Exhibit 10.1


    
      

    

     

    Exhibit
      10.1

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of May 12, 2006, by and among NutraCea, a California corporation (the
      “Company”),
      and
      the purchasers 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 agrees 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 Certificate of Determination (as defined herein), and (b) the following
      terms have the meanings indicated in this Section 1.1:

     

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

     

    “Actual
      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 exercise or conversion
      in full of all Warrants and shares of Preferred Stock, ignoring any conversion
      or exercise limits set forth therein, and assuming that any previously
      unconverted shares of Preferred Stock are held until the fourth anniversary
      of
      the date of determination and all dividends are paid in shares of Common Stock
      until such fourth anniversary.

     

    “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 144 under the Securities Act. With
      respect to a Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of such Purchaser.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Certificate
      of Determination”
means
      the Certificate of Determination to be filed prior to the Closing by the Company
      with the Secretary of State of California, in the form of Exhibit
      A
      attached
      hereto.

    


    “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.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, no par value per share, and any securities
      into
      which such common stock shall hereinafter have been reclassified
      into.

     

    “Company
      Counsel”
means
      Weintraub Genshlea Chediak Law Corporation.

     

    “Conversion
      Price”
shall
      have the meaning ascribed to such term in the Certificate of
      Determination.

     

    “Contingent
      Obligation”
means,
      as applied to any Person, any direct or indirect liability of that Person with
      respect to any Indebtedness, lease, dividend, guaranty, letter of credit or
      other obligation, contractual or otherwise (the “primary
      obligation”)
      of
      another Person other than an Affiliate of such Person (the “primary
      obligor”),
      whether or not contingent, (a) to purchase, repurchase or otherwise acquire
      such
      primary obligations or any property constituting direct or indirect security
      therefor, (b) to advance or provide funds (i) for the payment or discharge
      of
      any such primary obligation, or (ii) to maintain working capital or equity
      capital of the primary obligor or otherwise to maintain the net worth or
      solvency or any balance sheet item, level of income or financial condition
      of
      the primary obligor, (c) to purchase property, securities or services primarily
      for the purpose of assuring the owner of any such primary obligation of the
      ability of the primary obligor to make payment of such primary obligation,
      or
      (d) otherwise to assure or hold harmless the owner of any such primary
      obligation against loss or failure or inability to perform in respect thereof.
      The amount of any Contingent Obligation shall be deemed to be an amount equal
      to
      the stated or determinable amount of the primary obligation in respect of which
      such Contingent Obligation is made or, if not stated or determinable, the
      maximum reasonably anticipated liability in respect thereof.

     

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

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Indebtedness”
means,
      as to any Person, (a) all obligations of such Person for borrowed money
      (including, without limitation, reimbursement and all other obligations with
      respect to surety bonds, letters of credit and bankers’ acceptances, whether or
      not matured), (b) all obligations of such Person to pay the deferred purchase
      price of property or services, except trade accounts payable and accrued
      commercial or trade liabilities arising in the ordinary course of business
      (provided that to the extent that such accounts payable and liabilities are
      overdue, the interest and penalties incurred as a result of such overdue amounts
      shall be considered Indebtedness), (c) all interest rate and currency swaps,
      caps, collars and similar agreements or hedging devices under which payments
      are
      obligated to be made by such Person, whether periodically or upon the happening
      of a contingency, (d) all indebtedness created or arising under any conditional
      sale or other title retention agreement with respect to property acquired by
      such Person (even though the rights and remedies of the seller or lender under
      such agreement in the event of default are limited to repossession or sale
      of
      such property), (e) all obligations of such Person under leases which have
      been
      or should be, in accordance with GAAP, recorded as capital leases, (f) all
      indebtedness secured by any Lien (other than Liens in favor of lessors under
      leases other than leases included in clause (e)) on any property or asset owned
      or held by that Person regardless of whether the indebtedness secured thereby
      shall have been assumed by that Person or is non-recourse to the credit of
      that
      Person, and (g) any Contingent Obligation of such Person.

     

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

     

    “Material
      Adverse Effect”
means
      any of (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, or condition (financial or other) 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. Changes in the market price of
      the
      Company’s common stock shall not, in and of itself, constitute a Material
      Adverse Effect. 

     

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

     

    “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.

     

    “Preferred
      Stock”
means
      the up to 25,000 shares of the Company’s Series C Convertible Preferred Stock
      issued hereunder having the rights, preferences and privileges set forth in
      the
      Certificate of Determination.

    


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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “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).

     

    “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(i).

     

    “Securities”
means
      the Preferred Stock, the Warrants and the Underlying Shares.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

     

    “Stated
      Value”
means
      $1,000 per share of Preferred Stock.

     

    “Subscription
      Amount”
shall
      mean, as to each Purchaser, the amount to be paid for the Preferred Stock
      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).

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

     

    “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 Over-The-Counter Bulletin Board, the
      Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange
      or the Nasdaq National Market.

     

    “Transaction
      Documents”
means
      this Agreement, the Certificate of Determination, the Warrants, the Registration
      Rights Agreement and any other documents or agreements executed in connection
      with the transactions contemplated hereunder.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of the Preferred Stock,
      upon
      exercise of the Warrants and issued and issuable in lieu of the cash payment
      of
      dividends on the Preferred Stock.

     

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

     

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

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1    
Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      concurrent with the execution and delivery of this Agreement by the parties
      hereto, the Company agrees to sell, and each Purchaser agrees to purchase in
      the
      aggregate, severally and not jointly, up to $25,000,000 of shares of Preferred
      Stock with an aggregated Stated Value equal to such Purchaser’s Subscription
      Amount and Warrants as determined pursuant to Section 2.2(a)(viii). The
      aggregate number of shares of Preferred Stock sold hereunder shall be up to
      25,000. Each
      Purchaser shall deliver to the Company via wire transfer or a certified check
      immediately available funds equal to their Subscription Amount and the Company
      shall deliver to each Purchaser their respective shares of Preferred Stock
      and
      Warrants as determined pursuant to Section 2.2(a) and the other items set forth
      in Section 2.2 issuable at the Closing. Upon satisfaction of the conditions
      set
      forth in Section 2.2, the Closing shall occur at the offices of Company Counsel,
      or such other location as the parties shall mutually agree.

     

    
      	2.2
                	
              Deliveries.

            


    

     

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

            


    

     

    
      	(i) 
                	
              a
                certificate evidencing a number of shares of Preferred Stock equal
                to such
                Purchaser’s Subscription Amount divided by the Stated Value, registered in
                the name of such Purchaser;

            


    

     

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

            


    

     

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

            


    

     

    
      	 	
              (iv)

            	
              a
                certificate evidencing the incorporation and good standing of the
                Company
                and each Subsidiary in such entity’s state or other jurisdiction of
                incorporation or organization issued by the Secretary of State (or
                other
                applicable authority) of such state or jurisdiction of incorporation
                or
                organization as of a date within ten (10) days of the Closing Date;
                

            


    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (v)

            	
              a
                secretary’s certificate, dated as of the Closing Date, certifying as to
                (A) the Resolutions, (B) the Articles of Incorporation of the Corporation,
                certified as of a date within ten (10) days of the Closing Date,
                and (C)
                the Bylaws, each as in effect as of the Closing Date, (D) the
                organizational documents of each subsidiary, certified as of a date
                within
                ten (10) days of the Closing Date by the applicable governmental
                authority
                of the applicable jurisdiction, and (E) the by laws, limited partnership
                agreement or limited liability company agreement of each Subsidiary,
                as
                the case may be; such other documents relating to the transactions
                contemplated by this Agreement as such Purchaser or its counsel may
                reasonably request; and

            


    

     

    
      	 	
              (vi)

            	
              a
                Warrant registered in the name of such Purchaser to purchase up to
                a
                number of shares of Common Stock equal to 50% of such Purchaser’s
                Subscription Amount divided by $0.85, with a per share exercise price
                equal to $1.35.

            


    

     

    
      	 	
              (vii)

            	
              such
                other documents relating to the transactions contemplated by this
                Agreement as such Purchaser or its counsel may reasonably
                request.

            


    

     

    


    
      	b)  	
              On
                or prior to the Closing Date, each Purchaser shall deliver or cause
                to be
                delivered to the Company (or Company Counsel acting on behalf of
                the
                Company) the following: 

            


    

     

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

            


    

     

    
      	(ii)
                	
              the
                Registration Rights Agreement duly executed by such
                Purchaser.

            


    

     

    
      	2.3
                	
              Closing
                Conditions.

            


    

     

    
      
        	a)  	
                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 when made and on the Closing
                  Date of the
                  representations and warranties of the Purchasers contained
                  herein;

              


      

       

      
        	(ii)
                  	
                the
                  aggregate value of Preferred Shares to be sold hereunder shall
                  be no less
                  than $10,000,000;

              


      

       

    

    
      
        
        

      

      
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      	(iii)  	
              the
                Purchasers shall have performed in all material respects with all
                obligations, covenants and agreements of the Purchasers required
                to be
                performed by them at or prior to the Closing Date;
                and

            


    

     

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

            


    

     

    
      	b)  	
              The
                respective obligations of the Purchasers 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 Company contained
                herein;

            


    

     

    
      	(ii)   	
              the
                Company shall have performed in all material respects with all
                obligations, covenants and agreements of the Company required to
                be
                performed by it at or prior to the Closing Date;
                

            


    

     

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

            


    

     

    
      	(iv)  	
              from
                the date hereof to the Closing Date, trading in the Common Stock
                shall not
                have been suspended by the Commission or the 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

            


    

     

    
      	 	
              (v)

            	
              the
                aggregate value of Preferred Shares to be sold hereunder shall be
                no less
                than $10,000,000.

            


    

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1   Representations
      and Warranties of the Company.
      Except
      as set forth in the disclosure schedules separately delivered to the Purchasers
      concurrently herewith (the “Disclosure
      Schedules”),
      the
      Company hereby makes the representations and warranties set forth below to
      each
      Purchaser.

     

    (a)  Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      Except
      as 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 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, then
      references in the Transaction Documents to the Subsidiaries will be
      disregarded.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (b)  Organization
      and Qualification.
      Each of
      the Company and the Subsidiaries is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own and use its properties and assets and
      to
      carry on its business as currently conducted. Neither the Company nor any
      Subsidiary is in violation or default of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents. Each of the Company and the Subsidiaries is duly qualified
      to
      conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not
      have or reasonably be expected to result in 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 thereunder. The execution and
      delivery of each of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized by all necessary action on the part of the Company and no further
      action is required by the Company in connection therewith other than in
      connection with the Required Approvals. Each Transaction Document has been
      (or
      upon delivery will have been) duly executed by the Company and, when delivered
      in accordance with the terms hereof, will constitute the valid and binding
      obligation of the Company enforceable against the Company in accordance with
      its
      terms except (i) as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors’ rights generally and (ii) as limited by laws relating
      to the availability of specific performance, injunctive relief or other
      equitable remedies.

     

    (d)  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the other transactions contemplated
      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 material Lien
      upon
      any of the properties or assets of the Company or any Subsidiary, or give to
      others any rights of termination, amendment, acceleration or cancellation (with
      or without notice, lapse of time or both) of, any agreement, credit facility,
      debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
      or other understanding to which the Company or any Subsidiary is a party or
      by
      which any property or asset of the Company or any Subsidiary is bound or
      affected, or (iii) subject to receipt of 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 have not had and could not reasonably be
      expected to result in a Material Adverse Effect, individually or in the
      aggregate.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (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) filings required pursuant to Section
      4.6,
      (ii) filing with the Commission of a Current Report on Form 8-K disclosing
      the
      transaction contemplated hereby as required by the Exchange Act, (iii) the
      filing with the Commission of the Registration Statement, (iv) the notice and/or
      application(s) to each applicable Trading Market for the issuance and sale
      of
      the Preferred Stock and Warrants and the listing of the Underlying Shares for
      trading thereon in the time and manner required thereby, (v) the filing of
      Form
      D with the Commission and such filings as are required to be made under
      applicable state securities laws and (vi) the approvals set forth on
Schedule
      3.1(e)
      (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 other than those created
      by
      the Purchasers and 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 other than those created by the Purchasers and
      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 Actual Minimum
      on the date hereof. The Company has not, and to the knowledge of the Company,
      no
      Affiliate of the Company has sold, offered for sale or solicited offers to
      buy
      or otherwise negotiated 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 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.

     

    (g)  Capitalization.
      The
      capitalization of the Company is as described in the SEC Reports. Except as
      specified in the SEC Reports, 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 which shall not
      have
      been waived prior to Closing. Except as disclosed in the Company’s filings with
      the Commission, issued pursuant to the Company’s stock incentive plan or as a
      result of the purchase and sale of the Securities, there are no outstanding
      options, warrants, script rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities, rights or obligations
      convertible into or exchangeable for, or giving any Person any right to
      subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
      understandings or arrangements by which the Company or any Subsidiary is or
      may
      become bound to issue additional shares of Common Stock, or securities or rights
      convertible or exchangeable into shares of Common Stock. 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 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, except as set forth on Schedule
      3.1(g).
      No
      further approval or authorization of any stockholder, the Board of Directors
      of
      the Company or others is required for the issuance and sale of (i) the shares
      of
      Preferred Stock pursuant to this Agreement or (ii) the Underlying Shares upon
      exercise or conversion of the Preferred Stock or Warrants. Except as described
      in the reports publicly filed with the Commission, the Company does not have
      outstanding stockholder purchase rights or “poison pill” or any similar
      arrangement in effect giving any Person the right to purchase any equity
      interest in the Company upon the occurrence of certain events.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (h)  Indebtedness.
      Except
      as set forth in the SEC Reports or on Schedule
      3.1(h),
      the
      Company has not incurred or guaranteed, suffered to exist or is otherwise liable
      for any Indebtedness.

     

    (i)  SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
      for the twelve months preceding the date hereof (or such shorter period as
      the
      Company was required by law to file such material) (the foregoing materials,
      including the exhibits thereto, 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 and the rules and
      regulations of the Commission promulgated thereunder, 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 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. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (j)  No
      Undisclosed Events, Liabilities or Developments.
      Except
      for the issuance of the Preferred Stock and Underlying Shares contemplated
      by
      this Agreement or as set forth on Schedule
      3(j),
      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 that
      has not been publicly disclosed one (1) Trading Day prior to the date that
      this
      representation is made.

     

    (k)  Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in the SEC Reports, (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 required to be disclosed in filings
      made with the Commission, (iii) the Company has not altered its method of
      accounting or the identity of its auditors, (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 plan or restricted stock plan or as otherwise described on Schedule
      3(k).
      The
      Company does not have pending before the Commission any request for confidential
      treatment of information.

     

    (l)  Litigation.
      Except
      as set forth in SEC Reports, there is no action, suit, inquiry, notice of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company, threatened in writing 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, to the Company’s
      knowledge, any director or officer thereof (in his or her capacity as such),
      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, any investigation by the Commission involving the Company or
      any
      current or former director or officer of the Company (in his or her capacity
      as
      such). 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.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (m)  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, 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, 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.

     

    (n)  Compliance.
      Except
      as set forth in the SEC Reports, 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 material indenture, loan or credit agreement or any other
      material agreement or instrument to which it is a party or by which it or any
      of
      its material 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 as has not had and could not reasonably
      be expected to have a Material Adverse Effect, individually or in the aggregate.
      

     

    (o)  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 has not had and
      could not reasonably be expected to result in a Material Adverse Effect,
      individually or in the aggregate (“Material
      Permits”),
      and
      neither the Company nor any Subsidiary has received any notice of proceedings
      relating to the revocation, modification or material violation of any Material
      Permit.

     

    (p)  Title
      to Assets.
      Except
      as set forth on Schedule
      3.1(p),
      the
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to the business of the Company
      and
      the Subsidiaries 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 of which the Company
      and the Subsidiaries are in compliance.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (q)  Intellectual
      Property Rights.
      Other
      than as set forth in the SEC Reports, the Company and the Subsidiaries have,
      or
      have rights to use, all patents, patent applications, trademarks, trademark
      applications, service marks, trade names, trade secrets, inventory, copyrights,
      licenses and other similar intellectual property rights that are necessary
      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”).
      Except as set forth in the SEC Reports, neither the Company nor any Subsidiary
      has received a written notice that the Intellectual Property Rights used by
      the
      Company or any Subsidiary violates or infringes upon the rights of any Person.
      Except as set forth in the SEC Reports, to the knowledge of the Company, all
      such Intellectual Property Rights are enforceable and there is no existing
      material 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.

     

    (r)  Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged. To the best of Company’s knowledge, such insurance contracts and
      policies are accurate and complete. 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.

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (t)  Sarbanes-Oxley;
      Internal Accounting Controls.
      Except
      as set forth in the SEC Reports, 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 in the judgment of the Company’s management 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. 

     

    (u)  Certain
      Fees.
      No
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by this Agreement, except as set forth on Schedule
      3.1(s).
      The
      Purchasers shall have no personal obligation with respect to any fees or with
      respect to any claims (other than such fees or commissions owed by a Purchaser
      pursuant to agreements entered into by such Purchaser, which fees or commissions
      shall be the sole responsibility of such Purchaser) 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 this Agreement due to an
      arrangement or agreement made by the Company.

     

    (v)  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.

     

    (w)  Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately after receipt of
      payment for the shares of Preferred Stock, 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.

     

    (x)  Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 15(d) 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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (y)  Application
      of Takeover Protections.
      The
      Company and its Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company's Articles 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
      the
      Company's issuance of the Securities and the Purchasers’ ownership of the
      Securities.

     

    (z)  Disclosure.
      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 the Company believes constitutes material, nonpublic information except
      insofar as the existence and terms of the proposed transactions hereunder may
      constitute such information. The Company understands and confirms that the
      Purchasers will rely on the foregoing representations and covenants in effecting
      transactions in securities of the Company. All written materials provided to
      the
      Purchasers regarding the Company, its business and the transactions contemplated
      hereby, including the Disclosure Schedules to this Agreement, furnished by
      or on
      behalf of the Company with respect to the representations and warranties made
      herein are true and correct with respect to such representations and warranties
      and do not contain any untrue statement of a material fact or omit to state
      any
      material fact necessary in order to make the statements made therein, in light
      of the circumstances under which they were 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.

     

    (aa)  Tax
      Status.
      Except
      for matters that have not and could not reasonably be expected to result in
      a
      Material Adverse Effect, individually or in the aggregate, 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 in writing against the Company or any Subsidiary.

     

    (bb)  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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (cc)  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 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.

     

    (dd)  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 hereby. 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 this Agreement and
      the
      transactions contemplated hereby and any advice given by any Purchaser or any
      of
      their respective representatives or agents in connection with this Agreement
      and
      the transactions contemplated hereby 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 has been based solely
      on the independent evaluation of the transactions contemplated hereby by the
      Company and its representatives.

     

    (ee)  Treatment
      of Proceeds.
      The
      Company intends to account for the gross proceeds raised from the transactions
      which is a subject of this Agreement as equity in its financial statements
      filed
      with the Commission so long as such treatment complies with with
      GAAP.

     

    
      	3.2
                	
              Representations
                and Warranties of the Purchasers.

            


    

     

    Each
      Purchaser hereby, for itself and for no other Purchaser, 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 each Transaction
        Document to which it is a party and to consummate the transactions contemplated
        by the Transaction Documents and otherwise to carry out its obligations
        thereunder. The execution and delivery and performance by Purchaser of each
        of
        the Transaction Documents to which Purchaser is a party and the consummation
        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 and no further action is required by the Purchaser in connection
        therewith. 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.
         

      

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (b)  Purchaser
        Representation.
        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, has no present intention of distributing any of such Securities
        and has no arrangement or understanding with any other persons 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). Such Purchaser is acquiring the Securities hereunder in
        the
        ordinary course of its business. Such Purchaser does not have any agreement
        or
        understanding, directly or indirectly, with any Person to distribute any
        of the
        Securities.

       

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

      

      (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.
            Each
            Purchaser represents that from April 1, 2006 through 9:00 a.m. ET on
            the Trading
            Day immediately following the date of execution of this Agreement, neither
            it
            nor any Person over which the Purchaser has direct control, have made
            any
            purchases or sales of, or granted any option for the purchase of or entered
            into
            any hedging or similar transaction with the same economic effect as a
            net short
            sale, of the Common Stock.

           

          The
            Company acknowledges and agrees that each Purchaser does not make or
            has not
            made any representations or warranties with respect to the transactions
            contemplated hereby other than those specifically set forth in this Section
            3.2.

           

        

      

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

     

    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 pursuant to Rule 144(k)
      under
      the Securities Act, 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 other than a transfer (i) made pursuant to
      an
      effective registration statement, (ii) made in accordance with Rule 144 or
      (iii)
      in which the Company receives an opinion of counsel, reasonably satisfactory
      to
      the Company, that following such disposition, such transferred shares are freely
      tradable and not subject to transfer restrictions under federal and applicable
      state securities laws, any transferee shall in writing, (A) agree to be bound
      by
      the terms of Sections 4.1(a) and (b) hereof, (B) make the representations set
      forth in Section 3.2 hereof, and, (C) if any rights under the Registration
      Rights Agreement are assigned to the transferee of the shares, (i) furnish
      the
      Company with a fully executed Selling Holder Questionnaire (as defined in the
      Registration Rights Agreement), and (ii) agree to be bound by Section 7 of
      the
      Registration Rights Agreement.

     

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

     

    NEITHER
      THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
      OR CONVERTIBLE HAVE 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, PURSUANT TO RULE
      144(K) UNDER THE SECURITIES ACT OR PURSUANT TO ANOTHER 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. 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (c)      Upon
      the
      earlier of (i) registration for resale pursuant to the Registration Rights
      Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver
      to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable
      instructions that the Transfer Agent shall reissue a certificate representing
      shares of Common Stock without legends upon receipt by such Transfer Agent
      of
      the legended certificates for such shares, together with either (1) a customary
      representation by the Purchaser that Rule 144(k) applies to the shares of Common
      Stock represented thereby or (2) a statement by the Purchaser that such
      Purchaser (i) has sold the shares of Common Stock represented thereby pursuant
      to the Registration Statement and in accordance with the Plan of Distribution
      contained in the Registration Statement and (ii) is a named Selling Security
      Holder in the Registration Statement, and (B) cause its counsel to deliver
      to
      the Transfer Agent one or more blanket opinions to the effect that the removal
      of such legends in such circumstances may be effected under the Securities
      Act.
      From and after the earlier of such dates, upon a Purchaser’s written request,
      the Company shall promptly cause certificates evidencing the Purchaser’s
      Securities to be replaced with certificates which do not bear such restrictive
      legends, and Underlying Shares subsequently issued upon due conversion of the
      Preferred Stock or upon the exercise of the Warrants shall not bear such
      restrictive legends provided the provisions of either clause (i) or clause
      (ii)
      above, as applicable, are satisfied with respect to such Underlying Shares.
      If
      Purchaser shall make a sale or transfer of Securities that does not violate
      Section 7(c) of the Registration Rights
      Agreement
      either
      (x) pursuant to Rule 144(k) or (y) pursuant to a registration statement and
      in
      each case shall have provided written notice of such transaction to the Company
      and delivered to the Transfer Agent (or, in the case of the Preferred Stock
      or
      the Warrants, the Company) the certificate representing the Security which
      is
      the subject of such sale or transfer, together with the other documents referred
      to in this Section 4.1(c), (the date of such sale or transfer and delivery
      being
      the “Security Delivery Date”) and (1) the Company shall fail to deliver or cause
      to be delivered to such Purchaser a certificate representing such Security
      that
      is free from all restrictive or other legends by the fifth Trading Day following
      the Security Delivery Date
      (other
      than to comply with Sections 4.13(a) and (b) below)
      and (2)
      following such fifth Trading Day after the Security Delivery Date and prior
      to
      the time such Security is received free from restrictive legends, the Purchaser,
      or any third party on behalf of such Purchaser or for the Purchaser’s account,
      purchases (in an open market transaction or otherwise) securities to deliver
      in
      satisfaction of a sale by the Purchaser of such Security (a “Buy-In”), then the
      Company shall pay in cash to the Purchaser (for costs incurred either directly
      by such Purchaser or on behalf of a third party) the amount by which the total
      purchase price paid for the security as a result of the Buy-In (including
      brokerage commissions, if any) exceeds the proceeds received by such Purchaser
      as a result of the sale to which such Buy-In relates. The Purchaser shall
      provide the Company written notice indicating the amounts payable to the
      Purchaser in respect of the Buy-In. 

    


    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.

     

    
      
        
        

      

      
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    4.3   Furnishing
      of Information.
      For a
      period ending upon the earlier to occur of (i) the date in which no Purchaser
      owns the Securities and (ii) two (2) years following the Closing Date, the
      Company covenants to timely file (or obtain extensions in respect thereof and
      file within the applicable grace period) all reports required to be filed by
      the
      Company after the date hereof pursuant to the Exchange Act. The Company further
      covenants that it will take such further action as any holder of Securities
      may
      reasonably request, all to the extent required from time to time to enable
      such
      Person to sell such Securities without registration under the Securities Act
      within the limitation of the exemptions 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 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.
      Subject
      to Sections 7(c) and (d) of the Certificate of Determination, the form of Notice
      of Exercise included in the Warrants and the Notice of Conversion included
      in
      the Certificate of Determination set forth the totality of the procedures
      required of the Purchasers in order to exercise the Warrants or convert the
      Preferred Stock. No additional legal opinion or other information or
      instructions shall be required of the Purchasers to convert their Preferred
      Stock or exercise their Warrants. The Company shall honor exercises of the
      Warrants and conversions of the Preferred Stock 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 9:00 a.m. Eastern time on the fourth Trading Day following
      the
      date hereof, file a Current Report on Form 8-K, reasonably acceptable to counsel
      to the Purchasers disclosing the material terms of the transactions contemplated
      hereby, and shall attach this Agreement, the Registration Rights Agreement
      and
      the Certificate of Determination thereto. The Company shall not publicly
      disclose the name of any Purchaser other than the Placement Agent, if
      applicable, when issuing any press releases, without the prior written consent
      of such Purchaser, except to the extent such disclosure is required by law
      or
      Trading Market regulations. If the Company fails to file the Form 8-K as
      required in this Section, in addition to any other remedy provided herein or
      in
      the Transaction Documents, a Purchaser shall have the right to make, public
      disclosure in the form of a press release, public advertisement or otherwise,
      of
      such material nonpublic information without the prior approval by the Company,
      its Subsidiaries, or any of its or their respective officers, directors,
      employees or agents, provided that such Purchaser gives the Company at least
      two
      (2) Business Days’ notice of its intention to make such public disclosure and
      provides such intended disclosure to the Company. No Purchaser shall have any
      liability to the Company, its Subsidiaries, or any of its or their respective
      officers, directors, employees, shareholders or agents for any such disclosure
      so long as the nonpublic information disclosed by such Purchaser is accurate
      and
      not misleading.

     

    
      
        
        

      

      
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    4.7   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 to each Purchaser
      promptly after such filing. The Company shall, on or before the Closing Date,
      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 and issuance to the Purchasers on the Delivery Date
      pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
      states of the United States, and shall provide evidence of any such action
      to a
      Purchaser upon request on or prior to the Closing Dates. The Company shall
      make
      all filings and reports relating to the offer and sale of the Securities
      required under applicable securities or “Blue Sky” laws of the states of the
      United States following the Closing Dates. 

     

    4.8   Non-Public
      Information.
      The
      Company covenants and agrees that it and its employees, officers and directors
      will not, and it will not authorize any other Person acting on its behalf to
      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 representations
      in effecting transactions in securities of the Company.

     

    4.9   Use
      of
      Proceeds.
      Except
      for payment of (i) attorney’s fees, (ii) fees incurred in connection with the
      transactions contemplated by this Agreement and (iii) amounts for the
      construction of new facilities, capital improvements and acquisitions, the
      Company shall use the net proceeds from the sale of the Securities hereunder
      for
      working capital purposes.

     

    4.10        
      Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 4.10, the Company will indemnify and hold
      the
      Purchasers and their directors, officers, shareholders, partners, employees
      and
      agents and any controlling person of any of such persons (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 any breach of any of the representations and warranties, or
      material breach of any of the covenants or agreements, made by the Company
      in
      this Agreement or in the other Transaction Documents. 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. 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) the named parties to any such Proceeding (including
      any impleaded parties) include both such Purchaser Party and the Company, and
      such Purchaser Party shall reasonably believe that a material conflict of
      interest is likely to exist if the same counsel were to represent such Purchaser
      Party and the Company (in which case, if such Purchaser Party notifies the
      Company in writing that it elects to employ separate counsel at the expense
      of
      the Company, the reasonable fees and expenses of one separate counsel shall
      be
      at the expense of the Company). The Company shall not be liable for any
      settlement of any such Proceeding effected without its written consent, which
      consent shall not be unreasonably withheld. The Company will not be liable
      to
      any Purchaser Party under this Agreement (i) for any settlement by a Purchaser
      Party effected without the Company’s prior written consent, which shall not be
      unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
      that a loss, claim, damage or liability is primarily attributable to any
      Purchaser Party’s breach of any of the representations, warranties, covenants or
      agreements made by the Purchasers in this Agreement or in the other Transaction
      Documents. The Company shall not, without the prior written consent of the
      Purchaser Party (which consent shall not be unreasonably withheld or delayed),
      effect any settlement of any pending proceeding in respect of which any
      Purchaser Party is a party, unless such settlement provides for only the payment
      of money or the issuance of securities by the Company and includes an
      unconditional release of such Purchaser Party from all liability on claims
      that
      are the subject matter of such proceeding.

     

    
      
        
        

      

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

     

    (b)     
      The
      Company shall, if applicable: (i) in the time and manner required by the Trading
      Market, prepare and file with such Trading Market an additional shares listing
      application (if required by such Trading Market) covering a number of shares
      of
      Common Stock at least equal to the Actual 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 the Trading Market as soon as possible thereafter,
      and (iii) maintain the listing of such Common Stock on any date at least equal
      to the Actual Minimum on such date on such Trading Market or another Trading
      Market. 

     

    4.12   Equal
      Treatment of Purchasers.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      unless the same consideration is also offered to all of the parties to the
      Transaction Documents. 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 to treat for the Company 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.

     

    
      
        
        

      

      
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    4.13   Beneficial
      Ownership Limitation.

     

    (a)     
      4.99%
      Limitation. The Company shall not effect any conversion of the Preferred
      Stock, and the Purchaser shall not have the right to convert any portion of
      the
      Preferred Stock to the extent that after giving effect to such conversion,
      the
      Purchaser (together with the Purchaser’s affiliates), as set forth on the
      applicable Notice of Conversion (as defined in the Certificate of
      Determination), would beneficially own in excess of 4.99% of the number of
      shares of the Common Stock outstanding immediately after giving effect to such
      conversion. For purposes of the foregoing sentence, the number of shares of
      Common Stock beneficially owned by the Purchaser and its affiliates shall
      include the number of shares of Common Stock issuable upon conversion of the
      Preferred Stock with respect to which the determination of such sentence is
      being made, but shall exclude the number of shares of Common Stock which would
      be issuable upon (i) conversion of the remaining, nonconverted Stated Value
      of
      Preferred Stock beneficially owned by the Purchaser or any of its affiliates
      and
      (ii) exercise or conversion of the unexercised or nonconverted portion of any
      other securities of the Company subject to a limitation on conversion or
      exercise analogous to the limitation contained herein beneficially owned by
      the
      Purchaser or any of its affiliates. Except as set forth in the preceding
      sentence, for purposes of this Section 4.13(a), beneficial ownership shall
      be
      calculated in accordance with Section 13(d) of the Exchange Act. To the extent
      that the limitation contained in this Section 4.13(a) applies, the determination
      of whether the Preferred Stock is convertible (in relation to other securities
      owned by the Purchaser together with any affiliates) and of which shares of
      Preferred Stock is convertible shall be in the sole discretion of such
      Purchaser, and the submission of a Notice of Conversion shall be deemed to
      be
      such Purchaser’s determination of whether the shares of Preferred Stock may be
      converted (in relation to other securities owned by such Purchaser) and which
      shares of the Preferred Stock is convertible, in each case subject to such
      aggregate percentage limitations. To ensure compliance with this restriction,
      the Purchaser will be deemed to represent to the Company each time it delivers
      a
      Notice of Conversion that such Notice of Conversion has not violated the
      restrictions set forth in this paragraph and the Company shall have no
      obligation to verify or confirm the accuracy of such determination. For purposes
      of this Section 4.13(a), in determining the number of outstanding shares of
      Common Stock, the Purchaser may rely on the number of outstanding shares of
      Common Stock as reflected in the most recent of the following: (X) the Company’s
      most recent Form 10-QSB or Form 10-KSB, as the case may be, (Y) a more recent
      public announcement by the Company or (Z) any other notice by the Company or
      the
      Company’s transfer agent setting forth the number of shares of Common Stock
      outstanding. Upon the written or oral request of the Purchaser, the Company
      shall within two Trading Days confirm orally and in writing to the Purchaser
      the
      number of shares of Common Stock then outstanding. In any case, the number
      of
      outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including the Preferred
      Stock, by the Purchaser or its affiliates since the date as of which such number
      of outstanding shares of Common Stock was reported. The provisions of this
      Section 4.13(a) may be waived by the Purchaser upon, at the election of the
      Purchaser, not less than 61 days’ prior notice to the Company, and the
      provisions of this Section 4.13(a) shall continue to apply until such
      61st
      day (or
      such later date, as determined by the Purchaser, as may be specified in such
      notice of waiver).

     

    
      
        
        

      

      
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    (b)     
      9.99%
      Limitation. The Company shall not effect any conversion of the Preferred
      Stock, and the Purchaser shall not have the right to convert any portion of
      the
      Preferred Stock to the extent that after giving effect to such conversion,
      the
      Purchaser (together with the Purchaser’s affiliates), as set forth on the
      applicable Notice of Conversion (as defined in the Certificate of
      Determination), would beneficially own in excess of 9.99% of the number of
      shares of the Common Stock outstanding immediately after giving effect to such
      conversion. For purposes of the foregoing sentence, the number of shares of
      Common Stock beneficially owned by the Purchaser and its affiliates shall
      include the number of shares of Common Stock issuable upon conversion of the
      Preferred Stock with respect to which the determination of such sentence is
      being made, but shall exclude the number of shares of Common Stock which would
      be issuable upon (i) conversion of the remaining, nonconverted Stated Value
      of
      Preferred Stock beneficially owned by the Purchaser or any of its affiliates
      and
      (ii) exercise or conversion of the unexercised or nonconverted portion of any
      other securities of the Company subject to a limitation on conversion or
      exercise analogous to the limitation contained herein beneficially owned by
      the
      Purchaser or any of its affiliates. Except as set forth in the preceding
      sentence, for purposes of this Section 4.13(b), beneficial ownership shall
      be
      calculated in accordance with Section 13(d) of the Exchange Act. To the extent
      that the limitation contained in this Section 4.13(b) applies, the determination
      of whether the Preferred Stock is convertible (in relation to other securities
      owned by the Purchaser together with any affiliates) and of which shares of
      Preferred Stock is convertible shall be in the sole discretion of such
      Purchaser, and the submission of a Notice of Conversion shall be deemed to
      be
      such Purchaser’s determination of whether the shares of Preferred Stock may be
      converted (in relation to other securities owned by such Purchaser) and which
      shares of the Preferred Stock is convertible, in each case subject to such
      aggregate percentage limitations. To ensure compliance with this restriction,
      the Purchaser will be deemed to represent to the Company each time it delivers
      a
      Notice of Conversion that such Notice of Conversion has not violated the
      restrictions set forth in this paragraph and the Company shall have no
      obligation to verify or confirm the accuracy of such determination. For purposes
      of this Section 4.13(b), in determining the number of outstanding shares of
      Common Stock, the Purchaser may rely on the number of outstanding shares of
      Common Stock as reflected in the most recent of the following: (X) the Company’s
      most recent Form 10-QSB or Form 10-KSB, as the case may be, (Y) a more recent
      public announcement by the Company or (Z) any other notice by the Company or
      the
      Company’s transfer agent setting forth the number of shares of Common Stock
      outstanding. Upon the written or oral request of the Purchaser, the Company
      shall within two Trading Days confirm orally and in writing to the Purchaser
      the
      number of shares of Common Stock then outstanding. In any case, the number
      of
      outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including the Preferred
      Stock, by the Purchaser or its affiliates since the date as of which such number
      of outstanding shares of Common Stock was reported. The provisions of this
      Section 4.13(b) may not be waived.

     

    (c)     
      Application
      to Other Documents. 

     

    (i)    Automatic
      Conversion. The Company and each Purchaser agree that, if and to the extent
      Section 4.13(b) would restrict the right of the Company to issue or the right
      of
      the Purchaser to receive any of the Common Stock otherwise issuable upon the
      conversion in respect of a Automatic Conversion Notice (as defined in the
      Certificate of Determination), then notwithstanding anything to the contrary
      set
      forth in the Automatic Conversion Notice, the Automatic Conversion Notice shall
      be deemed automatically amended to apply only to such portion of the Preferred
      Stock as would permit conversion in full in compliance with Section 4.13(b).
      The
      Purchaser will promptly (and, in any event, prior to the Share Delivery Date
      (as
      defined in the Certificate of Determination)) notify the Company in writing
      following receipt of an Automatic Conversion Notice if Section 4.13(b) would
      restrict its right to receive the full number of otherwise issuable shares
      of
      Common Stock following such Automatic Conversion Notice. 

     

    
      
        
        

      

      
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      (ii)    Buy-In
        Cure. Each Purchaser agrees that to the extent the application of Sections
        4.13(a) and (b) prevent the Company from delivering shares of Common Stock
        to
        Purchaser or a transferee of Purchaser, the penalty provisions of Section
        7(g)
        of the Certificate of Determination and Section 4.1(c) hereof shall be
        unenforceable.

    

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1   Termination.
      This
      Agreement may be terminated by any Purchaser prior to the Closing, by written
      notice to the other parties, if (a) the Closing has not been consummated on
      or
      before May
      19,
      2006 or
      (b) at the election of any Purchaser, with respect to such Purchaser, if there
      has been a material breach of any representation, warranty, covenant or
      agreement on the part of the Company contained in this Agreement, which breach
      has not been cured within ten (10) business days notice to the Company of such
      breach; provided that no such termination will affect the right of any party
      to
      sue for any breach by the other party (or parties).

     

    5.2   Fees
      and Expenses.
      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 issuance of any Securities other than
      income taxes of the Purchasers that may be incurred in connection with the
      transactions contemplated hereby. In the event that legal proceedings are
      commenced by any party to this Agreement against another party to this Agreement
      in connection with this Agreement or the other Transaction Documents, the party
      or parties which do not prevail in such proceedings shall severally, but not
      jointly, pay their pro rata share of the reasonable attorneys’ fees and other
      reasonable out-of-pocket costs and expenses incurred by the prevailing party
      in
      such proceedings.

     

    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.

     

    
      
        
        

      

      
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    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, (d) upon actual receipt by the party to whom such
      notice is required to be given or (e) four (4) days after being placed in the
      mail, if mailed. The address for such notices and communications shall be as
      set
      forth on the signature pages attached hereto.

     

    5.5   Amendments;
      Waivers.
      No
      provision of this Agreement may be waived, modified, supplemented or amended
      except in a written instrument signed by the Company and the Purchasers holding
      at least two-thirds of the shares of Preferred Stock issued hereby. 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 either party to exercise
      any right hereunder in any manner impair the exercise of any such
      right.

     

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

     

    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; provided, however, that the Company may assign its
      rights and delegate its duties hereunder to any surviving, acquiring or
      successor corporation in connection with a merger or consolidation of the
      Company with another corporation, or a sale, transfer or other disposition
      of
      all or substantially all of the Company’s assets to another corporation, or
      other similar transaction, without the prior written consent of the Purchasers,
      after notice duly given by the Company to the Purchasers. 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 such transferee agrees
      in writing to be bound, with respect to the transferred Securities, by the
      provisions hereof 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 4.9.

     

    
      
        
        

      

      
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    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 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, that
      such suit, action or proceeding is improper or 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 manner
      permitted by law. The parties hereby waive all rights to a trial by jury. 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 attorneys’ fees and
      other costs and expenses incurred with the investigation, preparation and
      prosecution of such action or proceeding.

     

    5.10   Survival.
      The
      representations, warranties, covenants and other agreements contained herein
      shall survive the Closing and the delivery, exercise and/or conversion of the
      Securities; provided that the survival period for the representations and
      warranties shall be eighteen (18) months following the Closing
      Date.

     

    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, 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 signature page were an original
      thereof.

     

    5.12   Severability.
      If any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    5.13   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, 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 and
      customary and reasonable indemnity, if requested. The applicants for a new
      certificate or instrument under such circumstances shall also pay any reasonable
      third-party costs associated with the issuance of such replacement
      Securities.

     

    5.14   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 described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

    5.15   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 of the obligations of any other
      Purchaser under any Transaction Document. Nothing contained herein or in any
      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 Document. 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. 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.

     

     

    [SIGNATURE
      PAGE FOLLOWS]

     


    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    


    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.

     

    
      


      
        	
                NUTRACEA

              	 	
                Address
                  for Notice:

              
	
                By:

              	
                /s/
                  Bradley Edson

              	 	
                1261
                  Hawks’ Flight Court

              
	
                Name:
                  Bradley Edson

                Title:
                  President

              	 	
                El
                  Dorado Hills, CA 95762

                Facsimile:
                  (916) 933-7001

                Attention:
                  Chief Executive Officer

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

                 

                Weintraub
                  Genshlea Chediak law corporation

                400
                  Capitol Mall

                Sacramento,
                  CA 95814

                Facsimile:
                  (916) 446-1611

                Attn.:
                  Christopher Chediak, Esq.

              	 	 


      

    

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASERS FOLLOWS]

     


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    


    [PURCHASER
      SIGNATURE PAGES TO NUTRACEA SECURITIES PURCHASE AGREEMENT]

    [ENTITY
      INVESTOR]

    


    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
      Investing Entity: __________________________

    Signature
      of Authorized Signatory of Investing Entity:
      __________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

    Email
      Address of Authorized Signatory:________________________________

    Tax
      ID
      number of Investing Entity:__________________________________

    


    Physical
      Address for Notice of Investing Entity:

    
 

    


    Facsimile
      Address for Notice of Investing Entity:
      _____________________________     

    


    


    Address
      for Delivery of Securities for Investing Entity (if not same as
      above):

    


     

    


    Subscription
      Amount:

    Shares
      of
      Preferred Stock:

    


    


    


    [SIGNATURE
      PAGES CONTINUE]

     


    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    


    [PURCHASER
      SIGNATURE PAGES TO NUTRACEA SECURITIES PURCHASE AGREEMENT]

    [INDIVIDUAL
      INVESTOR]

    


    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
      Investing Individual: __________________________

    


    Signature
      of Investing Individual:
      __________________________

    Email
      Address of Investing Individual:________________________________

    Tax
      ID
      number of Investing Individual:__________________________________

    


    Physical
      Address for Notice to Investing Individual:

    


     

    


    Facsimile
      Address for Notice to Investing Individual:
      ___________________________     

    


    


    Address
      for Delivery of Securities for Investing Individual (if not same as
      above):

    


     

    


    Subscription
      Amount:

    Shares
      of
      Preferred Stock:

    Warrant
      Shares: 

    


    


    [SIGNATURE
      PAGES CONTINUE]

    



    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    CERTIFICATE
      OF DETERMINATION

     

    
 

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

    


    FORM
      OF REGISTRATION RIGHTS AGREEMENT

     

    
 

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    


    EXHIBIT
      C

    


    FORM
      OF WARRANT

     

    
 

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    


    EXHIBIT
      D

    


    FORM
      OF OPINION OF COUNSEL

    


     

     

    35