Unassociated Document


    EXECUTION
      COPY

     

    SECURITIES
      PURCHASE AGREEMENT

     

    THIS
      SECURITIES PURCHASE AGREEMENT (“Agreement”) is made as of the 29th day of
      December, 2006 by and among Inncardio Inc. (OTCBB: ICDO), a Utah corporation
      (“ICDO and/or the “Company”), Long-E International Group Co., Ltd., a company
      organized under the laws of the British Virgin Islands (“Long-E”) and the
      investors set forth on the signature pages affixed hereto (each an “Investor”
and collectively the “Investors”).

     

    Recitals

     

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

     

    B.
      (1) Certain
      of the Investors wish to purchase from the Company, and the Company wishes
      to
      sell and issue to such Investors, upon the terms and conditions stated in this
      Agreement, (i) an aggregate of Three Million Five Hundred Thousand (3,500,000)
      shares of Common Stock (collectively, the “Investor Common Shares”), at a
      purchase price of $0.40 per share, (ii) Series A warrants to purchase an
      aggregate of One Million Seven Hundred Fifty Thousand (1,750,000) shares of
      Common Stock at an exercise price of $0.48 per share in the form attached hereto
      as Exhibit
      A-1,
      collectively, the “Series A Warrants”) and (iii) Series B warrants to purchase
      an aggregate of One Million Seven Hundred Fifty Thousand (1,750,000) shares
      of
      Common Stock at an exercise price of $0.60 per share in the form attached hereto
      as Exhibit
      A-2,
      collectively, the “Series B Warrants” and together with the Series A Warrants,
      the “Warrants”), in each case, for an aggregate purchase price of $1,500,000
      (the “Purchase Price”); and

     

    B.
      (2) An
      Investor, who has previously purchased the securities described at the end
      of
      this paragraph (the “Bridge Investor”) wishes to purchase from the Company, and
      the Company wishes to sell and issue to the Investor, upon the terms and
      conditions stated in this Agreement, (i) an aggregate of One Million Seven
      Hundred Eighty Five Thousand Seven Hundred Fourteen (1,785,714) shares of Common
      Stock (collectively with the Investor Common Shares, the “Common Shares”), at a
      purchase price of $0.28 per share, (ii) Series A Warrants to purchase an
      aggregate of Eight Hundred Eighty Nine Thousand Two Hundred Eighty Five(889,285)
      shares of Common Stock at an exercise price of $0.48 per share and (iii) Series
      B Warrants to purchase an aggregate of Eight Hundred Eighty Nine Thousand Two
      Hundred Eighty Five (889,285) shares of Common Stock at an exercise price of
      $0.60 per share for an aggregate purchase price of $500,000 (the “Bridge
      Purchase Price”); The Bridge Investor will pay the Bridge Purchase Price by
      converting the Convertible Bridge Note into the Securities issued in this
      financing.

     

    C.
       Contemporaneous
      with the sale of the Common Shares and the Warrants, the parties hereto will
      execute and deliver a Registration Rights Agreement, in the form attached hereto
      as Exhibit
      B
      (the
“Registration Rights Agreement”), pursuant to which the Company will agree to
      provide certain registration rights under the Securities Act of 1933, as
      amended, and the rules and regulations promulgated thereunder, and applicable
      state securities laws; and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    D.
       The
      Company has retained WestPark Capital, Inc. (“WestPark”) to act as its exclusive
      placement agent in connection with the sale of the securities pursuant to this
      Agreement (WestPark, together with any authorized co-placement or sub-agents
      thereof, the “Placement Agent”); and

     

    E.
       Contemporaneous
      with the sale of the Common Shares and the Warrants, the Company, Long-E and
      the
      other parties named in the Securities Exchange Agreement (as defined in Section
      1 of this Agreement) shall have consummated the transactions contemplated
      thereby.

     

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

     

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

     

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

     

    “Bridge
      Investor”
means
      the investor that participated in that certain Note and Warrant Purchase
      Agreement, dated September 22, 2006. 

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    “Convertible
      Bridge Note”
means
      the convertible bridge note and warrants received by the Bridge Investor in
      the
      September 22, 2006 financing.

     

    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan or other
      arrangement duly adopted by a majority of the non-employee members of the Board
      of Directors of the Company or a majority of the members of a committee of
      non-employee directors established for such purpose, (b) securities upon the
      exercise of or conversion of any Securities issued hereunder, or convertible
      securities, options or warrants issued and outstanding on the date of this
      Agreement, provided that such securities have not been amended since the date
      of
      this Agreement to increase the number of such securities, and (c) debt or equity
      issued pursuant to strategic transactions with an operating company in a
      business synergistic with the business of the Company at the time of such
      issuance and in which the Company receives benefits in addition to the
      investment of funds or pursuant to arms’-length acquisitions or arms’-length
      equipment leases, but shall not include a transaction in which the Company
      is
      issuing securities primarily for the purpose of raising capital or to an entity
      whose primary business is investing in securities. 

     

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

     

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

     

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

     

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

     

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

     

    “SEC
      Filings”
has
      the
      meaning set forth in Section 4.9

     

    
      
        
        

      

      
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    “Securities”
means,
      collectively, the Common Shares, the Warrants and the Warrant Shares and any
      Common Shares, Warrants and Warrant Shares included in the Additional Securities
      as set forth in Section 3(d) of this Agreement.

     

    “Securities
      Exchange Agreement”
means
      that certain Share Exchange Agreement, dated November 30, 2006, by and among
      the
      Company, Long-E, and each of the shareholders of Long-E.

     

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

     

    “Transaction
      Documents”
means
      this Agreement, the Warrants, the warrants to be issued to the Placement Agent,
      the Escrow Agreement and the Registration Rights Agreement.

     

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

     

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

     

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

     

    2. Purchase
      and Sale of the Shares and Warrants.
      Subject
      to the terms and conditions of this Agreement, on the Closing Date, each of
      the
      Investors shall severally, and not jointly, purchase, and the Company shall
      sell
      and issue to the Investors, the Common Shares and the Series A Warrants and
      the
      Series B Warrants in the respective amounts set forth opposite the Investors’
names on the signature pages attached hereto in exchange for the Purchase Price
      as specified in Section 3 below.

     

    3. Closing.

     

    3.1 Simultaneously
      with the execution and delivery of this Agreement, the Company shall deliver
      to
      the Placement Agent, in trust, certificates representing the Common Shares,
      the
      Series A Warrants and the Series B Warrants, registered in such name or names
      as
      the Investors may designate, with instructions that such securities are to
      be
      held for release to the Investors only upon payment in full of the Purchase
      Price to the Company by all the Investors. 

     

    3.2
      (a) Simultaneously
      with the execution and delivery of this Agreement by an Investor, such Investor
      shall: promptly cause a wire transfer of immediately available funds (U.S.
      dollars) in an amount representing the “Purchase Price”, as set forth on such
      Investor’s signature page, to be paid to an escrow account of Escrow Agent, set
      forth on Schedule
      I
      affixed
      hereto (the aggregate amounts being held in escrow are referred to herein as
      the
“Escrow Amount”). Escrow Agent shall hold the Escrow Amount in escrow in
      accordance with this Section 3.

     

    
      
        
        

      

      
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    (b) Escrow
      Agent shall continue to hold the Escrow Amount in escrow in accordance with
      and
      subject to the terms of that certain Escrow Agreement dated as of December
      5,
      2006, by and among the Company, the Placement Agent and the Escrow Agent, as
      amended.

     

    (c) On
      the
      date the Company receives the Purchase Price of at least $1.9 million in the
      aggregate from the Investors pursuant to the terms and conditions of this
      Agreement (the “Closing Date”), the Common Shares, the Series A Warrants and the
      Series B Warrants shall be released by the Placement Agent to the Investors
      (the
“Closing”). The Closing of the purchase and sale of the Common Shares and
      Warrants shall take place at the offices of Olshan Grundman Frome Rosenzweig
      & Wolosky LLP, Park Avenue Tower 65 East 55th Street, New York NY 10022, or
      at such other location and on such other date as the Company and the Investors
      shall mutually agree. Immediately following the Closing, the capitalization
      of
      the Company shall be as set forth on Exhibit C.

     

    4. Representations
      and Warranties of the Company.
      For
      purposes of this Section 4 only, the Company hereby represents and warrants
      to
      the Investors and the Placement Agent that, except as set forth in the schedules
      delivered herewith (collectively, the “Disclosure Schedules”):

     

    4.1 Organization,
      Good Standing and Qualification.
      Each of
      the Company and its Subsidiaries is duly organized, validly existing and in
      good
      standing under the laws of the jurisdiction of its incorporation and has all
      requisite power and authority to carry on its business as now conducted and
      to
      own its properties. Each of the Company and its Subsidiaries is duly qualified
      to do business as a foreign corporation and is in good standing in each
      jurisdiction in which the conduct of its business or its ownership or leasing
      of
      property makes such qualification or leasing necessary unless the failure to
      so
      qualify has not had and could not reasonably be expected to have a Material
      Adverse Effect. The Company’s Subsidiaries are listed on Schedule
      4.1
      hereto.

     

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

     

    4.3 Capitalization.
      The
      Memorandum (as defined in Section 4.6) sets forth (a) the authorized capital
      stock of the Company on the date hereof; (b) the number of shares of capital
      stock issued and outstanding; (c) the number of shares of capital stock issuable
      pursuant to the Company’s stock plans; and (d) the number of shares of capital
      stock issuable and reserved for issuance pursuant to securities (other than
      the
      Securities) exercisable for, or convertible into or exchangeable for any shares
      of capital stock of the Company. All of the issued and outstanding shares of
      the
      Company’s capital stock have been duly authorized and validly issued and are
      fully paid, nonassessable and free of pre-emptive rights and were issued in
      compliance with applicable state and federal securities law and any rights
      of
      third parties. All of the issued and outstanding shares of capital stock of
      each
      Subsidiary have been duly authorized and validly issued and are fully paid,
      nonassessable and free of pre-emptive rights, were issued in compliance with
      applicable state and federal securities law and any rights of third parties
      and
      are owned by the Company, beneficially and of record, subject to no lien,
      encumbrance or other adverse claim. No Person is entitled to pre-emptive or
      similar statutory or contractual rights with respect to any securities of the
      Company. Except as described in the Memorandum, there are no outstanding
      warrants, options, convertible securities or other rights, agreements or
      arrangements of any character under which the Company or any of its Subsidiaries
      is or may be obligated to issue any equity securities of any kind and except
      as
      contemplated by this Agreement, neither the Company nor any of its Subsidiaries
      is currently in negotiations for the issuance of any equity securities of any
      kind. Except as described in the Memorandum and except for the Registration
      Rights Agreement, there are no voting agreements, buy-sell agreements, option
      or
      right of first purchase agreements or other agreements of any kind among the
      Company and any of the securityholders of the Company relating to the securities
      of the Company held by them. Except as described in the Memorandum and except
      as
      provided in the Registration Rights Agreement, no Person has the right to
      require the Company to register any securities of the Company under the 1933
      Act, whether on a demand basis or in connection with the registration of
      securities of the Company for its own account or for the account of any other
      Person.

     

    
      
        
        

      

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

     

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

     

    4.4 Valid
      Issuance.
      The
      Common Shares have been duly and validly authorized and, when issued and paid
      for pursuant to this Agreement, will be validly issued, fully paid and
      nonassessable, and shall be free and clear of all encumbrances and restrictions
      (other than those created by the Investors), except for restrictions on transfer
      set forth in the Transaction Documents or imposed by applicable securities
      laws.
      The Warrants have been duly and validly authorized. Upon the due exercise of
      the
      Warrants in accordance with the terms of the Warrants, the Warrant Shares will
      be validly issued, fully paid and non-assessable free and clear of all
      encumbrances and restrictions, except for restrictions on transfer set forth
      in
      the Transaction Documents or imposed by applicable securities laws and except
      for those created by the Investors. ICDO has reserved a sufficient number of
      shares of Common Stock for issuance upon the exercise of the Warrants, free
      and
      clear of all encumbrances and restrictions, except for restrictions on transfer
      set forth in the Transaction Documents or imposed by applicable securities
      laws
      and except for those created by the Investors.

     

    4.5 Consents.
      The
      execution, delivery and performance by the Company of the Transaction Documents
      and the offer, issuance and sale of the Securities require no consent of, action
      by or in respect of, or filing with, any Person, governmental body, agency,
      or
      official other than filings that have been made pursuant to applicable state
      securities laws and post-sale filings pursuant to applicable state and federal
      securities laws which ICDO undertakes to file within the applicable time
      periods. Subject to the accuracy of the representations and warranties of each
      Investor set forth in Section 6 hereof, the Company has taken all action
      necessary to exempt (i) the issuance and sale of the Securities, (ii) the
      issuance of the Warrant Shares upon due exercise of the Warrants, and (iii)
      the
      other transactions contemplated by the Transaction Documents from the provisions
      of any stockholder rights plan or other “poison pill” arrangement, any
      anti-takeover, business combination or control share law or statute binding
      on
      the Company or to which the Company or any of its assets and properties may
      be
      subject and any provision of the ICDO’s Articles of Incorporation or Bylaws that
      is or could reasonably be expected to become applicable to the Investors as
      a
      result of the transactions contemplated hereby, including without limitation,
      the issuance of the Securities and the ownership, disposition or voting of
      the
      Securities by the Investors or the exercise of any right granted to the
      Investors pursuant to this Agreement or the other Transaction
      Documents.

     

    
      
        
        

      

      
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    4.6 Delivery
      of Memorandum and SEC Filings; Business.
      The
      Company has prepared offering documents, including a Confidential Private
      Placement Memorandum, including ICDO’s reports and other filings with the SEC
      attached as exhibits to the Confidential Private Placement Memorandum (the
      “Memorandum”). The Company has made available to the Investors (i) a copy of the
      Memorandum and (ii) through the EDGAR system, true and complete copies of the
      Company’s most recent Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 2005 (the “10-KSB”), and all other reports filed by the Company
      pursuant to the 1934 Act since the filing of the 10-KSB and prior to the date
      hereof (collectively, the “SEC Filings”). The SEC Filings are the only filings
      required of the Company pursuant to the 1934 Act for such period. The Company
      and its Subsidiaries are engaged in all material respects only in the business
      described in the Memorandum and the SEC Filings, and the Memorandum and the
      SEC
      Filings contain a complete and accurate description in all material respects
      of
      the business of the Company and its Subsidiaries, taken as a whole.

     

    4.7 Use
      of
      Proceeds.
      The net
      proceeds of the sale of the Common Shares and the Warrants hereunder shall
      be
      used by the Company for working capital and general corporate
      purposes.

     

    4.8 No
      Material Adverse Change.
      Since
      September 30, 2006, except as identified and described in the SEC Filings or
      the
      Memorandum or as described on Schedule
      4.8,
      there
      has not been:

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    4.11 Tax
      Matters.
      The
      Company and each Subsidiary has timely prepared and filed all tax returns
      required to have been filed by the Company or such Subsidiary with all
      appropriate governmental agencies and timely paid all taxes shown thereon or
      otherwise owed by it. The charges, accruals and reserves on the books of the
      Company in respect of taxes for all fiscal periods are adequate in all material
      respects, and there are no material unpaid assessments against the Company
      or
      any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
      any additional taxes, penalties or interest for any fiscal period or audits
      by
      any federal, state or local taxing authority except for any assessment which
      is
      not material to the Company and its Subsidiaries, taken as a whole. All taxes
      and other assessments and levies that the Company or any Subsidiary is required
      to withhold or to collect for payment have been duly withheld and collected
      and
      paid to the proper governmental entity or third party when due. There are no
      tax
      liens or claims pending or, to the Company’s Knowledge, threatened against the
      Company or any Subsidiary or any of their respective assets or property. Except
      as described on Schedule
      4.11,
      there
      are no outstanding tax sharing agreements or other such arrangements between
      the
      Company and any Subsidiary or other corporation or entity.

     

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

     

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

     

    4.14 Labor
      Matters.

     

    (a) Except
      as
      set forth on Schedule
      4.14,
      the
      Company is not a party to or bound by any collective bargaining agreements
      or
      other agreements with labor organizations. The Company has not violated in
      any
      material respect any laws, regulations, orders or contract terms, affecting
      the
      collective bargaining rights of employees, labor organizations or any laws,
      regulations or orders affecting employment discrimination, equal opportunity
      employment, or employees’ health, safety, welfare, wages and hours.

     

    
      
        
        

      

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

     

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

     

    (d) Except
      as
      disclosed in the SEC Filings, the Memorandum or as described on Schedule
      4.14,
      the
      Company is not a party to, or bound by, any employment or other contract or
      agreement that contains any severance, termination pay or change of control
      liability or obligation, including, without limitation, any “excess parachute
      payment,” as defined in Section 280(g) of the Internal Revenue Code of 1986, as
      amended.

     

    4.15 Intellectual
      Property.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    4.17 Litigation.
      Except
      as described on Schedule
      4.17,
      there
      are no pending actions, suits or proceedings against the Company, its
      Subsidiaries or any of its or their properties; and to the Company’s Knowledge,
      no such actions, suits or proceedings are threatened or
      contemplated.

     

    4.18 Financial
      Statements.
      The
      financial statements included in each SEC Filing and the Memorandum present
      fairly, in all material respects, the consolidated financial position of the
      Company as of the dates shown and its consolidated results of operations and
      cash flows for the periods shown, and such financial statements have been
      prepared in conformity with United States generally accepted accounting
      principles applied on a consistent basis (“GAAP”) (except as may be disclosed
      therein or in the notes thereto, and, in the case of quarterly financial
      statements, as permitted by Form 10-QSB under the 1934 Act). Except as set
      forth
      in the financial statements of the Company included in the SEC Filings filed
      prior to the date hereof, the Memorandum or as described on Schedule
      4.18,
      neither
      the Company nor any of its Subsidiaries has incurred any liabilities, contingent
      or otherwise, except those incurred in the ordinary course of business,
      consistent (as to amount and nature) with past practices since the date of
      such
      financial statements, none of which, individually or in the aggregate, have
      had
      or could reasonably be expected to have a Material Adverse Effect.

     

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

     

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

     

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

     

    4.22 No
      Integrated Offering.
      Neither
      the Company nor any of its Affiliates, nor any Person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any Company
      security or solicited any offers to buy any security, under circumstances that
      would adversely affect reliance by the Company on Section 4(2) for the exemption
      from registration for the transactions contemplated hereby or would require
      registration of the Securities under the 1933 Act.

     

    
      
        
        

      

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

     

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

     

    4.25 Transactions
      with Affiliates.
      Except
      as disclosed in the SEC Filings, the Memorandum or as disclosed on Schedule
      4.25,
      none of
      the officers or directors of the Company and, to the Company’s Knowledge, none
      of the employees of the Company is presently a party to any transaction with
      the
      Company or any Subsidiary (other than as holders of stock options and/or
      warrants, and for services as employees, officers and directors), including
      any
      contract, agreement or other arrangement providing for the furnishing of
      services to or by, providing for rental of real or personal property to or
      from,
      or otherwise requiring payments to or from any officer, director or such
      employee or, to the Company’s Knowledge, any entity in which any officer,
      director, or any such employee has a substantial interest or is an officer,
      director, trustee or partner.

     

    4.26 Internal
      Controls.
      The
      Company is in material compliance with the provisions of the Sarbanes-Oxley
      Act
      of 2002 currently applicable to the Company. The Company and the Subsidiaries
      maintain a system of internal accounting controls sufficient to provide
      reasonable assurance that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      GAAP and to maintain asset accountability, (iii) access to assets is permitted
      only in accordance with management’s general or specific authorization, and (iv)
      the recorded accountability for assets is compared with the existing assets
      at
      reasonable intervals and appropriate action is taken with respect to any
      differences. The Company has established disclosure controls and procedures
      (as
      defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
      such disclosure controls and procedures to ensure that material information
      relating to the Company, including the Subsidiaries, is made known to the
      certifying officers by others within those entities, particularly during the
      period in which the Company’s most recently filed period report under the 1934
      Act, as the case may be, is being prepared. The Company’s certifying officers
      have evaluated the effectiveness of the Company’s controls and procedures as of
      the end of the period covered by the most recently filed periodic report under
      the 1934 Act (such date, the “Evaluation Date”). The Company presented in its
      most recently filed periodic report under the 1934 Act the conclusions of the
      certifying officers about the effectiveness of the disclosure controls and
      procedures based on their evaluations as of the Evaluation Date. Since the
      Evaluation Date, there have been no significant changes in the Company’s
      internal controls (as such term is defined in Item 308 of Regulation S-K) or,
      to
      the Company’s Knowledge, in other factors that could significantly affect the
      Company’s internal controls. The Company maintains and will continue to maintain
      a standard system of accounting established and administered in accordance
      with
      GAAP and the applicable requirements of the 1934 Act.

     

    
      
        
        

      

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

     

    4.28 Additional
      Representations.
      All
      representations and warranties of the Company contained in the Share Exchange
      Agreement are true and correct in all material respects (except for those
      representations and warranties that speak as of a certain date, which in such
      case, were true and correct in all material respects as of such date) and the
      Investors may rely on such representations and warranties as if made directly
      to
      them. The Company has complied in all material respects with all covenants
      and
      other obligations to which they are bound under the Share Exchange Agreement.
      The transactions contemplated by the Share Exchange Agreement are being
      consummated simultaneously with the Closing.

     

    5. Representations
      and Warranties of Long-E.
      Long-E
      hereby represents and warrants to the Investors and the Placement Agent that,
      except as set forth in the Disclosure Schedules:

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    5.5 Delivery
      of Memorandum; Business.
      Long-E
      has made available to the Investors a copy of the Memorandum. The Memorandum
      contains a complete and accurate description in all material respects of the
      business of Long-E and its Subsidiaries, taken as a whole.

     

    5.6 No
      Material Adverse Change.
      Since
      September 30, 2006, except as identified and described in the Memorandum or
      as
      described on Schedule
      5.6,
      there
      has not been:

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    (g) any
      material labor difficulties or labor union organizing activities with respect
      to
      employees of Long-E or any Subsidiary;

     

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

     

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

     

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

     

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

     

    5.7 The
      Memorandum.
      The
      Memorandum does not contain any untrue statement of a material fact or omit
      to
      state any material fact necessary in order to make the statements made therein,
      in the light of the circumstances under which they were made, not
      misleading.

     

    
      
        
        

      

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

     

    5.9 Tax
      Matters.
      Long-E
      and each Subsidiary has timely prepared and filed all tax returns required
      to
      have been filed by Long-E or such Subsidiary with all appropriate governmental
      agencies and timely paid all taxes shown thereon or otherwise owed by it. The
      charges, accruals and reserves on the books of Long-E in respect of taxes for
      all fiscal periods are adequate in all material respects, and there are no
      material unpaid assessments against Long-E or any Subsidiary nor, to Long-E’s
      Knowledge, any basis for the assessment of any additional taxes, penalties
      or
      interest for any fiscal period or audits by any federal, state or local taxing
      authority except for any assessment which is not material to Long-E and its
      Subsidiaries, taken as a whole. All taxes and other assessments and levies
      that
      Long-E or any Subsidiary is required to withhold or to collect for payment
      have
      been duly withheld and collected and paid to the proper governmental entity
      or
      third party when due. There are no tax liens or claims pending or, to Long-E’s
      Knowledge, threatened against Long-E or any Subsidiary or any of their
      respective assets or property. Except as described on Schedule
      5.9
      or as
      described in the Memorandum, there are no outstanding tax sharing agreements
      or
      other such arrangements between Long-E and any Subsidiary or other corporation
      or entity.

     

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

     

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

     

    5.12 Labor
      Matters.

     

    
      (a) Except
        as
        set forth on Schedule
        5.12,
        Long-E
        is not a party to or bound by any collective bargaining agreements or other
        agreements with labor organizations. Long-E has not violated in any material
        respect any laws, regulations, orders or contract terms, affecting the
        collective bargaining rights of employees, labor organizations or any laws,
        regulations or orders affecting employment discrimination, equal opportunity
        employment, or employees’ health, safety, welfare, wages and
        hours.

    

     

    
      
        
        

      

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

     

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

     

    (d) Except
      as
      disclosed in the Memorandum or as described on Schedule
      5.12,
      Long-E
      is not a party to, or bound by, any employment or other contract or agreement
      that contains any severance, termination pay or change of control liability
      or
      obligation, including, without limitation, any “excess parachute payment,” as
      defined in Section 280(g) of the Internal Revenue Code.

     

    5.13 Intellectual
      Property.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    (f) Long-E
      and its Subsidiaries have taken reasonable steps to protect Long-E’s and its
      Subsidiaries’ rights in their Intellectual Property and Confidential
      Information. 

     

    5.14 Environmental
      Matters.
      Neither
      Long-E nor any Subsidiary is in violation of any Environmental Laws, owns or
      operates any real property contaminated with any substance that is subject
      to
      any Environmental Laws, is liable for any off-site disposal or contamination
      pursuant to any Environmental Laws, or is subject to any claim relating to
      any
      Environmental Laws, which violation, contamination, liability or claim has
      had
      or could reasonably be expected to have a Material Adverse Effect, individually
      or in the aggregate; and there is no pending or, to Long-E’s Knowledge,
      threatened investigation that might lead to such a claim.

     

    
      
        
        

      

      
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    5.15 Litigation.
      Except
      as described on Schedule
      5.15,
      there
      are no pending actions, suits or proceedings against Long-E, its Subsidiaries
      or
      any of its or their properties; and to Long-E’s Knowledge, no such actions,
      suits or proceedings are threatened or contemplated.

     

    5.16 Financial
      Statements.
      The
      financial statements included in the Memorandum present fairly, in all material
      respects, the consolidated financial position of Long-E as of the dates shown
      and its consolidated results of operations and cash flows for the periods shown,
      and such financial statements have been prepared in conformity with GAAP (except
      as may be disclosed therein or in the notes thereto, and, in the case of
      quarterly financial statements, as would be permitted by Form 10-QSB under
      the
      1934 Act). Except as set forth in the financial statements of Long-E included
      in
      the Memorandum or as described on Schedule
      5.16,
      neither
      Long-E nor any of its Subsidiaries has incurred any liabilities, contingent
      or
      otherwise, except those incurred in the ordinary course of business, consistent
      (as to amount and nature) with past practices since the date of such financial
      statements, none of which, individually or in the aggregate, have had or could
      reasonably be expected to have a Material Adverse Effect.

     

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

     

    5.18 Brokers
      and Finders.
      Except
      for the Placement Agent, no Person will have, as a result of the transactions
      contemplated by the Transaction Documents, any valid right, interest or claim
      against or upon Long-E, any Subsidiary or an Investor for any commission, fee
      or
      other compensation pursuant to any agreement, arrangement or understanding
      entered into by or on behalf of Long-E.

     

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

     

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

     

    
      
        
        

      

      
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    5.21 Transactions
      with Affiliates.
      Except
      as disclosed in the Memorandum or as disclosed on Schedule
      5.21,
      none of
      the officers or directors of Long-E and, to Long-E’s Knowledge, none of the
      employees of Long-E is presently a party to any transaction with Long-E or
      any
      Subsidiary (other than as holders of stock options and/or warrants, and for
      services as employees, officers and directors), including any contract,
      agreement or other arrangement providing for the furnishing of services to
      or
      by, providing for rental of real or personal property to or from, or otherwise
      requiring payments to or from any officer, director or such employee or, to
      Long-E’s Knowledge, any entity in which any officer, director, or any such
      employee has a substantial interest or is an officer, director, trustee or
      partner.

     

    5.22 Internal
      Controls.
      Long-E
      and the Subsidiaries maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization, and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences. Long-E maintains and will continue
      to
      maintain a standard system of accounting established and administered in
      accordance with GAAP.

     

    5.23 Disclosures.
      Neither
      Long-E nor any Person acting on its behalf has provided the Investors or their
      agents or counsel with any information that constitutes or might constitute
      material, non-public information.

     

    5.24 Additional
      Representations.
      All
      representations and warranties of Long-E contained in the Share Exchange
      Agreement are true and correct in all material respects (except for those
      representations and warranties that speak as of a certain date, which in such
      case, were true and correct in all material respects as of such date) and the
      Investors may rely on such representations and warranties as if made directly
      to
      them. Long-E has complied in all material respects with all covenants and other
      obligations to which they are bound under the Share Exchange Agreement. The
      transactions contemplated by the Share Exchange Agreement are being consummated
      simultaneously with the Closing.

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    7. Conditions
      to Closing.

     

    7.1 Conditions
      to the Investors’ Obligations. The obligation of each Investor to purchase the
      Common Shares and the Warrants at Closing is subject to the fulfillment to
      such
      Investor’s satisfaction, on or prior to the Closing Date, of the following
      conditions, any of which may be waived by such Investor (as to itself
      only):

     

    (a) The
      representations and warranties made by the ICDO and Long-E in Section 4 and
      5
      hereof qualified as to materiality shall be true and correct on the Closing
      Date, except to the extent any such representation or warranty expressly speaks
      as of an earlier date, in which case such representation or warranty shall
      be
      true and correct as of such earlier date, and, the representations and
      warranties made by ICDO and Long-E in Section 4 and 5 hereof not qualified
      as to
      materiality shall be true and correct in all material respects on the Closing
      Date, except to the extent any such representation or warranty expressly speaks
      as of an earlier date, in which case such representation or warranty shall
      be
      true and correct in all material respects as of such earlier date. The Company
      shall have performed all obligations and covenants herein required to be
      performed by it on or prior to the Closing Date, including without limitation
      those contained in Section 3.1 hereof.

     

    
      
        
        

      

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

     

    (c) The
      Company shall have executed and delivered to the Placement Agent each of the
      Transition Documents.

     

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

     

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

     

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

     

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

     

    (h) The
      Company and the Placement Agent shall have received executed signature pages
      from Investors representing purchases of the Securities of at least $2.0 million
      in the aggregate.

     

    (i) The
      transactions contemplated by the Securities Exchange Agreement shall have been
      consummated simultaneously with the closing of the transactions contemplated
      by
      this Agreement.

     

    
      
        
        

      

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

     

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

     

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

     

    7.3 Termination
      of Obligations to Effect Closing; Effects.

     

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

     

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

     

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

     

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

     

    (iv) By
      either
      the Company or any Investor (with respect to itself only) if the Closing has
      not
      occurred on or prior to January 5, 2007; or

     

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

     

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

     

    
      
        
        

      

      
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    8. Covenants
      and Agreements of the Company.

     

    8.1 Reservation
      of Common Stock.
      The
      Company shall at all times reserve and keep available out of its authorized
      but
      unissued shares of Common Stock, solely for the purpose of providing for the
      exercise of the Warrants, such number of shares of Common Stock as shall from
      time to time equal the Warrants Shares issuable from time to time.

     

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

     

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

     

    8.4 Insurance.
      The
      Company shall not materially reduce the insurance coverages described in Section
      4.19 and 5.17.

     

    8.5 Compliance
      with Laws.
      The
      Company will comply in all material respects with all applicable laws, rules,
      regulations, orders and decrees of all governmental authorities.

     

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

     

    8.7 Removal
      of Legends.
      Upon
      the earlier of (i) registration for resale pursuant to the Registration Rights
      Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver
      to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable
      instructions that the Transfer Agent shall reissue a certificate representing
      shares of Common Stock without legends upon receipt by such Transfer Agent
      of
      the legended certificates for such shares, together with either (1) a customary
      representation by the Investor that Rule 144(k) applies to the shares of Common
      Stock represented thereby or (2) a statement by the Investor that such Investor
      has sold the shares of Common Stock represented thereby in accordance with
      the
      Plan of Distribution contained in the Registration Statement, and (B) cause
      its
      counsel to deliver to the Transfer Agent one or more blanket opinions to the
      effect that the removal of such legends in such circumstances may be effected
      under the 1933 Act. From and after the earlier of such dates, upon an Investor’s
      written request, the Company shall promptly cause certificates evidencing the
      Investor’s Securities to be replaced with certificates which do not bear such
      restrictive legends, and Warrant Shares subsequently issued upon due exercise
      of
      the Warrants shall not bear such restrictive legends provided the provisions
      of
      either clause (i) or clause (ii) above, as applicable, are satisfied with
      respect to such Warrant Shares, as applicable. When the Company is required
      to
      cause unlegended certificates that replace previously issued legended
      certificates to be prepared by the Transfer Agent and delivered to the holders
      thereof, if unlegended certificates are not delivered to an Investor within
      five
      (5) Business Days of submission by that Investor of legended certificate(s)
      to
      the Transfer Agent as provided above (or to the Company, in the case of the
      Warrants), the Company shall be liable to the Investor for liquidated damages
      in
      an amount equal to 1.5% of the aggregate purchase price of the Securities
      evidenced by such certificate(s) for each thirty (30) day period (or portion
      thereof) beyond such five (5) Business Day that the unlegended certificates
      have
      not been so delivered.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    8.8 Participation
      Right.
      The
      Investors shall have a right to participate in any subsequent placements of
      debt
      or equity until one (1) year after the effective date of the initial
      registration statement filed further to the Registration Rights Agreement on
      terms no less favorable than those obtained by the Company from an unaffiliated
      third party. Each Investor must notify the Company within 20 days following
      their receipt of notice from the Company of such proposed financing of its
      intention to participate in the financing, the closing of which shall occur
      within 30 days following the Company’s receipt of such participation notice.
      This participation right shall not apply to an Exempt Issuance. In the event
      that there is such a subsequent placement of debt or equity to any of the
      Investors, the Placement Agent will be entitled to receive cash compensation
      with respect to the amount invested by such Investors based on the cash
      commission rate paid to the Placement Agent for the Securities sold hereunder.
      

     

    8.9 Public
      Relations Escrow Fund.
      The
      Company shall deposit $250,000 of the gross proceeds from this transaction
      in a
      separate escrow account with a separate escrow agent to be used by the Company
      in connection with investor and public relations.

     

    9. Survival
      and Indemnification.

     

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

     

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

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

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

     

    10. Miscellaneous.

     

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

     

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

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

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

     

    10.4 Notices.
      Unless
      otherwise provided, any notice required or permitted under this Agreement shall
      be given in writing and shall be deemed effectively given as hereinafter
      described (i) if given by personal delivery, then such notice shall be deemed
      given upon such delivery, (ii) if given by telex or telecopier, then such notice
      shall be deemed given upon receipt of confirmation of complete transmittal,
      (iii) if given by mail, then such notice shall be deemed given upon the earlier
      of (A) receipt of such notice by the recipient or (B) three days after such
      notice is deposited in first class mail, postage prepaid, and (iv) if given
      by
      an internationally recognized overnight air courier, then such notice shall
      be
      deemed given one Business Day after delivery to such carrier. All notices shall
      be addressed to the party to be notified at the address as follows, or at such
      other address as such party may designate by ten days’ advance written notice to
      the other party:

     

    If
      to the
      Company:

     

    c/o
      Long-E International Group Co., Ltd.

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

    Hi-Tech
      Industry Zone,

    Shenzhen,
      518000, Guangdong, China

    Telephone:
      (86) 755 3396 5188

    Facsimile:
      (86) 755 3396 5123

    Attention:
      Chairman of the Board

     

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

     

    Kirkpatrick
      & Lockhart Nicholson Graham LLP

    10100
      Santa Monica Boulevard, Seventh Floor

    Los
      Angeles, California 90067

    Facsimile:
      (310) 552-5001

    Attention:
      Thomas Poletti, Esq.

     

    If
      to the
      Investors:

     

    to
      the
      addresses set forth on the signature pages hereto, with copies to (which shall
      not constitute notice):

     

    Olshan
      Grundman Frome Rosenzweig & Wolosky LLP

    Park
      Avenue Tower

    65
      East
      55th
      Street

    New
      York,
      New York 10022

    Facsimile:
      (212) 451-2222

    Attention:
      Kenneth M. Silverman, Esq.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    10.5 Expenses.
      The
      parties hereto shall pay their own costs and expenses in connection herewith,
      except that the Company shall pay the reasonable fees and expenses of Olshan
      Grundman Frome Rosenzweig & Wolosky LLP, counsel to Vision Opportunity
      Master Fund, Ltd. All of such fees and expenses shall be deducted from the
      Escrow Amount pursuant to signed written instructions of the Company and the
      Placement Agent.

     

    10.6 Break-Up
      Fee.
      Vision
      will be entitled to a fee in the amount of $10,000 in the event that (i) the
      Company accepts or approves any proposal that provides equity or debt financing
      for the Company following its execution of this Agreement but prior to Closing
      (any such proposal, an “Alternative Transaction”) or (ii) the Company fails to
      meet any requirement to close (the “Break-Up Fee”). No Break-Up Fee will be owed
      if Vision terminates this Agreement as to itself for any reason other than
      as a
      result of (i) the Company’s willful failure to comply with its conditions to
      Closing for the purposes of delaying or precluding the closing of the
      transaction or (ii) the Company’s failure to adhere to the Closing Date. In the
      event the Company enters into an Alternative Transaction, the break-up fee
      shall
      be due and payable immediately. If the Transaction contemplated herein does
      not
      close for any reason that is not the fault of Vision and Vision is not owed
      a
      Break-Up Fee, the Company shall pay Vision $10,000 in addition to any accrued
      but unpaid legal fees within three Business Days of such
      termination.

     

    10.7 Amendments
      and Waivers.
      Any
      term of this Agreement may be amended and the observance of any term of this
      Agreement may be waived (either generally or in a particular instance and either
      retroactively or prospectively), only with the written consent of the Company
      and the Investors. Any amendment or waiver effected in accordance with this
      paragraph shall be binding upon each holder of any Securities purchased under
      this Agreement at the time outstanding, each future holder of all such
      Securities, and the Company.

     

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

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    10.13 Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Securities pursuant to the Transaction Documents has been made by
      such
      Investor independently of any other Investor. Nothing contained herein or in
      any
      Transaction Document, and no action taken by any Investor pursuant thereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated by the Transaction Documents.
      Each
      Investor acknowledges that no other Investor has acted as agent for such
      Investor in connection with making its investment hereunder and that no Investor
      will be acting as agent of such Investor in connection with monitoring its
      investment in the Securities or enforcing its rights under the Transaction
      Documents. Each Investor shall be entitled to independently protect and enforce
      its rights, including, without limitation, the rights arising out of this
      Agreement or out of the other Transaction Documents, and it shall not be
      necessary for any other Investor to be joined as an additional party in any
      proceeding for such purpose. The Company acknowledges that each of the Investors
      has been provided with the same Transaction Documents for the purpose of closing
      a transaction with multiple Investors and not because it was required or
      requested to do so by any Investor.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


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

    
      	 	 	 
	 	
              INNCARDIO,
                INC.

            
	 
 	 
 	 
 
	 	By:  	
              /s/
                Eric Thatcher

            
	 	
              

              Name:
                Eric
                Thatcher

            
	 	Title:
              President


    

     

    
      	 	 	 
	 	
              LONG-E
                INTERNATIONAL GROUP CO., LTD.

            
	 
 	 
 	 
 
	 	By:  	
              /s/
                Bu Shengfu

            
	 	
              

              Name:
                Bu Shengfu

            
	 	Title: Chief
              Executive Officer


    

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

       

      
        	 	 	 
	 The
                Investors:	
                The
                  Nutmeg Group LLC

              
	 
 	 
 	 
 
	 	By:  	
                /s/
                  Randall S. Goulding

              
	 	 	
                

                Name:
                  Randall S. Goulding

                Title:
                  Manager

              
	 	 	 
	
                Purchase
                  Price:

              	
                $

              	50,000.00
	
                Number
                  of Common Shares:

              	 	125,000
	
                Number
                  of Series A Warrants:

              	 	62,500
	
                Number
                  of Series B Warrants:

              	 	62,500
	 	 	 
	
                Address
                  for Notice:

              	
                [
                  3346 Commercial Ave

                
                  Northbrook,
                    IL 60062 ]

                

              


      

       

      [Signature
        page to Securities Purchase
        Agreement]

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

    

     

    Definition
      of “Accredited Investor”

     

    
      	
              Category
                A ___ 

            	
              The
                undersigned is an individual (not a partnership, corporation, etc.)
                whose
                individual net worth, or joint net worth with his or her spouse,
                presently
                exceeds $1,000,000.

            
	 	 
	
              Category
                B ___

            	
              The
                undersigned is an individual (not a partnership, corporation, etc.)
                who
                had an income in excess of $200,000 in each of the two most recent
                years,
                or joint income with his or her spouse in excess of $300,000 in each
                of
                those years (in each case including foreign income, tax exempt income
                and
                full amount of capital gains and losses but excluding any income
                of other
                family members and any unrealized capital appreciation) and has a
                reasonable expectation of reaching the same income level in the current
                year.

            
	 	 
	
              Category
                C ___

            	
              The
                undersigned is a director or executive officer of the Company which
                is
                issuing and selling the securities.

            
	 	 
	
              Category
                D ___

            	
              The
                undersigned is a bank; a savings and loan association; insurance
                company;
                registered investment company; registered business development company;
                licensed small business investment company (“SBIC”); or employee benefit
                plan within the meaning of Title 1 of ERISA and (a) the investment
                decision is made by a plan fiduciary which is either a bank, savings
                and
                loan association, insurance company or registered investment advisor,
                or
                (b) the plan has total assets in excess of $5,000,000 or (c) is a
                self
                directed plan with investment decisions made solely by persons that
                are
                accredited investors.

            
	 	 
	
              Category
                E ___

            	
              The
                undersigned is a private business development company as defined
                in
                section 202(a)(22) of the Investment Advisors Act of
                1940.

            
	 	 
	
              Category
                F ___

            	
              The
                undersigned is either a corporation, partnership, Massachusetts business
                trust, or non-profit organization within the meaning of Section 501(c)(3)
                of the Internal Revenue Code, in each case not formed for the specific
                purpose of acquiring the Securities and with total assets in excess
                of
                $5,000,000.

            
	 	 
	
              Category
                G ___

            	
              The
                undersigned is a trust with total assets in excess of $5,000,000,
                not
                formed for the specific purpose of acquiring the Securities, where
                the
                purchase is directed by a “sophisticated investor” as defined in
                Regulation 506(b)(2)(ii) under the Act.

            
	 	 
	
              Category
                H ü

            	
              The
                undersigned is an entity (other than a trust) in which all of the
                equity
                owners are “accredited investors” within one or more of the above
                categories. If relying upon this Category alone, each equity owner
                must
                complete a separate copy of this
                Agreement.

            


    

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    
       

      
        	 	 	 
	 The
                Investors:	
                
                  MidSouth
                    Investor Fund LP

                

              
	 
 	 
 	 
 
	 	By:  	
                /s/
                  Lyman O. Heidtke

              
	 	 	
                

                Name:
                  Lyman
                  O. Heidtke

                Title:
                  General
                  Partner

              
	 	 	 
	
                Purchase
                  Price:

              	
                $

              	500,000
	
                Number
                  of Common Shares:

              	 	1,785,714
	
                Number
                  of Series A Warrants:

              	 	889,285
	
                Number
                  of Series B Warrants:

              	 	889,285
	 	 	 
	
                Address
                  for Notice:

              	
                [
                  201
                  4th
                  Ave. North

                
                  Suite
                    1950

                  Nashville,
                    TN 37219 ]

                

              


      

       

      [Signature
        page to Securities Purchase
        Agreement]

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

      Definition
        of “Accredited Investor”

       

      
        	
                Category
                  A ___ 

              	
                The
                  undersigned is an individual (not a partnership, corporation, etc.)
                  whose
                  individual net worth, or joint net worth with his or her spouse,
                  presently
                  exceeds $1,000,000.

              
	 	 
	
                Category
                  B ___

              	
                The
                  undersigned is an individual (not a partnership, corporation, etc.)
                  who
                  had an income in excess of $200,000 in each of the two most recent
                  years,
                  or joint income with his or her spouse in excess of $300,000 in
                  each of
                  those years (in each case including foreign income, tax exempt
                  income and
                  full amount of capital gains and losses but excluding any income
                  of other
                  family members and any unrealized capital appreciation) and has
                  a
                  reasonable expectation of reaching the same income level in the
                  current
                  year.

              
	 	 
	
                Category
                  C ___

              	
                The
                  undersigned is a director or executive officer of the Company which
                  is
                  issuing and selling the securities.

              
	 	 
	
                Category
                  D ___

              	
                The
                  undersigned is a bank; a savings and loan association; insurance
                  company;
                  registered investment company; registered business development
                  company;
                  licensed small business investment company (“SBIC”); or employee benefit
                  plan within the meaning of Title 1 of ERISA and (a) the investment
                  decision is made by a plan fiduciary which is either a bank, savings
                  and
                  loan association, insurance company or registered investment advisor,
                  or
                  (b) the plan has total assets in excess of $5,000,000 or (c) is
                  a self
                  directed plan with investment decisions made solely by persons
                  that are
                  accredited investors.

              
	 	 
	
                Category
                  E ___

              	
                The
                  undersigned is a private business development company as defined
                  in
                  section 202(a)(22) of the Investment Advisors Act of
                  1940.

              
	 	 
	
                Category
                  F ü

              	
                The
                  undersigned is either a corporation, partnership, Massachusetts
                  business
                  trust, or non-profit organization within the meaning of Section
                  501(c)(3)
                  of the Internal Revenue Code, in each case not formed for the specific
                  purpose of acquiring the Securities and with total assets in excess
                  of
                  $5,000,000.

              
	 	 
	
                Category
                  G ___

              	
                The
                  undersigned is a trust with total assets in excess of $5,000,000,
                  not
                  formed for the specific purpose of acquiring the Securities, where
                  the
                  purchase is directed by a “sophisticated investor” as defined in
                  Regulation 506(b)(2)(ii) under the Act.

              
	 	 
	
                Category
                  H ü

              	
                The
                  undersigned is an entity (other than a trust) in which all of the
                  equity
                  owners are “accredited investors” within one or more of the above
                  categories. If relying upon this Category alone, each equity owner
                  must
                  complete a separate copy of this
                  Agreement.

              


      

       

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

       

      
        
          	 	 	 
	 The
                  Investors:	
                  
                    Kagel
                      Family Trust

                  

                
	 
 	 
 	 
 
	 	By:  	/s/ David Kagel,
                  Trustee
	 	 	
                  

                  Name:
                    DAVID L. KAGEL

                  Title:
                    TRUSTEE

                
	 	 	 
	
                  Purchase
                    Price:

                	
                  $

                	50,000.00
	
                  Number
                    of Common Shares:

                	 	125,000
	
                  Number
                    of Series A Warrants:

                	 	62,500
	
                  Number
                    of Series B Warrants:

                	 	62,500
	 	 	 
	
                  Address
                    for Notice:

                	
                  [
                    1801
                    Century Park East, Suite 2500

                  
                    Los
                      Angeles, CA 90067 ]

                  

                


        

         

        [Signature
          page to Securities Purchase
          Agreement]

         

        
          
            
            

          

          
            38

            
              

            

          

          
            
            

          

        

         

        Definition
          of “Accredited Investor”

         

        
          	
                  Category
                    A ___ 

                	
                  The
                    undersigned is an individual (not a partnership, corporation,
                    etc.) whose
                    individual net worth, or joint net worth with his or her spouse,
                    presently
                    exceeds $1,000,000.

                
	 	 
	
                  Category
                    B ___

                	
                  The
                    undersigned is an individual (not a partnership, corporation,
                    etc.) who
                    had an income in excess of $200,000 in each of the two most recent
                    years,
                    or joint income with his or her spouse in excess of $300,000
                    in each of
                    those years (in each case including foreign income, tax exempt
                    income and
                    full amount of capital gains and losses but excluding any income
                    of other
                    family members and any unrealized capital appreciation) and has
                    a
                    reasonable expectation of reaching the same income level in the
                    current
                    year.

                
	 	 
	
                  Category
                    C ___

                	
                  The
                    undersigned is a director or executive officer of the Company
                    which is
                    issuing and selling the securities.

                
	 	 
	
                  Category
                    D ___

                	
                  The
                    undersigned is a bank; a savings and loan association; insurance
                    company;
                    registered investment company; registered business development
                    company;
                    licensed small business investment company (“SBIC”); or employee benefit
                    plan within the meaning of Title 1 of ERISA and (a) the investment
                    decision is made by a plan fiduciary which is either a bank,
                    savings and
                    loan association, insurance company or registered investment
                    advisor, or
                    (b) the plan has total assets in excess of $5,000,000 or (c)
                    is a self
                    directed plan with investment decisions made solely by persons
                    that are
                    accredited investors.

                
	 	 
	
                  Category
                    E ___

                	
                  The
                    undersigned is a private business development company as defined
                    in
                    section 202(a)(22) of the Investment Advisors Act of
                    1940.

                
	 	 
	
                  Category
                    F ___

                	
                  The
                    undersigned is either a corporation, partnership, Massachusetts
                    business
                    trust, or non-profit organization within the meaning of Section
                    501(c)(3)
                    of the Internal Revenue Code, in each case not formed for the
                    specific
                    purpose of acquiring the Securities and with total assets in
                    excess of
                    $5,000,000.

                
	 	 
	
                  Category
                    G ü

                	
                  The
                    undersigned is a trust with total assets in excess of $5,000,000,
                    not
                    formed for the specific purpose of acquiring the Securities,
                    where the
                    purchase is directed by a “sophisticated investor” as defined in
                    Regulation 506(b)(2)(ii) under the Act.

                
	 	 
	
                  Category
                    H ___

                	
                  The
                    undersigned is an entity (other than a trust) in which all of
                    the equity
                    owners are “accredited investors” within one or more of the above
                    categories. If relying upon this Category alone, each equity
                    owner must
                    complete a separate copy of this
                    Agreement.

                


        

         

        
          
            
            

          

          
            39

            
              

            

          

          
            
            

          

        

      

       

      
        
          
            	 	 	 
	 The
                    Investors:	
                    [NAME]

                  
	 
 	 
 	 
 
	 	By:  	
                    /s/
                      Richard Rappaport

                  
	 	 	
                    

                    Name:
                      Richard
                      Rappaport

                    Title:
                      CEO

                  
	 	 	 
	
                    Purchase
                      Price:

                  	
                    $

                  	250,000
	
                    Number
                      of Common Shares:

                  	 	625,000
	
                    Number
                      of Series A Warrants:

                  	 	312,500
	
                    Number
                      of Series B Warrants:

                  	 	312,500
	 	 	 
	
                    Address
                      for Notice:

                  	
                    [ WestPark
                      Capital Financial Services, LLC

                    
                      1900
                        Ave of the Stars 

                      Suite
                        310

                      
                        Los
                          Angeles, CA 90067 ]

                        Fax:
                          (310) 843- 9304

                        Phone:
                          (310) 843 - 9300

                      

                    

                  


          

           

          [Signature
            page to Securities Purchase
            Agreement]

           

          
            
              
              

            

            
              40

              
                

              

            

            
              
              

            

          

           

          Definition
            of “Accredited Investor”

           

          
            	
                    Category
                      A ___ 

                  	
                    The
                      undersigned is an individual (not a partnership, corporation,
                      etc.) whose
                      individual net worth, or joint net worth with his or her spouse,
                      presently
                      exceeds $1,000,000.

                  
	 	 
	
                    Category
                      B ___

                  	
                    The
                      undersigned is an individual (not a partnership, corporation,
                      etc.) who
                      had an income in excess of $200,000 in each of the two most
                      recent years,
                      or joint income with his or her spouse in excess of $300,000
                      in each of
                      those years (in each case including foreign income, tax exempt
                      income and
                      full amount of capital gains and losses but excluding any income
                      of other
                      family members and any unrealized capital appreciation) and
                      has a
                      reasonable expectation of reaching the same income level in
                      the current
                      year.

                  
	 	 
	
                    Category
                      C ___

                  	
                    The
                      undersigned is a director or executive officer of the Company
                      which is
                      issuing and selling the securities.

                  
	 	 
	
                    Category
                      D ___

                  	
                    The
                      undersigned is a bank; a savings and loan association; insurance
                      company;
                      registered investment company; registered business development
                      company;
                      licensed small business investment company (“SBIC”); or employee benefit
                      plan within the meaning of Title 1 of ERISA and (a) the investment
                      decision is made by a plan fiduciary which is either a bank,
                      savings and
                      loan association, insurance company or registered investment
                      advisor, or
                      (b) the plan has total assets in excess of $5,000,000 or (c)
                      is a self
                      directed plan with investment decisions made solely by persons
                      that are
                      accredited investors.

                  
	 	 
	
                    Category
                      E ___

                  	
                    The
                      undersigned is a private business development company as defined
                      in
                      section 202(a)(22) of the Investment Advisors Act of
                      1940.

                  
	 	 
	
                    Category
                      F ___

                  	
                    The
                      undersigned is either a corporation, partnership, Massachusetts
                      business
                      trust, or non-profit organization within the meaning of Section
                      501(c)(3)
                      of the Internal Revenue Code, in each case not formed for the
                      specific
                      purpose of acquiring the Securities and with total assets in
                      excess of
                      $5,000,000.

                  
	 	 
	
                    Category
                      G ___

                  	
                    The
                      undersigned is a trust with total assets in excess of $5,000,000,
                      not
                      formed for the specific purpose of acquiring the Securities,
                      where the
                      purchase is directed by a “sophisticated investor” as defined in
                      Regulation 506(b)(2)(ii) under the Act.

                  
	 	 
	
                    Category
                      H ü

                  	
                    The
                      undersigned is an entity (other than a trust) in which all
                      of the equity
                      owners are “accredited investors” within one or more of the above
                      categories. If relying upon this Category alone, each equity
                      owner must
                      complete a separate copy of this
                      Agreement.

                  


          

           

          
            
              
              

            

            
              41

              
                

              

            

            
              
              

            

          

        

      

    

     

    
      
        
          
            	 	 	 
	 The
                    Investors:	
                    
                      Professional
                        Offshore Opportunity Fund, Ltd.

                      
                        1400
                          Old Country Road Suite 206

                        
                          Westbury,
                            New York 11590

                        

                      

                    

                  
	 
 	 
 	 
 
	 	By:  	/s/ Marc K. Swickie
	 	 	
                    

                    Name:
                      Marc K. Swickie

                    Title:
                      MANAGER

                  
	 	 	 
	
                    Purchase
                      Price:

                  	
                    $

                  	150,000.00
                    US
	
                    Number
                      of Common Shares:

                  	 	350,000
	
                    Number
                      of Series A Warrants:

                  	 	312,000
	
                    Number
                      of Series B Warrants:

                  	 	250,000
	 	 	 
	
                    Address
                      for Notice:

                  	
                    [ Professional
                      Offshore Opportunity Fund, Ltd. 

                      
                        
                          1400
                            Old Country Road Suite 206

                          
                            Westbury,
                              New York 11590
]

                          

                        

                      

                    

                  


          

           

          [Signature
            page to Securities Purchase
            Agreement]

           

          
            
              
              

            

            
              42

              
                

              

            

            
              
              

            

          

           

          Definition
            of “Accredited Investor”

           

          
            	
                    Category
                      A ___ 

                  	
                    The
                      undersigned is an individual (not a partnership, corporation,
                      etc.) whose
                      individual net worth, or joint net worth with his or her spouse,
                      presently
                      exceeds $1,000,000.

                  
	 	 
	
                    Category
                      B ___

                  	
                    The
                      undersigned is an individual (not a partnership, corporation,
                      etc.) who
                      had an income in excess of $200,000 in each of the two most
                      recent years,
                      or joint income with his or her spouse in excess of $300,000
                      in each of
                      those years (in each case including foreign income, tax exempt
                      income and
                      full amount of capital gains and losses but excluding any income
                      of other
                      family members and any unrealized capital appreciation) and
                      has a
                      reasonable expectation of reaching the same income level in
                      the current
                      year.

                  
	 	 
	
                    Category
                      C ___

                  	
                    The
                      undersigned is a director or executive officer of the Company
                      which is
                      issuing and selling the securities.

                  
	 	 
	
                    Category
                      D ___

                  	
                    The
                      undersigned is a bank; a savings and loan association; insurance
                      company;
                      registered investment company; registered business development
                      company;
                      licensed small business investment company (“SBIC”); or employee benefit
                      plan within the meaning of Title 1 of ERISA and (a) the investment
                      decision is made by a plan fiduciary which is either a bank,
                      savings and
                      loan association, insurance company or registered investment
                      advisor, or
                      (b) the plan has total assets in excess of $5,000,000 or (c)
                      is a self
                      directed plan with investment decisions made solely by persons
                      that are
                      accredited investors.

                  
	 	 
	
                    Category
                      E ___

                  	
                    The
                      undersigned is a private business development company as defined
                      in
                      section 202(a)(22) of the Investment Advisors Act of
                      1940.

                  
	 	 
	
                    Category
                      F ü

                  	
                    The
                      undersigned is either a corporation, partnership, Massachusetts
                      business
                      trust, or non-profit organization within the meaning of Section
                      501(c)(3)
                      of the Internal Revenue Code, in each case not formed for the
                      specific
                      purpose of acquiring the Securities and with total assets in
                      excess of
                      $5,000,000.

                  
	 	 
	
                    Category
                      G ___

                  	
                    The
                      undersigned is a trust with total assets in excess of $5,000,000,
                      not
                      formed for the specific purpose of acquiring the Securities,
                      where the
                      purchase is directed by a “sophisticated investor” as defined in
                      Regulation 506(b)(2)(ii) under the Act.

                  
	 	 
	
                    Category
                      H ___

                  	
                    The
                      undersigned is an entity (other than a trust) in which all
                      of the equity
                      owners are “accredited investors” within one or more of the above
                      categories. If relying upon this Category alone, each equity
                      owner must
                      complete a separate copy of this
                      Agreement.

                  


          

           

          
            
              
              

            

            
              43

              
                

              

            

            
              
              

            

          

        

      

    

     

    
       

      
        
          
            
              	 	 	 
	 The
                      Investor:	
                      
                        
                          VISION
                            OPPORTUNITY MASTER FUND, LTD.

                        

                      

                    
	 
 	 
 	 
 
	 	By:  	/s/ Adam Benowitz
	 	 	
                      

                      Name:
                        Adam Benowitz

                      Title:
                        PORTFOLIO MGR

                    
	 	 	 
	
                      Purchase
                        Price:

                    	
                      $

                    	900,000
	
                      Number
                        of Common Shares:

                    	 	2,250,000
	
                      Number
                        of Series A Warrants:

                    	 	1,125,000
	
                      Number
                        of Series B Warrants:

                    	 	1,125,000
	 	 	 
	
                      Address
                        for Notice:

                    	
                      Vision
                        Opportunity Master Fund, Ltd.

                      
                        
                          20
                            W. 55th
                            Street, 5th
                            Floor

                        

                        New
                          York, NY 10019

                      

                    


            

             

            [Signature
              page to Securities Purchase
              Agreement]

             

            
              
                
                

              

              
                44

                
                  

                

              

              
                
                

              

            

             

          

        

      

    

    SCHEDULE
      I

     

    Wire
      Instructions:

     

    
      	
              Bank:

            	
              Wells
                Fargo Bank

              1801
                Avenue of the Stars

              Los
                Angeles, CA 90067

            
	 	 
	
              ABA
                No.:

            	
              121000248

            
	
              Account
                Name:

            	
              Subscription
                Escrow Account #3

            
	
              Account
                No.:

            	
              5763556601

            
	
              Reference:

            	
              Law
                Offices of David L. Kagel, 
A Professional
                Corporation

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Disclosure
        Schedules

       

      See
        disclosure in Confidential Private Offering Memorandum, dated December 27,
        2006.

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    EXHIBIT
      A-1

     

    Form
      of
      Series A Warrant

     

    [See
      attached.]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    



    EXHIBIT
      A-2

     

    Form
      of
      Series B Warrant

     

    [See
      attached.]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

     

    Form
      of
      Registration Rights Agreement

     

    [See
      attached.]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      C

     

    Post-Closing
      Capitalization

    

      
        	 	 	
                Shares

              	 
	
                Common
                  Stock Outstanding

              	 	 	
                31,259,714

              	 
	
                Common
                  Stock Underlying:

              	 	 	 	 
	
                Series
                  A Warrants

              	 	 	
                2,639,285

              	 
	
                Series
                  B Warrants

              	 	 	
                2,639,285

              	 
	
                Placement
                  Agent Warrants

              	 	 	
                528,571

              	 
	
                Bridge
                  Warrants

              	 	 	
                1,000,000

              	 
	 	 	 	 	 
	
                Fully
                  diluted share capital

              	 	 	
                38,066,855