**Exhibit 10.1**

**SECURITIESPURCHASE AGREEMENT**

This SecuritiesPurchase Agreement (this “***Agreement***”)is dated as of May 24, 2006, by and between UNIPIXEL, INC., a Delawarecorporation, along with its wholly-owned subsidiary, UNIPIXEL DISPLAYS, INC., aTexas corporation (collectively, hereinafter referred to as the “***Company***”), and each purchaseridentified on the signature pages hereto (each, including its successors andassigns, a “***Purchaser***” andcollectively the “***Purchasers***”).

**WITNESSETH:**

**WHEREAS**,subject to the terms and conditions set forth in this Agreement and pursuant toan exemption from registration contained in Section 4(2) of the Securities Actof 1933, as amended (the “***Securities Act***”)and Rule 506 promulgated thereunder, the Company desires to issue and sell toPurchasers, and Purchasers desire to purchase from the Company, securities ofthe Company as more fully described in this Agreement.

**NOW,THEREFORE,**in consideration of the mutual covenants containedin this Agreement, and for other good and valuable consideration the receiptand adequacy of which are hereby acknowledged, the Company and Purchasers agreeas follows:

# **ARTICLE I.**

**DEFINITIONS**

## 1.1           Definitions.  In addition to the terms defined elsewhere inthis Agreement: (a) capitalized terms that are not otherwise defined hereinhave the meanings given to such terms in the Debenture(s) (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(i).

“***Affiliate***”means any Person that, directly or indirectly through one or moreintermediaries, controls or is controlled by or is under common control with aPerson, as such terms are used in and construed under Rule 144 under theSecurities Act.  With respect to aPurchaser, any investment fund or managed account that is managed on adiscretionary basis by the same investment manager as Purchaser will be deemedto be an Affiliate of such Purchaser.

“***Business Day***” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of Texas are authorized or required by law or other government action to close.

“***CapSource***” means CapSource Fund, L.P., a Mississippi limited partnership.

“***Change of ControlTransaction***” means the occurrence after the date hereof ofany of (i) an acquisition after the date hereof by an individual or legalentity or “group” 

1

----

(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)of effective control (whether through legal or beneficial ownership (asdescribed in Rule 13d-3 of the Exchange Act) of capital stock of the Company,by contract or otherwise) of in excess of 40% of the voting securities of theCompany, or (ii) a replacement at one time or within a one year period of morethan one-half of the members of the Company’s board of directors which is notapproved by a majority of those individuals who are members of the board ofdirectors on the date hereof (or by those individuals who are serving asmembers of the board of directors on any date whose nomination to the board ofdirectors was approved by a majority of the members of the board of directorswho are members on the date hereof), or (iii) the execution by the Company ofan agreement to which the Company is a party or by which it is bound, providingfor any of the events set forth above in (i) or (ii).

“***Closing***”means the closing of the purchase and sale of the Securities pursuant to Section2.1.

“***Closing Date***”means the Business Day when all of the Transaction Documents have been executedand delivered by the applicable parties thereto, and all conditions precedentto (i) Purchasers’ obligations to pay the Subscription Amount and (ii) theCompany’s obligations to deliver the Securities have been satisfied orwaived.  There may be multiple ClosingDates.

“***Commission***”means the Securities and Exchange Commission.

“***Common Stock***”means the common stock of UniPixel, par value $.001 per share, and anysecurities into which such common stock shall hereinafter have beenreclassified into.

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

“***Company***”means UniPixel, Inc., a Delaware corporation, and UniPixel Displays, Inc., aTexas corporation, and such reference herein shall, when referring to anyobligation of the Company shall impose a joint and several obligation on eachsuch entity.

“***Debentures***”mean the 12% Senior Secured Convertible Debentures, in the form of Exhibit A.

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

“***Effective Date***”Not Applicable.

2

----

 

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

“***Exempt Issuance***”means the issuance of (a) shares of Common Stock or options to employees,officers or directors of the Company pursuant to any stock or option plancurrently in place as of the date hereof which has been duly adopted by theBoard of Directors and shareholders of the Company, (b) securities upon theexercise of or conversion of any securities issued hereunder, convertiblesecurities, options or warrants issued and outstanding on the date of thisAgreement, provided that such securities have not been amended since the dateof this Agreement to increase the number of such underlying shares inconnection therewith, (c) securities issued pursuant to acquisitions orstrategic transactions, provided any such issuance shall only be to a Personwhich is, itself or through its subsidiaries, an operating company in abusiness synergistic with the business of the Company and in which the Companyreceives benefits in addition to the investment of funds, but shall not includea transaction in which the Company is issuing securities primarily for the purposeof raising capital or to an entity whose primary business is investing insecurities, and (d) shares of Common Stock or Common Stock Equivalents issuedin connection with a Qualifying Transaction.

“***Fully Diluted Basis***”shall mean all Common Stock or Common Stock Equivalents of the Companyincluding the exercise or conversion of all rights, options, derivative andconvertible securities and further including the conversion (whetherconvertible or not) of all other common or preferred stock equivalents outstandingor required to be issued by the Company.

“***Fundamental Transaction***”shall mean (A) the Company effects any merger or consolidation of the Companywith or into another Person, (B) the Company effects any sale of all orsubstantially all of its assets in one or a series of related transactions, (C)any tender offer or exchange offer (whether by the Company or another Person)is completed pursuant to which holders of Common Stock are permitted to tenderor exchange their shares for other securities, cash or property, or (D) theCompany effects any reclassification of the Common Stock or any compulsoryshare exchange pursuant to which the Common Stock is effectively converted intoor exchanged for other securities, cash or property.

“***GAAP***”shall mean generally accepted accounting principles, consistently applied.

“***Intellectual PropertyRights***” shall have the meaning ascribed to such term inSection 3.1(n).

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

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

3

----

 

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

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

“***Maximum Rate***”shall have the meaning ascribed to such term in Section 6.15.

“***Person***”means an individual or corporation, partnership, trust, incorporated orunincorporated association, joint venture, limited liability company, jointstock company, government (or an agency or subdivision thereof) or other entityof any kind.

“***Proceeding***”means an action, claim, suit, investigation or proceeding (including, withoutlimitation, an investigation or partial proceeding, such as a deposition),whether commenced or threatened.

“***Public Offering Date***”Not Applicable.

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

“***Purchaser’s Designee***”shall have the meaning ascribed to such term in Section 4.15.

***“Qualifying Transaction***”shall mean (i) an equity or debt/equity financing wherein the Company receivesgross proceeds equal to at least $2,000,000 from the sale of Common Stock orCommon Stock Equivalents issued by the Company to unaffiliated third parties or(ii) a Fundamental Transaction..

“***Registrable Securities***”means (i) all Underlying Shares (exercised and unexercised); (ii) anysecurities issued or transferred to a Purchaser in connection with or arisingout of any Transaction Document; and (iii) any securities issued or issuableupon any stock split, dividend or other distribution recapitalization orsimilar event with respect to the foregoing.

“***Registration Statement***”means a registration statement covering the sale or resale of the RegistrableSecurities.

“***Required Minimum***”means, as of any date, the maximum aggregate number of shares of Common Stockthen issued or potentially issuable in the future pursuant to the TransactionDocuments, including any Underlying Shares issuable upon exercise of theWarrant or conversion of the Debenture, ignoring any exercise limits set forththerein.

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

4

----

 

“***SBA***”shall have the meaning ascribed to such term in Section 5.1.

“***SBA Documents***”shall have the meaning ascribed to such term in Section 5.1(b).

“***SBIC***”shall have the meaning ascribed to such term in Section 5.1.

“***SBIC Act***”shall have the meaning ascribed to such term in Section 5.1(a).

“***Securities***”means the Debenture, the Warrant, and the Underlying Shares.

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

“***Security Agreement***”means the Security Agreement, dated as of the date hereof, between the Companyand the Purchasers, in the form of Exhibit B attached hereto.

“***Security Documents***”shall mean the Security Agreement and any other documents and filing requiredthereunder in order to grant Purchasers a first priority security interest inall of the assets of the Company.

“***Subordination Agreement***”*Not Applicable*.

“***Subscription Amount***”means, as to each Purchaser, the aggregate amount to be paid for Debentures andWarrants purchased hereunder as specified on the Purchasers Signature Page inthe corresponding column next to such Purchaser’s name under the heading “SubscriptionAmount”, in United States Dollars in immediately available funds.

“***Subsequent Financing***”shall have the meaning ascribed to such term in Section 4.12.

“***Subsequent FinancingNotice***” shall have the meaning ascribed to such term inSection 4.12.

“***Subsidiary***”means any corporation or limited liability company of which at least 50% of theoutstanding securities having ordinary voting powers for the election of Boardof Directors (or similar governing body) are at the time owned by theCompany.  As used herein, the term “Company”shall be deemed to include all of the Company’s Subsidiaries, if any.

“***Trading Market***”means, as applicable, the following markets or exchanges on which the CommonStock is listed or quoted for trading on the date in question: the AmericanStock Exchange, the New York Stock Exchange, the Nasdaq National Market, the NasdaqSmallCap Market, the OTC Bulletin Board or the “Pink Sheets” published by thePink Sheets LLC.

5

----

 

“***Transaction Documents***”means this Agreement, the Debentures, the Security Agreement, the Warrants andany other documents or agreements executed in connection with the transactionscontemplated hereunder.

“***Trident***”means Trident Growth Fund, L.P., a Delaware limited partnership.

“***Underlying Shares***”means the shares of Common Stock issuable upon exercise of the Warrants orconversion of the Debenture, or any other shares of Common Stock acquired byPurchasers hereby.

“***Unipixel***”means Unipixel, Inc., a Delaware Corporation.

“***Unipixel Displays***”means Unipixel Displays, Inc., a Texas corporation, and wholly-owned Subsidiaryof Unipixel.

“***Variable Rate Transaction***”shall mean a transaction in which the Company issues or sells (i) any debt orequity securities that are convertible into, exchangeable or exercisable for,or include the right to receive additional shares of Common Stock (A) at aconversion, exercise or exchange rate or other price that is based upon and/orvaries with the trading prices of or quotations for the shares of Common Stockat any time after the initial issuance of such debt or equity securities, (B)with a conversion, exercise or exchange price that is subject to being reset atsome future date after the initial issuance of such debt or equity security orupon the occurrence of specified or contingent events directly or indirectlyrelated to the business of the Company or the market for the Common Stock, or(C) whereby the number of underlying shares of Common Stock to be received uponexercise, conversion, or exchange thereof, is variable in any respect in whichthe number of such underlying shares could be increased.

“***Warrants***”means the Common Stock Purchase Warrants, in the form of Exhibit Cdelivered to each Purchaser at the Closing in accordance with Section 2.2hereof, which Warrants shall be exercisable immediately and be exercisableuntil the close of business on the fifth anniversary following the InitialExercise Date (as defined in the Warrant). The Company and Purchasers agree that the value of the Warrants, in theaggregate, as of the date hereof is less than $1,000.

# **ARTICLE II.**

**PURCHASEAND SALE**

## 2.1           Closing.  On the Closing Date, upon the terms andsubject to the conditions set forth herein, concurrent with the execution anddelivery of this Agreement by the parties hereto, the Company agrees to sell,and Purchasers agree to purchase the Debentures and Warrants for an aggregateamount of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) (the “***Aggregate Subscription Amount***”).  On the Closing Date, Purchasers shall deliverto the Company via wire transfer of immediately available funds equal to theAggregate Subscription Amount (less all expenses and fees due hereunder), andthe Company shall deliver 

6

----

## to Purchasers the Debentures, the Warrants, and the other items setforth in Section 2.2 issuable at the Closing. On the Closing Date, contemporaneous with the funding of the purchasemade the basis hereof, the Company shall promptly pay to the order of eachPurchaser a Closing Fee of 4% and an Application Fee of 1% of the SubscriptionAmount for each such Purchaser, such amounts to be offset from the AggregateSubscription Amount wire transfer described above.  Upon satisfaction of the conditions set forthin Section 2.2, the Closing shall occur at the offices of Trident, or suchother location as the parties shall mutually agree.

2.2          Deliveries

### a)              On the Closing Date,the Company shall execute and deliver or cause to be delivered to Purchasersthe following, each fully executed by the appropriate authorized officer orofficers of the Company:

### (i)            this Agreement (along with allDisclosure Schedules);

### (ii)           the Debentures;

### (iii)          the Warrants;

### (iv)          the Security Agreement along with allSecurity Documents;

### (v)           to each Trident and CapSource, SBAForm 480 (Size Status Declaration), SBA Form 652 (Assurance of Compliance) andSBA Form 1031 (Portfolio Finance Report), Parts A and B, in the forms of ExhibitC, Exhibit D and Exhibit E, respectively, attached hereto;

### (vi)          Approval by the Board of Directors ofthe Company, done in conformance with all applicable law and the Bylaws of theCompany, certified by the Secretary of the Company as of the Closing Date,approving or otherwise ratifying the transactions contemplated by thisAgreement, and approving the form of this Agreement and the TransactionDocuments, and authorizing execution, delivery, and performance thereof;

### (vii)         A copy of the Certificate ofIncorporation of the Company, as amended to date, certified by an official ofthe Company’s jurisdiction of formation or incorporation and further certifiedby the Secretary of the Company not to have been altered or amended sincecertification by such official; a Certificate of Good Standing dated within 30days of the date first written above from the Secretary of State of the Company’sjurisdiction of formation or incorporation; and a copy of the Bylaws of theCompany, certified as true and correct by the Secretary of the Company;

### (viii)        Payment of the Application and Closingfees, if any, referenced in Section 2.1 hereof; and

7

----

 

(ix)          Suchother instruments, documents or items as Purchasers may reasonably request.

### b)            On the Closing Date, each Purchasershall deliver or cause to be delivered to the Company the following:

#### (i)            this Agreement duly executed by eachPurchaser;

#### (ii)           Each Purchasers’ respectiveSubscription Amount by wire transfer to the account as specified in writing bythe Company; and

#### (iii)          the Security Agreement, duly executedby each Purchaser.

## 2.3           ClosingConditions.

### a)             The obligations of the Companyhereunder in connection with the Closing are subject to the followingconditions being met:

#### (i)            the accuracy in all material respectswhen made and on the Closing Date of the representations and warranties of thePurchasers contained herein;

#### (ii)           all obligations, covenants andagreements of Purchasers required to be performed at or prior to the ClosingDate shall have been performed; and

#### (iii)          the delivery by Purchasers of theitems set forth in Section 2.2(b) of this Agreement.

### b)            The obligations of Purchasershereunder in connection with the Closing are subject to the followingconditions being met:

#### (i)            the accuracy in all material respectson the Closing Date of the representations and warranties of the Companycontained herein;

#### (ii)           all obligations, covenants andagreements of the Company required to be performed at or prior to the ClosingDate shall have been performed;

#### (iii)          the deliveryby the Company of the items set forth in Section 2.2(a) of this Agreement; and

#### (iv)          thereshall have been no Material Adverse Effect with respect to the Company sincethe date hereof.

8

----

####  

# **ARTICLE III.**

**REPRESENTATIONS AND WARRANTIES**

3.1           Representationsand Warranties of the Company. Except as set forth under the corresponding section of the disclosureschedules delivered to Purchasers concurrently herewith (the “***Disclosure Schedules***”) whichDisclosure Schedules shall be deemed a part hereof, the UniPixel and UniPixelDisplays hereby, jointly and severally, make the representations and warrantiesset forth below to Purchasers, again, where the term “Company” shall mean eachof UniPixel and UniPixel Displays.

## a)    Subsidiaries.  The Company does not have any Subsidiaries;provided, however, that the Purchasers acknowledge that UniPixel Displays isthe wholly-owned Subsidiary of UniPixel.

### b)   Organization and Qualification.  The Company is an entity duly incorporated,validly existing and in good standing under the laws of the jurisdiction of itsincorporation, with the requisite power and authority to own and use itsproperties and assets and to carry on its business as currently conducted.  The Company is not in violation or default ofany of the provisions of its certificate or articles of incorporation, bylaws,or other organizational or charter documents. The Company is duly qualified to conduct business and is in goodstanding as a foreign corporation or other entity in each jurisdiction in whichthe nature of the business conducted or property owned by it makes suchqualification necessary, except where the failure to be so qualified or in goodstanding, as the case may be, could not have or reasonably be expected toresult in (i) a material adverse effect on the legality, validity orenforceability of any Transaction Documents, (ii) a material adverse effect onthe results of operations, assets, business, prospects or financial conditionof the Company, or (iii) a material adverse effect on the Company’s ability toperform in any material respect on a timely basis its obligations under anyTransaction Documents (any of (i), (ii) or (iii), a “***Material Adverse Effect***”) and no Proceeding has beeninstituted in any such jurisdiction revoking, limiting or curtailing or seekingto revoke, limit or curtail such power and authority or qualification.

### c)    Authorization; Enforcement.  The Company has the requisite corporate powerand authority to enter into and to consummate the transactions contemplated byeach of the Transaction Documents and otherwise to carry out its obligationsthereunder.  The execution and deliveryof each of the Transaction Documents by the Company and the consummation by itof the transactions contemplated thereby have been duly authorized by allnecessary action on the part of the Company. Each Transaction Documents has been (or upon delivery will have been)duly executed by the Company and, when delivered in accordance with the termshereof, will constitute the valid and binding obligation of the Companyenforceable against the Company in accordance with its terms except (i) aslimited by applicable bankruptcy, insolvency, reorganization, moratorium andother laws of general application affecting enforcement of creditors’ rightsgenerally and (ii) as limited by laws relating to the availability of specificperformance, injunctive relief or other equitable remedies.

9

----

### d)   No Conflicts.  The execution, delivery and performance ofthe Transaction Documents by the Company and the consummation by the Company ofthe other transactions contemplated thereby do not and will not: (i) conflictwith or violate any provision of the Company’s certificate or articles ofincorporation, bylaws or other organizational or charter documents, or (ii)conflict with, or constitute a default (or an event that with notice or lapseof time or both would become a default) under, result in the creation of anyLien upon any of the properties or assets of the Company, or give to others anyrights of termination, amendment, acceleration or cancellation (with or withoutnotice, lapse of time or both) of, any agreement, credit facility, debt orother instrument (evidencing a Company debt or otherwise) or otherunderstanding to which the Company is a party or by which any property or assetof the Company is bound or affected, or (iii) conflict with or result in aviolation of any law, rule, regulation, order, judgment, injunction, decree orother restriction of any court or governmental authority to which the Companyis subject (including federal and state securities laws and regulations), or bywhich any property or asset of the Company is bound or affected; except in thecase of each of clauses (ii) and (iii), such as could not have or reasonably beexpected to result in a Material Adverse Effect.

### e)    Filings, Consents and Approvals.  Other than as set forth on Schedule 3.1(e)and except for filing of a Form D and/or state “blue sky” securities filings,the Company is not required to obtain any consent, waiver, authorization ororder of, give any notice to, or make any filing or registration with, anycourt or other federal, state, local or other governmental authority or otherPerson in connection with the execution, delivery and performance by theCompany of the Transaction Documents.

### f)    Issuance of the Securities.  The Securities are duly authorized and, whenissued and paid for in accordance with the applicable Transaction Documents,will be duly and validly issued, fully paid and nonassessable, free and clearof all Liens imposed by the Company other than restrictions on transferprovided for in the Transaction Documents. The Underlying Shares, when issued in accordance with the terms of theTransaction Documents, will be validly issued, fully paid and nonassessable,free and clear of all Liens imposed by the Company or any third party.  The Company has reserved from its dulyauthorized capital stock a number of shares of Common Stock for issuance of anumber of Underlying Shares at least equal to the Required Minimum on the datehereof.  The Company has not, and to theknowledge of the Company, no Affiliate of the Company has sold, offered forsale or solicited offers to buy or otherwise negotiated in respect of anysecurity (as defined in Section 2 of the Securities Act) that would beintegrated with the offer or sale of the Securities in a manner that wouldrequire the registration under the Securities Act of the sale of the Securitiesto Purchasers.

### g)   Capitalization.  The capitalization of the Company is asdescribed in Schedule 3.1(g).  TheCompany has not issued any capital stock other than as set forth on Schedule3.1(g). No Person has any right of first refusal, preemptive right, rightof participation, or any similar right to participate in the transactionscontemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities or 

10

----

### as set forth on Schedule 3.1(g), thereare no outstanding options, warrants, script rights to subscribe to, calls orcommitments of any character whatsoever relating to, or securities, rights orobligations convertible into or exchangeable for, or giving any Person anyright to subscribe for or acquire, any shares of the Company’s capital stock,or contracts, commitments, understandings or arrangements by which the Companyis or may become bound to issue additional shares of its capital stock, orsecurities or rights convertible or exchangeable into shares of its capitalstock. The issuance and sale of the Securities will not obligate the Company toissue shares of Common Stock or other securities to any Person (other thanPurchasers) and will not result in a right of any holder of Company securitiesto adjust the exercise, conversion, exchange or reset price under suchsecurities. All of the outstanding shares of capital stock of the Company arevalidly issued, fully paid and nonassessable, have been issued in compliancewith all federal and state securities laws, and none of such outstanding shareswas issued in violation of any preemptive rights or similar rights to subscribefor or purchase securities.  No furtherapproval or authorization of any stockholder, the Board of Directors of theCompany or others is required for the issuance and sale of the Securities.  Except as disclosed in Schedule 3.1(g),there are no stockholders agreements, voting agreements or other similaragreements with respect to the Company’s capital stock to which the Company isa party or, to the knowledge of the Company, between or among any of theCompany’s stockholders.  A complete listof stockholders of the Company that are officers, directors and individualsholding 5% or more of the outstanding Common Stock is included in Schedule3.1(g).

### h)    SEC Documents.  If the Company is subject to the reportingprovisions of the Exchange Act, the Company has filed all required reports,schedules, forms, statements and other documents with the Commission. (the “***SEC Documents***”).  As of their respective dates, the SECDocuments complied in all material respects with requirements of the SecuritiesAct or the Exchange Act, as the case may be and the rules and regulations ofthe Commission promulgated thereunder applicable to such SEC Documents, andnone of the SEC Documents contained any untrue statement of a material fact oromitted to state a material fact required to be stated therein or necessary inorder to make the statements therein, in light of the circumstances under whichthey were made, not misleading, except to the extent that information containedin any SEC Document has been revised or superseded by a later filed SECDocument.  The financial statements ofthe Company included in the SEC Documents comply as to form in all materialrespects with applicable accounting requirements and the published rules andregulations of the Commission with respect thereto, have been prepared inaccordance with GAAP (except, in the case of unaudited statements as permittedby Form 10-Q or Form 10-QSB) applied on a consistent basis during the periodsinvolved (except as may be indicated in the notes thereto) and fairly presentthe consolidated financial position of the Company and its consolidatedsubsidiaries as of the dates thereof and the consolidated results of theiroperation and cash flows for the period then ending in accordance with GAAP(subject, in the case of the unaudited statements, to normal year end auditadjustments).  Except as set forth in thefiled SEC Documents, neither the Company nor any Subsidiaries has anyliabilities or obligations of any nature (whether 

11

----

### accrued, absolute, contingent or otherwise)required by GAAP to be set forth on a consolidated balance sheet of the Companyand its consolidated subsidiaries or in the notes thereto and which couldreasonably be expected to have a Material Adverse Effect.

### i)     Litigation.  Other than as set forth on Schedule 3.1(i),there is no action, suit, inquiry, notice of violation, proceeding orinvestigation pending or, to the knowledge of the Company, threatened againstor affecting the Company, or any of its respective properties before or by anycourt, arbitrator, governmental or administrative agency or regulatoryauthority (federal, state, county, local or foreign) (collectively, an “***Action***”) which (i)adversely affects or challenges the legality, validity or enforceability of anyof the Transaction Documents or the Securities or (ii) could, if there were anunfavorable decision, have or reasonably be expected to result in a MaterialAdverse Effect.  Neither the Company norany director or officer thereof, is or has been the subject of any Actioninvolving a claim of violation of or liability under federal or statesecurities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge ofthe Company, there is not pending or contemplated, any investigation by theCommission involving the Company or any current or former director or officerof the Company.

### j)     Labor Relations.  No material labor dispute exists or, to theknowledge of the Company, is imminent with respect to any of the employees ofthe Company which could reasonably be expected to result in a Material AdverseEffect.

### k)    Compliance.  The Company (i) is not in default under or inviolation of (and no event has occurred that has not been waived that, withnotice or lapse of time or both, would result in a default by the Company), norhas the Company received notice of a claim that it is in default under or thatit is in violation of, any indenture, loan or credit agreement or any otheragreement or instrument to which it is a party or by which it or any of itsproperties is bound (whether or not such default or violation has been waived),(ii) is not in violation of any order of any court, arbitrator or governmentalbody, or (iii) is not or has not been in violation of any statute, rule orregulation of any governmental authority, including without limitation allforeign, federal, state and local laws applicable to its business except in eachcase as could not have a Material Adverse Effect.

### l)     Regulatory Permits.  The Company possesses all certificates,authorizations and permits issued by the appropriate federal, state, local orforeign regulatory authorities necessary to conduct its business as describedin Schedule 3.1(l), except where the failure to possess such permitscould not have or reasonably be expected to result in a Material Adverse Effect(“***Material Permits***”),and the Company has not received any notice of Proceedings relating to therevocation or modification of any Material Permit.

### m)   Title to Assets.  Except as set forth on Schedule 3.1(m),the Company has good and marketable title in (or licenses or rights to use) allpersonal property that is material to the business of the Company, in each casefree and clear of all Liens.  The 

12

----

### Company does not own any real property. Anyreal property and facilities held under lease by the Company are held by itunder valid, subsisting and enforceable leases of which the Company is in compliance.  The Company has not granted, and no thirdparty has obtained in any manner, other than as contemplated by the TransactionDocuments, any security interest in the assets of the Company.  Schedule 3.1(m) sets forth and details which,if any, of such assets are owned by any Subsidiary.

### n)   Intellectual Property.

### (i)           Schedule 3.1(n) contains alist of the Company’s Intellectual Property.  For purposes hereof, “***Intellectual Property***” meansany or all of the following and all rights and goodwill, arising out of orassociated therewith:  (A) all United States, international, and foreignpatents and applications therefor (including provisional applications) and allreissues, reexaminations, divisions, renewals, extensions, provisionals,continuations and continuations-in-part thereof; (B) all inventions (whetherpatentable or not), invention disclosures, improvements, trade secrets,proprietary information, know-how, technology, technical data and customerlists, and all documentation relating to any of the foregoing throughout theworld; (C) all international, U.S. and foreign registered trademarks, tradenames, service marks, logos, slogans, and designs, applications to registertrademarks, trade names, service marks, logos, slogans, and designs, intent-to-useapplications, or other registrations or applications related to trademarks,service marks, common law trademarks, trade names, service marks, logos,slogans, and designs and all associated goodwill associated with all of theforegoing; (D) all copyrights, copyright registrations and applicationstherefor, and all other rights corresponding thereto throughout the world; (E)all industrial designs and any registrations and applications thereforthroughout the world; (F) all URL’s, domain names, trade names, logos, slogans,designs, common law trademarks and service marks, trademark and service markregistrations and applications therefor throughout the world; (G) all databasesand data collections and all rights therein throughout the world; (H) all moraland economic rights of authors and inventors, however denominated, throughoutthe world; (I) any other intellectual property that is the subject of anapplication, certificate, filing, registration or other document issued, filedwith, or recorded with any federal, state, local or foreign government or otherpublic body; and (J) any similar or equivalent rights to any of the foregoinganywhere in the world.  For purposeshereof, “***Company IntellectualProperty***” means any Company Intellectual Property owned orlicensed by the Company, and “***CompanyRegistered Intellectual Property***” means any items ofIntellectual Property described in subsections (A), (C) or (D) of thisparagraph.

### (ii)          No Company Intellectual Property orproduct or service of the Company’s business related to the CompanyIntellectual Property is subject to any Proceeding or outstanding decree,order, judgment, agreement or stipulation restricting in any manner the use,transfer or licensing thereof by the Company, or which may affect the validity,use or enforceability of such Company Intellectual Property.  Each item of Company Registered IntellectualProperty is valid and subsisting.  Allnecessary registration, maintenance and renewal fees currently due inconnection with the Company 

13

----

### Registered Intellectual Property have beenmade and all necessary documents, recordations and certifications in connectionwith such Company Registered Intellectual Property have been filed with therelevant patent, copyright, trademark or other authorities in the United Statesor foreign jurisdictions, as the case may be, for the purpose of maintainingsuch Company Registered Intellectual Property.

### (iii)         The Company owns and has good andexclusive title to, or has licenses (any Intellectual Property subject to anylicense to be identified as such in Schedule 3.1(n)) (sufficient for theconduct of the Company’s business as currently conducted) to use each item ofthe Company’s Intellectual Property free and clear of any Lien; and the Companyis the exclusive owner or exclusive licensee of all trademarks and servicemarks, trade names and domain names used in connection with and material to theoperation or conduct of the Company’s business, including the sale of anyproducts or the provision of any services by same, free and clear of allLiens.  The Company IntellectualProperty, other than future improvements, derivations, and additions to be madeby the Company or on behalf of the Company, constitutes all of the IntellectualProperty used or contemplated for use in connection with the Company’s currentbusiness and in the performance of any contract, proposal or letter of intentin connection with same.

### (iv)        To the extent that any CompanyIntellectual Property has been developed or created by a third party for the Company,the Company has a written agreement with such third party with respect theretoand the Company thereby either (A) has obtained ownership of and is theexclusive owner of, or (b) has obtained a license (sufficient for theconduct of the Company’s business as currently conducted) to all of such thirdparty’s Intellectual Property in such work, material or invention by operationof law or by valid assignment, to the fullest extent it is legally possible todo so, each such agreement being listed on Schedule 3.1(n).

### (v)         The operation of the Company’s businessas it is currently conducted, including the Company’s design, development,marketing and sale of the products or services of the Company (including withrespect to products currently under development) has not, does not and will notinfringe or misappropriate in any manner the Intellectual Property of any thirdparty or, to the knowledge of the Company, constitute unfair competition ortrade practices under the laws of any jurisdiction.

### (vi)        The Company has no knowledge, and hasnot received written notice or any other overt threats from any third party,that the operation of the Company’s business as it is currently conducted, orany act, product or service of the Company’s business, infringes or misappropriatesthe Intellectual Property of any third party or constitutes unfair competitionor trade practices under the laws of any jurisdiction.  The Company’s Intellectual Property is notthe subject of any third party communications relating to validity orenforceability, cease and desist orders, demand letters, warnings or priorsettlement agreements.  The Company’s Intellectual Property is notcurrently the subject of any pending or threatened re-examinations,oppositions, interferences, or 

14

----

### infringement actions.

### (vii)       To the knowledge of the Company, noPerson has or is infringing or misappropriating any Company IntellectualProperty.

### (viii)      The Company has taken reasonable steps toprotect the rights of the Company in the confidential information and tradesecrets of the Company used in the Company’s business or any trade secrets orconfidential information of third parties used in same, and, without limitingthe foregoing, the Company has enforced a policy requiring each employee andcontractor to execute a proprietary information/confidentiality agreement, andexcept under confidentiality obligations or in the context of theattorney-client relationship, there has not been any disclosure by the Companyof any such trade secrets or confidential information.

### o)   Insurance.  The Company is insured by insurers ofrecognized financial responsibility against such losses and risks and in suchamounts as are prudent and customary in the businesses in which the Company isengaged, including directors and officers insurance at least equal to theaggregate principal amount of the Debenture. To the best of Company’s knowledge, such insurance contracts andpolicies are accurate and complete.  TheCompany has no reason to believe that it will not be able to renew its existinginsurance coverage as and when such coverage expires or to obtain similarcoverage from similar insurers as may be necessary to continue its businesswithout a significant increase in cost.

### p)   Transactions With Affiliates and Employees.  None of the officers or directors of theCompany and, to the knowledge of the Company, none of the employees of theCompany is presently a party to any transaction with the Company (other thanfor services as employees, officers and directors), including any contract,agreement or other arrangement providing for the furnishing of services to orby, providing for rental of real or personal property to or from, or otherwiserequiring payments to or from any officer, director or such employee or, to theknowledge of the Company, any entity in which any officer, director, or anysuch employee has a substantial interest or is an officer, director, trustee orpartner, in each case in excess of $60,000 other than (i) for payment of salaryor consulting fees for services rendered, (ii) reimbursement for expensesincurred on behalf of the Company and (iii) for other employee benefits,including stock option agreements under any stock option plan of the Company.

### q)   Internal Accounting Controls.  The Companymaintains a system of internal accounting controls sufficient to providereasonable assurance that (i) transactions are executed in accordance withmanagement’s general or specific authorizations, (ii) transactions are recordedas necessary to permit preparation of financial statements in conformity withGAAP and to maintain asset accountability, (iii) access to assets is permittedonly in accordance with management’s general or specific authorization, and(iv) the recorded accountability for assets is compared with the 

15

----

### existing assets atreasonable intervals and appropriate action is taken with respect to anydifferences.

### r)    Certain Fees.  Other than as set forth on Schedule 3.1(r),no brokerage or finder’s fees or commissions are or will be payable by theCompany to any broker, financial advisor or consultant, finder, placementagent, investment banker, bank or other Person with respect to the transactionscontemplated by this Agreement. Purchasers shall have no obligation with respect to any fees or withrespect to any claims made by or on behalf of other Persons for fees of a typecontemplated in this Section that may be due in connection with thetransactions contemplated by this Agreement.

### s)    Private Placement.  Assuming the accuracy of Purchasers’representations and warranties set forth in Section 3.2, no registration underthe Securities Act is required for the offer and sale of the Securities by theCompany to Purchasers as contemplated hereby.

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

### u)   Registration Rights.  Other than as set forth on Schedule 3.1(u),no Person has any right to cause the Company to effect the registration underthe Securities Act of any securities of the Company.

### v)   Application of Takeover Protections.  The Company and its Board of Directors havetaken all necessary action, if any, in order to render inapplicable any controlshare acquisition, business combination, poison pill (including anydistribution under a rights agreement) or other similar anti-takeover provisionunder the Company’s Certificate of Incorporation (or similar charter documents)or the laws of its state of incorporation that is or could become applicable toPurchasers as a result of Purchasers and the Company fulfilling theirobligations or exercising their rights under the Transaction Documents,including without limitation as a result of the Company’s issuance of theSecurities and the Purchasers’ ownership of the Securities.

### w)   Disclosure.  The Company confirms that neither it nor anyother Person acting on its behalf has provided Purchasers or their agents orcounsel with any information that constitutes or might constitute material,nonpublic information except for such information that will be publiclydisclosed in documents filed with the Commission.  The Company understands and confirms thatPurchasers will rely on the foregoing representations and covenants ineffecting transactions in securities of the Company.  All written statements provided to Purchasersregarding the Company, its business and the transactions contemplated hereby,including the Disclosure Schedules to this Agreement, furnished by or on behalfof the Company with respect to the 

16

----

### representations and warranties made hereinare true and correct with respect to such representations and warranties and donot contain any untrue statement of a material fact or omit to state anymaterial fact necessary in order to make the statements made therein, in lightof the circumstances under which they were made, not misleading.

### x)    No Integrated Offering. Assuming theaccuracy of Purchasers’ representations and warranties set forth in Section3.2, neither the Company, nor any of its Affiliates, nor any Person acting onits or their behalf has, directly or indirectly, made any offers or sales ofany security or solicited any offers to buy any security, under circumstancesthat would cause this offering of the Securities to be integrated with priorofferings by the Company for purposes of the Securities Act or any applicableshareholder approval provisions.

### y)   Solvency.  Based on the financial condition of theCompany as of the Closing Date after giving effect to the receipt by theCompany of the proceeds from the sale of the Securities hereunder, (i) theCompany’s fair saleable value of its assets exceeds the amount that will berequired to be paid on or in respect of the Company’s existing debts and otherliabilities (including known contingent liabilities) as they mature; (ii) theCompany’s assets do not constitute unreasonably small capital to carry on itsbusiness for the current fiscal year as now conducted and as proposed to beconducted including its capital needs taking into account the particularcapital requirements of the business conducted by the Company, and projectedcapital requirements and capital availability thereof; and (iii) the currentcash flow of the Company, together with the proceeds the Company would receive,were it to liquidate all of its assets, after taking into account allanticipated uses of the cash, would be sufficient to pay all amounts on or inrespect of its debt when such amounts are required to be paid.  The Company does not intend to incur debtsbeyond its ability to pay such debts as they mature (taking into account thetiming and amounts of cash to be payable on or in respect of its debt).

### z)    Tax Status.  Except for matters that would not,individually or in the aggregate, have or reasonably be expected to result in aMaterial Adverse Effect, the Company has filed all necessary federal, state andforeign income and franchise tax returns and has paid or accrued all taxesshown as due thereon, and the Company has no knowledge of a tax deficiencywhich has been asserted or threatened against the Company.

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

### bb) Foreign Corrupt Practices.  Neither the Company, nor to the knowledge ofthe Company, any agent or other person acting on behalf of the Company, has (i)directly or indirectly, used any corporate funds for unlawful contributions,gifts, entertainment or 

17

----

### other unlawful expenses related to foreign ordomestic political activity, (ii) made any unlawful payment to foreign ordomestic government officials or employees or to any foreign or domesticpolitical parties or campaigns from corporate funds, (iii) failed to disclosefully any contribution made by the Company (or made by any person acting on itsbehalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect anyprovision of the Foreign Corrupt Practices Act of 1977, as amended

### cc)     Indebtedness.  Other than as set forth on Schedule3.1(cc), as of the Closing Date, the Company has no indebtedness.

### dd)     No Disagreements with Accountants andLawyers.  There are no disagreementsof any kind presently existing, or reasonably anticipated by the Company toarise, between the accountants and lawyers formerly or presently employed bythe Company and the Company is current with respect to any fees owed to itsaccountants and lawyers.

### ee)     Acknowledgment Regarding Purchasers’Purchase of Securities.  The Companyacknowledges and agrees that Purchasers are acting solely in the capacity ofarm’s length purchasers with respect to the Transaction Documents and thetransactions contemplated hereby as they relate to the Company.  The Company further acknowledges thatPurchasers are not acting as a financial advisor or fiduciary of the Company(or in any similar capacity) with respect to this Agreement and thetransactions contemplated hereby and any advice given by Purchasers or any oftheir respective representatives or agents to the Company in connection withthis Agreement and the transactions contemplated hereby is merely incidental tothe Purchasers’ purchase of the Securities.

ff)       Material Liabilities.  The sole outstanding material liabilities ofthe Company are set forth on Schedule 3.1(ff) .

gg)     Material Agreements.  Except for those agreements set forth on Schedule3.1(gg) hereof, there are no other material agreements to which the Companyis a party.

hh)    Board of Directors.  The Board of Directors of the Companyconsists of those persons set forth on Schedule 3.1(hh).

ii)       Financial Statements.  Other than as set forth on Schedule3.1(ii), there are no audited financial statements of the Company.

## 3.2           Representationsand Warranties of Purchasers.    EachPurchaser hereby, for itself and for no other Purchaser, represents andwarrants as of the date hereof and as of the Closing Date to the Company asfollows:

### (a)           Organization;Authority.  Such Purchaser (if not anindividual) is an entity duly organized, validly existing and in good standingunder the laws of the jurisdiction of its organization with full right,corporate or partnership power and authority to enter into 

18

----

### and toconsummate the transactions contemplated by the Transaction Documents andotherwise to carry out its obligations thereunder. The execution, delivery andperformance by Purchaser of the transactions contemplated by this Agreementhave been duly authorized by all necessary corporate or similar action on thepart of Purchaser.  Each of theTransaction Documents to which it is a party has been duly executed byPurchaser, and when delivered by Purchaser in accordance with the terms hereof,will constitute the valid and legally binding obligation of Purchaser,enforceable against it in accordance with its terms, except (i) as limited bygeneral equitable principles and applicable bankruptcy, insolvency, reorganization,moratorium and other laws of general application affecting enforcement ofcreditors’ rights generally, (ii) as limited by laws relating to theavailability of specific performance, injunctive relief or other equitableremedies and (iii) insofar as indemnification and contribution provisions maybe limited by applicable law.

### (b)           Purchaser Representation.  Purchaser understands that the Securities are“restricted securities” and have not been registered or qualified, as the casemay be, under the Securities Act or any applicable state securities law byreason of a specific exemption from the registration or qualificationprovisions of the Securities Act or any applicable state securities laws, theavailability of which depends upon, among other things, the bona fide nature ofthe investment intent and the accuracy of Purchaser’s representations asexpressed herein.  Purchaser representsthat it is acquiring the Securities for investment as principal for its ownaccount and not with a view to or for distribution or resale of such Securitiesor any part thereof, has no present intention of distributing any of suchSecurities and has no arrangement or understanding with any other personsregarding the distribution of such Securities (this representation and warrantynot limiting Purchaser’s right to sell the Securities pursuant to aRegistration Statement or otherwise in compliance with applicable federal andstate securities laws).  Purchaser isacquiring the Securities hereunder in the ordinary course of its business.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 Purchaser was offered theSecurities, it was, and at the date hereof it is, and on each date on which itexercises any Warrants it will be either: (i) an “accredited investor” asdefined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)) of Regulation Dpromulgated under the Securities Act or (ii) a “qualified institutional buyer”as defined in Rule 144A(a) under the Securities Act.

### (d)           Experience ofPurchasers.  Purchaser, either aloneor together with its representatives, has such knowledge, sophistication andexperience in business and financial matters so as to be capable of evaluatingthe merits and risks of the prospective investment in the Securities, and hasso evaluated the merits and risks of such investment.  Purchaser understands that the acquisition ofthe Securities hereunder is highly a speculative investment which involves ahigh degree of loss of Purchaser’s investment therein.  Purchaser is able to bear the economic riskof an investment in the Securities and, at the present time, is able to afforda complete loss of such investment.

19

----

###  

### (e)           Certain Fees.  Purchaser has not entered into an agreementwhereby brokerage or finder’s fees or commissions are or will be payable by theCompany to any broker, financial advisor or consultant, finder, placementagent, investment banker, bank or other Person with respect to the transactionscontemplated by this Agreement.

The Companyacknowledges and agrees that no Purchaser has made any representations orwarranties with respect to the transactions contemplated hereby other thanthose specifically set forth in this Section 3.2.

# **ARTICLE IV.**

**OTHERAGREEMENTS OF THE PARTIES**

## 4.1           TransferRestrictions.

### (a)           The Securities mayonly be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securitiesother than pursuant to an effective registration statement or Rule 144, to theCompany or to an Affiliate of each Purchaser or in connection with a pledge ascontemplated in Section 4.1(b), the Company may require the transferor thereofto provide to the Company an opinion of counsel selected by the transferor andreasonably acceptable to the Company, the form and substance of which opinionshall be reasonably satisfactory to the Company, to the effect that suchtransfer does not require registration of such transferred Securities under theSecurities Act or any applicable state securities laws.  As a condition of transfer, any suchtransferee shall agree in writing to be bound by the terms of this Agreementand shall have the rights of a Purchaser under this Agreement.

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

NEITHER THESE SECURITIESNOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEENREGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIESCOMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDERTHE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVEREGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLEEXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATESECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TOSUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THECOMPANY.

20

----

 

The Company acknowledgesand agrees that Purchasers may from time to time pledge pursuant to a bona fidemargin agreement with a registered broker-dealer or grant a security interestin some or all of the Securities to a financial institution that is an “accreditedinvestor” as defined in Rule 501(a) under the Securities Act and who agrees tobe bound by the provisions of this Agreement and, if required under the termsof such arrangement, Purchasers may transfer pledged or secured Securities tothe pledgees or secured parties.  Such apledge or transfer would not be subject to approval of the Company and no legalopinion of legal counsel of the pledgee, secured party or pledgor shall berequired in connection therewith. Further, no notice shall be required of such pledge.  At the Purchaser’s expense, the Company willexecute and deliver such reasonable documentation as a pledgee or secured partyof Securities may reasonably request in connection with a pledge or transfer ofthe Securities.

### (c)           Certificatesevidencing Underlying Shares shall not contain any legend (including the legendset forth in Section 4.1(b) hereof): (i) while a Registration Statementcovering the resale of such Underlying Shares is effective under the SecuritiesAct, (ii) following any sale of such Underlying Shares pursuant to Rule 144,(iii) if such Underlying Shares are eligible for sale under Rule 144(k), or(iv) if such legend is not required under applicable requirements of theSecurities Act (including judicial interpretations and pronouncements issued bythe staff of the Commission); provided, however, in connectionwith the issuance of the Underlying Shares, Purchasers hereby agrees to adhereto and abide by all prospectus delivery requirements under the Securities Actand rules and regulations of the Commission and all applicable state “blue sky”securities laws. The Company shall cause its counsel to issue a legal opinionto the Company’s transfer agent if so required by the Company’s transfer agentto effect the removal of the legend hereunder. If all or any portion of a Warrant is exercised at a time when there isan effective Registration Statement to cover the resale of the UnderlyingShares, or if such shares may be sold under Rule 144(k) or if such legend isnot otherwise required under applicable requirements of the Securities Act(including judicial interpretations thereof) then such shares shall be issuedfree of all legends.  The Company agreesthat at such time as such legend is no longer required under this Section4.1(c), it will, no later than two Business Days following the delivery by Purchasersto the Company or the Company’s transfer agent of a certificate representingUnderlying Shares, as applicable, issued with a restrictive legend (such secondBusiness Day, the “***LegendRemoval Date***”), deliver or cause to be delivered toPurchasers a certificate (or certificates, as the case may be) representingsuch shares that is free from all restrictive and other legends.  The Company may not make any notation on itsrecords or give instructions to any transfer agent of the Company that enlargethe restrictions on transfer set forth in this Section.

### (d)           In addition toPurchasers’ other available remedies, the Company shall pay to Purchasers, incash, as partial liquidated damages and not as a penalty, the greater of (i)$500 for each Business Day after the Legend Removal Date, the Warrant ShareDelivery Date, or other such date the Underlying Shares are to be delivered tothe Purchasers, as the case may be, until such certificate is delivered with anappropriate 

21

----

### legend orwithout a restrictive legend, as the case may be; and (ii) the difference inthe Market Value of the Underlying Shares (based on the closing bid price ofthe Common Stock on the then principal Trading Market on the date suchSecurities are submitted to the Company’s transfer agent) on the delivery dateand the date such shares are actually received by the Holder in such form asrequired herein and in the Transaction Documents.  Nothing herein shall limit a Purchaser’sright to pursue actual damages for the Company’s failure to delivercertificates representing any Securities as required by the TransactionDocuments, and Purchasers shall have the right to pursue all remedies availableto it at law or in equity including, without limitation, a decree of specificperformance and/or injunctive relief.

### (e)           Purchasers agreethat the removal of the restrictive legend from certificates representingSecurities as set forth in this Section 4.1 is predicated upon the Company’sreliance that Purchasers will sell any Securities pursuant to either theregistration requirements of the Securities Act, including any applicableprospectus delivery requirements, or an exemption therefrom.

## 4.2           Acknowledgmentof Dilution.  The Companyacknowledges that the issuance of the Underlying Shares may result in dilutionof the outstanding shares of Common Stock, which dilution may be substantialunder certain market conditions.  TheCompany further acknowledges that its obligations under the TransactionDocuments, including without limitation its obligation to issue the UnderlyingShares pursuant to the Transaction Documents, are unconditional and absoluteand 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 haveagainst Purchasers and regardless of the dilutive effect that such issuance mayhave on the ownership of the other stockholders of the Company.

## 4.3           Furnishingof Information.  At any time afterthe date hereof, if the Company is or becomes subject to the rules,regulations, and/or reporting requirements of the Exchange Act and as long asany Purchaser owns restricted Securities, the Company covenants to timely file(or obtain extensions in respect thereof and file within the applicable graceperiod) all reports required to be filed by the Company after the date hereofpursuant to the Exchange Act.  As long asany Purchaser owns Securities, if the Company is not required to file reportspursuant to the Exchange Act, it will prepare and furnish to each suchPurchaser and make publicly available in accordance with Rule 144(c) suchinformation as is required for Purchaser to sell the Underlying Shares underRule 144.  The Company further covenantsthat it will take such further action as any holder of Securities may reasonablyrequest, all to the extent required from time to time to enable such Person tosell such Underlying Shares without registration under the Securities Actwithin the limitation of the exemptions provided by Rule 144.

## 4.4           Integration.  The Company shall not sell, offer for sale orsolicit offers to buy or otherwise negotiate in respect of any security (asdefined in Section 2 of the Securities Act) that would be integrated with theoffer or sale of the Securities in a manner that would require the registrationunder the Securities Act of the sale of the Securities to Purchasers or, ifthen listed or 

22

----

## quoted on a Trading Market, that would be integrated with the offer orsale of the Securities for purposes of the rules and regulations of any TradingMarket.

## 4.5           ExerciseProcedures.  The form of Notice ofExercise and Conversion Notice included in the Warrant and Debenture,respectively, set forth the totality of the procedures required of Purchasersin order to exercise the respective Warrants or convert the Debentures.  No additional legal opinion or otherinformation or instructions shall be required of any Purchaser to exercise itsWarrant or convert their Debenture.  TheCompany shall honor exercises of the Warrant and conversions of the Debentureand shall deliver Underlying Shares in accordance with the terms, conditionsand time periods set forth in such Transaction Documents.

## 4.6           ShareholdersRights Plan.  No claim will be madeor enforced by the Company or, to the knowledge of the Company, any otherPerson that any Purchaser is an “Acquiring Person” under any shareholdersrights plan or similar plan or arrangement in effect or hereafter adopted bythe Company, or that Purchaser could be deemed to trigger the provisions of anysuch plan or arrangement, by virtue of receiving Securities under theTransaction Documents or under any other agreement between the Company and anyPurchaser.

## 4.7           Non-PublicInformation.  If at any time theCompany becomes subject to the reporting provisions of the Exchange Act, theCompany covenants and agrees that neither it nor any other Person acting on itsbehalf will provide any Purchaser or its agents or counsel with any informationthat the Company believes constitutes material non-public information, unlessprior thereto such Purchaser shall have executed a written agreement regardingthe confidentiality and use of such information.  The Company understands and confirms thatsuch Purchaser shall be relying on the foregoing representations in effectingtransactions in securities of the Company.

## 4.8           Useof Proceeds.  Except as set forth in Schedule4.8, the Company shall use the net proceeds from the sale of the Securitieshereunder for working capital purposes and not for the satisfaction of anyportion of the Company’s debt (other than payment of trade payables in theordinary course of the Company’s business and prior practices), to redeem anyCommon Stock or Common Stock Equivalents or to settle any outstandinglitigation.  Schedule 4.8 shalldetail the Company’s expected use of proceeds received from the sale of theSecurities hereunder.

## 4.9           Reimbursement.  If any Purchaser becomes involved in anycapacity in any Proceeding by or against any Person who is a stockholder of theCompany (except as a result of sales, pledges, margin sales or any similartransaction(s) by such Purchaser to or with any current stockholder), solely asa result of such Purchaser’s acquisition of the Securities under thisAgreement, and such Purchaser is successful in the Proceeding the Company willreimburse Purchaser for its reasonable legal and other expenses (including thecost of any investigation preparation and travel in connection therewith)incurred in connection therewith, as such expenses are incurred.  The reimbursement obligations of the Companyunder this paragraph shall be in addition to any liability which the Companymay otherwise have, shall extend upon the same terms and conditions to anyAffiliates of such Purchaser who are actually named in 

23

----

## such Action,Proceeding or investigation, and partners, directors, agents, employees andcontrolling persons (if any), as the case may be, of Purchaser and any suchAffiliate, and shall be binding upon and inure to the benefit of anysuccessors, assigns, heirs and personal representatives of the Company,Purchaser and any such Affiliate and any such Person.  The Company also agrees that neither anyPurchaser nor any such Affiliates, partners, directors, agents, employees orcontrolling persons shall have any liability to the Company or any Personasserting claims on behalf of or in right of the Company solely as a result ofacquiring the Securities under this Agreement.

## 4.10         Indemnification ofPurchasers.  Subject to theprovisions of this Section 4.10, the Company will indemnify and hold thePurchasers and their respective directors, officers, managers, shareholders,partners, employees and agents (each, a “***Purchaser Party***”) harmless from anyand all losses, liabilities, obligations, claims, contingencies, damages, costsand expenses, including all judgments, amounts paid in settlements, court costsand reasonable attorneys’ fees and costs of investigation that any suchPurchaser Party may suffer or incur as a result of or relating to (a) anybreach of any of the representations, warranties, covenants or agreements madeby the Company in this Agreement or in the other Transaction Documents or (b)any action instituted against any Purchaser, or any of its Affiliates, by anystockholder of the Company who is not an Affiliate of Purchaser, with respectto any of the transactions contemplated by the Transaction Documents (unlesssuch action is based upon a breach of Purchaser’s representation, warranties orcovenants under the Transaction Documents or any agreements or understandings aPurchaser may have with any such stockholder or any violations by a Purchaserof state or federal securities laws or any conduct by such Purchaser whichconstitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any PurchaserParty in respect of which indemnity may be sought pursuant to this Agreement,such Purchaser Party shall promptly notify the Company in writing, and theCompany shall have the right to assume the defense thereof with counsel of itsown choosing.  Any Purchaser Party shallhave the right to employ separate counsel in any such action and participate inthe defense thereof, but the fees and expenses of such counsel shall be at theexpense of such Purchaser Party except to the extent that (i) the employmentthereof has been specifically authorized by the Company in writing, (ii) theCompany has failed after a reasonable period of time to assume such defense andto employ counsel or (iii) in such action there is, in the reasonable opinionof such separate counsel, a material conflict on any material issue between theposition of the Company and the position of such Purchaser Party.  The Company will not be liable to anyPurchaser Party under this Agreement (i) for any settlement by a PurchaserParty effected without the Company’s prior written consent, which shall not beunreasonably withheld or delayed; or (ii) to the extent, but only to the extentthat a loss, claim, damage or liability is attributable to any Purchaser Party’sbreach of any of the representations, warranties, covenants or agreements madeby such Purchaser in this Agreement or in the other Transaction Documents.

24

----

##  

## 4.11         Reservationand Listing of Securities.

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

### (b)           If, on any date, the number ofauthorized but unissued (and otherwise unreserved) shares of Common Stock isless than the Required Minimum on such date, then the Board of Directors of theCompany shall use commercially reasonable efforts to amend the Company’scertificate or articles of incorporation to increase the number of authorizedbut unissued shares of Common Stock to at least the Required Minimum at suchtime, as soon as possible and in any event not later than the 75th day aftersuch date; and

(c)           TheCompany shall, if then applicable: (i) in the time and manner required by theTrading Market or if the Common Stock is listed on another Trading Market,promptly prepare and file with such Trading Market an additional shares listingapplication covering a number of shares of Common Stock at least equal to theRequired Minimum on the date of such application, (ii) take all steps necessaryto cause such shares of Common Stock to be approved for listing on the TradingMarket as soon as possible thereafter, (iii) provide to Purchasers evidence ofsuch listing, and (iv) maintain the listing of such Common Stock on any date atleast equal to the Required Minimum on such date on such Trading Market.

4.12.        Participation in Future Financing.From the date hereof until the one year anniversary of the date hereof, uponany cash financing by the Company or any of its Subsidiaries of Common Stock orCommon Stock Equivalents (a “***Subsequent Financing***”),each Purchaser shall have the right to participate in up to an amount of theSubsequent Financing to the extent that such Purchaser’s percentage interest inthe Company after the Subsequent Financing is not less than such Purchaser’spercentage interest in the Company immediately prior to the SubsequentFinancing (the “***Participation Maximum***”).  At least 5 Business Days prior to the closingof the Subsequent Financing, the Company shall deliver to each Purchaser awritten notice of its intention to effect a Subsequent Financing (“***Pre-Notice***”), which Pre-Noticeshall ask such Purchaser if it wants to review the details of such financing(such additional notice, a “***Subsequent FinancingNotice***”).  Upon therequest of a Purchaser, and only upon a request by such Purchaser, for aSubsequent Financing Notice, the Company shall promptly, but no later than 1Business Day after such request, deliver a Subsequent Financing Notice to suchPurchaser.  The Subsequent FinancingNotice shall describe in reasonable detail the proposed terms of suchSubsequent Financing, the amount of proceeds intended to be raised thereunder,the Person with whom such Subsequent Financing is proposed to be effected, andattached to which shall be a term sheet or similar document relatingthereto.    If by 5:30 p.m. (Dallas,Texas time) on the 5thBusiness Day after all of the Purchasers have received thePre-Notice, notifications by the Purchasers of their willingness to participatein the Subsequent Financing (or to cause their designees to participate) is, inthe aggregate, less than the total amount of the Subsequent Financing, then theCompany may effect the remaining portion of such Subsequent 

25

----

Financing on the termsand to the Persons set forth in the Subsequent Financing Notice.  If the Company receives no notice from aPurchaser as of such 5th Business Day, such Purchaser shall be deemedto have notified the Company that it does not elect to participate.  The Company must provide the Purchasers witha second Subsequent Financing Notice, and the Purchasers will again have theright of participation set forth above in this Section 4.12, if the SubsequentFinancing subject to the initial Subsequent Financing Notice is not consummatedfor any reason on the terms set forth in such Subsequent Financing Noticewithin 15 Business Days after the date of the initial Subsequent FinancingNotice. In the event the Company receives responses to Subsequent FinancingNotices from Purchasers seeking to purchase more than the aggregate amount ofthe Subsequent Financing, each such Purchaser shall have the right to purchasetheir Pro Rata Portion (as defined below) of the Participation Maximum.  “***Pro Rata Portion***”is the ratio of (x) the Subscription Amount of Securities purchased by aparticipating Purchaser and (y) the sum of the aggregate Subscription Amount ofall participating Purchasers. Notwithstanding the foregoing, this Section 4.12 shall not apply in respectof an Exempt Issuance (not including subsection (d) within the definition ofExempt Issuance).

4.13                Future Priced Securities.  From the date hereof until the date that lessthan 20% in principal amount of the Debentures initially issued areoutstanding, the Company shall be prohibited from effecting or entering into anagreement to affect any Subsequent Financing involving a Variable RateTransaction.

4.14                Equal Treatment of Purchasers.  No consideration shall be offered or paid toany person to amend or consent to a waiver or modification of any provision ofany of the Transaction Documents unless the same consideration is also offeredto all of the parties to the Transaction Documents. Further, the Company shallnot make any payment of principal or interest on the Debentures in amounts whichare disproportionate to the respective principal amounts outstanding on theDebentures at any applicable time.  Forclarification purposes, this provision constitutes a separate right granted toeach Purchaser by the Company and negotiated separately by each Purchaser, andis intended to treat for the Company the Debenture holders as a class and shallnot in any way be construed as the Purchasers acting in concert or as a groupwith respect to the purchase, disposition or voting of Securities or otherwise.

4.15                Appointment of Board Member.  If the Debentures are not repaid in full onor by the 180th day following the Closing Date, the Purchasersshall have the right to appoint a member to the Board of Directors of UniPixelto (the “***Purchaser’s Designee***”). The Company shall use its best effortsto require one member of the then existing Board of Directors of UniPixel toresign, thereby permitting the Purchasers to appoint their Purchaser’sDesignee. If within 30 days of the Company’s election to appoint it’s Purchaser’sDesignee to the Board of Directors of UniPixel, such appointment of thePurchaser’s Designee has not occurred other than by reason of legalprohibitions or restrictions, the number of Warrant Shares purchasable pursuantto each Warrant purchased hereunder shall be increased by 10,000 per month(including such initial 30 day period) for each month such appointment has notoccurred.  The Company must provide andkeep in effect officers’ and directors’ liability insurance for the Purchaser’sDesignee which liability insurance shall be satisfactory to Purchaser, and suchPurchaser’s Designee shall be entitled to receive reasonable and customarydirector’s fees and such other compensation as is 

26

----

ordinarily given to theCompany’s directors as well as the reimbursement of all out of pocket expenses.

## 4.16         Registration Rights.

(a)           *Piggyback Registrations*.

A.           Atany time after the Closing Date, if the Company proposes to register any CommonStock for sale solely for cash, either for its own account or for the accountof a stockholder or stockholders (a “***Company Registration***”),then the Company shall give Purchasers written notice of its intention to do soand of the intended method of sale (the “***Registration Notice***”)not fewer than 30 days prior to the anticipated filing date of the RegistrationStatement effecting such Company Registration. Purchasers may request inclusion of any Registrable Securities in suchCompany Registration by delivering to the Company, within 20 days after receiptof the Registration Notice, a written notice (the “***PiggybackNotice***”) stating the number of shares of RegistrableSecurities proposed to be included and that such shares are to be included inany underwriting only on the same terms and conditions as the shares of Common Stockotherwise being sold through underwriters under such Company Registration.  The Company shall use its best efforts tocause all Registrable Securities specified in the Piggyback Notice to beincluded in the Company Registration and any related offering, all to theextent requisite to permit the sale by Purchasers of such RegistrableSecurities in accordance with the method of sale applicable to the other sharesof Common Stock included in the Company Registration.  If the Company fails to file the RegistrableSecurities in such Registration Statement, then, at the option of Purchasers,for each full calendar month that the Registrable Securities are not fullyregistered, Company shall issue to Purchaser 0.1% of its Common Stock thenoutstanding computed on a Fully Diluted Basis per day until the shares areregistered.

B.            Limitations on Piggyback Registrations.  The Company’s obligation to includeRegistrable Securities in a Company Registration pursuant to this Section4.16(a) shall be subject to the following limitations:

(i)            TheCompany shall not be obligated to include any Registrable Securities in aregistration statement (I) filed on Form S-4 or Form S-8 or such other similarsuccessor forms then in effect under the Securities Act, (II) pursuant to whichthe Company is offering to exchange its own securities, or (III) relating todividend reinvestment plans.

(ii)           Ifthe managing underwriter(s), if any, of an offering related to the CompanyRegistration determines in its reasonable judgment that marketing factorsrequire a limitation of the number of shares of Common Stock that can beincluded in such offering, the managing underwriter(s) may exclude theappropriate number of shares of Common Stock held by the stockholders of theCompany, including Purchasers, from such registration.  If the managing underwriter(s) determine(s)to 

27

----

exclude from such offering any Registrable Securities that Purchasersdesire to include or any shares of Common Stock that other Company stockholderswith applicable registration rights desire to include, Purchasers and suchother Company stockholders (except for such Person or Persons, if any, uponwhose demand such Company Registration is being made) shall share pro rata inthe portion of such offering available to them (the “***AvailablePortion***”), with Purchasers and each such other Companystockholder entitled to include in such Company Registration and relatedoffering a number of shares of Common Stock equal to the product of (I) theAvailable Portion and (II) a fraction, the numerator of which is the totalnumber of Registrable Securities which Purchasers desires to include in suchCompany Registration (in the case of Purchasers) or the total number of sharesof Common Stock which such other Company stockholder desires to include in suchCompany Registration (in the case of each such other Company stockholder) andthe denominator of which is (x) the total of the number of RegistrableSecurities which Purchasers desire to include in such Company Registration plus(y) the total number of shares of Common Stock that such other Companystockholders desire to include in such Company Registration.

(b)           *Provisions Applying to AllRegistrations Under Section 4.16*.

(i)           Selectionof Underwriter.  Any CompanyRegistration and related offering shall be managed by the Company; the Companyshall have the power to select the managing underwriter(s) for such offering,and shall in consultation with the managing underwriter(s) have the power todetermine the offering price, the underwriting discounts and commissions, theterms of the underwriting agreement and, the timing of the registration andrelated offering.  To the extent thatPurchasers participate in a Company Registration and related offering, Purchasersshall enter into, and sell its Registrable Securities only pursuant to, theunderwriting arranged by the Company, and shall either commit to attend theclosing of the offering and take such other actions as may be reasonablynecessary to effect Purchasers’ participation in the offering and to provideany assurances reasonably requested by the Company and the managingunderwriter(s) in that regard, or shall deliver to the Company in custodycertificates representing all Registrable Securities to be included in theregistration and shall execute and deliver to the Company a custody agreementand a power of attorney, each in form and substance appropriate for the purposeof effecting Purchasers’ participation in the Company Registration and relatedoffering and otherwise reasonably satisfactory to the Company.  If Purchasers disapprove of the features ofthe Company Registration and related offering, Purchasers or such individualPurchaser, as the case may be, may withdraw therefrom (in whole or part) bywritten notice to the Company and the managing underwriter(s) delivered nolater than ten days prior to the effectiveness of the applicable registrationstatement and the Registrable Securities of Purchasers shall thereupon bewithdrawn from such registration.

(ii)          TheCompany shall furnish Purchasers such number of copies of a prospectus,including a preliminary prospectus, in conformity with the requirements of theSecurities Act, and such other documents as they may reasonably 

28

----

request in order to facilitate the disposition of the RegistrableSecurities owned by it that are included in such registration;

(ii)          Whenever required to includeRegistrable Securities in any registration or to effect the registration of anyRegistrable Securities pursuant to this Agreement, the Company shall, as expeditiouslyas reasonably possible, prepare and file with the SEC a registration statementwith respect to such Registrable Securities and use its absolute best lawfulefforts to cause such registration statement to become effective, and use itsabsolute best efforts to keep such registration statement effective until allsuch Registrable Securities have been distributed.  In addition, the Company shall use its bestlawful efforts to register and qualify the securities covered by suchregistration statement under such other securities or Blue Sky laws of suchjurisdictions as shall be reasonably requested by the Purchasers, provided thatthe Company shall not be required in connection therewith or as a conditionthereto to qualify as a broker-dealer in any states or jurisdictions or to dobusiness or to file a general consent to service of process in any of suchstates or jurisdictions.

(iii)         All expenses, other than underwritingdiscounts and commissions incurred in connection the registrations contemplatedherein, including, without limitation, all registration, filing andqualification fees, printers’ and accounting fees, fees and disbursements ofcounsel for the Company, and the reasonable fees and disbursements of onecounsel for each selling Purchaser, shall be borne by the Company.

(c)           Subject to the terms and conditionsof this Agreement and the other Transaction Documents, the right to cause theCompany to register Registrable Securities pursuant to this Agreement may beassigned by each Purchaser to any transferee or assignee of such securities;provided that said transferee or assignee is a transferee or assignee of atleast five percent (5%) of the such Purchaser’s Registrable Securities.

# **ARTICLEV.**

# **SMALLBUSINESS INVESTMENT COMPANY**

## 5.1           Small Business Investment Company Provisions.  The Company acknowledges that Trident andCapSource, are small business investment companies (“***SBIC***”) licensedby the United States Small Business Administration (the “**SBA**”), and makes the followingrepresentations, warranties and covenants to Trident and CapSource for so longas the Debentures held by Trident and CapSource areoutstanding:

### (a)           Small BusinessConcern.  The Company represents andwarrants that it, taken together with its “affiliates” (as that term is definedin 13 C.F.R. §121.103), is a “Small Business Concern” within the meaning of 15U.S.C. §662(5), that is Section 103(5) of the Small Business Investment Act of1958, as amended (the “***SBIC Act***”),and the regulations thereunder, including 13 C.F.R. §107, and meets theapplicable size eligibility criteria set forth in 13 C.F.R. §121.301(c)(1) orthe industry standard covering 

29

----

### the industryin which the Company is primarily engaged as set forth in 13 C.F.R.§121.301(c)(2).  Neither the Company norany of its Subsidiaries presently engages in any activities for which a smallbusiness investment company is prohibited from providing funds by the SBIC Act,including 13 C.F.R. §107.

### (b)           Small BusinessAdministration Documentation.  On orbefore the Closing Date, Trident and CapSource shall have received SBA Form 480(Size Status Declaration) and SBA Form 652 (Assurance of Compliance) which havebeen completed and executed by the Company, and SBA Form 1031 (PortfolioFinance Report), Parts A and B of which have been completed by the Company (the“***SBA Documents***”).

### (c)           Inspection.  The Company will permit Trident and CapSourceor their representatives, at the Company’s expense, and examiners of the SBA tovisit and inspect the properties and assets of the Company, to examine itsbooks of account and records, and to discuss the Company’s affairs, financesand accounts with the Company’s officers, senior management and accountants,all at such reasonable times as may be requested by Trident or the SBA.

### (d)           InformationalCovenant.  Within sixty (60) calendardays after the end of the Company’s fiscal year, the Company will furnish orcause to be furnished to Trident and CapSource information required by the SBAconcerning the economic impact of Trident’s and CapSource’s investment, for (oras of the end of) each fiscal year, including but not limited to: (i) boardminutes, (ii) information concerning full-time equivalent employees, (iii)federal, state and local income taxes paid, (iv) gross revenue, (v) source ofrevenue growth, (vi) after-tax profit and loss, and (vii) and federal, stateand local income tax withholding.  Suchinformation shall be forwarded by the Company on a form provided by Trident andCapSource.  The Company also will furnishor cause to be furnished to Trident and CapSource such other informationregarding the business, affairs and condition of the Company as Trident mayfrom time to time reasonably request.

### (e)           Use of Proceeds.  The Company will deliver to Trident andCapSourcefrom time to time promptly following Trident’s and CapSource’srequest, a written report, certified as correct by an officer, verifying thepurposes and amounts for which proceeds from the Debenture have beendisbursed.  The Company will supply toTrident and CapSource such additional information and documents as they mayreasonably request with respect to the Company’s use of proceeds, and willpermit Trident to have access to any and all the Company’s records andinformation and personnel as Trident and CapSource deem necessary to verify howsuch proceeds have been or are being used, and to assure that the proceeds havebeen used for the purposes specified on Schedule 4.9.

### (f)            Activities andProceeds.

### (i)            Neither the Companynor any of its Affiliates will engage in any activities or use directly orindirectly the proceeds from the 

30

----

### Debenture forany purpose for which a SBIC is prohibited from providing funds by the SBICAct, including 13 C.F.R. §107.

### (ii)           Without obtainingthe prior written approval of Trident and CapSource, the Company will notchange, within one (1) year of the Closing Date, the Company’s businessactivity from that described on Schedule 5.1(f) to a business activitywhich a SBIC is prohibited from providing funds by the SBIC Act.  The Company agrees that any such changes inits business activity without such prior written consent of Trident andCapSource will constitute a material breach of the obligations of the Companyunder the Transaction Documents (an “***ActivityEvent of Default***”).

# **ARTICLEVI.**

**MISCELLANEOUS**

## 6.1           Feesand Expenses.  At the closing, theCompany shall reimburse Trident for Purchasers’ legal fees and expenses up tothe amount of $25,000.  Except asexpressly set forth above and 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 suchparty incident to the negotiation, preparation, execution, delivery andperformance of this Agreement and the other Transaction Documents.  The Company shall pay all transfer agentfees, stamp taxes and other taxes and duties levied in connection with theissuance of any Securities.

## 6.1           Entire Agreement. The Transaction Documents, together with the exhibits and schedulesthereto, contain the entire understanding of the parties with respect to thesubject matter hereof and supersede all prior agreements and understandings,oral or written, with respect to such matters, which the parties acknowledgehave been merged into such documents, exhibits and schedules.

## 6.2           Notices.  Any and all notices or other communicationsor deliveries required or permitted to be provided hereunder shall be inwriting and shall be deemed given and effective on the earliest of (a) the dateof transmission, if such notice or communication is delivered via facsimile atthe facsimile number set forth on the signature pages attached hereto prior to5:30 p.m. (Dallas, Texas time) on a Business Day, (b) the next Business Dayafter the date of transmission, if such notice or communication is deliveredvia facsimile at the facsimile number set forth on the signature pages attachedhereto on a day that is not a Business Day or later than 5:30 p.m. (Dallas,Texas time) on any Business Day, (c) the second Business Day following the dateof mailing, if sent by U.S. nationally recognized overnight courier service, or(d) upon actual receipt by the party to whom such notice is required to begiven.  The address for such notices andcommunications shall be as set forth on the signature pages attached hereto.

31

----

##  

## 6.3           Amendments; Waivers.  No provision of this Agreement may be waivedor amended except in a written instrument signed, in the case of an amendment,by the Company and each Purchaser or, in the case of a waiver, by the party againstwhom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition orrequirement of this Agreement shall be deemed to be a continuing waiver in thefuture or a waiver of any subsequent default or a waiver of any otherprovision, condition or requirement hereof, nor shall any delay or omission ofeither party to exercise any right hereunder in any manner impair the exerciseof any such right.

## 6.4           Construction. The headings herein are for convenience only, do not constitute a partof this Agreement and shall not be deemed to limit or affect any of theprovisions hereof.  The language used inthis Agreement will be deemed to be the language chosen by the parties to expresstheir mutual intent, and no rules of strict construction will be appliedagainst any party.

## 6.5           Successors and Assigns.  This Agreement shall be binding upon andinure to the benefit of the parties and their successors and permittedassigns.  The Company may not assign thisAgreement or any rights or obligations hereunder without the prior writtenconsent of each Purchaser.  EachPurchaser may assign any or all of its rights under this Agreement to anyPerson to whom such Purchaser assigns or transfers any Securities, providedsuch transferee agrees in writing to be bound, with respect to the transferredSecurities, by the provisions hereof that apply to such Purchaser.

## 6.6           No Third-Party Beneficiaries.  This Agreement is intended for the benefit ofthe parties hereto and their respective successors and permitted assigns and isnot for the benefit of, nor may any provision hereof be enforced by, any otherPerson, except as otherwise set forth in Section 4.9.

## 6.7           Governing Law. All questions concerning the construction, validity, enforcement andinterpretation of the Transaction Documents shall be governed by and construedand enforced in accordance with the internal laws of the State of Texas,without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedingsconcerning the interpretations, enforcement and defense of the transactionscontemplated by this Agreement and any other Transaction Documents (whetherbrought against a party hereto or its respective affiliates, directors,officers, shareholders, employees or agents) shall be commenced exclusively inthe state and federal courts sitting in the City of Dallas, Texas.  Each party hereby irrevocably submits to theexclusive jurisdiction of the state and federal courts sitting in the City ofDallas, Texas for the adjudication of any dispute hereunder or in connectionherewith or with any transaction contemplated hereby or discussed herein(including with respect to the enforcement of any of the TransactionDocuments), and hereby irrevocably waives, and agrees not to assert in anysuit, action or proceeding, any claim that it is not personally subject to thejurisdiction of any such court, that such suit, action or proceeding isimproper or inconvenient venue for such proceeding.  **THE PARTIESHEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY**.  If either party shall commence an action orproceeding to enforce any provisions of the Transaction Documents, then theprevailing party in such action or proceeding shall be reimbursed by the 

32

----

## other party for its attorneys’ fees and othercosts and expenses incurred with the investigation, preparation and prosecutionof such action or proceeding.

## 6.8           Survival. The representations and warranties contained herein shall survive theClosing and the delivery of the Securities until the later of the satisfaction,complete conversion, or exercise of the Debenture and/or the Warrant, as thecase may be.

## 6.9           Execution. This Agreement may be executed in two or more counterparts, all of whichwhen taken together shall be considered one and the same agreement and shallbecome effective when counterparts have been signed by each party and deliveredto the other party, it being understood that both parties need not sign thesame counterpart.  In the event that anysignature is delivered by facsimile transmission, such signature shall create avalid and binding obligation of the party executing (or on whose behalf suchsignature is executed) with the same force and effect as if such facsimilesignature page were an original thereof.

## 6.10         Severability. If any provision of this Agreement is held to be invalid orunenforceable in any respect, the validity and enforceability of the remainingterms and provisions of this Agreement shall not in any way be affected orimpaired thereby and the parties will attempt to agree upon a valid andenforceable provision that is a reasonable substitute therefor, and upon soagreeing, shall incorporate such substitute provision in this Agreement.

## 6.11         Rescission and Withdrawal Right.  Notwithstanding anything to the contrarycontained in (and without limiting any similar provisions of) the TransactionDocuments, whenever a Purchaser exercises a right, election, demand or optionunder a Transaction Document and the Company does not timely perform itsrelated obligations within the periods therein provided, then such Purchasermay rescind or withdraw, in its sole discretion from time to time upon writtennotice to the Company, any relevant notice, demand or election in whole or inpart without prejudice to its future actions and rights; provided, however,in the case of a rescission of an exercise of a Warrant, such Purchaser shallbe required to return any shares of Common Stock subject to any such rescindedexercise notice.

## 6.12         Replacement of Securities.  If any certificate or instrument evidencingany Securities is mutilated, lost, stolen or destroyed, the Company shall issueor cause to be issued in exchange and substitution for and upon cancellationthereof, or in lieu of and substitution therefor, a new certificate orinstrument, but only upon receipt of evidence reasonably satisfactory to theCompany of such loss, theft or destruction and customary and reasonableindemnity, if requested.  The applicantsfor a new certificate or instrument under such circumstances shall also pay anyreasonable third-party costs associated with the issuance of such replacementSecurities.

## 6.13         Remedies.  Inaddition to being entitled to exercise all rights provided herein or granted bylaw, including recovery of damages, Purchasers and the Company will be entitledto specific performance under the Transaction Documents.  The parties agree that monetary damages maynot be adequate compensation for any loss incurred by reason of any breach of 

33

----

## obligations described in the foregoingsentence and hereby agrees to waive in any action for specific performance ofany such obligation the defense that a remedy at law would be adequate.

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

## 6.15         Usury.  To theextent it may lawfully do so, the Company hereby agrees not to insist upon orplead or in any manner whatsoever claim, and will resist any and all efforts tobe compelled to take the benefit or advantage of, usury laws wherever enacted,now or at any time hereafter in force, in connection with any claim, action orproceeding that may be brought by Purchasers in order to enforce any right orremedy under any Transaction Documents. Notwithstanding any provision to the contrary contained in anyTransaction Documents, it is expressly agreed and provided that the totalliability of the Company under the Transaction Documents for payments in thenature of interest shall not exceed the maximum lawful rate authorized underapplicable law or regulation (the “***Maximum Rate***”), and, without limiting theforegoing, in no event shall any rate of interest or default interest, or bothof them, when aggregated with any other sums in the nature of interest that theCompany may be obligated to pay under the Transaction Documents exceed suchMaximum Rate.  It is agreed that if themaximum contract rate of interest allowed by law or regulation and applicableto the Transaction Documents is increased or decreased by statute or anyofficial governmental action subsequent to the date hereof, the new maximumcontract rate of interest allowed by law or regulation will be the Maximum Rateapplicable to the Transaction Documents from the effective date forward, unlesssuch application is precluded by applicable law or regulation.  If under any circumstances whatsoever,interest in excess of the Maximum Rate is paid by the Company to Purchaserswith respect to indebtedness evidenced by the Transaction Documents, suchexcess shall be applied by Purchasers to the unpaid principal balance of anysuch indebtedness or be refunded to the Company, the manner of handling suchexcess to be at Purchasers’ election.

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

## *(Signature PageFollows)*

 

34

----

## **IN WITNESS WHEREOF**,the parties hereto have caused this Securities Purchase Agreement to be dulyexecuted by their respective authorized signatories as of the date firstindicated above.

 
| **COMPANY**                 |
|-----------------------------|
| **UNIPIXEL, INC.**          | Address for Notice and  Delivery:  8708 Technology Forest Place   Suite 100   The Woodlands, Texas 77381   Telephone: (281) 825-4500   Facsimile: (281) 825-4599   Attn: Reed Killion, President |
| ** **                  |   |
| By:                         |   |   |
|                        | Name: Reed Killion |   |
|                        | Title: President |   |
|                        |   |   |
| **UNIPIXEL DISPLAYS, INC.** | Address for Notice and  Delivery:  8708 Technology Forest Place   Suite 100   The Woodlands, Texas 77381   Telephone: (281) 825-4500   Facsimile: (281) 825-4599   Attn: Reed Killion, President |
| ** **                  |   |
| By:                         |   |   |
|                        | Name: Reed Killion |   |
|                        | Title: President |   |

 

----

 

PURCHASERSIGNATURE PAGE
| **PURCHASERS:**                  | ** **                   | **SUBSCRIPTION AMOUNT:** |
|----------------------------------|------------------------------|--------------------------|
| ** **                       | ** **                   | ** **               |
| ** **                       | ** **                   | ** **               |
| **TRIDENT GROWTH FUND, L.P.**    |                         | $750,000                 |
| ** **                       |                         |                     |
| By:                              | TRIDENT MANAGEMENT, LLC, its |                     |   |
|                             | GENERAL PARTNER              |                     |   |
|                             |                         |                     |   |
|                             |                         |                     |   |
|                             |                         |                     |   |
| By:                              |                         |                     |   |
|                             | Name: Frank DeLape           |                     |   |
|                             | Title: Authorized Member     |                     |   |
|                             |                         |                     |   |
| Address for Notice and Delivery  |                         |                     |
|                             |                         |                     |
| 700 Gemini                       |                         |                     |
| Houston, TX 77058                |                         |                     |
| Telephone: (281) 488-8484        |                         |                     |
| Facsimile: (281) 488-5353        |                         |                     |
| Attn: Larry St. Martin           |                         |                     |
|                             |                         |                     |
|                             |                         |                     |
| **CAPSOURCE FUND, L.P.**         |                         | $750,000                 |
| ** **                       |                         |                     |
| By:                              | CapSource Partners, L.P.     |                     |   |
|                             | its general partner          |                     |   |
|                             |                         |                     |   |
| By:                              | CapSource Managers, Inc.     |                     |   |
|                             | its general partner          |                     |   |
|                             |                         |                     |   |
|                             |                         |                     |   |
| By:                              |                         |                     |   |
|                             | Name: R. Rand Ray            |                     |
|                             | Title: Vice President        |                     |
|                             |                         |                     |
| Address for Notice and Delivery  |                         |
|                             |                         |
| 795 Woodlands Parkway, Suite 100 |                         |
| Ridgeland, MS 39157              |                         |

----

 

**ATTACHMENTS**

ExhibitA                        Form of Debenture

ExhibitB                        Form of SecurityAgreement

ExhibitC                        Form of Warrant

ExhibitD                        SBA Form 480

ExhibitE                         SBA Form 652

Exhibit F                         SBA Form 1031

Schedule3.1(a)             Subsidiaries

Schedule3.1(e)             Filings,Consents and Approvals

Schedule3.1(g)             Capitalization

Schedule3.1(i)              Litigation

Schedule3.1(l)              Regulatory Permits

Schedule 3.1(m)            Titleto Assets (Outstanding liens)

Schedule 3.1(n)             IntellectualProperty

Schedule 3.1(r)              CertainFees (Broker Fees)

Schedule 3.1(u)             RegistrationRights

Schedule 3.1(cc)           Indebtedness

Schedule 3.1(ff)            MaterialLiabilities

Schedule 3.1(gg)          MaterialAgreements

Schedule 3.1(hh)          Boardof Directors

Schedule3.1(ii)             Financial Statements

Schedule 4.8                  Useof Proceeds

Schedule5.1(f)              Business Activity

----

 

**DISCLOSURESCHEDULE**

 

----