Exhibit
      10.1

    


    THERMOENERGY
      CORPORATION

    


    Securities
      Purchase Agreement

    


    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of December 18, 2007, by and between ThermoEnergy Corporation, a
      Delaware corporation (the “Company”),
      and
      The Quercus Trust (the “Investor”).

    


    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
      thereunder, the Company desires to issue and sell to the Investor, and the
      Investor desires to purchase from the Company certain securities of the Company,
      as more fully described in this Agreement.

    


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


    


    ARTICLE
      1

    


    Definitions

    


    Section
      1.1. Definitions.
      In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms have the meanings indicated in this Section
      1.1:

    


    “Action”
      means
      any action, suit, inquiry, notice of violation, proceeding (including any
      partial proceeding such as a deposition) or investigation pending or threatened
      in writing against or affecting the Company, any Subsidiary or any of their
      respective properties before or by any court, arbitrator, governmental or
      administrative agency, regulatory authority (federal, state, county, local
      or
      foreign), stock market, stock exchange or trading facility.

    


    “Adjusted
      Purchase Price”
      has the
      meaning set forth in Section 2.2.

    


    “Affiliate”
      means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144.

    


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

    


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

    


    “Buy-In”
      has the
      meaning set forth in Section 5.1(c).

    


    “Claim”
      has
      the
      meaning set forth in Section 4.6(c).

    


    “Closing”
      means
      each closing of the purchase and sale of Shares and a Warrant pursuant to
      Article 2.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    “Closing
      Date”
      means
      the Initial Closing Date and date on which the Second Closing, if any, occurs
      pursuant to Section 2.2 hereof.

    


    “Commission”
      means
      the Securities and Exchange Commission.

    


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

    


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

    


    “Company
      Counsel”
      means
      Nixon Peabody, LLP.

    


    “Company
      Deliverables”
      has the
      meaning set forth in Section 2.2(a). 

    


    “Company
      Stock Options”
has
      the
      meaning set forth in Section 3.1(g).

    


    “Contingent
      Obligations”
      has the
      meaning set forth in Section 3.1(r). 

    


    “Convertible
      Securities”
has
      the
      meaning set forth in Section 3.1(g). 

    


    “Cut
      Back Shares”
      has the
      meaning assigned thereto in Section 4.1(a).

    


    “Delaware
      Courts”
      has the
      meaning set forth in Section 7.9. 

    


    “Development
      Contract” means
      a
      fully executed contract between the Company and the City of New York, New York
      (or any agency thereof) for the development of the 26th
      Ward
      wastewater treatment plant substantially as set forth in the business plan
      previously provided by the Company to the Investor. 

    


    “Effective
      Date”
      means
      the date that any Registration Statement filed pursuant to Article 4 is first
      declared effective by the Commission. 

    


    “Effectiveness
      Period”
      has the
      meaning set forth in Section 4.1(b). 

    


    “Environmental
      Law”
      has the
      meaning set forth in Section 3.1(aa).

    


    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended, and the rules
      and regulations promulgated thereunder.

     

    “ERISA
      Affiliate” means
      any
      trade or business, whether or not incorporated, that together with the Company
      would be deemed to be a single employer for purposes of Section 4001 of ERISA
      or
      Sections 414(b), (c), (m), (n) or (o) of the Internal Revenue Code of 1986,
      as
      amended.

     

    “Evaluation
      Period” has
      the
      meaning set forth in Section 3.1(r). 

    


    “Event”
      has the
      meaning set forth in Section 4.1(d). 


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    “Event
      Date”
      has the
      meaning set forth in Section 4.1(d).

    


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

    


    “Exempt
      Issuance”
      means
the
      issuance by the Company (a) to employees, officers, directors of,
      and
      consultants to, the
      Company of shares of Common Stock or options for the purchase of shares of
      Common Stock pursuant to stock option or long-term incentive plans approved
      by
      the Board, (b) of shares of Common Stock upon the exercise of Warrants issued
      hereunder, (c) of shares of Common Stock upon conversion of shares of Series
      A
      Preferred Stock, (d) of shares of Common Stock upon exercise of Prior Warrants
      or conversion of Prior Convertible Securities, (e) of securities issued pursuant
      to acquisitions, licensing agreements, or
      other
      strategic transactions, (f) of securities issued in connection with equipment
      leases, real
      property leases, loans, credit lines, guaranties or similar transactions
      approved by the Board,
      (g) of
      securities issued in connection with join ventures or similar strategic
      relationships approved by the Board, (h) of securities in a merger, or (i)
      of
      securities in a public offering registered under the Securities Act; provided
      that in the case of securities issued pursuant clauses (e), (g) and (h), the
      purpose of such issuance may not be primarily to obtain cash
      financing.

     

    “Filing
      Date” means
      the
      date that is 60 days after the Initial Closing Date. 

    


    “Financing
      Notice” has
      the
      meaning set forth in Section 5.5(b).

    


    “First
      Closing Unit”
      means a
      Unit consisting of one Share and a Warrant to purchase one and one-half shares
      of Common Stock, issued in combination.

    


    “GAAP”
      means
      generally accepted accounting principles as in effect from time to time in
      the
      United States of America.

    


    “Governmental
      Authority” has
      the
      meaning set forth in Section 3.1(e). 

    


    “Hazardous
      Substance”
      has the
      meaning set forth in Section 3.1(aa).

    


    “Indebtedness”
      has the
      meaning set forth in Section 3.1(r).

    


    “Indemnified
      Party” has
      the
      meaning set forth in Section 4.6(c).

    


    “Indemnified
      Person”
      has the
      meaning set forth in Section 4.6(a). 

    


    “Indemnifying
      Party” has
      the
      meaning set forth in Section 4.6(c). 

    


    “Initial
      Closing Date”
      means
      the Business Day immediately following the date on which all of the conditions
      set forth in Sections 6.1 and 6.2 hereof are satisfied, or such other date
      as
      the parties may agree. 

    


    “Initial
      Purchase Price” has
      the
      meaning set forth in Section 2.1.

    


    “Intellectual
      Property Rights”
      has the
      meaning set forth in Section 3.1(o).

    


    “Investor
      Deliverables”
      has the
      meaning set forth in Section 2.2(b).

    


    “Lien”
      means
      any lien, charge, encumbrance, security interest, right of first refusal or
      other restrictions of any kind.


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    


    “Losses”
      has the
      meaning set forth in Section 5.7.

    


    “Material
      Adverse Effect”
      means
      any of (i) a material and adverse effect on the legality, validity or
      enforceability of any Transaction Document, (ii) a material and adverse effect
      on the results of operations, assets, prospects, business or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
      or (iii) a material impairment of the Company’s ability to perform on a timely
      basis its obligations under any Transaction Document.

    


    “NASD
      Rules”
      has the
      meaning set forth in Section 4.3(o). 

    


    “OFAC”
      has the
      meaning set forth in Section 3.1(ee).

    


    “Outside
      Date”
      means
      June 30, 2009.

    


    “Penalty
      Base”
      has the
      meaning set forth in Section 4.1(d).

    


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

    


    “Placement
      Agent”
      has the
      meaning set forth in Section 3.1(s).

    


    “Plan
      of Distribution”
      has the
      meaning set forth in Section 4.2(o).

    


    “Post-Effective
      Amendment” means
      a
      post-effective amendment to the Registration Statement.

     

    “Post-Effective
      Amendment Filing Deadline”
means
      the seventh Business Day after the Registration Statement ceases to be effective
      pursuant to applicable securities laws due to the passage of time or the
      occurrence of an event requiring the Company to file a Post-Effective
      Amendment.

     

    “Pre-Notice”
      has the
      meaning set forth in Section 5.5(b).

     

    “Prior
      Warrants”
has
      the
      meaning set forth in Section 3.1(g).

    


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

    


    “Prospectus”
      has
      the
      meaning set forth in Section 4.3. 

    


    “Proposed
      Financing”
      has the
      meaning set forth in Section 5.5(a).

    


    “Proposed
      Financing Notice”
      has the
      meaning set forth in Section 5.5(b).

    


    “Purchase
      Price” means
      either the Initial Purchase price or the Adjusted Purchase Price, as the context
      indicates.

    


    “Registrable
      Securities” means
      the
      Shares and the Warrant Shares; provided, however, that the Investor shall not
      be
      required to exercise the Warrants in order to have the Warrant Shares included
      in any Registration Statement.


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    “Registration
      Period”
      means
      the period commencing on the date hereof and ending on the date on which all
      of
      the Registrable Securities may be sold to the public without registration under
      the Securities Act in reliance on paragraph (k) of Rule 144.

    


    “Registration
      Statement”
      means a
      registration statement filed on the appropriate Form with, and declared
      effective by, the Commission under the Securities Act and covering the resale
      by
      the Investor of the Registrable Securities.

    


    “Requested
      Information”
      has the
      meaning set forth in Section 4.3(a).

    


    “Required
      Effectiveness Date”
      means
      the earlier of (i) the date that is 150 days after the Initial Closing Date,
      or,
      in the case of the registration of Cut Back Shares, 120 days after the
      Restriction Termination Date or (ii) five Business Days after receipt by the
      Company from the Commission of notice of “no review” of the Registration
      Statement. 

    


    “Restriction
      Termination Date”
      has the
      meaning assigned thereto in Section 4.1(a).

    


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

    


    “Rule
      415 Response Effort”
      has the
      meaning assigned thereto in Section 4.1(a).

    


    “Second
      Closing Unit”
      means a
      Unit consisting of one Share and a Warrant to purchase one share of Common
      Stock, issued in combination. 

    


    “SEC
      Objection”
      has the
      meaning assigned thereto in Section 4.1(a).

    


    “SEC
      Restrictions”
      has the
      meaning assigned thereto in Section 4.1(a).

    


    “SEC
      Reports”
      has the
      meaning set forth in Section 3.1(h).

    


    “Securities”
      means
      the Shares, the Warrant, and the Warrant Shares.

    


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

    


    “Series
      A Preferred Stock”
      means
      the shares of the preferred stock of the Company, par value $0.01 per share,
      that have been designated as “Series A Convertible Preferred
      Stock.”

    


    “Shares”
      means
      the shares of Common Stock issuable to the Investor at the
      Closings.

    


    “Subsidiary”
      means
      any “significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
      promulgated by the Commission under the Exchange Act.

    


    “Trading
      Day”
      means
      (i) a day on which the Common Stock is traded on a Trading Market, or (ii)
      if
      the Common Stock is not listed on a Trading Market, a day on which the Common
      Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
      Board, or (iii) if the Common Stock is not then
      listed or quoted on the OTC Bulletin Board, a
      day on
      which the Common Stock is quoted in the over-the-counter market as reported
      by
      the National Quotation Bureau Incorporated (or any similar organization or
      agency succeeding to its functions of reporting prices); provided, that in
      the
      event that the Common Stock is not listed or quoted as set forth in (i), (ii)
      and (iii) hereof, then Trading Day shall mean a Business Day.


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    


    “Trading
      Market”
      means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      Nasdaq National Market, or the Nasdaq Over-the-Counter Market on which the
      Common Stock is listed or traded on the date in question.

    


    “Transfer
      Agent”
      has the
      meaning set forth in Section 5.1(c).

    


    “Transaction
      Documents”
      means
      this Agreement, the Warrant and any other documents or agreements executed
      in
      connection with the transactions contemplated hereunder.

    


    “Unit”
      means
      a
      First Closing Unit or a Second Closing Unit, as the context
      indicates.

    


    “Warrant”
      means
      any of the Common Stock Purchase Warrants, in the form of Exhibit A,
      which
      are issuable to the Investor at the Closings.

    


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


    


    ARTICLE
      2

    


    Purchase
      and Sale

    


    Section
      2.1. Issuance
      of Securities at the Initial Closing.
      Upon
      the
      terms and subject to the conditions set forth in this Agreement, and in
      accordance with applicable law, the Company agrees to sell to the Investor,
      and
      the Investor agrees to purchase from the Company, for the purchase price of
      $0.75 per Unit (the “Initial
      Purchase Price”),
      on the
      Initial Closing Date, 6,666,667 First Closing Units, each Unit to consist of
      (i)
      one Share and (ii) a Warrant to purchase 1.5 shares of Common Stock. 

    


    Section
      2.2. Issuance
      of Securities at the Second Closings.
      If but
      only if the Development Contract is executed and delivered on or before the
      Outside Date, on the fifth Business Day following the filing by the Company
      with
      the Commission of a Current Report on Form 8-K reporting the execution and
      delivery of the Development Contract, the Company will sell to the Investor,
      and
      the Investor will purchase from the Company, at the purchase price per Unit
      determined in accordance with the following sentence (the “Adjusted
      Purchase Price”),
      9,333,334
      Second Closing Units, each Unit to consist of (i) one Share and (ii) a Warrant
      to purchase one share of Common Stock. The purchase price per Unit payable
      for
      the Second Closing Units shall be as set forth below:

    
      	
               

            	
               

            	
               

            
	
              
                If
                  the Development Contract is executed and delivered on or
                  before:

              

            	
              
                 

              

            	
              Adjusted Purchase Price

            
	
              
                60
                  days after the Initial Closing Date

              

            	
              
                 

              

            	
              
                
                  $

                

              

            	
              
                0.91072

              

            
	
              
                90
                  days after the Initial Closing Date

              

            	
              
                 

              

            	
              
                
                  $

                

              

            	
              
                0.83036

              

            
	
              
                120
                  days after the Initial Closing Date

              

            	
              
                 

              

            	
              
                
                  $

                

              

            	
              
                0.77679

              

            
	
              
                More
                  than 120 days after the Initial Closing Date

              

            	
              
                 

              

            	
              
                
                  $

                

              

            	
              
                0.75

              

            


    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    Section
      2.3. Payment
      of Purchase Price.
      As
      consideration for the issuance of the Securities being purchased at each
      Closing, the
      Investor
      shall on the respective Closing Date pay to the Company, by wire transfer or
      other form of immediately available funds, an amount equal to applicable
      aggregate Purchase Price for the Securities being purchased at such
      Closing.

     

    Section
      2.4. Delivery
      of Securities.
      At each
      Closing, the Company shall,
      against payment by the Investor of the applicable Purchase Price, (i) issue
      to
      the Investor the Warrants included in the Units being purchased at such Closing
      and (ii) execute and deliver to the transfer agent for the Common Stock
      irrevocable instructions to issue to the Investor the number of Shares included
      in the Units being purchased at such Closing.

     

    Section
      2.5. Additional
      Closing Deliveries.
      At
      each
      Closing, the Company shall deliver or cause to be delivered to the Investor
      the
      following (the “Company
      Deliverables”):

    


    
      	 	
              (i)
                

            	
              The
                legal opinion of Company Counsel, in substantially the form of
                Exhibit
                B
                hereto, addressed to the Investor; 

            


    

    


    
      	 	
              (ii)

            	
              The
                Certificate of Incorporation of the Company, together with all amendments
                thereto, certified by the Secretary of State of the State of Delaware
                as
                of a date not more than five Business Days prior to the Closing Date;
                

            


    

    


    
      	 	
              (iii)

            	
              Copies
                of each of the following documents, in each case certified by the
                Secretary of the Company to be in full force and effect on the Closing
                Date:

            


    

    


    
      	 	
              (A)

            	
              resolutions
                of the board of directors of the Company approving the execution,
                delivery
                and performance of the Transaction Documents and the transactions
                contemplated thereby; 

            


    

    


    
      	 	
              (B)

            	
              the
                By-laws of the Company; and

            


    

    


    
      	 	
              (C)

            	
              irrevocable
                instructions to the Company’s transfer agent as to the reservation and
                issuance of the Warrant Shares; and

            


    

    


    
      	 	
              (iv)

            	
              A
                good standing certificate of the Company issued by the Secretary
                of State
                of the State of Delaware dated as of a date no earlier than five
                Business
                Days prior to the Closing Date.

            


    

     

    ARTICLE
      3

    


    Representations
      and Warranties

    


    Section
      3.1. Representations
      and Warranties of the Company.
      The
      Company hereby makes the following representations and warranties to the
      Investor:

    


    
      	 	
              (a)

            	
              Subsidiaries.
                The Company has no direct or indirect Subsidiaries other than as
                specified
                in the SEC Reports. Except as disclosed in the SEC Reports, the Company
                owns, directly or indirectly, all of the capital stock of each Subsidiary
                free and clear of any and all Liens other than Liens disclosed in
                the SEC
                Reports, and all the issued and outstanding shares of capital stock
                of
                each Subsidiary are validly issued and are fully paid, non-assessable
                and
                free of preemptive and similar
                rights.

            


    


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    


    
      	 	
              (b)

            	
              Organization
                and Qualification.
                Each of the Company and each Subsidiary is duly incorporated or otherwise
                organized, validly existing and in good standing under the laws of
                the
                jurisdiction of its incorporation or organization (as applicable),
                with
                the requisite power and authority to own and use its properties and
                assets
                and to carry on its business as currently conducted. Neither the
                Company
                nor any Subsidiary is in violation of any of the provisions of its
                respective certificate or articles of incorporation, bylaws or other
                organizational or charter
                documents. Each of the Company and each Subsidiary is duly qualified
                to
                conduct its respective business and is in good standing as a foreign
                corporation or other entity in each jurisdiction in which the nature
                of
                the business conducted or property owned by it makes such qualification
                necessary, except where the failure to be so qualified or in good
                standing, as the case may be, could not, individually or in the aggregate,
                have or reasonably be expected to result in a Material Adverse Effect,
                and
                no proceedings have been instituted in any such jurisdiction revoking,
                limiting or curtailing, or seeking to revoke, such power and authority
                or
                qualification.

            


    

    


    
      	 	
              (c)

            	
              Authorization;
                Enforcement.
                The Company has the requisite corporate power and authority to enter
                into
                and to consummate the transactions contemplated by each of the Transaction
                Documents and otherwise to carry out its obligations thereunder.
                The
                execution and delivery of each of the Transaction Documents by the
                Company
                and the consummation by it of the transactions contemplated thereby
                have
                been duly authorized by all necessary action on the part of the Company
                and no further action is required by the Company in connection therewith.
                Each Transaction Document has been (or upon delivery will have been)
                duly
                executed by the Company and, when delivered in accordance with the
                terms
                hereof, will constitute the valid and binding obligation of the Company
                enforceable against the Company in accordance with its terms, except
                as
                such enforceability may be limited by applicable bankruptcy, insolvency,
                reorganization, moratorium, liquidation or similar laws relating
                to, or
                affecting generally the enforcement of, creditors’ rights and remedies or
                by other equitable principles of general
                application.

            


    

    


    
      	 	
              (d)

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

            


    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    
      	 	
              (e)

            	
              Filings,
                Consents and Approvals.
                The Company is not required to obtain any consent, waiver, authorization
                or order of, give any notice to, or make any filing or registration
                with,
                any court or other federal, state, local or other governmental authority
                (a “Governmental
                Authority”)
                or other Person in connection with the execution, delivery and performance
                by the Company of the Transaction Documents and the consummation
                of the
                transactions contemplated thereby, other than (i) the filing of a
                Notice
                of Sale of Securities on Form D with the Commission under Regulation
                D of
                the Securities Act (ii) filings required under applicable state securities
                laws, and (iii) the filing with the Commission of one or more Registration
                Statements in accordance with the requirements of Article 4 of
                this
                Agreement,.

            


    

    


    
      	 	
              (f)

            	
              Issuance
                of the Securities.
                The Securities have been duly authorized. Each Share, when issued
                and paid
                for in accordance with this Agreement, will be duly and validly issued,
                fully paid and nonassessable, free and clear of all Liens. Each Warrant,
                when issued and paid for in accordance with this Agreement, will
                be duly
                and validly issued. The Company has reserved and set aside from its
                duly
                authorized capital stock a sufficient number of shares of Common
                Stock to
                satisfy in full the Company’s obligations to issue the Warrant Shares upon
                exercise of the Warrants. The Warrants Shares, when issued and paid
                for
                upon exercise of the Warrants in accordance with their terms, will
                be duly
                and validly issued, fully paid and nonassessable, free and clear
                of all
                Liens.

            


    

    


    
      	 	
              (g)

            	
              Capitalization.
                The authorized capital stock of the Company consists of 150,000,000
                shares
                of Common Stock and 20,000,000 shares of Preferred Stock, par value
                $0.01,
                of which 10,000,000 shares have been designed Series A Preferred
                Stock and
                10,000,000 shares are undesignated. As of the close of business on
                the
                Business Day immediately prior to the date hereof, (i) 5,306,670
                shares of
                Series A Preferred Stock were issued and outstanding, all of which
                are
                validly issued, fully-paid and non-assessable, (ii) 34,062,552 shares
                of
                Common Stock were issued and outstanding, all of which are validly
                issued,
                fully-paid and non-assessable, (iii) 83,797 shares of Common Stock
                were
                held by the Company in Treasury, (iv) 6,516,900 shares of Common
                Stock
                were reserved for issuance upon exercise of outstanding options granted
                to
                employees, directors, and consultants of the Company (the
                “Company
                Stock Options”);
                (v) 15,916,616 shares of Common Stock were reserved for issuance
                upon
                exercise of outstanding warrants to purchase Common Stock (the
                “Prior
                Warrants”);
                (vi) 5,306,670 shares of Common Stock were reserved for issuance
                upon
                conversion of outstanding shares of Series A Preferred Stock, and
                (vii)
                10,206,253 shares of Common Stock were reserved for issuance upon
                conversion of other convertible notes, debentures or securities
                (“Prior
                Convertible Securities”).
                No
                Person has any right of first refusal, preemptive right, right of
                participation, or any similar right to participate in the transactions
                contemplated by the Transaction Documents.  Except pursuant to (i)
                the outstanding shares of Series A Preferred Stock, (ii) the Company
                Stock
                Options, (iii) the Prior Warrants or (iv) the Prior Convertible
                Securities, or as a result of the purchase and sale of the Securities
                as
                contemplated by this Agreement, there are no outstanding options,
                warrants, script rights to subscribe to, calls or commitments of
                any
                character whatsoever relating to, or securities, rights or obligations
                convertible into or exchangeable for, or giving any Person any right
                to
                subscribe for or acquire, any shares of Common Stock, or contracts,
                commitments, understandings or arrangements by which the Company
                or any
                Subsidiary is or may become bound to issue additional shares of Common
                Stock or Common Stock Equivalents.  The issue and sale of the
                Securities will not obligate the Company to issue shares of Common
                Stock
                or other securities to any Person (other than the Investor) and will
                not
                result in a right of any holder of Company securities to adjust the
                exercise or conversion price under such securities. No further approval
                or
                authorization of any stockholder, the Board of Directors of the Company
                or
                any other Person is required for the issuance and sale of the
                Securities.  There are no stockholders agreements, voting agreements
                or other similar agreements with respect to the Company’s capital stock to
                which the Company is a party or, to the knowledge of the Company,
                between
                or among any of the Company’s
                stockholders.

            


    


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    


    
      	 	
              (h)

            	
              SEC
                Reports; Financial Statements.
                The Company has filed all reports required to be filed by it under
                the
                Securities Act and the Exchange Act, including pursuant to Section
                13(a)
                or 15(d) thereof, for the twelve months preceding the date hereof
                (the
                foregoing materials, being collectively referred to herein as
                the “SEC
                Reports”).
                As of their respective dates, the SEC Reports complied in all material
                respects with the requirements of the Securities Act and the Exchange
                Act
                and the rules and regulations of the Commission promulgated thereunder,
                and none of the SEC Reports, when filed, contained any untrue statement
                of
                a material fact or omitted to state a material fact required to be
                stated
                therein or necessary in order to make the statements therein, in
                light of
                the
                circumstances under which they were made, not misleading. The financial
                statements of the Company included in the SEC Reports comply in all
                material respects with applicable accounting requirements and the
                rules
                and regulations of the Commission with respect thereto as in effect
                at the
                time of filing. Such financial statements have been prepared in accordance
                with GAAP applied on a consistent basis during the periods involved,
                except as may be otherwise specified in such financial statements
                or the
                notes thereto, and fairly present in all material respects the financial
                position of the Company and its consolidated Subsidiaries as of and
                for
                the dates thereof and the results of operations and cash flows for
                the
                periods then ended, subject, in the case of unaudited statements,
                to
                normal, immaterial, year-end audit
                adjustments.

            


    

    


    
      	 	
              (i)

            	
              Financial
                Statements and Material Changes.
                Except as set forth in the SEC Reports (including the financial statements
                included therein), (i) there has been no event, occurrence or development
                that has had or that could reasonably be expected to result in a
                Material
                Adverse Effect, (ii) the Company has not incurred any liabilities
                or
                obligations (contingent or otherwise) other than (A) trade payables,
                accrued expenses and other liabilities incurred in the ordinary course
                of
                business consistent with past practice and (B) liabilities incurred
                in the
                ordinary course of business not required to be reflected in the Company’s
                financial statements pursuant to GAAP or required to be disclosed
                in
                filings made with the Commission, (iii) the Company has not altered
                its
                method of accounting or the identity of its auditors, (iv) the Company
                has
                not declared or made any dividend or distribution of cash or other
                property to its stockholders or purchased, redeemed or made any agreements
                to purchase or redeem any shares of its capital stock, and (v) the
                Company
                has not issued any equity securities to any officer, director or
                Affiliate, except pursuant to existing Company stock option plans.
                The
                Company does not have pending before the Commission any request for
                confidential treatment of information.


            


    

    


    
      	 	
              (j)

            	
              Litigation
                and Investigations.
                There is no Action which (i) adversely affects or challenges the
                legality,
                validity or enforceability of any of the Transaction Documents or
                the
                Securities or (ii) except as specifically disclosed in the SEC Reports,
                could, if there were an unfavorable decision, individually or in
                the
                aggregate, have or reasonably be expected to result in a Material
                Adverse
                Effect. Neither the Company nor any Subsidiary, nor any director
                or
                officer thereof (in his capacity as such), is or has been the subject
                of
                any Action involving a claim of violation of or liability under federal
                or
                state securities laws or a claim of breach of fiduciary duty, except
                as
                specifically disclosed in the SEC Reports. There has not been, and
                to the
                knowledge of the Company, there is not pending any investigation
                by the
                Commission involving the Company or any current or former director
                or
                officer of the Company (in his or her capacity as such). The Commission
                has not issued any stop order or other order suspending the effectiveness
                of any registration statement filed by the Company or any Subsidiary
                under
                the Exchange Act or the Securities Act. There are no outstanding
                comments
                by the Staff of the Commission on any filing by the Company or any
                Subsidiary under the Exchange Act or the Securities
                Act.

            


    


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    


    
      	 	
              (k)

            	
              Labor
                Relations.
                No
                material labor dispute exists or, to the knowledge of the Company,
                is
                imminent with respect to any of the employees of the
                Company.

            


      	 	 	 


    

    
      	 	
              (l)

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

            


    

    


    
      	 	
              (m)

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

            


    

    


    
      	 	
              (n)

            	
              Title
                to Assets.
                The Company and the Subsidiaries have good and marketable title in
                fee
                simple to all real property owned by them that is material to their
                respective businesses and good and marketable title in all personal
                property owned by them that is material to their respective businesses,
                in
                each case free and clear of all Liens, except for Liens that do not
                materially affect the value of such property and do not materially
                interfere with the use made and proposed to be made of such property
                by
                the Company and the Subsidiaries. All real property and facilities
                held
                under lease by the Company and the Subsidiaries are held by them
                under
                valid, subsisting and enforceable leases of which the Company and
                the
                Subsidiaries are in material compliance, except as could not, individually
                or in the aggregate, have or reasonably be expected to result in
                a
                Material Adverse Effect.

            


    

    


    
      	 	
              (o)

            	
              Patents
                and Trademarks.
                The Company and the Subsidiaries have, or have rights to use, all
                patents,
                patent applications, trademarks, trademark applications, service
                marks,
                trade names, copyrights, licenses and other similar rights that are
                necessary or material for use in connection with their respective
                businesses as described in the SEC Reports and which the failure
                to so
                have could, individually or in the aggregate, have or reasonably
                be
                expected to result in a Material Adverse Effect (collectively,
                the “Intellectual
                Property Rights”).
                No claims or Actions have been made or filed by any Person against
                the
                Company to the effect that Intellectual Property Rights used by the
                Company or any Subsidiary violate or infringe upon the rights of
                such
                claimant. To the knowledge of the Company, after commercially reasonable
                investigation, all of the Intellectual Property Rights are enforceable
                and
                there is no existing infringement by another Person of any of the
                Intellectual Property Rights.

            


    


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    


    
      	 	
              (p)

            	
              Insurance.
                The Company and the Subsidiaries are insured by insurers of recognized
                financial responsibility against such losses and risks and in such
                amounts
                as are prudent and customary in the businesses in which the Company
                and
                the Subsidiaries are engaged. The Company has no reason to believe
                that it
                will not be able to renew its and the Subsidiaries’ existing insurance
                coverage as and when such coverage expires or to obtain similar coverage
                from similar insurers as may be necessary to continue its business
                on
                terms consistent with the market for the Company’s and such Subsidiaries’
                respective lines of business.

            


    

    


    
      	 	
              (q)

            	
              Transactions
                With Affiliates and Employees.
                Except as set forth in the SEC Reports, none of the officers or directors
                of the Company and, to the knowledge of the Company, none of the
                employees
                of the Company is a party to any transaction with the Company or
                any
                Subsidiary (other than for services as employees, officers and directors),
                including any contract, agreement or other arrangement providing
                for the
                furnishing of services to or by, providing for rental of real or
                personal
                property to or from, or otherwise requiring payments to or from any
                officer, director or such employee or, to the knowledge of the Company,
                any entity in which any officer, director, or any such employee has
                a
                substantial interest or is an officer, director, trustee or
                partner.

            


    

    


    
      	 	
              (r)

            	
              Sarbanes-Oxley;
                Internal Accounting Controls. 
                The Company is in material compliance with all provisions of the
                Sarbanes-Oxley Act of 2002 (including the rules and regulations of
                the
                Commission adopted thereunder) which are applicable to it as of the
                Closing Date.  The Company’s certifying officers have evaluated the
                effectiveness of the Company’s controls and procedures as of the filing
                date of the most recently filed periodic report under the Exchange
                Act
                (such date, the “Evaluation
                Date”). 
                The Company presented in its most recently filed periodic report
                under the
                Exchange Act the conclusions of the certifying officers about the
                effectiveness of the disclosure controls and procedures based on
                their
                evaluations as of the Evaluation Date.  Since the Evaluation Date,
                there have been no significant changes in the Company’s internal controls
                (as such term is defined in Item 307(b) of Regulation S-K under the
                Exchange Act) or, to the Company’s knowledge, in other factors that could
                significantly affect the Company’s internal controls. The
                Company maintains a standard system of accounting established and
                administered in accordance with
                GAAP.

            


    

    


    
      	 	
              (s)

            	
              Certain
                Fees.
                No
                brokerage or finder’s fees or commissions are or will be payable by the
                Company to any broker, financial advisor or consultant, finder, placement
                agent, investment banker, bank or other Person with respect to the
                transactions contemplated by this Agreement except to Merriman Curhan
                Ford
                & Co. (the “Placement
                Agent”).
                The Investor shall have no obligation with respect to any fees or
                with
                respect to any claims (other than such fees or commissions owed by
                the
                Investor pursuant to written agreements executed by the Investor
                which
                fees or commissions shall be the sole responsibility of the Investor)
                made
                by or on behalf of the Placement Agent or any other Persons for fees
                of a
                type contemplated in this Section that may be due in connection with
                the
                transactions contemplated by this
                Agreement.

            


    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    
      	 	
              (t)

            	
              Certain
                Registration Matters.
                Assuming the accuracy of the Investor’s representations and warranties set
                forth in Section 3.2(b)-(e), no registration under the Securities
                Act is
                required for the offer and sale of the Securities by the Company
                to the
                Investor under the Transaction Documents.


            


    

    


    
      	 	
              (u)

            	
              Investment
                Company.
                The Company is not, and is not an Affiliate of, and immediately following
                the Closing will not have become, an “investment company” within the
                meaning of the Investment Company Act of 1940, as
                amended.

            


    

    


    
      	 	
              (v)

            	
              No
                Additional Agreements.
                The Company does not have any agreement or understanding with the
                Investor
                with respect to the transactions contemplated by the Transaction
                Documents
                other than as specified in the Transaction
                Documents.

            


    

    


    
      	 	
              (w)

            	
              Full
                Disclosure.
                All
                disclosures provided to the Investor regarding the Company, its business
                and the transactions contemplated hereby, furnished by or on behalf
                of the
                Company (including the Company’s representations and warranties set forth
                in this Agreement) are true and correct in all material respects
                and do
                not contain any untrue statement of a material fact or omit to state
                any
                material fact necessary in order to make the statements made therein,
                in
                light of the circumstances under which they were made, not
                misleading.

            


    

    


    
      	 	
              (x)

            	
              Environmental
                Matters.
                To
                the Company’s knowledge, after commercially reasonable investigation: (i)
                the Company and its Subsidiaries have complied with all applicable
                Environmental Laws; (ii) the properties currently owned or operated
                by
                Company (including soils, groundwater, surface water, buildings or
                other
                structures) are not contaminated with any Hazardous Substances; (iii)
                the
                properties formerly owned or operated by Company or its Subsidiaries
                were
                not contaminated with Hazardous Substances during the period of ownership
                or operation by Company and its Subsidiaries; (iv) Company and its
                Subsidiaries are not subject to liability for any Hazardous Substance
                disposal or contamination on any third party property; (v) Company
                and its
                Subsidiaries have not been associated with any release or threat
                of
                release of any Hazardous Substance; (vi) Company and its Subsidiaries
                have
                not received any notice, demand, letter, claim or request for information
                alleging that Company and its Subsidiaries may be in violation of
                or
                liable under any Environmental Law; and (vii) Company and its Subsidiaries
                are not subject to any orders, decrees, injunctions or other arrangements
                with any Governmental Authority or subject to any indemnity or other
                agreement with any third party relating to liability under any
                Environmental Law or relating to Hazardous
                Substances.

            


    

     

    As
      used
      in this Agreement, the term “Environmental
      Law”
      means any federal, state, local or foreign law, regulation, order, decree,
      permit, authorization, opinion, common law or agency requirement relating to:
      (A) the protection, investigation or restoration of the environment, health
      and
      safety, or natural resources; (B) the handling, use, presence, disposal, release
      or threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
      pollution, contamination or any injury or threat of injury to persons or
      property.

     

    As
      used
      in this Agreement, the term “Hazardous
      Substance”
      means any substance that is: (i) listed, classified or regulated pursuant to
      any
      Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
      material, lead-containing paint or plumbing, polychlorinated biphenyls,
      radioactive materials or radon; or (iii) any other substance which is the
      subject of regulatory action by any Governmental Authority pursuant to any
      Environmental Law.


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	
            	(y)	
              Taxes.
                The Company and its Subsidiaries have filed all necessary federal,
                state
                and foreign income and franchise tax returns when due (or obtained
                appropriate extensions for filing) and have paid or accrued all taxes
                shown as due thereon, and the Company has no knowledge of a tax deficiency
                which has been or might be asserted or threatened against it or any
                Subsidiary which would have a Material Adverse
                Effect.

            


    

     

    
      	
            	(z)	
              Private
                Offering.
                Assuming the correctness of the representations and warranties of
                the
                Investors set forth in this Agreement, the offer and sale of the
                Convertible Notes and the Warrants hereunder are, and upon (i) exercise
                of
                the Warrants, the issuance of the Warrant Shares and (ii) upon conversion
                of the Convertible Notes, the issuance of the Conversion Shares will
                be,
                exempt from registration under the Securities Act. The Company has
                offered
                the Convertible Notes and the Warrants for sale only to the
                Investor.

            


    

     

    
      	
            	(aa)	
              ERISA.
                Neither the Company nor any ERISA Affiliate maintains, contributes
                to or
                has any liability or contingent liability with respect to any employee
                benefit plan subject to ERISA.

            


    

     

    
      	
            	(bb)	
              Foreign
                Assets Control Regulations and Anti-Money
                Laundering.

            


    

     

    (i)
      OFAC.
      Neither
      the issuance of the Convertible Note and Warrant to the Investor, nor the use
      of
      the respective proceeds thereof, shall cause the Investor to violate the U.S.
      Bank Secrecy Act, as amended, and any applicable regulations thereunder or
      any
      of the sanctions programs administered by the U.S. Department of the Treasury’s
      Office of Foreign Assets Control (“OFAC”)
      of the United States Department of Treasury, any regulations promulgated
      thereunder by OFAC or under any affiliated or successor governmental or
      quasi-governmental office, bureau or agency and any enabling legislation or
      executive order relating thereto. Without limiting the foregoing, neither the
      Company nor any Subsidiary (i) is a person whose property or interests in
      property are blocked or subject to blocking pursuant to Section 1 of
      Executive Order 13224 of September 23, 200l Blocking Property and Prohibiting
      Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
      (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions
      prohibited by Section 2 of such executive order, or is otherwise associated
      with any such person in any manner violative of Section 2, or (iii) is a
      person on the list of Specially Designated Nationals and Blocked Persons or
      subject to the limitations or prohibitions under any other OFAC regulation
      or
      executive order.

     

    (ii)
      Patriot
      Act.
      The
      Company and each of its Subsidiaries are in compliance, in all material
      respects, with the USA PATRIOT Act. No part of the proceeds of the sale of
      the
      Shares and the Warrants hereunder will be used, directly or indirectly, for
      any
      payments to any governmental official or employee, political party, official
      of
      a political party, candidate for political office, or anyone else acting in
      an
      official capacity, in order to obtain, retain or direct business or obtain
      any
      improper advantage, in violation of the United States Foreign Corrupt Practices
      Act of 1977, as amended.


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    


    Section
      3.2. Representations
      and Warranties of the Investor.
      The
      Investor hereby represents and warrants to the Company as follows:

    


    
      	 	
              (a)

            	
              Authority.
                This Agreement has been duly executed by the Investor, and when delivered
                by the Investor in accordance with terms hereof, will constitute
                the valid
                and legally binding obligation of the Investor, enforceable against
                him in
                accordance with its terms, except as such enforceability may be limited
                by
                applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
                or similar laws relating to, or affecting generally the enforcement
                of,
                creditors’ rights and remedies or by other equitable principles of general
                application.

            


    

    


    
      	 	
              (b)

            	
              Investment
                Intent.
                The Investor is acquiring the Securities as principal for its own
                account
                for investment purposes only and not with a view to or for distributing
                or
                reselling such Securities or any part thereof, without prejudice,
                however,
                to the Investor’s right at all times to sell or otherwise dispose of all
                or any part of such Securities in compliance with applicable federal
                and
                state securities laws. The Investor does not have any agreement or
                understanding, directly or indirectly, with any Person to distribute
                any
                of the Securities.

            


    

    


    
      	 	
              (c)

            	
              Investor
                Status.
                The Investor is an “accredited investor” as defined in Rule 501(a) under
                the Securities Act and a “qualified institutional buyer” as defined in
                Rule 144A under the Securities Act. The Investor is not a registered
                broker-dealer under Section 15 of the Exchange
                Act.

            


    

    


    
      	 	
              (d)

            	
              Access
                to Information.
                The Investor acknowledges that he has reviewed the SEC Reports and
                has
                been afforded (i) the opportunity to ask such questions as he has deemed
                necessary of, and to receive answers from, representatives of the
                Company
                concerning the terms and conditions of the offering of the Securities
                and
                the merits and risks of investing in the Securities; (ii) access
                to
                information about the Company and the Subsidiaries and their respective
                financial condition, results of operations, business, properties,
                management and prospects sufficient to enable him to evaluate his
                investment; and (iii) the opportunity to obtain such additional
                information that the Company possesses or can acquire without unreasonable
                effort or expense that is necessary to make an informed investment
                decision with respect to the
                investment.

            


    

    


    
      	 	
              (e)

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

            


    

     

    
      	 	
              (f)

            	
              Disclosure.
                The Investor acknowledges and agrees that the Company neither makes
                nor
                has made any representations or warranties with respect to the
                transactions contemplated hereby other than those specifically set
                forth
                in Section
                3.1.

            


    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


    ARTICLE
      4

    


    Registration
      Rights

    


    Section
      4.1. Shelf
      Registration.

     

    (a)
      As
      promptly as possible, and in any event on or prior to the Filing Date, the
      Company shall prepare and file with the Commission a “shelf” Registration
      Statement covering the resale of all Registrable Securities for an offering
      to
      be made on a continuous basis pursuant to Rule 415. The Registration Statement
      shall be on a Form S-3; in the event Form S-3 is not available for the
      registration of the resale of Registrable Securities hereunder, the Company
      shall (i) register the resale of the Registrable Securities on another
      appropriate form in accordance herewith and (ii) attempt to register the
      Registrable Securities on Form S-3 as soon as such form is available, provided
      that the Company shall maintain the effectiveness of the Registration Statements
      then in effect until such time as a Registration Statement on Form S-3 covering
      the Registrable Securities has been declared effective by the Commission. If
      at
      any time the staff of the Commission takes the position that the offering of
      some or all of the Registrable Securities in a Registration Statement is not
      eligible to be made on a delayed or continuous basis under the provisions of
      Rule 415 under the Securities Act or requires any Investor to be named as an
      “underwriter” (an “SEC
      Objection”),
      the Company shall promptly notify the Investor of such SEC Objection and if
      the
      Investor shall request, the Company shall use its commercially reasonable
      efforts to persuade the staff of the Commission that the offering contemplated
      by the Registration Statement is a valid secondary offering and not an offering
      “by or on behalf of the issuer” as defined in Rule 415 and that the Investor is
      not an “underwriter” (a “Rule
      415 Response Effort”).
      The Investor shall have the right to participate or have its counsel participate
      in any meetings or discussions with the staff of the Commission regarding such
      position and to comment or have its counsel comment on any written submission
      made to the staff of the Commission with respect thereto, and to have such
      comments relayed to the staff of the Commission with the consent of the Company,
      not to be unreasonably withheld. No such written submission shall be made to
      the
      staff of the Commission to which the Investor’s counsel reasonably objects. In
      the event that, despite the Company’s commercially reasonable efforts and
      compliance with the terms of this Section 4.1(a), the staff of the Commission
      refuses to alter its position, the Company shall (i) remove from the
      Registration Statement such portion of the Registrable Securities (the
“Cut
      Back Shares”)
      and/or (ii) agree to such restrictions and limitations on the registration
      and
      resale of the Registrable Securities as the staff of the Commission may require
      to assure the Company’s compliance with the requirements of Rule 415; provided,
      however, that the Company shall not agree to name any Investor as an
“underwriter” in such Registration Statement without the prior written consent
      of such Investor (collectively, the “SEC
      Restrictions”).
      Notwithstanding any other provision of this Agreement to the contrary, no
      liquidated damages shall accrue pursuant to Section 4.1(d) (i) during the
      pendency of a Rule 415 Response Effort or (ii) on or as to any Cut Back Shares
      until such time as the Company is able, using commercially reasonable efforts,
      to effect the filing of an additional Registration Statement with respect to
      the
      Cut Back Shares in accordance with any SEC Restrictions (such date, the
“Restriction
      Termination Date”).
      From and after the Restriction Termination Date, all of the provisions of this
      Article 4 (including the liquidated damages provisions) shall again be
      applicable to the Cut Back Shares; provided, however, that for such purposes,
      references to the Filing Date shall be deemed to be the date that is 30 days
      after the Restriction Termination Date.

     

    (b)
      The
      Company shall use its best efforts to cause each Registration Statement filed
      hereunder to be declared effective by the Commission as promptly as possible
      after the filing thereof, but in any event prior to the Required Effectiveness
      Date, and shall use its best efforts to keep the Registration Statement
      continuously effective under the Securities Act until the earlier of (i) the
      fifth anniversary of the Effective Date, (ii) the date when all Registrable
      Securities covered by such Registration Statement have been sold publicly,
      or
      (iii) the date on which the Registrable Securities are eligible
      for sale without volume limitation pursuant to subparagraph (k) of Rule 144
      (the
“Effectiveness
      Period”).
      The
      Company shall notify the Investor in writing promptly (and in any event within
      one Business Day) after receiving notification from the Commission that the
      Registration Statement has been declared effective.


    
      
        
        

      

      
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    (c)
      As
      promptly as possible, and in any event no later than the Post-Effective
      Amendment Filing Deadline, the Company shall prepare and file with the
      Commission a Post-Effective Amendment. The Company shall use its best efforts
      to
      cause the Post-Effective Amendment to be declared effective by the Commission
      as
      promptly as possible after the filing thereof. The Company shall notify the
      investor in writing promptly (and in any event within one Business Day) after
      receiving notification from the Commission that the Post-Effective Amendment
      has
      been declared effective. 

     

    (d)
      If:
      (i)
      any Registration Statement is not filed on or prior to the Filing Date (or
      the
      Restriction Termination Date, as applicable) or a Post-Effective Amendment
      is
      not filed on or prior to the Post-Effective Amendment Filing Deadline, or (ii)
      the Company fails to file with the Commission a request for acceleration of
      effectiveness in accordance with Rule 461 promulgated under the Securities
      Act,
      within five Business Days after the date that the Company is notified (orally
      or
      in writing, whichever is earlier) by the Commission that a Registration
      Statement will not be “reviewed,” or will not be subject to further review, or
      (iii) the Company fails to respond to any comments made by the Commission within
      15 Business Days after the receipt of such comments, or (iv) a Registration
      Statement filed hereunder is not declared effective by the Commission by the
      Required Effectiveness Date (which date shall be extended by 30 days in the
      case
      of a comment regarding Rule 415), or a Post-Effective Amendment is not declared
      effective on or prior to the fifteenth Business Day following the Post-Effective
      Amendment Filing Deadline, or (v) after a Registration Statement is filed with
      and declared effective by the Commission, such Registration Statement ceases
      to
      be effective as to all Registrable Securities to which it is required to relate
      at any time prior to the expiration of the Effectiveness Period for a period
      of
      more than 60 days without being succeeded by an amendment to such Registration
      Statement or by a subsequent Registration Statement filed with and declared
      effective by the Commission, or (vi) an amendment to a Registration Statement
      is
      not filed by the Company with the Commission within 15 Business Days after
      the
      Commission’s having notified the Company that such amendment is required in
      order for such Registration Statement to be declared effective (any such failure
      or breach being referred to as an “Event”
      and the
      date on which such Event occurs being referred to as “Event
      Date”),
      then:
      (x) on each such Event Date the Company shall pay to the Investor an amount
      in
      cash, as liquidated damages and not as a penalty, equal to 1% of the aggregate
      Purchase Price paid by the Investor pursuant to this Agreement for the
      Registrable Securities covered by such Registration Statement (the “Penalty
      Base”);
      and
      (y) on the same day of each successive month following such Event Date (so
      long
      as the applicable Event shall not have been cured by such date) until the
      applicable Event is cured, the Company shall pay to the Investor an amount
      in
      cash, as liquidated damages and not as a penalty, equal to 1% of the Penalty
      Base. Such payments shall be the Investor’s sole and exclusive remedy for such
      Events. If the Company fails to pay any liquidated damages pursuant to this
      Section in full within seven Business Days after the date payable, the Company
      will pay interest thereon at a rate of 18% per annum (or such lesser maximum
      amount that is permitted to be paid by applicable law) to the Investor, accruing
      daily from the date such liquidated damages are due until such amounts, plus
      all
      such interest thereon, are paid in full.

     

    (e)
      The
      Company shall not, prior to the Effective Date of the Registration Statement,
      prepare and file with the Commission a registration statement relating to an
      offering for its own account or the account of others under the Securities
      Act
      of any of its equity securities.

     

    (f)
      If
      the Company issues to the Investor any Common Stock pursuant to the Transaction
      Documents that is not included in the initial Registration Statement, then
      the
      Company shall file an additional Registration Statement covering such number
      of
      shares of Common Stock on or prior to the Filing Date and shall use it best
      efforts, but in no event later than the Required Effectiveness Date, to cause
      such additional Registration Statement to be declared effective by the
      Commission.


    
      
        
        

      

      
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    Section
      4.2. Registration
      Process.
      In
      connection with the registration of the Registrable
      Securities pursuant to Section 4.1, the Company shall:

     

    (a)
      Prepare
      and file
      with the
      Commission the
      Registration Statement
      and such
      amendments (including post-effective amendments) to the Registration Statement
      and supplements to the prospectus included therein (a
“Prospectus”)
      as the
      Company may deem necessary or appropriate and take all lawful action such that
      the Registration Statement and any amendment thereto does not, when it becomes
      effective, contain an untrue statement of a material fact or omit to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, not misleading and that the Prospectus forming part of the Registration
      Statement, and any amendment or supplement thereto, does not at any time during
      the Registration
      Period include an untrue statement of a material fact or omit to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading.;

     

    (b)
      Comply
      with the provisions of the Securities Act with respect to the Registrable
      Securities covered by the Registration Statement until the earlier of (i) such
      time as all of such Registrable Securities have been disposed of in accordance
      with the intended methods of disposition by the Investor as set forth in the
      Prospectus forming part of the Registration Statement or (ii) the date on which
      the Registration Statement is withdrawn;

     

    (c)
      Prior
      to
      the filing with the Commission of the
      Registration Statement (including any amendments thereto) and the distribution
      or delivery of any Prospectus (including any supplements thereto), provide
      draft
      copies thereof to the Investor and reflect in such documents all such comments
      as the Investor (and its counsel) reasonably may propose and furnish to the
      Investor and its legal counsel identified to the Company (i) promptly after
      the same is prepared and publicly distributed, filed with the Commission, or
      received by the Company, one copy of the Registration Statement, each
      Prospectus, and each amendment or supplement thereto, and (ii) such number
      of copies of the Prospectus and all amendments and supplements thereto and
      such
      other documents, as the Investor may reasonably request in order to facilitate
      the disposition of the Registrable
      Securities;

     

    (d)
      (i) register
      or qualify the Registrable Securities covered by the Registration Statement
      under such securities or “blue sky” laws of such jurisdictions as the Investors
reasonably
      request, (ii) prepare and file in such jurisdictions such amendments
      (including post-effective amendments) and supplements to such registrations
      and
      qualifications as may be necessary to maintain the effectiveness thereof at
      all
      times during the Registration Period, (iii) take all such other lawful
      actions as may be necessary to maintain such registrations and qualifications
      in
      effect at all times during the Registration Period, and (iv) take all such
      other lawful actions reasonably necessary or advisable to qualify the
      Registrable Securities for sale in such jurisdictions; provided,
      however,
      that the
      Company shall not be required in connection therewith or as a condition thereto
      to (A) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify, (B) subject itself to general taxation in
      any such jurisdiction or (C) file a general consent to service of process
      in any such jurisdiction;


    
      
        
        

      

      
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    (e)
      As
      promptly as practicable after becoming aware of such event, notify the Investor
      of the occurrence of any event, as a result of which the Prospectus included
      in
      the Registration Statement, as then in effect, includes an untrue statement
      of a
      material fact or omits to state a material fact required to be stated therein
      or
      necessary to make the statements therein, in light of the circumstances under
      which they were made, not misleading, and promptly prepare an amendment to
      the
      Registration Statement and supplement to the Prospectus to correct such untrue
      statement or omission, and deliver a number of copies of such supplement and
      amendment to each Investor as such Investor may reasonably request;

     

    (f)
      As
      promptly as practicable after becoming aware of such event, notify the Investor
      (or, in the event of an underwritten offering, the managing underwriters) of
      the
      issuance by the Commission of any stop order or other suspension of the
      effectiveness of the Registration Statement and take all lawful action to effect
      the withdrawal, rescission
      or
      removal of such stop order or other suspension;

     

    (g)
      Take
      all
      such other lawful actions reasonably necessary to expedite and facilitate the
      disposition by the Investor of his Registrable Securities in accordance with
      the
      intended methods therefor provided in the Prospectus which are customary under
      the circumstances;

     

    (h)
      Make
      generally available to its security holders as soon as practicable, but in
      any
      event not later than 18
      months
      after the Effective Date of the Registration Statement, an earnings
      statement of the Company and its subsidiaries complying with Section 11(a)
      of the Securities Act and the rules and regulations of the Commission
      thereunder;

     

    (i)
      In
      the
      event of an underwritten offering, promptly include or incorporate in a
      Prospectus supplement or post-effective amendment to the Registration Statement
      such information as the underwriters reasonably agree should be included therein
      and to which the Company does not reasonably object and make all required
      filings of such Prospectus supplement or post-effective amendment as soon as
      practicable after it is notified of the matters to be included or incorporated
      in such Prospectus supplement or post-effective amendment;

     

    (j)
      Make
      reasonably available for inspection by the Investor, any underwriter
      participating in any disposition pursuant to the Registration Statement, and
      any
      attorney, accountant or other agent retained by such Investors or any such
      underwriter all relevant financial and other records, pertinent corporate
      documents and properties of the Company and its subsidiaries, and cause the
      Company’s officers, directors and employees to supply all information reasonably
      requested by the Investor or any such underwriter, attorney, accountant or
      agent
      in connection with the Registration Statement, in each case, as is customary
      for
      similar due diligence examinations; provided,
      however,
      that all
      records, information and documents that are designated in writing by the
      Company, in good faith, as confidential, proprietary or containing any nonpublic
      information shall be kept confidential by such Investors and any such
      underwriter, attorney, accountant or agent (pursuant to an appropriate
      confidentiality agreement in the case of any such holder or agent), unless
      such
      disclosure is made pursuant to judicial process in a court proceeding (after
      first giving the Company an opportunity promptly to seek a protective order
      or
      otherwise limit the scope of the information sought to be disclosed) or is
      required by law, or such records, information or documents become available
      to
      the public generally or through a third party not in violation of an
      accompanying obligation of confidentiality; and provided,
      further,
      that, if
      the foregoing inspection and information gathering would otherwise disrupt
      the
      Company’s conduct of its business, such inspection and information gathering
      shall, to the maximum extent possible, be coordinated on behalf of the Investors
      and the other parties entitled thereto by one firm of counsel designated
      by and
      on behalf of the majority in interest of Investors and other
      parties;


    
      
        
        

      

      
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    (k)
      In
      connection with any offering,
      make such representations and warranties to the Investor and to the underwriters
      if an underwritten offering,
      in
      form, substance and scope as are customarily made by a company to underwriters
      in secondary underwritten offerings;

     

    (l)
      In
      connection with any underwritten offering, deliver such documents and
      certificates as may be reasonably required by the underwriters;

     

    (m)
      Cooperate
      with the Investor to facilitate the timely preparation and delivery of
      certificates representing Registrable
      Securities
      to be
      sold pursuant to the Registration Statement, which certificates shall, if
      required under the terms of this Agreement, be free of all restrictive legends,
      and to enable such Registrable
      Securities
      to be in
      such denominations and registered in such names as any Investor may request
      and
      maintain a transfer agent for the Common Stock; 

     

    (n)
      Use
      its
      commercially reasonable efforts to cause all Registrable
      Securities
      covered
      by the Registration Statement to be listed or qualified for trading on the
      principal Trading Market, if any, on which the Common Stock is traded or listed
      on the Effective Date of the Registration Statement; and

     

    (o)
      Include
      in each Prospectus and Registration the Plan of Distribution attached hereto
      as
Exhibit
      C
      (the
“Plan
      of Distribution”),
      unless and to the extent that such Plan of Distribution requires modification
      due to inaccuracy or due to a change in the Commission’s rules and regulations
      under the Securities Act.

     

    Section
      4.3. Obligations
      and Acknowledgements of the Investor.
      In
      connection with the registration of the Registrable
      Securities, the Investor shall have the following obligations and hereby make
      the following acknowledgements:

     

    (a)
      It
      shall
      be a condition precedent to the obligations of the Company to include
      the
      Registrable Securities in
      the
      Registration Statement
      that the
      Investor (i) shall furnish to the Company such information regarding
      itself, the Registrable Securities held by it and the intended method of
      disposition of the Registrable Securities held by it as shall be reasonably
      required to effect the registration of such Registrable Securities and
      (ii) shall execute such documents in connection with such registration as
      the Company may reasonably request. At least five Business Days prior to the
      first anticipated filing date of a Registration Statement, the Company shall
      notify the Investor of the information the Company requires from the Investor
      (the “Requested
      Information”)
      if the
      Investor elects to have any of its Registrable Securities included in the
      Registration Statement. If at least two Business Days prior to the anticipated
      filing date the Company has not received the Requested Information from the
      Investor, then the Company may file the Registration Statement without including
      any Registrable Securities of the Investor and the Company shall have no further
      obligations under this Article 4 to the Investor
      after
      such Registration Statement has been declared effective. If the Investor
      notifies the Company and provides the Company the information required hereby
      prior to the time the Registration Statement is declared effective, the Company
      will file an amendment to the Registration Statement that includes the
      Registrable Securities of the Investor;
      provided,
      however,
      that the
      Company shall not be required to file such amendment to the Registration
      Statement at any time less than 5 Business Days prior to the Effectiveness
      Date.


    
      
        
        

      

      
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    (b)
      The
      Investor agrees to cooperate with the Company in connection with the preparation
      and filing of a Registration Statement hereunder, unless the Investor has
      notified the Company in writing of its election to exclude all of its
      Registrable Securities from such Registration Statement;

     

    (c)
      The
      Investor agrees that, upon receipt of any notice from the Company of the
      occurrence of any event of the kind described in Section 4.2(e) or 4.2(f),
      the Investor shall immediately discontinue its disposition of Registrable
      Securities pursuant to the Registration Statement covering such Registrable
      Securities until the Investor’s receipt of the copies of the supplemented or
      amended Prospectus contemplated by Section 4.2(e) and, if so directed by
      the Company, the Investor shall deliver to the Company (at the expense of the
      Company) or destroy (and deliver to the Company a certificate of destruction)
      all copies in the Investor’s possession, of the Prospectus covering such
      Registrable Securities current at the time of receipt of such notice;
      and

     

    (d)
      The
      Investor acknowledges that it may be deemed to be a statutory underwriter within
      the meaning of the Securities Act with respect to the Registrable Securities
      being registered for resale by it, and if the Investor includes Registrable
      Securities for offer and sale within a Registration Statement the Investor
      hereby consents to the inclusion in such Registration Statement of a disclosure
      to such effect.

     

    Section
      4.4. Expenses
      of Registration.
      All
      expenses (other than underwriting discounts and commissions and the fees an
      expenses of the Investor’s counsel) incurred in connection with registrations,
      filings or qualifications pursuant to this Article 4, including, without
      limitation, all registration, listing, and qualifications fees, printing and
      engraving fees, accounting fees, and the fees and disbursements of counsel
      for
      the Company, shall be borne by the Company.

     

    Section
      4.5 Accountant’s
      Letter.
      If
      the
      Investor proposes to engage in an underwritten offering of any Registrable
      Shares, the Company shall deliver to the Investor, at the Company’s expense, a
      letter dated as of the effective date of each Registration Statement or
      Post-Effective Amendment thereto, from the independent public accountants
      retained by the Company, addressed to the underwriters and to the Investor,
      in
      form and substance as is customarily given in an underwritten public offering,
      provided that the Investor has made such representations and furnished such
      undertakings as the independent public accountants may reasonably
      require;

     

    Section
      4.6. Indemnification
      and Contribution

     

    (a)
      Indemnification
      by the Company.
      The
      Company shall indemnify and hold harmless the Investor and each underwriter,
      if
      any, which facilitates the disposition of Registrable Securities, and each
      of
      their respective officers and directors and each Person who controls such
      underwriter within the meaning of Section 15 of the Securities Act or
      Section 20 of the Exchange Act (each such Person being sometimes
      hereinafter referred to as an “Indemnified
      Person”)
      from
      and against any losses, claims, damages or liabilities, joint or several, to
      which such Indemnified Person may become subject under the Securities Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon an untrue statement or alleged
      untrue statement of a material fact contained in any Registration Statement
      or
      an omission or alleged omission to state therein a material fact required to
      be
      stated therein or necessary to make the statements therein, not misleading,
      or
      arise out of or are based upon an untrue statement or alleged untrue statement
      of a material fact contained in any Prospectus or an omission or alleged
      omission to state therein a material fact required to be stated therein or
      necessary to make the statements therein, in the light of the circumstances
      under which they were made, not misleading; and the Company hereby agrees to
      reimburse such Indemnified Person for all reasonable legal and other expenses
      incurred by them in connection with investigating or defending any such action
      or claim as and when such expenses are incurred; provided,
      however, that
      the
      Company shall not be liable to any such Indemnified Person in any such case
      to
      the extent that any such loss, claim, damage or liability arises out of or
      is
      based upon (i) an untrue statement or alleged untrue statement made in, or
      an omission or alleged omission from, such Registration Statement or Prospectus
      in reliance upon and in conformity with written information furnished to the
      Company by such Indemnified Person expressly for use therein or (ii) in the
      case of the occurrence of an event of the type specified in Section 4.3(e),
      the use by the Indemnified Person of an outdated or defective Prospectus after
      the Company has provided to such Indemnified Person an updated Prospectus
      correcting the untrue statement or alleged untrue statement or omission or
      alleged omission giving rise to such loss, claim, damage or
      liability.


    
      
        
        

      

      
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    (b)
      Indemnification
      by the Investor and Underwriters.
      The
      Investor agrees, as
      a
      consequence of the inclusion of any of its Registrable Securities in a
      Registration Statement, and each underwriter, if any, which facilitates the
      disposition of Registrable Securities shall agree, severally
      and not jointly, as
      a
      consequence of facilitating such disposition of Registrable Securities to
      (i) indemnify and hold harmless the Company, its directors (including any
      person who, with his or her consent, is named in the Registration Statement
      as a
      director nominee of the Company), its officers who sign any Registration
      Statement and each Person, if any, who controls the Company within the meaning
      of either Section 15 of the Securities Act or Section 20 of the
      Exchange Act, against any losses, claims, damages or liabilities to which the
      Company or such other persons may become subject, under the Securities Act
      or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon an untrue statement or alleged
      untrue statement of a material fact contained in such Registration Statement
      or
      Prospectus or arise out of or are based upon the omission or alleged omission
      to
      state therein a material fact required to be stated therein or necessary to
      make
      the statements therein (in light of the circumstances under which they were
      made, in the case of the Prospectus), not misleading, in each case to the
      extent, but only to the extent, that such untrue statement or alleged untrue
      statement or omission or alleged omission was made in reliance upon and in
      conformity with written information furnished to the Company by the Investor
      or
      underwriter expressly for use therein,
      and
      (ii) reimburse the Company for any legal or other expenses incurred by the
      Company in connection with investigating or defending any such action or claim
      as such expenses are incurred;
      provided,
      however,
      that the
      Investor shall not be liable under this Section 4.5(b) for any amount in
      excess of the net proceeds paid to the Investor in respect of Registrable
      Securities sold by it.

     

    (c)
      Notice
      of Claims, etc. 
      Promptly
      after receipt by a Person seeking indemnification pursuant to this
      Section 4.5 (an “Indemnified
      Party”)
      of
      written notice of any investigation, claim, proceeding or other action in
      respect of which indemnification is being sought (each, a “Claim”),
      the
      Indemnified Party promptly shall notify the Person against whom indemnification
      pursuant to this Section 4.5 is being sought (the“Indemnifying
      Party”)
      of the
      commencement thereof; but the omission to so notify the Indemnifying Party
      shall
      not relieve it from any liability that it otherwise may have to the Indemnified
      Party, except to the extent that the Indemnifying Party is materially prejudiced
      and forfeits substantive rights and defenses by reason of such failure. In
      connection with any Claim as to which both the Indemnifying Party and the
      Indemnified Party are parties, the Indemnifying Party shall be entitled to
      assume the defense thereof. Notwithstanding the assumption of the defense of
      any
      Claim by the Indemnifying Party, the Indemnified Party shall have the right
      to
      employ separate legal counsel and to participate in the defense of such Claim,
      and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
      and expenses of such separate legal counsel to the Indemnified Party if (and
      only if): (i) the Indemnifying Party shall have agreed to pay such fees,
      costs and expenses, (ii) the Indemnified Party shall
      reasonably have concluded that representation of the Indemnified Party by the
      Indemnifying Party by the same legal counsel would not be appropriate due to
      actual or, as reasonably determined by legal counsel to the Indemnified Party,
      potentially differing interests between such parties in the conduct of the
      defense of such Claim, or if there may be legal defenses available to the
      Indemnified Party that are in addition to or disparate from those available
      to
      the Indemnifying Party, or (iii) the Indemnifying Party shall have failed
      to employ legal counsel reasonably satisfactory to the Indemnified Party within
      a reasonable period of time after notice of the commencement of such Claim.
      If
      the Indemnified Party employs separate legal counsel in circumstances other
      than
      as described in the preceding sentence, the fees, costs and expenses of such
      legal counsel shall be borne exclusively by the Indemnified Party. Except as
      provided above, the Indemnifying Party shall not, in connection with any Claim
      in the same jurisdiction, be liable for the fees and expenses of more than
      one
      firm of counsel for the Indemnified Party (together with appropriate local
      counsel). The Indemnified Party shall not, without the prior written consent
      of
      the Indemnifying Party (which consent shall not unreasonably be withheld),
      settle or compromise any Claim or consent to the entry of any judgment that
      does
      not include an unconditional release of the Indemnifying Party from all
      liabilities with respect to such Claim or judgment
      or
      contain any admission of wrongdoing.


    
      
        
        

      

      
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    (d)
      Contribution.
      If the
      indemnification provided for in this Section 4.5 is unavailable to or
      insufficient to hold harmless an Indemnified Party in respect of any losses,
      claims, damages or liabilities (or actions in respect thereof) referred to
      therein, then each Indemnifying Party shall contribute to the amount paid or
      payable by such Indemnified Party as a result of such losses, claims, damages
      or
      liabilities (or actions in respect thereof) in such proportion as is appropriate
      to reflect the relative fault of the Indemnifying Party and the Indemnified
      Party in connection with the statements or omissions or
      alleged statements or omissions which
      resulted in such losses, claims, damages or liabilities (or actions in respect
      thereof), as well as any other relevant equitable considerations. The relative
      fault of such Indemnifying Party and Indemnified Party shall be determined
      by
      reference to, among other things, whether the untrue or alleged untrue statement
      of a material fact or omission or alleged omission to state a material fact
      relates to information supplied by such Indemnifying Party or by such
      Indemnified Party, and the parties’ relative intent, knowledge, access to
      information and opportunity to correct or prevent such statement or omission.
      The parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 4.5(d) were determined by pro rata allocation
      (even if the Investors or any underwriters were treated as one entity for such
      purpose) or by any other method of allocation which does not take account of
      the
      equitable considerations referred to in this Section 4.5(d). The amount
      paid or payable by an Indemnified Party as a result of the losses, claims,
      damages or liabilities (or actions in respect thereof) referred to above shall
      be deemed to include any legal or other fees or expenses reasonably incurred
      by
      such Indemnified Party in connection with investigating or defending any such
      action or claim. No person guilty of fraudulent misrepresentation (within the
      meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any person who was not guilty of such fraudulent
      misrepresentation. 

     

    (e)
      Limitation
      on Investor’s and Underwriters’ Obligations.
      Notwithstanding any other provision of this Section 4.5, in no event shall
      (i) the Investor have
      any
      liability under
      this Section 4.5 for any amounts in excess of the dollar amount of the
      proceeds actually
      received
      by the Investor from the sale of Registrable Securities (after deducting any
      fees, discounts and commissions applicable thereto) pursuant to any Registration
      Statement under which such Registrable Securities are
      registered under the Securities Act and (ii) any underwriter be required to
      undertake liability to any Person hereunder for any amounts in excess of the
      aggregate discount, commission or other compensation payable to such underwriter
      with respect to the Registrable Securities underwritten by it and distributed
      pursuant to the Registration Statement.

     

    (f)
      Other
      Liabilities.
      The
      obligations of the Company under this Section 4.5 shall be in addition to
      any liability which the Company may otherwise have to any Indemnified Person
      and
      the obligations of any Indemnified Person under this Section 4.5 shall be
      in addition to any liability which such Indemnified Person may otherwise have
      to
      the Company. The remedies provided in this Section 4.5 are not exclusive and
      shall not limit any rights or remedies which may otherwise be available to
      an
      indemnified party at law or in equity.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    Section
      4.6. Rule
      144.
      With a
      view to making available to the Investor the benefits of Rule 144, the
      Company agrees to use its best efforts to:

     

    (i)
      comply
      with the provisions of paragraph (c)(1) of Rule 144; and

     

    (ii)
      file
      with
      the Commission in a timely manner all reports and other documents required
      to be
      filed by the Company pursuant to Section 13 or 15(d) under the Exchange
      Act; and, if at any time it is not required to file such reports but in the
      past
      had been required to or did file such reports, it will, upon the request of
      any
      Investor, make available other information as required by, and so long as
      necessary to permit sales of, its Registrable Securities pursuant to
      Rule 144.

     

    Section 4.7.
      Common
      Stock Issued Upon Stock Split, etc.
      The
      provisions of this Article 4 shall apply to any shares of Common Stock or
      any other securities issued as a dividend or distribution in respect of the
      Shares or the Warrant Shares.

    


    ARTICLE
      5

    


    Other
      Agreements of the Parties

    


    Section
      5.1. Certificates;
      Legends.

    


    (a)
       The
      Securities may only be transferred in compliance with state and federal
      securities laws. In connection with any transfer of the Securities other than
      (i) pursuant to an effective registration statement, (ii) to the Company, or
      (iii) to an Affiliate of the Investor, the Company may require the transferor
      thereof
      to
      provide to the Company an opinion of counsel selected by the transferor and
      reasonably acceptable to the Company, the form and substance of which opinion
      shall be reasonably satisfactory to the Company, to the effect that such
      transfer does not require registration of such transferred Securities under
      the
      Securities Act. In the event of a private transfer of the Securities, the
      transferee shall be required to execute a counterpart to this Agreement,
      agreeing to be bound by (and shall have the benefits of) the terms hereof other
      than those set forth in Article 2 hereof, and such transferee shall be deemed
      to
      be an “Investor” for purposes of this Agreement. 

    


    (b)
       The
      certificates representing the Shares and the Warrants to be delivered at the
      Closings and the certificates evidencing the Warrant Shares to be delivered
      upon
      exercise of the Warrants will contain appropriate legends referring to
      restrictions on transfer relating to the registration requirements of the
      Securities Act and applicable state securities laws.


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    


    (c) In
      connection with any sale or disposition of the Securities by the Investor
      pursuant to Rule 144 or pursuant to any other exemption under the Securities
      Act
      such that the purchaser acquires freely tradable shares and upon compliance
      by
      the Investor with the requirements of this Agreement, the Company shall, or,
      in
      the case of Common Stock, shall cause the transfer agent for the Common Stock
      (the “Transfer
      Agent”)
      to, issue replacement certificates representing the Securities sold or disposed
      of without restrictive legends. Upon the earlier of (i) registration of any
      Securities for resale pursuant Article 4 or (ii) Rule 144(k) becoming available
      with respect to any Securities, the Company shall (A) deliver to the Transfer
      Agent irrevocable instructions that the Transfer Agent shall reissue a
      certificate representing such Securities without legends upon receipt by such
      Transfer Agent of the legended certificates, together with either (1) a
      customary representation by the Investor that Rule 144(k) applies to the shares
      of Common Stock represented thereby or (2) a statement by the Investor that
      the
      Investor has sold the shares of Common Stock represented thereby in accordance
      with the Plan of Distribution contained in the Registration Statement, and
      (B)
      cause its counsel to deliver to the Transfer Agent one or more blanket opinions
      to the effect that the removal of such legends in such circumstances may be
      effected under the Securities Act. From and after the earlier of such dates,
      upon the Investor’s written request, the Company shall promptly cause
      certificates evidencing the Investor’s Securities to be replaced with
      certificates which do not bear such restrictive legends, and Warrant Shares
      subsequently issued upon due exercise of the Warrants shall not bear such
      restrictive legends provided the provisions of either clause (i) or clause
      (ii)
      above, as applicable, are satisfied with respect to such Warrant Shares. When
      the Company is required to cause an unlegended certificate to replace a
      previously issued legended certificate, if: (1) the unlegended certificate
      is
      not delivered to an Investor within five Business Days after submission by
      the
      Investor of a legended certificate and supporting documentation to the Transfer
      Agent as provided above and (2) prior to the time such unlegended certificate
      is
      received by the Investor, the Investor, or any third party on behalf of such
      Investor or for the Investor’s account, purchases (in an open market transaction
      or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
      the
      Investor of shares represented by such certificate (a
“Buy-In”),
      then the Company shall pay in cash to the Investor (for costs incurred either
      directly by such Purchaser or on behalf of a third party) the amount by which
      the total purchase price paid for Common Stock as a result of the Buy-In
      (including brokerage commissions, if any) exceeds the proceeds received by
      such
      Investor as a result of the sale to which such Buy-In relates. The Investor
      shall provide the Company written notice indicating the amounts payable to
      the
      Investor in respect of the Buy-In.

    


    Section
      5.2. Integration.
      The
      Company has not and shall not, and shall use its best efforts to ensure that
      no
      Affiliate of the Company shall, sell, offer for sale or solicit offers to buy
      or
      otherwise negotiate in respect of any security (as defined in Section 2 of
      the
      Securities Act) that would be integrated with the offer or sale of the
      Securities in a manner that would require the registration under the Securities
      Act of the sale of the Securities to the Investor, or that would be integrated
      with the offer or sale of the Securities for purposes of the rules and
      regulations of any Trading Market in a manner that would require stockholder
      approval of the sale of the securities to the Investor.

    


    Section
      5.3. Securities
      Laws Disclosure; Publicity.
      By 9:00
      a.m. (New York time) on the Trading Day following the execution of this
      Agreement, and by 5:00 p.m. (New York time) on the Initial Closing Date, the
      Company shall issue press releases disclosing the transactions contemplated
      hereby and the Closing. On the Trading Day following the execution of this
      Agreement the Company will file a Current Report on Form 8-K disclosing the
      material terms of the Transaction Documents (and attach the Transaction
      Documents as exhibits thereto), and on each Closing Date the Company will file
      an additional Current Report on Form 8-K to disclose the Closing. In addition,
      the Company will make such other filings and notices in the manner and time
      required by the Commission and the Trading Market on which the Common Stock
      is
      listed. 


    Section
      5.4. Use
      of Proceeds.
      The
      Company
      shall use the net proceeds from the sale of the Securities hereunder (i) for
      working capital purposes, (ii) to purchase fixed assets used in the development
      or production of the Company’s products or (iii) for investment in new
      technologies related to the Company’s business (including without limitation
      through the acquisition of other companies). 



    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    


    Section
      5.5. Right
      of First Refusal

     

    (a)
      Proposed
      Financings.
      In the
      event that, during the period commencing on the Initial Closing Date and
      continuing to the earlier of (i) the second anniversary of the Second Closing
      Date or (ii) the second anniversary of the Outside Date, the Company seeks
      to
      raise additional funds through a private placement of its securities (a
“Proposed
      Financing”),
      other
      than Exempt Issuances, the Investor shall have the right to participate in
      the
      Proposed Financing on a pro rata basis, based on the percentage that (a) the
      number of shares of Common Stock then held by the Investor plus
      the
      number of shares of Common Stock issuable upon conversion of the Warrants bears
      to (b) the total number of shares of Common Stock outstanding plus
      the
      number of shares of Common Stock issuable upon conversion of the Series A
      Preferred Stock and the Prior Convertible Securities and exercise of the Company
      Stock Options, the Warrants and the Prior Warrants.

     

    (b)
      Pre-Notice
      of Proposed Financings.
      At least
      15 Business Days prior to the closing of any Proposed Financing, the Company
      shall deliver to each Investor a written notice of its intention to effect
      a
      Proposed Financing (“Pre-Notice”).
      If within 10 Business Days after receipt of the Pre-Notice, the Investor
      delivers to the Company a written request for detailed information regarding
      the
      Proposed Financing, the Company shall promptly, but no later than the Business
      Day immediately following its receipt of such request, deliver to the Investor
      a
      notice (a “Proposed
      Financing Notice”)
      which shall describe in reasonable detail the proposed terms of such Proposed
      Financing, the amount of proceeds intended to be raised thereunder, and the
      Person with whom such Proposed Financing is proposed to be effected, and shall
      have attached thereto be a term sheet or similar document relating to the
      Proposed Financing. The Investor shall notify the Company no later than 6:30
      p.m. (Little Rock time) on the fifth Business Day after receipt of the Proposed
      Financing Notice of its willingness to participate in the Proposed Financing
      on
      the terms described in the Proposed Financing Notice, subject to completion
      of
      mutually acceptable documentation and diligence investigation. The Company
      shall
      promptly provide to the Investor such diligence materials as it may reasonably
      request, subject to execution of a non-disclosure agreement, in reasonable
      form,
      mutually acceptable to the parties.

     

    (c)
      Investment
      Terms.
      The
      terms
      on which the Investor shall purchase securities pursuant to the Proposed
      Financing shall be the same as such securities are purchased by other investors
      in such Proposed Financing. In the event that the terms of the Proposed
      Financing are changed, the Borrower shall provide the Investor with the same
      notice of the revised terms that is provided to the other investors in such
      Proposed Financing in reasonably sufficient time to allow the Investor to review
      the Proposed Financing and the Company’s financial condition and prospects in
      light of the changed terms. 

     

    (d)
       Financings.
      In
      the
      event that the Investor does not exercise, within 12 Business Days after receipt
      of the Financing Notice, its right to participate in the Proposed Financing,
      the
      Company may sell the securities in the Proposed Financing at a price and on
      terms which are no more favorable to the investors in such Proposed Financing
      than the terms offered to the Investor. If the Company subsequently changes
      the
      price or terms so that the terms are at a price or more favorable to the
      investors in the Proposed Financing, the Company shall re-offer the securities
      to the Investor as provided in this Section 5.5. 

     

    Section
      5.6. No
      Disclosure of Material Non-Public Information.
      The
      Company will not disclose to the Investor any material non-public information
      concerning the Company except (a) with the consent of the Investor and (b)
      if
      such consent is given, pursuant to a non-disclosure agreement which provides,
      among other things, that the Investor will not disclose the material non-public
      information to any person and the Investor or the Agent will not engage in
      any
      transactions involving the Company’s securities while in possession of material
      non-public information.


    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    


    ARTICLE
      6

    


    Conditions
      Precedent to Closing

    


    Section
      6.1. Conditions
      Precedent to the Obligations of the Investor to Purchase
      Securities.
      The
      obligation of the Investor to acquire Securities at any Closing is subject
      to
      the satisfaction or waiver by the Investor, at or before the Closing, of each
      of
      the following conditions:

    


    
      	 	
              (a)

            	
              Representations
                and Warranties.
                The Company shall have delivered a certificate of the Company’s Chief
                Executive Officer certifying that the representations and warranties
                of
                the Company contained herein are true and correct in all material
                respects
                as of the date when made and as of the Closing Date as though made
                on and
                as of such Closing Date;

            


    

    


    
      	 	
              (b)

            	
              Performance.
                The Company shall have performed, satisfied and complied in all material
                respects with all covenants, agreements and conditions required by
                the
                Transaction Documents to be performed, satisfied or complied with
                by it at
                or prior to the Closing;

            


    

    


    
      	 	
              (c)

            	
              No
                Injunction.
                No
                statute, rule, regulation, executive order, decree, ruling or injunction
                shall have been enacted, entered, promulgated or endorsed by any
                court or
                governmental authority of competent jurisdiction that prohibits the
                consummation of any of the transactions contemplated by the Transaction
                Documents;

            


    

    


    
      	 	
              (d)

            	
              No
                Adverse Changes.
                Since the date of execution of this Agreement, no event or series
                of
                events shall have occurred that reasonably could have or result in
                a
                Material Adverse Effect;

            


    

    


    
      	 	
              (e)

            	
              Company
                Deliverables.
                The Company shall have delivered the Company Deliverables in accordance
                with Section 2.2(a).

            


    

    


    Section
      6.2. Conditions
      Precedent to the Obligations of the Company to Sell
      Securities.
      The
      obligation of the Company to sell Securities at any Closing is subject to the
      satisfaction or waiver by the Company, at or before the Closing, of each of
      the
      following conditions:

    


    
      	 	
              (a)

            	
              Representations
                and Warranties.
                The representations and warranties of the Investor contained herein
                shall
                be true and correct in all material respects as of the date when
                made and
                as of the Closing Date as though made on and as of such
                date;

            


    

    


    
      	 	
              (b)

            	
              Performance.
                The Investor shall have performed, satisfied and complied in all
                material
                respects with all covenants, agreements and conditions required by
                the
                Transaction Documents to be performed, satisfied or complied with
                by such
                Investor at or prior to the Closing;


            


    

    


    
      	 	
              (c)

            	
              No
                Injunction.
                No
                statute, rule, regulation, executive order, decree, ruling or injunction
                shall have been enacted, entered, promulgated or endorsed by any
                court or
                governmental authority of competent jurisdiction that prohibits the
                consummation of any of the transactions contemplated by the Transaction
                Documents; and

            


    

    


    
      	 	
              (d)

            	
              Purchase
                Price.
                The Investor shall have paid the Purchase Price payable at such Closing
                in
                accordance with Section 2.3.

            


    

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    


    ARTICLE
      7

    


    Miscellaneous

    


    Section
      7.1. Fees
      and Expenses.
      Each
      party shall pay the fees and expenses of its advisers, counsel, accountants
      and
      other experts, if any, and all other expenses incurred by such party incident
      to
      the negotiation, preparation, execution, delivery and performance of the
      Transaction Documents; provided,
      however,
      that,
      if but only if Securities are sold hereunder at the Initial Closing, the Company
      shall, at the Initial Closing, reimburse the Investor for its reasonable legal
      fees and expenses of its legal counsel, up to a maximum of $30,000, incurred
      in
      connection with the Investor’s due diligence and the negotiation and preparation
      of the Agreement. The Company shall pay all stamp and other taxes and duties
      levied in connection with the sale of the Shares.

    


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

    


    Section
      7.3. Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 6:30 p.m. (Little Rock time) on a Business Day, (b) the
      next Business Day after the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number specified
      in
      this Section on a day that is not a Business Day or later than 6:30 p.m. (Little
      Rock time) on any Business Day, (c) the Business Day following the date of
      transmission, if sent by a nationally recognized overnight courier service,
      or
      (d) upon actual receipt by the party to whom such notice is required to be
      given. The address for such notices and communications shall be as
      follows:

    


    
      	
              If
                to the Company:

            	
              ThermoEnergy
                Corporation

            
	 	
              Attn.:
                Andrew T. Melton

            
	 	
              124
                West Capitol Avenue, Suite 880

            
	 	
              Little
                Rock, AR 72201

            
	 	 
	 	
              Telephone:
                (501) 376-6477

            
	 	
              Facsimile:
                (501) 376-5249

            
	 	 
	
              With
                a copy to:

            	
              Nixon
                Peabody, LLP

            
	 	
              Attn.:
                William E. Kelly, Esq.

            
	 	
              100
                Summer Street

            
	 	
              Boston,
                MA 02110

            
	 	 
	 	
              Telephone:
                (617) 345-1195

            
	 	
              Facsimile:
                (866) 743-4899

            
	 	 
	
              If
                to the Investor:

            	
              The
                Quercus Trust

            
	 	
              1835
                Newport Blvd

            
	 	
              A109
                - PMB 467

            
	 	
              Costa
                Mesa, CA 92627

            
	 	 
	 	
              Telephone:
                (949) 646-3785

            
	 	
              Facsimile:
                (949) 903-1598

            


    

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    


    
      	
              With
                a copy to:

            	
              Greenberg
                Glusker Fields Claman & Machtinger, LLP

            
	 	
              Attn.:
                Joseph P. Bartlett, Esq.

            
	 	
              1900
                Avenue of the Stars, Suite 2100

            
	 	
              Los
                Angeles, CA 90067

            
	 	 
	 	
              Telephone:
                (310) 201-7481

            
	 	
              Facsimile:
                (310) 201-2380;

            


    

     

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

    


    Section
      7.4. Amendments;
      Waivers; No Additional Consideration.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed by the Company and the Investor. No waiver of any default
      with
      respect to any provision, condition or requirement of this Agreement shall
      be
      deemed to be a continuing waiver in the future or a waiver of any subsequent
      default or a waiver of any other provision, condition or requirement hereof,
      nor
      shall any delay or omission of either party to exercise any right hereunder
      in
      any manner impair the exercise of any such right. 

    


    Section
      7.5  Termination.
      This
      Agreement may be terminated prior to Initial Closing:

    


    
      	 	
              (a)
                

            	
              by
                written agreement of the Investor and the Company;
                or

            


    

    


    
      	 	
              (b)
                

            	
              by
                the Company or the Investor, upon written notice to the other, if
                the
                Closing shall not have taken place by 6:30 p.m., Little Rock time,
                on the
                Outside Date; provided,
                that the right to terminate this Agreement under this Section 7.5(b)
                shall
                not be available to any Person whose failure to comply with its
                obligations under this Agreement has been the cause of or resulted
                in the
                failure of the Closing to occur on or before such time, to the extent
                such
                delay is caused by such Person.

            


    

    


    Upon
      a
      termination in accordance with this Section 7.5, the Company and the Investor
      shall have no further obligation or liability (including as arising from such
      termination) to the other, provided that any liabilities arising prior to such
      termination shall not be affected by the termination.

    


    Section
      7.6. Construction.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party. This Agreement shall be
      construed as if drafted jointly by the parties, and no presumption or burden
      of
      proof shall arise favoring or disfavoring any party by virtue of the authorship
      of any provisions of this Agreement or any of the Transaction
      Documents.

    


    Section
      7.7. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. Neither party may assign this Agreement
      or any rights or obligations hereunder without the prior written consent of
      the
      other party.

    


    Section
      7.8. No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except as otherwise set
      forth
      in Section 4.6 (with respect to rights to indemnification and
      contribution).


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    Section
      7.9. Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of Delaware, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and of the transactions contemplated
      by this Agreement and any other Transaction Documents (whether brought against
      a
      party hereto or its respective Affiliates,
      employees or agents) shall be commenced exclusively in the state or federal
      courts sitting in, or having jurisdiction over, the State of Delaware (the
      “Delaware
      Courts”).
      Each
      party hereto hereby irrevocably submits to the exclusive jurisdiction of the
      Delaware Courts for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein
      (including with respect to the enforcement of the any of the Transaction
      Documents), and hereby irrevocably waives, and agrees not to assert in any
      Proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such Delaware Court, or that such Proceeding has been commenced in an
      improper or inconvenient forum. Each party hereto hereby irrevocably waives
      personal service of process and consents to process being served in any such
      Proceeding by mailing a copy thereof via registered or certified mail or
      overnight delivery (with evidence of delivery) to such party at the address
      in
      effect for notices to it under this Agreement and agrees that such service
      shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law. Each party hereto hereby irrevocably waives,
      to
      the fullest extent permitted by applicable law, any and all right to trial
      by
      jury in any legal proceeding arising out of or relating to this Agreement or
      the
      transactions contemplated hereby. If either party shall commence a Proceeding
      to
      enforce any provisions of a Transaction Document, then the prevailing party
      in
      such Proceeding shall be reimbursed by the other party for its reasonable
      attorneys’ fees and other costs and expenses incurred with the investigation,
      preparation and prosecution of such Proceeding.

     

    Section
      7.10. Survival.
      The
      representations, warranties, agreements and covenants contained herein shall
      survive the Closings and the delivery of the Securities.

    


    Section
      7.11. Execution.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original thereof,
      notwithstanding any subsequent failure or refusal of the signatory to deliver
      an
      original executed in ink.

    


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

    


    Section
      7.13. Replacement
      of Securities.
      If any
      certificate or instrument evidencing any Securities is mutilated, lost, stolen
      or destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction and
      customary and reasonable indemnity, if requested. The applicants for a new
      certificate or instrument under such circumstances shall also pay any reasonable
      third-party costs associated with the issuance of such replacement Securities.
      If a replacement certificate or instrument evidencing any Securities is
      requested due to a mutilation thereof, the Company may require delivery of
      such
      mutilated certificate or instrument as a condition precedent to any issuance
      of
      a replacement.

     

    
      
        
        

      

      
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    Section
      7.14. Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Investors and the Company will
      be entitled to specific performance under the Transaction Documents. The parties
      agree that, except as expressly set forth herein with respect to liquidated
      damages, monetary damages may not be adequate compensation for any loss incurred
      by reason of any breach of obligations described in the foregoing sentence
      and
      hereby agrees to waive in any action for specific performance of any such
      obligation the defense that a remedy at law would be adequate.

    


    Section
      7.15 Attorney’s
      Fees.
      If any
      action at law or in equity (including arbitration) is necessary to enforce
      or
      interpret the terms of any of the Transaction Documents, the prevailing party
      shall be entitled to reasonable attorney’s fees, costs and necessary
      disbursements in addition to any other relief to which such party may be
      entitled.

    


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

     

    


    
      	
              
                THE
                  QUERCUS
                  TRUST

              

            	
              
                
                  THERMOENERGY
                    CORPORATION

                

              

            
	 	 
	 	 
	
              By:

            	
                 
                /s/ David Gelbaum

            	 	
              By:

            	
                 
                /s/ Andrew T. Melton

            	 
	
                              
                David Gelbaum

            	
                              
                Andrew T. Melton

            
	
                              
                Trustee

            	
                               Executive
                Vice President and CFO

            


    

    


    
      
        
        

      

      
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