,                            Facsimile No.:      .     .     ]   With a copy to: [                                                                                                                                                                                         Facsimile No.:      .     .     ]
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or such other address as may be designated by the Investor or the Company in writing, in the samemanner, by such Person.     Section 6.4. **Amendments; Waivers**. No provision of this Agreement may be waived oramended except in a written instrument signed by the Company and the Investor. No waiver of anydefault with respect to any provision, condition or requirement of this Agreement shall be deemedto be a continuing waiver in the future or a waiver of any subsequent default or a waiver of anyother provision, condition or requirement hereof, nor shall any delay or omission of either partyto exercise any right hereunder in any manner impair the exercise of any such right.     Section 6.5. **Termination**. This Agreement may be terminated prior to the Closing bywritten agreement of the Investor and the Company. Upon a termination in accordance with thisSection 7.5, the Company and the Investor shall have no further obligation or liability (includingas arising from such termination) to the other, provided that any liabilities arising prior to suchtermination shall not be affected by the termination.     Section 6.6. **Construction**. The headings herein are for convenience only, do notconstitute a part of this Agreement and shall not be deemed to limit or affect any of theprovisions hereof. The language used in this Agreement will be deemed to be the language chosen bythe parties to express their mutual intent, and no rules of strict construction will be appliedagainst any party. This Agreement shall be construed as if drafted jointly by the parties, and nopresumption or burden of proof shall arise favoring or disfavoring any party by virtue of theauthorship of any provisions of this Agreement or any of the Transaction Documents.     Section 6.7. **Successors and Assigns**. This Agreement shall be binding upon and inureto the benefit of the parties and their successors, and permitted assigns. Neither party may assignthis Agreement or any rights or obligations hereunder without the prior written consent of theother party.     Section 6.8. **No Third-Party Beneficiaries**. This Agreement is intended for the benefitof the parties hereto, and their heirs, representatives, successors, and permitted assigns, andtheir affiliated Persons that are parties to the Asset Purchase Agreement, and is not for thebenefit of, nor may any provision hereof be enforced by, any other Person.     Section 6.9. **Governing Law; Jurisdiction**. This Agreement shall be governed by andconstrued in accordance with the laws of the State of Delaware and of the United States, withoutgiving effect to the doctrine of conflicts of laws. The parties each agree that the federal andstate courts located within the State of Delaware, the State of Ohio, and the State of Tennesseeshall have nonexclusive jurisdiction as to all matters, actions, claims or disputes arising out ofthis Agreement or the transactions contemplated hereby.     Section 6.10. **Survival**. The representations, warranties, agreements and covenantscontained herein shall survive the Closing and the delivery of the Securities; provided, however,that the representations and warranties shall expire one month after the Company files its AnnualReport on Form 10-K for the period ending December 31, 2010.
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     Section 6.11. **Execution**. This Agreement may be executed in two or more counterparts,all of which when taken together shall be considered one and the same agreement and shall becomeeffective when counterparts have been signed by each party and delivered to the other party, itbeing understood that both parties need not sign the same counterpart. In the event that anysignature is delivered by facsimile transmission, such signature shall create a valid and bindingobligation of the party executing (or on whose behalf such signature is executed) with the sameforce and effect as if such facsimile signature page were an original thereof, notwithstanding anysubsequent failure or refusal of the signatory to deliver an original executed in ink.     Section 6.12. **Severability**. If any provision of this Agreement is held to be invalidor unenforceable in any respect, the validity and enforceability of the remaining terms andprovisions of this Agreement shall not in any way be affected or impaired thereby and the partieswill attempt to agree upon a valid and enforceable provision that is a reasonable substitutetherefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement.     Section 6.13. **Replacement of Securities**. If any certificate or instrument evidencingany Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to beissued in exchange and substitution for and upon cancellation thereof, or in lieu of andsubstitution therefore, a new certificate or instrument, but only upon receipt of evidencereasonably satisfactory to the Company of such loss, theft or destruction and customary andreasonable indemnity, if requested. The applicant for a new certificate or instrument under suchcircumstances shall also pay any reasonable third-party costs associated with the issuance of suchreplacement Securities. If a replacement certificate or instrument evidencing any Securities isrequested due to a mutilation thereof, the Company may require delivery of such mutilatedcertificate or instrument as a condition precedent to any issuance of a replacement.     Section 6.14. **Remedies**. In addition to being entitled to exercise all rights providedherein or granted by law, including recovery of damages, each of the Investor and the Company willbe entitled to specific performance under the Transaction Documents. The parties agree that, exceptas expressly set forth herein with respect to liquidated damages, monetary damages may not beadequate compensation for any loss incurred by reason of any breach of obligations described in theforegoing sentence and hereby agrees to waive in any action for specific performance of any suchobligation the defense that a remedy at law would be adequate.[Signatures appear on following page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first indicatedabove.      COMPANY: