EXHIBIT 10.1


SECURITIES PURCHASE AGREEMENT


          This
Securities Purchase Agreement (this “Agreement”) is dated as of October
31, 2011, between Rodman & Renshaw Capital Group, Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively, the “Purchasers”).


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


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


ARTICLE I.

DEFINITIONS


	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Acquiring
 Person” shall have the meaning ascribed to such term in Section 4.6.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Closing
 Date” means the Trading Day on which all of the Transaction Documents
 have been executed and delivered by the applicable parties thereto, and all
 conditions precedent to (i) each Purchaser’s obligations to pay its
 Subscription Amount and (ii) the Company’s obligations to deliver the
 Securities, in each case, have been satisfied or waived, but in no event
 later than the third Trading Day following the date hereof.

 


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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Company
 Counsel” means Morse Zelnick Rose & Lander, LLP, with offices located
 at 405 Park Avenue, New York, NY 10022.

 
	
  

 	
  

 
	
  

 	
           “Conversion
 Shares” has the meaning set forth in the Debentures. 

 
	
  

 	
  

 
	
  

 	
           “Debentures”
 means the 10% Senior Secured Convertible Debentures due October 31, 2013,
 issued by the Company to the Purchasers hereunder, in the form of Exhibit
 A attached hereto.

 
	
  

 	
  

 
	
  

 	
           “Effective
 Date” means the earliest of the date that (a) the initial Registration
 Statement has been declared effective by the Commission, (b) all of the
 Underlying Shares have been sold pursuant to Rule 144 or may be sold pursuant
 to Rule 144 without the requirement for the Company to be in compliance with
 the current public information required under Rule 144 and without volume or
 manner-of-sale restrictions or (c) following the one year anniversary of the
 Closing Date provided that a holder of Registrable Securities is not an
 Affiliate of the Company, all of the Underlying Shares may be sold pursuant
 to an exemption from registration under Section 4(1) of the Securities Act
 without volume or manner-of-sale restrictions and Company counsel has
 delivered to such holders a standing written unqualified opinion that resales
 may then be made by such holders of the Underlying Shares pursuant to such
 exemption which opinion shall be in form and substance reasonably acceptable
 to such holders.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Exempt
 Issuance” means the issuance of (a) shares of Common Stock or options or
 restricted stock units to employees, officers or directors of the Company
 pursuant to any stock or option plan duly adopted for such purpose, by a
 majority of the non-employee members of the Board of Directors or a majority
 of the members of a committee of non-employee directors established for such
 purpose, (b) securities upon the exercise or exchange of or conversion of any
 Securities issued hereunder and/or other securities exercisable or
 exchangeable for or convertible into shares of Common Stock issued and
 outstanding on the date of this Agreement, provided that such securities have
 not been amended since the date of this Agreement to increase the number of
 such 

 


2






	
  

 	
  

 
	
  

 	
 securities
 or to decrease the exercise price, exchange price or conversion price of such
 securities (c) securities issued pursuant to acquisitions or strategic
 transactions approved by a majority of the disinterested directors of the
 Company, provided that any such issuance shall only be to a Person (or to the
 equityholders of a Person) which is, itself or through its subsidiaries, an
 operating company or an owner of an asset in a business synergistic with the
 business of the Company and shall provide to the Company additional benefits
 in addition to the investment of funds, but shall not include a transaction
 in which the Company is issuing securities primarily for the purpose of
 raising capital or to an entity whose primary business is investing in
 securities and (d) up to an amount of debentures and warrants with aggregate subscription
 amounts equal to the lesser of $1,500,000 and the difference between
 $8,000,000 and the aggregate Subscription Amounts hereunder, on the same
 terms and conditions and prices (including, without limitation, conversion
 prices and exercise prices) as hereunder, with investors executing definitive
 agreements for the purchase of such securities and such transactions having
 closed on or before the earlier of (i) the Filing Date (as defined in the
 Registration Rights Agreement) or (ii) the date that the Registration
 Statement (as defined in the Registration Rights Agreement) is actually filed
 with the Commission, provided that such issuances are to Persons that were
 both contacted prior to the execution of this Agreement and with whom the
 Company had a pre-existing relationship prior to the execution of this
 Agreement.

 
	
  

 	
  

 
	
  

 	
           “FCPA”
 means the Foreign Corrupt Practices Act of 1977, as amended.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 


3






	
  

 	
  

 
	
  

 	
           “Purchaser
 Party” shall have the meaning ascribed to such term in Section 4.9.

 
	
  

 	
  

 
	
  

 	
           “Registrable
 Securities” shall have the meaning set forth in the Registration Rights
 Agreement.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Rule
 424” means Rule 424 promulgated by the Commission pursuant to the
 Securities Act, as such Rule may be amended or interpreted from time to time,
 or any similar rule or regulation hereafter adopted by the Commission having
 substantially the same purpose and effect as such Rule.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Securities”
 means the Debentures, the Conversion Shares, the Warrants and the Warrant
 Shares.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Series
 A Warrants” means the Series A Common Stock purchase warrants delivered
 to the Purchasers at the Closing in accordance with Section 2.2(a) hereof,
 which Warrants shall be exercisable 6 months from the Closing Date and have a
 term of exercise expiring December 31, 2014, in the form of Exhibit C-1
 attached hereto.

 


4






	
  

 	
  

 
	
  

 	
           “Series
 B Warrants” means the Series B Common Stock purchase warrants delivered
 to the Purchasers at the Closing in accordance with Section 2.2(a) hereof,
 which Warrants shall be exercisable only to the extent set forth therein and
 have a term of exercise expiring October 31, 2013, in the form of Exhibit C-2
 attached hereto.

 
	
  

 	
  

 
	
  

 	
           “Short
 Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
 under the Exchange Act. 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Subsidiary”
 means any significant subsidiary of the Company as defined in Rule 1-02(w) of
 Regulation S-X under the Securities Act, and shall, where applicable, also
 include any direct or indirect significant subsidiary of the Company formed
 or acquired after the date hereof.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Trading
 Market” means any of the following markets or exchanges on which the
 Common Stock is listed or quoted for trading on the date in question: the
 NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
 Global Select Market, the New York Stock Exchange or the OTC Bulletin Board
 (or any successors to any of the foregoing).

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Transfer
 Agent” means Corporate Stock Transfer, Inc., the current transfer agent
 of the Company, with a mailing address of 3200 Cherry Creek South Drive,
 Suite 430 Denver, Colorado 80209 and a facsimile number of (303) 282-5800,
 and any successor transfer agent of the Company.

 
	
  

 	
  

 
	
  

 	
           “Underlying
 Shares” means, collectively, the Conversion Shares and the Warrant
 Shares.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           “Warrants”
 means, collectively, the Series A Warrants and Series B Warrants.

 


5






	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
  

 
	
 ARTICLE II.
PURCHASE AND SALE

 
	
  

 	
  

 
	
  

 	
           2.1
 Closing. On the Closing Date, upon the terms and subject to the
 conditions set forth herein, substantially concurrent with the execution and
 delivery of this Agreement by the parties hereto, the Company agrees to sell,
 and the Purchasers, severally and not jointly, agree to purchase, up to an
 aggregate of $8,000,000 of Securities. Each Purchaser shall deliver to the
 Company, via wire transfer or a certified check, immediately available funds
 equal to such Purchaser’s Subscription Amount as set forth on the signature
 page hereto executed by such Purchaser, and the Company shall deliver to each
 Purchaser its respective Securities, and the Company and each Purchaser shall
 deliver the other items set forth in Section 2.2 deliverable at the Closing.
 Upon satisfaction of the covenants and conditions set forth in Sections 2.2
 and 2.3, the Closing shall occur at the offices of Company Counsel or such
 other location as the parties shall mutually agree.

 
	
  

 	
  

 
	
  

 	
           2.2
 Deliveries.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (i)
 this Agreement duly executed by the Company;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (iii)
 a Series A Warrant registered in the name of such Purchaser to purchase up to
 a number of shares of Common Stock equal to 50% of such Purchaser’s
 Conversion Shares on the Closing Date, with an exercise price equal to $1.50,
 subject to adjustment therein (such Warrant certificate may be delivered
 within three Trading Days of the Closing Date); 

 
	
  

 	
  

 
	
  

 	
                     (iv)
 a Series B Warrant registered in the name of such Purchaser to purchase up to
 a number of shares of Common Stock equal to 50% of such Purchaser’s
 Conversion Shares on the Closing Date, with an exercise price equal to $1.50,
 subject to adjustment therein (such Warrant certificate may be delivered within
 three Trading Days of the Closing Date);

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (vi)
 the Registration Rights Agreement duly executed by the Company; and

 


6






	
  

 	
  

 
	
  

 	
                     (vii)
 a legal opinion of Company Counsel, substantially in the form of Exhibit D
 attached hereto.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (i)
 this Agreement duly executed by such Purchaser; 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (iv)
 such Purchaser’s Subscription Amount by wire transfer to the account
 specified in writing by the Company.

 
	
  

 	
  

 
	
  

 	
           2.3
 Closing Conditions.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (i)
 the accuracy in all respects on the Closing Date of the representations and
 warranties of the Purchasers contained herein (unless as of a specific date
 therein in which case they shall be accurate as of such date); 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (iii)
 the Company shall have received, and shall close on, minimum Subscription
 Amounts of not less than $5,000,000 in the aggregate; and

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (i)
 the accuracy in all respects when made and on the Closing Date of the
 representations and warranties of the Company contained herein (unless as of
 a specific date therein in which case they shall be accurate as of such
 date);

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
                     (iv)
 the Company shall have received, and shall close on, minimum Subscription
 Amounts of not less than $5,000,000 in the aggregate; 

 


7






	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
  

 
	
 ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 
	
  

 	
  

 
	
           3.1
 Representations and Warranties of the Company. Except as set forth in
 the SEC Reports (except for Sections 3.1(c), (d), (e), (f), (h), (r), (s),
 (t), (u), (v), (w), (x), (y), (z), (bb), (cc), (dd), (ee), (ff), (gg), (ii),
 (kk) and (ll)) which representations and warranties shall not be qualified
 anything contained in the SEC Reports) or the schedules attached hereto,
 which SEC Reports and schedules shall be deemed a part hereof and shall
 qualify any representation or otherwise made herein to the extent of the
 disclosure contained in the SEC Reports (other than with respect to the
 sections enumerated in the parenthetical above) or the corresponding section
 of the schedules, the Company hereby makes the following representations and
 warranties to each Purchaser:

 
	
  

 	
  

 
	
  

 	
           (a)
 Subsidiaries. All of the Subsidiaries of the Company are set forth in
 the SEC Reports or on Schedule 3.1(a). The Company owns, directly or
 indirectly, all of the capital stock or other equity interests of each
 Subsidiary free and clear of any Liens, and all of the issued and outstanding
 shares of capital stock of each Subsidiary are validly issued and are fully
 paid, non-assessable and free of preemptive and similar rights to subscribe
 for or purchase securities. 

 
	
  

 	
  

 
	
  

 	
           (b)
 Organization and Qualification. The Company and each of the
 Subsidiaries is an entity duly incorporated or otherwise organized, validly
 existing and in good standing under the laws of the jurisdiction of its
 incorporation or organization, with the requisite power and authority to own
 and use its properties and assets and to carry on its business as currently
 conducted. Neither the Company nor any Subsidiary is in violation nor default
 of any of the provisions of its respective certificate or articles of
 incorporation, bylaws or other organizational or charter documents. Each of
 the Company and the Subsidiaries is duly qualified to conduct business and is
 in good standing as a foreign corporation or other entity in each
 jurisdiction in which the nature of the business conducted or property owned
 by it makes such qualification necessary, except where the failure to be so
 qualified or in good standing, as the case may be, could not have or
 reasonably be expected to result in: (i) a material adverse effect on the 

 


8






	
  

 	
  

 
	
  

 	
 legality,
 validity or enforceability of any Transaction Document, (ii) a material
 adverse effect on the results of operations, assets, business, prospects or
 condition (financial or otherwise) of the Company and the Subsidiaries, taken
 as a whole, or (iii) a material adverse effect on the Company’s ability to
 perform in any material respect on a timely basis its obligations under any
 Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
 Effect”) and no Proceeding has been instituted in any such jurisdiction
 revoking, limiting or curtailing or seeking to revoke, limit or curtail such
 power and authority or qualification.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 


9






	
  

 	
  

 
	
  

 	
 clauses
 (ii) and (iii), such as could not have or reasonably be expected to result in
 a Material Adverse Effect.

 
	
  

 	
  

 
	
  

 	
           (e)
 Filings, Consents and Approvals. The Company is not required to obtain
 any consent, waiver, authorization or order of, give any notice to, or make
 any filing or registration with, any court or other federal, state, local or
 other governmental authority or other Person in connection with the
 execution, delivery and performance by the Company of the Transaction
 Documents, other than: (i) the filings required pursuant to Section 4.2 of
 this Agreement, (ii) the notice and/or application(s) to each applicable
 Trading Market for the issuance and sale of the Securities and the listing of
 the Underlying Shares for trading thereon in the time and manner required
 thereby, and (iv) the filing of Form D with the Commission and such filings
 as are required to be made under applicable state securities laws
 (collectively, the “Required Approvals”).

 
	
  

 	
  

 
	
  

 	
           (f)
 Issuance of the Securities. The Securities are duly authorized and,
 when issued and paid for in accordance with the applicable Transaction
 Documents, will be duly and validly issued, fully paid and nonassessable,
 free and clear of all Liens imposed by the Company other than restrictions on
 transfer provided for in the Transaction Documents. The Conversion Shares,
 when issued in accordance with the terms of the Debentures, will be validly
 issued, fully paid and nonassessable, free and clear of all Liens imposed by
 the Company other than restrictions on transfer provided for in the
 Transaction Documents. The Warrant Shares, when issued in accordance with the
 terms of the Warrants, will be validly issued, fully paid and nonassessable,
 free and clear of all Liens imposed by the Company other than restrictions on
 transfer provided for in the Transaction Documents. The Company has reserved
 from its duly authorized capital stock the maximum number of shares of Common
 Stock issuable pursuant to conversion of the Debentures and exercise of the
 Warrants.

 
	
  

 	
  

 
	
  

 	
           (g)
 Capitalization. The capitalization of the Company is as set forth in
 the SEC Reports. The Company has not issued any capital stock since its most
 recently filed periodic report under the Exchange Act, other than pursuant to
 the exercise of employee stock options under the Company’s stock option
 plans, the issuance of shares of Common Stock to employees pursuant to the
 Company’s employee stock purchase plans and pursuant to the conversion and/or
 exercise of Common Stock Equivalents outstanding as of the date of the most
 recently filed periodic report under the Exchange Act. No Person has any
 right of first refusal, preemptive right, right of participation, or any
 similar right to participate in the transactions contemplated by the
 Transaction Documents. Except as a result of the purchase and sale of the
 Securities, there are no outstanding options, warrants, scrip rights to
 subscribe to, calls or commitments of any character whatsoever relating to,
 or securities, rights or obligations convertible into or exercisable or
 exchangeable for, or giving any Person any right to subscribe for or acquire
 any shares of Common Stock, or contracts, commitments, understandings or
 arrangements by which the Company or any Subsidiary is or may become bound to
 issue additional shares of Common Stock or Common Stock Equivalents. The
 issuance and sale of the Securities will not obligate the Company to issue
 shares of Common Stock or other securities to any Person (other than the
 Purchasers) and will not result in a right of any holder of Company
 securities to adjust the exercise, conversion, exchange or reset price under
 any of such 

 


10






	
  

 	
  

 
	
  

 	
 securities.
 All of the outstanding shares of capital stock of the Company are duly
 authorized, validly issued, fully paid and nonassessable, have been issued in
 compliance with all federal and state securities laws, and none of such
 outstanding shares was issued in violation of any preemptive rights or
 similar rights to subscribe for or purchase securities. No further approval
 or authorization of any stockholder, the Board of Directors or others is
 required for the issuance and sale of the Securities. Except as set forth in
 the SEC Reports, there are no stockholders agreements, voting agreements or
 other similar agreements with respect to the Company’s capital stock to which
 the Company is a party or, to the knowledge of the Company, between or among
 any of the Company’s stockholders.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (i)
 Material Changes; Undisclosed Events, Liabilities or Developments.
 Since the date of the latest audited financial statements included within the
 SEC Reports, except as specifically disclosed in a subsequent SEC Report
 filed prior to the date hereof: (i) there has been no event, occurrence or
 development unrelated to general economic or market conditions that has had
 or that could reasonably be expected to result in a Material Adverse Effect,
 (ii) the Company has not incurred any liabilities (contingent or otherwise)
 other than (A) trade payables and accrued expenses incurred in the ordinary
 course of business consistent with past practice and (B) liabilities not
 required to be reflected in the Company’s financial statements pursuant to
 GAAP or disclosed in filings made with the Commission, (iii) the Company has
 not altered its method of accounting, 

 


11






	
  

 	
  

 
	
  

 	
 (iv)
 the Company has not declared or made any dividend or distribution of cash or
 other property to its stockholders or purchased, redeemed or made any
 agreements to purchase or redeem any shares of its capital stock and (v) the
 Company has not issued any equity securities to any officer, director or
 Affiliate, except pursuant to existing Company stock option plans. The
 Company does not have pending before the Commission any request for
 confidential treatment of information. Except for the issuance of the
 Securities contemplated by this Agreement or as set forth on Schedule
 3.1(i), no event, liability, fact, circumstance, occurrence or
 development has occurred or exists, or is reasonably expected to occur or
 exist, with respect to the Company or its Subsidiaries or their respective
 businesses, properties, operations, assets or financial condition, that would
 be required to be disclosed by the Company under applicable securities laws
 at the time this representation is made or deemed made that has not been
 publicly disclosed at least 1 Trading Day prior to the date that this
 representation is made.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (k)
 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 judgment, decree, or order of any court, arbitrator or
 other governmental authority or (iii) is or has been in violation of any
 statute, rule, ordinance 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 have or reasonably be expected to result in a Material
 Adverse Effect.

 
	
  

 	
  

 
	
  

 	
           (l)
 Regulatory Permits. The Company and the Subsidiaries possess all
 certificates, authorizations and permits issued by the appropriate federal,
 state, local or 

 


12






	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (n)
 Intellectual Property. The Company and the Subsidiaries have, or have
 rights to use, all patents, patent applications, trademarks, trademark
 applications, service marks, trade names, trade secrets, inventions,
 copyrights, licenses and other intellectual property rights and similar
 rights as described in the SEC Reports as necessary, required or material for
 use in connection with their respective businesses and which the failure to
 so have could have a Material Adverse Effect (collectively, the “Intellectual
 Property Rights”). None of, and neither the Company nor any Subsidiary
 has received a notice (written or otherwise) that any of, the Intellectual
 Property Rights has expired, terminated or been abandoned, or is expected to
 expire or terminate or be abandoned, within two (2) years from the date of
 this Agreement. Neither the Company nor any Subsidiary has received, since
 the date of the latest audited financial statements included within the SEC
 Reports, a written notice of a claim or otherwise has any knowledge that the
 Intellectual Property Rights violate or infringe upon the rights of any
 Person, except as could not have or reasonably be expected to not have a
 Material Adverse Effect. To the knowledge of the Company, all such
 Intellectual Property Rights are enforceable and there is no existing
 infringement by another Person of any of the Intellectual Property Rights.
 The Company and its Subsidiaries have taken reasonable security measures to
 protect the secrecy, confidentiality and value of all of their intellectual
 properties, except where failure to do so could not, individually or in the
 aggregate, reasonably be expected to have a Material Adverse Effect.

 
	
  

 	
  

 
	
  

 	
           (o)
 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, including, but not limited to, directors
 and officers insurance coverage. Neither the Company nor any Subsidiary has
 any reason to believe that it will not be able to renew its existing
 insurance coverage as and when such coverage expires or to obtain similar
 coverage from similar insurers as may be necessary to continue its business
 without a significant increase in cost.

 


13






	
  

 	
  

 
	
  

 	
           (p)
 Transactions With Affiliates and Employees. None of the
 officers or directors of the Company or any Subsidiary and, to the knowledge
 of the Company, none of the employees of the Company or any Subsidiary is
 presently a party to any transaction with the Company or any Subsidiary
 (other than for services as employees, officers and directors), including any
 contract, agreement or other arrangement providing for the furnishing of
 services to or by, providing for rental of real or personal property to or
 from, providing for the borrowing of money from or lending of money to 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, stockholder, member or partner, in each case in
 excess of $120,000 other than for: (i) payment of salary or consulting fees
 for services rendered, (ii) reimbursement for expenses incurred on behalf of the
 Company and (iii) other employee benefits, including stock option agreements
 under any stock option plan of the Company. Each of the Founders
 (as defined below), Paul Revere LLC (“PR LLC”) and each of the members
 of PR LLC have entered into written agreements with the Company with respect
 to all securities of the Company and PR LLC (1) held, directly or indirectly,
 by each of them or for their benefit, (2) as to which any of them have any
 record or beneficial ownership or (3) as to which any of them have any
 pecuniary interest, (ii) all of such agreements are in full force and effect
 and (iii) Schedule 3.1(p) attached to the schedules attached hereto
 contains a complete and accurate list of all such agreements and complete and
 accurate copies thereof.

 
	
  

 	
  

 
	
  

 	
           (q)
 Sarbanes-Oxley; Internal Accounting Controls. The Company and the
 Subsidiaries are in compliance with any and all applicable requirements of
 the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and
 any and all applicable rules and regulations promulgated by the Commission
 thereunder that are effective as of the date hereof and as of the Closing
 Date. The Company and the Subsidiaries maintain a system of internal
 accounting controls sufficient to provide reasonable assurance that: (i)
 transactions are executed in accordance with management’s general or specific
 authorizations, (ii) transactions are recorded as necessary to permit
 preparation of financial statements in conformity with GAAP and to maintain
 asset accountability, (iii) access to assets is permitted only in accordance
 with management’s general or specific authorization, and (iv) the recorded
 accountability for assets is compared with the existing assets at reasonable
 intervals and appropriate action is taken with respect to any differences.
 The Company and the Subsidiaries have established disclosure controls and
 procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
 Company and the Subsidiaries and designed such disclosure controls and procedures
 to ensure that information required to be disclosed by the Company in the
 reports it files or submits under the Exchange Act is recorded, processed,
 summarized and reported, within the time periods specified in the
 Commission’s rules and forms. The Company’s certifying officers have
 evaluated the effectiveness of the disclosure controls and procedures of the
 Company and the Subsidiaries as of the end of the period covered by 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 changes in the internal control over financial 

 


14






	
  

 	
  

 
	
  

 	
 reporting
 (as such term is defined in the Exchange Act) of the Company and its
 Subsidiaries that have materially affected, or is reasonably likely to
 materially affect, the internal control over financial reporting of the
 Company or its Subsidiaries.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (v)
 Listing and Maintenance Requirements. The Common Stock is registered
 pursuant to Section 12(b) of the Exchange Act, and the Company has taken no
 action designed to, or which to its knowledge is likely to have the effect
 of, terminating the registration of the Common Stock under the Exchange Act
 nor has the Company received any notification that the Commission is
 contemplating terminating such registration. The Company has not, in the 12
 months preceding the date hereof, received notice from any Trading Market on
 which the Common Stock is or has been listed or quoted to the effect that the
 Company is not in compliance with the listing or maintenance requirements of
 such Trading Market. The Company is, and has no reason to believe that it
 will not in the foreseeable future continue to be, in compliance with all
 such listing and maintenance requirements; however, the Company cannot
 predict its future stock price and thus cannot assure that it will continue
 to meet the minimum bid price of $1.00 required by the Nasdaq Stock Market.

 
	
  

 	
  

 
	
  

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

 


15






	
  

 	
  

 
	
  

 	
 certificate
 of incorporation (or similar charter documents) or the laws of its state of
 incorporation that is or could become applicable to the Purchasers as a
 result of the Purchasers and the Company fulfilling their obligations or
 exercising their rights under the Transaction Documents, including without
 limitation as a result of the Company’s issuance of the Securities and the
 Purchasers’ ownership of the Securities.

 
	
  

 	
  

 
	
  

 	
           (x)
 Disclosure. Except with respect to the material terms and conditions
 of the transactions contemplated by the Transaction Documents and disclosed in
 the 8-K Filing (as defined below), the Company confirms that neither it nor
 any other Person acting on its behalf has provided any of the Purchasers or
 their agents or counsel with any information that it believes constitutes or
 might constitute material, non-public information. The Company understands
 and confirms that the Purchasers will rely on the foregoing representation in
 effecting transactions in securities of the Company. All of the disclosure
 furnished by or on behalf of the Company to the Purchasers regarding the
 Company and its Subsidiaries, their respective businesses and the
 transactions contemplated hereby, including the schedules to this Agreement,
 is true and correct and does not contain any untrue statement of a material
 fact or omit to state any material fact necessary in order to make the
 statements made therein, in light of the circumstances under which they were
 made, not misleading. The Company acknowledges and agrees that no Purchaser
 makes or has made any representations or warranties with respect to the
 transactions contemplated hereby other than those specifically set forth in
 Section 3.2 hereof.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (aa)
 Foreign Corrupt Practices. Neither the Company nor any Subsidiary, to
 the knowledge of the Company or any Subsidiary, any agent or other person
 acting on behalf of the Company or any Subsidiary, has: (i) directly or
 indirectly, used any funds for unlawful contributions, gifts, entertainment
 or other unlawful expenses related to foreign or domestic political activity,
 (ii) made any unlawful payment to foreign or domestic government officials or
 employees or to any foreign or domestic political parties or campaigns from corporate
 funds, (iii) failed to disclose fully any contribution made by the Company or
 any Subsidiary (or made by any person acting on its behalf of 

 


16






	
  

 	
  

 
	
  

 	
 which
 the Company is aware) which is in violation of law or (iv) violated in any material
 respect any provision of FCPA.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (cc)
 Acknowledgment Regarding Purchaser’s Trading Activity.  Anything in this
 Agreement or elsewhere herein to the contrary notwithstanding (except for
 Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by the
 Company that: (i) none of the Purchasers have been asked by the Company to
 agree, nor has any Purchaser agreed, to desist from purchasing or selling,
 long and/or short, securities of the Company, or “derivative” securities
 based on securities issued by the Company or to hold the Securities for any
 specified term, (ii) past or future open market or other transactions by any
 Purchaser, specifically including, without limitation, Short Sales or
 “derivative” transactions, before or after the closing of this or future
 private placement transactions, may negatively impact the market price of the
 Company’s publicly-traded securities, (iii) any Purchaser, and
 counter-parties in “derivative” transactions to which any such Purchaser is a
 party, directly or indirectly, may presently have a “short” position in the
 Common Stock and (iv) each Purchaser shall not be deemed to have any
 affiliation with or control over any arm’s length counter-party in any
 “derivative” transaction. The Company further understands and
 acknowledges that (y) one or more Purchasers may engage in hedging activities
 at various times during the period that the Securities are outstanding, and
 (z) such hedging activities (if any) could reduce the value of the existing
 stockholders’ equity interests in the Company at and after the time that the
 hedging activities are being conducted. The Company acknowledges that such
 aforementioned hedging activities do not constitute a breach of any of the
 Transaction Documents.

 
	
  

 	
  

 
	
  

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

 


17






	
  

 	
  

 
	
  

 	
           (ee)
 Office of Foreign Assets Control. Neither the Company nor any
 Subsidiary nor, to the Company’s knowledge, any director, officer, agent,
 employee or affiliate of the Company or any Subsidiary is currently subject
 to any U.S. sanctions administered by the Office of Foreign Assets Control of
 the U.S. Treasury Department (“OFAC”).

 
	
  

 	
  

 
	
  

 	
           (ff)
 Money Laundering. The operations of the Company and its Subsidiaries
 are and have been conducted at all times in compliance with applicable
 financial record-keeping and reporting requirements of the Currency and
 Foreign Transactions Reporting Act of 1970, as amended, applicable money
 laundering statutes and applicable rules and regulations thereunder
 (collectively, the “Money Laundering Laws”), and no action, suit or
 proceeding by or before any court or governmental agency, authority or body
 or any arbitrator involving the Company or any Subsidiary with respect to the
 Money Laundering Laws is pending or, to the knowledge of the Company or any
 Subsidiary, threatened.

 
	
  

 	
  

 
	
  

 	
           (gg)
 Form S-3 Eligibility. The Company is eligible to register the resale
 of the Underlying Shares by the Purchasers on Form S-3 promulgated under the
 Securities Act.

 
	
  

 	
  

 
	
  

 	
           (hh)
 Solvency. Based on the consolidated financial condition of the Company
 as of the Closing Date, after giving effect to the receipt by the Company of
 the proceeds from the sale of the Securities hereunder: (i) the fair saleable
 value of the Company’s assets exceeds the amount that will be required to be
 paid on or in respect of the Company’s existing debts and other liabilities
 (including known contingent liabilities) as they mature and (ii) the
 Company’s assets do not constitute unreasonably small capital to carry on its
 business as now conducted and as proposed to be conducted including its
 capital needs taking into account the particular capital requirements of the
 business conducted by the Company, and projected capital requirements and
 capital availability thereof. The Company does not intend to incur debts beyond
 its ability to pay such debts as they mature (taking into account the timing
 and amounts of cash to be payable on or in respect of its debt). The Company
 has no knowledge of any facts or circumstances which lead it to believe that
 it will file for reorganization or liquidation under the bankruptcy or
 reorganization laws of any jurisdiction within one year from the Closing
 Date. The SEC Reports sets forth as of the date hereof all outstanding
 secured and unsecured Indebtedness (as defined in the Debentures) of the
 Company or any Subsidiary, or for which the Company or any Subsidiary has
 commitments.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (jj)
 Stock Option Plans. Each security granted by the Company under the
 Company’s equity plan was granted (i) in accordance with the terms of the
 Company’s equity plan and (ii) with an exercise price at least equal to the
 fair market value of the 

 


18






	
  

 	
  

 
	
  

 	
 Common
 Stock on the date such security would be considered granted under GAAP and
 applicable law. No security granted under the Company’s equity plan has been
 backdated. The Company has not knowingly granted, and there is no and has
 been no Company policy or practice to knowingly grant, securities prior to,
 or otherwise knowingly coordinate the grant of equity with, the release or
 other public announcement of material information regarding the Company or
 its Subsidiaries or their financial results or prospects.

 
	
  

 	
  

 
	
  

 	
           (kk)
 Bank Holding Company Act. Neither the Company nor any of its
 Subsidiaries or Affiliates is subject to the Bank Holding Company Act of
 1956, as amended (the “BHCA”) and to regulation by the Board of
 Governors of the Federal Reserve System (the “Federal Reserve”).
 Neither the Company nor any of its Subsidiaries or Affiliates owns or
 controls, directly or indirectly, five percent (5%) or more of the outstanding
 shares of any class of voting securities or twenty-five percent or more of
 the total equity of a bank or any entity that is subject to the BHCA and to
 regulation by the Federal Reserve. Neither the Company nor any of its
 Subsidiaries or Affiliates exercises a controlling influence over the
 management or policies of a bank or any entity that is subject to the BHCA
 and to regulation by the Federal Reserve.

 
	
  

 	
  

 
	
  

 	
           (ll)
 No Undisclosed Events, Liabilities, Developments or Circumstances. No
 event, liability, development or circumstance has occurred or exists, or is
 reasonably expected to occur or exist with respect to the Company, any of its
 Subsidiaries or any of their respective businesses, properties, liabilities,
 prospects, operations (including results thereof) or condition (financial or
 otherwise), that (i) would be required to be disclosed by the Company under
 applicable securities laws on a registration statement on Form S-1 filed with
 the Commission relating to an issuance and sale by the Company of its Common
 Stock and which has not been publicly announced or (ii) could have a Material
 Adverse Effect.

 
	
  

 	
  

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

 
	
  

 	
  

 
	
  

 	
           (a)
 Organization; Authority. Such Purchaser is either an individual or an
 entity duly incorporated or formed, validly existing and in good standing
 under the laws of the jurisdiction of its incorporation or formation with
 full right, corporate, partnership, limited liability company or similar
 power and authority to enter into and to consummate the transactions contemplated
 by the Transaction Documents and otherwise to carry out its obligations
 hereunder and thereunder. The execution and delivery of the Transaction
 Documents and performance by such Purchaser of the transactions contemplated
 by the Transaction Documents have been duly authorized by all necessary
 corporate, partnership, limited liability company or similar action, as
 applicable, on the part of such Purchaser. Each Transaction Document to which
 it is a party has been duly executed by such Purchaser, and when delivered by
 such Purchaser in accordance with the terms hereof, will constitute the valid
 and legally binding obligation of such Purchaser, enforceable against it in
 accordance with its terms, except: (i) as limited by general equitable
 principles and applicable bankruptcy, insolvency, reorganization, moratorium 

 


19






	
  

 	
  

 
	
  

 	
 and
 other laws of general application affecting enforcement of creditors’ rights
 generally, (ii) as limited by laws relating to the availability of specific
 performance, injunctive relief or other equitable remedies and (iii) insofar
 as indemnification and contribution provisions may be limited by applicable
 law.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (f)
 Certain Transactions and Confidentiality. Other than consummating the
 transactions contemplated hereunder, such Purchaser has not directly or
 indirectly, nor has any Person acting on behalf of or pursuant to any
 understanding with such Purchaser, executed any purchases or sales, including
 Short Sales, of the securities of the Company during the period
 commencing as of the time that such Purchaser first received a term sheet
 (written or oral) from the Company or any other Person representing the
 Company setting forth the material terms of the transactions contemplated
 hereunder and ending immediately prior to the execution hereof (it being
 understood and agreed that for all purposes of this Agreement, and without
 implication that the contrary would otherwise be 

 


20






	
  

 	
  

 
	
  

 	
 true,
 neither transactions nor purchases nor sales shall include the location
 and/or reservation of borrowable shares of Common Stock). Notwithstanding the
 foregoing, in the case of a Purchaser that is a multi-managed investment
 vehicle whereby separate portfolio managers manage separate portions of such
 Purchaser’s assets and the portfolio managers have no direct knowledge of the
 investment decisions made by the portfolio managers managing other portions
 of such Purchaser’s assets, the representation set forth above shall only
 apply with respect to the portion of assets managed by the portfolio manager
 that made the investment decision to purchase the Securities covered by this
 Agreement. Other than to other Persons party to this Agreement (and such
 Purchaser’s representatives and advisors), such Purchaser has maintained the
 confidentiality of all disclosures made to it in connection with this
 transaction (including the existence and terms of this transaction).
 Notwithstanding the foregoing, for avoidance of doubt, nothing contained
 herein shall constitute a representation or warranty, or preclude any
 actions, with respect to the identification of the availability of, or
 securing of, available shares to borrow in order to affect Short Sales or
 similar transactions in the future.

 
	
  

 	
  

 
	
 The
 Company acknowledges and agrees that the representations contained in Section
 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the
 Company’s representations and warranties contained in this Agreement or any
 representations and warranties contained in any other Transaction Document or
 any other document or instrument executed and/or delivered in connection with
 this Agreement or the consummation of the transaction contemplated hereby.

 
	
  

 	
  

 
	
  

 	
  

 
	
 ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 
	
  

 	
  

 
	
  

 	
 4.1 Transfer
 Restrictions. 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
 [NEITHER
 THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
 THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
 HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
 REGISTERED 

 


21






	
  

 	
  

 
	
  

 	
 UNDER
 THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
 THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I)
 IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO
 THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO
 THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
 SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
 NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
 WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
 SECURED BY THE SECURITIES.

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (c)
 Certificates evidencing the Securities shall not contain any legend
 (including the legend set forth in Section 4.1(b) hereof), (i) while a
 registration statement (including the Registration Statement) covering the
 resale of such security is effective under the Securities Act, (ii) following
 any sale of such Securities pursuant to Rule 144, (iii) if such Securities
 are eligible for sale under Rule 144, without the requirement for the Company
 to be in compliance with the current public information required under Rule
 144 as to such Securities and without volume or manner-of-sale restrictions,
 or (iv) if such legend is not required under applicable requirements of the
 Securities Act (including judicial interpretations and pronouncements issued
 by the staff of the Commission). The Company shall cause its counsel to issue
 a legal opinion to the Transfer Agent promptly after the Effective Date if
 required by the Transfer Agent to effect the removal of the legend hereunder.
 The Company agrees that following the Effective Date or at such time as such
 legend is no longer required under this Section 4.1(c), it will, no later
 than three Trading Days following the delivery by a Purchaser to the Company
 or the Transfer Agent of a certificate representing Securities issued with a
 restrictive legend (such third Trading Day, the “Legend Removal Date”),
 deliver or cause to be delivered to such 

 


22





	 
	 

	 
	Purchaser a certificate representing
          such Securities that is free from all restrictive and other legends.
          The Company may not make any notation on its records or give instructions
          to the Transfer Agent that enlarge the restrictions on transfer set
          forth in this Section 4. Certificates for Conversion Shares and Warrant
          Shares subject to legend removal hereunder shall be transmitted by
          the Transfer Agent to the Purchaser by crediting the account of the
          Purchaser’s prime broker with the Depository Trust Company System
          as directed by such Purchaser.

	 
	 

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



          4.2
Furnishing of Information; Public Information. Until the earlier of two
years from the Closing Date or no Purchaser owns any Securities, the Company
covenants to maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange Act and to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act. As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to each of the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for each of the
Purchasers to sell the Securities, including without limitation, under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, to the extent required from time
to time to enable such Person to sell such Securities without registration
under the Securities Act, including without limitation, within the requirements
of the exemption provided by Rule 144. 


          4.3
Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or
sale of the Securities in a manner that would require the registration under
the Securities Act of the sale of the Securities or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.


          4.4
Conversion and Exercise Procedures. Each of the form of Notice of
Exercise included in the Warrants and the form of Notice of Conversion included
in the Debentures set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants or convert the Debentures. No
additional legal opinion, other information or instructions shall be required
of the Purchasers to exercise their Warrants or convert their Debentures. The
Company shall honor exercises of the Warrants and conversions of the Debenture
and shall deliver 


23






Underlying
Shares in accordance with the terms, conditions and time periods set forth in
the Transaction Documents.


          4.5
Securities Laws Disclosure; Publicity. The Company shall (a) by 9:30
a.m. (New York City time) on the Trading Day immediately following the date
hereof, issue a press release disclosing all the material terms of the
transactions contemplated hereby, and (b) file a Current Report on Form 8-K,
including the Transaction Documents as exhibits thereto, with the Commission within
the time required by the Exchange Act (the “8-K Filing”). From and after
the issuance of such press release, the Company represents to the Purchasers
that it shall have publicly disclosed all material, non-public information
delivered to any of the Purchasers by the Company or any of its Subsidiaries,
or any of their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction Documents. The
Company and each Purchaser shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release nor
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except: (a) as required by federal
securities law in connection with (i) any registration statement contemplated
by the Registration Rights Agreement and (ii) the filing of final Transaction
Documents with the Commission, or (b) to the extent such disclosure is required
by law, Trading Market regulations, or pursuant to any governmental, judicial
or administrative order, subpoena or discovery request or inquiry of a
regulatory or self-regulatory body, in which case the Company shall provide, to
the extent permitted, the Purchasers with prior notice of such disclosure
permitted under this clause (b).


          4.6
Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents between the Company and the Purchasers.


          4.7
Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on
its behalf, will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have entered into a
written agreement with the Company regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser
shall be relying on the foregoing covenant in effecting transactions in securities
of the Company.


24






          4.8
Use of Proceeds. The Company shall use the net proceeds from the sale of
the Securities hereunder for working capital purposes.


          4.9
Indemnification of Purchasers. Subject to the provisions of this Section
4.9, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company or any Guarantor (as defined in the
Subsidiary Guarantee) in this Agreement or in the other Transaction Documents
or (b) any action instituted against any Purchaser Party in any capacity, or
any of them or their respective Affiliates, by any stockholder of the Company
who is not an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of such Purchaser Party’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct by such
Purchaser Party which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party,
in which case the Company shall be responsible for the reasonable fees and
expenses of no more than one such separate counsel. The Company will not be
liable to any Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only
to the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants
or agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section 4.9 shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are incurred. The
indemnity agreements contained herein shall be in addition to any cause of
action or similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to law.


25






          4.10
Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue the Conversion Shares and the
Warrant Shares pursuant to the applicable Transaction Documents.


          4.11
Listing of Common Stock. The Company hereby agrees to use commercially
reasonable efforts to maintain the listing or quotation of the Common Stock on
the Trading Market on which it is currently listed for at least two years from
the Closing Date, and concurrently with the Closing, the Company shall apply to
list or quote all of the Underlying Shares on such Trading Market and promptly
secure the listing of all of the Underlying Shares on such Trading Market. The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Trading Market, it will then include in such application all of
the Underlying Shares, and will take such other action as is necessary to cause
all of the Underlying Shares to be listed or quoted on such other Trading
Market as promptly as possible. The Company will then take all action
reasonably necessary to continue the listing or quotation and trading of its
Common Stock on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.


          4.12
Subsequent Equity Sales. 


	
  

 	
  

 
	
  

 	
           (a)
 From the date hereof until none of the Debentures are outstanding, the
 Company shall be prohibited from effecting or entering into an agreement to
 effect any Subsequent Placement by the Company involving a Variable Rate
 Transaction. “Variable Rate Transaction” means a transaction in which
 the Company (i) issues or sells any debt or equity securities that are
 convertible into, exchangeable or exercisable for, or include the right to
 receive, additional shares of Common Stock either (A) at a conversion price,
 exercise price or exchange rate or other price that is based upon, and/or
 varies with, the trading prices of or quotations for the shares of Common
 Stock at any time after the initial issuance of such debt or equity
 securities or (B) with a conversion, exercise or exchange price that is
 subject to being reset at some future date after the initial issuance of such
 debt or equity security or upon the occurrence of specified or contingent
 events directly or indirectly related to the business of the Company or the
 market for the Common Stock or (ii) enters into any agreement, including, but
 not limited to, an equity line of credit, whereby the Company may sell
 securities at a future determined price. Nothing herein shall preclude the
 Company from (i) conducting an “at the market” offering within the meaning of
 Rule 415 or (ii) issuing securities pursuant to clause (c) of the definition
 of Exempt Issuance. Any Purchaser shall be entitled to obtain injunctive
 relief against the Company to preclude any such issuance, which remedy shall
 be in addition to any right to collect damages.

 
	
  

 	
  

 
	
  

 	
           (b)
 The Company expressly acknowledges and agrees that no Variable Rate
 Transaction shall be or shall constitute an Exempt Issuance.

 


          4.13
Participation Right. From the date hereof until none of the Debentures
are outstanding, neither the Company nor any of its Subsidiaries shall,
directly or indirectly, issue, 


26






offer,
sell, grant any option or right to purchase, or otherwise dispose of (or
announce any issuance, offer, sale, grant of any option or right to purchase or
other disposition of) any equity security or any equity-linked or related
security (including, without limitation, any “equity security” (as that term is
defined under Rule 405 promulgated under the Securities Act), any Common Stock
Equivalents, any debt, any preferred stock or any purchase rights) (any such
issuance, offer, sale, grant, disposition or announcement is referred to as a “Subsequent
Placement”) unless the Company shall have first complied with this Section
4.13. The Company acknowledges and agrees that the right set forth in this
Section 4.13 is a right granted by the Company, separately, to each Purchaser.


	
  

 	
  

 
	
  

 	
           (a)
 At least two (2) Trading Days prior to any proposed or intended Subsequent
 Placement, the Company shall deliver to each Purchaser a written notice of
 its proposal or intention to effect a Subsequent Placement (each such notice,
 a “Pre-Notice”), which Pre-Notice shall not contain any information
 (including, without limitation, material, non-public information) other than:
 (i) a statement that the Company proposes or intends to effect a Subsequent
 Placement, (ii) a statement that the statement in clause (i) above does not
 constitute material, non-public information and (iii) a statement informing
 such Purchaser that it is entitled to receive an Offer Notice (as defined
 below) with respect to such Subsequent Placement upon its written request.
 Upon the written request of a Purchaser within one (1) Trading Day after the
 Company’s delivery to such Purchaser of such Pre-Notice, and only upon a
 written request by such Purchaser, the Company shall promptly deliver to such
 Purchaser an irrevocable written notice (the “Offer Notice”) of any
 proposed or intended issuance or sale or exchange (the “Offer”) of the
 securities being offered (the “Offered Securities”) in a Subsequent
 Placement, which Offer Notice shall (w) identify and describe the Offered
 Securities, (x) describe the price and other terms upon which they are to be
 issued, sold or exchanged, and the number or amount of the Offered Securities
 to be issued, sold or exchanged, (y) identify the Persons (if known) to which
 or with which the Offered Securities are to be offered, issued, sold or
 exchanged and (z) offer to issue and sell to or exchange with such Purchaser
 in accordance with the terms of the Offer 30% of the Offered Securities,
 provided that the number of Offered Securities which such Purchaser shall
 have the right to subscribe for under this Section 4.13 shall be (A) based on
 such Purchaser’s pro rata portion of the aggregate original principal amount
 of the Notes purchased hereunder by all Purchasers (the “Basic Amount”),
 and (B) with respect to each Purchaser that elects to purchase its Basic
 Amount, any additional portion of the Offered Securities attributable to the
 Basic Amounts of other Purchasers as such Purchaser shall indicate it will
 purchase or acquire should the other Purchasers subscribe for less than their
 Basic Amounts (the “Undersubscription Amount”). Notwithstanding
 anything in this Section 4.13(a) to the contrary, in the event the Company
 intends to effect a Subsequent Placement that is a widely-marketed public
 offering of its securities, the notification periods above shall not apply to
 such Subsequent Placement so long as each of the Purchasers are notified
 concurrently with the offering of such securities to the public, have at
 least 2.5 hours (between the hours of 8 a.m. (New York time) and 6 p.m. (New
 York time) on a Business Day) to accept such offer of such securities, have
 the right to purchase such securities (including, without limitation, as to
 amount and price) in accordance with the terms of this Section 4.13 and the
 Company complies with all terms and conditions of this Section 

 






27






	
  

 	
  

 
	
  

 	
 4.13
 with respect to such Subsequent Placement (other the notification period
 above in this Section 4.13(a)).

 
	
  

 	
  

 
	
  

 	
           (b)
 To accept an Offer, in whole or in part, such Purchaser must deliver a
 written notice to the Company prior to the end of the first (1st) Business
 Day after such Purchaser’s receipt of the Offer Notice (the “Offer Period”),
 setting forth the portion of such Purchaser’s Basic Amount that such
 Purchaser elects to purchase and, if such Purchaser shall elect to purchase
 all of its Basic Amount, the Undersubscription Amount, if any, that such
 Purchaser elects to purchase (in either case, the “Notice of Acceptance”). If
 the Basic Amounts subscribed for by all Purchasers are less than the total of
 all of the Basic Amounts, then such Purchaser who has set forth an
 Undersubscription Amount in its Notice of Acceptance shall be entitled to
 purchase, in addition to the Basic Amounts subscribed for, the
 Undersubscription Amount it has subscribed for; provided, however, if the
 Undersubscription Amounts subscribed for exceed the difference between the
 total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available
 Undersubscription Amount”), such Purchaser who has subscribed for any
 Undersubscription Amount shall be entitled to purchase only that portion of
 the Available Undersubscription Amount as the Basic Amount of such Purchaser
 bears to the total Basic Amounts of all Purchasers that have subscribed for
 Undersubscription Amounts, subject to rounding by the Company to the extent
 it deems reasonably necessary. Notwithstanding the foregoing, if the Company
 desires to modify or amend the terms and conditions of the Offer prior to the
 expiration of the Offer Period, the Company may deliver to each Purchaser a
 new Offer Notice and the Offer Period shall expire on the fifth (5th)
 Business Day after such Purchaser’s receipt of such new Offer Notice.

 
	
  

 	
  

 
	
  

 	
           (c)
 The Company shall have ten (10) days from the expiration of the Offer Period
 above (i) to offer, issue, sell or exchange all or any part of such Offered
 Securities as to which a Notice of Acceptance has not been given by a
 Purchaser (the “Refused Securities”) pursuant to a definitive
 agreement(s) (the “Subsequent Placement Agreement”), but only to the
 offerees described in the Offer Notice (if so described therein) and only
 upon terms and conditions (including, without limitation, unit prices and
 interest rates) that are not more favorable to the acquiring Person or
 Persons or less favorable to the Company than those set forth in the Offer
 Notice and (ii) to publicly announce (A) the execution of such Subsequent
 Placement Agreement, and (B) either (x) the consummation of the transactions
 contemplated by such Subsequent Placement Agreement or (y) the termination of
 such Subsequent Placement Agreement, which shall be filed with the Commission
 on a Current Report on Form 8-K with such Subsequent Placement Agreement and
 any documents contemplated therein filed as exhibits thereto.

 
	
  

 	
  

 
	
  

 	
           (d)
 In the event the Company shall propose to sell less than all the Refused
 Securities (any such sale to be in the manner and on the terms specified in
 Section 4.13(c) above), then such Purchaser may, at its sole option and in
 its sole discretion, reduce the number or amount of the Offered Securities
 specified in its Notice of Acceptance to an amount that shall be not less
 than the number or amount of the Offered Securities that such Purchaser
 elected to purchase pursuant to Section 4.13(b) above multiplied by a
 fraction, (i) the numerator of which shall be the number or amount of Offered
 Securities the Company actually proposes to issue, sell or exchange
 (including Offered Securities to 

 


28






	
  

 	
  

 
	
  

 	
 be
 issued or sold to Purchasers pursuant to this Section 4.13 prior to such
 reduction) and (ii) the denominator of which shall be the original amount of
 the Offered Securities. In the event that any Purchaser so elects to reduce
 the number or amount of Offered Securities specified in its Notice of
 Acceptance, the Company may not issue, sell or exchange more than the reduced
 number or amount of the Offered Securities unless and until such securities
 have again been offered to the Purchasers in accordance with Section 4.13(a)
 above.

 
	
  

 	
  

 
	
  

 	
           (e)
 Upon the closing of the issuance, sale or exchange of all or less than all of
 the Refused Securities, such Purchaser shall acquire from the Company, and
 the Company shall issue to such Purchaser, the number or amount of Offered
 Securities specified in its Notice of Acceptance. The purchase by such
 Purchaser of any Offered Securities is subject in all cases to the
 preparation, execution and delivery by the Company and such Purchaser of a
 separate purchase agreement relating to such Offered Securities reasonably
 satisfactory in form and substance to such Purchaser and its counsel.

 
	
  

 	
  

 
	
  

 	
           (f)
 Any Offered Securities not acquired by a Purchaser or other Persons in
 accordance with this Section 4.13 may not be issued, sold or exchanged until
 they are again offered to such Purchaser under the procedures specified in
 this Agreement.

 
	
  

 	
  

 
	
  

 	
           (g)
 The Company and each Purchaser agree that if any Purchaser elects to
 participate in the Offer, neither the Subsequent Placement Agreement with
 respect to such Offer nor any other transaction documents related thereto (collectively,
 the “Subsequent Placement Documents”) shall include any term or
 provision whereby such Purchaser shall be required to agree to any
 restrictions on trading as to any securities of the Company or be required to
 consent to any amendment to or termination of, or grant any waiver or release
 or the like under or in connection with, any agreement previously entered
 into with the Company or any instrument received from the Company.

 
	
  

 	
  

 
	
  

 	
           (h)
 Notwithstanding anything to the contrary in this Section 4.13 and unless
 otherwise agreed to by such Purchaser, the Company shall either confirm in
 writing to such Purchaser that the transaction with respect to the Subsequent
 Placement has been abandoned or shall publicly disclose its intention to
 issue the Offered Securities, in either case, in such a manner such that such
 Purchaser will not be in possession of any material, non-public information,
 by the tenth (10th) Business Day following delivery of the Offer
 Notice. If by such tenth (10th) Business Day, no public disclosure
 regarding a transaction with respect to the Offered Securities has been made,
 and no notice regarding the abandonment of such transaction has been received
 by such Purchaser, such transaction shall be deemed to have been abandoned and
 such Purchaser shall not be in possession of any material, non-public
 information with respect to the Company or any of its Subsidiaries. Should
 the Company decide to pursue such transaction with respect to the Offered
 Securities, the Company shall provide such Purchaser with another Offer
 Notice in accordance with, and subject to, the terms of this Section 4.13 and
 such Purchaser will again have the right of participation set forth in this
 Section 4.13.

 


29





	 
	 

	 
	          (i)
          The restrictions contained in this Section 4.13 shall not apply in
          connection with any Exempt Issuance. The Company shall not circumvent
          the provisions of this Section 4.13 by providing terms or conditions
          to one Purchaser that are not provided to all Purchasers.



          4.14
Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents. For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Shares or otherwise.


          4.15
Certain Transactions and Confidentiality. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that neither it, nor any
Affiliate acting on its behalf or pursuant to any understanding with it will
execute any purchases or sales, including Short Sales, of any of the Company’s
securities during the period commencing with the execution of this Agreement
and ending at such time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release as described
in Section 4.5. Each Purchaser, severally and not jointly with the other
Purchasers, covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company pursuant to the initial
press release as described in Section 4.5, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Transaction Documents and the schedules hereto.
Notwithstanding the foregoing, and notwithstanding anything contained in this
Agreement to the contrary, the Company expressly acknowledges and agrees that
(i) no Purchaser makes any representation, warranty or covenant hereby that it
will not engage in effecting transactions in any securities of the Company
after the time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in
Section 4.5, (ii) no Purchaser shall be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance with applicable
securities laws and regulations from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.5 and (iii) no Purchaser shall
have any duty of confidentiality to the Company or its Subsidiaries after the
issuance of the initial press release as described in Section 4.5.
Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions
of such Purchaser’s assets and the portfolio managers have no knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the covenant set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.


          4.16
Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities 


30






for, sale
to the Purchasers at the Closing under applicable securities or “Blue Sky” laws
of the states of the United States, and shall provide evidence of such actions
promptly upon request of any Purchaser.


          4.17
Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Conversion Shares and the Warrant Shares may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without limitation, its
obligation to issue the Conversion Shares and the Warrant Shares pursuant to
the Transaction Documents, are unconditional and absolute and not subject to
any right of set off, counterclaim, delay or reduction, regardless of the
effect of any such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company.


          4.18
Additional Covenants. Until such time as less than 50% of the original
principal amount of the Debentures sold pursuant to this Agreement remain
outstanding, the Company shall not (and the Company shall cause each of its
Subsidiaries (as defined in the Debentures) to not), directly or indirectly,
make or cause to be made any payments, or provide or cause to be provided any
amounts, to any of Edward Rubin, Michael Vasinkevich or John J. Borer III
(collectively, the “Founders”) or any of their affiliated or related
Persons (not including for this purpose blood relatives of any Founder who are
otherwise employees of the Company or any Subsidiary in the ordinary course of
their respective businesses) in respect of salary, bonus, commissions or the
like; provided, however, the Company and each of its Subsidiaries (as defined
in the Debentures) shall be permitted to (i) reimburse the Founders for
ordinary business expenses incurred by each of them in accordance with Company
policies applicable to all other employees of the Company and (ii) compensate
each of the Founders to the extent of the employee-paid portions of employee
benefit plans (such as 401(k) and health insurance) in which the Founders are
eligible to participate to the same extent as all other employees of the
Company and its Subsidiaries (as defined in the Debentures). After such time
that less than 50% of the original principal amount of the Debentures sold
pursuant to this Agreement remain outstanding, the Company shall be permitted
to pay to each of the Founders (1) a base salary of up to $150,000 per calendar
year and (2) bonuses and commissions, in each case of clauses (1) and (2), as
determined by a majority of the disinterested members of the board of directors
of the Company; provided, however, all such bonuses and commissions (but not
base salary) so determined shall be reduced by 50% and the other 50% of such
determined bonus and/or commission (as the case may be) (but before giving
effect to such 50% reduction) shall be used by the Company to effect
redemptions of the Debentures pursuant to Section 2(d) thereof. The Company
agrees that the maximum bonus amounts to be paid to all the Founders with
respect to a fiscal year of the Company shall not exceed in the aggregate an
amount equal to 20% of the pre-tax net income on a non-GAAP basis of the
Company and its Subsidiaries (as defined in the Debentures), with respect to such
fiscal year.


ARTICLE V.

MISCELLANEOUS


          5.1
Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser’s obligations hereunder only and without any effect whatsoever
on the obligations 


31






between
the Company and the other Purchasers, by written notice to the other parties,
if the Closing has not been consummated on or before November 7, 2011; provided,
however, that such termination will not affect the right of any party to
sue for any breach by any other party (or parties).


          5.2
Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer
Agent fees (including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and any exercise
notice delivered by a Purchaser), stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers. 


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


          5.4
Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New
York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (c) the second (2nd) Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set forth on the
signature pages attached hereto.


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


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


          5.7
Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign 


32






this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser (other than by merger or acquisition). Any Purchaser
may assign any or all of its rights under this Agreement to any Person to whom
such Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
“Purchasers.”


          5.8
No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise set forth in Section 4.9.


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


          5.10
Survival. The representations, warranties and covenants contained herein
shall survive the Closing and the delivery of the Securities.


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


33






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


          5.13
Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with
the issuance of such replacement Securities.


          5.14
Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agree to waive and not to
assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.


          5.15
 Payment Set Aside. To the extent
that the Company makes a payment or payments to any Purchaser pursuant to any
Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.


          5.16
Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection
with any claim, action or proceeding that may be brought by any Purchaser in
order to enforce any right or remedy under any Transaction Document.
Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature of interest
shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum
Rate”), and, without limiting the foregoing, in 


34






no event
shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may
be obligated to pay under the Transaction Documents exceed such Maximum Rate.
It is agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date thereof forward, unless such
application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to
any Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the unpaid
principal balance of any such indebtedness or be refunded to the Company, the
manner of handling such excess to be at such Purchaser’s election.


          5.17
Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance or non-performance of the
obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by
any Purchaser pursuant hereof or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined
as an additional party in any proceeding for such purpose. Each Purchaser has
been represented by its own separate legal counsel in its review and
negotiation of the Transaction Documents. For reasons of administrative
convenience only, each Purchaser and its respective counsel have chosen to
communicate with the Company through Company Counsel. Company Counsel does not
represent any of the Purchasers and only represents the Company. The Company
has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or
requested to do so by any of the Purchasers. It is expressly understood and
agreed that each provision contained in this Agreement and in each other
Transaction Document is between the Company and a Purchaser, solely, and not
between the Company and the Purchasers collectively and not between and among
the Purchasers.


          5.18
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.


          5.19
Construction. The parties agree that each of them and/or their
respective counsel have reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments thereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock 


35






splits,
stock dividends, stock combinations and other similar transactions of the
Common Stock that occur after the date of this Agreement. It is
expressly understood and agreed that for all purposes of all Transaction
Documents the debentures issued pursuant to clause (d) of Exempt Issuance (i)
shall be deemed to be Debentures and (ii) shall be deemed to have been issued,
and shall be deemed to be outstanding, on the Original Issue Date (as defined
in the Debentures).


          5.20
WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY. 


          5.21
Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does
not timely perform its related obligations within the periods therein provided,
then such Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights.


 (Signature Pages Follow)


36






                    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.


	
  

 	
  

 	
  

 	
  

 	
  

 
	
 RODMAN &
 RENSHAW CAPITAL GROUP, INC.

 	
  

 	
 Address for Notice:

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
  

 	
 1251 Avenue of the Americas

 
	
  

 	
  

 	
 New York, NY 10020

 
	
  

 	
  

 	
 Attn: General Counsel

 
	
  

 	
  

 	
 Fax: 646-841-1640

 
	
 By:

 	
  

 	
  

 	
  

 	
  

 
	
  

 	

 


 	
  

 	
  

 	
  

 
	
  

 	
 Name:

 	
  

 	
  

 	
  

 
	
  

 	
 Title:

 	
  

 	
  

 	
  

 
	
  

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

 	
  

 	
  

 	
  

 
	
 Morse Zelnick Rose & Lander, LLP

 	
  

 	
  

 	
  

 
	
 405 Park Avenue

 	
  

 	
  

 	
  

 
	
 New York, NY 10022

 	
  

 	
  

 	
  

 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]


37






[PURCHASER
SIGNATURE PAGES TO RODM SECURITIES PURCHASE AGREEMENT]


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


Name of
Purchaser: ________________________________________________________


Signature of
Authorized Signatory of Purchaser:
__________________________________


Name of
Authorized Signatory: ____________________________________________________


Title of
Authorized Signatory: _____________________________________________________


Email
Address of Authorized Signatory: ______________________________________________


Facsimile
Number of Authorized Signatory: _____________________________________________


Address
for Notice to Purchaser:


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


Subscription
Amount: $_________________


Series A
Warrants: _________________


Series B
Warrant: ___________________


EIN
Number: _______________________


[SIGNATURE
PAGES CONTINUE]


38