Securities Purchase Agreement


 EXHIBIT 10.1 
  
 SECURITIES PURCHASE AGREEMENT 
  

This Securities Purchase Agreement (this “Agreement”) is dated as of December 28, 2005 among North American Technologies Group,
Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the
“Purchasers”). 
  
 WHEREAS, subject to the terms
and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement. 
  
 NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows: 
  
 ARTICLE I. 
 DEFINITIONS 
  
 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are
not otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings indicated in this Section 1.1: 
  
 “Action” shall have the meaning ascribed to
such term in Section 3.1(j). 
  
 “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144
under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser. 

 
 “Closing” means the closing of the
purchase and sale of the Securities pursuant to Section 2.1. 
  
 “Closing Date” means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all deliveries set forth in § 2.2 have been
made. 
  
 “Commission” means the
Securities and Exchange Commission. 
  
 “Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter have been reclassified or changed into. 






 “Common Stock Equivalents” means any securities of the Company or its
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock. 
  
 “Conversion Price” shall have the meaning ascribed to such term in the Debentures. 
  
 “Custodial Agent” shall have the meaning
set forth in the Custodial Agreement. 
  
 “Custodial Agreement” shall mean the Custodial Agreement in substantially the form of Exhibit C hereto executed and delivered contemporaneously with this Agreement. 
  
 “Debentures” means, the 7% Convertible
Debentures due, subject to the terms therein, one year from their date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A. 
  
 “Disclosure Schedules” shall have the meaning ascribed to such term in Section 4.1.

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder. 
  
 “Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion price of any such securities and (c) securities issued pursuant to acquisitions or strategic transactions, provided any such issuance shall only be to a Person which is, itself or
through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. 
  
 “FW” means Feldman Weinstein LLP with offices located at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002.

  

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 “GAAP” shall have the meaning ascribed to such term in
Section 4.1(h). 
  
 “Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o). 
  
 “Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c). 
  
 “Liens” means a lien, charge, mortgage,
security interest, encumbrance, right of first refusal, preemptive right or other restriction, but excluding Permitted Liens. 
  
 “Market Price” shall mean the average of the each of the 10 VWAPs immediately prior to the date hereof. 
  
 “Material Adverse Effect” shall have the
meaning assigned to such term in Section 4.1(b). 
  
 “Material Permits” shall have the meaning ascribed to such term in Section 4.1(m). 
  
 “Maximum Rate” shall have the meaning ascribed to such term in Section 6.17. 
  
 “Opus” shall mean OPUS 5949 LLC, a Texas
limited liability company, formerly known as TIE Investors, LLC. 
  
 “Opus Loan” means that certain loan by Opus to TIETEK LLC, a Delaware limited liability company, TIETEK Technologies, Inc., a Texas corporation, North American Technologies Group, Inc., a Delaware
corporation, in the original principal amount of $14,000,000 as evidenced by that certain Construction Loan Agreement, dated as of February 5, 2004, as amended, supplemented, extended, refinanced or otherwise modified from time to time, and the
promissory note and security documents executed pursuant thereto, as amended, replaced or restated from time to time. 
  
 “Permitted Lien” means (a) Liens securing repayment of the Opus Loan and (b) Liens as do not materially affect
the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. 
  
 “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or
other entity of any kind. 
  
 “Pro Rata
Share” shall mean the unconverted principal amount of the Debentures held by such Purchaser divided by the aggregate amount of unconverted Debentures held by all of the Purchasers. 
  

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 “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. 
  
 “Purchaser” shall have the meaning ascribed to such term in Section 5.11. 
  
 “Registration Rights Agreement” means the
Registration Rights Agreement, as amended and restated as of the date hereof, among the Company, the Purchasers and certain other investors in the Company. 
  
 “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement. 
  
 “Required Approvals” shall have the meaning ascribed to such term in Section 4.1(e). 
  
 “Required Minimum” means, as of any date,
the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise or conversion in full of all Warrants and
Debentures (including Underlying Shares issuable as payment of interest), ignoring any conversion or exercise limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 75% of the then
Conversion Price on the Trading Day immediately prior to the date of determination. 
  
 “Return Request” shall have the meaning ascribed to such term in Article III. 
  
 “Rule 144” means Rule 144 promulgated by
the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 
  
 “SEC Reports” shall have the meaning
ascribed to such term in Section 4.1(h). 
  
 “Securities” means the Debentures, the Warrants, the Warrant Shares and the Underlying Shares. 
  
 “Securities Act” means the Securities Act of 1933, as amended. 
  
 “Short Sales” shall include all “short
sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.
  
 “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page
of this Agreement and next to the heading “Subscription Amount”, in United States Dollars and in immediately available funds. 
  

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 “Subsidiary” means any subsidiary of the Company as set forth on
Schedule 4.1(a). 
  
 “Trading
Day” means a day on which the Common Stock is traded on a Trading Market. 
  
 “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange or the Nasdaq National Market or the OTC Bulletin Board. 
  
 “Transaction Documents” means this Agreement, the Debentures, the Warrants, the
Registration Rights Agreement, the Custodial Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder. 
  
 “Underlying Shares” means the shares of Common Stock issued and issuable upon conversion of
the Debentures and upon exercise of the Warrants and issued and issuable in lieu of the cash payment of interest on the Debentures in accordance with the terms of the Debentures. 
  
 “VWAP” means, for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then
listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock
are then quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers and reasonably acceptable to the Company. 

 
 “Warrants” means collectively the Common
Stock purchase warrants, in the form of Exhibit B delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to 3 years.

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

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 ARTICLE II. 
 PURCHASE AND SALE 
  
 2.1
Initial Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and each Purchaser agrees to
purchase Debentures in an amount equal to the Subscription Amount set forth on such Purchaser’s signature page hereto, with an aggregate principal amount of $5,000,000. On the Closing Date: (a) each Purchaser shall deliver to the Custodial
Agent via wire transfer or a certified check of immediately available funds equal to their Subscription Amount to be held in escrow by the Custodial Agent pursuant to the terms of the Custodial Agreement (the “Escrow Account”);
(b) the Custodial Agent shall deliver $1,500,000 to the Company via wire transfer or certified check of immediately available funds (subject to the Custodial Agent receiving a certificate authorizing such release as provided in the Custodial
Agreement); and (c) the Company shall deliver to each Purchaser their respective Debenture and Warrants as determined pursuant to Section 2.2(a) and the other items set forth in Section 2.2 issuable on the Closing Date. 
  
 2.2 Deliveries. 
  
 a) On the Closing Date, the Company shall deliver or cause
to be delivered to the Custodial Agent with respect to each Purchaser the following: 
  
 (i) this Agreement duly executed by the Company; 
  

(ii) a Debenture with a principal amount equal to such Purchaser’s Subscription Amount as set forth on such Purchaser’s
signature page hereto, registered in the name of such Purchaser; 
  
 (iii) a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 25% of such Purchaser’s Subscription Amount divided by the Market Price, with an exercise
price equal to $0.18, subject to adjustment therein; 
  
 (iv) the First Amendment to Amended and Restated Promissory Note with Opus which has the effect of extending the date through which quarterly principal payments can be deferred and interest payments can be made in kind on the debt to Opus
from July 7, 2006 to December 31, 2006, and the Second Amendment to Construction Loan Agreement with Opus in which Opus consents to the transactions contemplated hereby, such amendments to be in form and substance reasonably satisfactory
to the Purchasers; 
  
 (v) the Custodial
Agreement duly executed by the Company; and 
  
 (vi) the amended and restated Registration Rights Agreement duly executed by the Company. 
  

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 b) On the Closing Date, each Purchaser shall deliver or cause to be delivered to the
Custodial Agent the following: 
  
 (i) this
Agreement duly executed by such Purchaser; 
  
 (ii) such Purchaser’s Subscription Amount by wire transfer to the account of the Custodial Agent to be held in escrow pursuant to the terms of the Custodial Agreement; 
  
 (iii) the Custodial Agreement duly executed by such Purchaser; and 
  
 (iv) the amended and restated Registration Rights Agreement
duly executed by such Purchaser. 
  
 2.3 Closing
Conditions. 
  
 a) The obligations of the
Company hereunder in connection with the Closing are subject to the following conditions being met: 
  
 (i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchasers
contained herein; 
  
 (ii) all obligations,
covenants and agreements of the Purchasers required to be performed at or prior to the Closing Date shall have been performed; and 
  
 (iii) the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement. 
  
 b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being met: 
  
 (iv) the accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained herein;

  
 (v) all obligations, covenants and agreements
of the Company required to be performed at or prior to the Closing Date shall have been performed; 
  
 (vi) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; 
  
 (vii) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof; 
  
 (viii) the holders of the Company’s convertible debentures issued pursuant to that certain Securities Purchase Agreement dated July 7, 2005 (the “July Transaction”) which are not also a Purchaser 

  

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hereunder (if any) shall have executed and delivered the Consent, Waiver and Extension, in the form attached hereto as Exhibit D; and 
  
 (ix) trading in the Common Stock shall not have been
suspended by the Commission (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, trading in securities generally as reported by Bloomberg Financial
Markets shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Debentures at the Closing. 
  
 2.4 Additional Investment Obligation. Each Purchaser and the Company further agree that the Purchaser shall purchase
and the Company shall sell to the Purchaser, its pro-rata share (based upon Subscription Amounts) of an aggregate of $1,500,000 principal amount of Debentures and Warrants within five (5) Trading Days of the last to occur of both (1) the
adoption of a resolution of the Board of Directors of the Company finding that both production lines one and two of the Company are fully operational and capable of sustained production of at least 350 “A” line ties per line per day, and
(2) the adoption of a resolution of the Board of Directors of the Company approving Company management’s plan to purchase and install a shredder/grinder/wash tank line for the Company’s production line, along with a finding that such
plan is economically viable and has superior economics to current arrangement; provided, that both such conditions shall have been met no later than October 30, 2006. Upon notice from the Company that such conditions have been met, and there
being no Event of Default then existing under the Debentures, and the closing conditions set forth in Section 2.3(b)(iv) through and including (vii) and (ix) being met, the second Closing shall occur as described in
Section 2.2(a)(ii) and (iii) and Section 2.2(b)(ii). 
  
 ARTICLE III. 
 [INTENTIONALLY OMITTED] 
  
 ARTICLE IV. 
 REPRESENTATIONS AND WARRANTIES 
  
 4.1
Representations and Warranties of the Company. Except as set forth under the corresponding section of the disclosure schedules delivered to the Purchasers concurrently herewith (the “Disclosure Schedules”) which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the representations and warranties set forth below to each Purchaser. 
  
 a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 4.1(a). The Company
owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, then references in the Transaction Documents to the Subsidiaries will be disregarded. 
  

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 b) Organization and Qualification. The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no
Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. 
  
 c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. the execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its board of directors or its stockholders in connection
therewith other than in connection with the Required Approvals. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. 
  
 d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the other 

  

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transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to
which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material Adverse Effect. 
  
 e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents,
other than (i) filings required pursuant to Section 5.6, (ii) the filing with the Commission of the Registration Statement and (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of
the Debentures and Warrants and the listing of the Underlying Shares for trading thereon in the time and manner required thereby (collectively, the “Required Approvals”). 
  
 f) Issuance of the Securities. The Securities are
duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof. 
  
 g) Capitalization. The capitalization of the Company
is as set forth on Schedule 4.1(g). The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s
stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan and pursuant to the conversion or exercise of outstanding Common Stock Equivalents. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the 

  

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Transaction Documents. Except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate
the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the
Company’s stockholders. 
  
 h) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports”). As of their respective dates, the reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act or the Exchange Act the
SEC Reports filed by the Company complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. 
  

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 i) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. 
  
 j) Litigation. There is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty that could reasonably be expected to result in a Material Adverse Effect. There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. 
  
 k) Labor Relations. No material labor dispute exists
or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. 
  
 l) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business except in each case as could not have a Material Adverse Effect. 
  

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 m) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not
have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material
Permit. 
  
 n) Title to Assets. The
Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them
that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance. 
  
 o) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights necessary and material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so
have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any
Subsidiary materially violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual
Property Rights of others. 
  
 p)
Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the
Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. To the knowledge of the Company, such insurance contracts and policies are accurate and complete.
Neither the Company nor any Subsidiary has any knowledge that it will not be able to renew its existing insurance coverage as and when such coverage expires. 
  

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

  

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services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company. 
  
 r) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by the Transaction Documents. 
  
 s) Private Placement. Assuming the accuracy of the Purchasers representations and warranties set forth in Section 4.2, no
registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. 
  
 t) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities,
will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. 
  
 u) Registration Rights. Other than under the Registration Rights Agreement, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company. 
  
 v) Listing and Maintenance Requirements. The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. 
  
 w) Application of Takeover Protections. The Company
and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover
provision under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities. 
  
 x) Disclosure. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement and the Transaction Documents, furnished by or on behalf of the Company with respect to the representations
and warranties made herein are true and 

  

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correct with respect to such representations and warranties and do not contain any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth in Section 4.2 hereof. 
  
 y) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in
Section 4.2, neither the Company, nor to its knowledge any of its Affiliates, nor to its knowledge any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act such that the offering of Securities made hereby would be required to be
registered under the Securities Act. 
  
 z)
Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income
and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary. 
  
 aa) No General Solicitation. Neither the Company nor
any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other
“accredited investors” within the meaning of Rule 501 under the Securities Act. 
  
 bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf
of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended except as the foregoing would not be expected to result in a Material
Adverse Effect. 
  
 cc) Seniority. As of
the Closing Date, no indebtedness or other equity of the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets covered thereby), capital lease obligations (which is senior only as to the property covered thereby) and the Opus Loan. 
  

 15 







 dd) No Disagreements with Accountants and Lawyers. There are no material
disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its
accountants and lawyers. 
  
 ee)
Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

  
 ff) Accountants. The Company’s
accountants are set forth on Schedule 4.1(ff) of the Disclosure Schedule. To the knowledge of the Company, such accountants, who the Company expects will express their opinion with respect to the financial statements to be included in the
Company’s Annual Report on Form 10-KSB for the year ending December 31, 2005 are a registered public accounting firm as required by the Securities Act. 
  
 gg) Acknowledgement Regarding Purchasers’ Trading Activity. Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Section 5.14 hereof), it is understood and agreed by the Company (i) that none of the Purchasers have been asked to agree, nor has any Purchaser agreed, to desist from purchasing
or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) that past or future open market or other
transactions by any Purchaser, including Short Sales, and specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities; (iii) that any Purchaser, and counter parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a
“short” position in the Common Stock, and (iv) that each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further
understands and acknowledges that (a) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the
Underlying Shares deliverable with respect to Securities are being determined and (b) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the
hedging activities are being conducted. 
  

 16 







 hh) Manipulation of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities (other than for the placement agent’s placement of the Securities), or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the Company. 
  
 ii) Sarbanes-Oxley. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are
applicable to it as of the Closing Date. 
  
 4.2
Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows: 
  
 a) Organization; Authority. Such Purchaser is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid
and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law. 
  
 b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring
the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no arrangement or understanding with any other persons regarding the distribution of such Securities (this representation and
warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state
securities law. Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business. Such Purchaser does not have 

  

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any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities. 
  
 c) Purchaser Status. At the time such Purchaser was
offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises any Warrants or converts any Debentures it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the
Exchange Act. 
  
 d) Experience of Such
Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such
investment. 
  
 e) General Solicitation.
Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general advertisement. 
  
 f) Short Sales and Confidentiality Prior To The Date Hereof. Other than the transaction contemplated hereunder, such Purchaser has
not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any disposition, including Short Sales (but not including the location and/or reservation of borrowable shares of
Common Stock), in the securities of the Company during the period commencing from the time that such Purchaser first received a term sheet from the Company or any other Person setting forth the material terms of the transactions contemplated
hereunder until the date hereof (“Discussion Time”). Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). 
  
 The Company acknowledges and agrees that each Purchaser does not make or has not made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in this Section 4.2. 
  

 18 







 ARTICLE V. 
 OTHER AGREEMENTS OF THE PARTIES 
  
 5.1 Transfer Restrictions. 
  
 a)
The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section 5.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such
transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement. 
  
 b) The Purchasers agree to the imprinting, so long as is required by this Section 5.1(b), of a legend
on any of the Securities in the following form: 
  
 [NEITHER]
THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] [CONVERTIBLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

  
 The Company acknowledges and agrees that a
Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection 

  

 19 







 
therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.

  
 c) Certificates evidencing the Underlying
Shares shall not contain any legend (including the legend set forth in Section 5.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent promptly after the Effective Date if
required by the Company’s transfer agent to effect the removal of the legend hereunder. If all or any portion of a Debenture or Warrant is converted or exercised (as applicable) at a time when there is an effective registration statement to
cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144(k) or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations thereof) then
such Underlying Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 5.1(c), it will, no later than ten Trading Days following
the delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such tenth Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section. Certificates for Securities subject to legend removal hereunder shall be transmitted by the transfer agent of the Company to the Purchasers by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company System. 
  
 d) In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the
VWAP of the Common Stock on the date such Securities are submitted to the Company’s transfer agent) delivered for removal of the restrictive legend and subject to Section 5.1(c), $10 per Trading Day (increasing to $20 per Trading Day 5
Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the
Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all 

  

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remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. 
  
 e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5.1 is predicated upon the Company’s reliance that the Purchaser will sell any Securities pursuant to
either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom. 
  
 f) Until the one year anniversary of the Effective Date, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in principal amount outstanding of the Debentures. 
  

5.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including without limitation its obligation to issue the Underlying Shares
pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser
and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company. 
  
 5.3 Furnishing of Information. As long as any Purchaser owns Securities, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144. 
  
 5.4
Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any
Trading Market. 
  
 5.5 Conversion and Exercise Procedures.
The form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Debentures set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Debentures.
No additional legal opinion or other information or instructions shall be 

  

 21 







 
required of the Purchasers to exercise their Warrants or convert their Debentures. The Company shall honor exercises of the Warrants and conversions of the
Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents. 
  
 5.6 Securities Laws Disclosure; Publicity. The Company shall issue a Current Report on Form 8-K within the time period required by law, reasonably
acceptable to each Purchaser disclosing the material terms of the transactions contemplated hereby, and shall attach the Transaction Documents thereto. The Company and each Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld, except if such disclosure is required by law, in which case the disclosing
party shall promptly provide the other party with prior notice of such public statement or communication. 
  
 5.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or, to the knowledge of the Company, any other Person that any
Purchaser is an “Acquiring Person” under any shareholder rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers. The Company shall conduct its business in a manner so that it will not become subject to the
Investment Company Act of 1940, as amended. 
  
 5.8 Non-Public
Information. The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the Company. 
  
 5.9 Use of Proceeds. Except as set forth on Schedule 5.9 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and not for the satisfaction of any
portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), to redeem any Common Stock or Common Stock Equivalents or to settle any outstanding litigation.
Other than the initial disbursement of $1,500,000 at the Closing, the Company shall not request any further disbursements from the Custodial Account until and unless the Company has entered into a long-term supply contract with Union Pacific Railway
Company (or an affiliated Person) on terms which the Board of Directors of the Company has expressly determined is economically viable for the Company. If such agreement has not been executed by all parties thereto on or before February 15,
2006, the Custodial Account shall be dealt with as set forth in Section 2(c)(iii) of the Custodial Agreement. 
  

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 5.10 Reimbursement. If any Purchaser becomes involved in any capacity in any Proceeding by or
against any Person who is a stockholder of the Company (except as a result of sales, pledges, margin sales and similar transactions by such Purchaser to or with any current stockholder), solely as a result of such Purchaser’s acquisition of the
Securities under this Agreement, the Company will reimburse such Purchaser for its reasonable legal and other expenses (including the cost of any investigation preparation and travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates, partners, directors,
agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company solely as a result of acquiring the Securities under this Agreement. 
  
 5.11 Indemnification of Purchasers. Subject to the provisions of this
Section 5.11, the Company will indemnify and hold the Purchasers and their directors, officers, shareholders, members, partners, employees and agents (each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser, or any
of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such
Purchaser’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal securities laws or
any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing. Any Purchaser Party shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party. The Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations,


  

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warranties, covenants or agreements made by the Purchasers in this Agreement or in the other Transaction Documents. 
  
 5.12 Reservation and Listing of Securities. 
  
 a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents. 
  
 b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock
is less than the Required Minimum on such date, then the Board of Directors of the Company shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but
unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date. 
  
 c) The Company shall, if applicable: (i) in the time and manner required by the Trading Market, prepare
and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing on the Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing, and (iv) maintain the listing of such Common Stock on any date at least equal to the
Required Minimum on such date on such Trading Market or another Trading Market. 
  
 5.13 Equal Treatment of Purchasers. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same
consideration is also offered to all of the parties to the Transaction Documents. Further, the Company shall not make any payment of principal or interest on the Debentures in amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise. 
  
 5.14 Short Sales and Confidentiality After The Date Hereof. Each
Purchaser severally and not jointly with the other Purchasers covenants that neither it nor any Affiliates acting on its behalf or pursuant to any understanding with it will execute any Short Sales for a period ending three (3) days after the
time that the transactions contemplated by this Agreement are first publicly announced as described in Section 5.6. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as described in Section 5.6, such Purchaser will maintain, the confidentiality of all disclosures made to it in connection with this transaction (including the existence and
terms of this transaction). Each Purchaser understands and acknowledges, severally and not jointly with any other Purchaser, that the Commission currently takes the position that coverage of short sales of shares of the Common Stock “against
the box” 

  

 24 







 
prior to the Effective Date of the Registration Statement with the Securities is a violation of Section 5 of the Securities Act, as set forth in
Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser makes
any representation, warranty or covenant hereby that it will not engage in Short Sales in the securities of the Company after the three (3) day period beginning at the time that the transactions contemplated by this Agreement are first publicly
announced as described in Section 5.6. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. 
  
 5.15 Consent and Waiver. To the extent a Purchaser is also a purchaser under the July Transaction, such Purchaser hereby consents to the
transactions contemplated hereby, to the extent required under the July Transaction documents, and hereby waives any provision thereunder that would prohibit the transactions contemplated hereby, including, without limitation, any provision
prohibiting the Company from incurring additional Indebtedness or granting Liens on its assets. Such consent and waiver is limited to the transactions hereunder and except as specifically waived by the terms of this Agreement, the July Transaction
documents shall remain unmodified and in full force and effect, and shall not be in any way changed, modified or superseded by the terms set forth herein, except that the Maturity Date of the July Debentures shall be extended to December 31,
2006. 
  
 ARTICLE VI. 
 MISCELLANEOUS 
  
 6.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any
effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before December 30, 2005; provided, however, that no such
termination will affect the right of any party to sue for any breach by the other party (or parties). 
  
 6.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse the Purchasers up to $10,000 for their actual, reasonable, out-of-pocket
legal fees and expenses, incurred in the preparation and negotiation of the Transaction Documents. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities. 
  

 25 







 6.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules. 
  
 6.4 Notices. Any and
all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. 
  

6.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each Purchaser, or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any
manner impair the exercise of any such right. 
  
 6.6
Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 
  
 6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser. Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Purchasers”. 
  
 6.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 5.11. 
  
 6.9 Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and 

  

 26 







 
enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that
all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting
in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The parties hereby waive all rights to a trial by jury. If either party shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such
action or proceeding. 
  
 6.10 Survival. The
representations and warranties contained herein shall survive the Closing and the delivery, exercise and/or conversion of the Securities, as applicable for the applicable statue of limitations. 
  
 6.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need
not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof. 
  
 6.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in
any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

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

  

 27 







 
to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights;
provided, however, in the case of a rescission of a conversion of a Debenture or exercise of a Warrant, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice.

  
 6.14 Replacement of Securities. If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. 
  
 6.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in
the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. 
  
 6.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any
Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred. 
  
 6.17
Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the
contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the
Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or 

  

 28 







 
decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election. 
  
 6.18 Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. For reasons of administrative
convenience only, Purchasers and their respective counsel have chosen to communicate with the Company through FW. FW does not represent all of the Purchasers but only Midsummer. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers. 
  
 6.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial
liquidated damages or other amounts are due and payable shall have been canceled. 
  
 6.20 Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. 
  
 (Signature Pages Follow) 
  

 29 







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

									
	NORTH AMERICAN TECHNOLOGIES GROUP, INC.	 	 	 	 	 	 Address for Notice:

					
	By:	 	/s/    HENRY W. SULLIVAN        	 	 	 	 	 	 14315 West Hardy Road

	 Name:
	 	Henry W. Sullivan	 	 	 	 	 	 Houston, Texas 77060

	 Title:
	 	President	 	 	 	 	 	 

  
 With
a copy to (which shall not constitute notice): 
  
 Boyer & Ketchand 
 9 Greenway Plaza, Suite 3100 
 Houston, Texas 77019 
 Attn: John R. Boyer

 Tel: (713) 871-2025 
 Fax:
(713) 871-2024 






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

			
	 Name of Purchaser:
	  	 


			
	Signature of Authorized Signatory of Purchaser:	  	 


			
	 Name of Authorized Signatory:
	  	 


			
	 Title of Authorized Signatory:
	  	 


			
	 Email Address of Purchaser:
	  	 

  
 Address for Notice of Purchaser: 
  
 Address for Delivery of Securities for Purchaser (if not same as above): 
  
 Do you want a 9.99% beneficial ownership blocker in your Warrant and Debenture? 
  
  ̈
Yes                                        
          ̈ No 
  
 First Closing Subscription Amount: 
  
 Second Closing Subscription Amount: 
  
 Warrant Shares: 
  
 EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]