Unassociated Document


     

    Exhibit
4.1

     

     

     

    SECURITIES
PURCHASE AGREEMENT

    
       

      This
Securities Purchase Agreement (this “Agreement”) is dated
as of November 4, 2008 between Hague Corp., a Nevada corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

       

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

       

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

       

       

      ARTICLE
I.

      DEFINITIONS

       

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

       

      “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.7.

       

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

       

      “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities
Act.  

       

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

       

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

       

      “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.

       

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

       

      
        
          
          

        

        
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      “Closing Statement”
means the Closing Statement in the form Annex A attached
hereto.

       

       “Commission” means the
United States Securities and Exchange Commission.

       

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

       

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

       

      “Company Counsel”
means Morse & Morse, PLLC with offices located at 1400 Old Country Road,
Suite 302, Westbury, New York 11590.

       

      “Conversion Price”
shall have the meaning ascribed to such term in the Debentures.

       

      “Debentures” means the
8% Senior Secured Convertible Debentures due, subject to the terms therein, 36
months from their date of issuance, issued by the Company to the Purchasers
hereunder, in the form of Exhibit A attached
hereto.

       

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

       

      “Discussion Time”
shall have the meaning ascribed to such term in Section 3.2(f).

       

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

       

      “Eligible Holder”
shall have the meaning ascribed to such term in Section 4.12(a).

       

      “Equity Securities”
shall have the meaning ascribed to such term in Section 4.12(a).

       

      “Escrow Agreement”
means the Escrow Agreement, dated the date hereof, among the Company, the
Purchasers and Sichenzia Ross Friedman Ference LLP, in the form of Exhibit G attached
hereto.

       

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

       

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

       

      
        
          
          

        

        
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      “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose and ratified by the Company’s
shareholders, (b) securities upon the exercise or exchange of or conversion of
any Securities issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion price of such
securities, and (c) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the
Company, provided that any such issuance shall only be to a Person which is,
itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in
securities.

       

      “Family Member” shall
have the meaning ascribed to such term in Section 4.12(a).

       

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

       

      
        
          
          

        

        
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      “Holder” shall have
the meaning ascribed to such term in Section 4.12(a).

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      “Merger” shall have
the meaning ascribed to such term in Section 2.3(b)(i).

       

      “Holder” shall have
the meaning ascribed to such term in Section 4.12(a).

       

      “Permitted Assignee”
shall have the meaning ascribed to such term in Section 4.12(a).

       

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

       

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

       

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

       

      “Registrable
Securities” shall have the meaning ascribed to such term in Section
4.12(a).

       

      “Registration Rights
Agreement” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of Exhibit B attached
hereto.

       

      “Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Purchaser as provided for in the Registration Rights
Agreement.

       

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

       

      “Required Minimum”
means, as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon conversion in full of
all Debentures, ignoring any conversion or exercise limits set forth therein,
and assuming that the Conversion Price is at all times on and after the date of
determination 75% of the then Conversion Price on the Trading Day immediately
prior to the date of determination.

       

      “Restricted Shares”
shall have the meaning ascribed to such term in Section 2.3(a)(iv).

       

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

       

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

       

       

      
        
          
          

        

        
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      “Securities” means the
Debentures, the Underlying Shares and the Restricted Shares.

       

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

       

      “Security Agreement”
means the Security Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit D attached
hereto.

      


      “Security Documents”
shall mean the Security Agreement, the Subsidiary Guarantee and the Stock Pledge
Agreement and any other documents and filing required thereunder in order to
grant the Purchasers a first priority security interest in the assets of the
Company and the Subsidiaries as provided in the Security Agreement, including
all UCC-1 filing receipts.

       

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

       

      “SRFF” means Sichenzia
Ross Friedman Ference LLP with offices located at 61 Broadway, 32nd Floor,
New York, New York 10006.

       

      “Stock Pledge
Agreement” means the Stock Pledge Agreement, dated the date hereof,
between the Company and Stephen Squires, in the form of Exhibit F attached
hereto.

       

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

       

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

       

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

       

      “Trading Day” means a
day on which the principal Trading Market is open for trading.

       

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

       

      
        
          
          

        

        
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      “Transaction
Documents” means this Agreement, the Debentures, the Registration Rights
Agreement, the Security Agreement, the Escrow Agreement and the Subsidiary
Guarantee, all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.

       

      “Transfer Agent” means
Empire Stock Transfer Inc. the current transfer agent of the Company with a
mailing address of 2470 Saint Rose Parkway, Suite 304, Henderson, Nevada 89074
and a facsimile number of (702) 974-1444, and any successor transfer agent of
the Company.

       

      “Underlying Shares”
means the shares of Common Stock issued and issuable upon conversion or
redemption of the Debentures.

       

      “Variable Rate
Transaction” shall have the meaning ascribed to such term in Section
4.13(b).

       

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

       

       

      ARTICLE
II.

      PURCHASE
AND SALE

       

      2.1 Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, up to an aggregate of up to $1,500,000 of
Debentures.  Each Purchaser shall deliver to the Company via wire
transfer or a certified check, immediately available funds equal to its
Subscription Amount and the Company shall deliver to each Purchaser its
respective Debenture, as determined pursuant to Section 2.2(a), and the Company
and each Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon satisfaction of the conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of SRFF or
such other location as the parties shall mutually agree.

      
 

      
        
          
          

        

        
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      2.2 Deliveries.

       

      (a) 

       

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

       

      
        (i)  this
Agreement duly executed by the Company;

      

       

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

       

      (iii) a
Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
registered in the name of such Purchaser;

       

      (iv) a number
of shares of Common Stock (the “Restricted Shares”)
equal to: (3,525,000 multiplied by (the Purchaser’s Principal Amount divided by
$1,500,000) which shall bear a legend restricting transfer under the Securities
Act of 1933, as amended and acknowledging the restrictions on transfer set forth
herein, such legend shall be substantially in the following form:

       

      THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE
SECURITIES LAW.  NO TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
(B) THE HOLDER SHALL DELIVER TO COMPANY AN OPINION OF ITS COUNSEL, IN FORM
AND SUBSTANCE REASONABLY ACCEPTABLE TO COMPANY AND REASONABLY CONCURRED IN BY
COMPANY’S COUNSEL, THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT;

      


      (v) the
Security Agreement, duly executed by the Company and each Subsidiary, along with
all of the Security Documents, including the Subsidiary Guarantee, duly executed
by the parties thereto;

       

      (vi) a copy of
the written resolutions adopted by the Board of Directors authorizing the
execution, delivery and performance of this Agreement, any agreement
contemplated herein to which the Company is a party and the transactions
contemplated thereby;

       

      (vii) the Stock
Pledge Agreement duly executed by Stephen Squires; and

       

      
        
          
          

        

        
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      (viii) the
Registration Rights Agreement duly executed by the Company;

       

      (ix) the
Escrow Agreement duly executed by the Company; and

       

      (x) the
Subsidiary Guarantee, duly executed by each Subsidiary of the
Company.

       

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

       

      
        (i)  this
Agreement duly executed by such Purchaser;

      

       

      (ii) such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company;

       

      (iii) the
Security Agreement duly executed by such Purchaser;

       

      (iv) the
Registration Rights Agreement duly executed by such Purchaser; and

       

      (v) the
Escrow Agreement duly executed by such Purchaser.

       

      2.3 Closing
Conditions.

       

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

       

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

       

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

       

      (iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this
Agreement, it being understood that the Purchasers shall receive an aggregate of
$1,500,000 in Debentures and the Company shall receive  $1,500,000 in
payment thereof.

       

      (c) The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

       

      (i) the
Company shall have entered into and closed upon an Agreement and Plan of Merger
and Reorganization (the “Merger”) by and among
the Company, Solterrra Renewable Technologies, Inc. (“Solterra”) and the
shareholders of Solterra in form acceptable to Holders;

       

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

       

      
        
          
          

        

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

       

      (iv) all
existing debtholders of the Company and its Subsidiaries shall each have
executed and delivered the Purchasers a written subordination agreement
acceptable to, and approved by, the Purchasers;

       

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

       

      (vi) the
Company shall have prepared the Current Report on Form 8-K relating to the
Merger (the “Merger
8-K”) in a form acceptable to the Purchasers;

       

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

       

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

       

       

      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES

       

      3.1 Representations and
Warranties of the Company.  Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or otherwise made herein to the extent of
the disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties
to each Purchaser:

      
 

      (a) Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

       

      
        
          
          

        

        
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      (b) Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      
        
          
          

        

        
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      (g) Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock
purchase plans and pursuant to the conversion and/or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents.  Except as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further approval or authorization of
any stockholder, the Board of Directors or others is required for the issuance
and sale of the Securities.  There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

       

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

       

      
        
          
          

        

        
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      (i) Material
Changes.  Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
a subsequent SEC Report filed prior to the date hereof: (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.  Except for the issuance of the Securities contemplated
by this Agreement or as set forth on Schedule 3.1(i), no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or
deemed made that has not been publicly disclosed at least one Trading Day prior
to the date that this representation is made.

       

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

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

       

      (k) Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

       

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

       

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

       

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

       

      
        
          
          

        

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

       

      (p) Insurance.  Except
as set forth on Schedule 3.1(p), the
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount.  Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

       

      (q) Transactions with Affiliates
and Employees.  Except as set forth in the SEC Reports and on
Schedule
3.1(q), none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for: (i) payment of
salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.

       

      
        
          
          

        

        
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      (r) Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

       

      (s) Certain
Fees.  Except as set forth on Schedule 3.1(s), no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.  The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.

       

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

       

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

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

       

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

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

      (bb) Tax Status. Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, the Company and each
Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon,
and the Company has no knowledge of a tax deficiency which has been asserted or
threatened against the Company or any Subsidiary.

       

      
        
          
          

        

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

       

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

       

      (ee) Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm is a registered public accounting firm as required by the
Exchange Act.

       

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

       

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

       

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

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

       

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

       

      


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

       

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

       

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

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

       

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

       

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

       

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

       

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

       

       

      ARTICLE
IV.

      OTHER
AGREEMENTS OF THE PARTIES

       

      4.1 Transfer
Restrictions.

       

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

       

      
        
          
          

        

        
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      (b) The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:

       

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

       

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

       

      
        
          
          

        

        
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      (c) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such
Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares are
eligible for sale under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale restrictions or (iv)
if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff
of the Commission). The Company shall cause its counsel to issue a legal opinion
to the Transfer Agent promptly after the Effective Date if required by the
Transfer Agent to effect the removal of the legend hereunder.  If all
or any portion of a Debenture is converted at a time when there is an effective
registration statement to cover the resale of the Underlying Shares, or if such
Underlying Shares may be sold under Rule 144, without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 as to such Underlying Shares and without volume or manner-of-sale
restrictions or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) then such Underlying
Shares shall be issued free of all legends.  The Company agrees that
following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Transfer Agent of a
certificate representing Underlying Shares, as applicable, issued with a
restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.  Certificates for Underlying Shares subject
to legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.

      


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

       

      
        
          
          

        

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

       

      4.3 Furnishing of
Information.  Until the earliest of the time that no Purchaser
owns Securities, the Company covenants to maintain the registration of the
Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act.  As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144.  The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act
within the requirements of the exemption provided by Rule 144.

       

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

       

      4.5 Conversion and Exercise
Procedures.  The form of Notice of Conversion included in the
Debentures set
forth the totality of the procedures required of the Purchasers in order to
convert the Debentures.  No additional legal opinion, other
information or instructions shall be required of the Purchasers to convert their
Debentures.  The Company shall honor conversions of the Debentures and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

       

      4.6 Securities Laws Disclosure;
Publicity. The Company shall, by 8:30 a.m. (New York City time) on the
Trading Day following the date hereof, file a press release disclosing the
material terms of the transactions contemplated hereby, and by 5:30 p.m. (New
York City time) on the fourth Trading Day following the date hereof, file (i) a
Current Report on Form 8-K disclosing the material terms of the transactions
contemplated hereby and including the Transaction Documents as exhibits thereto
and (ii) the Merger 8-K.  The Company and each Purchaser shall consult
with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (y) as required by federal securities law in connection with
(i) any registration statement contemplated by the Registration Rights Agreement
and (ii) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (z) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under this clause
(z).  Notwithstanding the foregoing, the Company shall have until 30
calendar days from the date hereof to file an amended Merger 8-K with the
financial statements required by Item 9.01 of Form 8-K.  It is
expressly understood by the parties that the failure by the Company to make the
filings are required by this Section 4.6 on a timely basis will constitute a
material default under this Agreement and the Transaction
Documents.

       

      
        
          
          

        

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

       

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

       

      4.9 Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder as set forth on Schedule 4.9 attached
hereto, and shall not use such proceeds for: (a) the satisfaction of any portion
of the Company’s debt (other than payment of trade payables in the ordinary
course of the Company’s business and prior practices), (b) the redemption of any
Common Stock or Common Stock Equivalents or (c) the settlement of any
outstanding litigation.

       

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

       

      
        
          
          

        

        
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      4.11 Reservation and Listing of
Securities.

       

      (a) The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may then be
required to fulfill its obligations in full under the Transaction
Documents.

       

      (b) If, on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then the
Board of Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the Required Minimum
at such time, as soon as possible and in any event not later than the 75th day
after such date.

       

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

       

      
        
          
          

        

        
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      4.12 Preemptive
Rights.

       

      (a) Subsequent Offerings.
In the event the Company issues and sells (i) any Common Stock,
(ii) any security convertible, with or without consideration, into any
Common Stock (including any option to purchase such a convertible security),
(iii) any security carrying any warrant or right to subscribe to or
purchase any Common Stock, or (iv) any such warrant or right (clauses (i) –
(iv) referred to hereinafter as “Equity Securities”)
other than an Exempt Issuance, each Holder (as defined below) who qualifies as
an “accredited investor” within the meaning of Rule 501(a) of Regulation D under
the Act (an “Eligible
Holder”) shall have a preemptive right to purchase such number of shares
of Equity Securities necessary for such Eligible Holder to maintain its
percentage ownership position in the Company.  Each Eligible Holder's
preemptive share is equal to the ratio of (a) the number of shares of the
Company’s Common Stock of which such Eligible Holder is deemed to be a holder
immediately prior to the issuance of such Equity Securities (including all
shares of Common Stock issued or issuable upon conversion of any security of the
Company or upon the exercise of any outstanding warrants, options, or rights to
subscribe to or purchase any Common Stock or other security of the Company) to
(b) the total number of shares of the Company’s outstanding Common Stock
(including all shares of Common Stock issued or issuable upon conversion of any
security of the Company or upon the exercise of any outstanding warrants,
options, or rights to subscribe to or purchase any Common Stock or other
security of the Company) immediately prior to the issuance of the Equity
Securities. For purposes of this Section 4, “Holder” is defined as
each Purchaser, or any of Purchaser’s successors or Permitted Assignees (as
defined below), who acquire rights in accordance with this Agreement with
respect to the Registrable Securities (as defined below) directly or indirectly
from Purchasers or any Permitted Assignee.  “Permitted Assignee”
means (a) with respect to a partnership, its partners or former partners in
accordance with their partnership interests, (b) with respect to a
corporation, its shareholders in accordance with their interest in the
corporation, (c) with respect to a limited liability company, its members
or former members in accordance with their interest in the limited liability
company, (d) with respect to an individual party, any Family Member (as
defined below) of such party, (e) an entity that is controlled by, controls, or
is under common control with a transferor, or (f) a party to this Agreement.
“Family Member”
means (a) with respect to any individual, such individual's spouse, any
descendants (whether natural or adopted), any trust all of the beneficial
interests of which are owned by any of such individuals or by any of such
individuals together with any organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, the estate of any such individual,
and any corporation, association, partnership, or limited liability company all
of the equity interests of which are owned by those above described individuals,
trusts, or organizations and (b) with respect to any trust, the owners of the
beneficial interests of such trust.  “Registrable
Securities” means the Underlying Shares, the Restricted Shares and the
Interest Shares.

       

      
        
          
          

        

        
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      (b) Exercise of Preemptive
Rights.  If the Company issues any Equity Securities in a
transaction to which the preemptive rights set forth in Section 4.12(a) apply,
it shall give each Eligible Holder written notice of such issuance, describing
the Equity Securities and the price and the terms and conditions upon which the
Company issued the same and shall provide each Eligible Holder with access to
any information regarding such offering and the Company, provided to the
purchasers of Equity Securities.  Each Eligible Holder shall have
seven business days from the giving of such notice to exercise its preemptive
right to purchase Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Holder who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or
sale.

       

      (c) Issuance of Equity
Securities to Other Persons.  The Company shall have 90 days
after expiration of the seven business day period set forth in Section 4.12(b)
above to sell the Equity Securities in respect of which the Holders' rights were
not exercised, at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof than specified in the Company’s notice
to the Eligible Holders pursuant to Section 4.12(b) above. If the Company has
not sold such Equity Securities within 90 days of the notice provided pursuant
to Section 4.12(b) above, the Company shall not thereafter issue or sell any
Equity Securities, without first offering such securities to the Eligible
Holders in the manner provided above.

       

      (d) Termination and Waiver of
Preemptive Rights.  The preemptive rights established by this
Section 4.12 shall terminate upon the earlier of (x) the date the Debentures are
no longer outstanding or (y) the 12 month anniversary of the Effective
Date.

       

      (e) Excluded
Securities.  The preemptive rights established by this Section
4.12 shall have no application to (x) any Exempt Issuance, (y) any of the
Transaction Documents and (z) any financing, up to $3,500,000, that is closed
within 75 days of the Closing Date.

       

      
        
          
          

        

        
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      4.13 Subsequent Equity
Sales.

       

      (a) From the
date hereof until the earlier of (x) the date the Debentures are no longer
outstanding or (y) the 12 month anniversary of the Effective Date, the Company
shall be prohibited from effecting or entering into an agreement to effect any
Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company issues or sells (i)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock or (ii) enters into any agreement, including, but
not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.

       

      (b) Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.

       

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

       

      4.15 Restrictions on Short Sales
and Confidentiality After The Date Hereof. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that neither it, nor any
Affiliate acting on its behalf or pursuant to any understanding with it, will
execute any Short Sales during the period commencing at the Discussion Time and
ending the date that such Purchaser no longer holds any Debentures.  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.6, such Purchaser will
maintain the confidentiality of the existence and terms of this transaction and
the information included in the Transaction Documents and the Disclosure
Schedules.  Each Purchaser severally and not jointly with any other
Purchaser acknowledges the positions of the Commission as set forth in Item 65,
Section A, of the Manual of Publicly Available Telephone Interpretations, dated
July 1997, compiled by the Office of Chief Counsel, Division of Corporation
Finance.

       

      
        
          
          

        

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

       

      4.17 Capital
Changes.  Until such time that the Debentures are no longer
outstanding, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding 75% of the principal amount outstanding of the
Debentures.

       

      4.18 Board of
Directors.  From the date of this Agreement until such time as
the Holders no longer hold any Debentures, the Company shall appoint two (2)
members to its Board of Directors, with such board members to be appointed by
MKM Opportunity Master Fund, Ltd. (“MKM”).  Each member appointed by
MKM will be independent of, and not affiliated with, MKM. In addition, so long
as MKM has the right to appoint two board members under this Agreement, the
Company shall not expand the size of its Board of Directors to more than seven
(7) board members.  Notwithstanding the foregoing, in the event of a
default under this Agreement or any of the Transaction Documents, MKM and Steven
Posner Irrevocable Trust u/t/a Dated 06/17/65 (“Posner”) shall have the right to
appoint three (3) and two (2) members, respectively, to the Company’s Board of
Directors, which directors need not be independent of, and may be affiliated
with, MKM or Posner.  In the event that MKM or Posner exercises their
right to appoint members of the Company’s Board of Directors in the event of a
default, the Board of Directors shall set the size of the Board to no more than
nine (9) members.

       

      4.19 Secured
Obligation.  As an inducement for the Purchasers to purchase
the Debentures and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the obligations of the Company
under the Debentures, the Company and each Subsidiary, unconditionally and
irrevocably pledges, grants and hypothecates to the Purchasers a continuing and
perfected security interest in and to, a lien upon and a right of set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, all of the assets of the Company and its
Subsidiaries.  The parties acknowledge and agree that the obligations
of the Company under the Transaction Documents, including but not limited to the
Debentures, are subject to the security interest granted by the Company and its
Subsidiaries pursuant to the Security Agreement, by and among the Company, its
Subsidiaries and the secured parties thereto and that such obligations are
“Obligations” under such Security Agreement.  The Company and the
Subsidiaries shall take any and all actions requested by the Purchasers in order
to grant the Purchasers a first priority security interest in the assets of the
Company and the Subsidiaries, including all UCC-1 filing receipts.

       

      4.20 Insurance. Within 30
days from the date hereof, the Company agrees to be insured by insurers of
recognized financial responsibility for directors and officers insurance for a
minimum of one million dollars per incident and five million dollars in the
aggregate.  The Company shall keep such insurance in effect until such
time as all the Debentures have been repaid in full (including interest and
penalties) or converted pursuant to the terms thereunder.

       

      
        
          
          

        

        
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      4.21 Sarbanes-Oxley
Compliance. As long as any of the Debentures are outstanding, the Company
shall use its best efforts to ensure that the Company’s controls and procedures
are in compliance with the Sarbanes-Oxley Act of 2002 as if the Company was an
“accelerated filer” as defined in Rule 12b-2 of the Securities Exchange Act of
1934, except that the Company shall not be required to provide a registered
public accounting firm’s attestation report on the Company’s internal control
over financial reporting.

       

       

      ARTICLE
V.

      MISCELLANEOUS

       

      5.1 Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before November 15, 2008;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

       

      5.2 Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
MKM the non-accountable sum of $25,000 for its legal fees and expenses, of
which, $10,000 has been paid. The Company shall deliver to each Purchaser, prior
to the Closing, a completed and executed copy of the Closing Statement attached
hereto as Annex
A.  Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      5.8 No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.10.

       

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

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

       

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

       

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

       

      5.12 Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

       

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

       

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

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

       

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

       

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

       

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

       

      
        
          
          

        

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

       

      5.19 Liquidated
Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.

       

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

       

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

       

      5.22 WAIVER OF JURY
TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.

       

      (Signature
Pages Follow)

       

      
        
          
          

        

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

       

      
        	
                HAGUE
      CORP.

                 

                 

              	
                Address for Notice:

                 

                14220
      E Cavedale Road

                Scottsdale
      AZ 85262

              
	
                By:__________________________________________

                     Name:
      Stephen Squires

                     Title:
      Chief Executive Officer

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

              	
                Facsimile:
      (480) 248-3116

              
	
                 

                Steven
      Morse, Esq.

                Morse
      & Morse, PLLC

                1400
      Old Country Road, Suite 302

                Westbury,
      NY 11590

                Facsimile:
      (516) 487-1452

                 

              	 
      


      

      


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      SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

       

      
        
          
          

        

        
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      [PURCHASER
SIGNATURE PAGES TO HAGUE SECURITIES PURCHASE AGREEMENT]

      


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

       

      Name of
Purchaser: MKM OPPORTUNITY MASTER FUND, LTD.

      Signature of Authorized Signatory of
Purchaser: __________________________________

      Name of
Authorized Signatory: David Skriloff

      Title of
Authorized Signatory: Portfolio Manager

      Email
Address of Authorized Signatory: david@mkmcap.com

      Facsimile
Number of Authorized Signatory:
__________________________________________

      


      Address
for Notice of Purchaser:

      


      MKM
Opportunity Master Fund, Ltd.

      644
Broadway, 4th
Floor

      New York,
New York 10012

      


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

      


      


      


      


      


      Subscription
Amount: $875,000

      


      


      


      


      


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      [PURCHASER
SIGNATURE PAGES TO HAGUE SECURITIES PURCHASE AGREEMENT]

       

       

      


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

       

      Name of
Purchaser:                                                      Steven
Posner Irrevocable Trust u/t/a Dated 06/17/65

      Signature of
Purchaser:                                                      ______________________________________________________

      Name of
Authorized
Signatory:                                                                Steven
Posner

      Title of
Authorized
Signatory:                                                                Trustee

      Signature of
Purchaser:                                                      ______________________________________________________

      Name of
Authorized
Signatory:                                                                Stuart
Posner

      Title of
Authorized
Signatory:                                                                Trustee

      Email
Address of Authorized Signatory:
_____________________________________________

      Facsimile
Number of Authorized Signatory:
__________________________________________

      


      Address
for Notice of Purchaser:

      


      


      


      


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

      


      


      


      


      


      Subscription
Amount: $500,000

      


      


      


      


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      Name of
Purchaser: MKM SP1, LLC

      Signature of Authorized Signatory of
Purchaser: __________________________________

      Name of
Authorized Signatory: David Skriloff

      Title of
Authorized Signatory: Portfolio Manager

      Email
Address of Authorized Signatory: david@mkmcap.com

      Facsimile
Number of Authorized Signatory:
__________________________________________

      


      Address
for Notice of Purchaser:

      


      MKM SP1,
LLC

      644
Broadway, 4th
Floor

      New York,
New York 10012

      


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

      


      


      


      


      


      Subscription
Amount: $125,000

      


      


      


      


      


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