f10qsb0307ex10g.htm


    SECURITIES
      PURCHASE
      AGREEMENT

    


    SECURITIES
      PURCHASE AGREEMENT (this “Agreement”), dated as of
      October 19, 2007, by and among Midnight Holdings Group, Inc., a Delaware
      corporation, with headquarters located at 22600 Hall Road, Suite 205, Clinton
      Township, MI  48036 (the “Company”), and each of the
      purchasers set forth on the signature pages hereto (the “Buyers”).

     

    WHEREAS:

     

    A.  The
      Company and the Buyers are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by the rules and
      regulations as promulgated by the United States Securities and Exchange
      Commission (the “SEC”)
      under the Securities Act of 1933, as amended (the “1933 Act”);

     

    B.  Buyers
      desire to purchase and the Company desires to issue and sell, upon the terms
      and
      conditions set forth in this Agreement (i) 10% secured convertible notes of
      the Company, in the form attached hereto as Exhibit “A”, in the aggregate
      principal amount of Three Hundred Sixty-Seven Thousand Six Hundred Forty-Five
      Dollars ($367,645) (together with any note(s) issued in replacement thereof
      or
      otherwise with respect thereto in accordance with the terms thereof, the “Notes”), convertible into
      shares of common stock, par value $.00005 per share, of the Company (the “Common Stock”), upon the terms
      and subject to the limitations and conditions set forth in such Notes and
      (ii) warrants, in the form attached hereto as Exhibit “B”, to purchase an
      aggregate of Seven Hundred Thirty-Five Thousand Two Hundred Ninety (735,290)
      shares of Common Stock (the “Warrants”);

     

    C.  Each
      Buyer wishes to purchase, upon the terms and conditions stated in this
      Agreement, such principal amount of Notes and number of Warrants as is set
      forth
      immediately below its name on the signature pages hereto; and

     

    D.  Contemporaneous
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, in the form attached
      hereto as Exhibit “C”
      (the “Registration Rights
      Agreement”), pursuant to which the Company has agreed to provide certain
      registration rights under the 1933 Act and the rules and regulations promulgated
      thereunder, and applicable state securities laws.

     

    NOW
      THEREFORE, the Company and
      each of the Buyers severally (and not jointly) hereby agree as
      follows:

     

    1.  PURCHASE
      AND SALE OF NOTES
      AND WARRANTS.

     

    2.  Purchase
      of Notes and
      Warrants.  On the Closing Date (as defined below), the
      Company shall issue and sell to each Buyer and each Buyer severally agrees
      to
      purchase from the Company such principal amount of Notes and number of Warrants
      as is set forth immediately below such Buyer’s name on the signature pages
      hereto.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.  Form
      of
      Payment.  On the Closing Date (as defined below),
      (i)each Buyer shall pay the purchase price for the Notes (less the purchase
      price paid with respect to any Bridge Note) and the Warrants to be issued and
      sold to it at the Closing (as defined below) (the “Purchase Price”) by wire
      transfer of immediately available funds to the Company, in accordance with
      the
      Company’s written wiring instructions, against delivery of the Notes in the
      principal amount equal to the Purchase Price and the number of Warrants as
      is
      set forth immediately below such Buyer’s name on the signature pages hereto, and
      (ii) the Company shall deliver such Notes and Warrants duly executed on
      behalf of the Company, to such Buyer, against delivery of such Purchase
      Price.

     

    4.  Closing
      Date.  Subject to the satisfaction (or written waiver)
      of the conditions thereto set forth in Section 6 and Section 7 below, the date
      and time of the issuance and sale of the Notes and the Warrants pursuant to
      this
      Agreement (the “Closing
      Date”) shall be 12:00 noon, Eastern Standard Time on October 19, 2007, or
      such other mutually agreed upon time.  The closing of the transactions
      contemplated by this Agreement (the “Closing”) shall occur on the
      Closing Date at such location as may be agreed to by the parties.

     

    5.  BUYERS’
REPRESENTATIONS
      AND
      WARRANTIES.  Each Buyer severally (and not jointly)
      represents and warrants to the Company solely as to such Buyer
      that:

     

    6.  and
      the
      shares of Common Stock issuable upon conversion of or otherwise pursuant to
      the
      Notes (including, without limitation, such additional shares of Common Stock,
      if
      any, as are issuable (i) on account of interest on the Notes, (ii) as
      a result of the events described in Sections 1.3 and 1.4(g) of the Notes and
      Section 2(c) of the Registration Rights Agreement or (iii) in payment of
      the Standard Liquidated Damages Amount (as defined in Section 2(f) below)
      pursuant to this Agreement, such shares of Common Stock being collectively
      referred to herein as the “Conversion Shares”) and the
      Warrants and the shares of Common Stock issuable upon exercise thereof (the
      “Warrant Shares” and,
      collectively with the Notes, Warrants and Conversion Shares, the “Securities”) for its own
      account and not with a present view towards the public sale or distribution
      thereof, except pursuant to sales registered or exempted from registration
      under
      the 1933 Act; provided, however,
      that by
      making the representations herein, such Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act.

     

    7.  Accredited
      Investor
      Status.  Such Buyer is an “accredited investor” as that
      term is defined in Rule 501(a) of Regulation D (an “Accredited
      Investor”).

     

    8.  Reliance
      on
      Exemptions.  Such Buyer understands that the Securities
      are being offered and sold to it in reliance upon specific exemptions from
      the
      registration requirements of United States federal and state securities laws
      and
      that the Company is relying upon the truth and accuracy of, and such Buyer’s
      compliance with, the representations, warranties, agreements, acknowledgments
      and understandings of such Buyer set forth herein in order to determine the
      availability of such exemptions and the eligibility of such Buyer to acquire
      the
      Securities.

     

    9.  Information.  Such
      Buyer and its respective advisors, if any, have been furnished with all
      materials relating to the business, finances and operations of the Company
      and
      materials relating to the offer and sale of the Securities which have been
      reasonably requested by such Buyer or its advisors.  Such Buyer and
      its respective advisors, if any, have been afforded the opportunity to ask
      questions of the Company.  

     

     

    
      
        
        

      

      
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      Notwithstanding
        the foregoing, the Company has not disclosed to such Buyer any material
        nonpublic information and will not disclose such information unless such
        information is disclosed to the public prior to or promptly following such
        disclosure to such Buyer.  Neither such inquiries nor any other due
        diligence investigation conducted by such Buyer or any of its respective
        advisors or representatives shall modify, amend or affect Buyer’s right to rely
        on the Company’s representations and warranties contained in Section 3
        below.  Such Buyer understands that its investment in the Securities
        involves a significant degree of risk.

    

     

    10.  Governmental
      Review.  Such Buyer understands that no United States
      federal or state agency or any other government or governmental agency has
      passed upon or made any recommendation or endorsement of the
      Securities.

     

    11.  Transfer
      or
      Re-sale.  Such Buyer understands that (i) except as
      provided in the Registration Rights Agreement, the sale or re-sale of the
      Securities have not been and are not being registered under the 1933 Act or
      any
      applicable state securities laws, and the Securities may not be transferred
      unless (a) the Securities are sold pursuant to an effective registration
      statement under the 1933 Act, (b) such Buyer shall have delivered to the
      Company an opinion of counsel that shall be in form, substance and scope
      customary for opinions of counsel in comparable transactions to the effect
      that
      the Securities to be sold or transferred may be sold or transferred pursuant
      to
      an exemption from such registration, which opinion shall be accepted by the
      Company, (c) the Securities are sold or transferred to an “affiliate” (as
      defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of such Buyer who
      agrees to sell or otherwise transfer the Securities only in accordance with
      this
      Section 2(f) and who is an Accredited Investor, or (d) the Securities are
      sold pursuant to Rule 144, and such Buyer shall have delivered to the Company
      an
      opinion of counsel that shall be in form, substance and scope customary for
      opinions of counsel in corporate transactions, which opinion shall be accepted
      by the Company; (ii) any sale of such Securities made in reliance on Rule 144
      may be made only in accordance with the terms of said Rule and further, if
      said
      Rule is not applicable, any re-sale of such Securities under circumstances
      in
      which the seller (or the person through whom the sale is made) may be deemed
      to
      be an underwriter (as that term is defined in the 1933 Act) may require
      compliance with some other exemption under the 1933 Act or the rules and
      regulations of the SEC thereunder; and (iii) neither the Company nor any other
      person is under any obligation to register such Securities under the 1933 Act
      or
      any state securities laws or to comply with the terms and conditions of any
      exemption thereunder (in each case, other than pursuant to the Registration
      Rights Agreement).  Notwithstanding the foregoing or anything else
      contained herein to the contrary, subject to applicable law, the Securities
      may
      be pledged as collateral in connection with a bonafide
      margin account
      or other lending arrangement.  In the event that the Company does not
      accept an opinion of counsel provided by such Buyer with respect to the transfer
      of Securities pursuant to an exemption from registration, such as Rule 144,
      and
      such opinion is correct in form and substance, within three (3) business days
      of
      delivery of the opinion to the Company, the Company shall pay to such Buyer
      liquidated damages of three percent (3%) of the outstanding amount of the Notes
      held by such Buyer per month plus accrued and unpaid interest on the Notes,
      prorated for partial months, in cash or shares at the option of the Company
      (“Standard Liquidated Damages
      Amount”).  If the Company elects to pay the Standard Liquidated
      Damages Amount in shares of Common Stock, such shares shall be issued at the
      Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
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    12.  Legends.  Such
      Buyer understands that the Notes and the Warrants and, until such time as the
      Conversion Shares and Warrant Shares have been registered under the 1933 Act
      as
      contemplated by the Registration Rights Agreement or otherwise may be sold
      pursuant to Rule 144 without any restriction as to the number of securities
      as
      of a particular date that can then be immediately sold, the Conversion Shares
      and Warrant Shares may bear a restrictive legend in substantially the following
      form (and a stop-transfer order may be placed against transfer of the
      certificates for such Securities):

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended.  The securities may not be sold,
      transferred, assigned, or otherwise disposed of in the absence of an effective
      registration statement for the securities under said Act, or an opinion of
      counsel, in form, substance and scope customary for opinions of counsel in
      comparable transactions, that registration is not required under said Act or
      unless sold pursuant to Rule 144 under said Act.”

     

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of any Security upon which it is
      stamped, if, unless otherwise required by applicable state securities laws,
      (a)
      such Security is registered for sale under an effective registration statement
      filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
      any restriction as to the number of securities as of a particular date that
      can
      then be immediately sold, (b) such holder provides the Company with an opinion
      of counsel, in form, substance and scope customary for opinions of counsel
      in
      comparable transactions, to the effect that a public sale or transfer of such
      Security may be made without registration under the 1933 Act, which opinion
      shall be accepted by the Company so that the sale or transfer is effected,
      or
      (c) such holder provides the Company with reasonable assurances that such
      Security shall be sold pursuant to Rule 144.  Such Buyer agrees to
      sell all Securities, including those represented by a certificate(s) from which
      the legend has been removed, in compliance with applicable prospectus delivery
      requirements, if any.

     

    13.  Authorization;
      Enforcement. This Agreement and the Registration Rights Agreement
      have been duly and validly authorized.  This Agreement has been duly
      executed and delivered on behalf of such Buyer, and this Agreement constitutes,
      and upon execution and delivery by such Buyer of the Registration Rights
      Agreement, such agreement will constitute, legal, valid and binding agreements
      of such Buyer enforceable in accordance with their respective
      terms.

     

    14.  Residency.  Such
      Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
      name on the signature pages hereto.

     

    15.  REPRESENTATIONS
      AND
      WARRANTIES OF THE COMPANY.  The Company represents and
      warrants to each Buyer that:

     

    16.  Organization
      and
      Qualification.  The Company and each of its Subsidiaries
      (as defined below), if any, is a corporation duly organized, validly existing
      and in good standing under the laws of the jurisdiction in which it is
      incorporated, with full power and authority (corporate and other) to own, lease,
      use and operate its properties and to carry on its business as and where now
      owned, leased, used, operated and conducted.  Schedule 3(a) sets forth a
      list of all of the Subsidiaries (as defined below) of the Company and the
      jurisdiction in which each is incorporated.  

     

     

    
      
        
        

      

      
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      The
        Company and each of its Subsidiaries is duly qualified as a foreign corporation
        to do business and is in good standing in every jurisdiction in which its
        ownership or use of property or the nature of the business conducted by it
        makes
        such qualification necessary except where the failure to be so qualified
        or in
        good standing would not have a Material Adverse Effect.  “Material Adverse Effect” means
        any material adverse effect on the business, operations, assets, financial
        condition or prospects of the Company or its Subsidiaries, if any, taken
        as a
        whole, or on the transactions contemplated hereby or by the agreements or
        instruments to be entered into in connection herewith.  “Subsidiaries” means any
        corporation or other organization, whether incorporated or unincorporated,
        in
        which the Company owns, directly or indirectly, all of the equity or other
        ownership interests.

    

     

    17.  Authorization;
      Enforcement.  (i) The Company has all requisite
      corporate power and authority to enter into and perform this Agreement, the
      Registration Rights Agreement, the Notes and the Warrants and, subject to the
      adoption of necessary resolutions by the Board of Directors and the stockholders
      of the Company to consummate the transactions contemplated hereby and thereby
      and to issue the Securities, in accordance with the terms hereof and thereof,
      (ii) the execution and delivery of this Agreement, the Registration Rights
      Agreement, the Notes and the Warrants by the Company and, the consummation
      by it
      of the transactions contemplated hereby and thereby (including, without
      limitation, the issuance of the Notes and the Warrants and the issuance and
      reservation for issuance of the Conversion Shares and Warrant Shares issuable
      upon conversion or exercise thereof) have been duly authorized by the Company’s
      Board of Directors and no further consent or authorization of the Company,
      its
      Board of Directors, or its shareholders is required, (iii) this Agreement has
      been duly executed and delivered by the Company by its authorized
      representative, and such authorized representative is the true and official
      representative with authority to sign this Agreement and the other documents
      executed in connection herewith and bind the Company accordingly, and (iv)
      this
      Agreement constitutes, and upon execution and delivery by the Company of the
      Registration Rights Agreement, the Notes and the Warrants, each of such
      instruments will constitute, a legal, valid and binding obligation of the
      Company enforceable against the Company in accordance with its respective
      terms.

     

    18.  Capitalization.  Except
      as set forth on Schedule
      3(c), as of June 30, 2006 hereof, the authorized capital stock of the
      Company consists of (i) 1,000,000,000 shares of Common Stock, par value
      $0.00005, of which 470,050,001 shares are issued and outstanding and (ii)
      10,000,000 shares of preferred stock, par value $0.001, of which no shares
      are
      issued and outstanding.  All of such outstanding shares of capital stock
      are, or upon issuance will be, duly authorized, validly issued, fully paid
      and
      nonassessable.  No shares of capital stock of the Company are subject to
      preemptive rights or any other similar rights of the shareholders of the Company
      or any liens or encumbrances imposed through the actions or failure to act
      of
      the Company.  Except as disclosed in Schedule 3(c), as of the date
      of this Agreement, (i) there are no outstanding options, warrants, scrip, rights
      to subscribe for, puts, calls, rights of first refusal, agreements,
      understandings, claims or other commitments or rights of any character
      whatsoever relating to, or securities or rights convertible into or exchangeable
      for any shares of capital stock of the Company or any of its Subsidiaries,
      or
      arrangements by which the Company or any of its Subsidiaries is or may become
      bound to issue additional shares of capital stock of the Company or any of
      its
      Subsidiaries, 

     

     

    
      
        
        

      

      
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      (ii)
        there are no agreements or arrangements under which the Company or any of
        its
        Subsidiaries is obligated to register the sale of any of its or their securities
        under the 1933 Act (except the Registration Rights Agreement) and (iii) there
        are no anti-dilution or price adjustment provisions contained in any security
        issued by the Company (or in any agreement providing rights to security holders)
        that will be triggered by the issuance of the Notes, the Warrants, the
        Conversion Shares or Warrant Shares.  The Company has made available to
        each Buyer true copies of the Certificate of Incorporation as in effect on
        the
        date hereof, the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms
        of
        all securities convertible into or exercisable for Common Stock of the Company
        and the material rights of the holders thereof in respect
        thereto.

    

     

    19.  Issuance
      of
      Shares.  The Conversion Shares and Warrant Shares are
      duly authorized and reserved for issuance and, upon conversion of the Notes
      and
      exercise of the Warrants in accordance with their respective terms, will be
      validly issued, fully paid and non-assessable, and free from all taxes, liens,
      claims and encumbrances with respect to the issue thereof and shall not be
      subject to preemptive rights or other similar rights of shareholders of the
      Company and will not impose personal liability upon the holder
      thereof.

     

    20.  Acknowledgment
      of
      Dilution.  The Company understands and acknowledges the
      potentially dilutive effect to the Common Stock upon the issuance of the
      Conversion Shares and Warrant Shares upon conversion of the Note or exercise
      of
      the Warrants.  The Company further acknowledges that its obligation to
      issue Conversion Shares and Warrant Shares upon conversion of the Notes or
      exercise of the Warrants in accordance with this Agreement, the Notes and the
      Warrants is absolute and unconditional regardless of the dilutive effect that
      such issuance may have on the ownership interests of other shareholders of
      the
      Company.

     

    21.  No
      Conflicts.  The execution, delivery and performance of
      this Agreement, the Registration Rights Agreement, the Notes and the Warrants
      by
      the Company and the consummation by the Company of the transactions contemplated
      hereby and thereby (including, without limitation, the issuance and reservation
      for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
      with or result in a violation of any provision of the Certificate of
      Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
      of any provision of, or constitute a default (or an event which with notice
      or
      lapse of time or both could become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation of, any
      agreement, indenture, patent, patent license or instrument to which the Company
      or any of its Subsidiaries is a party, or (iii)  result in a violation
      of any law, rule, regulation, order, judgment or decree (including federal
      and
      state securities laws and regulations and regulations of any self-regulatory
      organizations to which the Company or its securities are currently subject)
      applicable to the Company or any of its Subsidiaries or by which any property
      or
      asset of the Company or any of its Subsidiaries is bound or affected (except
      for
      such conflicts, defaults, terminations, amendments, accelerations, cancellations
      and violations as would not, individually or in the aggregate, have a Material
      Adverse Effect).  

     

     

    
      
        
        

      

      
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      Neither
        the Company nor any of its Subsidiaries is in violation of its Certificate
        of
        Incorporation, By-laws or other organizational documents and neither the
        Company
        nor any of its Subsidiaries is in default (and no event has occurred which
        with
        notice or lapse of time or both could put the Company or any of its Subsidiaries
        in default) under, and neither the Company nor any of its Subsidiaries has
        taken
        any action or failed to take any action that would give to others any rights
        of
        termination, amendment, acceleration or cancellation of, any agreement,
        indenture or instrument to which the Company or any of its Subsidiaries is
        a
        party or by which any property or assets of the Company or any of its
        Subsidiaries is bound or affected, except for possible defaults as would
        not,
        individually or in the aggregate, have a Material Adverse Effect. The businesses
        of the Company and its Subsidiaries, if any, are not being conducted, and
        shall
        not be conducted so long as a Buyer owns any of the Securities, in violation
        of
        any law, ordinance or regulation of any governmental entity, which violation
        would cause a Material Adverse Effect.  Except as specifically
        contemplated by this Agreement and as required under the 1933 Act and any
        applicable state securities laws, the Company is not required to obtain any
        consent, authorization or order of, or make any filing or registration with,
        any
        court, governmental agency, regulatory agency, self regulatory organization
        or
        stock market or any third party in order for it to execute, deliver or perform
        any of its obligations under this Agreement, the Registration Rights Agreement,
        the Notes or the Warrants in accordance with the terms hereof or thereof
        or to
        issue and sell the Notes and Warrants in accordance with the terms hereof
        and to
        issue the Conversion Shares upon conversion of the Notes and the Warrant
        Shares
        upon exercise of the Warrants.  All consents, authorizations, orders,
        filings and registrations which the Company is required to obtain pursuant
        to
        the preceding sentence have been obtained or will be obtained promptly after
        Closing effected on or prior to the date hereof.

    

     

    22.  Absence
      of Certain
      Changes.  Since December 31, 2005, there has been no
      material adverse change and no material adverse development in the assets,
      liabilities, business, properties, operations, financial condition, results
      of
      operations or prospects of the Company or any of its Subsidiaries.

     

    23.  Absence
      of
      Litigation.  There is no action, suit, claim,
      proceeding, inquiry or investigation before or by any court, public board,
      government agency, self-regulatory organization or body pending or, to the
      knowledge of the Company or any of its Subsidiaries, threatened against or
      affecting the Company or any of its Subsidiaries, or their officers or directors
      in their capacity as such, that could have a Material Adverse
      Effect.  Schedule
      3(h) contains a complete list and summary description of any pending or
      threatened proceeding against or affecting the Company or any of its
      Subsidiaries, without regard to whether it would have a Material Adverse
      Effect.  The Company and its Subsidiaries are unaware of any facts or
      circumstances which might give rise to any of the foregoing.

     

    24.  Patents,
      Copyrights,
      etc.  The Company and each of its Subsidiaries owns or
      possesses the requisite licenses or rights to use all patents, patent
      applications, patent rights, inventions, know-how, trade secrets, trademarks,
      trademark applications, service marks, service names, trade names and copyrights
      (“Intellectual
      Property”) necessary to enable it to conduct its business as now operated
      (and, to the best of the Company’s knowledge, as presently contemplated to be
      operated in the future); there is no claim or action by any person pertaining
      to, or proceeding pending, or to the Company’s knowledge threatened, which
      challenges the right of the Company or of a Subsidiary with respect to any
      Intellectual Property necessary to enable it to conduct its business as now
      operated (and, to the best of the Company’s knowledge, as presently contemplated
      to be operated in the future); to the best of the Company’s knowledge, the
      Company’s or its Subsidiaries’ current and intended products, services and
      processes do not infringe on any Intellectual Property or other rights held
      by
      any person; and the Company is unaware of any facts or circumstances which
      might
      give rise to any of the foregoing.  The Company and each of its
      Subsidiaries have taken reasonable security measures to protect the secrecy,
      confidentiality and value of their Intellectual Property.

     

     

    
      
        
        

      

      
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    25.  No
      Materially Adverse
      Contracts, Etc.  Neither the Company nor any of its
      Subsidiaries is subject to any charter, corporate or other legal restriction,
      or
      any judgment, decree, order, rule or regulation which in the judgment of the
      Company’s officers has or is expected in the future to have a Material Adverse
      Effect.  Neither the Company nor any of its Subsidiaries is a party to
      any contract or agreement which in the judgment of the Company’s officers has or
      is expected to have a Material Adverse Effect.

     

    26.  Tax
      Status.  Except as set forth on Schedule 3(k), the
      Company and
      each of its Subsidiaries has made or filed all federal, state and foreign income
      and all other tax returns, reports and declarations required by any jurisdiction
      to which it is subject (unless and only to the extent that the Company and
      each
      of its Subsidiaries has set aside on its books provisions reasonably adequate
      for the payment of all unpaid and unreported taxes) and has paid all taxes
      and
      other governmental assessments and charges that are material in amount, shown
      or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and has set aside on its books provisions
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply.  To the
      Company’s knowledge, there are no unpaid taxes in any material amount claimed to
      be due by the taxing authority of any jurisdiction.  The Company has
      not executed a waiver with respect to the statute of limitations relating to
      the
      assessment or collection of any foreign, federal, state or local
      tax.  Except as set forth on Schedule 3(k), none of the
      Company’s tax returns is presently being audited by any taxing
      authority.

     

    27.  Certain
      Transactions.  Except as set forth on Schedule 3(l) and
      except for
      arm’s length transactions pursuant to which the Company or any of its
      Subsidiaries makes payments in the ordinary course of business upon terms no
      less favorable than the Company or any of its Subsidiaries could obtain from
      third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the
      officers, directors, or employees of the Company is presently a party to any
      transaction with the Company or any of its Subsidiaries (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 corporation, partnership, trust or other entity in which
      any
      officer, director, or any such employee has a substantial interest or is an
      officer, director, trustee or partner.

     

    28.  Disclosure.  All
      information relating to or concerning the Company or any of its Subsidiaries
      set
      forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
      hereof and otherwise in connection with the transactions contemplated hereby
      is,
      to the knowledge of the Company, true and correct in all material respects
      and
      the Company has not omitted to state any material fact necessary in order to
      make the statements made herein or therein, in light of the circumstances under
      which they were made, not misleading.  To the knowledge of the
      Company, no event or circumstance has occurred or exists with respect to the
      Company or any of its Subsidiaries or its or their business, properties,
      prospects, operations or financial conditions, which, under applicable law,
      rule
      or regulation, requires public disclosure or announcement by the Company but
      which has not been so publicly announced or disclosed (assuming for this purpose
      that the Company’s reports filed under the 1934 Act are being incorporated into
      an effective registration statement filed by the Company under the 1933
      Act).

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    29.  Acknowledgment
      Regarding
      Buyers’ Purchase of Securities.  The Company
      acknowledges and agrees that the Buyers are acting solely in the capacity of
      arm’s length purchasers with respect to this Agreement and the transactions
      contemplated hereby.  The Company further acknowledges that no Buyer
      is acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby and any statement made by any Buyer or any of their respective
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is not advice or a recommendation and is merely incidental
      to the Buyers’ purchase of the Securities.  The Company further
      represents to each Buyer that the Company’s decision to enter into this
      Agreement has been based solely on the independent evaluation of the Company
      and
      its representatives.

     

    30.  No
      Integrated
      Offering.  Except for sales of securities to the Buyers
      and affiliates thereof heretofore consummated, neither the Company, nor any
      of
      its affiliates, nor any person acting on its or their behalf, has directly
      or
      indirectly made any offers or sales in any security or solicited any offers
      to
      buy any security under circumstances that would require registration under
      the
      1933 Act of the issuance of the Securities to the Buyers.  The
      issuance of the Securities to the Buyers will not be integrated with any other
      issuance of the Company’s securities (past, current or future) for purposes of
      any shareholder approval provisions applicable to the Company or its
      securities.

     

    31.  No
      Brokers.  The Company has taken no action which would
      give rise to any claim by any person for brokerage commissions, transaction
      fees
      or similar payments relating to this Agreement or the transactions contemplated
      hereby.

     

    32.  Permits;
      Compliance.  The Company and each of its Subsidiaries is
      in possession of all material franchises, grants, authorizations, licenses,
      permits, easements, variances, exemptions, consents, certificates, approvals
      and
      orders necessary to own, lease and operate its properties and to carry on its
      business as it is now being conducted (collectively, the “Company Permits”), and there
      is no action pending or, to the knowledge of the Company, threatened regarding
      suspension or cancellation of any of the Company Permits.  Neither the
      Company nor any of its Subsidiaries is in conflict with, or in default or
      violation of, any of the Company Permits, except for any such conflicts,
      defaults or violations which, individually or in the aggregate, would not
      reasonably be expected to have a Material Adverse Effect.  Since
      December 31, 2005, neither the Company nor any of its Subsidiaries has received
      any notification with respect to possible conflicts, defaults or violations
      of
      applicable laws, except for notices relating to possible conflicts, defaults
      or
      violations, which conflicts, defaults or violations would not have a Material
      Adverse Effect.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    a.  Environmental
      Matters.

     

    (i)  There
      are, to the Company’s knowledge, with respect to the Company or any of its
      Subsidiaries or any predecessor of the Company, no present violations of
      Environmental Laws (as defined below), releases of any material into the
      environment, actions, activities, circumstances, conditions, events, incidents,
      or contractual obligations which may give rise to any common law environmental
      liability or any liability under the Comprehensive Environmental Response,
      Compensation and Liability Act of 1980 or similar federal, state, local or
      foreign laws and neither the Company nor any of its Subsidiaries has received
      any notice with respect to any of the foregoing, nor is any action pending
      or,
      to the Company’s knowledge, threatened in connection with any of the
      foregoing.  The term “Environmental Laws” means all
      material federal, state, local or foreign laws relating to pollution or
      protection of human health or the environment (including, without limitation,
      ambient air, surface water, groundwater, land surface or subsurface strata),
      including, without limitation, laws relating to emissions, discharges, releases
      or threatened releases of chemicals, pollutants contaminants, or toxic or
      hazardous substances or wastes (collectively, “Hazardous Materials”) into the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (ii)  Other
      than those that are or were stored, used or disposed of in compliance with
      applicable law, no Hazardous Materials are contained on or about any real
      property currently owned, leased or used by the Company or any of its
      Subsidiaries, and no Hazardous Materials were released on or about any real
      property previously owned, leased or used by the Company or any of its
      Subsidiaries during the period the property was owned, leased or used by the
      Company or any of its Subsidiaries, except in the normal course of the Company’s
      or any of its Subsidiaries’ business.

     

    (iii)  There
      are
      no underground storage tanks on or under any real property owned, leased or
      used
      by the Company or any of its Subsidiaries that are not in compliance with
      applicable law.

     

    33.  Title
      to
      Property.  Except as set forth on Schedule 3(s), the
      Company and
      its Subsidiaries have good and marketable title to all real property and good
      and marketable title to all personal property owned by them which is material
      to
      the business of the Company and its Subsidiaries, in each case free and clear
      of
      all liens and encumbrances and, to the knowledge of the Company, defects or
      such
      as would not have a Material Adverse Effect.  To the knowledge of the
      Company, any real property and facilities held under lease by the Company and
      its Subsidiaries are held by them under valid, subsisting and enforceable leases
      with such exceptions as would not have a Material Adverse Effect.

     

    34.  Insurance.  The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged.  Neither the
      Company nor any such Subsidiary has any reason to believe that it will not
      be
      able to renew its existing insurance coverage as and when such coverage expires
      or to obtain similar coverage from similar insurers as may be necessary to
      continue its business at a cost that would not have a Material Adverse
      Effect.  The Company has provided to Buyer true and correct copies of
      all policies relating to directors’ and officers’ liability coverage, errors and
      omissions coverage, and commercial general liability coverage.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    35.  Internal
      Accounting
      Controls.  The Company and each of its Subsidiaries
      maintain a system of internal accounting controls sufficient, in the judgment
      of
      the Company’s board of directors, to provide reasonable assurance that (i)
      transactions are executed in accordance with management’s general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management’s general or specific
      authorization and (iv) the recorded accountability for assets is compared with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences.

     

    36.  Foreign
      Corrupt
      Practices.  Neither the Company, nor any of its
      Subsidiaries, nor any director, officer, agent, employee or other person acting
      on behalf of the Company or any Subsidiary has, in the course of his actions
      for, or on behalf of, the Company, used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; made any direct or indirect unlawful payment to any foreign
      or domestic government official or employee from corporate funds; violated
      or is
      in violation of any provision of the U.S. Foreign Corrupt Practices Act of
      1977,
      as amended, or made any bribe, rebate, payoff, influence payment, kickback
      or
      other unlawful payment to any foreign or domestic government official or
      employee.

     

    37.  Solvency.  The
      Company (after giving effect to the transactions contemplated by this Agreement)
      is solvent (i.e., its assets
      have
      a fair market value in excess of the amount required to pay its probable
      liabilities on its existing debts as they become absolute and matured) and
      currently the Company has no information that would lead it to reasonably
      conclude that the Company would not, after giving effect to the transaction
      contemplated by this Agreement, have the ability to, nor does it intend to
      take
      any action that would impair its ability to, pay its debts from time to time
      incurred in connection therewith as such debts mature.

     

    38.  No
      Investment
      Company.  The Company is not, and upon the issuance and
      sale of the Securities as contemplated by this Agreement will not be an
“investment company” required to be registered under the Investment Company Act
      of 1940 (an “Investment
      Company”).  The Company is not controlled by an Investment
      Company.

     

    39.  Breach
      of Representations
      and Warranties by the Company.  If the Company breaches
      any of the representations or warranties set forth in this Section 3, and in
      addition to any other remedies available to the Buyers pursuant to this
      Agreement, the Company shall pay to the Buyers the Standard Liquidated Damages
      Amount in cash or in shares of Common Stock at the option of the Company, until
      such breach is cured.  If the Company elects to pay the Standard
      Liquidated Damages Amounts in shares of Common Stock, such shares shall be
      issued at the Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    40.  COVENANTS.

     

    41.  Best
      Efforts.  The parties shall use their best efforts to
      satisfy timely each of the conditions agreed to thereby described in Section
      6
      and 7 of this Agreement.

     

    42.  Form
      D; Blue Sky
      Laws.  The Company agrees to file a Form D with respect
      to the Securities as required under Regulation D and to make available a copy
      thereof to each Buyer promptly after such filing.  The Company shall,
      on, before or promptly after the Closing Date, take such action as the Company
      shall reasonably determine is necessary to qualify the Securities for sale
      to
      the Buyers under applicable securities or “blue sky” laws of the states of the
      United States (or to obtain an exemption from such qualification), and shall
      make available evidence of any such action so taken to each Buyer on or prior
      to
      the Closing Date.

     

    43.  Reporting
      Status;
      Eligibility to Use Form S-3, SB-2 or Form

     

    S-1. The
      Company represents
      and warrants that it shall use its best efforts to meet the requirements for
      the
      use of Form S-3 (or if the Company is not eligible for the use of Form S-3
      as of
      the Filing Date (as defined in the Registration Rights Agreement), the Company
      may use  the form of registration for which it is eligible at that
      time) for registration of the sale by the Buyer of the Registrable Securities
      (as defined in the Registration Rights Agreement).  So long as any
      Buyer beneficially owns any of the Securities, the Company shall use its best
      efforts to timely file all reports required to be filed with the SEC pursuant
      to
      the 1934 Act, and the Company shall not terminate its status as an issuer
      required to file reports under the 1934 Act even if the 1934 Act or the rules
      and regulations thereunder would permit such termination.  The Company
      further agrees that it shall use its best efforts to file all reports required
      to be filed by the Company with the SEC in a timely manner so as to become
      eligible, and thereafter to maintain its eligibility, for the use of Form
      S-3.  The Company shall issue a press release describing the materials
      terms of the transaction contemplated hereby as soon as practicable following
      the Closing Date but in no event more than five (5) business days of the Closing
      Date, which press release shall be subject to prior review by the
      Buyers.  The Company agrees that such press release shall not disclose
      the name of the Buyers unless expressly consented to in writing by the Buyers
      or
      unless required by applicable law or regulation, and then only to the extent
      of
      such requirement.

     

    44.  Use
      of
      Proceeds.  The Company shall use the proceeds from the
      sale of the Notes and the Warrants for general working capital purposes and
      shall not, directly or indirectly, use such proceeds for any loan to or
      investment in any other corporation, partnership, enterprise or other person
      (except in connection with its currently existing direct or indirect
      Subsidiaries.

     

    45.  Future
      Offerings.  Subject to the exceptions described below,
      the Company will not, without the prior written consent of a
      majority-in-interest of the Buyers, not to be unreasonably withheld, negotiate
      or contract with any party to obtain additional equity financing (including
      debt
      financing with an equity component) that involves (A) the issuance of Common
      Stock at a discount to the market price of the Common Stock on the date of
      issuance (taking into account the value of any warrants or options to acquire
      Common Stock issued in connection therewith) or (B) the issuance of convertible
      securities that are convertible into an indeterminate number of shares of Common
      Stock or (C) the issuance of warrants during the period (the “Lock-up Period”) beginning on
      the Closing Date and ending on the later of (i) two hundred seventy (270) days
      from the Closing Date and (ii) one hundred eighty (180) days from the date
      the
      Registration Statement (as defined in the Registration Rights Agreement) is
      declared effective (plus any days in which sales cannot be made
      thereunder).  

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

       

      In
        addition, subject to the exceptions described below, the Company will not
        conduct any equity financing (including debt with an equity component) (“Future Offerings”) during the
        period beginning on the Closing Date and ending two (2) years after the end
        of
        the Lock-up Period unless it shall have first delivered to each Buyer, at
        least
        twenty (20) business days prior to the closing of such Future Offering, written
        notice describing the proposed Future Offering, including the terms and
        conditions thereof and proposed definitive documentation to be entered into
        in
        connection therewith, and providing each Buyer an option during the fifteen
        (15)
        day period following delivery of such notice to purchase its pro rata share
        (based on the ratio that the aggregate principal amount of Notes purchased
        by it
        hereunder bears to the aggregate principal amount of Notes purchased hereunder)
        of the securities being offered in the Future Offering on the same terms
        as
        contemplated by such Future Offering (the limitations referred to in this
        sentence and the preceding sentence are collectively referred to as the “Capital Raising
        Limitations”).  In the event
        the terms
        and conditions of a proposed Future Offering are amended in any respect after
        delivery of the notice to the Buyers concerning the proposed Future Offering,
        the Company shall deliver a new notice to each Buyer describing the amended
        terms and conditions of the proposed Future Offering and each Buyer thereafter
        shall have an option during the fifteen (15) day period following delivery
        of
        such new notice to purchase its pro rata share of the securities being offered
        on the same terms as contemplated by such proposed Future Offering, as
        amended.  The foregoing sentence shall apply to successive amendments
        to the terms and conditions of any proposed Future Offering.  The
        Capital Raising Limitations shall not apply to any transaction involving
        (i)
        issuances of securities in a firm commitment underwritten public offering
        (excluding a continuous offering pursuant to Rule 415 under the 1933 Act)
        or
        (ii) issuances of securities as consideration for a merger, consolidation
        or
        purchase of assets, or in connection with any strategic partnership or joint
        venture (the primary purpose of which is not to raise equity capital), or
        in
        connection with the disposition or acquisition of a business, product or
        license
        by the Company.  The Capital Raising Limitations also shall not apply
        to the issuance of securities upon exercise or conversion of the Company’s
        options, warrants or other convertible securities outstanding as of the date
        hereof or to the grant of additional options or warrants, or the issuance
        of
        additional securities, under any Company stock option or restricted stock
        plan
        approved by the shareholders of the Company.

    

     

    46.  Expenses.  At
      the Closing, the Company shall reimburse Buyers for expenses incurred by them
      in
      connection with the negotiation, preparation, execution, delivery and
      performance of this Agreement and the other agreements to be executed in
      connection herewith (“Documents”), including,
      without limitation, attorneys’ and consultants’ fees and expenses, transfer
      agent fees, fees for stock quotation services, fees relating to any amendments
      or modifications of the Documents or any consents or waivers of provisions
      in
      the Documents, fees for the preparation of opinions of counsel, escrow fees,
      and
      costs of restructuring the transactions contemplated by the Documents in an
      amount not to exceed $30,000.  When possible, the Company must pay
      these fees directly, otherwise the Company must make immediate payment for
      reimbursement to the Buyers for all fees and expenses immediately upon written
      notice by the Buyer or the submission of an invoice by the Buyer.  If
      the Company fails to reimburse the Buyer in full within three (3) business
      days
      of the written notice or submission of invoice by the Buyer, the Company shall
      pay interest on the total amount of fees to be reimbursed at a rate of 15%
      per
      annum.

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    47.  Financial
      Information.  The Company agrees to send the following
      reports to each Buyer until such Buyer transfers, assigns, or sells all of
      the
      Securities: (i) within ten (10) days after the filing with the SEC, a copy
      of its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and
      any
      Current Reports on Form 8-K; (ii) within one (1) day after release, copies
      of all press releases issued by the Company or any of its Subsidiaries; and
      (iii) contemporaneously with the making available or giving to the
      shareholders of the Company, copies of any notices or other information the
      Company makes available or gives to such shareholders.

     

    48.  Authorization
      and
      Reservation of Shares.  The Company shall at all times
      have authorized, and reserved for the purpose of issuance, a sufficient number
      of shares of Common Stock to provide for the full conversion or exercise of
      the
      outstanding Notes and Warrants and issuance of the Conversion Shares and Warrant
      Shares in connection therewith (based on the Conversion Price of the Notes
      or
      Exercise Price of the Warrants in effect from time to time) and as otherwise
      required by the Notes.  The Company shall not reduce the number of
      shares of Common Stock reserved for issuance upon conversion of Notes and
      exercise of the Warrants without the consent of each Buyer.  The
      Company shall at all times maintain the number of shares of Common Stock so
      reserved for issuance at an amount (“Reserved Amount”) equal to no
      less than two (2) times the number that is then actually issuable upon full
      conversion of the Notes and upon exercise of the Warrants (based on the
      Conversion Price of the Notes or the Exercise Price of the Warrants in effect
      from time to time).  If at any time the number of shares of Common
      Stock authorized and reserved for issuance (“Authorized and Reserved
      Shares”) is below the Reserved Amount, the Company will promptly take all
      corporate action necessary to authorize and reserve a sufficient number of
      shares, including, without limitation, calling a special meeting of shareholders
      to authorize additional shares to meet the Company’s obligations under this
      Section 4(h), in the case of an insufficient number of authorized shares, obtain
      shareholder approval of an increase in such authorized number of shares, and
      voting the management shares of the Company in favor of an increase in the
      authorized shares of the Company to ensure that the number of authorized shares
      is sufficient to meet the Reserved Amount.  If the Company fails to
      obtain such shareholder approval within sixty (60) days following the date
      on
      which the number of Reserved Amount exceeds the Authorized and Reserved Shares,
      the Company shall pay to the Buyers the Standard Liquidated Damages Amount,
      in
      cash or in shares of Common Stock at the option of each Buyer.  If a
      Buyer elects to be paid the Standard Liquidated Damages Amount in shares of
      Common Stock, such shares shall be issued at the Conversion Price at the time
      of
      payment.  In order to ensure that the Company has authorized a
      sufficient amount of shares to meet the Reserved Amount at all times, the
      Company shall use its best efforts to deliver to a representative for the Buyers
      at the end of every month a list detailing (1) the current amount of shares
      authorized by the Company and reserved for the Buyers; and (2) amount of shares
      issuable upon conversion of the Notes and upon exercise of the Warrants and
      as
      payment of interest accrued on the Notes for one year.  If the Company
      fails to provide such list within five (5) business days of having received
      a
      written demand therefor, the Company shall pay the Standard Liquidated Damages
      Amount, in cash or in shares of Common Stock at the option of the Buyer, until
      the list is delivered.  If the Buyer elects to be paid the Standard
      Liquidated Damages Amount in shares of Common Stock, such shares shall be issued
      at the Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    49.  Listing.  The
      Company shall use its best efforts to secure the listing of the Conversion
      Shares and Warrant Shares upon each national securities exchange or automated
      quotation system, if any, upon which shares of Common Stock are then listed
      (subject to official notice of issuance) and, so long as any Buyer owns any
      of
      the Securities, shall maintain, so long as any other shares of Common Stock
      shall be so listed, such listing of all Conversion Shares and Warrant Shares
      from time to time issuable upon conversion of the Notes or exercise of the
      Warrants.  The Company will use best efforts to obtain and, so long as
      any Buyer owns any of the Securities, maintain the listing and trading of its
      Common Stock on the OTCBB or any equivalent replacement exchange, the Nasdaq
      National Market (“Nasdaq”), the Nasdaq SmallCap
      Market (“Nasdaq
      SmallCap”), the New York Stock Exchange (“NYSE”), or the American
      Stock
      Exchange (“AMEX”) and
      will comply in all respects with the Company’s reporting, filing and other
      obligations under the bylaws or rules of the National Association of Securities
      Dealers (“NASD”) and
      such exchanges, as applicable.  The Company shall promptly provide to
      each Buyer copies of any notices it receives from the OTCBB and any other
      exchanges or quotation systems on which the Common Stock is then listed
      regarding the continued eligibility of the Common Stock for listing on such
      exchanges and quotation systems.

     

    50.  Corporate
      Existence.  So long as a Buyer beneficially owns any
      Notes or Warrants, the Company shall maintain its corporate existence and shall
      not sell all or substantially all of the Company’s assets, except in the event
      of a merger or consolidation or sale of all or substantially all of the
      Company’s assets, where the surviving or successor entity in such transaction
      (i) assumes the Company’s obligations hereunder and under the agreements and
      instruments entered into in connection herewith and (ii) is a publicly traded
      corporation whose Common Stock is listed for trading on the OTCBB, Nasdaq,
      Nasdaq SmallCap, NYSE or AMEX.

     

    51.  No
      Integration.  The Company shall not make any offers or
      sales of any security (other than the Securities) under circumstances that
      would
      require registration of the Securities being offered or sold hereunder under
      the
      1933 Act or cause the offering of the Securities to be integrated with any
      other
      offering of securities by the Company for the purpose of any stockholder
      approval provision applicable to the Company or its securities.

     

    52.  Breach
      of
      Covenants.  If the
      Company
      breaches any of the covenants set forth in this Section 4, and in addition
      to
      any other remedies available to the Buyers pursuant to this Agreement, the
      Company shall pay to the Buyers the Standard Liquidated Damages Amount, in
      cash
      or in shares of Common Stock at the option of the Company, until such breach
      is
      cured.  If the Company elects to pay the Standard Liquidated Damages
      Amount in shares, such shares shall be issued at the Conversion Price at the
      time of payment.

     

    53.  TRANSFER
      AGENT
      INSTRUCTIONS.  The Company shall issue irrevocable
      instructions to its transfer agent to issue certificates, registered in the
      name
      of each Buyer or its nominee, for the Conversion Shares and Warrant Shares
      in
      such amounts as specified from time to time by each Buyer to the Company upon
      conversion of the Notes or exercise of the Warrants in accordance with the
      terms
      thereof (the “Irrevocable
      Transfer Agent Instructions”).  

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

       

      Prior
        to
        registration of the Conversion Shares and Warrant Shares under the 1933 Act
        or
        the date on which the Conversion Shares and Warrant Shares may be sold pursuant
        to Rule 144 without any restriction as to the number of Securities as of
        a
        particular date that can then be immediately sold, all such certificates
        shall
        bear the restrictive legend specified in Section 2(g) of this
        Agreement.  The Company warrants that no instruction other than the
        Irrevocable Transfer Agent Instructions referred to in this Section 5, and
        stop
        transfer instructions to give effect to Section 2(f) hereof (in the case
        of the
        Conversion Shares and Warrant Shares, prior to registration of the Conversion
        Shares and Warrant Shares under the 1933 Act or the date on which the Conversion
        Shares and Warrant Shares may be sold pursuant to Rule 144 without any
        restriction as to the number of Securities as of a particular date that can
        then
        be immediately sold), will be given by the Company to its transfer agent
        and
        that the Securities shall otherwise be freely transferable on the books and
        records of the Company, subject to and to the extent provided in this Agreement
        and the Registration Rights Agreement.  Nothing in this Section shall
        affect in any way each Buyer’s obligations and agreement set forth in Section
        2(g) hereof to comply with all applicable prospectus delivery requirements,
        if
        any, upon re-sale of the Securities.  If a Buyer provides the Company
        with (i) an opinion of counsel in form, substance and scope customary for
        opinions in comparable transactions, to the effect that a public sale or
        transfer of such Securities may be made without registration under the 1933
        Act
        and such sale or transfer is effected or (ii) the Buyer provides reasonable
        assurances that the Securities can be sold pursuant to Rule 144, the Company
        shall permit the transfer, and, in the case of the Conversion Shares and
        Warrant
        Shares, promptly instruct its transfer agent to issue one or more certificates,
        free from restrictive legend, in such name and in such denominations as
        specified by such Buyer.  The Company acknowledges that a breach by it
        of its obligations hereunder will cause irreparable harm to the Buyers, by
        vitiating the intent and purpose of the transactions contemplated
        hereby.  Accordingly, the Company acknowledges that the remedy at law
        for a breach of its obligations under this Section 5 may be inadequate and
        agrees, in the event of a breach or threatened breach by the Company of the
        provisions of this Section, that the Buyers shall be entitled, in addition
        to
        all other available remedies, to an injunction restraining any breach and
        requiring immediate transfer, without the necessity of showing economic loss
        and
        without any bond or other security being required.

    

     

    54.  CONDITIONS
      TO THE COMPANY’S
      OBLIGATION TO SELL.  The obligation of the Company
      hereunder to issue and sell the Notes and Warrants to a Buyer at the Closing
      is
      subject to the satisfaction, at or before the Closing Date of each of the
      following conditions thereto, provided that these conditions are for the
      Company’s sole benefit and may be waived by the Company at any time in its sole
      discretion:

     

    55.  The
      applicable Buyer shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Company.

     

    56.  The
      applicable Buyer shall have delivered the Purchase Price in accordance with
      Section 1(b) above.

     

    57.  The
      representations and warranties of the applicable Buyer shall be true and correct
      in all material respects as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date), and the applicable Buyer shall have performed, satisfied
      and complied in all material respects with the covenants, agreements and
      conditions required by this Agreement to be performed, satisfied or complied
      with by the applicable Buyer at or prior to the Closing Date.

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

     

    58.  No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    59.  CONDITIONS
      TO EACH BUYER’S
      OBLIGATION TO PURCHASE.  The obligation of each Buyer
      hereunder to purchase the Notes and Warrants at the Closing is subject to the
      satisfaction, at or before the Closing Date of each of the following conditions,
      provided that these conditions are for such Buyer’s sole benefit and may be
      waived by such Buyer at any time in its sole discretion:

     

    60.  The
      Company shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Buyer.

     

    61.  The
      Company shall have delivered to such Buyer duly executed Notes (in such
      denominations as the Buyer shall request) and Warrants in accordance with
      Section 1(b) above.

     

    62.  The
      Irrevocable Transfer Agent Instructions, in form and substance satisfactory
      to a
      majority-in-interest of the Buyers, shall have been delivered to and
      acknowledged in writing by the Company’s Transfer Agent.

     

    63.  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Date as though
      made at such time (except for representations and warranties that speak as
      of a
      specific date) and the Company shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Company at
      or
      prior to the Closing Date.  The Buyer shall have received a
      certificate or certificates, executed by the chief executive officer of the
      Company, dated as of the Closing Date, to the foregoing effect and as to such
      other matters as may be reasonably requested by such Buyer including, but not
      limited to certificates with respect to the Company’s Articles of Incorporation,
      By-laws and Board of Directors’ resolutions relating to the transactions
      contemplated hereby.

     

    64.  No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    65.  No
      event
      shall have occurred which could reasonably be expected to have a Material
      Adverse Effect on the Company.

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    66.  The
      Buyer
      shall have received an officer’s certificate described in Section 3(c) above,
      dated as of the Closing Date.

     

    67.  GOVERNING
      LAW;
      MISCELLANEOUS.

     

    68.  Governing
      Law.  THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
      AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
      TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY
      SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
      IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT,
      THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE
      OF AN
      INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
      PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
      PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
      SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
      PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
      PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
      A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
      CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
      OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
      ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES
      AND
      EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
      CONNECTION WITH SUCH DISPUTE.

     

    69.  Counterparts;
      Signatures by
      Facsimile.  This Agreement may be executed in one or
      more counterparts, each of which shall be deemed an original but all of which
      shall constitute one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other
      party.  This Agreement, once executed by a party, may be delivered to
      the other party hereto by facsimile transmission of a copy of this Agreement
      bearing the signature of the party so delivering this Agreement.

     

    70.  Headings.  The
      headings of this Agreement are for convenience of reference only and shall
      not
      form part of, or affect the interpretation of, this Agreement.

     

    71.  Severability.  In
      the event that any provision of this Agreement is invalid or unenforceable
      under
      any applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law.  Any provision
      hereof which may prove invalid or unenforceable under any law shall not affect
      the validity or enforceability of any other provision hereof.

     

    72.  Entire
      Agreement;
      Amendments.  This Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor the Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters.  No
      provision of this Agreement may be waived or amended other than by an instrument
      in writing signed by the party to be charged with enforcement.

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    73.  Notices.  Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile and shall be effective five days after being placed
      in
      the mail, if mailed by regular United States mail, or upon receipt, if delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile, in each case addressed to a party.  The addresses for
      such communications shall be:

     

    If
      to the
      Company:

    


    Midnight
      Holdings Group, Inc.

    22600
      Hall Road, Suite 205

    Clinton
      Township, MI  48036

    Attention:  Chief
      Executive Officer

    Telephone:  586-468-8741

    Facsimile:   586-468-8768

     

    With
      a
      copy to:

     

    Anslow
      & Jaclin, LLP

    195
      Route
      9 South, Suite 204

    Manalapan,
      NJ  07726

    Attention:  Gregg
      E. Jaclin, Esq.

    Telephone:  732-409-1212

    Facsimile:   732-577-1188

     

    If
      to a
      Buyer:  To the address set forth immediately below such Buyer’s name
      on the signature pages hereto.

     

    With
      copy
      to:

    


    Ballard
      Spahr Andrews & Ingersoll, LLP

    1735
      Market Street

    51st
      Floor

    Philadelphia,
      Pennsylvania  19103

    Attention:  Gerald
      J. Guarcini, Esq.

    Telephone:  215-864-8625

    Facsimile:  215-864-8999

    Email:  guarcini@ballardspahr.com

     

    Each
      party shall provide notice to the other party of any change in
      address.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

     

    74.  Successors
      and
      Assigns.  This Agreement shall be binding upon and inure
      to the benefit of the parties and their successors and
      assigns.  Neither the Company nor any Buyer shall assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the other.  Notwithstanding the foregoing, subject to
      Section 2(f), any Buyer may assign its rights hereunder to any person who
      is an “Accredited Investor” that purchases Securities in a private transaction
      from a Buyer or to any of its “affiliates,” as that term is defined under the
      1934 Act, without the consent of the Company.

     

    75.  Third
      Party
      Beneficiaries.  This Agreement is intended for the
      benefit of the parties hereto and their respective permitted successors and
      assigns, and is not for the benefit of, nor may any provision hereof be enforced
      by, any other person.

     

    76.  Survival.  The
      representations and warranties of the Company and the agreements and covenants
      set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
      notwithstanding any due diligence investigation conducted by or on behalf of
      the
      Buyers.  The Company agrees to indemnify and hold harmless each of the
      Buyers and all their officers, directors, employees and agents for loss or
      damage arising as a result of or related to any breach or alleged breach by
      the
      Company of any of its representations, warranties and covenants set forth in
      Sections 3 and 4 hereof or any of its covenants and obligations under this
      Agreement or the Registration Rights Agreement, including advancement of
      reasonable expenses as they are incurred.

     

    77.  Publicity.  The
      Company and each of the Buyers shall have the right to review a reasonable
      period of time before issuance of any press releases, SEC, OTCBB or NASD
      filings, or any other public statements with respect to the transactions
      contemplated hereby; provided, however,
      that the
      Company shall be entitled, without the prior approval of each of the Buyers,
      to
      make any press release or SEC, OTCBB (or other applicable trading market) or
      NASD filings with respect to such transactions as is required by applicable
      law
      and regulations (although each of the Buyers shall be consulted by the Company
      in connection with any such press release prior to its release and shall be
      provided with a copy thereof and be given an opportunity to comment
      thereon).

     

    78.  Further
      Assurances.  Each party shall do and perform, or cause
      to be done and performed, all such further acts and things, and shall execute
      and deliver all such other agreements, certificates, instruments and documents,
      as the other party may reasonably request in order to carry out the intent
      and
      accomplish the purposes of this Agreement and the consummation of the
      transactions contemplated hereby.

     

    79.  No
      Strict
      Construction.  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.

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    E.  Remedies.  The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Buyers by vitiating the intent and purpose of the
      transaction contemplated hereby.  Accordingly, the Company
      acknowledges that the remedy at law for a breach of its obligations under this
      Agreement will be inadequate and agrees, in the event of a breach or threatened
      breach by the Company of the provisions of this Agreement, that the Buyers
      shall
      be entitled, in addition to all other available remedies at law or in equity,
      and in addition to the penalties assessable herein, to an injunction or
      injunctions restraining, preventing or curing any breach of this Agreement
      and
      to enforce specifically the terms and provisions hereof, without the necessity
      of showing economic loss and without any bond or other security being
      required.

     

    


     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF, the
      undersigned Buyers and the Company have caused this Agreement to be duly
      executed as of the date first above written.

     

    


    


    MIDNIGHT
      HOLDINGS GROUP,
      INC.

     

    


    


    /s/ 
Nicholas
      Cocco                    

    Nicholas
      Cocco

    Chief
      Executive Officer

    


    


    AJW
      PARTNERS, LLC

    By:  SMS
      Group, LLC

    


    


    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

    


    


    RESIDENCE:  Delaware

    


    ADDRESS:            1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New
      York  11576

    Facsimile:  (516)
      739-7115

    Telephone:  (516)
      739-7110

    


    AGGREGATE
      SUBSCRIPTION AMOUNT:

    


    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

    


    


    


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    


    


    AJW
      OFFSHORE,
      LTD.

    By:  First
      Street Manager II, LLC

    


    


    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

    


    


    RESIDENCE:         Cayman
      Islands

    


    ADDRESS:            AJW
      Offshore, Ltd.

    P.O.
      Box
      32021 SMB

    Grand
      Cayman, Cayman Island, B.W.I.

    


    AGGREGATE
      SUBSCRIPTION AMOUNT:

    


    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

    


    


     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    
 

    AJW
      QUALIFIED PARTNERS,
      LLC

     

    By:  AJW
      Manager, LLC

     

    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

     

    


    


    RESIDENCE:         New
      York

    


    ADDRESS:           
      1044 Northern Boulevard

    Suite
      302

    Roslyn,
      New
      York  11576

    Facsimile:                                (516)
      739-7115

    Telephone:                             
      (516) 739-7110

    


    


    AGGREGATE
      SUBSCRIPTION AMOUNT:

    


    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

    


    


    


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

     

     

    NEW
      MILLENNIUM CAPITAL PARTNERS II,
      LLC

     

    By:  First
      Street Manager II, LLP

     

    /s/ 
Corey
      S.
      Ribotsky                  

    Corey
      S.
      Ribotsky

    Manager

     

    


    


    RESIDENCE:         
      New York

    


    ADDRESS:            1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New
      York  11576

    Facsimile:                                (516)
      739-7115

    Telephone:                              (516)
      739-7110

    


    


    AGGREGATE
      SUBSCRIPTION AMOUNT:

    


    


    Aggregate
      Principal Amount of
      Notes:                                                                                                           $

    Number
      of
      Warrants:

    Aggregate
      Remaining Purchase Price (after

    accounting
      for any principal of Bridge
      Note):                                                                                                $

     

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    
 

    


     Exhibit
      A

    


    


    FORM
      OF
      NOTE

    


    (See
      Attached)

    


     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    
 

    Exhibit
      B

    


    


    FORM
      OF
      WARRANT

    


    (See
      Attached)

    


     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    
 

    Exhibit
      C

    


    


    FORM
      OF REGISTRATION RIGHTS
      AGREEMENT

    


    (See
      Attached)

    


    


     

     

     

     

    
 

    
28