WWW.EXFILE.COM, INC. -- 888-775-4789 -- MEDIS TECHNOLOGIES LTD. -- EXHIBIT 10.1 TO FORM 8-K


    EXHIBIT
10.1

     

     

    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
February 13, 2009 by and between Medis Technologies Ltd., a Delaware corporation
(the “Company”)
and Ascendiant Capital Group, LLC (the “Purchaser”).
Capitalized terms used in this Agreement and not otherwise defined shall have
the meanings ascribed to them in Article 1.

    


    WHEREAS, the parties desire
that, upon the terms and subject to the conditions contained herein, the Company
shall have the right to issue and sell to Purchaser from time to time as
provided herein, and Purchaser shall be obligated to purchase from the Company
up to $6,000,000 worth of shares of Common Stock pursuant to the Company’s
effective registration statement under the Securities Act, file no.
333-155574.

     

    NOW, THEREFORE, in
consideration of the foregoing premises, and the promises and covenants herein
contained, the receipt and sufficiency of which are hereby acknowledged by the
parties hereto, the parties, intending to be legally bound, hereby agree as
follows:

     

    ARTICLE
I.

    DEFINITIONS

     

    1.1 Definitions.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings 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 the Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as the Purchaser will be
deemed to be an Affiliate of the Purchaser.

     

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

     

    “Closing Price” 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 closing bid 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 for trading as reported by Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time); (b)  if the Common Stock is not listed or quoted on a Trading
Market, but is quoted on the OTC Bulletin Board, the closing bid price of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted for trading on a
Trading Market or the OTC Bulletin Board and if prices for the Common Stock are
then reported in the “Pink Sheets” published by Pink Sheets, LLC (or


    
      
        
        

      

      
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    a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Purchaser and
reasonably acceptable to the Company.

     

    “Commission” means the
Securities and Exchange Commission.

     

    “Commencement Date”
shall have the meaning assigned to such term in Section 6.1(e).

    


    “Commitment Amount”
shall have the meaning assigned to such term in Section 2.1 hereof.

     

    “Commitment Period”
shall mean the period of 24 consecutive months commencing
immediately after the date that the Company files a prospectus supplement
disclosing the terms hereunder.

     

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

     

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

     

    “Company Counsel”
means Herrick, Feinstein LLP, with offices at 2 Park Avenue, New York, New York
10016.

     

    “Consolidation Event”
shall mean a sale of all or substantially all of the Company’s assets or a
merger pursuant to which the holders of the voting securities of the Company
prior to the merger do not own a majority of the voting securities of the
surviving entity.

     

    “Disclosure Schedules”
means the Disclosure Schedules of the Company delivered to the Purchaser
concurrently herewith.

     

    “Draw Down” shall have
the meaning assigned to such term in Section 6.1(a) hereof.

     

    “Draw Down Notice”
shall have the meaning assigned to such term in Section 6.1(e)
hereof.

     

    “Draw Down Pricing
Period” shall mean each period of 10 consecutive Trading Days following
the delivery by the Company of a Draw Down Notice, the first of such periods
commencing on the date specified in the Draw Down Notice and subsequent periods,
if any, described in the Draw Down Notice, commencing  on the third Trading
Day following the immediately preceding Draw Down Pricing Period, such
subsequent 

    
      
        
        

      

      
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    periods,
if any, continuing until such time that the Company delivers to the Purchaser a
subsequent suspension notice, which notice must be delivered on or before the
end of the prior Draw Down Pricing Period; provided, however, the first
Draw Down Pricing Period and any subsequent Draw Down Pricing Period commencing
after a suspension notice is delivered, shall not begin before the day on which
receipt of such notice is delivered to Purchaser pursuant to Section 8.3 herein.
“Draw Down
Shares” or “Shares” shall mean
the shares of Common Stock issuable pursuant to a Draw Down.

     

    “DTC” shall have the
meaning assigned to such term in Section 6.1(f).

     

    “DWAC” shall have the
meaning assigned to such term in Section 6.1(f).

     

    “Equity Conditions”
shall mean, during the period described in Section 5.3(e) in question, (i) there is an effective and available
Registration Statement pursuant to which the Company is permitted to utilize the
prospectus thereunder to sell all of the Draw Down Shares (issued and to be
issued pursuant to the applicable Draw Down), (ii) the Common Stock is trading
on the Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed or quoted (if applicable) for trading on a Trading Market
(and the Company believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable future), (iii)
there is a sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the Draw Down Shares (issued
and to be issued pursuant to the applicable Draw Down), (iv) the Company, directly or indirectly, has not provided
the Purchaser with any material, non-public information that has not been made
publicly available in a widely disseminated release and (v) the Draw Down in
question shall not exceed 4.9% of the then issued and outstanding shares
of Common Stock on the date that such Draw Down Shares are issued.

     

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

     

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

    


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

     

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

     

    “Initial Closing”
shall have the meaning assigned to such term in Section 2.2 hereof.

     

    “Initial Closing Date”
shall have the meaning assigned to such term in Section 2.2 hereof.

     

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

    
      
        
        

      

      
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    “Investment Amount”
shall have the meaning assigned to such term in Section 6.1(e)
hereof.

     

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

     

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

     

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

     

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

     

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

     

    “Purchase Price” shall
mean, with respect to Draw Down Shares purchased during each applicable
Settlement Period, 89.5% of the VWAP on the date in question.

     

    “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.7.

     

    “Registration
Statement” means the registration statement file no. 333-155574, covering
the sale by the Company to the Purchaser of the Draw Down Shares and the shares
issuable pursuant to Section 5.2(f) below.

     

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

     

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

     

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

     

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

     

    “Securities” means the
Draw Down Shares, and the shares of Common Stock issuable to the Purchaser
pursuant to Section 2.2(a)(iv) and 5.2(f) below.

    
      
        
        

      

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

     

    “Settlement” shall
mean the delivery of the Draw Down Shares into the Purchaser’s DTC account via
DTC’s DWAC system and the Purchaser’s delivery of payment therefor.

     

    “Settlement Date”
shall have the meaning assigned to such term in Section 6.1(b).

     

    “Settlement Period”
shall have the meaning assigned to such term in Section 6.1(b).

     

    “Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act; provided,
however, that
in no event shall either the sale of Draw Down Shares to be received but not yet
delivered pursuant to a pending Draw Down during a Draw Down Pricing Period be
deemed a Short Sale or the sale of any Securities issued under this Agreement
after the date hereof be deemed a Short Sale.

     

    “Subsidiary” means any
subsidiary of the Company as set forth on Schedule
3.1(a).

     

    “Threshold Price”
shall mean a price specified by the Company in each Draw Down
Notice.

     

    “Trading Cushion”
shall mean the mandatory 2 Trading Days between Draw Down Pricing
Periods.


     

    “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 Capital Market, the American
Stock Exchange, the New York Stock Exchange or the Nasdaq Global
Market.

     

    “Transaction
Documents” means this Agreement and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.

     

    “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 for trading as reported by Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time); (b)  if the Common Stock is not then listed or quoted on a Trading
Market, but is 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 for
trading on a Trading Market or the OTC Bulletin Board

    
      
        
        

      

      
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    and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
Pink Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by the Purchaser and reasonably acceptable to the
Company.

     

    ARTICLE
II.

    PURCHASE
AND SALE

     

    2.1 Purchase and Sale of Draw
Down Shares. Upon the terms and subject to the conditions of this
Agreement, at its discretion, the Company may sell and issue to the Purchaser
and the Purchaser shall be obligated to purchase from the Company, up to an
aggregate of $6,000,000 worth of shares of Common Stock (the “Commitment Amount”),
provided that in no event shall the Commitment Amount and the shares of Common
Stock issuable to the Purchaser pursuant to Section 2.2(a)(iv) and 5.2(f),
exceed 9,170,494 shares of Common Stock without first obtaining approval of the
stockholders of the Company of such excess issuance.  It is
acknowledged and agreed that the Company is under no obligation to seek to
obtain such stockholder approval.

     

    2.2 Initial
Closing.  The initial closing of the transactions referred to
herein (the “Initial
Closing”) shall take place at the offices of FWS, 420 Lexington Avenue,
Suite 2620, New York, New York 10170 (i) at 10:00 a.m. local time within 5
Trading Days of the date hereof, or (ii) at such other time and place or on such
date as the Purchaser and the Company may agree upon (the “Initial Closing
Date”). Each party shall deliver the following documents, instruments and
writings at or prior to the Initial Closing:

     

    (a) the
Company shall deliver or cause to be delivered to the Purchaser the
following:

     

    (i) this
Agreement duly executed by the Company;

     

    (ii) the legal
opinion from Company Counsel, in the form attached hereto as Exhibit
A;

     

    (iii) the base
prospectus in the Registration Statement shall be accepted by FINRA under Rule
5110, to the extent necessary; and

     

    (iv)
266,667 shares
of Common Stock, which shares shall be delivered without legend to the DTC
account specified by the Purchaser in writing to the Company.

     

    (b) the
Purchaser shall deliver or cause to be delivered to the Company this Agreement
duly executed by the Purchaser.

     

    
      
        
        

      

      
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    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

    3.1 Representations and
Warranties of the Company.  Except as set forth under the
corresponding section of the Disclosure Schedules which Disclosure Schedules
shall be deemed a part hereof and to qualify any representation or warranty
otherwise made herein to the extent of such disclosure, the Company hereby makes
the representations and warranties set forth below to the
Purchaser:

     

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

     

    (b) Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(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 hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, its board of directors or its stockholders in connection therewith
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    Approvals.  Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

     

    (d) No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Shares and
the consummation by the Company of the other transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any provision of
the Company’s or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, 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 would 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 4.4 of this Agreement, (ii) the filing
with the Commission of a prospectus supplement to the Registration Statement
describing the transactions contemplated hereby, (iii) application(s) to each
applicable Trading Market for the listing of the Securities for trading thereon
in the time and manner required thereby, and (iv) such filings as are required
to be made under applicable state securities laws (collectively, the “Required
Approvals”).

     

    (f) Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Draw Down Shares and the other
shares of Common Stock issuable

    
      
        
        

      

      
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    hereunder
will be, upon issuance, duly registered under the Securities Act and will be
freely tradable by the Purchaser, subject to any prospectus delivery
requirements under Rule 172 under the Securities Act.

     

    (g) Capitalization.  The
capitalization of the Company is as set forth in the SEC Reports as of the dates
thereof.  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 stock options under the Company’s equity incentive plans, the
issuance of shares of Common Stock to directors, employees and consultants
pursuant to the Company’s equity incentive plan and pursuant to the conversion
or exercise of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act.  No Person has
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Transaction
Documents.  Other than as set forth in the SEC Reports, 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 Purchaser) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase
securities.  No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance and
sale of the Securities.  There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party.

     

    (h) SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements, registration 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 or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any
such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
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    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, year-end audit
adjustments.

     

    (i) Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the Registration
Statement or the SEC Reports, except as specifically disclosed in a subsequent
SEC Report, (i) there has been no event, occurrence or development that has had
or that would reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company equity
incentive plans.  The Company does not have pending before the
Commission any request for confidential treatment of
information.  Except for the issuance of the Securities contemplated
by this Agreement or as set forth on Schedule 3.1(i), no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made that
has not been publicly disclosed at least 1 Trading Day prior to the date that
this representation is made.

     

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

     

    (k) Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company,
and neither the Company or any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good.  No executive officer, to
the knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.  The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to have 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
and all such laws that affect the environment, except in each case as would not
have or reasonably be expected to result in a Material Adverse
Effect.

     

    (m) Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not 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 all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially 

    
      
        
        

      

      
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    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.  Neither the Company nor its Subsidiaries own any real
property.  Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in
compliance.

     

    (o) Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that the Intellectual Property Rights used by
the Company or any Subsidiary violates or infringes upon the rights of any
Person.  To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.  The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     

    (p) Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Commitment Amount.  Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

     

    (q) Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements or
restricted shares under any equity incentive plan of the Company.

    
      
        
        

      

      
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    (r) Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

     

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

     

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

     

    (u) Listing and Maintenance
Requirements.  The Company’s Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration.  The Company has not, in
the 12 months preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been 

    
      
        
        

      

      
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    listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.

     

    (v) 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 Purchaser as a
result of the Purchaser 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
Purchaser’s ownership of the Securities.

     

    (w) Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that, neither it
nor any other Person acting on its behalf has provided any of the Purchaser or
their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information.   The Company
understands and confirms that the Purchaser will rely on the foregoing
representation in effecting transactions in securities of the
Company.  All disclosure furnished by or on behalf of the Company to
the Purchaser regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, with
respect to the representations and warranties made herein are true and 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 press releases disseminated by
the Company during the twelve months preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements, in light of the circumstances under which they were made
and when made, not misleading.  The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.

     

    (x) No Integrated
Offering. Neither the Company, nor any of its affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated.

     

    (y) Indebtedness.  For
the purposes of this Agreement, “Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of 

    
      
        
        

      

      
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    others,
whether or not the same are or should be reflected in the Company’s balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (c) the present value of any lease payments in excess of
$50,000 due under leases required to be capitalized in accordance with
GAAP.  Neither the Company nor any Subsidiary is in default with
respect to any Indebtedness.

     

    (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) 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.

     

    (bb) Accountants.  The
Company’s accountants are set forth in the Registration Statement.  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-K for the year ended December 31, 2008,
are a registered public accounting firm as required by the Exchange
Act.

     

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

     

    (dd) Acknowledgement Regarding
Purchaser’s Trading
Activity.  Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (other than Section 4.14), it is understood and acknowledged by the
Company (i) that the Purchaser has
not 

    
      
        
        

      

      
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    been asked to agree, nor has Purchaser agreed, to
desist from purchasing or selling
securities of the Company; and (ii) that past
or future open market or other transactions
by Purchaser before or after the closing of
this Agreement or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded
securities.  The Company
further understands and acknowledges that (a) the Purchaser may engage in
selling activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Draw Down Shares are being determined and (b) such selling activities could
reduce the value of the existing stockholders' equity interests in the Company
at and after the time that the selling activities are being conducted.  The
Company acknowledges that such aforementioned selling activities do not
constitute a breach of any of the Transaction Documents.

     

    (ee) Regulation M
Compliance.  The Company has not, and will not during the term of
this Agreement, and to its knowledge no one acting on its behalf has, or will
during the term of this Agreement, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company.

     

    3.2 Representations and
Warranties of the Purchaser.  Purchaser hereby represents and
warrants as of the date hereof and as of each Closing Date to the Company as
follows:

     

    (a) Organization;
Authority.  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 the Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of the Purchaser.  Each
Transaction Document to which it is a party has been duly executed by the
Purchaser, and when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of the
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) Ordinary Course of
Business.  Purchaser is acquiring the Securities hereunder in
the ordinary course of its business.

     

    (c) Purchaser
Status.  At the time the Purchaser was offered the Securities,
it was, and at the date hereof it is, either: (i) an “accredited investor” as
defined in Rule 

    
      
        
        

      

      
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    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.

     

    (d) Experience of
Purchaser.  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.  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.

     

    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1 No Transfer Restrictions;
DWAC Delivery.

     

    Securities
issued hereunder shall not contain any legend.  The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company that place restrictions on the Securities.   All
Securities shall be transmitted by the transfer agent of the Company to the
Purchaser by crediting the account of the Purchaser’s prime broker with the DTC
system.

    


    4.2 THIS
SECTION HAS BEEN INTENTIONALLY OMITTED.

     

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

     

    4.4 Securities Laws Disclosure;
Publicity.  The Company shall, by 8:30 a.m. Eastern time on the
second Trading Day immediately following the date hereof, issue a Current Report
on Form 8-K, disclosing the material terms of the transactions contemplated
hereby, and shall attach this Agreement thereto, and, within the time periods
required by Rule 424, file a prospectus supplement containing all information
required to be contained therein.  Other than as required by this
Agreement, the Company and the Purchaser shall consult with each other in
issuing any other press releases with respect to the transactions contemplated
hereby, and neither the Company nor the 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 the Purchaser, or without the
prior consent of the Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.

     

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


    
      
        
        

      

      
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    such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchaser.

     

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

     

    4.7 Indemnification of
Purchaser.   Subject to the provisions of this Section
4.7, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls the Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any 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 the Purchaser, or any
of its Affiliates, by any stockholder of the Company who is not an Affiliate of
the Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of the
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings the Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by the 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, the Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing reasonably acceptable to the Purchaser
Party.  Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the 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 the Purchaser Party, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than one such
separate counsel.  The Company will not be liable to any Purchaser
Party under this Agreement (i) for any settlement by the 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 

    
      
        
        

      

      
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    loss,
claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by the
Purchaser Party in this Agreement or in the other Transaction
Documents.

     

    4.8 Reservation of Common
Stock. As of the date hereof, the Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Draw Down Shares pursuant to this
Agreement.

     

    4.9 Listing of Common
Stock.  The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on a Trading
Market, and as soon as reasonably practicable following the Initial Closing to
notify such Trading Market of the transactions provided for herein. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application all of the Shares, and
will take such other action as is necessary to cause all of the Shares to be
listed on such other Trading Market as promptly as possible.  The
Company will take all action reasonably necessary to continue the listing and
trading of its Common Stock on a Trading Market and will comply in all respects
with the Company’s reporting, filing and other obligations under the bylaws or
rules of the Trading Market.

     

    4.10 Blue Sky Filings. The
Company shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the Securities for,
sale to the Purchaser at the Closing under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence of such
actions promptly upon request of Purchaser.

     

    4.11 Accuracy of Registration
Statement. On each Settlement Date, the Registration Statement and
the prospectus therein (including any prospectus supplement) shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made;
and on such Settlement Date the Registration Statement and the prospectus
included therein will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement and the
prospectus included therein in reliance upon and in conformity with the
information furnished in writing to the Company by the Purchaser specifically
for inclusion in the Registration Statement and the prospectus
therein.

     

    4.12 Notice of Certain Events
Affecting Registration; Suspension of Right to Request a Draw
Down.  The Company will promptly notify the Purchaser in
writing upon the occurrence of any of the following events: (a) when any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed; (b) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or prospectus or for additional information; (c) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Securities or the initiation of any 

    
      
        
        

      

      
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    Proceedings
for that purpose; (d) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; (e) of the occurrence of any
event or passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement made in
the Registration Statement or prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, prospectus or other
documents so that, in the case of the Registration Statement or the prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and (f) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may
be material and that, in the determination of the Company, makes it not in the
best interest of the Company to allow continued availability of the Registration
Statement or prospectus; provided that the Company shall not disclose the
substance of such corporate development to the Purchaser. The Company shall not
deliver to the Purchaser any Draw Down Notice during the continuation of any of
the foregoing events.  The Company shall promptly make available to
the Purchaser any such supplements or amendments to the prospectus, at which
time, provided that the registration statement and any supplements and
amendments thereto are then effective, the Company may recommence the delivery
of Draw Down Notices.

     

    4.13 Minimum Use of
Facility.  Subject to the limitation described in Section 2.1
and Article V, prior to the one year anniversary of the date hereof, the Company
shall have sold to the Purchaser not less than $3 million of Draw Down Shares
pursuant to this Agreement.

     

    4.14 Short
Sales.  After the date hereof and prior to the termination of
this Agreement, the Purchaser hereby agrees not to execute any Short Sales of
the Common Stock.

     

    ARTICLE
V.

    CONDITIONS
TO INITIAL CLOSING AND DRAW DOWNS

     

    5.1 Conditions Precedent to the
Obligation of the Company to Sell the Shares.  The obligation
hereunder of the Company to proceed to close this Agreement and to issue and
sell the Shares to the Purchaser is subject to the satisfaction or waiver, at or
before the Initial Closing, and as of each Settlement Date of each of the
conditions set forth below.  These conditions are for the Company's
sole benefit and may be waived by the Company in writing at any time in its sole
discretion.

     

    (a) Accuracy of the Purchaser’s
Representations and Warranties.  The representations and
warranties of the Purchaser shall be true and correct in all material respects
as of the date when made and as of the Initial Closing and as of each Settlement
Date as though made at that time (except for representations and warranties that
speak as of a particular date, which shall be true and correct in all material
respects as of such dates).

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (b) Performance by the
Purchaser.  The Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Purchaser at or prior to the Initial Closing and as of each Settlement
Date.

     

    (c) No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

     

    (d) No Proceedings or
Litigation.  No material Action shall have been commenced after
the date hereof against the Purchaser or the Company or any Subsidiary, or any
of the officers, directors or affiliates of the Company or any Subsidiary,
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.

     

    5.2 Conditions Precedent to the
Obligation of the Purchaser to Close.  The obligation hereunder
of the Purchaser to perform its obligations under this Agreement and to purchase
the Shares is subject to the satisfaction or waiver, at or before the Initial
Closing, of each of the conditions set forth below.  These conditions
are for the Purchaser's sole benefit and may be waived by the Purchaser in
writing at any time in its sole discretion.

     

    (a) Accuracy of the Company’s
Representations and Warranties.  Each of the representations
and warranties of the Company shall be true and correct in all material respects
as of the date when made and as of the Initial Closing as though made at that
time (except for representations and warranties that speak as of a particular
date, which shall be true and correct in all material respects as of such
date).

     

    (b) Performance by the
Company.  The Company shall have performed, satisfied and
complied in all material respects with all material covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Initial Closing.

     

    (c) No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

     

    (d) No Proceedings or
Litigation.  No material Action shall have been commenced,
against the Purchaser or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.

     

    (e) Initial Closing
Deliveries.  The delivery by the Company of the items set forth
in Section 2.2(a) of this Agreement.

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (f) Commitment
Shares.  On the Trading Day immediately prior to the
commencement of the first Draw Down Pricing Period, in consideration for
agreeing to the terms of this Agreement and no additional consideration at such
time, the Company shall have delivered to the Purchaser a number of shares of
Common Stock equal to $90,000 divided by the Closing Price of the Company’s
Common Stock on the Trading Day immediately prior to issuance, which shares
shall be delivered without legend to the DTC account specified by the Purchaser
in writing to the Company.

     

    5.3 Conditions Precedent to the
Obligation of the Purchaser to Accept a Draw Down and Purchase the
Shares.  The obligation hereunder of the Purchaser to accept a
Draw Down request and to acquire and pay for the Shares is subject to the
satisfaction at or before each Settlement Date, of each of the conditions set
forth below.

     

    (a) Satisfaction of Conditions
to Initial Closing.  The Company shall have satisfied at the
Initial Closing, or the Purchaser shall have waived at the Initial Closing, the
conditions set forth in Section 5.2 hereof.

     

    (b) No
Suspension.  Trading in the Common Stock shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the delivery of each Draw Down Notice), and, at any time
prior to such Draw Down Notice, trading in securities generally as reported on
the Trading Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported on the
Trading Market unless the general suspension or limitation shall have been
terminated prior to the delivery of such Draw Down Notice.

     

    (c) Material Adverse
Effect.  No Material Adverse Effect and no Consolidation Event
where the successor entity has not agreed to deliver to the Purchaser such
shares of stock and/or securities as the Purchaser is entitled to receive
pursuant to this Agreement.

     

    (d) Opinion of
Counsel.  The Purchaser shall have received an opinion of
Company Counsel, substantially in the form of Exhibit A
hereto.

     

    (e) Equity
Conditions.  During the Draw Down Pricing Period through the
Settlement Date, all of the Equity Conditions shall have been met.

     

    


    ARTICLE
VI.

    DRAW DOWN
TERMS

     

    6.1 Draw Down
Terms.  Subject to the satisfaction of the conditions set forth
in this Agreement, the parties agree as follows:

     

    (a)  The
Company may, in its sole discretion, issue and exercise draw downs against the
Commitment Amount (each a “Draw Down”) during
the Commitment Period, which Draw Downs the Purchaser shall be obligated to
accept, subject to the terms and 

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    conditions
of this Agreement. Before the Company shall exercise a Draw Down, the Company
shall have caused a sufficient number of shares of Common Stock to be registered
to cover the Draw Down Shares to be issued in connection with such Draw
Down.

     

    (b) Only one
Draw Down shall be allowed in each Draw Down Pricing Period and any subsequent
Draw Down Pricing Period shall not commence until the Trading Cushion has
elapsed since the end of the previous Draw Down Pricing Period. The number of
shares of Common Stock purchased by the Purchaser with respect to each Draw Down
shall be determined as set forth in Section 6.1(d) herein and settled on the
second Trading Day immediately following the end of the applicable Draw Down
Pricing period (each such settlement period and each such settlement date shall
be referred to as a “Settlement Period”
and a “Settlement
Date”, respectively).

     

    (c)  The
maximum Investment Amount as to each Draw Down shall be equal to A multiplied by B, where A equals a
number of shares of Common Stock equal to 15% of the total trading volume during
the 10 Trading Days immediately prior to the applicable Draw Down Pricing Period
and B equals the average of each of the VWAPs during such 10 Trading Day period,
or an amount mutually agreed upon in writing by the Company and the
Purchaser.

     

    (d) The
number of shares of Common Stock to be issued on each Settlement Date shall be a
number of shares equal to the sum of the quotients (for each Trading Day within
the Settlement Period) of (x) 10% of the Investment Amount, and (y) the Purchase
Price on each Trading Day within the Settlement Period, subject to the following
adjustments:

     

    (i) if the
Purchase Price on a given Trading Day is less than the applicable Threshold
Price, then such Trading Day shall be withdrawn from the Draw Down Pricing
Period; and

     

    (ii) if during
any Trading Day during the Draw Down Pricing Period trading of the Common Stock
on the Trading Market is suspended for more than 3 hours, in the aggregate, or
if any Trading Day during the Draw Down Pricing Period is shortened because of a
public holiday, then such Trading Day shall be withdrawn from the Draw Down
Pricing Period; and

     

    (iii) if during
any Trading Day during the Draw Down Pricing Period sales of Draw Down Shares
pursuant to the Registration Statement are suspended by the Company for more
than three (3) hours, in the aggregate, then such Trading Day shall be withdrawn
from the Draw Down Pricing Period.

     

    (e) The
Company must inform the Purchaser by delivering a draw down notice, in the form
of Exhibit B
hereto (the “Draw Down
Notice”), via facsimile transmission in accordance with Section 8.3, as
to the amount of the Draw Down (the “Investment Amount”)
the Company wishes to exercise. The Draw Down Notice shall also inform the
Purchaser of the first day of the Draw Down Pricing Period, which, 

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    unless
otherwise agreed to in writing by the parties, shall be the first Trading Day
following the date such Draw Down Notice is received (the “Commencement
Date”).  At no time shall the Purchaser be required to purchase
more than the maximum Investment Amount for a given Draw Down Pricing
Period.  The Company shall have the right to notify the Purchaser that
Draw Downs shall be continuous pursuant to a Draw Down Notice until such time
that the Company elects to suspend such Draw Down Notice.  In the
event of a continuous Draw Down Notice, the Company must give at least 2 Trading
Days’ written notice of suspension to the Purchaser and in no event shall a
suspension of a Draw Down occur prior to the end of any pending Draw Down
Pricing Periods.  On or before any Trading Day that a Draw Down Notice
is delivered or notice of suspension of Draw Downs is delivered, the Company
shall have filed with the Commission a prospectus supplement pursuant to Rule
424 under the Securities Act setting forth the terms of the Draw Down Notice or
suspension notice.

     

    (f) On the
Trading Day immediately following the last day of the Settlement Period, the
Company shall deliver and the Purchaser shall acknowledge a settlement statement
(the “Settlement
Statement”) setting forth the number of Draw Down Shares issuable and the
aggregate Purchase Price as to such Settlement Period.  On the
Settlement Date as to such Draw Down, the Draw Down Shares purchased pursuant to
such Settlement Statement shall be delivered to the Depository Trust Company
(“DTC”) account
of the Purchaser, or its designees, as designated by the Purchaser in the
Settlement Statement, via DTC’s Deposit Withdrawal Agent Commission system
(“DWAC”).  Upon
the Company electronically delivering such Draw Down Shares to the DTC account
of the Purchaser, or its designees, via DWAC by 1:00 p.m. ET, the Purchaser
shall, on the same day (or the next Business Day if such day is not a Business
Day) wire transfer immediately available funds to the Company’s bank account, as
designated by the Company in the Settlement Statement, for the amount of the
aggregate Purchase Price of such Draw Down Shares. Upon the Company
electronically delivering the Draw Down Shares to the Purchaser or its
designee’s DTC account via DWAC after 1:00 p.m. ET, the Purchaser shall wire
transfer next day available funds to the Company’s designated account on such
day.

     

    (g) The
Company understands that a delay in the delivery of the Shares to the Purchaser
beyond the Settlement Date could result in economic loss to the
Purchaser.  In addition to the Purchaser’s other available remedies,
the Company shall pay to the Purchaser, in cash, as partial liquidated damages
and not as a penalty, for each $1,000 of Shares (based on the Closing Price of
the Common Stock on the applicable Settlement Date) required to be delivered on
the Settlement Date, $10 per Trading Day (increasing to $20 per Trading Day five
(5) Trading Days after such damages have begun to accrue) for each Trading Day
after the Settlement Date until such Shares are delivered pursuant to this
Article VI.  Nothing herein shall limit the Purchaser’s right to
pursue actual damages for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, including
but not limited to the cost of any buy-in to the Purchaser, and the Purchaser
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    ARTICLE
VII.

    TERMINATION

     

    7.1 Term.  The
term of this Agreement shall begin on the date hereof and shall end 24 months
from the date hereof or as otherwise set forth in Section 7.2.

     

    7.2 Other
Termination. 

     

    (a) This
Agreement shall terminate (i) if the Common Stock is de-listed from the Trading
Market unless such de-listing is in connection with a subsequent listing on
another Trading Market, (ii) if the Company files for protection from creditors
under any applicable law, (iii) if the Company withdraws the Registration
Statement or (iv) upon the written mutual consent of the parties
hereto.

     

    (b) The
Company may terminate this Agreement upon 5 Trading Day’s notice if the
Purchaser shall fail to fund a properly noticed Draw Down within 5 Trading Days
of the end of the applicable Settlement Period.

     

    (c) This
Agreement shall automatically terminate upon the date that the entire Commitment
Amount has been drawn down.

     

    (d) This
Agreement may be terminated by the Company in its sole discretion, subject to
the minimum Draw Down described in Section 4.13 hereof, upon five (5) Business
Days’ notice, provided that such termination shall not occur during a Draw Down
Pricing Period or prior to a Settlement Date.

     

    7.3 Effect of
Termination.

     

    In the
event of termination of this Agreement pursuant to Section 7.2 herein, written
notice thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated without further action by
either party.  If this Agreement is terminated as provided in Section
7.1 or 7.2 herein, this Agreement shall become void and of no further force and
effect, except for Section 4.7 and Article 8 herein and any payments due and
owing to the Company hereunder, which shall survive the termination of this
Agreement.  Nothing in this Section 7.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights of the Company or the Purchaser to compel specific
performance by the other party of its obligations under this
Agreement.

    


    


    ARTICLE
VIII.

    MISCELLANEOUS

    


    8.1 Fees and
Expenses.  At the Initial Closing, the Company has agreed to
reimburse the Purchaser for its legal fees and expenses, $10,000 of which was
paid prior to the Initial Closing; provided, however, if such
legal fees and expenses exceed $10,000, the Purchaser shall have received the
consent of the Company with respect to any reimbursement.  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 

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
transfer agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchaser.

     

    8.2 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.

     

    8.3 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 transmission 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.

     

    8.4 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 the Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waived provision is sought.  No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such
right.

     

    8.5 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.

     

    8.6 Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors.  Neither party may assign
this Agreement or any rights or obligations hereunder (other than by
merger).

     

    8.7 No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.7.

     

    8.8 Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the


    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
law.  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
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.

     

    8.9 Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities.

     

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

     

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

     

    8.12 Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu 

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction.  The applicant for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs (including
providing customary indemnity) associated with the issuance of such replacement
Securities.

     

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

     

    8.14 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.

     

    8.15 Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction
Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.

     

    (Signature
Pages Follow)

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    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.

     

    


    
      	
              MEDIS
      TECHNOLOGIES LTD.

               

               

               

            	
              Address
      for Notice:

              805
      Third Avenue

              New
      York, New York 10022

              Facsimile:
      (212) 935-9216

            
	
              By: 
      /s/ Jose Mejia

              

                
      

              Name:
      Jose Mejia

              Title:
      President and CEO

               

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

               

              Herrick,
      Feinstein LLP

              2
      Park Avenue

              New
      York, New York 10016

              Attention:
      Stephen E. Fox, Esq.

              Facsimile:
      (212) 545-3476

               

               

            	 
      


    

    


    


    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    [PURCHASER
SIGNATURE PAGES TO MDTL SECURITIES PURCHASE AGREEMENT]

    


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

    
    

     

    
      	

              Name
      of Purchaser:  Ascendiant Capital Group, LLC

              

                
      

              Signature of Authorized
      Signatory of Purchaser:  /s/ Mark Bergendahl

              

                
      

              Name
      of Authorized Signatory:  Mark Bergendahl

              

                
      

              Title
      of Authorized Signatory:   Managing Director

              

                
      

              Email
      Address of Purchaser:  mbergendahl@ascendiant.com

              

                
      

              Fax
      Number of Purchaser:  (949) 756-1090

              

                
      

              Address
      for Notice of Purchaser:  18881 Von Karman, Ste. 1600, Irvine,
      CA 92612

              
                
      

            	 


    

    
 

    


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

    


    


    


    


    


    Commitment
Amount:

    Shares:

    


    


    [SIGNATURE
PAGES CONTINUE]

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    


     

    EXHIBIT
B

     

    DRAW
DOWN NOTICE/COMPLIANCE CERTIFICATE

     

    MEDIS
TECHNOLOGIES LTD.

     

    The
undersigned hereby certifies, with respect to shares of Common Stock of Medis
Technologies Ltd. (the “Company”) issuable in
connection with this Draw Down Notice and Compliance Certificate dated
_____________ (the “Notice”), delivered
pursuant to the Securities Purchase Agreement dated as of ______, 2009 (the
“Agreement”),
as follows:

    


    1.           The
undersigned is the duly appointed Chief Executive Officer or Chief Financial
Officer of the Company.

     

     

    2.           Except
as set forth on the schedules attached hereto or in the SEC Reports (as defined
in the Agreement), the representations and warranties of the Company set forth
in the Agreement are true and correct in all material respects as though made on
and as of the date hereof, except for representations and warranties expressly
made as of a particular date.

     

    3.           The
Company has performed in all material respects all covenants and agreements and
conditions required under the Agreement to be performed by the Company on or
prior to the date of this Draw Down Notice.

     

    4.           The
Investment Amount is $___________.

     

    5.           Draw
Downs shall commence on ____________ and end after [check one]:

     

    a.           ______
the completion of ___ Draw Down Pricing Periods.

     

    b.           ______
until written notice to you that Draw Downs have been suspended provided that no
pending Draw Down may be suspended.

     

    6.           The
Threshold Price for purposes of this Draw Down is $_____.

     

    The
undersigned has executed this Certificate this ____ day of ________,
_____.

     

     

    


    
      
        	 	
                MEDIS
      TECHNOLOGIES LTD.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 


      

    

     

    
 

    
      
        
        

      

      
        31