Unassociated Document


     

    
      Exhibit
        10.11

       

      SECURITIES
        PURCHASE AGREEMENT

       

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of November ____, 2008 between Capital Growth Systems, Inc., a Florida
        corporation (the “Company”),
        and
        each purchaser identified on the signature pages hereto (each, including
        its
        successors and assigns, a “Purchaser”
and
        collectively, the “Purchasers”).

       

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

       

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

       

       

      ARTICLE
        I.

      DEFINITIONS

       

      1.1 Definitions.
        In
        addition to the terms defined elsewhere in this Agreement: (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:

       

      “Acquiring
        Person”
shall
        have the meaning ascribed to such term in Section 4.7.

       

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

       

      “Administrator”
means
        Vanco plc (in administration).

       

      “Administrator
        Debenture”
means
        the debenture in the form of Exhibit
        A-1
        hereto,
        issuable to the administrator pursuant to the terms of the ILPA (as defined
        below) in the original principal amount of $3,000,000.

       

      “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. 

       

      “Archer
        Intercreditor Agreement”
        means the Intercreditor Agreement, dated as of the date hereof, duly executed
        by
        the Company, each of the Purchasers, and the Archer Purchasers in the form
        of
Exhibit
        H-1
        attached hereto 

       

      “Archer
        Purchasers”
means
        the purchasers of the securities issued pursuant to the Loan and Security
        Agreement dated as of the date hereof by and among the Company and its
        Subsidiaries and ACF CGS, L.L.C. (the “Archer
        Loan Agreement”).

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      “Authorized
        Share Approval”
means
        (i) the vote by the stockholders of the Company to approve an amendment to
        the
        Company’s articles or certificate of incorporation that increases the number of
        authorized shares of Common Stock to at least 600,000,000 shares of Common
        Stock
        (the “Amendment”)
        and
        (ii) the filing by the Company of the Amendment with the Secretary of State
        of
        the State of Florida and the acceptance of the Amendment by the Secretary
        of
        State of the State of Florida. 

       

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

       

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

       

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

       

      “Closing
        Date”
means
        the Trading Day 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.

       

      “Closing
        Statement”
means
        the Closing Statement in the form Annex
        A
        attached
        hereto.

       

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

       

      “Common
        Stock”
means
        the common stock of the Company, par value $0.001 per share, and any other
        class
        of securities into which such securities 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
        Shefsky & Froelich, with offices located at 111 E. Wacker Drive, Suite 2800,
        Chicago, Illinois 60601.

       

      “Conversion
        Price”
shall
        have the meaning ascribed to such term in the Debentures.

       

      “Debentures”
means
        the Original Issue Discount Secured Convertible Debentures due, subject to
        the
        terms therein, seven years from their date of issuance, issued by the Company
        to
        the Purchasers hereunder, in the form of Exhibit
        A
        attached
        hereto.

       


      
        
          
          

        

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

       

      “Discussion
        Time”
shall
        have the meaning ascribed to such term in Section 3.2(f). 

       

      “Effective
        Date”
means
        the earlier of (a) the effective date of a Registration Statement and (b)
        the
        date that all of Underlying Shares issuable pursuant to the Transaction
        Documents may be sold or are eligible for sale under Rule 144, without volume
        or
        manner-of-sale restrictions.

       

      “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 or options to employees, officers
        or
        directors of the Company pursuant to any stock or option plan duly adopted
        for
        such purpose by a majority of the non-employee members of the Board of Directors
        or a majority of the members of a committee of non-employee directors
        established for such purpose, (b) securities upon the exercise or exchange
        of or
        conversion of any Securities issued hereunder (including but not limited
        to any
        issuance of Common Stock with respect to the redemption of the Debentures
        and
        the debentures issued pursuant to the March Purchase Agreement or payment
        of any
        liquidated damages with respect to the Debentures, the Warrants and this
        Agreement and the debentures and warrants issued pursuant to the March Purchase
        Agreement) 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, (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 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, (d) for purposes of Section 4.12 only,
        an
        issuance of Common Stock or Common Stock Equivalents, without registration
        rights, for cash consideration, to the global carrier referenced in the
        Company’s press release dated February 20, 2008, provided, however, any such
        issuance of Common Stock Equivalents shall be expressly subordinate to the
        Debentures pursuant to a written subordination agreement with the Purchasers
        that is acceptable to each Purchaser in its sole and absolute discretion
        and (e)
        for purposes of Sections 4.12 and 4.13 only, securities
        (including shares of Common Stock, warrants and Common Stock Equivalents)
        issued
        in connection with the Archer Loan Agreement the terms of which are described
        in
        the Disclosure Schedules hereto and the Administrator Debenture.

       


      
        
          
          

        

        
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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. 

       

      “March
        Purchase Agreement”
        means the Securities Purchase Agreement, dated March 11, 2008, by and among
        the
        Company and each of the purchasers signatories thereto for the issuance of
        debentures and warrants.

      


      “March
        Purchasers”
        means the purchasers of the securities issued pursuant to the March Purchase
        Agreement and any successors in interest to any of the debentures and warrants
        issued pursuant to the March Purchase Agreement (by way of assignment or
        cancellation and reissuance of the same).

      


      “March
        Purchasers Intercreditor Agreement”
        means the intercreditor agreement, dated as of the date hereof, duly executed
        by
        the Company, each of the Purchasers, and each of the March Purchasers in
        the
        form of Exhibit
        H-2
        attached hereto 

       

      “March
        Registration Rights Agreement”
means
        the Registration Rights Agreement, dated March 11, 2008, by and among the
        Company and each of the March Purchasers.

       

      “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 4.12(a). 

       

      “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.

       


      
        
          
          

        

        
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      “Pre-Notice”
shall
        have the meaning ascribed to such term in Section 4.12(b). 

       

      “Principal
        Amount”
means,
        as to each Purchaser, the amounts set forth below such Purchaser’s signature
        block on the signature pages hereto next to the heading “Principal Amount,” in
        United States Dollars, which shall equal such Purchaser’s Subscription Amount
        multiplied by 1.65.

       

      “Pro
        Rata Portion”
shall
        have the meaning ascribed to such term in Section 4.12(e).

       

      “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
        Statement”
means
        a
        registration statement filed pursuant to Section 4.18, registering the resale,
        by the Purchasers, of all of the Underlying Shares, or any portion
        thereof.

       

      “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 potentially issuable in the future pursuant to the Transaction
        Documents, including any Underlying Shares issuable upon exercise in full
        of all
        Warrants or conversion in full of all Debentures (including Underlying Shares
        issuable as payment of interest on the Debentures), ignoring any conversion
        or
        exercise limits set forth therein, and assuming that the Conversion Price
        is at
        all times on and after the date of determination 75% of the then Conversion
        Price on the Trading Day immediately prior to the date of
        determination.

       

      “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 Warrants, the Warrant Shares and the Underlying
        Shares.

       

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

       

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


      
        
          
          

        

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

       

      “Senior
        Debt”
shall
        have the meaning set forth in the Archer Intercreditor Agreement.

       

      “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 Warrants purchased hereunder as specified below
        such Purchaser’s name on the signature page of this Agreement and next to the
        heading “Subscription Amount,” in United States dollars and in immediately
        available funds or, with respect to (i) Aequitas Catalyst Fund, LLC - Series
        C
        (“Aequitas”),
        through the conversion of its bridge note dated September 29, 2008, in the
        original principal amount of $500,000 (the “Aequitas
        Note”)
        to a debenture and warrant hereunder and (ii) Capstone Investments
        (“Capstone”),
        through the irrevocable waiver of its right to all or a portion of its cash
        fee
        of 7% of the cash proceeds hereunder and under the Archer Loan
        Agreement.

       

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

       

      “Subsequent
        Financing Notice”
shall
        have the meaning ascribed to such term in Section 4.12(b). 

       

      “Subsidiary”
means
        any subsidiary of the Company as set forth on Schedule
        3.1(a)
        and
        shall, where applicable, 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
        F
        attached
        hereto.

       

      “Trading
        Day”
means
        a
        day on which the principal Trading Market 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 Debentures, the Warrants, the Security Agreement, the
        Subsidiary Guarantee, the Archer Intercreditor Agreement, the March Purchasers
        Intercreditor Agreement, the Voting Agreement, the Consent, Waiver and Amendment
        Agreement, all exhibits and schedules thereto and hereto and any other documents
        or agreements executed in connection with the transactions contemplated
        hereunder.

       

      “Transfer
        Agent”
means
        Continental Stock Transfer & Trust Company, the current transfer agent of
        the Company with a mailing address of 17 Battery Place, New York, New York
        10004
        and a facsimile number of 212-509-5150, and any successor transfer agent
        of the
        Company.

       

      “Underlying
        Shares”
means
        the shares of Common Stock issued and issuable upon conversion or redemption
        of
        the Debentures and upon exercise of the Warrants and issued and issuable
        in lieu
        of the cash payment of interest on the Debentures in accordance with the
        terms
        of the Debentures.

       

      “Variable
        Rate Transaction”
        shall
        have the meaning ascribed to such term in Section 4.13(b).

       

      “Voting
        Agreement”
        means the written agreement, in the form of Exhibit
        G
        attached hereto, of all of the officers, directors, and stockholders 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 stockholders of the Company in favor
        of
        the Authorized Share Approval, amounting to, in the aggregate, at least 50.1%
        of
        the issued and outstanding Common Stock. 

       

      “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 for
        trading
        on the OTC Bulletin Board and if prices for the Common Stock are then reported
        in the “Pink Sheets” published by Pink OTC Markets, Inc. (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 fees and expenses of which shall be paid by
        the
        Company.

       


      
        
          
          

        

        
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      “Warrants”
means,
        collectively, the Common Stock purchase warrants delivered to the Purchasers
        at
        the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
        be
        exercisable immediately and have a term of exercise equal to 5 years from
        the
        date of the Authorized Share Approval, in the form of Exhibit C
        attached
        hereto.

       

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

       

      ARTICLE
        II.

      PURCHASE
        AND SALE

       

      2.1 Closing.
        On the
        Closing Date, upon the terms and subject to the conditions set forth herein,
        substantially concurrent with the execution and delivery of this Agreement
        by
        the parties hereto, the Company agrees to sell, and the Purchasers, severally
        and not jointly, agree to purchase, up to $17,325,000, in the aggregate,
        in
        principal amount of the Debentures (with an aggregate Subscription Amount
        of up
        to $10,500,000). Each Purchaser shall deliver to the Company via wire transfer
        or a certified check, immediately available funds equal to its cash Subscription
        Amount (and, with respect to (x) Aequitas, evidence of the cancellation of
        the
        Aequitas Note and (y) Capstone, evidence of their irrevocable waiver of their
        right to a cash fee hereunder and under the Archer Loan Agreement) and the
        Company shall deliver to each Purchaser its respective Debenture and a Warrant,
        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.

       

      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
        D
        attached
        hereto; 

       

      (iii) a
        Debenture with a principal amount equal to such Purchaser’s Subscription Amount
        multiplied by 1.65, registered in the name of such Purchaser;

       

      (iv) the
        Voting Agreements, duly executed by all officers, directors and 10% stockholders
        of the Company;

       

      (v) a
        Warrant
        registered in the name of such Purchaser to purchase up to a number of shares
        of
        Common Stock equal to 75% of such Purchaser’s Subscription Amount divided by
        $0.24, with an exercise price equal to $0.24,
        subject
        to adjustment therein;

       


      
        
          
          

        

        
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      (vi) the
        Security Agreement, duly executed by the Company, VDUL (as defined below)
        and
        each Subsidiary, along with all of the Security Documents (including, without
        limitation, documents and agreements evidencing the Purchasers’ security
        interest in the assets of the Company’s Subsidiary that is organized in the UK),
        including the Subsidiary Guarantee, duly executed by the parties thereto;
        

       

      (vii) the
        Archer Intercreditor Agreement, duly executed by the Company and the Archer
        Purchasers; and

       

      (viii) the
        March
        Purchasers Intercreditor Agreement, duly executed by the Company and each
        of the
        March Purchasers.

      


      (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;

           

        

      

      (ii) such
        Purchaser’s cash Subscription Amount by wire transfer to the account as
        specified in writing by the Company (or, with respect to (x) Aequitas, evidence
        of the cancellation of the Aequitas Note and (y) Capstone, evidence of their
        irrevocable waiver of their right to a cash fee hereunder and under the Archer
        Loan Agreement);

       

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

       

      (iv) the
        Archer Intercreditor Agreement duly executed by such Purchaser; and

       

      (v) the
        March
        Purchasers Intercreditor 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 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.

       


      
        
          
          

        

        
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      (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 of a lock-up agreement, in the form attached hereto as Exhibit
        J,
        duly
        executed by each of the Administrator and Capstone, the Company and the Transfer
        Agent;

       

      (iv)all
        existing debtholders of the Company and its Subsidiaries, with the exception
        of
        the Excepted Debtholders, as that term is defined herein (each, an “Existing
        Debtholder” and together, the “Existing
        Debtholders”),
        shall
        each have executed and delivered to the Purchasers an agreement whereby each
        Existing Debtholder shall agree, that all amounts owed to it shall not
mature
        or require payments of any nature prior to the repayment of all amounts due
        under the Debentures, and whereby such indebtedness is made expressly
        subordinate in right of payment to the indebtedness evidenced by the Debentures,
        as reflected in a written agreement reasonably acceptable to, and approved
        by,
        the Purchasers. The term the Excepted Debtholders includes the March Purchasers,
        the Archer Purchasers and such other debtholders described on Schedule
        2.3(b)(iii) attached
        hereto (together, the “Excepted
        Debtholders”);
        

       

      (v)the
        delivery of a consent, waiver and amendment agreement, in the form attached
        hereto as Exhibit
        I
        duly
        executed by each March Purchaser (the “Consent,
        Waiver and Amendment Agreement”);

       

      (vi)the
        Interest and Loan Purchase Agreement (“ILPA”)
        among
        Capital Growth Acquisition, Inc. (“Acquisition”),
        Vanco
        Direct USA, LLC (“VDUL”)
        and
        the Administrators for the estate of Vanco, plc (“Administrators”)
        shall
        have been duly executed on terms and conditions described in the Disclosure
        Schedules hereto, and the transactions consummated thereunder shall have
        been
        consummated subject only to the conveyance of the VDUL limited liability
        company
        interest, which shall be subject only to certain post-closing state regulatory
        filings described on Schedule 3.1(m)(A) hereto or the passage of time as
        further
        described on the Disclosure Schedules hereto; 

       

      (vii) the
        closing of the Archer Loan Agreement, with gross proceeds of not less than
        $8,500,000 to the Company and its Affiliates, shall have been consummated
        prior
        to or contemporaneous with the Closing hereunder on terms and conditions
        described in the Disclosure Schedules (provided, the aggregate principal
        amount
        of the Senior Debt shall not exceed $10,500,000), and the Company shall have
        delivered evidence thereof to the Purchasers;

       


      
        
          
          

        

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

       

      (ix)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).
        Except
        as 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. 

       

      (b) Organization
        and Qualification.
        The
        Company and each of the Subsidiaries is an entity duly incorporated or otherwise
        organized, validly existing and in good standing under the laws of the
        jurisdiction of its incorporation or organization, with the requisite power
        and
        authority to own and use its properties and assets and to carry on its business
        as currently conducted. Neither the Company nor any Subsidiary is in violation
        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, the Board of Directors or the
        Company’s stockholders in connection therewith other than in connection with the
        Required Approvals. Each Transaction Document to which it is a party has
        been
        (or upon delivery will have been) duly executed by the Company and, when
        delivered in accordance with the terms hereof and thereof, will constitute
        the
        valid and binding obligation of the Company enforceable against the Company
        in
        accordance with its terms, except: (i) as limited by general equitable
        principles and applicable bankruptcy, insolvency, reorganization, moratorium
        and
        other laws of general application affecting enforcement of creditors’ rights
        generally, (ii) as limited by laws relating to the availability of specific
        performance, injunctive relief or other equitable remedies and (iii) insofar
        as
        indemnification and contribution provisions may be limited by applicable
        law.

       

      (d) No
        Conflicts.
        The
        execution, delivery and performance by the Company of the Transaction Documents
        and the consummation by it to which it is a party 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,
        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, (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 have or 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) the filings required pursuant to Section
        4.6, (ii) the notice and/or application(s) to each applicable Trading Market
        for
        the issuance and sale of the Securities and the listing of the Underlying
        Shares
        for trading thereon in the time and manner required thereby, (iii) the filing
        of
        Form D with the Commission and such filings as are required to be made under
        applicable state securities laws, and (iv) the filings set forth in Schedule
        3.1(e)
        required
        under the ILPA to obtain necessary FCC and state commerce commission approvals
        to the change in control of VDUL (collectively, the “Required
        Approvals”).

       

      (f) Issuance
        of the Securities.
        The
        Securities (other than the Underlying Shares) 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. Subject only to the Authorized Share Approval,
        the Underlying Shares, when issued 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. 

       

      (g) Capitalization.
        The
        capitalization of the Company is as set forth on Schedule
        3.1(g),
        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
        and/or exercise of Common Stock Equivalents outstanding as of the date of
        the
        most recently filed periodic report under the Exchange Act or as reflected
        on
Schedule
        3.1(g).
        Except
        as set forth on Schedule
        3.1(g)(i),
        no
        Person has any right of first refusal, preemptive right, right of participation,
        or any similar right to participate in the transactions contemplated by the
        Transaction Documents. Except as a result of the purchase and sale of the
        Securities or on Schedule
        3.1(g),
        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. Except as set forth on Schedule
        3.1(g)(ii),
        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. Except as set forth on Schedule
        3.1(g)(iii),
        no
        further approval or authorization of any stockholder, the Board of Directors
        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.
        Except
        as otherwise disclosed in subsequently filed SEC Reports filed prior to the
        date
        hereof, 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 except as otherwise
        disclosed in subsequently filed SEC Reports filed prior to the date hereof,
        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. Except as described on Schedule
        3.1(h),
        the
        Company has never been an issuer subject to Rule 144(i) under the Securities
        Act. Except as otherwise disclosed in subsequently filed SEC Reports filed
        prior
        to the date hereof, 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. Except as otherwise disclosed in subsequently
        filed SEC Reports filed prior to the date hereof, 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.
        Other
        than as set forth on Schedule
        3.1(i),
        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 or in connection
        with
        the transaction contemplated by this Agreement 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.
        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 and the other transactions contemplated by
        the
        Transaction Documents 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 1 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 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, except as set forth on Schedule
        3.1(j).
        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.
        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. Except as disclosed
        on
Schedule
        3.1(k),
        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.
        Except
        as set forth on Schedule
        3.1(l),
        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
        have or reasonably be expected to result in a Material Adverse
        Effect.

       

      (m) Regulatory
        Permits.
        Except
        as disclosed on Schedule
        3.1(m),
        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.
        Except
        for the liens set forth on Schedule
        3.1(n),
        the
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them and good and marketable title in all personal
        property owned by them that is material to the business of the Company and
        the
        Subsidiaries, in each case free and clear of all Liens, except for 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.

       


      
        
          
          

        

        
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      (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 as described in the SEC Reports as necessary or
        material for use in connection with their respective businesses and which
        the
        failure to so could 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.

       

      (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 in the amount of $10.0 million. 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 $120,000
        other than for: (i) payment of salary or consulting fees for services rendered,
        (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
        other employee benefits, including stock option agreements under any stock
        option plan of the Company.

       

      (r) Sarbanes-Oxley;
        Internal Accounting Controls.
        Except
        as set forth on Schedule
        3.1(r),
        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.
        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, except as set forth on Schedule
        3.1(s).
        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 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 the persons specified on Schedule
        3.1(v),
        no
        Person has any right to cause the Company to effect the registration under
        the
        Securities Act of any securities of the Company.

       


      
        
          
          

        

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

       

      (x) Application
        of Takeover Protections.
        The
        Company and the Board of Directors have taken all necessary action, if any,
        in
        order to render inapplicable any control share acquisition, business
        combination, poison pill (including any distribution under a rights agreement)
        or other similar anti-takeover provision under the Company’s 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 Archer Loan Agreement and
        the
        ILPA, the material terms of which are set forth on Schedule
        3.1(y) (all
        of
        which shall be publicly disclosed contemporaneous with the disclosure of
        this
        Agreement as required by Section 4.6), 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 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 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. The Company acknowledges and agrees that no Purchaser
        makes or has made any representations or warranties with respect to the
        transactions contemplated hereby other than those specifically set forth
        in
        Section 3.2 hereof.

       


      
        
          
          

        

        
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      (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. 

       

      (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
        projected cash flow of the Company from its future operations, 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
        (x) 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),
        (y) 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 (z) 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, have or 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.

       


      
        
          
          

        

        
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      (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.

       

      (ee) Accountants.
        The
        Company’s present accounting firm is Plante Moran. To the knowledge and belief
        of the Company, such accounting firm is a registered public accounting firm
        as
        required by the Exchange Act. The Company has advised that it is in the process
        of retaining a new accounting firm. The Company warrants that it shall retain
        a
        new accounting firm duly registered as a public accounting firm as required
        by
        the Exchange Act and that such new firm shall express its opinion with respect
        to the financial statements to be included in the Company’s Annual Report for
        the year ending December 31, 2008.

       

      (ff) Seniority.
        Except
        for the Senior Debt, 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), or as otherwise
        set
        forth 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 except as noted in
Schedule
        3.1(gg),
        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.

       


      
        
          
          

        

        
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      (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 4.15 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,
        specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement
        transactions, may negatively impact the market price of the Company’s
        publicly-traded securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
        indirectly, may presently have a “short” position in the Common Stock and (iv)
        each Purchaser shall not be deemed to have any affiliation with or control
        over
        any arm’s length counter-party in any “derivative” transaction. The
        Company further understands and acknowledges that (y) one or more Purchasers
        may
        engage in hedging activities at various times during the period that the
        Securities are outstanding, including, without limitation, during the periods
        that the value of the Underlying Shares deliverable with respect to Securities
        are being determined, and (z) such hedging activities (if any) could reduce
        the
        value of the existing stockholders' equity interests in the Company at and
        after
        the time that the hedging activities are being conducted.  The Company
        acknowledges that such aforementioned hedging activities do not constitute
        a
        breach of any of the Transaction Documents.

       

      (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 in connection with the placement of the
        Securities.

       


      
        
          
          

        

        
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      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 if an entity, 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 a Purchaser 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.

       

      (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 a 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. Notwithstanding the foregoing, Midsummer
        Investment Ltd. (“Midsummer”)
        has
        been approached by an institutional accredited investor that was introduced
        to
        Midsummer by the placement agent for this transaction (the “Potential
        Purchaser”)
        about
        purchasing a portion of its Securities purchased hereunder after the Closing
        in
        a private transaction.  Midsummer represents there are no present
        understandings or agreements to transfer any of its Securities to such Potential
        Purchaser, however, any such transfer otherwise in accordance with the
        provisions of Section 4.1(a) hereof shall in no way be deemed a breach of
        Midsummer’s representations and warranties hereunder or under any other
        Transaction Document.

       

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

       


      
        
          
          

        

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

       

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

       

      (f) 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 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).
        Notwithstanding the foregoing, for avoidance of doubt, nothing contained
        herein
        shall constitute a representation or warranty, or preclude any actions, with
        respect to the identification of the availability of, or securing of, available
        shares to borrow in order to effect short sales or similar transactions in
        the
        future.

       

      ARTICLE
        IV.

      OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1 Transfer
        Restrictions.

       


      
        
          
          

        

        
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      (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 this 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 [EXERCISABLE]
        [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
        [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH
        A
        BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

       

      The
        Company acknowledges and agrees that a Purchaser may from time to time pledge
        pursuant to a bona fide margin agreement with a registered broker-dealer
        or
        grant a security interest in some or all of the Securities to a financial
        institution that is an “accredited investor” as defined in Rule 501(a) under the
        Securities Act and who agrees to be bound by the provisions of this Agreement
        and, 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 Section 4.18, 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.

       


      
        
          
          

        

        
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      (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 a Registration Statement) covering the resale of such security
        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, without the requirement for the Company
        to be
        in compliance with the current public information required under Rule 144
        as to
        such Underlying Shares and without volume or manner-of-sale restrictions
        or (iv)
        if such legend is not required under applicable requirements of the Securities
        Act (including judicial interpretations and pronouncements issued by the
        staff
        of the Commission). The Company shall cause its counsel to issue a legal
        opinion
        to the Transfer Agent if promptly after the Effective Date required by the
        Transfer Agent to effect the removal of the legend hereunder. If all or any
        portion of a Debenture is converted or Warrant is 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, without
        volume
        or manner-of-sale restrictions 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 such time as such legend is no longer required under this
        Section
        4.1(c), it will, no later than three Trading Days following the delivery
        by a
        Purchaser to the Company or the Transfer Agent of a certificate representing
        Underlying Shares, as applicable, issued with a restrictive legend (such
        third
        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 4.
        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.

      


      (d) (i) 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 (the “Legend
        Removal Deadline”)
        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.

       


      
        
          
          

        

        
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      (ii) Notwithstanding
        anything to the contrary contained herein, if at any time prior to the Senior
        Creditor Repayment (as defined in the Archer Intercreditor Agreement) the
        Company is prohibited from paying, and the Purchasers are prohibited from
        receiving, cash payments of liquidated damages pursuant to Section 4.1(d)(i)
        above, at the option of each Purchaser on written notice to the Company,
        such
        amounts otherwise payable in cash pursuant to Section 4.1(d)(i) shall either
        accrue, or be payable in the form of shares of Common Stock. The price at
        which
        shares of Common Stock issuable in lieu of the cash payment of liquidated
        damages hereunder shall be equal to the least of (x) 90% of the average of
        the 5
        consecutive VWAPs immediately prior to the date of the applicable Legend
        Removal
        Deadline, (y) 90% of the average of the 5 consecutive VWAPs immediately prior
        to
        the date such shares are actually issued, and (z) the then applicable Conversion
        Price.

       

      


      (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; Public Information.
        

       

      (a) If
        the
        Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
        Act
        on the date hereof, the Company agrees to cause the Common Stock to be
        registered under Section 12(g) of the Exchange Act on or before the
        60th
        calendar
        day following the date hereof. Until the time that no Purchaser owns Securities,
        the Company covenants to maintain the registration of the Common Stock under
        Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain
        extensions in respect thereof and file within the applicable grace period)
        all
        reports required to be filed by the Company after the date hereof pursuant
        to
        the Exchange Act. 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. Upon a cashless exercise of the Warrant, the holding
        period for purpose of Rule 144 shall tack back to the original date of issuance
        of such Warrants.

       


      
        
          
          

        

        
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      (b) At
        any
        time during the period commencing from the six (6) month anniversary of the
        date
        hereof and ending at such time that all of the Securities may be sold without
        the requirement for the Company to be in compliance with Rule 144(c)(1) and
        otherwise without restriction or limitation pursuant to Rule 144, if the
        Company
        shall fail for any reason to satisfy the current public information requirement
        under Rule 144(c) (a “Public
        Information Failure”)
        then,
        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,
        by
        reason of any such delay in or reduction of its ability to sell the Securities,
        an amount in cash equal to two percent (2.0%) of the aggregate Subscription
        Amount of such Purchaser’s Securities on the day of a Public Information Failure
        and on every thirtieth (30th) day (pro rated for periods totaling less than
        thirty days) thereafter until the earlier of (a) the date such Public
        Information Failure is cured and (b) such time that such public information
        is
        no longer required for the Purchasers to transfer the Underlying Shares pursuant
        to Rule 144. The payments to which a Purchaser shall be entitled pursuant
        to
        this Section 4.3(b) are referred to herein as “Public
        Information Failure Payments.”
Public
        Information Failure Payments shall be paid on the earlier of (i) the last
        day of
        the calendar month during which such Public Information Failure Payments
        are
        incurred and (ii) the third (3rd) Business Day after the event or failure
        giving
        rise to the Public Information Failure Payments is cured. In the event the
        Company fails to make Public Information Failure Payments in a timely manner,
        such Public Information Failure Payments shall bear interest at the rate
        of 1.5%
        per month (prorated for partial months) until paid in full. Nothing herein
        shall
        limit such Purchaser’s right to pursue actual damages for the Public Information
        Failure, 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.

       

      (c) Notwithstanding
        anything to the contrary contained herein, if at any time prior to the Senior
        Creditor Repayment (as defined in the Archer Intercreditor Agreement) the
        Company is prohibited from paying, and the Purchasers are prohibited from
        receiving, cash payments of liquidated damages pursuant to Section 4.3(b)
        above,
        at the option of each Purchaser on written notice to the Company, such amounts
        otherwise payable in cash pursuant to Section 4.3(b) shall either accrue,
        or be
        payable in the form of shares of Common Stock. The price at which shares
        of
        Common Stock issuable in lieu of the cash payment of liquidated damages
        hereunder shall be equal to the least of (x) 90% of the average of the 5
        consecutive VWAPs immediately prior to the date of the applicable Public
        Information Failure, (y) 90% of the average of the 5 consecutive VWAPs
        immediately prior to the date such shares are actually issued, and (z) the
        then
        applicable Conversion Price.


      
        
          
          

        

        
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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 Trading Market.

       

      4.5 Conversion
        and Exercise Procedures.
        Each of
        the Purchasers agrees the he/she/it will not convert their Debenture or exercise
        their Warrant until such time as the Authorized Share Approval has occurred.
        Each of the form of Notice of Exercise included in the Warrants and the form
        of
        Notice of Conversion included in the Debentures set
        forth
        the totality of the procedures required of the Purchasers in order to exercise
        the Warrants or convert the Debentures. No additional legal opinion, other
        information or instructions shall be required of the Purchasers to exercise
        their Warrants or convert their Debentures. The Company shall honor exercises
        of
        the Warrants and conversions of the Debentures 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 Trading Day immediately
        following the date hereof, issue a Current Report on Form 8-K disclosing
        the
        material terms of the transactions contemplated hereby and including 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 nor otherwise make any such public statement
        without the prior consent of the Company, with respect to any press release
        of
        any Purchaser, or without the prior consent of each Purchaser, with respect
        to
        any press release of the Company, which consent shall not unreasonably be
        withheld or delayed, except if such disclosure is required by law, in which
        case
        the disclosing party shall promptly provide the other party with prior notice
        of
        such public statement or communication. Notwithstanding the foregoing, the
        Company shall not publicly disclose the name of any Purchaser, or include
        the
        name of any Purchaser in any filing with the Commission or any regulatory
        agency
        or Trading Market, without the prior written consent of such Purchaser, except:
        (a) as required by federal securities law in connection with (i) any
        registration statement contemplated by Section 4.18 of this Agreement and
        (ii)
        the filing of final Transaction Documents (including signature pages thereto)
        with the Commission and (b) 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
        (b).

       

      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, 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, 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:
        (a)
        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), (b) the redemption of any Common Stock or Common Stock Equivalents
        or (c) 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 in
        any
        capacity, or any of them or their respective Affiliates, by any stockholder
        of
        the Company who is not an Affiliate of such Purchaser, 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 (y) for any settlement by a Purchaser Party effected
        without the Company’s prior written consent, which shall not be unreasonably
        withheld or delayed; or (z) to the extent, but only to the extent that a
        loss,
        claim, damage or liability is attributable to any Purchaser Party’s breach of
        any of the representations, warranties, covenants or agreements made by such
        Purchaser Party in this Agreement or in the other Transaction
        Documents.

       


      
        
          
          

        

        
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      4.11 Reservation
        and Listing of Securities.

       

      (a) Following
        the Authorized Share Approval, the Company shall maintain a reserve from
        its
        duly authorized shares of Common Stock for issuance pursuant to the Transaction
        Documents at least equal to the Required Minimum as of such date.

       

      (b) If,
        on
        any date after the date of the Authorized Share Approval, 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
        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. 

       

      (d) In
        addition, the Company shall hold a special meeting of shareholders (which
        may
        also be at the annual meeting of shareholders) at the earliest practical
        date
        following the date hereof, and in any event within 75 calendar days following
        the Closing Date, for the purpose of obtaining the Authorized Share 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. In addition, the Company agrees to use
        its
        best efforts to promptly respond to any comments the Commission may have
        with
        respect to any preliminary proxy statement. If the Company does not obtain
        the
        Authorized Share Approval at the first meeting, the Company shall call a
        meeting
        every 30 days thereafter to seek Authorized Share Approval until the earlier
        of
        the date the Authorized Share Approval is obtained or the Debentures and
        Warrants are no longer outstanding.

       


      
        
          
          

        

        
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      4.12 Participation
        in Future Financing.
        

       

      (a) Other
        than the Senior Debt, from the date hereof until the date that the Debentures
        are no longer outstanding, upon any issuance by the Company or any of its
        Subsidiaries of Common Stock, Common Stock Equivalents, Indebtedness (or
        a
        combination of units hereof) (a “Subsequent
        Financing”),
        each
        Purchaser shall have the right to participate in up to an amount of the
        Subsequent Financing equal to 30% 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 Participation Maximum,
        Company may effect the remaining portion of the Participation Maximum of
        such
        Subsequent Financing on the terms and with the Persons set forth in the
        Subsequent Financing Notice. 

       


      
        
          
          

        

        
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      (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 4.12 and (y) the sum
        of the
        aggregate Subscription Amounts of Securities purchased on the Closing Date
        by
        all Purchasers participating under this Section 4.12.

       

      (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 4.12, 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 30 Trading Days after the date of
        the
        initial Subsequent Financing Notice. 

       

      (g) Notwithstanding
        the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
        Issuance, or (ii) an underwritten public offering of Common Stock.

       

      4.13 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 4.13 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, a
        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 price, exercise price or exchange rate or other price that is
        based
        upon and/or varies with the trading prices of or quotations for the shares
        of
        Common Stock at any time after the initial issuance of such debt or equity
        securities or (B) with a conversion, exercise or exchange price that is subject
        to being reset at some future date after the initial issuance of such debt
        or
        equity security or upon the occurrence of specified or contingent events
        directly or indirectly related to the business of the Company or the market
        for
        the Common Stock or (ii) enters into any agreement, including, but not limited
        to, an equity line of credit, whereby the Company may sell securities at
        a
        future determined price. Any Purchaser shall be entitled to obtain injunctive
        relief against the Company to preclude any such issuance, which remedy shall
        be
        in addition to any right to collect damages.

       


      
        
          
          

        

        
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      (c) Unless
        and until the Authorized Share Approval is obtained, neither the Company
        nor any
        Subsidiary shall issue any Common Stock or Common Stock Equivalents. So long
        as
        the Debentures or Warrants are outstanding, neither the Company nor any
        Subsidiary shall make any issuance whatsoever of Common Stock or Common Stock
        Equivalents at an effective price per share less than $0.24 (subject to
        adjustment for forward and reverse stock splits, stock dividends and
        combinations and similar transactions affecting the Common Stock after the
        Closing Date). Any Purchaser shall be entitled to obtain injunctive relief
        against the Company to preclude any such issuance, which remedy shall be
        in
        addition to any right to collect damages. 

       

      (d) Notwithstanding
        the foregoing, this Section 4.13 shall not apply in respect of an Exempt
        Issuance, except that no Variable Rate Transaction shall be an Exempt
        Issuance. 

       

      4.14 Equal
        Treatment of Purchasers.
        No
        consideration (including any modification of any Transaction Document) shall
        be
        offered or paid to any Person to amend or consent to a waiver or modification
        of
        any provision of any of the Transaction Documents unless the same consideration
        is also offered to all of the parties to the Transaction Documents. 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.

       

      4.15 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
        with the Discussion Time and ending at such time 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 Transaction Documents and the Disclosure
        Schedules. 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; provided,
        however, each Purchaser agrees, severally and not jointly with any other
        Purchasers, that they will not enter into any Net Short Sales (as hereinafter
        defined) from the period commencing on the Closing Date and ending on the
        date
        that is the earlier of (x) the 6-month anniversary of the Closing Date or
        (y)
        the date that such Purchaser no longer holds any Debentures.  For purposes
        of this Section 4.15, a “Net
        Short Sale”
by
        any
        Purchaser shall mean a sale of Common Stock by such Purchaser that is marked
        as
        a short sale and that is made at a time when there is no equivalent offsetting
        long position in Common Stock held by such Purchaser.  For purposes of
        determining whether there is an equivalent offsetting long position in Common
        Stock held by the Purchaser, Underlying Shares that have not yet been converted
        pursuant to the Debentures and Warrant Shares that have not yet been exercised
        pursuant to the Warrants shall be deemed to be held long by the Purchaser,
        and
        the amount of shares of Common Stock held in a long position shall be all
        unconverted Underlying
        Shares and
        unexercised Warrant Shares (ignoring any exercise limitations included therein)
        issuable to such Purchaser on such date, plus any shares of Common Stock
        or
        other Common Stock Equivalents (other than the unconverted Underlying Shares
        and
        unexercised Warrant Shares described in this sentence) otherwise then held
        by
        such Purchaser.  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.

       


      
        
          
          

        

        
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      4.16 Form
        D; Blue Sky Filings.
        The
        Company agrees to timely file a Form D with respect to the Securities as
        required under Regulation D and to provide a copy thereof, promptly upon
        request
        of any Purchaser. The Company shall take such action as the Company shall
        reasonably determine is necessary in order to obtain an exemption for, or
        to
        qualify the Securities for, sale to the Purchasers at the Closing under
        applicable securities or “Blue Sky” laws of the states of the United States, and
        shall provide evidence of such actions promptly upon request of any
        Purchaser.

       

      4.17 Capital
        Changes.
        Until
        the one year anniversary of the Effective Date, other than in connection
        with a
        Permitted Reverse Stock Split (as defined below), the Company shall not
        undertake a reverse or forward stock split or reclassification of the Common
        Stock without the prior written consent of the Purchasers holding a majority
        in
        principal amount outstanding of the Debentures. As used herein, a “Permitted
        Reverse Stock Split” is a reverse stock split of the Common Stock that is
        approved on or before April 15, 2009 for purposes of satisfying minimum bid
        requirements of the New York Stock Exchange, the Nasdaq Capital Market, the
        Nasdaq Global Market or the Nasdaq Global Select Market, and is effective
        contemporaneous with, or immediately prior to, the approval of the Common
        Stock
        for listing on the New York Stock Exchange, the Nasdaq Capital Market, the
        Nasdaq Global Market or the Nasdaq Global Select Market.

       

      4.18 Registration
        Rights.
        If at
        any time after the date hereof, the Company shall determine to prepare and
        file
        with the Commission a Registration Statement relating to an offering for
        its own
        account or the account of others of any of its equity securities, other than
        on
        Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their
        then equivalents, relating to equity securities to be issued solely in
        connection with any acquisition of any entity or business or equity securities
        issuable in connection with stock option or other employee benefit plans,
        then,
        subject to SEC Guidance (as defined in the March Registration Rights Agreement)
        the Company shall send a written notice of such determination to each Purchaser
        and, if within 

       


      
        
          
          

        

        
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      ten
        calendar days after the date of delivery of such notice, any such Purchaser
        shall so request in writing, the Company shall include in such Registration
        Statement all or any part of the Underlying Shares as the Purchaser requests
        to
        be registered so long as such Underlying Shares are proposed to be disposed
        of
        in the same manner as those securities set forth in the Registration Statement,
        subject to pro rata cutback of the Purchasers (based upon the respective
        amounts
        of their Underlying Shares that are proposed for registration) and all other
        security holders proposed to be included in such Registration Statement,
        to the
        extent that all of the shares proposed for registration shall not be permitted
        due to SEC Guidance with respect to Rule 415. The Company shall use its best
        efforts to cause any Registration Statement to be declared effective by the
        Commission as promptly as is possible following it being filed with the
        Commission and to remain effective until all Underlying Shares subject thereto
        have been sold. All fees and expenses incident to the performance of or
        compliance with this Section 4.18 by the Company shall be borne by the Company
        whether or not any Underlying Shares are sold pursuant to the Registration
        Statement. The Company shall indemnify and hold harmless the Purchasers,
        the
        officers, directors, members, partners, agents, brokers, investment advisors
        and
        employees of each of them, each person who controls the Purchasers (within
        the
        meaning of Section 15 of the Securities Act or Section 20 of the Exchange
        Act),
        and the officers, directors, members, shareholders, partners, agents and
        employees of each such controlling person, to the fullest extent permitted
        by
        applicable law, from and against any and all losses, claims, damages,
        liabilities, costs (including, without limitation, reasonable attorneys’ fees)
        and expenses (collectively, the “Losses”),
        as
        incurred, arising out of or relating to (i) any untrue or alleged untrue
        statement of a material fact contained in the Registration Statement, any
        prospectus included therein or any form of prospectus or in any amendment
        or
        supplement thereto or in any preliminary prospectus, or arising out of or
        relating to any omission or alleged omission of a material fact required
        to be
        stated therein or necessary to make the statements therein (in the case of
        any
        prospectus or form of prospectus or supplement thereto, in light of the
        circumstances under which they were made) not misleading or (ii) any violation
        or alleged violation by the Company of the Securities Act, the Exchange Act
        or
        any state securities law, or any rule or regulation thereunder, in connection
        with the performance of its obligations under this Section 4.18, except to
        the
        extent, but only to the extent, that such untrue statements or omissions
        referred to in (i) above are based solely upon information regarding such
        Purchaser furnished in writing to the Company by such Purchaser expressly
        for
        use therein, or to the extent that such information relates to such Purchaser
        or
        such Purchaser’s proposed method of distribution of Underlying Shares and was
        reviewed and expressly approved in writing by such Purchaser expressly for
        use
        in the Registration Statement, such prospectus or such form of prospectus
        or in
        any amendment or supplement thereto. The rights of the Purchasers under this
        Section 4.18 shall survive until all Underlying Shares have been either
        registered under a Registration Statement or been sold pursuant to an exemption
        to the registration requirements of the Securities Act.

       

      4.19 Removal
        of Subordination Legend. Following
        the Senior Creditor Repayment (as defined in the Archer Intercreditor
        Agreement), within 3 Business Days of a written request from any Purchaser,
        the
        Company hereby agrees to issue such Purchaser a replacement Debenture, without
        the restrictive legend referencing the Archer Intercreditor Agreement, and
        otherwise in the same form of such Purchaser’s Debenture.

       

      4.20 Certain
        Permitted Payments under the Archer Intercreditor Agreement.
        In
        connection with “Permitted Payments” (as defined in the Archer Intercreditor
        Agreement) pursuant to Section 2(c)(iv) thereunder, no
        less
        than ten (10) days prior to the due date of such Quarterly Redemption Amounts
        (as defined in the Debentures) as described in such Section, the Company
        agrees
        to deliver each Purchaser a written certification of compliance with the
        financial covenants under the Archer Loan Agreement for the month prior to
        the
        date such Quarterly Redemption Amount is due, and, if requested in writing
        by a
        Purchaser and subject to Section 4.8 hereunder, calculations in reasonable
        detail evidencing compliance with such financial covenants.

       


      
        
          
          

        

        
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      4.21 Other
        Agreement(s).
        From
        the date hereof until the two year anniversary of the Closing Date, neither
        the Company nor any Subsidiary shall issue any Common Stock or Common Stock
        Equivalents to Patrick Shutt, George King or Robert Pollan, or any of their
        respective Affiliates. Any Purchaser shall be entitled to obtain injunctive
        relief against the Company to preclude any such issuance, which remedy shall
        be
        in addition to any right to collect damages.

       

       

      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 November 21,
        2008;
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 has agreed to reimburse Midsummer Capital, LLC
        (“Midsummer”)
        the
        non-accountable sum of $75,000 for its legal fees and expenses, $25,000 of
        which
        has been paid prior to the Closing. 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 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.

       

      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.

       


      
        
          
          

        

        
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      5.5 Amendments;
        Waivers.
        No
        provision of this Agreement may be waived, modified, supplemented or amended
        except in a written instrument signed, in the case of an amendment, by the
        Company and the Purchasers holding at least 67% in interest 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.

       

      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). 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.

       

      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.

       


      
        
          
          

        

        
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      5.10 Survival.
        The
        representations and warranties shall survive the Closing and the delivery
        of the
        Securities for the applicable statute 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; provided,
        however,
        that in
        the case of a rescission of a conversion of a Debenture or exercise of a
        Warrant, the Purchaser shall be required to return any shares of Common Stock
        subject to any such rescinded conversion or exercise notice.

       


      
        
          
          

        

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

       

      5.21 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. In addition, each
        and
        every reference to share prices in any Transaction Document shall be subject
        to
        adjustment for reverse and forward stock splits, stock dividends, stock
        combinations and other similar transactions of the Common Stock that occur
        after
        the date of this Agreement.

       


      
        
          
          

        

        
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      5.22 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.

       

      


      
        	
                CAPITAL
                  GROWTH SYSTEMS, INC.

                 

              	
                Address
                  for Notice:

                 

                Attention
                  Chief Executive Officer

                500
                  W. Madison St., Suite 2060

                Chicago,
                  Illinois 60661

                 

                Facsimile:
                  312-673-2422

              
	
                By:__________________________________________
Name:
Title:

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

              	 
	
                Shefsky
                  & Froelich Ltd.

                111
                  E. Wacker Dr., Suite 2800

                Chicago,
                  Illinois 60601

                Facsimile:
                  312-275-7569

                 

              	 


      

      


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      [PURCHASER
        SIGNATURE PAGES TO CGSY SECURITIES PURCHASE AGREEMENT]

      


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

       

      Name
        of
        Purchaser: ________________________________________________________

       

      Signature
        of Authorized Signatory of Purchaser:
        __________________________________

       

      Name
        of
        Authorized Signatory:
        ____________________________________________________

       

      Title
        of
        Authorized Signatory:
        _____________________________________________________

       

      Email
        Address of Authorized Signatory:
        _____________________________________________

       

      Facsimile
        Number of Authorized Signatory:
        __________________________________________

      


      Address
        for Notice of Purchaser:

       

      


      


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

       

      


      


      Subscription
        Amount: _____________

       

      Principal
        Amount (Subscription Amount multiplied by 1.65): _____________   

       

      Warrant
        Shares: _________________

       

      


      EIN
        Number: [PROVIDE
        THIS UNDER SEPARATE COVER]

      


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