oxford8k071607ex10-4.htm


    
      

      

    

    
      EXHIBIT
        10.4

       

    

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”) is dated as of July __,
      2007 between Oxford Media, Inc., a Nevada corporation (the “Company”),
      and each purchaser identified on the signature pages hereto (each, including
      its
      successors and permitted 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: (a) capitalized
      terms
      that are not otherwise defined herein have the meanings given to such terms
      in
      the Debentures (as defined herein), and (b) the following terms have the
      meanings set forth in this Section 1.1:

     

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

     

    “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.

     

    “Certificate
      of Designation” means the Certificate of Designation to be filed prior to
      the Closing by the Company with the Secretary of State of Nevada, in the form
      of
Exhibit B attached hereto.

     

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

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    “Closing
      Date” means the Trading Day when all of the Transaction Documents have been
      executed and delivered by the applicable parties thereto, and all conditions
      precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and
      (ii) the Company’s obligations to deliver the Securities have been satisfied or
      waived.

     

     “Commission”
      means the Securities and Exchange Commission.

     

    “Common
      Stock” means the common stock of the Company, par value $0.01 per share, and
      any other class of securities into which such securities may hereafter be
      reclassified or changed into.

     

    “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, rights, options,
      warrants 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 Spectrum Law Group, LLP, with offices located at 1900 Main
      Street, Suite 125, Irvine, California 92614.

     

    “Debentures”
      means the 12% Senior Secured Debentures due, subject to the terms therein,
      4
      years from their date of issuance, issued by the Company to the Purchasers
      hereunder, in the form of Exhibit A attached hereto.

     

    “Disclosure
      Date” shall have the meaning ascribed to such term in Section
      4.6.

     

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

     

    “Effective
      Date” means the date that the initial Registration Statement filed by the
      Company pursuant to the Registration Rights Agreement is first declared
      effective by the Commission.

     

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

     

    “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, options or other
      stock-based awards or grants to employees, officers, directors or consultants
      (provided that such issuances to consultants shall not exceed 1,000,000 shares
      (subject to adjustment for reverse and forward stock splits, recapitalizations
      and the like that occur after the date hereof) in any 12 month period) of the
      Company pursuant to any stock or option plan duly adopted by a majority of
      the
      non-employee members of the Board of Directors of the Company 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 securities
      or to
      decrease the exercise, exchange or conversion price of such securities and
      (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 which is, itself or through its subsidiaries,
      an operating company in, or an owner of, a business synergistic with the
      business of the Company and in which the Company receives 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.

    


    


    
      
        
          
          

        

        
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    “FWS”
      means Feldman Weinstein & Smith LLP with offices located at 420 Lexington
      Avenue, Suite 2620, New York, New York 10170-0002.

     

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

     

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

     

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

     

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

     

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

     

    “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).

     

    “Maximum
      Rate” shall have the meaning ascribed to such term in Section
      5.17.

     

    “Participation
      Maximum” shall have the meaning ascribed to such term in Section
      4.16.

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

     

    “Preferred
      Stock” means the up to 7,220.17 shares of the Company’s Series C Convertible
      Preferred Stock issued hereunder, in addition to such shares issued as dividends
      on such preferred stock, having the rights, preferences and privileges set
      forth
      in the Certificate of Designation, in the form of Exhibit B
      hereto.

    


    


    


    
      
        
          
          

        

        
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    “Pre-Notice”
      shall have the meaning ascribed to such term in Section 4.15.

    


    “Principal
      Amount” shall mean, as to each Purchaser, the amounts set forth below such
      Purchaser’s signature block on the signature pages hereto and next to the
      heading “Principal Amount,” in United States Dollars, which shall equal such
      Purchaser’s Subscription amount multiplied by 1.0526315.

     

    “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.

     

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

     

    “Registration
      Rights Agreement” means the Registration Rights Agreement, dated the date
      hereof, among the Company, the Purchasers and the signatories to that certain
      Securities Exchange Agreement, dated as of the   holders of the
      Company’s securities, in the form of Exhibit G attached
      hereto.

    


    “Registration
      Statement” means a registration statement meeting the requirements set forth
      in the Registration Rights Agreement and covering the resale of the Underlying
      Shares by each Purchaser as provided for in the Registration Rights
      Agreement

     

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

     

    “Required
      Minimum” means, as of any date, the maximum aggregate number of shares of
      Common Stock then issued or issuable pursuant to the Transaction Documents,
      including all of the Underlying Shares issuable upon conversion in full of
      the
      Preferred Stock, ignoring any conversion limitations set forth
      therein.

     

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

     

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

     

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

     

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

     

    “Securities
      Exchange Agreement” means that certain Securities Exchange Agreement dated
      as of the date hereof by and among the Company and all of the holders of the
      Company’s Senior Non-Convertible Debentures, Convertible Subordinated
      Debentures, Series A Convertible Preferred Stock, Series B Convertible Preferred
      Stock and holders of all of the company common stock purchase warrants pursuant
      to which such outstanding securities shall be exchanged into either Preferred
      Stock or Common Stock.

     

    


    


    
      
        
          
          

        

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

    


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

     

    “Shareholder
      Approval” means approval by the shareholders of the Company to undertake a 1
      for 30 reverse stock split.

     

    “Short
      Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
      under the Exchange Act (but shall not be deemed to include the location and/or
      reservation of borrowable shares of Common Stock).

     

    “Subscription
      Amount” means, as to each Purchaser, the aggregate amount to be paid for
      Debentures and Preferred Stock purchased hereunder as specified below such
      Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
      funds, except with respect to the surrender of those certain two (2) Secured
      Promissory Notes with a principal amount of $200,000 payable to Palisades Master
      Fund, LP and Midsummer Investment Fund, respectively, which shall be applied
      (including accrued but unpaid interest) to the Subscription Amount on a $1
      for
      $1 basis.

     

    “Subsequent
      Financing” shall have the meaning ascribed to such term in Section
      4.15.

    


    “Subsequent
      Financing Notice” shall have the meaning ascribed to such term in Section
      4.15.

    


    “Subsidiary”
      means any subsidiary of the Company as set forth on Schedule 3.1(a) and
      shall, where applicable, also include any direct or indirect 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, in the form of Exhibit D attached
      hereto.

     

    “Trading
      Day” means a day on which the New York Stock Exchange is open for
      trading.

     

    “Trading
      Market” means the following markets or exchanges on which the Common Stock
      is listed or quoted for trading on the date in question: the American Stock
      Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
      Select Market, the New York Stock Exchange or the OTC Bulletin
      Board.

     

    


    
      
        
          
          

        

        
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    “Transaction
      Documents” means this Agreement, the Securities Exchange Agreement, the
      Debentures, the Certificate of Designation, the Security Agreement, the
      Registration Rights Agreement, the Subsidiary Guarantee, the Voting Agreements
      all exhibits and schedules thereto and hereto and any other documents or
      agreements executed in connection with the transactions contemplated
      hereunder.

     

    “Transfer
      Agent” means Interwest Transfer Co., with a mailing address of 1981 East
      4800 South, Suite 100, Salt Lake City, Utah, 84117 and a facsimile number of
      (801) 277 3147, and any successor transfer agent of the Company.

     

    “Variable
      Rate Transaction” shall have the meaning ascribed to such term in Section
      4.16.

     

    “Underlying
      Shares” means the shares of Common Stock issued and issuable upon conversion
      of the Preferred Stock in accordance with the terms of the Certificate of
      Designation.

     

    “VWAP”
      means, for any date, the price determined by the first of the following clauses
      that applies: (a) if the Common Stock is then listed or quoted on a Trading
      Market, the daily volume weighted average price of the Common Stock for such
      date (or the nearest preceding date) on the Trading Market on which the Common
      Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
      Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time);
      (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted
      average price of the Common Stock for such date (or the nearest preceding date)
      on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted
      on the OTC Bulletin Board and if prices for the Common Stock are then reported
      in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or
      agency succeeding to its functions of reporting prices), the most recent bid
      price per share of the Common Stock so reported; or (d) in all other cases,
      the fair market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Purchasers of a majority in interest
      of
      the Securities then outstanding and reasonably acceptable to the Company, the
      reasonable fees and expenses of which shall be paid by the Company.

     

     

    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, in the aggregate, up to $4,210,526 Principal
      Amount of the Debentures.  Each Purchaser shall deliver to the
      Company, via wire transfer or a certified check, immediately available funds
      equal to its Subscription Amount, and if appropriate a duly endorsed notice
      to
      convert to an equal portion of the Subscription Amount any of the notes
      reference above in the definition of the “Subscription Amount”, and the Company
      shall deliver to each Purchaser its respective Debenture and shares of Preferred
      Stock, as determined pursuant to Section 2.2(a), 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 conditions set forth in
      Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS or such
      other location as the parties shall mutually agree.

     

    


    
      
        
          
          

        

        
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              2.2

            	
              Deliveries

            


    

     

    (a)        On
      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
      legal opinion of Company Counsel in substantially the form of Exhibit E
      attached hereto;

     

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

     

    (iv)       the
      written agreement, in the form of Exhibit F attached hereto, of all of
      the officers, directors and shareholders holding more than 10% of the issued
      and
      outstanding shares of Common Stock on the date hereof to vote all Common Stock
      over which such Persons have voting control as of the record date for the
      meeting of shareholders of the Company in favor of Shareholder Approval
      amounting to, in the aggregate, at least 50% of the issued and outstanding
      Common Stock;

     

    (v)        a
      certificate evidencing a number of shares of Preferred Stock equal to a number
      of shares of Preferred Stock convertible into such Purchaser’s pro-rata share of
      30% of the Company’s Common Stock post money on a fully diluted basis (ignoring
      any conversion limitations therein) as set forth on Schedule 3.1(g)
      attached hereto;

     

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

     

    (vii)      the
      Registration Rights Agreement duly executed by the Company.

     

    (b)        On
      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;

            


    

     

    


     

    


    
      
        
          
          

        

        
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    (ii)        such
      Purchaser’s Subscription Amount by wire transfer of immediately available funds
      to the accounts as specified in writing by the Company in the Closing Statement
      attached hereto as Annex A and, as to Palisades Master Fund, LP and
      Midsummer Investment Fund only, the surrender of two (2) Secured Promissory
      Notes;

     

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

     

    (iv)       the
      Security Agreement duly executed by such Purchaser.

     

    
      	
               

            	
              2.3

            	
              Closing
                Conditions.

            


    

     

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

     

    (i)         the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Purchasers contained herein;

     

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

     

    (iii)       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 material respects when made and on the Closing Date of the
      representations and warranties of the Company contained herein;

     

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

     

    (v)        the
      Securities Exchange Agreement shall be executed by the Company and all
      signatories thereto;

     

    (vi)       the
      Company shall have filed UCC-3 terminations of any outstanding liens on the
      Company’s assets; and

     

    


     

    


    
      
        
          
          

        

        
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    (vii)       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 (except for any suspension of trading of limited duration agreed to
      by
      the Company, which suspension shall be terminated prior to the Closing), 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 each 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
      Disclosure Schedules which Disclosure 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 corresponding section of the Disclosure
      Schedules, the Company hereby makes the following representations and warranties
      to each Purchaser:

     

    (a)        Subsidiaries.  All
      of the direct and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a).  The Company owns, directly or indirectly, all
      of the capital stock or other equity interests of each Subsidiary free and
      clear
      of any Liens, and all 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.  If the Company has no subsidiaries, all other references
      to the Subsidiaries or any of them in the Transaction Documents shall be
      disregarded.

     

    (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
      (as applicable), with the requisite power and authority to own and use its
      properties and assets and to carry on its business as currently
      conducted.  Neither the Company nor any Subsidiary is in violation or
      default of any of the provisions of its respective certificate or articles
      of
      incorporation, bylaws or other organizational or charter
      documents.  Each of the Company and the Subsidiaries is duly qualified
      to conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not
      have or reasonably be expected to result in (i) a material adverse effect on
      the
      legality, validity or enforceability of any Transaction Document, (ii) a
      material adverse effect on the results of operations, assets, business,
      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.

     

    


    
      
        
          
          

        

        
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    (c)        Authorization;
      Enforcement.  The Company has the requisite corporate power and
      authority to enter into and to consummate the transactions contemplated by
      each
      of the Transaction Documents and otherwise to carry out its obligations
      hereunder and thereunder.  The execution and delivery of each of the
      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, its board of directors or its stockholders in connection therewith
      other than in connection with the Required Approvals.  Each
      Transaction Document has been (or upon delivery will have been) duly executed
      by
      the Company and, when delivered in accordance with the terms hereof 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 of the
      Transaction Documents by the Company and the consummation by the Company of
      the
      other 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, or (ii) conflict with, or constitute a default (or an event
      that with notice or lapse of time or both would become a default) under, result
      in the creation of any Lien upon any of the properties or assets of the Company
      or any Subsidiary (other than under the Security Documents), 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 clauses (ii) and (iii),
      such
      as could not reasonably be expected to result in a Material Adverse
      Effect.

     

    


     

    


    
      
        
          
          

        

        
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    (e)        Filings,
      Consents and Approvals.  The Company is not required to obtain any
      consent, waiver, authorization or order of, give any notice to, or make any
      filing or registration with, any court or other federal, state, local or other
      governmental authority or other Person in connection with the execution,
      delivery and performance by the Company of the Transaction Documents, other
      than
      (i) filings required pursuant to Section 4.6, (ii) the filing with the
      Commission of the Registration Statement, (iii) 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, (iv) Shareholder Approval, (v) the filing of Form
      D
      with the Commission and such filings as are required to be made under applicable
      state securities laws and (vi) Shareholder Approval (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 Underlying Shares, when issued and
      paid for in accordance with the terms of the Transaction Documents, 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 will immediately reserve from its
      duly authorized capital stock a number of shares of Common Stock for issuance
      of
      the Underlying Shares at least equal to the Required Minimum upon the closing
      of
      all transactions envisioned under the Shareholder Approval.

     

    (g)        Capitalization.  Following
      the consummation of this Agreement and the consummation of the Securities
      Exchange Agreement, the capitalization of the Company shall be as set forth
      on
Schedule 3.1(g) attached hereto, which Schedule 3.1(g) shall also
      include the number of shares of Common Stock owned beneficially, and of record,
      by Affiliates of the Company as of the date hereof.  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 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, other than pursuant to Section 4.17,
      below.  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 securities. All of the outstanding shares of capital
      stock of the Company are validly issued, fully paid and nonassessable, have
      been
      issued in compliance with all federal and state securities laws, and none of
      such outstanding shares was issued in violation of any preemptive rights or
      similar rights to subscribe for or purchase securities.  No further
      approval or authorization of any stockholder, the Board of Directors of the
      Company or others is required for the issuance and sale of the
      Securities.  There are no stockholders agreements, voting agreements
      or other similar agreements with respect to the Company’s capital stock to which
      the Company is a party or, to the knowledge of the Company, between or among
      any
      of the Company’s stockholders.

     

    


    
      
        
          
          

        

        
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    (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.  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 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, (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 and stock purchase plans, and
      pursuant to the conversion or exercise of any outstanding Common Stock
      Equivalents. 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 or development has occurred or exists with
      respect to the Company or its Subsidiaries or their respective business,
      properties, operations or financial condition, that would be required to be
      disclosed by the Company under applicable securities laws at the time this
      representation is made or deemed made that has not been publicly disclosed
      at
      least one Trading Day prior to the date that this representation is
      made.

     

    


    
      
        
          
          

        

        
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    (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, to the Company’s knowledge, 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)        Labor
      Relations.  Other than as set forth on Schedule 3.1(k),
      attached hereto, no material labor dispute exists or, to the knowledge of the
      Company, is imminent with respect to any of the employees of the Company which
      could reasonably be expected to result in a Material Adverse
      Effect.  None of the Company’s or its Subsidiaries’ employees is a
      member of a union that relates to such employee’s relationship with the Company
      or such Subsidiary, and neither the Company nor any of its Subsidiaries is
      a
      party to a collective bargaining agreement, and the Company and its Subsidiaries
      believe that their relationships with their employees are good.  No
      executive officer, to the knowledge of the Company, is, or is now expected
      to
      be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant in favor of any third party, and the continued employment of each
      such
      executive officer does not subject the Company or any of its Subsidiaries to
      any
      liability with respect to any of the foregoing matters.  The Company
      and its Subsidiaries are in compliance with all U.S. federal, state, local
      and
      foreign laws and regulations relating to employment and employment practices,
      terms and conditions of employment and wages and hours, except where the failure
      to be in compliance could not, individually or in the aggregate, reasonably
      be
      expected to have a Material Adverse Effect.

     

     

     

    


    
      
        
          
          

        

        
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    (l)         Compliance.  Assuming
      that the transactions contemplated by the Securities Exchange Agreement have
      been consummated, neither the Company nor any Subsidiary (i) is in default
      under
      or in violation of (and no event has occurred that has not been waived that,
      with notice or lapse of time or both, would result in a default by the Company
      or any Subsidiary under), nor has the Company or any Subsidiary received notice
      of a claim that it is in default under or that it is in violation of, any
      indenture, loan or credit agreement or any other agreement or instrument to
      which it is a party or by which it or any of its properties is bound (whether
      or
      not such default or violation has been waived), (ii) is in violation of any
      order of any court, arbitrator or governmental body, or (iii) is or has been
      in
      violation of any statute, rule or regulation of any governmental authority,
      including without limitation all foreign, federal, state and local laws
      applicable to its business and all such laws that affect the environment, except
      in each case as could not reasonably be expected to result in a Material Adverse
      Effect.

     

    (m)       Regulatory
      Permits.  The Company and the Subsidiaries possess all
      certificates, authorizations and permits issued by the appropriate federal,
      state, local or foreign regulatory authorities necessary to conduct their
      respective businesses as described in the SEC Reports, except where the failure
      to possess such permits could not 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.

     

    (n)        Title
      to Assets.  The Company and the Subsidiaries have good and
      marketable title in fee simple to all real property owned by them and good,
      and
      except as otherwise disclosed on Schedule 3.1(n), attached hereto, marketable
      title in all personal property owned by them that is material to the business
      of
      the Company and the Subsidiaries, in each case free and clear of all Liens,
      except for Liens as do not materially affect the value of such property and
      do
      not materially interfere with the use made and proposed to be made of such
      property by the Company and the Subsidiaries and Liens for the payment of
      federal, state or other taxes, the payment of which is neither delinquent nor
      subject to penalties.  Any real property and facilities held under
      lease by the Company and the Subsidiaries are held by them under valid,
      subsisting and enforceable leases with which the Company and the Subsidiaries
      are in compliance.

     

    (o)  
           Patents and Trademarks.  The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      trade secrets, inventions, copyrights, licenses and other intellectual property
      rights and similar rights necessary or material for use in connection with
      their
      respective businesses as described in the SEC Reports and which the failure
      to
      so have could reasonably be expected to have a Material Adverse Effect
      (collectively, the “Intellectual Property Rights”).  Neither
      the Company nor any Subsidiary has received a notice (written or otherwise)
      that
      any of the Intellectual Property Rights used by the Company or any Subsidiary
      violates or infringes upon the rights of any Person. 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.

     

    


    
      
        
          
          

        

        
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    (p)        Insurance.  The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the aggregate Subscription Amount.  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.

     

    (q) 
            Transactions with Affiliates and
      Employees.  Except as set forth in the SEC Reports, none of the
      officers or directors of the Company and, to the knowledge of the Company,
      none
      of the employees of the Company is presently a party to any transaction with
      the
      Company or any Subsidiary (other than for services as employees, officers and
      directors), including any contract, agreement or other arrangement providing
      for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $60,000
      other than 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.

     

    (r)         Sarbanes-Oxley;
      Internal Accounting Controls.  The Company is in material
      compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are
      applicable to it as of the Closing Date.  The Company and the
      Subsidiaries maintain a system of internal accounting controls sufficient 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 has established disclosure controls
      and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
      Company 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 Company’s disclosure controls and procedures as of the end
      of the period covered by the Company’s 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 Company’s internal control over financial reporting (as such term
      is defined in the Exchange Act) that has materially affected, or is reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.

     

    


    
      
        
          
          

        

        
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    (s)         Certain
      Fees.  Except as otherwise disclosed on Schedule 3.1(s), no
      brokerage or finder’s fees or commissions are or will be payable by the Company
      to any broker, financial advisor or consultant, finder, placement agent,
      investment banker, bank or other Person with respect to the transactions
      contemplated by 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.

     

    (t)         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
      principal Trading Market.

     

    (u)        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 subject to the Investment Company Act of 1940, as
      amended.

     

    (v)        Registration
      Rights.  Other than each of the Purchasers, and as otherwise
      disclosed on Schedule 3.1(v), attached hereto, no Person has any right to cause
      the Company to effect the registration under the Securities Act of any
      securities of the Company.

     

    (w)       Listing
      and Maintenance Requirements.  The  Common Stock is
      registered pursuant to Section 12(g) 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.

     

    


    
      
        
          
          

        

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

     

    (y)        Disclosure.  Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, 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, nonpublic information.  The Company
      understands and confirms that the Purchasers will rely on the foregoing
      representation in effecting transactions in securities of the
      Company.  All disclosure furnished by or on behalf of the Company to
      the Purchasers regarding the Company, its business and the transactions
      contemplated hereby, including the information set forth in the Disclosure
      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 press releases
      disseminated by the Company during the twelve months preceding the date of
      this
      Agreement, taken as a whole, together with its SEC Reports during such period,
      do not contain any untrue statement of a material fact or omit to state a
      material fact required to be stated therein or necessary in order to make the
      statements therein, in light of the circumstances under which they were made
      and
      when made, not misleading.

     

    (z)         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.

     

     

     

     

     

    


    
      
        
          
          

        

        
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    (aa)       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; (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; and (iii)
      the
      current cash flow of the Company, together with the proceeds the Company would
      receive, were it to liquidate all of its assets, after taking into account
      all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in
      respect of its liabilities when such amounts are required to be
      paid.  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.  Schedule 3.1(aa) sets forth as of the date hereof all
      outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
      or for which the Company or any Subsidiary has commitments.  For the
      purposes of this Agreement, “Indebtedness” means (a) any liabilities for
      borrowed money or amounts owed in excess of $50,000 (other than trade accounts
      payable incurred in the ordinary course of business), (b) all guaranties,
      endorsements and other contingent obligations in respect of Indebtedness of
      others, whether or not the same are or should be reflected in the Company’s
      balance sheet (or the notes thereto), except guaranties by endorsement of
      negotiable instruments for deposit or collection or similar transactions in
      the
      ordinary course of business; and (c) the present value of any lease payments
      in
      excess of $50,000 due under leases required to be capitalized in accordance
      with
      GAAP.  Neither the Company nor any Subsidiary is in default with
      respect to any Indebtedness.

     

    (bb)      Tax
      Status.      Except for matters that would not,
      individually or in the aggregate, reasonably be expected to result in a Material
      Adverse Effect, the Company and each Subsidiary has filed all necessary federal,
      state and foreign income and franchise tax returns and has paid or accrued
      all
      taxes shown as due thereon, and the Company has no knowledge of a tax deficiency
      which has been asserted or threatened against the Company or any
      Subsidiary.

     

    (cc)       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.

     

    (dd)      Foreign
      Corrupt Practices.  Neither the Company, nor to the knowledge of
      the Company, any agent or other person acting on behalf of the Company, has
      (i)
      directly or indirectly, used any funds for unlawful contributions, gifts,
      entertainment or other unlawful expenses related to foreign or domestic
      political activity, (ii) made any unlawful payment to foreign or domestic
      government officials or employees or to any foreign or domestic political
      parties or campaigns from corporate funds, (iii) failed to disclose fully any
      contribution made by the Company (or made by any person acting on its behalf
      of
      which the Company is aware) which is  in violation of law, or (iv)
      violated in any material respect any provision of the Foreign Corrupt Practices
      Act of 1977, as amended.

     

    


    
      
        
          
          

        

        
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    (ee)      Accountants.  The
      Company’s accounting firm is set forth on Schedule 3.1(ee) of the
      Disclosure Schedule.  To the knowledge and belief of the Company, such
      accounting firm (i) is a registered public accounting firm as required by the
      Exchange Act and (ii) shall express its opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-KSB for the
      year ended December 31, 2007.

     

    (ff)        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) and Indebtedness listed on
      Schedule 3.1(ff).

     

    (gg)       No
      Disagreements with Accountants and Lawyers.  There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the
      Company to arise, between the Company and the accountants and lawyers formerly
      or presently employed by the Company and the Company is current with respect
      to
      any fees owed to its accountants and lawyers which could affect the Company’s
      ability to perform any of its obligations under any of the Transaction
      Documents.

     

    (hh)       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.

     

    (ii)         Acknowledgment
      Regarding Purchasers’ Trading Activity.  Notwithstanding anything
      in this Agreement or elsewhere herein to the contrary (except for
      Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the
      Company that (i) none of the Purchasers has been asked to agree by the Company,
      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, including
      Short Sales, and 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 (a) one or more Purchasers
      may
      engage in hedging activities at various times during the period that the
      Securities are outstanding, including, without limitation, during the periods
      that the value of the Underlying Shares deliverable with respect to Securities
      are being determined and (b) 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.

     

    


    
      
        
          
          

        

        
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    (jj)        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 of the Company 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, if any, in connection
      with the placement of the Securities.

     

    Each
      Purchaser acknowledges and agrees that the Company does not make or has not
      made
      any representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.1.

     

    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:

     

    (a)        Organization;
      Authority.  Such Purchaser is an entity duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization with full right, corporate or partnership power and authority
      to
      enter into 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 or similar action 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 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.

     

     

     

    
 

    
      
        
          
          

        

        
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    (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
      (this representation and warranty not limiting such Purchaser’s right to sell
      the Securities pursuant to the Registration Statement or otherwise in compliance
      with applicable federal and state securities laws) in violation of the
      Securities Act or any applicable state securities law.  Such Purchaser
      is acquiring the Securities hereunder in the ordinary course of its business.
      Such Purchaser does not have any agreement or understanding, directly or
      indirectly, with any Person to distribute any of the Securities.

     

    (c)        Purchaser
      Status.  At the time such Purchaser was offered the Securities, it
      was, and at the date hereof it is (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.

     

    


    


    
      
        
          
          

        

        
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    (f)         Short
      Sales and Confidentiality Prior To The Date Hereof.  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 from the time that such Purchaser first received a term sheet
      (written or oral) from the Company or any other Person acting on behalf of
      or
      pursuant to any understanding with the Company or otherwise representing the
      Company setting forth the material terms of the transactions contemplated
      hereunder until the date hereof (“Discussion
      Time”).  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, 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).

     

     

    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 shall have the rights of a Purchaser under 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]
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS
      [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
      SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON CONVERSION
      OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
      OR OTHER LOAN SECURED BY SUCH SECURITIES.

     

    


    
      
        
          
          

        

        
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    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 terms of 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 thereunder.

     

    (c)        Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section 4.1(b) hereof): (i) while a registration statement
      (including any Registration Statement) covering the resale of such Underlying
      Shares is effective under the Securities Act, or (ii) following any sale of
      such
      Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
      are
      eligible for sale under Rule 144(k), or (iv) if such legend is not required
      under applicable requirements of 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.  If all or any portion of any
      shares of Preferred Stock are exercised at a time when there is an effective
      registration statement to cover the resale of the Underlying Shares, or if
      such
      Underlying Shares may be sold under Rule 144(k) or if such legend is not
      otherwise required under applicable requirements of the Securities Act
      (including judicial interpretations and pronouncements issued by the staff
      of
      the Commission) then such Underlying Shares shall be issued free of all
      legends.  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 3 Trading Days following the delivery by a Purchaser to
      the
      Company or the Transfer Agent of a certificate representing Underlying Shares,
      as applicable, issued with a restrictive legend (such 3rd Trading
      Day, the
“Legend Removal Date”), deliver or cause to be delivered to such
      Purchaser a certificate representing such shares 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.  Certificates for
      Underlying 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.

    


    


    
      
        
          
          

        

        
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    (d)        In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
      the
      date such Securities are submitted to the Transfer Agent) delivered for removal
      of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
      (increasing to $20 per Trading Day 5 Trading Days after such damages have begun
      to accrue) for each Trading Day after the second Trading Day following the
      Legend Removal Date until such certificate is delivered without a
      legend.  Nothing herein shall limit such Purchaser’s right to pursue
      actual damages for the Company’s failure to deliver certificates representing
      any Securities as required by the Transaction Documents, and such Purchaser
      shall have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.

     

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

     

    4.3       Furnishing
      of Information.  Until the earliest of the time that no Purchaser
      owns Securities, the Company covenants to timely file (or obtain extensions
      in
      respect thereof and file within the applicable grace period) all reports
      required to be filed by the Company after the date hereof pursuant to the
      Exchange Act.    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 the Purchasers and make publicly available in
      accordance with Rule 144(c) such information as is required for the Purchasers
      to sell the Securities 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 within the
      requirements of the exemption provided by Rule 144.

     

    


    
      
        
          
          

        

        
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    4.4        Integration.  The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities to the
      Purchasers in a manner that would require the registration under the Securities
      Act of the sale of the Securities to the Purchasers or that would be integrated
      with the offer or sale of the Securities for purposes of the rules and
      regulations of any applicable Trading Market.

     

    4.5    
         Conversion Procedures.  Section 6 of the
      Certificate of Designation and the form of Notice of Conversion included in
      the
      Certificate of Designation set forth the totality of the procedures required
      of
      the Purchasers in order to convert the Preferred Stock.  No additional
      legal opinion or other information or instructions shall be required of the
      Purchasers to convert their Preferred Stock.  The Company shall honor
      conversion of Preferred Stock and shall deliver Underlying Shares in accordance
      with the terms, conditions and time periods set forth in the Transaction
      Documents.

     

    4.6        Securities
      Laws Disclosure; Publicity.  The Company shall, by 8:30 a.m. (New
      York City time) on the 4th Trading
      Day
      following the date hereof, issue a Current Report on Form 8-K disclosing the
      material terms of the transactions contemplated hereby and attaching the
      Transaction Documents as exhibits thereto.  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 or 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 or any applicable Trading Market rules or regulations, 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 (i) as required by federal securities law in connection with
      (A) any registration statement contemplated by the Registration Rights Agreement
      and (B) the filing of final Transaction Documents (including signature pages
      thereto) with the Commission and (ii) to the extent such disclosure is required
      by law or Trading Market regulations, in which case the Company shall provide
      the Purchasers with prior notice of such disclosure permitted under this clause
      (ii).

     

    4.7        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 or under any other agreement between the Company and the
      Purchasers.

     

    


    
      
        
          
          

        

        
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    4.8   
          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 at any time following the Disclosure Date, unless prior
      thereto such Purchaser shall have executed a written agreement regarding the
      confidentiality and use of such information.  The Company understands
      and confirms that each Purchaser shall be relying on the foregoing covenant
      in
      effecting transactions in securities of the Company.

     

    4.9        Use
      of Proceeds.  Except as set forth on Schedule 4.9, attached
      hereto or as otherwise contemplated by Annex A attached hereto, the
      Company shall use the net proceeds from the sale of the Securities hereunder
      for
      working capital purposes and shall not use such proceeds for the satisfaction
      of
      any portion of the Company’s debt (other than payment of trade payables in the
      ordinary course of the Company’s business and prior practices), the redemption
      of any Common Stock or Common Stock Equivalents or the settlement of any
      outstanding litigation.

     

    4.10      Indemnification
      of Purchasers.   Subject to the provisions of this Section
      4.10, 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 person (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 in
      this
      Agreement or in the other Transaction Documents or (b) any action instituted
      against a Purchaser, or any of them or their respective Affiliates, by any
      stockholder of the Company who is not an Affiliate of such Purchaser, with
      respect to any of the transactions contemplated by the Transaction Documents
      (unless such action is based upon a breach of such Purchaser’s representations,
      warranties or covenants under the Transaction Documents or any agreements or
      understandings such Purchaser may have with any such stockholder or any
      violations by the Purchaser of state or federal securities laws or any conduct
      by such Purchaser 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 such separate 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 (i) for any settlement by a Purchaser Party effected without
      the
      Company’s prior written consent, which shall not be unreasonably withheld or
      delayed; or (ii) to the extent, but only to the extent that a loss, claim,
      damage or liability is 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.

     

    


    
      
        
          
          

        

        
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    4.11      Reservation
      and Listing of Securities.

     

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

     

    (b)        If,
      on any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than the Required Minimum on such date, then
      the
      Board of Directors of the Company shall use commercially reasonable efforts
      to
      amend the Company’s certificate or articles of incorporation to increase the
      number of authorized but unissued shares of Common Stock to at least the
      Required Minimum at such time, as soon as possible and in any event not later
      than the 75th day after such date.

     

    (c)        The
      Company shall, if applicable: (i) in the time and manner required by the
      principal Trading Market, prepare and file with such Trading Market an
      additional shares listing application covering a number of shares of Common
      Stock at least equal to the Required Minimum on the date of such application,
      (ii) take all steps necessary to cause such shares of Common Stock to be
      approved for listing on such Trading Market as soon as possible thereafter,
      (iii) provide to the Purchasers evidence of such listing, and (iv) maintain
      the
      listing of such Common Stock on any date at least equal to the Required Minimum
      on such date on such Trading Market or another Trading
      Market.   In addition, the Company shall hold a special meeting
      of shareholders (which may also be at the annual meeting of shareholders) on
      or
      before August 31, 2007 for the purpose of obtaining Shareholder Approval, with
      the recommendation of the Company’s Board of Directors that such proposal be
      approved, and the Company shall solicit proxies from its shareholders in
      connection therewith in the same manner as all other management proposals in
      such proxy statement and all management-appointed proxyholders shall vote their
      proxies in favor of such proposal.  If the Company does not obtain
      Shareholder Approval at the first meeting, the Company shall seek Shareholder
      Approval every 4 months thereafter until the date Shareholder Approval is
      obtained.

     

    


     

    


     

    


    
      
        
          
          

        

        
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    4.12      Equal
      Treatment of Purchasers.  Other than the payment of certain
      reasonable legal fees incurred by some of the Purchasers, no consideration
      shall
      be offered or paid to any Person to amend or consent to a waiver or modification
      of any provision of any of the Transaction Documents unless the same
      consideration is also offered to all of the parties to the Transaction
      Documents. Further, the Company shall not make any payment of principal or
      interest on the Debentures in amounts which are disproportionate to the
      respective principal amounts outstanding on the Debentures at any applicable
      time.  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 Securities or otherwise.

     

    4.13      Short
      Sales and Confidentiality After The Date Hereof.  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 Short Sales during the period commencing at the Discussion
      Time
      and ending at the time that the transactions contemplated by this Agreement,
      are
      first publicly announced as described in Section 4.6.  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 as described in Section 4.6, such Purchaser will maintain the
      confidentiality of the existence and terms of this transaction and the
      information included in the Disclosure Schedules.  Each Purchaser
      understands and acknowledges, and agrees, severally and not jointly with any
      other Purchaser, to act in a manner that will not violate the positions of
      the
      Commission as set forth in Item 65, Section A, of the Manual of Publicly
      Available Telephone Interpretations, dated July 1997, compiled by the Office
      of
      Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing,
      no Purchaser makes any representation, warranty or covenant hereby that it
      will
      not engage in Short Sales in the securities of the Company after the time that
      the transactions contemplated by this Agreement are first publicly announced
      as
      described in Section 4.6.  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
      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.

     

    4.14      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 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.

     

    4.15      Participation
      in Future Financing.

     

    


    
      
        
          
          

        

        
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    (a)        From
      the date hereof until the date that is the 24 month anniversary of the Effective
      Date, upon any issuance by the Company or any of its Subsidiaries of Common
      Stock or Common Stock Equivalents for cash consideration or any financing for
      Indebtedness of the Company (a “Subsequent Financing”), each Purchaser
      shall have the right to participate in up to an amount of the Subsequent
      Financing equal to 100% of the Subsequent Financing (the “Participation
      Maximum”) on the same terms, conditions and price provided for in the
      Subsequent Financing.

    


    (b)        At
      least 5 Trading Days prior to the closing of the Subsequent Financing, the
      Company shall deliver to each Purchaser a written notice of its intention to
      effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask
      such Purchaser if it wants to review the details of such financing (such
      additional notice, a “Subsequent Financing Notice”).  Upon the
      request of a Purchaser, and only upon a request by such Purchaser, for a
      Subsequent Financing Notice, the Company shall promptly, but no later than
      1
      Trading Day after such request, deliver a Subsequent Financing Notice to such
      Purchaser.  The Subsequent Financing Notice shall describe in
      reasonable detail the proposed terms of such Subsequent Financing, the amount
      of
      proceeds intended to be raised thereunder and the Person or Persons through
      or
      with whom such Subsequent Financing is proposed to be effected and shall include
      a term sheet or similar document relating thereto as an attachment.

    


    (c)        Any
      Purchaser desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. (New York City time)
      on the 5th
      Trading Day after all of the Purchasers have received the Pre-Notice that the
      Purchaser is willing to participate in the Subsequent Financing, the amount
      of
      the Purchaser’s participation, and that the Purchaser has such funds ready,
      willing, and available for investment on the terms set forth in the Subsequent
      Financing Notice.  If the Company receives no notice from a Purchaser
      as of such 5th
      Trading Day, such Purchaser shall be deemed to have notified the Company that
      it
      does not elect to participate.

    


    (d)        If
      by 5:30 p.m. (New York City time) on the 5th Trading
      Day after
      all of the Purchasers have received the Pre-Notice, notifications by the
      Purchasers of their willingness to participate in the Subsequent Financing
      (or
      to cause their designees to participate) is, in the aggregate, less than the
      total amount of the Subsequent Financing, then the Company may effect the
      remaining portion of such Subsequent Financing on the terms and with the Persons
      set forth in the Subsequent Financing Notice.

    


    (e)        If
      by 5:30 p.m. (New York City time) on the 5th Trading Day after all of the
      Purchasers have received the Pre-Notice, the Company receives responses to
      a
      Subsequent Financing Notice from Purchasers seeking to purchase more than the
      aggregate amount of the Participation Maximum, each such Purchaser shall have
      the right to purchase its Pro Rata Portion (as defined below) of the
      Participation Maximum.  “Pro Rata Portion” means the ratio of (x) the
      Subscription Amount of Securities purchased on the Closing Date by a Purchaser
      participating under this Section 4.15 and (y) the sum of the aggregate
      Subscription Amounts of Securities purchased on the Closing Date by all
      Purchasers participating under this Section 4.15.

    


    


    
      
        
          
          

        

        
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    (f)         The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.15, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice.

    


    (g)        Notwithstanding
      the foregoing, this Section 4.15 shall not apply in respect of (i) an Exempt
      Issuance or (ii) an underwritten public offering of Common Stock.

    


    
      	
               

            	
              4.16

            	
              Subsequent
                Equity Sales.

            


    

    


    (a)        From
      the date hereof until 90 days after the Effective Date, neither the Company
      nor
      any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
      provided, however, the 90 day period set forth in this Section
      4.16 shall be extended for the number of Trading Days during such period in
      which (i) trading in the Common Stock is suspended by any Trading Market, or
      (ii) following the Effective Date, the Registration Statement is not effective
      or the prospectus included in the Registration Statement may not be used by
      the
      Purchasers for the resale of the Underlying Shares.

    


    (b)        From
      the date hereof until such time as no Purchaser holds any of the Securities,
      the
      Company shall be prohibited from effecting or entering into an agreement to
      effect any Subsequent Financing involving a Variable Rate Transaction.
“Variable Rate Transaction” means a transaction in which the Company
      issues or sells (i) 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, exercise 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.

    


    (c)        Notwithstanding
      the foregoing, this Section 4.16 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance.

    


    


    
      
        
          
          

        

        
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    4.17      Cantone
      Board of Directors.  At any time following the date hereof,
      Cantone Office Center, LLC (“Cantone”) or its designees (collectively,
“Cantone Board Appointer”) shall have the right, in their sole
      discretion, to appoint 2 members to the Board of Directors of the
      Company.  The Board of Directors of the Company shall not exceed 9
      members following any such appointment.  The Company agrees that it
      shall have its Board of Directors or nominating committee, if it has one, to
      re-nominate the individuals designated by Cantone Board Appointer or its
      designees, as directors pursuant to this Section 4.17 or for re-election at
      each
      meeting of shareholders called for such purpose, to recommend to the Company’s
      shareholders that that they vote “for” such nominees, and that all proxies given
      to management are voted in favor of such nominees.  If Cantone Board
      Appointer shall exercise its right to appoint a member to the Company’s Board of
      Directors, the Company shall use and exercise its best efforts to maintain
      directors and officers liability insurance in such amounts as are customary
      for
      companies of the Company’s size and market position, which the Company
      represents it currently has in force; and shall enter into indemnification
      contracts with the individuals designated by Cantone Board Appointer, or its
      designees, as members of the Board of Directors, in form and substance customary
      under comparable circumstances and reasonably satisfactory to such individuals,
      and in no event less than the full extent of the protections and remedies
      afforded under applicable Nevada law. The right of Cantone Board Appointer,
      its
      designees, to appoint members of the Board of Directors pursuant to this Section
      4.17 shall terminate upon the earlier of (i) written notice of such termination
      by Cantone Board Appointer to the Company or (ii) the Debentures are
      paid-in-full and retired in their entirety. Evidence of the Company’s current
      directors and officers liability insurance policy is reflected on Schedule
      4.17, attached hereto and incorporated herein by reference.

     

     

    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
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before July 13, 2007;
      provided, however, that such termination will not affect the right
      of any party to sue for any breach by the other party (or parties).

     

    5.2        Fees
      and Expenses.  At the Closing, the Company shall reimburse
      Midsummer Capital, LLC (“Midsummer”) and Cantone for their reasonable
      legal fees and expenses.  The Company shall deliver to each Purchaser,
      prior to the Closing, a completed and executed copy of the Closing Statement
      attached hereto as Annex A.  Except as expressly set forth in
      the Transaction Documents to the contrary, each party shall pay the fees and
      expenses of its advisers, counsel, accountants and other experts, if any, and
      all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this
      Agreement.  The Company shall pay all transfer agent fees, stamp taxes
      and other similar 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 supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.

     

    


    
      
        
          
          

        

        
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    5.4        Notices.  Any
      and all notices or other communications or deliveries required or permitted
      to
      be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
      Trading Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, 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 Purchasers holding at least 75% of the Securities
      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. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party.

     

    5.7        Successors
      and Assigns.  This Agreement shall be binding upon and inure to
      the benefit of the parties and their successors and permitted
      assigns.  The Company may not assign this Agreement or any rights or
      obligations hereunder without the prior written consent of each Purchaser (other
      than by merger).  Upon prior written notice to the Company, 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
      4.10.

     

    


    
      
        
          
          

        

        
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    5.9        Governing
      Law.  All questions concerning the construction, validity,
      enforcement and interpretation of the Transaction Documents shall be governed
      by
      and construed and enforced in accordance with the internal laws of the State
      of
      New York, without regard to the principles of conflicts of law
      thereof.  Each party agrees that all legal proceedings concerning the
      interpretations, enforcement and defense of the transactions contemplated by
      this Agreement and any other Transaction Documents (whether brought against
      a
      party hereto or its respective affiliates, directors, officers, shareholders,
      employees or agents) shall be commenced exclusively in the state and federal
      courts sitting in the City of New York.  Each party hereby irrevocably
      submits to the exclusive jurisdiction of the state and federal courts sitting
      in
      the City of New York, borough of Manhattan for the adjudication of any dispute
      hereunder or in connection herewith or with any transaction contemplated hereby
      or discussed herein (including with respect to the enforcement of any of the
      Transaction Documents), and hereby irrevocably waives, and agrees not to assert
      in any suit, action or proceeding, any claim that it is not personally subject
      to the jurisdiction of any such court, that such suit, action or proceeding
      is
      improper or 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.   If either party shall commence an action or
      proceeding to enforce any provisions of the Transaction Documents, then the
      prevailing party in such action or proceeding shall be reimbursed by the other
      party for its reasonable attorneys’ fees and other costs and expenses incurred
      with the investigation, preparation and prosecution of such action or
      proceeding.

     

    5.10      Survival.  The
      representations and warranties shall survive the Closing and the delivery of
      the
      Securities for the applicable statue of limitations.

     

    5.11      Execution.  This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart.  In the event that any signature is delivered by
      facsimile transmission 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.

     

    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      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..

     

    


    
      
        
          
          

        

        
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    5.14      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.

     

    5.15      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 agrees 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.

     

    5.16      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.

     

    5.17      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 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 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.

     

    


    
      
        
          
          

        

        
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    5.18      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
      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 their review and
      negotiation of the Transaction Documents.  For reasons of
      administrative convenience only, Purchasers and their respective counsel have
      chosen to communicate with the Company through FWS.  FWS does not
      represent all of the Purchasers but only Midsummer.  The Company has
      elected to provide all Purchasers with the same terms and Transaction Documents
      for the convenience of the Company and not because it was required or requested
      to do so by the Purchasers.

     

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

     

    5.20      Construction.
      The parties agree that each of them and/or their respective counsel has 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 hereto.

     

    5.21      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.

     

    


     

    (Signature
      Pages Follow)

     

    


     

    


     

    


    
      
        
          
          

        

        
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    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.

     

    
      	
              OXFORD
                MEDIA, INC.

               

               

            	 	
              Address
                for Notice:

            
	
              By:__________________________________________

              Name:

              Title:

               

            	 	
              Fax:

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

               

               

               

            	 	 


    

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
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    [PURCHASER
      SIGNATURE PAGES TO OXMI 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 Purchaser:
      ________________________________________________

    Facsimile
      Number of Purchaser:
      ________________________________________________

    


    Address
      for Notice of Purchaser:

    


    


    


    


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

    


    


    


    


    


    Subscription
      Amount:

    Cash:
      $250,000

    Surrender
      of Debt plus accrued but unpaid interest: -0-

    Principal
      Amount (Subscription Amount x 1.0526315): $263,157.89

    Shares
      of
      Preferred Stock: 451.26

    


    


    


    EIN
      Number:

    


    [SIGNATURE
      PAGES CONTINUE]

    


    


    


    
      
        
          
          

        

        
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    Annex
      A

    


    CLOSING
      STATEMENT

    


    Pursuant
      to the attached Securities Purchase Agreement, dated as of the date hereto,
      the
      purchasers shall purchase up to $4,210,526 of Debentures and Shares of Preferred
      Stock from Oxford Media, Inc. (the “Company”).  All funds will
      be wired into an account maintained by the Company.  All funds will be
      disbursed by the Company in accordance with this Closing Statement.

    


    Disbursement
      Date:   July
      16,
      2007

    
      
        

      



    
      	
              I.   PURCHASE
                PRICE

            	 
	 	 	 
	 	
              Gross
                Proceeds to be Received

            	
              $

            
	 	 	 
	
              II.
                DISBURSEMENTS

            	 
	 	 	 
	 	
              Credit
                for Surrender of Midsummer Note

            	
              $

            
	 	
              Midsummer
                Capital

            	
              $

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
              Total
                Amount Disbursed:

            	
              $

            


    

    


    


    


    WIRE
      INSTRUCTIONS:

    


    


    


    


    
      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      “A”

    


    Senior
      Secured Debentures

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      “B”

    


    Certificate
      of Designation

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      “C”

    


    Security
      Agreement

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          41

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      “D”

    


    Subsidiary
      Guarantee

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      “E”

    


    Legal
      Opinion of Company Counsel

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      “F”

    


    Voting
      Confirmation

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      “G”

    


    Registration
      Rights Agreement

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          45

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(a)

    


    Subsidiaries

    


    OxfordSVI,
      Inc., an Illinois
      corporation

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          46

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(g)

    


    Preferred
      Stock Issued; Capitalization

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          47

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(i)

    


    Material
      Changes

    


    The
      Company and David L. Parker, a
      member of the Company’s executive management team and its Board of Directors,
      has agreed to terminate his employment and his status as a Board member
      effective as of 16 July 2007. The Company and Parker have entered into a
      Settlement and Release Agreement under which, among other things, (i) the
      parties release each other from all future liability arising out of Parker’s
      employment and tenure as a Director; (ii) the Company will issue to Parker
      6,300,000 shares of its common stock; and, (iii) the shares of stock will be
      afforded the same registration rights as provided under the Registration Rights
      Agreement.

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(k)

    


    Labor
      Relations

    


    The
      Company recently terminated the
      employment of its CFO, David Noyes. The Company believes there was “cause” to
      terminate Noyes. No litigation has been threatened by Noyes and the Company
      is
      not aware of any other judicial action planned or threatened by Noyes against
      the Company.

    


    The
      Company recently terminated the
      employment of its CTO, Herbert Presley. The Company believes there was “cause”
to terminate Presley. No litigation has been threatened by Presley and the
      Company is not aware of any other judicial action planned or threatened by
      Presley against the Company.

    


    The
      Company is in the process of
      terminating Cliff Hall. The Company does not reasonably anticipate any legal
      issues attendant to the termination. Pursuant to Mr. Hall’s employment
      agreement, he is entitled to 60 days notice and a three
      month severance.

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(n)

    


    Title
      to Assets

    


    1.           75
      Gateway E-2600S desktops and 43 Gateway 17" LCD Monitors that are located in
      OxfordSVI, Inc.’s Call Center in Peoria is pledged as collateral under a finance
      transaction with Leaf Funding Inc.

    


    2.           16
      Instant Entertainment digital servers are pledged as collateral in favor of
      The
      Leasing Experts Inc. under a financing agreement for the servers.

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(s)

    


    Certain
      Fees

    


    1.           In
      the event Anthony Cantone or any affiliated or related entity executes the
      Purchase Agreement and invests in the Company, a fee equal to one percent (1%)
      of said investment will be due and payable to Barry Kaplan
      Associates.

    


    2.           In
      the event Marc Kreloff or any affiliated or related entity executes the Purchase
      Agreement and invests in the Company, a fee equal to eight percent (8%) of
      said
      investment will be due and payable to Early Bird Capital.

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          51

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(v)

    


    Registration
      Rights

    


    David
      L. Parker has been granted
      registration rights, as further described in Schedule 3.1(i),
      above.

    


    Pursuant
      to the terms and conditions of
      the Securities Exchange Agreement the following “Holders” under the Securities
      Exchange Agreement shall be afforded all rights and preferences as a “Holder”
under the Registration Rights Agreement with regard to the number of shares
      of
      Series “C” Preferred Stock designated next to each such person:

    


    
      	
              Palisades
                Master Fund, LP

            	 	
              6,407.0373

            
	
              Midsummer
                Investment Fund

            	 	
              3,093.2811

            
	
              Longview
                Fund, L.P.

            	 	
              2,652.7661

            
	
              Camofi
                Master LDC

            	 	
              1,048.4932

            
	
              Crescent
                International, Ltd.

            	 	
              524.2466

            
	
              Plus
                Four Private Equities, L.P.

            	 	
              524.2466

            
	
              Lew
                Jaffe

            	 	
              104.8493

            
	
              Dave
                Parker

            	 	
              104.8493

            
	
              Marital
                Trust U/T Richard L. Owens,

              Trustee,
                Dated 11-24-92

            	 	
              639.2709

            
	
              Marsha
                S. Glazer

            	 	
              639.2709

            
	
              Andrew
                Rubenstein

            	 	
              26.0927

            
	
              Marital
                Trust U/T Richard L. Owens,

              Trustee,
                Dated 11-24-92

            	 	
              6.8008

            
	
              Marsha
                S. Glazer

            	 	
              6.8008

            
	
              Andrew
                Rubenstein

            	 	
              0.2776

            
	
              Edward
                Kelly

            	 	
              6.5181

            
	
              Paul
                & Kathleen Kelly

            	 	
              6.5181

            
	
              Lew
                Jaffe

            	 	
              37.2299

            


    

    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          52

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(aa)

    


    Indebtedness

    


    1.          75
      Gateway E-2600S desktops and 43 Gateway 17" LCD Monitors that are located in
      OxfordSVI, Inc.’s Call Center in Peoria is pledged as collateral under a finance
      transaction with Leaf Funding Inc.

    


    2.          16
      Instant Entertainment digital servers are pledged as collateral in favor of
      The
      Leasing Experts Inc. under a financing agreement for the servers.

    


    3.          The
      following severance obligations:

    


    a.          Cliff
      Hall, as described on Schedule 3.1(k), above.

    


    b.          $147,692.40
      owed to Rick Shafer, payable in bi-weekly installments of $6,153.85 up to and
      until 30 May 2008.

    


    c.          $42,307.75
      owed to Kelly Yordy, payable in bi-weekly installments of $3,384.62 up to and
      until 28 December 2007 at which time $1,692.31 will be due and
      owing.

    


    d.          $26,502.00
      owed to Wayne Brown, payable in bi-weekly installments of $4,417.00 commencing
      on 10 August 2007 and continuing up to and until 19 October 2007.

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          53

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(ee)

    


    Accountants

    


    McKennon,
      Wilson & Morgan LLP

    16959
      Bernardo Center Drive, Suite 202

    San
      Diego, California  92128

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          54

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      3.1(ff)

    


    Seniority

    


    1.           75
      Gateway E-2600S desktops and 43 Gateway 17" LCD Monitors that are located in
      OxfordSVI, Inc.’s Call Center in Peoria is pledged as collateral under a finance
      transaction with Leaf Funding Inc.

    


    2.           16
      Instant Entertainment digital servers are pledged as collateral in favor of
      The
      Leasing Experts Inc. under a financing agreement for the servers.

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          55

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      4.9

    


    Use
      of
      Proceeds

    


    


    


    
      	
              Source

            	 	 	 
	 	 	 	 
	
              New
                funds at closing

            	 	$	
              3,800,000

            	 
	
              Bridge
                loan (June 28, 2007)

            	 	$	
              200,000

            	 
	 	 	 	 	 
	
              Total

            	 	$	
              4,000,000

            	 
	 	 	 	 	 
	
              Use

            	 	 	 	 
	 	 	 	 	 
	
              Transaction
                fees

            	 	 	 	 
	
              Legal

            	 	$	
              200,000

            	 
	 	 	 	 	 
	
              Operations

            	 	 	 	 
	
              Operating
                cash losses

            	 	$	
              1,200,000

            	 
	
              Studio
                payments past due

            	 	$	
              800,000

            	 
	
              critical
                AP operations

            	 	$	
              250,000

            	 
	
              critical
                AP to CapEx venders

            	 	$	
              250,000

            	 
	 	 	 	 	 
	
              CapEx

            	 	 	 	 
	
              digital
                upgrades (add 100K new digital IE systems)

            	 	$	
              400,000

            	 
	
              inventory
                purchase (committed inventory for pre sold hotels)

            	 	$	
              130,000

            	 
	
              digital
                remotes (upgrade 120K rooms)

            	 	$	
              300,000

            	 
	 	 	 	 	 
	
              Other

            	 	 	 	 
	
              Payment
                to Longview of CBC Pro Rata Proceeds

            	 	$	
              6,354.30

            	 
	
              Balance
                sheet cash

            	 	$	
              463,645.70

            	 
	 	 	 	 	 
	
              Total

            	 	$	
              4,000,000

            	 
	 	 	 	 	 


    

    


    


    


    


    
      
        
          
          

        

        
          56

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      4.17

    


    Proof
      of Directors and Officers Liability Insurance Policy

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


     

     

    
 

    


    


    


    


     

    57