f8k032010ex10i_ecoblu.htm


    Exhibit
10.1

     

    
      SECURITIES
PURCHASE AGREEMENT

       

      This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of March
26, 2010, is by and among EcoBlu Products, Inc., a Colorado corporation with
offices located at 909 West Vista Way, Vista, California 92083 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the
“Buyers”).

      


      RECITALS

      


      A.           The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933
Act.

       

      B.           The
Company has authorized the issuance of senior secured convertible notes in the
aggregate amount of $1,500,000, in the form attached hereto as Exhibit
A (the “Notes”),
which Notes shall be convertible into shares of the Company’s common stock,
$0.001 par value per share (the “Common Stock”) (as converted,
collectively, the “Conversion
Shares”), in accordance with the terms of the Notes.

      


      C.           Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the aggregate original principal amount
of the Notes set forth opposite such Buyer’s name in column (3) on the Schedule
of Buyers, (ii) a warrant to acquire up to that number of additional shares of
Common Stock set forth opposite such Buyer’s name in column (4) on the Schedule
of Buyers, in the form attached hereto as Exhibit
B (the “Series A
Warrants”) (as exercised, collectively, the “Series A Warrant Shares”), (iii) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (5) on the Schedule of Buyers, in the
form attached hereto as Exhibit
C (the “Series B
Warrants”) (as exercised, collectively, the “Series B Warrant Shares”), (iv) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (6) on the Schedule of Buyers, in the
form attached hereto as Exhibit
D (the “Series C
Warrants”) (as exercised, collectively, the “Series C Warrant Shares”), (v) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (7) on the Schedule of Buyers, in the
form attached hereto as Exhibit
E (the “Series D
Warrants”) (as exercised, collectively, the “Series D Warrant Shares”), (vi) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (8) on the Schedule of Buyers, in the
form attached hereto as Exhibit
F (the “Series E
Warrants”) (as exercised, collectively, the “Series E Warrant Shares”), (vii) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (9) on the Schedule of Buyers, in the
form attached hereto as Exhibit
G (the “Series F
Warrants”) (as exercised, collectively, the “Series F Warrant Shares”) and (vi) a
warrant to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (10) on the Schedule of Buyers, in
the form attached hereto as Exhibit
H (the “Series G
Warrants”) (as exercised, collectively, the “Series G Warrant Shares”). The Series A
Warrants, the Series B Warrants, the Series C Warrants, the Series D Warrants,
the Series E Warrants, the Series F Warrants and the Series G Warrants are
collectively referred to herein as the “Warrants.” The Series A
Warrant Shares, the Series B Warrant Shares, the Series C Warrant Shares, the
Series D Warrant Shares, the Series E Warrant Shares, the Series F Warrant
Shares and the Series G Warrant Shares are collectively referred to herein as
the “Warrant
Shares.”

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
 

      D.           At
the Closing, the parties hereto shall execute and deliver a Registration Rights
Agreement, in the form attached hereto as Exhibit
I (the “Registration
Rights Agreement”), pursuant to which the Company has agreed to provide
certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement), under the 1933 Act and the rules
and regulations promulgated thereunder, and applicable state securities
laws.

      


      E.           The
Notes, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities.”

       

      F.           The
Notes will be secured by a first priority perfected security interest in all of
the assets of the Company and its Subsidiaries (as defined below) as evidenced
by a security agreement as the Buyers shall require in form and substance
acceptable to each Buyer (the “Security Agreement” and
together with the other security documents and agreements entered into in
connection with this Agreement and each of such other documents and agreements,
as each may be amended or modified from time to time, collectively, the “Security Documents”), and each
of its Subsidiaries (as defined below) will execute a guaranty in favor of each
Buyer (collectively, the “Guaranties”) pursuant to which
each of them guarantees the obligations of the Company under the Transaction
Documents (as defined below).

       

      AGREEMENT

       

      NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:

       

      
        	
                1.  

              	
                PURCHASE
      AND SALE OF NOTES AND WARRANTS.

              


      

       

      
        (a)  Notes and
Warrants. Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company shall issue and sell to each Buyer, and each Buyer severally,
but not jointly, shall purchase from the Company on the Closing Date (as defined
below), a Note in the original principal amount as is set forth opposite such
Buyer’s name in column (3) on the Schedule of Buyers along with (i) Series A
Warrants to acquire up to that aggregate number of Series A Warrant Shares as is
set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers,
(ii) Series B Warrants to acquire up to that aggregate number of Series B
Warrant Shares as is set forth opposite such Buyer’s name in column (5) on the
Schedule of Buyers, (iii) Series C Warrants to acquire up to that aggregate
number of Series C Warrant Shares as is set forth opposite such Buyer’s name in
column (6) on the Schedule of Buyers, (iv) Series D Warrants to acquire up to
that aggregate number of Series D Warrant Shares as is set forth opposite such
Buyer’s name in column (7) on the Schedule of Buyers, (iv) Series E Warrants to
acquire up to that aggregate number of Series E Warrant Shares as is set forth
opposite such Buyer’s name in column (8) on the Schedule of Buyers, (v) Series F
Warrants to acquire up to that aggregate number of Series F Warrant Shares as is
set forth opposite such Buyer’s name in column (9) on the Schedule of Buyers and
(vi) Series G Warrants to acquire up to that aggregate number of Series G
Warrant Shares as is set forth opposite such Buyer’s name in column (10) on the
Schedule of Buyers.

      

       

       

      
        
           

        

        
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      (b) Closing. The
closing (the “Closing”)
of the purchase of the Notes and the Warrants by the Buyers shall occur at the
offices of Greenberg Traurig, LLP, 77 W. Wacker Drive, Suite 3100, Chicago,
Illinois 60601. The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York time, on the first (1st)
Business Day on which the conditions to the Closing set forth in Sections 6 and
7 below are satisfied or waived (or such later date as is mutually agreed to by
the Company and each Buyer). As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.

       

      (c) Purchase
Price

       

      (d) .  The
aggregate purchase price for the Notes and the Warrants to be purchased by each
Buyer (the “Purchase
Price”) shall be the amount set forth opposite such Buyer’s name in
column (11) on the Schedule of Buyers.

       

      (e) Form of
Payment. On the
Closing Date, (i) each Buyer shall pay its respective Purchase Price (less, in
the case of Iroquois, the amounts withheld pursuant to Section 4(g)) to the
Company for the Note and the Warrants to be issued and sold to such Buyer at the
Closing, by wire transfer of immediately available funds in accordance with the
Company’s written wire instructions and (ii) the Company shall deliver to
each Buyer (A) a Note (in such amount as is set forth opposite such Buyer’s name
in column (3) of the Schedule of Buyers), (B) a Series A Warrant pursuant to
which such Buyer shall have the right to acquire up to such number of Series A
Warrant Shares as is set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers, (C) a Series B Warrant pursuant to which such Buyer shall
have the right to acquire up to such number of Series B Warrant Shares as is set
forth opposite such Buyer’s name in column (5) of the Schedule of Buyers, (D) a
Series C Warrant pursuant to which such Buyer shall have the right to acquire up
to such number of Series C Warrant Shares as is set forth opposite such Buyer’s
name in column (6) of the Schedule of Buyers, (E) a Series D Warrant pursuant to
which such Buyer shall have the right to acquire up to such number of Series D
Warrant Shares as is set forth opposite such Buyer’s name in column (7) of the
Schedule of Buyers, (F) a Series E Warrant pursuant to which such Buyer shall
have the right to acquire up to such number of Series E Warrant Shares as is set
forth opposite such Buyer’s name in column (8) of the Schedule of Buyers, (G) a
Series F Warrant pursuant to which such Buyer shall have the right to acquire up
to such number of Series F Warrant Shares as is set forth opposite such Buyer’s
name in column (9) of the Schedule of Buyers and (H) a Series G Warrant pursuant
to which such Buyer shall have the right to acquire up to such number of Series
G Warrant Shares as is set forth opposite such Buyer’s name in column (10) of
the Schedule of Buyers, in all cases, duly executed on behalf of the Company and
registered in the name of such Buyer or its designee.

       

      
        	
                2.  

              	
                BUYER’S
      REPRESENTATIONS AND WARRANTIES.

              


      

       

      Each
Buyer, severally and not jointly, represents and warrants to the Company with
respect to only itself that:

       

       

      
        
           

        

        
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      (a) Organization;
Authority. Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents to which it is a party and otherwise to carry out its
obligations hereunder and thereunder.

       

      (b) No Public Sale or
Distribution. Such
Buyer (i) is acquiring its Note and Warrants, (ii) upon conversion of its Note
will acquire the Conversion Shares issuable upon conversion thereof, and
(iii) upon exercise of its Warrants will acquire the Warrant Shares
issuable upon exercise thereof, in each case, for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof in violation of applicable securities laws, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, by making the
representations herein, such Buyer does not agree, or make any representation or
warranty, to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.
Such Buyer is acquiring the Securities hereunder in the ordinary course of its
business. Such Buyer does not presently have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities in
violation of applicable securities laws.

       

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

       

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

       

      (e) Information. Such
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such Buyer.
Such Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein or any representations
and warranties contained in any other Transaction Document or any other document
or instrument executed and/or delivered in connection with this Agreement or the
consummation of the transaction contemplated hereby. Such Buyer understands that
its investment in the Securities involves a high degree of risk. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.

       

      (f) No Governmental
Review.  Such
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.

       

      
        
           

        

        
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      (g) Transfer or
Resale. Such
Buyer understands that except as provided in the Registration Rights Agreement
and Section 4(h) hereof: (i) the Securities have not been and are not being
registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company (if
requested by the Company) an opinion of counsel to such Buyer, in a form
reasonably acceptable to the Company, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor
rule thereto) (collectively, “Rule 144”); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the Person (as
defined below) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.


       

      (h) Validity;
Enforcement. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and constitutes the legal, valid and binding obligations of such
Buyer enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

       

      (i) No
Conflicts.  The
execution, delivery and performance by such Buyer of this Agreement and the
Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment  or decree (including federal
and state securities laws) applicable to such Buyer, except in the case of
clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations
which would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the ability of such Buyer to perform its
obligations hereunder.

       

      (j) Certain Trading
Activities. Such Buyer has not directly or indirectly, nor has any Person
acting on behalf of or pursuant to any understanding with such Buyer, engaged in
any transactions in the securities of the Company (including, without
limitation, any Short Sales (as defined below) involving the Company’s
securities) during the period commencing as of the time that such Buyer was
first contacted by the Placement Agent (as defined below) regarding the specific
investment in the Company contemplated by this Agreement and ending immediately
prior to the execution of this Agreement by such Buyer. “Short Sales” means all “short
sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934
Act (as defined below) (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

       

       

      
        
           

        

        
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                3.  

              	
                REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

              


      

       

      The
Company represents and warrants to each of the Buyers that:

       

      (a) Organization and
Qualification. Each of
the Company and each of its Subsidiaries are entities duly organized and validly
existing and in good standing under the laws of the jurisdiction in which they
are formed, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted and as
presently proposed to be conducted. Each of the Company and each of its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means
any material adverse effect on (i) the business, properties, assets,
liabilities, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company or any Subsidiary, individually or taken
as a whole, (ii) the transactions contemplated hereby or in any of the other
Transaction Documents or (iii) the authority or ability of the Company or any of
its Subsidiaries to perform any of their respective obligations under any of the
Transaction Documents (as defined below). The Company has no Subsidiaries.
“Subsidiaries” means any
Person in which the Company, directly or indirectly, (I) owns any of the
outstanding capital stock or holds any equity or similar interest of such Person
or (II) controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.”

      


      (b) Authorization; Enforcement;
Validity. The
Company has the requisite power and authority to enter into and perform its
obligations under this Agreement and the other Transaction Documents and to
issue the Securities in accordance with the terms hereof and thereof. Each
Subsidiary has the requisite power and authority to enter into and perform its
obligations under the Transaction Documents to which it is a party. The
execution and delivery of this Agreement and the other Transaction Documents by
the Company and its Subsidiaries, and the consummation by the Company and its
Subsidiaries of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Notes and the reservation for issuance
and issuance of the Conversion Shares issuable upon conversion of the Notes and
the issuance of the Warrants and the reservation for issuance and issuance of
the Warrant Shares issuable upon exercise of the Warrants) have been duly
authorized by the Company’s board of directors and each of its Subsidiaries’
board of directors or other governing body, as applicable, and (other than the
filing with the SEC of one or more Registration Statements in accordance with
the requirements of the Registration Rights Agreement, a Form D with the SEC and
any other filings as may be required by any state securities agencies) no
further filing, consent or authorization is required by the Company, its
Subsidiaries, their respective boards of directors or their stockholders or
other governing body.  This Agreement has been, and the other
Transaction Documents will be prior to the Closing, duly executed and delivered
by the Company, and each constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law.  Prior to the Closing, the Transaction Documents to
which each Subsidiary is a party will be duly executed and delivered by each
such Subsidiary, and shall constitute the legal, valid and binding obligations
of each such Subsidiary, enforceable against each such Subsidiary in accordance
with their respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law. “Transaction Documents” means,
collectively, this Agreement, the Notes, the Warrants, the Security Documents,
the Guaranties, the Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions (as defined below) and each of the other agreements and
instruments entered into or delivered by any of the parties hereto in connection
with the transactions contemplated hereby and thereby, as may be amended from
time to time.

       

       

      
        
           

        

        
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      (c) Issuance of
Securities. The
issuance of the Notes and the Warrants are duly authorized and upon issuance in
accordance with the terms of the Transaction Documents shall be validly issued,
fully paid and non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the issue thereof.
As of the Closing, the Company shall have reserved from its duly authorized
capital stock not less than 133% of the sum of (i) the maximum number of
Conversion Shares issuable upon conversion of the Notes (assuming for purposes
hereof that the Notes are convertible at the initial Conversion Price (as
defined in the Notes) and without taking into account any limitations on the
conversion of the Notes set forth therein) and (ii) the maximum number of
Warrant Shares issuable upon exercise of the Warrants (without taking into
account any limitations on the exercise of the Warrants set forth therein). Upon
conversion in accordance with the Notes or exercise in accordance with the
Warrants (as the case may be), the Conversion Shares and the Warrant Shares,
respectively, when issued, will be validly issued, fully paid and nonassessable
and free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock. Subject to the accuracy of
the representations and warranties of the Buyers in this Agreement, the offer
and issuance by the Company of the Securities is exempt from registration under
the 1933 Act.

       

      (d) No
Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and its Subsidiaries and the consummation by the Company and its Subsidiaries of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Notes, the Warrants, the Conversion Shares and Warrant
Shares and the reservation for issuance of the Conversion Shares and Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation (as
defined below) or other organizational documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
Bylaws (as defined below) of the Company or any of its Subsidiaries, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations and the rules and regulations of the OTC Bulletin Board (the “Principal Market”) and
including all applicable  federal laws, rules and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected except, in
the case of clause (ii) or (iii) above, to the extent such violations that could
not reasonably be expected to have a Material Adverse Effect.

       

       

      
        
           

        

        
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      (e) Consents.  Neither
the Company nor any Subsidiary is required to obtain any consent from,
authorization or order of, or make any filing or registration with (other than
the filing with the SEC of one or more Registration Statements in accordance
with the requirements of the Registration Rights Agreement, a Form D with the
SEC and any other filings as may be required by any state securities agencies),
any court, governmental agency or any regulatory or self-regulatory agency or
any other Person in order for it to execute, deliver or perform any of its
respective obligations under or contemplated by the Transaction Documents, in
each case, in accordance with the terms hereof or thereof.  All
consents, authorizations, orders, filings and registrations which the Company or
any Subsidiary is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the Closing Date, and neither the
Company nor any of its Subsidiaries are aware of any facts or circumstances
which might prevent the Company or any Subsidiary from obtaining or effecting
any of the registration, application or filings contemplated by the Transaction
Documents. The Company is not in violation of the requirements of the Principal
Market and has no knowledge of any facts or circumstances which could reasonably
lead to delisting or suspension of the Common Stock in the foreseeable
future.

       

      (f) Acknowledgment Regarding
Buyer’s Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of its Subsidiaries, (ii) an “affiliate” (as
defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its
knowledge, a “beneficial owner” of more than 10% of the shares of Common Stock
(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the “1934
Act”)). The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company or any of its Subsidiaries (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a Buyer or
any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer’s purchase of the Securities. The Company further
represents to each Buyer that the Company’s and each Subsidiary’s decision to
enter into the Transaction Documents to which it is a party has been based
solely on the independent evaluation by the Company, each Subsidiary and their
respective representatives.

       

      (g) No General Solicitation;
Placement Agent’s Fees. Neither
the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby. Other than Chardan Capital
Markets, LLC (the “Placement
Agent”), neither the Company nor any of its Subsidiaries has engaged any
placement agent or other agent in connection with the sale of the
Securities.

       

       

      
        
           

        

        
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      (h) No Integrated
Offering. None of
the Company, its Subsidiaries or any of their affiliates, nor any Person acting
on 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 require registration of the issuance of any of the Securities under the
1933 Act, whether through integration with prior offerings or otherwise, or
cause this offering of the Securities to require approval of stockholders of the
Company under any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated. None of the Company, its Subsidiaries, their affiliates nor any
Person acting on their behalf will take any action or steps that would require
registration of the issuance of any of the Securities under the 1933 Act or
cause the offering of any of the Securities to be integrated with other
offerings.

       

      (i) Dilutive
Effect. The
Company understands and acknowledges that the number of Conversion Shares and
Warrant Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Conversion Shares upon conversion
of the Notes and the Warrant Shares upon exercise of the Warrants in accordance
with this Agreement, the Notes and the Warrants is, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company.

       

      (j) Application of Takeover
Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Articles
of Incorporation, Bylaws or other organizational documents or the laws of the
jurisdiction of its incorporation or otherwise which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of shares of Common Stock or a change in
control of the Company or any of its Subsidiaries.

       

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      (k) SEC Documents; Financial
Statements. During
the two (2) years prior to the date hereof, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The Company
has delivered to the Buyers or their respective representatives true, correct
and complete copies of each of the SEC Documents not available on the EDGAR
system. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, 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. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as in effect as of the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents (including, without
limitation, information referred to in Section 2(e) of this Agreement) contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein not misleading, in the light
of the circumstance under which they are or were made.

       

      (l) Absence of Certain
Changes. Since
the date of the Company’s most recent audited financial statements contained in
a Form 10-K, there has been no material adverse change and no material adverse
development in the business, assets, liabilities, properties, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Company or any of its Subsidiaries. Since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, neither the
Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii)
sold any assets, individually or in the aggregate, outside of the ordinary
course of business or (iii) made any material capital expenditures, individually
or in the aggregate. Neither the Company nor any of its Subsidiaries has taken
any steps to seek protection pursuant to any law or statute relating to
bankruptcy, insolvency, reorganization, receivership, liquidation or winding up,
nor does the Company or any Subsidiary have any knowledge or reason to believe
that any of their respective creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a
creditor to do so. The Company and its Subsidiaries, individually and on a
consolidated basis, are not as of the date hereof, and after giving effect to
the transactions contemplated hereby to occur at the Closing, will not be
Insolvent (as defined below). For purposes of this Section 3(l), “Insolvent” means, (I) with
respect to the Company and its Subsidiaries, on a consolidated basis, (i) the
present fair saleable value of the Company’s and its Subsidiaries’ assets is
less than the amount required to pay the Company’s and its Subsidiaries’ total
Indebtedness (as defined below), (ii) the Company and its Subsidiaries are
unable to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company and its Subsidiaries intend to incur or believe that they will incur
debts that would be beyond their ability to pay as such debts mature; and (II)
with respect to the Company and each Subsidiary, individually, (i) the present
fair saleable value of the Company’s or such Subsidiary’s (as the case may be)
assets is less than the amount required to pay its respective total
Indebtedness, (ii) the Company or such Subsidiary (as the case may be) is unable
to pay its respective debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company or such Subsidiary (as the case may be) intends to incur or believes
that it will incur debts that would be beyond its respective ability to pay as
such debts mature. Neither the Company nor any of its Subsidiaries has engaged
in any business or in any transaction, and is not about to engage in any
business or in any transaction, for which the Company’s or such Subsidiary’s
remaining assets constitute unreasonably small capital.

       

       

      
        
           

        

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

       

      (n) Conduct of Business;
Regulatory Permits. Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under its Articles of Incorporation, any certificate of designation,
preferences or rights of any other outstanding series of preferred stock of the
Company or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation or certificate of incorporation or bylaws,
respectively. Neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market and has no
knowledge of any facts or circumstances that could reasonably lead to delisting
or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2008, (i) the Common Stock has been listed or
designated for quotation on the Principal Market, (ii) trading in the Common
Stock has not been suspended by the SEC or the Principal Market and (iii) the
Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and each of its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

       

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

       

       

      
        
           

        

        
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      (p) Sarbanes-Oxley
Act. The
Company and each Subsidiary is in compliance with all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.

       

      (q) Transactions With
Affiliates. None of
the officers, directors or employees of the Company or any of its Subsidiaries
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers or
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 such
officer, director or employee or, to the knowledge of the Company or any of its
Subsidiaries, any corporation, partnership, trust or other Person in which any
such officer, director, or employee has a substantial interest or is an
employee, officer, director, trustee or partner. (i) All officers and directors
of the Company (and each of their affiliates) and all Persons, directly or
indirectly, having record or beneficial ownership of 5% or more of the Common
Stock (and each of their affiliates) have entered into written agreements with
the Company with respect to all securities of the Company (1) held, directly or
indirectly, by each them or for their benefit, (2) as to which any of them have
any record or beneficial ownership or (3) as to which any of them have any
pecuniary interest, (ii) all of such agreements are in full force and effect and
(iii) Schedule 7(a)(xviii) contains a complete and accurate list of all such
agreements.

       

      (r) Equity
Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists
of  100,000,000 shares of Common Stock, of which, 69,232,194 are
issued and outstanding and no shares are reserved for issuance pursuant to
securities (other than the Notes and the Warrants) exercisable or exchangeable
for, or convertible into, shares of Common Stock.  No shares of Common
Stock are held in treasury.  All of such outstanding shares are duly
authorized and have been, or upon issuance will be, validly issued and are fully
paid and nonassessable. 50,000,000 shares of the Company’s issued and
outstanding Common Stock on the date hereof are as of the date hereof owned by
Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and
calculated based on the assumption that only officers, directors and holders of
at least 10% of the Company’s issued and outstanding Common Stock are
“affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of its Subsidiaries.
To the Company’s knowledge, no Person owns 10% or more of the Company’s issued
and outstanding shares of Common Stock (calculated based on the assumption that
all Convertible Securities, whether or not presently exercisable or convertible,
have been fully exercised or converted (as the case may be) taking
account of any limitations on exercise or conversion (including “blockers”)
contained therein without conceding that such identified Person is a 10%
stockholder for purposes of federal securities laws). (i) None of the Company’s
or any Subsidiary’s capital stock is subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the Company
or any 

       

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

       

      Subsidiary;
(ii) except as disclosed in Schedule 3(r)(ii), there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries; (iii) except as disclosed in Schedule 3(r)(iii), there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any amounts filed in connection with the Company or any
of its Subsidiaries; (v) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration Rights
Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii)
neither the Company nor any Subsidiary has any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; and (ix)
neither the Company nor any of its Subsidiaries have any liabilities or
obligations required to be disclosed in the SEC Documents which are not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or could not have a Material Adverse
Effect. The Company has furnished to the Buyers true, correct and complete
copies of the Company’s Articles of Incorporation, as amended and as in effect
on the date hereof (the “Articles of Incorporation”), and the
Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock and the material rights of the holders thereof in respect
thereto.

       

      (s) Indebtedness and Other
Contracts. Except
as disclosed on Schedule 3(s), neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness (as defined below), (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument could
reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of, or in default under, any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect. For
purposes of this Agreement: (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or 

       

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

       

      payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F) all monetary
obligations under any leasing or similar arrangement which, in connection with
generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred
to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

       

      (t) Absence of
Litigation. There
is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries, the Common Stock or
any of the Company’s or its Subsidiaries’ officers or directors which is outside
of the ordinary course of business or individually or in the aggregate material
to the Company or any of its Subsidiaries. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any
current of former director or officer of the Company or any of its Subsidiaries.
The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the 1933
Act or the 1934 Act.

       

      (u) Insurance. The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such Subsidiary has any reason to believe
that it will be unable to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.

       

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      (v) Employee
Relations.  Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. The Company believes that its and
its Subsidiaries’ relations with their respective employees are good. No
executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or
other key employee of the Company or any of its Subsidiaries has notified the
Company or any such Subsidiary that such officer intends to leave the Company or
any such Subsidiary or otherwise terminate such officer’s employment with the
Company or any such Subsidiary. No executive officer or other key employee of
the Company or any of its Subsidiaries is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer or other key employee (as the case may
be) does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.  The Company and its
Subsidiaries are in compliance with all federal, state, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

       

      (w) Title. The
Company and its Subsidiaries have good and marketable title in fee simple to all
real property, and have good and marketable title to all personal property,
owned by them which is material to the business of the Company and its
Subsidiaries, in each case, free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or any of its Subsidiaries.

       

      (x) Intellectual Property
Rights. The
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, original works, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual
property rights and all applications and registrations therefor (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted.  None of the Company’s or its
Subsidiaries’ Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three
years from the date of this Agreement.  The Company has no knowledge
of any infringement by the Company or any of its Subsidiaries of Intellectual
Property Rights of others.  There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding their Intellectual Property Rights.  The Company is not
aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and each
of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property
Rights.

       

       

      
        
           

        

        
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      (y) Environmental
Laws. The
Company and its Subsidiaries (i) are in compliance with all Environmental Laws
(as defined below), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.  The term
“Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.

       

      (z) Subsidiary
Rights. The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.

       

      (aa) Tax
Status. The
Company and each of its Subsidiaries (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company and its
Subsidiaries know of no basis for any such claim.  The Company is not
operated in such a manner as to qualify as a passive foreign investment company,
as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.

       

      (bb) Internal Accounting and
Disclosure Controls. The
Company and each of its Subsidiaries maintains internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is
effective to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, including that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that
are effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. Neither the Company nor any of its Subsidiaries has received any
notice or correspondence from any accountant or other Person relating to any
potential material weakness or significant deficiency in any part of the
internal controls over financial reporting of the Company or any of its
Subsidiaries.

       

      
        
           

        

        
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      (cc) Off Balance Sheet
Arrangements. There
is no transaction, arrangement, or other relationship between the Company or any
of its Subsidiaries and an unconsolidated or other off balance sheet entity that
is required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

       

      (dd) Investment Company
Status. The
Company is not, and upon consummation of the sale of the Securities will not be,
an “investment company,” an affiliate of an “investment company,” a company
controlled by an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company” as such terms
are defined in the Investment Company Act of  1940, as
amended.

       

      (ee) Acknowledgement Regarding
Buyers’ Trading Activity. It is
understood and acknowledged by the Company that (i) following the public
disclosure of the transactions contemplated by the Transaction Documents, in
accordance with the terms thereof, none of the Buyers have been asked by the
Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the
Company or any of its Subsidiaries, to desist from effecting any transactions in
or with respect to (including, without limitation, purchasing or selling, long
and/or short) any securities of the Company, or “derivative” securities based on
securities issued by the Company or to hold the Securities for any specified
term; (ii) any Buyer, and counterparties in “derivative” transactions to which
any such Buyer is a party, directly or indirectly, presently may have a “short”
position in the Common Stock which was established prior to such Buyer’s
knowledge of the transactions contemplated by the Transaction Documents; and
(iii) each Buyer shall not be deemed to have any affiliation with or control
over any arm’s length counterparty in any “derivative” transaction. The Company
further understands and acknowledges that following the public disclosure of the
transactions contemplated by the Transaction Documents pursuant to the Press
Release (as defined below) one or more Buyers may engage in hedging and/or
trading activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value
and/or number of the Warrant Shares deliverable with respect to the Securities
are being determined and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company
both at and after the time the hedging and/or trading activities are being
conducted. The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or any other
Transaction Document or any of the documents executed in connection herewith or
therewith.

       

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

       

      (ff) Manipulation of
Price. Neither
the Company nor any of its Subsidiaries has, and, to the knowledge of the
Company, no Person acting on their behalf has, directly or indirectly, (i) taken
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company or any of its Subsidiaries 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 (other than the Placement Agent), or (iii) paid or agreed to pay to
any Person any compensation for soliciting another to purchase any other
securities of the Company or any of its Subsidiaries.

       

      (gg) U.S. Real Property Holding
Corporation.  Neither
the Company nor any of its Subsidiaries is, or has ever been, and so long as any
of the Securities are held by any of the Buyers, shall become, a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company and each Subsidiary shall so
certify upon any Buyer’s request.

       

      (hh) Transfer Taxes. On
the Closing Date, all stock transfer or other taxes (other than income or
similar taxes) which are required to be paid in connection with the issuance,
sale and transfer of the Securities to be sold to each Buyer hereunder will be,
or will have been, fully paid or provided for by the Company, and all laws
imposing such taxes will be or will have been complied with.

       

      (ii) Bank Holding Company
Act.  Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by
the Board of Governors of the Federal Reserve System (the “Federal
Reserve”).  Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

       

      (jj) Public Utility Holding
Act.  None of the Company nor any of its Subsidiaries is a
“holding company,” or an “affiliate” of a “holding company,” as such terms are
defined in the Public Utility Holding Act of 2005.

       

      (kk) Federal Power
Act.  None of the Company nor any of its Subsidiaries is
subject to regulation as a “public utility” under the Federal Power Act, as
amended.

       

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

       

      (mm) Ranking of Notes. No
Indebtedness of the Company, at the Closing, will be senior to, or pari passu with, the Notes in
right of payment, whether with respect to payment or redemptions, interest,
damages, upon liquidation or dissolution or otherwise.

       

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

      (nn) Disclosure.  The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries, other than the
existence of the transactions contemplated by this Agreement and the other
Transaction Documents. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions contemplated
hereby, including the schedules to this Agreement, furnished by or on behalf of
the Company or any of its Subsidiaries 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 the light of the
circumstances under which they were made, not misleading. Each press release
issued by the Company or any of its Subsidiaries during the twelve (12) months
preceding the date of this Agreement did not at the time of release 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 the
light of the circumstances under which they are made, not
misleading.  No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, liabilities, prospects, operations (including results
thereof) or conditions (financial or otherwise), which, under applicable law,
rule or regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

       

      
        	
                4.  

              	
                COVENANTS.

              


      

       

      (a) Best
Efforts. Each
Buyer shall use its best efforts to timely satisfy each of the conditions to be
satisfied by it as provided in Section 6 of this Agreement. The Company shall
use its best efforts to timely satisfy each of the conditions to be satisfied by
it as provided in Section 7 of this Agreement.

       

      (b) Form D and Blue
Sky.  The
Company agrees to file a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, 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 Buyers at the
Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.  The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or “Blue Sky” laws of the states of the United
States following the Closing Date.

       

      (c) Reporting
Status. Until
the date on which the Buyers shall have sold all of the Registrable Securities
(the “Reporting
Period”), the Company shall timely file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would no longer require or otherwise
permit such termination.  From the time Form S-3 is available to the
Company for the registration of the Registrable Securities, the Company shall
take all actions necessary to maintain its eligibility to register the
Registrable Securities for resale by the Buyers on Form S-3.

       

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

       

       

      (d) Use of
Proceeds. The
Company shall use the proceeds from the sale of the Securities solely as set
forth on Schedule 4(d).

       

      (e) Financial
Information. The
Company agrees to send the following to each Investor (as defined in the
Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through EDGAR and are available to the public
through the EDGAR system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q, any interim reports or any consolidated balance sheets, income
statements, stockholders’ equity statements and/or cash flow statements for any
period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933
Act, (ii) on the same day as the release thereof, facsimile copies of all press
releases issued by the Company or any of its Subsidiaries and (iii) copies of
any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders.

       

      (f) Listing.  The
Company shall promptly secure the listing or designation for quotation (as the
case may be) of all of the Registrable Securities upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is
then listed or designated for quotation (as the case may be) (subject to
official notice of issuance) and shall maintain such listing or designation for
quotation (as the case may be) of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents on such national
securities exchange or automated quotation system. The Company shall maintain
the Common Stock’s listing or authorization for quotation (as the case may be)
on the Principal Market, the NYSE Amex, The New York Stock Exchange, the Nasdaq
Global Market, the Nasdaq Global Select Market or the Nasdaq Capital Market
(each, an “Eligible
Market”). Neither the Company nor any of its Subsidiaries shall take any
action which could be reasonably expected to result in the delisting or
suspension of the Common Stock on an Eligible Market. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 4(f).

       

      (g) Fees.  The
Company shall reimburse Iroquois Master Fund Ltd. (“Iroquois”) or its designee(s)
for all costs and expenses incurred by it or its affiliates in connection with
the transactions contemplated by the Transaction Documents (including, without
limitation, all legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence and regulatory filings in connection
therewith) in an amount not to exceed $50,000, which amount shall be withheld by
Iroquois from its Purchase Price at the Closing or paid by the Company upon
termination of this Agreement on demand by Iroquois so long as such termination
did not occur as a result of a material breach by Iroquois of any of its
obligations hereunder (as the case may be), less $25,000 which was previously
advanced to Iroquois by the Company. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or arising
out of the transactions contemplated hereby (including, without limitation, any
fees payable to the Placement Agent, who is the Company’s sole placement agent
in connection with the transactions contemplated by this Agreement). The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys’ fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment.
Except as otherwise set forth in the Transaction Documents, each party to this
Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.

       

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

      (h) Pledge of
Securities.
Notwithstanding anything to the contrary contained in Section 2(g), the Company
acknowledges and agrees that the Securities may be pledged by a Buyer in
connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and no Buyer effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document. The Company hereby
agrees to execute and deliver such documentation as a pledgee of the Securities
may reasonably request in connection with a pledge of the Securities to such
pledgee by a Buyer.

       

      (i) Disclosure of Transactions
and Other Material Information. The
Company shall, on or before [_______] a.m., New York time, on the date of this
Agreement, issue a press release (the “Press Release”) reasonably
acceptable to the Buyers disclosing all the material terms of the transactions
contemplated by the Transaction Documents. On or before [_______] a.m., New
York time, on the date of this Agreement, the Company shall file a Current
Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching all the material Transaction Documents (including, without
limitation, this Agreement (and all schedules to this Agreement), the form of
the Security Documents, the form of Guaranties, the form of the Notes, the form
of the Warrants and the form of the Registration Rights Agreement) (including
all attachments, the “8-K
Filing”). From and after the issuance of the Press Release, the Company
shall have disclosed all material, non-public information (if any) delivered to
any of the Buyers by the Company or any of its Subsidiaries, or any of their
respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents. The Company shall not,
and the Company shall cause each of its Subsidiaries and each of its and their
respective officers, directors, employees and agents not to, provide any Buyer
with any material, non-public information regarding the Company or any of its
Subsidiaries from and after the issuance of the Press Release without the
express prior written consent of such Buyer. In the event of a breach of any of
the foregoing covenants or any of the covenants contained in Section 4(o) by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents (as determined in the reasonable good faith
judgment of such Buyer), in addition to any other remedy provided herein or in
the Transaction Documents, such Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, non-public information without the prior approval by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents, for any such disclosure. Subject
to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of the applicable Buyer, the Company shall not (and shall
cause each of its Subsidiaries and affiliates to not) disclose the name of such
Buyer in any filing, announcement, release or otherwise.

       

       

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

       

       

      (j) Additional Registration
Statements. Until the Applicable Date (as defined below) and at any time
thereafter while any Registration Statement is not effective or any prospectus
contained therein is not available for use, the Company shall not file a
registration statement under the 1933 Act relating to securities that are not
the Registrable Securities. “Applicable Date” means the
first date on which the resale by the Buyers of all Registrable Securities is
covered by one or more effective Registration Statements (as defined in the
Registration Rights Agreement) (and each prospectus contained therein is
available for use on such date).

       

      (k) Additional Issuance of
Securities. The
Company agrees that for the period commencing on the date hereof and ending on
the date immediately following the one hundred eighty (180) day anniversary of
the Closing Date (provided that such period shall be extended by the number of
days during such period and any extension thereof contemplated by this proviso
on which the Registration Statement is not effective or any prospectus contained
therein is not available for use) (the “Restricted Period”), neither the Company
nor any of its Subsidiaries shall directly or indirectly issue, offer, sell,
grant any option or right to purchase, or otherwise dispose of (or announce any
issuance, offer, sale, grant of any option or right to purchase or other
disposition of) any equity security or any equity-linked or related security
(including, without limitation, any “equity security” (as that term is defined
under Rule 405 promulgated under the 1933 Act), any Convertible Securities (as
defined below), any debt, any preferred stock or any purchase rights) (any such
issuance, offer, sale, grant, disposition or announcement (whether occurring
during the Restricted Period or at any time thereafter) is referred to as a
“Subsequent
Placement”).  Notwithstanding the foregoing, this Section 4(k)
shall not apply in respect of the issuance of (A) shares of Common Stock or
standard options to purchase Common Stock to directors, officers or employees of
the Company in their capacity as such pursuant to an Approved Share Plan (as
defined below), provided that (1) all such issuances (taking into account the
shares of Common Stock issuable upon exercise of such options) after the date
hereof pursuant to this clause (A) do not, in the aggregate, exceed more than 5%
of the Common Stock issued and outstanding immediately prior to the date hereof
and (2) the exercise price of any such options is not lowered, none of such
options are amended to increase the number of shares issuable thereunder and
none of the terms or conditions of any such options are otherwise materially
changed in any manner that adversely affects any of the Buyers; (B) shares of
Common Stock issued upon the conversion or exercise of Convertible Securities
(other than standard options to purchase Common Stock issued pursuant to an
Approved Share Plan that are covered by clause (A) above) issued prior to the
date hereof, provided that the conversion price of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (A) above) is not lowered,
none of such Convertible Securities (other than standard options to purchase
Common Stock issued pursuant to an Approved Share Plan that are covered by
clause (A) above) are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Share Plan that are covered by clause (A) above) are otherwise
materially changed in any manner that adversely affects any of the Buyers; (C)
the Conversion Shares; and (D) the Warrant Shares (each of the foregoing in
clauses (A) through (D), collectively the “Excluded Securities”). “Approved Share Plan” means any
employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any
employee, officer or director for services provided to the Company in their
capacity as such. “Convertible
Securities” means any capital stock or other security of the Company or
any of its Subsidiaries that is at any time and under any circumstances directly
or indirectly convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any capital stock or other
security of the Company (including, without limitation, Common Stock) or any of
its Subsidiaries.

       

       

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

       

       

      (l) Reservation of
Shares. So long
as any Notes or Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 133% of (i) the maximum number of shares of Common Stock
issuable upon conversion of all the Notes (assuming for purposes hereof, that
the Notes are convertible at the Conversion Price (as defined in the Notes) and
without regard to any limitations on the conversion of the Notes set forth
therein) and (ii) the maximum number of shares of Common Stock issuable upon
exercise of all the Warrants (without regard to any limitations on the exercise
of the Warrants set forth therein).

       

      (m) Conduct of
Business.  The
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.

       

      (n) Variable Rate
Transaction. Until none of the Notes or Warrants are outstanding, the
Company and each Subsidiary shall be prohibited from effecting or entering into
an agreement to effect any Subsequent Placement involving a Variable Rate
Transaction. “Variable Rate
Transaction” means a transaction in which the Company or any Subsidiary
(i) issues or sells any Convertible Securities either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of, or quotations for, the shares of Common Stock at any time
after the initial issuance of such Convertible 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 Convertible Securities 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, other than
pursuant to a customary “weighted average” anti-dilution provision or (ii)
enters into any agreement (including, without limitation, an equity line of
credit) whereby the Company or any Subsidiary may sell securities at a future
determined price (other than standard and customary “preemptive” or
“participation” rights). Each Buyer shall be entitled to obtain injunctive
relief against the Company and its Subsidiaries to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.

       

      (o) Participation Right.
From the date hereof through the one (1) year anniversary of the Closing Date,
neither the Company nor any of its Subsidiaries shall, directly or indirectly,
effect any Subsequent Placement unless the Company shall have first complied
with this Section 4(o). The Company acknowledges and agrees that the right set
forth in this Section 4(o) is a right granted by the Company, separately, to
each Buyer.

       

       

      
        
           

        

        
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      (i) At least
five (5) Trading Days prior to any proposed or intended Subsequent Placement,
the Company shall deliver to each Buyer a written notice of its proposal or
intention to effect a Subsequent Placement (each such notice, a “Pre-Notice”), which Pre-Notice
shall not contain any information (including, without limitation, material,
non-public information) other than: (i) a statement that the Company proposes or
intends to effect a Subsequent Placement, (ii) a statement that the statement in
clause (i) above does not constitute material, non-public information and (iii)
a statement informing such Buyer that it is entitled to receive an Offer Notice
(as defined below) with respect to such Subsequent Placement upon its written
request. Upon the written request of a Buyer within three (3) Trading Days
after the Company’s delivery to such Buyer of such Pre-Notice, and only upon a
written request by such Buyer, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver to such Buyer an irrevocable written
notice (the “Offer
Notice”) of any proposed or intended issuance or sale or exchange (the
“Offer”) of the
securities being offered (the “Offered Securities”) in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the Persons (if known)
to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyer in
accordance with the terms of the Offer all of the Offered Securities, provided
that the number of Offered Securities which such Buyer shall have the right to
subscribe for under this Section 4(o) shall be (a) based on such Buyer’s pro
rata portion of the aggregate original principal amount of the Notes purchased
hereunder by all Buyers (the “Basic Amount”), and (b) with
respect to each Buyer that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of other
Buyers as such Buyer shall indicate it will purchase or acquire should the other
Buyers subscribe for less than their Basic Amounts (the “Undersubscription
Amount”).

      


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

       

       

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

      
 

      (iii) The
Company shall have five (5) Business Days from the expiration of the Offer
Period above (i) to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by a
Buyer (the “Refused
Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement
Agreement”), but only to the offerees described in the Offer Notice (if
so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of
such Subsequent Placement Agreement, and (b) either (x) the consummation of the
transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with
the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement
and any documents contemplated therein filed as exhibits thereto.

      


      (iv) In the
event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section
4(o)(iii) above), then such Buyer may, at its sole option and in its sole
discretion, reduce the number or amount of the Offered Securities specified in
its Notice of Acceptance to an amount that shall be not less than the number or
amount of the Offered Securities that such Buyer elected to purchase pursuant to
Section 4(o)(ii) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to this Section 4(o) prior to such reduction) and
(ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or amount
of Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Buyers in accordance with Section 4(o)(i) above.

      


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

       

       

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

      
 

      (vi) Any
Offered Securities not acquired by a Buyer or other Persons in accordance with
this Section 4(o) may not be issued, sold or exchanged until they are again
offered to such Buyer under the procedures specified in this
Agreement.

      


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

      


      (viii) Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to by
such Buyer, the Company shall either confirm in writing to such Buyer that the
transaction with respect to the Subsequent Placement has been abandoned or shall
publicly disclose its intention to issue the Offered Securities, in either case,
in such a manner such that such Buyer will not be in possession of any material,
non-public information, by the fifth (5th)
Business Day following delivery of the Offer Notice. If by such fifth (5th)
Business Day, no public disclosure regarding a transaction with respect to the
Offered Securities has been made, and no notice regarding the abandonment of
such transaction has been received by such Buyer, such transaction shall be
deemed to have been abandoned and such Buyer shall not be in possession of any
material, non-public information with respect to the Company or any of its
Subsidiaries. Should the Company decide to pursue such transaction with respect
to the Offered Securities, the Company shall provide such Buyer with another
Offer Notice and such Buyer will again have the right of participation set forth
in this Section 4(o). The Company shall not be permitted to deliver more than
one Offer Notice to such Buyer in any sixty (60) day period, except as expressly
contemplated by the last sentence of Section 4(o)(ii).

       

      (ix) The
restrictions contained in this Section 4(o) shall not apply in connection with
the issuance of any Excluded Securities. The Company shall not circumvent the
provisions of this Section 4(o) by providing terms or conditions to one Buyer
that are not provided to all.

       

      (p) Passive Foreign Investment
Company.  The Company shall conduct its business in such a
manner as will ensure that the Company will not be deemed to constitute a
passive foreign investment company within the meaning of Section 1297 of the
U.S. Internal Revenue Code of 1986, as amended.

       

      (q) Restriction on Redemption
and Cash Dividends. So long as any Notes are outstanding, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, any securities of the Company without the prior express
written consent of the Buyers.

       

      (r) Corporate Existence.
So long as any Buyer owns any Notes or Warrants, the Company shall not be party
to any Fundamental Transaction (as defined in the Notes) unless the Company is
in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Notes and the Warrants.

       

       

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

       

       

      
        	
                5.  

              	
                REGISTER;
      TRANSFER AGENT INSTRUCTIONS;
LEGEND.

              


      

       

      (a) Register. The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes and the Warrants in which the Company
shall record the name and address of the Person in whose name the Notes and the Warrants have been
issued (including the name and address of each transferee), the principal amount
of the Notes held by such Person, the number of Conversion Shares issuable upon
conversion of the Notes and the number of Warrant Shares issuable upon exercise
of the Warrants held by such Person. The Company shall keep the register open
and available at all times during business hours for inspection of any Buyer or
its legal representatives.

       

      (b) Transfer Agent
Instructions. The
Company shall issue irrevocable instructions to its transfer agent and any
subsequent transfer agent in a form acceptable to each of the Buyers (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares to the applicable
balance accounts at The Depository Trust Company (“DTC”), registered in the name
of each Buyer or its respective nominee(s), for the Conversion Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Notes or the exercise of the Warrants (as the
case may be). The Company represents and warrants that no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this Section 5(b),
and stop transfer instructions to give effect to Section 2(g) hereof, will be
given by the Company to its transfer agent with respect to the Securities, and
that the Securities shall otherwise be freely transferable on the books and
records of the Company, as applicable, to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(g), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such shares to such Buyer,
assignee or transferee (as the case may be) without any restrictive legend in
accordance with Section 5(d) below. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to a Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5(b) will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required. The Company shall cause
its counsel to issue the legal opinion referred to in the Irrevocable Transfer
Agent Instructions to the Company’s transfer agent on each Effective Date (as
defined in the Registration Rights Agreement). Any fees (with respect to the
transfer agent, counsel to the Company or otherwise) associated with the
issuance of such opinion or the removal of any legends on any of the Securities
shall be borne by the Company.

       

       

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

       

       

      (c) Legends. Each
Buyer understands that the Securities have been issued (or will be issued in the
case of the Conversion Shares and the Warrant Shares) pursuant to an exemption
from registration or qualification under the 1933 Act and applicable state
securities laws, and except as set forth below, the Securities shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

       

      [NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

       

      
        (d)  Removal of
Legends.
Certificates evidencing Securities shall not be required to contain the legend
set forth in Section 5(c) above or any other legend (i) while a registration
statement (including a Registration Statement) covering the resale of such
Securities is effective under the 1933 Act, (ii) following any sale of such
Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of
the Company), (iii) if such Securities are eligible to be sold, assigned or
transferred under Rule 144 (provided that a Buyer provides the Company with
reasonable assurances that such Securities are eligible for sale, assignment or
transfer under Rule 144 which shall not include an opinion of counsel), (iv) in
connection with a sale, assignment or other transfer (other than under Rule
144), provided that such Buyer provides the Company with an opinion of counsel
to such Buyer, in a generally acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act or (v) if such legend is not
required under applicable requirements of the 1933 Act (including, without
limitation, controlling judicial interpretations and pronouncements issued by
the SEC). If a legend is not required pursuant to the foregoing, the Company
shall no later than two (2) Trading Days following the delivery by a Buyer to
the Company or the transfer agent (with notice to the Company) of a legended
certificate representing such Securities (endorsed or with stock powers
attached, signatures guaranteed, and otherwise in form necessary to affect the
reissuance and/or transfer, if applicable), together with any other deliveries
from such Buyer as may be required above in this Section 5(d), as directed by
such Buyer, either: (A) provided that the Company’s transfer agent is
participating in the DTC Fast Automated Securities Transfer Program and such
Securities are Conversion Shares or Warrant Shares, credit the aggregate number
of shares of Common Stock to which such Buyer shall be entitled to such Buyer’s
or its designee’s balance account with DTC through its Deposit/Withdrawal at
Custodian system or (B) if the Company’s transfer agent is not participating in
the DTC Fast Automated Securities Transfer Program, issue and deliver (via
reputable overnight courier) to such Buyer, a certificate representing such
Securities that is free from all restrictive and other legends, registered in
the name of such Buyer or its designee (the date by which such credit is so
required to be made to the balance account of such Buyer’s or such Buyer’s
nominee with DTC or such certificate is required to be delivered to such Buyer
pursuant to the foregoing is referred to herein as the “Required Delivery
Date”).

      

       

       

       

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

       

      (e) Failure to Timely Deliver;
Buy-In. If the
Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer by
the Required Delivery Date a certificate representing the Securities so
delivered to the Company by such Buyer that is free from all restrictive and
other legends or (ii) credit the balance account of such Buyer’s or such Buyer’s
nominee with DTC for such number of Conversion Shares or Warrant Shares so
delivered to the Company, then, in addition to all other remedies available to
such Buyer, the Company shall pay in cash to such Buyer on each day after the
Required Delivery Date that the issuance or credit of such shares is not timely
effected an amount equal to 1% of the original principal amount of such Buyer’s
Note.  In addition to the foregoing, if the Company fails to so
properly deliver such unlegended certificates or so properly credit the balance
account of such Buyer’s or such Buyer’s nominee with DTC by the Required
Delivery Date, and if on or after the Required Delivery Date such Buyer
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Buyer of shares of Common Stock that
such Buyer anticipated receiving from the Company without any restrictive
legend, then, in addition to all other remedies available to such Buyer, the
Company shall, within three (3) Trading Days after such Buyer’s request and in
such Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount
equal to such Buyer’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate or credit such Buyer’s
balance account shall terminate and such shares shall be cancelled, or (ii)
promptly honor its obligation to deliver to such Buyer a certificate or
certificates or credit such Buyer’s DTC account representing such number of
shares of Common Stock that would have been issued if the Company timely
complied with its obligations hereunder and pay cash to such Buyer in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Conversion Shares or Warrant Shares (as the case may be)
that the Company was required to deliver to such Buyer by the Required Delivery
Date times (B) the Closing Sale Price (as defined in the Warrants) of the Common
Stock on the Trading Day immediately preceding the Required Delivery
Date.

       

      
        	
                6.  

              	
                CONDITIONS
      TO THE COMPANY’S OBLIGATION TO
SELL.

              


      

       

      (a) The
obligation of the Company hereunder to issue and sell the Notes and the related Warrants
to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

       

      (i) Such
Buyer shall have executed each of the other Transaction Documents to which it is
a party and delivered the same to the Company.

       

       

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

       

      (ii) Such
Buyer and each other Buyer shall have delivered to the Company the Purchase
Price (less, in the case of Iroquois, the amounts withheld pursuant to Section
4(g)) for the Note and the related Warrants being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.

       

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

       

      
        	
                7.  

              	
                CONDITIONS
      TO EACH BUYER’S OBLIGATION TO
PURCHASE.

              


      

       

      (a) The
obligation of each Buyer hereunder to purchase its Note and its related Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer’s sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice
thereof:

       

      (i) The
Company and each Subsidiary (as the case may be) shall have duly executed and
delivered to such Buyer each of the Transaction Documents to which it is a party
and the Company shall have duly executed and delivered to such Buyer a Note (in
such original principal amount as is set forth across from such Buyer’s name in
column (3) of the Schedule of Buyers) and the related Series A
Warrants, Series B Warrants, Series C Warrants, Series D Warrants, Series E
Warrants, Series F Warrants and Series G Warrants (for such aggregate number of
Warrant Shares as is set forth across from such Buyer’s name in columns (4),
(5), (6), (7), (8), (9) and (10) of the Schedule of Buyers, respectively) being
purchased by such Buyer at the Closing pursuant to this Agreement.

       

      (ii) Such
Buyer shall have received the opinion of Anslow & Jaclin, LLP, the Company’s
counsel, dated as of the Closing Date, in the form acceptable to such
Buyer.

       

      (iii) The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form acceptable to such Buyer, which instructions
shall have been delivered to and acknowledged in writing by the Company’s
transfer agent.

       

      (iv) The
Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of its Subsidiaries in each
such entity’s jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction of formation as of a date within ten
(10) days of the Closing Date.

       

      
        
           

        

        
          30

          
            

          

        

        
           

        

      

       

       

      (v) The
Company shall have delivered to such Buyer a certificate evidencing the
Company’s and each Subsidiary’s qualification as a foreign corporation and good
standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company and each Subsidiary conducts business and is
required to so qualify, as of a date within ten (10) days of the Closing
Date.

       

      (vi) The
Company shall have delivered to such Buyer a certified copy of the Articles of
Incorporation as certified by the Colorado Secretary of State within ten (10)
days of the Closing Date.

       

      (vii) Each
Subsidiary shall have delivered to such Buyer a certified copy of its
certificate of incorporation as certified by the Secretary of State (or
comparable office) of such Subsidiary’s jurisdiction of incorporation within ten
(10) days of the Closing Date.

       

      (viii) The
Company and each Subsidiary shall have delivered to such Buyer a certificate, in
the form acceptable to such Buyer, executed by the Secretary of the Company and
each Subsidiary and dated as of the Closing Date, as to (i) the resolutions
consistent with Section 3(b) as adopted by the Company’s and each Subsidiary’s
board of directors in a form reasonably acceptable to such Buyer, (ii) the
Articles of Incorporation of the Company and the organizational documents of
each Subsidiary and (iii) the Bylaws of the Company and the bylaws of each
Subsidiary, each as in effect at the Closing.

       

      (ix) Each and
every representation and warranty of the Company shall be true and correct as of
the date when made and as of the Closing Date as though originally made at that
time (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such date) and the Company shall
have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or complied with
by the Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form acceptable to such
Buyer.

       

      (x) The
Company shall have delivered to such Buyer a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding on the Closing
Date immediately prior to the Closing.

       

      (xi) The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum maintenance requirements of the Principal
Market.

       

       

      
        
           

        

        
          31

          
            

          

        

        
           

        

      

       

      (xii) The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities, including
without limitation, those required by the Principal Market.

       

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

       

      (xiv) Since the
date of execution of this Agreement, no event or series of events shall have
occurred that reasonably would have or result in a Material Adverse
Effect.

       

      (xv) The
Company shall have obtained approval of the Principal Market to list or
designate for quotation (as the case may be) the Conversion Shares and the
Warrant Shares.

       

      (xvi) In
accordance with the terms of the Security Documents, the Company shall have
delivered to such Buyer (i) certificates representing the Subsidiaries' shares
of capital stock to the extent such subsidiary is a corporation or otherwise has
certificated capital stock, along with duly executed blank stock powers and (ii)
appropriate financing statements on Form UCC-1 to be duly filed in such office
or offices as may be necessary or, in the opinion of the Buyers, desirable to
perfect the security interests purported to be created by each Security
Document.

       

      (xvii) Within
two (2) Business Days prior to the Closing, the Company shall have delivered or
caused to be delivered to each Buyer (i) true copies of UCC search results,
listing all effective financing statements which name as debtor the Company or
any of its Subsidiaries filed in the prior five years to perfect an interest in
any assets thereof, together with copies of such financing statements, none of
which, except as otherwise agreed in writing by the Buyers, shall cover any of
the Collateral (as defined in the Security Documents) and the results of
searches for any tax lien and judgment lien filed against such Person or its
property, which results, except as otherwise agreed to in writing by the Buyers
shall not show any such Liens (as defined in the Security Documents); and (ii) a
perfection certificate, duly completed and executed by the Company and each of
its Subsidiaries, in form and substance satisfactory to the Buyers.

       

      (xviii) (i) The
Company shall not have amended, modified, waived compliance with or terminated,
revoked or rescinded in any manner or respect (and the Company shall not have
taken any action, or permitted any action to be taken (whether through the
Company’s inaction or otherwise), that has a similar effect to any of the
foregoing) any provision of any of the agreements set forth on Schedule
7(a)(xviii) attached hereto and all of such agreements shall be in full force
and effect and (2) no Person that is party to any such agreements shall have
breached, or failed to comply with, in any manner or respect any provision of
any such agreements.

       

      (xix) The
Company shall have delivered to such Buyer a Collateral Access
Agreement (as defined in the Security Agreement) with respect to
the location commonly known as 1280 Jefferson Lane, Colton, CA, in form
acceptable to such Buyer.

       

      (xx) The
Company and its Subsidiaries shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.

       

       

      
        
           

        

        
          32

          
            

          

        

        
           

        

      

       

       

      
        	
                8.  

              	
                TERMINATION.

              


      

       

      In the
event that the Closing shall not have occurred with respect to a Buyer within
ten (10) days of the date hereof, then such Buyer shall have the right to
terminate its obligations under this Agreement with respect to itself at any
time on or after the close of business on such date without liability of such
Buyer to any other party; provided, however, (i) the right to terminate this
Agreement under this Section 8 shall not be available to such Buyer if the
failure of the transactions contemplated by this Agreement to have been
consummated by such date is the result of such Buyer’s breach of this Agreement
and (ii) the abandonment of the sale and purchase of the Notes and the Warrants
shall be applicable only to such Buyer providing such written notice, provided
further that no such termination shall affect any obligation of the Company
under this Agreement to reimburse such Buyer for the expenses described in
Section 4(g) above. Nothing contained in this Section 8 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction
Documents.

      


      
        	
                9.  

              	
                MISCELLANEOUS.

              


      

       

      (a) Governing Law; Jurisdiction;
Jury Trial. The
parties hereby agree that pursuant to 735 Illinois Compiled Statutes 105/5-5
they have chosen that all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Illinois. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
Chicago, Illinois, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, 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 brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. 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 to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

      


      (b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
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. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page 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 signature page were an original
thereof.

       

       

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

       

      (c) Headings;
Gender. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,” “includes,” “include” and words of like import shall be construed
broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.

       

      (d) Severability. If any
provision of this Agreement is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s). Notwithstanding anything to
the contrary contained in this Agreement or any other Transaction Document (and
without implication that the following is required or applicable), it is the
intention of the parties that in no event shall amounts and value paid by the
Company and/or its Subsidiaries (as the case may be), or payable to or received
by any of the Buyers, under the Transaction Documents (including without
limitation, any amounts that would be characterized as “interest” under
applicable law) exceed amounts permitted under any applicable law. Accordingly,
if any obligation to pay, payment made to any Buyer, or collection by any Buyer
pursuant the Transaction Documents is finally judicially determined to be
contrary to any such applicable law, such obligation to pay, payment or
collection shall be deemed to have been made by mutual mistake of such Buyer,
the Company and its Subsidiaries and such amount shall be deemed to have been
adjusted with retroactive effect to the maximum amount or rate of interest, as
the case may be, as would not be so prohibited by the applicable law. Such
adjustment shall be effected, to the extent necessary, by reducing or refunding,
at the option of such Buyer, the amount of interest or any other amounts which
would constitute unlawful amounts required to be paid or actually paid to such
Buyer under the Transaction Documents. For greater certainty, to the extent that
any interest, charges, fees, expenses or other amounts required to be paid to or
received by such Buyer under any of the Transaction Documents or related thereto
are held to be within the meaning of “interest” or another applicable term to
otherwise be violative of applicable law, such amounts shall be pro-rated over
the period of time to which they relate.

       

       

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

       

      (e) Entire Agreement;
Amendments. This
Agreement, the other Transaction Documents and the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
supersede all other prior oral or written agreements between the Buyers, the
Company, its Subsidiaries, their affiliates and Persons acting on their behalf
solely with respect to the matters contained herein and therein, and this
Agreement, the other Transaction Documents, the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein contain the
entire understanding of the parties solely with respect to the matters covered
herein and therein; provided, however, nothing contained in this Agreement or
any other Transaction Document shall (or shall be deemed to) (i) have any effect
on any agreements any Buyer has entered into with the Company or any of its
Subsidiaries prior to the date hereof with respect to any prior investment made
by such Buyer in the Company or (ii) waive, alter, modify or amend in any
respect any obligations of the Company or any of its Subsidiaries, or any rights
of or benefits to any Buyer or any other Person, in any agreement entered into
prior to the date hereof between or among the Company and/or any of its
Subsidiaries and any Buyer and all such agreements shall continue in full force
and effect. Except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. For clarification purposes, the
Recitals are part of this Agreement. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Required Buyers (as defined below), and any amendment to any provision of this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Securities, as applicable, provided that no
such amendment shall be effective to the extent that it (1) applies to less than
all of the holders of the Securities then outstanding, (2) imposes any
obligation or liability on any Buyer without such Buyer’s prior written consent
(which may be granted or withheld in such Buyer’s sole discretion) or (3)
applies retroactively. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving party, provided that the
Required Buyers may waive any provision of this Agreement, and any waiver of any
provision of this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable, provided that no such waiver shall be effective to the extent that
it (1) applies to less than all of the holders of the Securities then
outstanding (unless a party gives a waiver as to itself only), (2) imposes any
obligation or liability on any Buyer without such Buyer’s prior written consent
(which may be granted or withheld in such Buyer’s sole discretion) or (3)
applies retroactively. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration also is offered to all of
the parties to the Transaction Documents, all holders of the Notes or all
holders of the Warrants (as the case may be). The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents. Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement, no Buyer has made
any commitment or promise or has any other obligation to provide any financing
to the Company, any Subsidiary or otherwise. As a material inducement for each
Buyer to enter into this Agreement, the Company expressly acknowledges and
agrees that (i) no due diligence or other investigation conducted by a Buyer,
any of its advisors or any of its representatives shall affect such Buyer’s
right to rely on, or shall modify or qualify in any manner or be an exception to
any of, the Company’s representations and warranties contained in this Agreement
or any other Transaction Document and (ii) unless a provision of this Agreement
or any other Transaction Document is expressly preceded by the phrase “except as
disclosed in the SEC Documents,” nothing contained in any of the SEC Documents
shall affect such Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document. “Required Buyers” means each of
the Buyers whose Purchase Price was greater than $290,000.

       

      
        
           

        

        
          35

          
            

          

        

        
           

        

      

       

       

      (f) Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) Business Day after deposit with an overnight courier service
with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:

       

      If to the
Company:

       

      EcoBlu
Products, Inc.

      909 West
Vista Way

      Vista,
California 92083

      Telephone:  (909)
519-5470

      Facsimile:  (800)
516-1349

      Attention:  Chief
Executive Officer

      


      With a
copy (for informational purposes only) to:

       

      Anslow
& Jaclin, LLP

      195 Route
9 South, 2nd
Floor

      Manalapan,
NJ  07726

      Telephone:  (732)
409-1212

      Facsimile:  (732)
577-1188

      Attention:  Gregg
E. Jaclin, Esq.

             Eric
M. Stein, Esq.

       

      If to the
Transfer Agent:

       

      Transhare
Corporation

      5105
DTC Parkway, Suite 325

      Greenwood
Village, CO 80111

      Phone:
(303) 662-1112

      Facsimile:
(303) 662-1113

      Attention:
Cindie Fanchi

      


      If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer’s representatives as set forth on the Schedule of
Buyers,

       

       

      
        
           

        

        
          36

          
            

          

        

        
           

        

      

       

       

      with a
copy (for informational purposes only) to:

       

      Greenberg
Traurig, LLP

      77 W.
Wacker Drive, Suite 3100

      Chicago,
Illinois 60601

      Telephone:  (312)
456-8400

      Facsimile:  (312)
456-8435

      Attention:  Peter
H. Lieberman, Esq.

            Todd A.
Mazur, Esq.

       

      or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change, provided
that Greenberg Traurig, LLP shall only be provided copies of notices sent to
Iroquois. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

       

      (g) Successors and
Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of any of the
Securities. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Required Buyers,
including, without limitation, by way of a Fundamental Transaction (as defined
in the Warrants) (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Warrants) or a
Fundamental Transaction (as defined in the Notes) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes). A Buyer may assign some or all of its rights hereunder in
connection with any transfer of any of its Securities without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder
with respect to such assigned rights.

       

      (h) No Third Party
Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Indemnitees
referred to in Section 9(k).

       

      (i) Survival. The
representations, warranties, agreements and covenants shall survive the Closing.
Each Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.

       

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

       

       

      
        
           

        

        
          37

          
            

          

        

        
           

        

      

       

      (k) Indemnification.  In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company or any Subsidiary in any of the Transaction Documents, (b) any breach of
any covenant, agreement or obligation of the Company or any Subsidiary contained
in any of the Transaction Documents or (c) any cause of action, suit or claim
brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company or any Subsidiary)
and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of any of the Transaction Documents, (ii) any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Securities, (iii) any disclosure properly made by such
Buyer pursuant to Section 4(i), or (iv) the status of such Buyer or holder of
the Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 9(k) shall be the same as those set
forth in Section 6 of the Registration Rights Agreement.

       

      (l) Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party.

       

      (m) Remedies.  Each
Buyer and each holder of any Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it or any Subsidiary fails to perform, observe, or
discharge any or all of its or such Subsidiary’s (as the case may be)
obligations under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.

       

       

      
        
           

        

        
          38

          
            

          

        

        
           

        

      

       

       

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

       

      (o) Payment Set Aside;
Currency

       

      (p) . To the
extent that the Company makes a payment or payments to any Buyer hereunder or
pursuant to any of the other Transaction Documents or any of the Buyers enforce
or exercise their rights hereunder or 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, foreign, 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. Until the Warrants
and all warrants issued pursuant to the terms thereof are no longer outstanding,
the Company shall not effect any stock combination, reverse stock split or other
similar transaction (or make any public announcement or disclosure with respect
to any of the foregoing) without the prior written consent of the Required
Buyers. Unless otherwise expressly indicated, all dollar amounts referred to in
this Agreement and the other Transaction Documents are in United States Dollars
(“U.S. Dollars”), and
all amounts owing under this Agreement and all other Transaction Documents shall
be paid in U.S. Dollars. All amounts denominated in other currencies (if any)
shall be converted into the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this
Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.

       

      (q) Independent Nature of
Buyers’ Obligations and Rights.  The
obligations of each Buyer under the Transaction Documents are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document.  Nothing contained herein or in any other
Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as, and the Company
acknowledges that the Buyers do not so constitute, a partnership, an
association, a joint venture or any other kind of group or entity, or create a
presumption that the Buyers are in any way acting in concert or as a group or
entity with respect to such obligations or the transactions contemplated by the
Transaction Documents or any matters, and the Company acknowledges that the
Buyers are not acting in concert or as a group, and the Company shall not assert
any such claim, with respect to such obligations or the transactions
contemplated by the Transaction Documents. The decision of each Buyer to
purchase Securities pursuant to the Transaction Documents has been made by such
Buyer independently of any other Buyer. Each Buyer acknowledges that no other
Buyer has acted as agent for such Buyer in connection with such Buyer making its
investment hereunder and that no other Buyer will be acting as agent of such
Buyer in connection with monitoring such Buyer’s investment in the Securities or
enforcing its rights under the Transaction Documents. The Company and each Buyer
confirms that each Buyer has independently participated with the Company and its
Subsidiaries in the negotiation of the transaction contemplated hereby with the
advice of its own counsel and advisors. Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose. The use of a single agreement to
effectuate the purchase and sale of the Securities contemplated hereby was
solely in the control of the Company, not the action or decision of any Buyer,
and was done solely for the convenience of the Company and its Subsidiaries and
not because it was required or requested to do so by any Buyer.  It is
expressly understood and agreed that each provision contained in this Agreement
and in each other Transaction Document is between the Company, each Subsidiary
and a Buyer, solely, and not between the Company, its Subsidiaries and the
Buyers collectively and not between and among the Buyers.

       

       

      
        
           

        

        
          39

          
            

          

        

        
           

        

      

       

      
        (r)  Judgment
Currency.

      

       

      (i) If for
the purpose of obtaining or enforcing judgment against the Company in any court
in any jurisdiction it becomes necessary to convert into any other currency
(such other currency being hereinafter in this Section 9(r) referred to as the
“Judgment Currency”) an
amount due in U.S. Dollars under this Agreement or any other Transaction
Document, the conversion shall be made at the Exchange Rate prevailing on the
Trading Day immediately preceding: (1) the date actual payment of the amount
due, in the case of any proceeding in the courts of Illinois or in the courts of
any other jurisdiction that will give effect to such conversion being made on
such date or (2) the date on which the foreign court determines, in the case of
any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 9(r)(i) being hereinafter
referred to as the “Judgment
Conversion Date”).

       

      (ii) If in the
case of any proceeding in the court of any jurisdiction referred to in Section
9(r)(i) above, there is a change in the Exchange Rate prevailing between the
Judgment Conversion Date and the date of actual payment of the amount due, the
applicable party shall pay such adjusted amount as may be necessary to ensure
that the amount paid in the Judgment Currency, when converted at the Exchange
Rate prevailing on the date of payment, will produce the amount of U.S. Dollars
which could have been purchased with the amount of Judgment Currency stipulated
in the judgment or judicial order at the Exchange Rate prevailing on the
Judgment Conversion Date.

       

      (iii) Any
amount due from the Company under this provision shall be due as a separate debt
and shall not be affected by judgment being obtained for any other amounts due
under or in respect of this Agreement or any other Transaction
Document.

       

      [signature pages
follow]

       

       

      
        
           

        

        
          40

          
            

          

        

        
           

        

      

       

       

      IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.

       

      
        
          	
                  COMPANY:

                   

                  ECOBLU PRODUCTS, INC.

                	 
	 	 	 
	
                  By:
      

                	 	 
	Name 	 	 
	Title 	 	 
	 	 	 


        

      

       

      
 

       

       

       

      
        
           

        

        
          41

          
            

          

        

        
           

        

      

       

       

      


      IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.

       

      
         

        
          
            	
                    OTHER
      BUYERS:

                  	 
	 	 	 
	[                                  ]	 
	 	 
	 	 
	
                    By:
      

                  	 	 
	 	 	 


          

        

         

      

       

       

      
 

      
        
           

        

        
          42

          
            

          

        

        
           

        

      

       

      


      IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.

       

       

      
        
          
            
              	
                      BUYERS:

                    	 
	 	 	 
	      
                      IROQUOIS MASTER FUND
      LTD.

                    	 
	 	 
	 	 
	
                      By:
      

                    	Joshua
      Silverman, Authorized Signatory	 
	 	 	 


            

          

           

        

      

       

      
 

      
        
           

        

        
          43

          
            

          

        

        
           

        

      

       

      


       

      IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Agreement to
be duly executed as of the date first written above.

       

       

      
         

        
          
            
              
                	
                        BUYERS:

                      	 
	 	 	 
	      
                        CHARDAN CAPITAL
      MARKETS, LLC

                      	 
	 	 
	 	 
	
                        By:
      

                      	 	 
	 	 	 


              

            

             

          

        

      

      
 

       

      
        
           

        

        
          44

          
            

          

        

        
           

        

      

      


       

      SCHEDULE
OF BUYERS

       

      


      
        	
                (1)

              	
                (2)

              	
                (3)

              	
                (4)

              	
                (5)

              	
                (6)

              	
                (7)

              	
                (8)

              	
                (9)

              	
                (10)

              	
                (11)

              	
                (12)

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                
                   

                  Buyer

                

              	
                
                   

                  Address and Facsimile Number

                

              	
                
                   

                  Principal Amount of Note

                

              	
                
                  Number of

                  Series A Warrant Shares

                

              	
                
                  Number of

                  Series B Warrant Shares

                

              	
                
                  Number of

                  Series C Warrant Shares

                

              	
                
                  Number of

                  Series D Warrant Shares

                

              	
                
                  Number of

                  Series E Warrant Shares

                

              	
                
                  Number of

                  Series F Warrant Shares

                

              	
                
                  Number of

                  Series G Warrant Shares

                

              	
                
                  Purchase Price

                

              	
                
                  Legal Representative’s

                  Address and Facsimile Number

                

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Iroquois Master Fund Ltd.

              	
                Iroquois Master Fund Ltd.

                641 Lexington Avenue

                26th  Floor

                New York, New York  10022

                Facsimile: (212) 207-3452

                 

              	
                $500,000

              	
                1,250,000

              	
                1,250,000

              	
                1,250,000

              	
                1,250,000

              	
                1,250,000

              	
                1,250,000

              	
                1,250,000

              	
                $500,000

              	
                Greenberg Traurig, LLP

                77 W. Wacker Drive, Suite 3100

                Chicago, Illinois 60601

                Attention:  Peter H. Lieberman

                Todd A. Mazur

                Facsimile: (312) 456-8435

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Hudson Bay Fund, LP

              	
                c/o Hudson Bay Capital Management LP

                120 Broadway, 40th
      Fl.

                NY, NY 10271

                Attn: Yoav Roth

                Facsimile: (646) 478-9513

              	
                $205,000

              	
                512,500

              	
                512,500

              	
                512,500

              	
                512,500

              	
                512,500

              	
                512,500

              	
                512,500

              	
                $205,000

              	
                Elected not to provide

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Hudson Bay Overseas Fund, Ltd.

              	
                c/o Hudson Bay Capital Management LP

                120 Broadway, 40th
      Fl.

                NY, NY 10271

                Attn: Yoav Roth

                Facsimile: (646) 478-9513

              	
                $295,000

              	
                737,500

              	
                737,500

              	
                737,500

              	
                737,500

              	
                737,500

              	
                737,500

              	
                737,500

              	
                $295,000

              	
                Elected not to provide

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Alpha Capital Anstalt

              	
                c/o LH Financial Services Corp

                150 Central Park South, 2nd
      Fl.

                New York, New York 10019

                Attn: Joe Hammer

                Facsimile: (212) 586-8244

              	
                $250,000

              	
                625,000

              	
                625,000

              	
                625,000

              	
                625,000

              	
                625,000

              	
                625,000

              	
                625,000

              	
                $250,000

              	
                Elected not to provide

              
	 	 	 	 	 	 	 	 	 	 	 	 


         

         

         

        
          
             

          

          
            45

            
              

            

          

          
             

          

        

         

         

         

        	
                Chardan Capital Markets, LLC

              	
                Chardan Capital Markets, LLC

                17 State Street, Suite 1600

                New York, NY 10004

                Facsimile: (646) 465-9039

              	
                $42,000

              	
                105,000

              	
                105,000

              	
                105,000

              	
                105,000

              	
                105,000

              	
                105,000

              	
                105,000

              	
                $42,000

              	
                Elected not to provide

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Chardan SPAC Asset Management, LLC

              	
                Chardan Capital Markets, LLC

                17 State Street, Suite 1600

                New York, NY 10004

                Facsimile: (646) 465-9039

              	
                $118,000

              	
                295,000

              	
                295,000

              	
                295,000

              	
                295,000

              	
                295,000

              	
                295,000

              	
                295,000

              	
                $118,000

              	
                Elected not to provide

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Joseph Reda

              	
                Joseph Reda

                1324 Manor Circle

                Pelham, NY 10803

                Facsimile: (646) 465-9039

              	
                $50,000

              	
                125,000

              	
                125,000

              	
                125,000

              	
                125,000

              	
                125,000

              	
                125,000

              	
                125,000

              	
                $50,000

              	
                Elected not to provide

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Jonathan Schechter

              	
                Jonathan Schechter

                135 Sycamore Drive

                Roslyn, NY 11576

                Facsimile: (646) 465-9039

              	
                $30,000

              	
                75,000

              	
                75,000

              	
                75,000

              	
                75,000

              	
                75,000

              	
                75,000

              	
                75,000

              	
                $30,000

              	
                Elected not to provide

              
	 	 	 	 	 	 	 	 	 	 	 	 
	
                Adam Selkin

              	
                Adam Selkin

                10 Lake Street, Apt. 1C

                White Plains, NY 10603

                Facsimile: (646) 465-9039

              	
                $10,000

              	
                25,000

              	
                25,000

              	
                25,000

              	
                25,000

              	
                25,000

              	
                25,000

              	
                25,000

              	
                $10,000

              	
                Elected not to
provide

              


      

      
 

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