Unassociated Document


    
       

      
         EXHIBIT
10.1

      

       

      
        SECURITIES
PURCHASE AGREEMENT

      

       

      This
Securities Purchase Agreement (this “Agreement”) is dated
as of February 26, 2009, between Akeena Solar, Inc., a Delaware corporation (the
“Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively the “Purchasers”).

       

      WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the “Securities
Act”), the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company,
securities of the Company as more fully described in this
Agreement.

       

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

       

      ARTICLE
I.

      DEFINITIONS

       

      1.1           Definitions.  In
addition to the terms defined elsewhere in this Agreement, (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Certificate of Designation (as defined herein) and (b) the following terms
have the meanings set forth in this Section 1.1:

       

      “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.

       

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

       

      “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person as such terms are
used in and construed under Rule 405 under the Securities Act.

       

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

       

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

       

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


      
        
           


        

        
          1

          
            

          

        

        
           


        

      


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

       

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

       

      “Closing Price” means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 p.m. (New York City time)), (b) if there is no such price on such date,
then the closing bid price on the Trading Market on the date nearest preceding
such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or
(c)  if the shares of Common Stock are not then publicly traded the fair
market value as of such date of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchasers of a majority in
interest of the Shares then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the
Company.

       

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

       

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

       

      “Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed.

       

      “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 DLA Piper LLP (US), with offices located at 2000 University Avenue, East
Palo Alto, CA 94301.

       

      “Conversion Price”
shall have the meaning ascribed to such term in the Certificate of
Designation.

       

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

       

      “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.


      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an asset in a business
synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities.

       

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

       

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

       

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

       

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

       

      “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).

       

      “Participation
Maximum” shall have the meaning ascribed to such term in Section
4.11(a).

       

       “Per Share Purchase
Price” equals $1.12, 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.


      
        
           


        

        
          3

          
            

          

        

        
           


        

      


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

       

      “Preferred Stock”
means the up to 2,000 shares of the Company’s 0% Series A Convertible Preferred
Stock issued hereunder having the rights, preferences and privileges set forth
in the Certificate of Designation, in the form of Exhibit A
hereto.

       

      “Pre-Notice” shall
have the meaning ascribed to such term in Section 4.11(b).

       

      “Pro Rata Portion”
shall have the meaning ascribed to such term in Section 4.11(e).

       

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

       

      “Prospectus” means the
final prospectus filed for the Registration Statement.

       

      “Prospectus
Supplement” means the supplement to the Prospectus complying with Rule
424(b) of the Securities Act that is filed with the Commission and delivered by
the Company to each Purchaser at the Closing.

       

      “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.

       

      “Registration
Statement” means the effective registration statement with Commission
file No. 333-156603 which registers the sale to the Purchasers of the shares of
Preferred Stock, the Shares, the Warrants and the Underlying
Shares.

       

      “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 or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

       

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

       

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


      
        
           


        

        
          4

          
            

          

        

        
           


        

      


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

       

      “Series E Warrants”
means, collectively, the Series E Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Series E Warrants shall be exercisable starting on the date which is six months
after the Closing Date, and have a term of exercise equal to seven years from
such Initial Exercise Date and exercise price equal to $1.34, subject to
adjustment as provided therein, in the form of Exhibit B attached
hereto.

       

      “Series F Warrants”
means, collectively, the Series F Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Series F Warrants shall be exercisable immediately and have a term of exercise
equal to 150 Trading Days from such Initial Exercise Date and an exercise price
equal to $1.12, subject to adjustment as provided therein, in the form of Exhibit B attached
hereto.

       

      “Series G Warrants”
means, collectively, the callable Series G Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Series G Warrants shall be exercisable immediately and have a term
of exercise equal to 67 Trading Days from such Initial Exercise Date and an
exercise price equal to $1.12, subject to adjustment as provided therein, in the
form of Exhibit
B attached hereto.

       

       “Shares” means the
shares of Common Stock issued or issuable to each Purchaser pursuant to this
Agreement.

       

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

       

      “Stated Value” means
$1,000 per share of Preferred Stock.

       

      “Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for the Preferred
Stock, the Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds.

       

      “Subsequent Financing”
shall have the meaning ascribed to such term in Section 4.11(a).

       

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

       

       “Subsidiary” means any
subsidiary of the Company as set forth on Exhibit 21.1 to the Company’s Annual
Report on Form 10-KSB for the year ended December 31, 2007 and shall, where
applicable, also include any direct or indirect subsidiary of the Company formed
or acquired after the date hereof.


      
        
           


        

        
          5

          
            

          

        

        
           


        

      


      “Trading Day” means a
day on which the principal Trading Market is open for trading.

       

       “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the NYSE Alternext, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or
the New York Stock Exchange (or any successors to any of the
foregoing).

       

      “Transaction
Documents” means this Agreement, the Certificate of Designation, the
Warrants, all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.

       

      “Transfer Agent” means
Empire Stock Transfer, Inc., the current transfer agent of the Company, with a
mailing address of 2470 Saint Rose Pkwy, Suite 304, Henderson, NV 89074, and a
facsimile number of _______________, and any successor transfer agent of the
Company.

       

      “Underlying Shares”
means the shares of Common Stock issued and issuable upon conversion or
redemption of the Preferred Stock and upon exercise of the
Warrants.

       

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

       

       “Warrants” means the
Series A Warrants and the Series B Warrants.

       

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

       

      ARTICLE
II.

      PURCHASE
AND SALE

       

      2.1           Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
the Company agrees to sell, and the Purchasers, severally and not jointly, agree
to purchase, an aggregate of up to $2,000,000 of Shares, Warrants and shares of
Preferred Stock with an aggregate Stated Value for each Purchaser equal to such
Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser.  The aggregate number of shares of
Preferred Stock sold hereunder shall be up to 2,000. Each Purchaser shall
deliver to the Company, via wire transfer or a certified check of immediately
available funds equal to such Purchaser’s Subscription Amount as set forth on
the signature page hereto executed by such Purchaser and the Company shall
deliver to each Purchaser its respective shares of Preferred Stock, Shares and
three Warrants as determined pursuant to Section 2.2(a), and the Company and
each Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of FWS or such other location as the parties shall mutually
agree.


      
        
           


        

        
          6

          
            

          

        

        
           


        

      


      2.2          Deliveries.

       

      (a)           On
or prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:

       

      (i)           this
Agreement duly executed by the Company;

       

      (ii)          a
legal opinion of Company Counsel, substantially in the form of Exhibit C attached
hereto;

       

      (iii)         a
certificate evidencing a number of shares of Preferred Stock equal to such
Purchaser’s Subscription Amount divided by the Stated Value, registered in the
name of such Purchaser and evidence of the filing and acceptance of the
Certificate of Designation from the Secretary of State of Delaware, with the
total of all such certificates evidencing 2,000 shares of Preferred Stock which
are convertible into a maximum aggregate of 539,867 shares of Common Stock to
all Purchasers;

       

      (iv)         a
copy of the irrevocable instructions to the Company’s transfer agent instructing
the transfer agent to deliver via the Depository Trust Company Deposit
Withdrawal Agent Commission System (“DWAC”) Shares equal
to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser, for an aggregate of 1,785,714 shares
of Common Stock;

       

      (v)          a
Series E Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 75% of such Purchaser’s Subscription
Amount divided by $1.12, subject to adjustment as provided therein, for an
aggregate of 1,339,285 shares of Common Stock to all Purchasers;

       

      (vi)         a
Series F Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 270 shares for each share of Preferred
Stock issued to such Purchaser, subject to adjustment provided therein, for an
aggregate of 540,000 shares of Common Stock to all Purchasers;

       

      (vii)        a
Series G Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to  such Purchaser’s
Subscription Amount multiplied by 1.0982 subject to adjustment provided therein,
for an aggregate of 2,196,400 shares of Common Stock to all Purchasers;
and

       

      (viii)       the
Prospectus and Prospectus Supplement (which may be delivered in accordance with
Rule 172 under the Securities Act).


      
        
           


        

        
          7

          
            

          

        

        
           


        

      


      (b)           On
or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

       

      (i)           this
Agreement duly executed by such Purchaser; and

       

      (ii)          such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company.

       

      2.3           Closing
Conditions.

       

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

       

      (i)           the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a specific date
therein);

       

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

       

      (iii)         the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.

       

      (b)           The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

       

      (i)           the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein);

       

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

       

      (iii)         the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

       

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

       

      (v)          from
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.


      
        
           


        

        
          8

          
            

          

        

        
           


        

      


      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES

       

      3.1          
Representations and
Warranties of the Company.  Except as set forth in the
Registration Statement (including any SEC Reports incorporated by reference
therein), or in the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation or warranty otherwise
made herein to the extent of the disclosure contained in the corresponding
section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to each Purchaser:

       

      (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Exhibit
21.1 to the Company’s Annual Report on Form 10-KSB for the year ended December
31, 2007.  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

       

      (b)     Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, 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 nor
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.


      
        
           


        

        
          9

          
            

          

        

        
           


        

      


      (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

       

      (d)           No
Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the transactions contemplated hereby and thereby
to which it is a party do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.


      
        
           


        

        
          10

          
            

          

        

        
           


        

      


      (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii)
the filing with the Commission of the Prospectus Supplement, (iii)
application(s) to each applicable Trading Market for the issuance and sale of
the Securities and the listing of the Underlying Shares for trading thereon in
the time and manner required thereby and (iv) such filings as are required to be
made under applicable state securities laws (collectively, the “Required
Approvals”).

       

      (f)           Issuance of the Securities;
Registration.  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.  The Underlying Shares, when issued
in accordance with the terms of the Preferred Stock and Warrants, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants. The Company has prepared and filed
the Registration Statement in conformity with the requirements of the Securities
Act, which Registration Statement became effective on January 30, 2009 (the
“Effective
Date”), including the Prospectus, and such amendments and supplements
thereto as may have been required to the date of this Agreement.  The
Registration Statement is effective under the Securities Act and no stop order
preventing or suspending the effectiveness of the Registration Statement or
suspending or preventing the use of the Prospectus has been issued by the
Commission and no proceedings for that purpose have been instituted or, to the
knowledge of the Company, are threatened by the Commission.  The
Company, if required by the rules and regulations of the Commission, proposes to
file the Prospectus, with the Commission pursuant to Rule 424(b).  At
the time the Registration Statement and any amendments thereto became effective,
at the date of this Agreement and at the Closing Date, the Registration
Statement and any amendments thereto conformed and will conform in all material
respects to the requirements of the Securities Act and did not and 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
not misleading; and the Prospectus and any amendments or supplements thereto, at
time the Prospectus or any amendment or supplement thereto was issued and at the
Closing Date, conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.


      
        
           


        

        
          11

          
            

          

        

        
           


        

      


      (g)           Capitalization.  The
capitalization of the Company is as set forth in the Registration Statement or
Prospectus Supplement.  The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other than
pursuant to the exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees pursuant to
the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the
most recently filed periodic report under the Exchange Act.  No Person
has any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Transaction
Documents.  Except as a result of the purchase and sale of the
Securities, and except as disclosed or described in the Registration Statement
(including in the SEC Reports incorporated therein) and for stock options and
other equity grants to employees made under the Company’s existing stock plans,
there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents.  Except for outstanding warrants
disclosed or described in the Registration Statement (including in any SEC
Reports incorporated therein), the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities.  No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities.  There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

       

      (h)           SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, together with the Prospectus and the
Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Company has never been an issuer subject to Rule 144(i) under
the Securities Act. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing.  Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods
indicated therein, subject, in the case of unaudited statements, to normal,
year-end audit adjustments.


      
        
           


        

        
          12

          
            

          

        

        
           


        

      

    

     

     (i)           Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof or otherwise disclosed to the Purchasers, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.  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), or as disclosed or
described in the Current Report on Form 8-K to be made by the Company prior to
the opening of the Trading Day on the date hereof, no event, liability, fact,
circumstance, occurrence or development has occurred or exists or is reasonably
expected to occur or exist with respect to the Company or its Subsidiaries or
their respective business, prospects, properties, operations, assets or
financial condition that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made or deemed
made that has not been publicly disclosed at least 1 Trading Day prior to the
date that this representation is made.

     

    (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
director or officer of the Company.  The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

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

     

    (l)           Compliance.  Except
with regard to non-compliance with financial covenants in the credit facility
provided to the Company by Comerica Bank, 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 judgment, decree or order of any court,
arbitrator or governmental body or (iii) is or has been in violation of any
statute, rule, ordinance or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws applicable to its
business and all such laws that affect the environment, except in each case as
could not have or reasonably be expected to result in a Material Adverse
Effect.

     

    (m)           Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (o)           Patents and
Trademarks.  To its knowledge, 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 any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person.  To the knowledge of the Company, all Intellectual
Property Rights that it owns or has rights to 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 their
intellectual property that consist of trade secrets, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

     

    (t)           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 an “investment company” subject to registration under the
Investment Company Act of 1940, as amended.

     

    (u)           Registration
Rights.  Other than rights which have expired or as to which
the Company has previously filed effective registration statements, no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (v)           Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  Except as disclosed in the SEC
Reports, the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance
requirements.

     

    (w)           Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

     

    (x)           Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information which is not otherwise
disclosed in the Prospectus Supplement.   The Company understands
and confirms that the Purchasers will rely on the foregoing representation in
effecting transactions in securities of the Company.  All of the
disclosure furnished by or on behalf of the Company to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, is true and correct in all material
respects and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not
misleading.  The 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.

     

    (y)           No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
any applicable shareholder approval provisions of any Trading Market on which
any of the securities of the Company are listed or designated.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (z)           Solvency.  Except
as set forth in the Prospectus Supplement, the Company has no knowledge of any
facts or circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date.  The SEC Reports
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments.  For the purposes of this Agreement,
“Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary course of
business), (y) all guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (z) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     

    (aa)           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.

     

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

     

    (cc)           Accountants.  The
Company’s accounting firm is set forth in the SEC Reports.  To the
knowledge and belief of the Company, such accounting firm (i) is a registered
public accounting firm as required by the Exchange Act and (ii) shall express
its opinion with respect to the financial statements to be included in the
Company’s Annual Report for the year ended December 31, 2008.

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (ee)           Acknowledgement Regarding
Purchaser’s Trading Activity.  Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(e) and 4.14
hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) past or future
open market or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities; (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) each Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and
acknowledges that (y) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing stockholders'
equity interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

     

    (ff)           Regulation M
Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

     

    3.2           Representations and
Warranties of the Purchasers.  Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a specific date
therein):

     

    (a)           Organization;
Authority.  Such Purchaser is either an individual or 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
this Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate, partnership, limited liability company or
similar action, as applicable, on the part of such Purchaser.  Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (b)           Own
Account.  Such Purchaser is acquiring the Securities as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing
any of such Securities in violation of the Securities Act or any applicable
state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of such
Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such Purchaser’s right to
sell the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws).  Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business.

     

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

     

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

     

    (e)           Certain Transactions and
Confidentiality.  Other than consummating the transactions
contemplated hereunder, such Purchaser has not, nor has any Person acting on
behalf of or pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that such
Purchaser first received a term sheet (written or oral) as of the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar transactions in the
future.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    The
Company acknowledges and agrees that the representations contained in Section
3.2 shall not modify, amend or affect such Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated
hereby.

     

    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1           Underlying
Shares.  If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the issuance or
resale of the Warrant Shares, if the Warrant is exercised via cashless exercise,
or if the shares of Preferred Stock are converted at any time after the date
hereof, the Underlying Shares issued pursuant to any such exercise or conversion
shall be issued free of all legends.  If at any time following the
date hereof the Registration Statement (or any subsequent registration statement
registering the sale or resale of the Warrant Shares) is not effective or is not
otherwise available for the sale or resale of the Warrant Shares, the Company
shall immediately notify the holders of the Warrants in writing that such
registration statement is not then effective and thereafter shall promptly
notify such holders when the registration statement is effective again and
available for the sale or resale of the Warrant Shares (it being understood and
agreed that the foregoing shall not limit the ability of the Company to issue,
or any Purchaser to sell, any of the Warrant Shares in compliance with
applicable federal and state securities laws).  The Company shall use
best efforts to keep a registration statement (including the Registration
Statement) registering the issuance or resale of the Warrant Shares effective
during the term of the Warrants. Upon a cashless exercise of a Warrant, the
holding period for purposes of Rule 144 shall tack back to the original date of
issuance of such Warrant.

     

    4.2           Furnishing of
Information.  Until the earliest of the time that (i) no
Purchaser owns Securities or (ii) the Warrants have expired, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange
Act.  As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the
Securities, including without limitation, under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act,
including without limitation, within the requirements of the exemption provided
by Rule 144.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    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. (New York City
time) on the Trading Day immediately following the date hereof, file a Current
Report on Form 8-K disclosing the material terms of the transactions
contemplated hereby, and including the Transaction Documents as exhibits
thereto.  From and after the issuance of such press release, the
Company shall have publicly disclosed all material, non-public information
delivered to any of the Purchasers by the Company or any of its subsidiaries, or
any of their respective officers, directors, employees or agents in connection
with the transactions contemplated by the Transaction Documents.  The
Company and each Purchaser shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release nor otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent of
each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or
communication.  Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except (a) as
required by federal securities law in connection with the filing of final
Transaction Documents (including signature pages thereto) with the Commission
and (b) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause (b).

     

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

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    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 any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such
information.  The Company understands and confirms that each Purchaser
shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.

     

    4.7           Use of
Proceeds.  Except as set forth on Schedule 4.7 attached
hereto or in the Registration Statement, the Company shall use the net proceeds
from the sale of the Securities hereunder for working capital purposes and shall
not use such proceeds for: (a) the satisfaction of any portion of the Company’s
debt (other than payment of trade payables in the ordinary course of the
Company’s business and prior practices), (b) the redemption of any Common Stock
or Common Stock Equivalents or (c) the settlement of any outstanding
litigation.

     

    4.8           Indemnification of
Purchasers.   Subject to the provisions of this Section
4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling 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 such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by such Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party, in
which case the Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel.  The Company will not be
liable to any Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    4.9           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 all of the Underlying Shares.

     

    4.10           Listing of Common
Stock. The Company hereby agrees to use all commercially reasonable
efforts to maintain the listing or quotation of the Common Stock on the Trading
Market on which it is currently listed, and concurrently with the Closing, the
Company shall apply to list or quote all of the Shares and Underling Shares on
such Trading Market and promptly secure the listing of all of the Shares and
Underlying Shares on such Trading Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market, it
will then include in such application all of the Shares and Underlying Shares,
and will take such other action as is necessary to cause all of the Shares and
Underlying Shares to be listed or quoted on such other Trading Market as
promptly as possible.  The Company will then 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.

     

    4.11           Participation in Future
Financing.

     

    (a)           From
the date hereof until the date that is the 12 month anniversary of the Closing
Date, upon any issuance by the Company or any of its Subsidiaries of Common
Stock or Common Stock Equivalents for cash consideration, Indebtedness (other
than with a licensed commercial lender) (or a combination of units hereof) (a
“Subsequent
Financing”), the Purchasers shall have, collectively, the right to
participate in up to an amount of the Subsequent Financing equal to the greater
of (i) $2,000,000 and (ii) 20% of the Subsequent Financing (the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing, unless the Subsequent Financing is a registered public
offering, in which case the Company shall offer each Purchaser the right to
participate in such public offering when it is lawful for the Company to do so,
but no Purchaser shall be entitled to purchase any particular amount of such
public offering. 

     

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

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

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

     

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

     

    (e)           If
by 5:30 p.m. (New York City time) on the fifth (5th)
Trading Day after all of the Purchasers have received the Pre-Notice, the
Company receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the Participation Maximum,
each such Purchaser shall have the right to purchase its Pro Rata Portion (as
defined below) of the Participation Maximum.  “Pro Rata Portion”
means the ratio of (x) the Subscription Amount of Securities purchased on the
Closing Date by a Purchaser participating under this Section 4.11 and (y) the
sum of the aggregate Subscription Amounts of Securities purchased on the Closing
Date by all Purchasers participating under this Section 4.11.

     

    (f)           The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in
this Section 4.11, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 30 Trading Days after the date of the
initial Subsequent Financing Notice.

     

    (g)           Notwithstanding
the foregoing, this Section 4.11 shall not apply in respect of (i) an Exempt Issuance or (ii) an underwritten public offering of Common
Stock.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    4.12        Subsequent Equity
Sales.

     

    (a)           From
the date hereof until 30 Trading Days after the Closing Date, neither the
Company nor any Subsidiary shall sell, offer for sale or solicit offers to buy
or otherwise negotiate, issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents; provided, however, that the 30
Trading Day period set forth in this Section 4.12 shall be extended ratably for
up to an additional 45 Trading Days in the event that a Purchaser exercises the
Series G Warrant (whether voluntarily or pursuant to the Company put provision
under Section 2(f) therein) such that, upon the Series G Warrants being
exercised in full, then this restriction shall be extended by the full 45 days
and if such Warrant has been exercised in part, then such extension shall be
extended ratably in proportion to the amount exercised; provided, further,
during the additional 45 Trading Day period, the Company shall have the right to
issue shares of Common Stock to management and their family at the greater of
the then market price and the Per Share Purchase Price provided that the net
proceeds raised shall not exceed, in the aggregate during such period,
$540,000.

     

    (b)           From
the date hereof until after the 180th day
following the date hereof, the Company shall be prohibited from effecting or
entering into an agreement to effect any issuance by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration
(or a combination of units hereof) involving a Variable Rate
Transaction.  “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock or (ii) enters into any agreement, including, but
not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.  Any Purchaser shall be
entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.

     

    (c)           Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.

     

    4.13        Equal Treatment of
Purchasers.  No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents.  For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.


    
      
         


      

      
        26

        
          

        

      

      
         


      

    


    4.14        Certain Transactions and
Confidentiality. Each Purchaser, severally and not jointly with the other
Purchasers, covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or sales,
including Short Sales of any of the Company’s securities during the period
commencing with the execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4.  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as described in
Section 4.4, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction and the information included in the Transaction
Documents and the Disclosure Schedules.  Notwithstanding the foregoing and
notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in effecting
transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable securities laws from
and after the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in
Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality to the
Company or its Subsidiaries after the issuance of the initial press release as
described in Section 4.4.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.

     

    4.15        Delivery of Warrants After
Closing.  The Company shall deliver, or cause to be delivered,
the respective Warrant certificates purchased by each Purchaser to such
Purchaser within 3 Trading Days of the Closing Date.

     

    4.16        Capital
Changes.  Until the date that is 90 days after the Closing
Date, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in interest of the Shares and shares of Preferred
Stock.

     

    4.17        Management Lock-Up.
The Company hereby agrees that, from the date hereof until the 90th day
following the date hereof (such period, the “Restriction Period”),
no member of the Board of Directors and no officer of the Company (such group,
the “Management”) will
offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or
enter into any transaction which is designed to, or might reasonably be expected
to, result in the disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) by such Management or
any Affiliate of such Management or any person in privity with such Management
or any Affiliate of such Management), directly or indirectly, including the
filing (or participation in the filing) of a registration statement with the
Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Exchange Act with respect to, any shares of Common Stock or Common
Stock Equivalents beneficially owned, held or hereafter acquired by such
Management.  Beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act.  In order to enforce this
covenant, promptly upon the written request of a Purchaser, the Company shall
impose irrevocable stop-transfer instructions preventing the Transfer Agent from
effecting any actions in violation of this Section 4.17.  The Company
hereby acknowledges that the enforcement of this Section 4.17 is a material
inducement to each Purchaser to complete the transactions contemplated by this
Agreement and that each Purchaser and the Company shall be entitled to specific
performance of the obligations pursuant to this Section 4.17.


    
      
         


      

      
        27

        
          

        

      

      
         


      

    

     

    ARTICLE
V.

    MISCELLANEOUS

     

    5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before February ___,
2009; provided,
however, that
no such termination will affect the right of any party to sue for any breach by
the other party (or parties).

     

    5.2           Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
Alpha Capital (“Alpha”) the
non-accountable sum of $50,000 for its legal fees and expenses, $10,000 of which
has been paid prior to the Closing.  The Company shall deliver to each
Purchaser, prior to the Closing, a completed and executed copy of the Closing
Statement, attached hereto as Annex
A.  Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

     

    5.3           Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.

     

    5.4           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.


    
      
         


      

      
        28

        
          

        

      

      
         


      

    


    5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least 67% in
interest of the Securities then outstanding or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

     

    5.6           Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

     

    5.7           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser (other
than by merger).  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided that such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers.”

     

    5.8           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.8.

     

    5.9           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.  If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.8, 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.


    
      
         


      

      
        29

        
          

        

      

      
         


      

    

     

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

     

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

     

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

     

    5.13        Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, that in the
case of a rescission of a conversion of the Preferred Stock or an exercise of a
Warrant, the applicable Purchaser shall be required to return any shares of
Common Stock subject to any such rescinded conversion or exercise notice
concurrently with the return to such Purchaser of the aggregate exercise price
paid to the Company for such shares and the restoration of such Purchaser’s
right to acquire such shares pursuant to such Purchaser’s Warrant (including,
issuance of a replacement warrant certificate evidencing such restored
right).

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    5.14        Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.


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

     

    5.16        Payment Set
Aside.  To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     

    5.17        Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser shall be entitled to
independently protect and enforce its rights including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.  For reasons of
administrative convenience only, each Purchaser and its respective counsel have
chosen to communicate with the Company through FWS.  FWS does not
represent any of the Purchasers and only represents Alpha.  The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers.

     

    5.18        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.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

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

     

    5.20        Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. 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.

     

    5.21        WAIVER OF
JURY TRIAL.  IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

     

    (Signature
Pages Follow)


    
      
         


      

      
        32

        
          

        

      

      
         


      

    


    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.

    


    
      
        
          
            
              	
                      AKEENA
      SOLAR, INC.

                    	
                       

                    	Address for Notice:
	 	 	 
	
                      By:

                    	 
      	 
      	
                      Fax:

                    
	 
      	
                      Name:

                      Title:

                    	 
      	
                       

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

                    	 
      	 
      


            

          

        

      

    

    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]


    
      
         


      

      
        33

        
          

        

      

      
         


      

    


    [PURCHASER
SIGNATURE PAGES TO AKNS SECURITIES PURCHASE AGREEMENT]

    


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

     

    Name of
Purchaser:
________________________________________________________________

     

    Signature of Authorized Signatory of
Purchaser: _________________________________________

     

    Name of
Authorized Signatory:
_______________________________________________________

     

    Title of
Authorized Signatory:
________________________________________________________

     

    Email
Address of Authorized
Signatory:_________________________________________________

     

    Facsimile
Number of Authorized Signatory:
__________________________________________________

     

    Address
for Notice of Purchaser:

     

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

    


    Subscription
Amount: $_________________

    


    Shares of
Common Stock: _________________

    


    Shares of
Preferred Stock: _________________

    


    Series A
Warrant Shares: __________________

    


    Series B
Warrant Shares: __________________

    


    EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

    


    [SIGNATURE
PAGES CONTINUE]


    
      
         


      

      
        34

        
          

        

      

      
         


      

    

    
       

      Annex
A

      


      CLOSING
STATEMENT

      


      Pursuant
to the attached Securities Purchase Agreement, dated as of the date hereto, the
purchasers shall purchase up to $2,000,000 of Common Stock and Warrants from
Akeena Solar, Inc., a Delaware corporation (the “Company”).  All
funds will be wired into an account maintained by the Company.  All
funds will be disbursed in accordance with this Closing Statement.

      


      
        Disbursement Date:February
___, 2009 

         

        
          

        

      

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	
                                                  I.   PURCHASE
      PRICE

                                                	 	 	 
	 	 	 	 
	
                                                  Gross
      Proceeds to be Received

                                                	 	$	2,000,000	 
	 
      	 	 	 	 
	
                                                  II. 
      DISBURSEMENTS

                                                	 	 	 	 
	 	 	 	 	 
	 
      	 	$	 	 
	 
      	 	$	 	 
	 
      	 	$	 	 
	 
      	 	$	 	 
	 
      	 	$	 	 
	 
      	 	 	 	 
	
                                                  Total
      Amount Disbursed:

                                                	 	$	 	 


                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        


        WIRE
INSTRUCTIONS:

        


        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    To:

                                  	 
      
	 	 
	
                                    To:

                                  	 
      


                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
          
          

        

        
          35