Exhibit 10.65


    

      EXHIBIT
        10.65

       

      SECURITIES
        PURCHASE AGREEMENT

       

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of November 23, 2005, among Xfone, Inc., a Nevada corporation (the
        “Company”),
        and
        each purchaser identified on the signature pages hereto (each, including
        its
        successors and assigns, a “Purchaser”
and
        collectively the “Purchasers”).

       

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

       

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

       

      ARTICLE
        I.
DEFINITIONS

       

      1.1  Definitions.
        In
        addition to the terms defined elsewhere in this Agreement, for all purposes
        of
        this Agreement, the following terms have the meanings indicated in this Section
        1.1:

       

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

       

      “Affiliate”
means
        any Person that, directly or indirectly through one or more intermediaries,
        controls or is controlled by or is under common control with a Person as
        such
        terms are used in and construed under Rule 144 under the Securities Act.
        With
        respect to a Purchaser, any investment fund or managed account that is managed
        on a discretionary basis by the same investment manager as such Purchaser
        will
        be deemed to be an Affiliate of such Purchaser.

       

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

       

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

       

      
        
          
          

        

        
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      “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 PM (New York time)), or (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 PM (New York time)), or (c)  if
        the Common Stock is not then listed or quoted on the Trading Market and if
        prices for the Common Stock are then reported in the “pink sheets” published by
        the National Quotation Bureau Incorporated (or a similar organization or
        agency
        succeeding to its functions of reporting prices), the most recent bid price
        per
        share of the Common Stock so reported, or (d) if the shares of Common Stock
        are not then publicly traded the fair market value of a share of Common Stock
        as
        determined by an appraiser selected in good faith by the Purchasers of a
        majority in interest of the Shares then outstanding.

       

      “Commission”
means
        the Securities and Exchange Commission.

       

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

       

      “Common
        Stock Equivalents”
means
        any securities of the Company 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.

       

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

       

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

       

      “Escrow
        Agent”
shall
        have the meaning set forth in the Escrow Agreement.

       

      “Escrow
        Agreement”
        shall
        mean the Escrow Agreement in substantially the form of Exhibit
        C
        hereto
        executed and delivered contemporaneously with this Agreement.

       

      “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.

      


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

       

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

       

      “Legend
        Removal Date”
shall
        have the meaning ascribed to such term in Section 4.1(c). 

       

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

       

      
        
          
          

        

        
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      “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).

       

      “Per
        Share Purchase Price”
equals
        $2.50, 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.

       

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

       

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

       

      “Purchaser
        Party”
shall
        have the meaning ascribed to such term in Section 4.9.

       

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

       

      “Registration
        Statement”
means
        a
        registration statement meeting the requirements set forth in the Registration
        Rights Agreement and covering the resale by the Purchasers of the Shares
        and the
        Warrant 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.

       

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

       

      “Securities”
means
        the Shares, the Warrants and the Warrant Shares.

       

      “Securities
        Act”
means
        the Securities Act of 1933, as amended.

       

      “Shareholder
        Approval”
means
        such approval as may be required by the applicable rules and regulations
        of the
        American Stock Exchange (or any successor entity) from the shareholders of
        the
        Company with respect to the transactions contemplated by the Transaction
        Documents, including issuance of shares of Common Stock.

       

      
        
          
          

        

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

       

      “Short
        Sales”
shall
        include all “short sales” as defined in Rule 200 of Regulation SHO under the
        Exchange Act. 

       

      “Subscription
        Amount”
means,
        as to each Purchaser, the aggregate amount to be paid for 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.

       

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

       

      “Trading
        Day”
means
        a
        day on which the Common Stock is traded on a Trading Market.

       

      “Trading
        Market”
means
        the following markets or exchanges on which the Common Stock is listed or
        quoted
        for trading on the date in question: the NASDAQ SmallCap Market, the American
        Stock Exchange, the New York Stock Exchange, the NASDAQ National Market or
        the
        OTC Bulletin Board.

       

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

       

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

       

      “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,
        concurrent with the execution and delivery of this Agreement by the parties
        hereto, the Company agrees to sell, and each Purchaser agrees to purchase,
        severally and not jointly, the Common Stock and the Warrants in an amount
        not to
        exceed 19.99% of the issued and outstanding Common Stock on the Closing Date.
        Each Purchaser shall deliver to the Company via wire transfer immediately
        available funds equal to their Subscription Amount and the Company shall
        deliver
        to each Purchaser their respective Shares and Warrants as determined pursuant
        to
        Section 2.2(a) and the other items set forth in Section 2.2 issuable at the
        Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and
        2.3,
        the Closing shall occur at the offices of the Escrow Agent, or such other
        location as the parties shall mutually agree.

       

      
        
          
          

        

        
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      2.2     
        Deliveries.

       

      (a)  On
        the
        Closing Date, the Company shall deliver or cause to be delivered to the Escrow
        Agent the following:

       

      (i)  this
        Agreement duly executed by the Company;

       

      (ii)  a
        certificate evidencing a number of Shares equal to such Purchaser’s Subscription
        Amount divided by the Per Share Purchase Price, registered in the name of
        such
        Purchaser;

       

      (iii)  a
        Warrant
        registered in the name of such Purchaser to purchase up to a number of shares
        of
        Common Stock equal to 25% of the number of Shares purchased by such Purchaser
        at
        the Closing, with an exercise price equal to $3.00, subject to adjustment
        therein;

       

      (iv)  a
        Warrant
        registered in the name of such Purchaser to purchase up to a number of shares
        of
        Common Stock equal to 25% of the number of Shares purchased by such Purchaser
        at
        the Closing, with an exercise price equal to $3.25, subject to adjustment
        therein;

       

      (v)  the
        Escrow Agreement duly executed by the Company; and

       

      (vi)  the
        Registration Rights Agreement duly executed by the Company.

       

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

       

      (i)  this
        Agreement duly executed by such Purchaser;

       

      (ii)  such
        Purchaser’s Accredited Investor Questionnaire in the form of Annex
        B
        attached
        to the Registration Rights Agreement;

       

      (iii)  such
        Purchaser’s Subscription Amount by wire transfer to the account of the Escrow
        Agent;

       

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

       

      (v)  the
        Registration Rights Agreement duly executed by such Purchaser.

       

      2.3  Closing
        Conditions. 

       

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

       

      (i)  the
        accuracy in all material respects when made and on the Closing Date of the
        representations and warranties of the Purchasers contained herein; 

       

      
        
          
          

        

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

       

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

       

      (b)  The
        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 on the Closing Date of the representations
        and
        warranties of the Company contained herein;

       

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

       

      (iii)  the
        delivery 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;

       

      (v)  either
        (1) Shareholder Approval shall have been obtained and deemed effective; or
        (2)
        the American Stock Exchange shall have approved in writing that the Closing
        may
        occur without Shareholder Approval; and

       

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

       

      
        
          
          

        

        
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      ARTICLE
        III.
REPRESENTATIONS
        AND WARRANTIES

       

      3.1  Representations
        and Warranties of the Company. Except
        as set forth under the corresponding section of the Disclosure Schedules
        which
        Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
        the
        representations and warranties set forth below to each Purchaser:

       

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

       

      (b)  Organization
        and Qualification.
        The
        Company and each of the Subsidiaries is an entity duly incorporated or otherwise
        organized, validly existing and in good standing under the laws of the
        jurisdiction of its incorporation or organization (as applicable), with the
        requisite power and authority to own and use its properties and assets and
        to
        carry on its business as currently conducted. Neither the Company nor any
        Subsidiary is in violation or default of any of the provisions of its respective
        certificate or articles of incorporation, bylaws or other organizational
        or
        charter documents. Each of the Company and the Subsidiaries is duly qualified
        to
        conduct business and is in good standing as a foreign corporation or other
        entity in each jurisdiction in which the nature of the business conducted
        or
        property owned by it makes such qualification necessary, except where the
        failure to be so qualified or in good standing, as the case may be, could
        not
        have or reasonably be expected to result in (i) a material adverse effect
        on the
        legality, validity or enforceability of any Transaction Document, (ii) a
        material adverse effect on the results of operations, assets, business or
        condition (financial or otherwise) of the Company and the Subsidiaries, taken
        as
        a whole, or (iii) a material adverse effect on the Company’s ability to perform
        in any material respect on a timely basis its obligations under any Transaction
        Document (any of (i), (ii) or (iii), a “Material
        Adverse Effect”)
        and no
        Proceeding has been instituted in any such jurisdiction revoking, limiting
        or
        curtailing or seeking to revoke, limit or curtail such power and authority
        or
        qualification.

       

      (c)  Authorization;
        Enforcement.
        The
        Company has the requisite corporate power and authority to enter into and
        to
        consummate the transactions contemplated by each of the Transaction Documents
        and otherwise to carry out its obligations hereunder and thereunder. The
        execution and delivery of each of the Transaction Documents by the Company
        and
        the consummation by it of the transactions contemplated thereby have been
        duly
        authorized by all necessary action on the part of the Company and no further
        action is required by the Company, its board of directors or its stockholders
        in
        connection therewith other than in connection with the Required Approvals.
        Each
        Transaction Document has been (or upon delivery will have been) duly executed
        by
        the Company and, when delivered in accordance with the terms hereof and thereof,
        will constitute the valid and binding obligation of the Company enforceable
        against the Company in accordance with its terms except (i) as limited by
        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.

       

      
        
          
          

        

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

       

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

       

      (f)  Issuance
        of the Securities.
        The
        Securities are duly authorized and, when issued and paid for in accordance
        with
        the applicable Transaction Documents, will be duly and validly issued, fully
        paid and nonassessable, free and clear of all Liens imposed by the Company
        other
        than restrictions on transfer provided for in the Transaction Documents.
        The
        Warrant Shares, when issued in accordance with the terms of the Transaction
        Documents, will be validly issued, fully paid and nonassessable, free and
        clear
        of all Liens imposed by the Company. The Company has reserved from its duly
        authorized capital stock the maximum number of shares of Common Stock issuable
        pursuant to this Agreement and the Warrants.

       

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

       

      
        
          
          

        

        
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      (h)  SEC
        Reports; Financial Statements.
        The
        Company has filed all reports, schedules, forms, statements and other documents
        required to be filed by it under the Securities Act and the Exchange Act,
        including pursuant to Section 13(a) or 15(d) thereof, for the two years
        preceding the date hereof (or such shorter period as the Company was required
        by
        law to file such material) (the foregoing materials, including the exhibits
        thereto and documents incorporated by reference therein, being collectively
        referred to herein as the “SEC
        Reports”)
        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 and the rules
        and
        regulations of the Commission promulgated thereunder, and none of the SEC
        Reports, when filed, contained any untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or necessary
        in
        order to make the statements therein, in the light of the circumstances under
        which they were made, not misleading. The financial statements of the Company
        included in the SEC Reports comply in all material respects with applicable
        accounting requirements and the rules and regulations of the Commission with
        respect thereto as in effect at the time of filing. Such financial statements
        have been prepared in accordance with United States generally accepted
        accounting principles applied on a consistent basis during the periods involved
        (“GAAP”),
        except as may be otherwise specified in such financial statements or the
        notes
        thereto and except that unaudited financial statements may not contain all
        footnotes required by GAAP, and fairly present in all material respects the
        financial position of the Company and its consolidated subsidiaries as of
        and
        for the dates thereof and the results of operations and cash flows for the
        periods then ended, subject, in the case of unaudited statements, to normal,
        immaterial, year-end audit adjustments.

       

      (i)  Material
        Changes.
        Since
        the date of the latest audited financial statements included within the SEC
        Reports, except as specifically disclosed in the SEC Reports, (i) there has
        been
        no event, occurrence or development that has had or that could reasonably
        be
        expected to result in a Material Adverse Effect, (ii) the Company has not
        incurred any liabilities (contingent or otherwise) other than (A) trade payables
        and accrued expenses incurred in the ordinary course of business consistent
        with
        past practice and (B) liabilities not required to be reflected in the Company’s
        financial statements pursuant to GAAP or required to be disclosed in filings
        made with the Commission, (iii) the Company has not altered its method of
        accounting, (iv) the Company has not declared or made any dividend or
        distribution of cash or other property to its stockholders or purchased,
        redeemed or made any agreements to purchase or redeem any shares of its capital
        stock and (v) the Company has not issued any equity securities to any officer,
        director or Affiliate, except pursuant to existing Company stock option plans.
        The Company does not have pending before the Commission any request for
        confidential treatment of information.

       

      (j)  Litigation.
        Except
        as disclosed in the SEC Reports, 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.

       

      (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.

       

      
        
          
          

        

        
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      (l)  Compliance.
        Neither
        the Company nor any Subsidiary (i) is in default under or in violation of
        (and
        no event has occurred that has not been waived that, with notice or lapse
        of
        time or both, would result in a default by the Company or any Subsidiary
        under),
        nor has the Company or any Subsidiary received notice of a claim that it
        is in
        default under or that it is in violation of, any indenture, loan or credit
        agreement or any other agreement or instrument to which it is a party or
        by
        which it or any of its properties is bound (whether or not such default or
        violation has been waived), (ii) is in violation of any order of any court,
        arbitrator or governmental body, or (iii) is or has been in violation of
        any
        statute, rule or regulation of any governmental authority, including without
        limitation all foreign, federal, state and local laws applicable to its business
        except in each case as could not have a Material Adverse Effect.

       

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

       

      (n)  Title
        to Assets.
        The
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them that is material to the business of the Company
        and
        the Subsidiaries and good and marketable title in all personal property owned
        by
        them that is material to the business of the Company and the Subsidiaries,
        in
        each case free and clear of all Liens, 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 of which the
        Company
        and the Subsidiaries are in compliance.

       

      (o)  Patents
        and Trademarks.
        The
        Company and the Subsidiaries have, or have rights to use, all patents, patent
        applications, trademarks, trademark applications, service marks, trade names,
        copyrights, licenses and other similar rights necessary 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 written notice that
        the
        Intellectual Property Rights used by the Company or any Subsidiary violates
        or
        infringes upon the rights of any Person. To the knowledge of the Company,
        all
        such Intellectual Property Rights are enforceable and there is no existing
        infringement by another Person of any of the Intellectual Property Rights
        of
        others.

       

      (p)  Insurance.
        The
        Company and the Subsidiaries are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as are prudent
        and customary in the businesses in which the Company and the Subsidiaries
        are
        engaged, including, but not limited to, directors and officers insurance
        coverage at least equal to the aggregate Subscription Amount. To the best
        knowledge of the Company, such insurance contracts and policies are accurate
        and
        complete. 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.

       

      
        
          
          

        

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

       

      (r)  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 the Company 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 material information relating to the Company, including its
        Subsidiaries, is made known to the certifying officers by others within those
        entities, particularly during the period in which the Company’s most recently
        filed periodic report under the Exchange Act, as the case may be, is being
        prepared. The Company’s certifying officers have evaluated the effectiveness of
        the Company’s controls and procedures as of the date prior to the filing date of
        the 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 significant
        changes in the Company’s internal controls or, to the knowledge of the Company,
        in other factors that could significantly affect the Company’s internal
        controls.

       

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

       

      (t)  Private
        Placement.
        Assuming the accuracy of the Purchasers representations and warranties set
        forth
        in Section 3.2, no registration under the Securities Act is required for
        the
        offer and sale of the Securities by the Company to the Purchasers as
        contemplated hereby. The issuance and sale of the Securities hereunder does
        not
        contravene the rules and regulations of the Trading Market.

       

      
        
          
          

        

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

       

      (v)  [RESERVED]

       

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

       

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

       

      (y)  Disclosure.
        Other
        than information that shall be made public pursuant to the first sentence
        of
        Section 4.4, 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 constitutes or might constitute material, non-public
        information. The Company understands and confirms that the Purchasers will
        rely
        on the foregoing representations and covenants in effecting transactions
        in
        securities of the Company. All disclosure provided to the Purchasers regarding
        the Company, its business and the transactions contemplated hereby, including
        the Disclosure Schedules to this Agreement, furnished by or on behalf of
        the
        Company with respect to the representations and warranties made herein are
        true
        and correct with respect to such representations and warranties and do not
        contain any untrue statement of a material fact or omit to state any material
        fact necessary in order to make the statements made therein, in light of
        the
        circumstances under which they were made, not misleading. The 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.

       

      (z)  [RESERVED] 

       

      
        
          
          

        

        
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      (aa)  Solvency.
        Based
        on the financial condition of the Company as of the Closing Date after giving
        effect to the receipt by the Company of the proceeds from the sale of the
        Securities hereunder, (i) the Company’s fair saleable value of its assets
        exceeds the amount that will be required to be paid on or in respect of the
        Company’s existing debts and other liabilities (including known contingent
        liabilities) as they mature; (ii) the Company’s assets do not constitute
        unreasonably small capital to carry on its business for the current fiscal
        year
        as now conducted and as proposed to be conducted including its capital needs
        taking into account the particular capital requirements of the business
        conducted by the Company, and projected capital requirements and capital
        availability thereof; and (iii) the current cash flow of the Company, together
        with the proceeds the Company would receive, were it to liquidate all of
        its
        assets, after taking into account all anticipated uses of the cash, would
        be
        sufficient to pay all amounts on or in respect of its debt when such amounts
        are
        required to be paid. The Company does not intend to incur debts beyond its
        ability to pay such debts as they mature (taking into account the timing
        and
        amounts of cash to be payable on or in respect of its debt). The Company
        has no
        knowledge of any facts or circumstances which lead it to believe that it
        will
        file for reorganization or liquidation under the bankruptcy or reorganization
        laws of any jurisdiction within one year from the Closing Date. The SEC Reports
        set forth as of the dates thereof 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”
shall
        mean (a) any liabilities for borrowed money or amounts owed in excess of
        $50,000
        (other than trade accounts payable incurred in the ordinary course of business),
        (b) all guaranties, endorsements and other contingent obligations in respect
        of
        Indebtedness of others, whether or not the same are or should be reflected
        in
        the Company’s balance sheet (or the notes thereto), except guaranties by
        endorsement of negotiable instruments for deposit or collection or similar
        transactions in the ordinary course of business; and (c) the present value
        of
        any lease payments
        in excess of $50,000 due under leases required to be capitalized in accordance
        with GAAP. Neither
        the Company nor any Subsidiary is in default with respect to any
        Indebtedness.

       

      (bb)  Form
        SB-2 Eligibility.
        The
        Company is eligible to register the resale of the Securities for resale by
        the
        Purchaser on Form SB-2 promulgated under the Securities Act.

       

      (cc)  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.

       

      (dd)  No
        General Solicitation.
        Neither
        the Company nor any person acting on behalf of the Company has offered or
        sold
        any of the Securities by any form of general solicitation or general
        advertising. The Company has offered the Securities for sale only to the
        Purchasers and certain other “accredited investors” within the meaning of Rule
        501 under the Securities Act.

       

      (ee)  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.

       

      
        
          
          

        

        
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      (ff)  Accountants.
        The
        Company’s existing accountants are set forth on Schedule
        3.1(ff)
        of the
        Disclosure Schedule. To the knowledge of the Company, such accountants are
        a
        registered public accounting firm as required by the Securities
        Act.

       

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

       

      (hh)  Acknowledgement
        Regarding Purchasers’ Trading Activity.
        Anything in this Agreement or elsewhere herein to the contrary notwithstanding
        (except for Section 4.15 hereof), it is understood and agreed by the Company
        (i)
        that none of the Purchasers have been asked to agree, nor has any Purchaser
        agreed, to desist from purchasing or selling, long and/or short, securities
        of
        the Company, or “derivative” securities based on securities issued by the
        Company or to hold the Securities for any specified term; (ii) that past
        or
        future open market or other transactions by any Purchaser, including Short
        Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
        placement transactions, may negatively impact the market price of the Company’s
        publicly-traded securities; (iii) that any Purchaser, and counter parties
        in
“derivative” transactions to which any such Purchaser is a party, directly or
        indirectly, presently may have a “short” position in the Common Stock, and (iv)
        that each Purchaser shall not be deemed to have any affiliation with or control
        over any arm’s length counter-party in any “derivative” transaction.
The
        Company further understands and acknowledges that (a) one or more Purchasers
        may
        engage in hedging activities at various times during the period that the
        Securities are outstanding, including, without limitation, during the periods
        that the value of the Warrant Shares deliverable with respect to Securities
        are
        being determined and (b) such hedging activities (if any) could reduce the
        value
        of the existing stockholders' equity interests in the Company at and after
        the
        time that the hedging activities are being conducted.  The Company
        acknowledges that such aforementioned hedging activities do not constitute
        a
        breach of any of the Transaction Documents.

       

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

       

      
        
          
          

        

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

       

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

       

      (b)  Own
        Account.
        Such
        Purchaser understands that the Securities are “restricted securities” and have
        not been registered under the Securities Act or any applicable state securities
        law and is acquiring the Securities as principal for its own account and
        not
        with a view to or for distributing or reselling such Securities or any part
        thereof in violation of the Securities Act or any applicable state securities
        law, has no present intention of distributing any of such Securities in
        violation of the Securities Act or any applicable state securities law and
        has
        no arrangement or understanding with any other persons regarding the
        distribution of such Securities (this representation and warranty not limiting
        such Purchaser’s right to sell the Securities pursuant to the Registration
        Statement or otherwise in compliance with applicable federal and state
        securities laws) in violation of the Securities Act or any applicable state
        securities law. Such Purchaser is acquiring the Securities hereunder in the
        ordinary course of its business. Such Purchaser does not have any agreement
        or
        understanding, directly or indirectly, with any Person to distribute any
        of the
        Securities.

       

      (c)  Purchaser
        Status.
        At the
        time such Purchaser was offered the Securities, it was, and at the date hereof
        it is, and on each date on which it exercises any Warrants, 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. Such Purchaser, either alone or together with its representatives,
        had the opportunity to ask questions of the Company concerning the investment
        contemplated hereby and to obtain any additional information they have deemed
        necessary as a condition to making such investment and access to information
        filed with the Commission; provided that such access does not relieve the
        Company of its obligation to provide complete and accurate Disclosure Schedules
        without, except as specifically referenced herein or therein, reliance on
        the
        SEC Reports.

       

      
        
          
          

        

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

       

      (f)  Short
        Sales and Confidentiality Prior To The Date Hereof.
        Other than the transaction contemplated hereunder, such Purchaser has not
        directly or indirectly, nor has any Person acting on behalf of or pursuant
        to
        any understanding with such Purchaser, executed any disposition, including
        Short
        Sales (but not including the location and/or reservation of borrowable shares
        of
        Common Stock), in the securities of the Company during the period
        commencing from
        the time
        that such Purchaser first received a term sheet from the Company or any other
        Person setting forth the material terms of the transactions contemplated
        hereunder until the date hereof (“Discussion
        Time”).
        Notwithstanding the foregoing, in the case of a Purchaser that is a
        multi-managed investment vehicle whereby separate portfolio managers manage
        separate portions of such Purchaser's assets and the portfolio managers have
        no
        direct knowledge of the investment decisions made by the portfolio managers
        managing other portions of such Purchaser's assets, the representation set
        forth
        above shall only apply with respect to the portion of assets managed by the
        portfolio manager that made the investment decision to purchase the Securities
        covered by this Agreement. Other than to other Persons party to this Agreement,
        such Purchaser has maintained the confidentiality of all disclosures made
        to it
        in connection with this transaction (including the existence and terms of
        this
        transaction).

       

      The
        Company acknowledges and agrees that each Purchaser does not make or has
        not
        made any representations or warranties with respect to the transactions
        contemplated hereby other than those specifically set forth in this Section
        3.2
        and in the Accredited Investment Questionnaire.

       

      ARTICLE
        IV.
OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1   
        Transfer Restrictions. 

       

      (a)  The
        Securities may only be disposed of in compliance with state and federal
        securities laws. In connection with any transfer of Securities other than
        pursuant to an effective registration statement or Rule 144, to the Company
        or
        to an affiliate of a Purchaser or in connection with a pledge as contemplated
        in
        Section 4.1(b), the Company may require the transferor thereof to provide
        to the
        Company an opinion of counsel selected by the transferor and reasonably
        acceptable to the Company, the form and substance of which opinion shall
        be
        reasonably satisfactory to the Company, to the effect that such transfer
        does
        not require registration of such transferred Securities under the Securities
        Act. As a condition of transfer, any such transferee shall agree in writing
        to
        be bound by the terms of this Agreement and shall have the rights of a Purchaser
        under this Agreement and the Registration Rights Agreement.

       

      
        
          
          

        

        
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      (b)  The
        Purchasers agree to the imprinting, so long as is required by this Section
        4.1(b), of a legend on any of the Securities in the following form:

       

      THESE
        SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
        OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
        REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
        ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD OR TRANSFERRED EXCEPT
        PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
        OR
        PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
        TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
        APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
        TO
        THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
        ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED
        IN
        CONNECTION WITH SUCH DISPOSITION. THESE SECURITIES MAY BE PLEDGED IN CONNECTION
        WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER
        LOAN
        WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
        501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
        SECURITIES.

       

      The
        Company acknowledges and agrees that a Purchaser may from time to time pledge
        pursuant to a bona fide margin agreement with a registered broker-dealer
        or
        grant a security interest in some or all of the Securities to a financial
        institution that is an “accredited investor” as defined in Rule 501(a) under the
        Securities Act and who agrees to be bound by the provisions of this Agreement
        and the Registration Rights Agreement and, if required under the terms of
        such
        arrangement, such Purchaser may transfer pledged or secured Securities to
        the
        pledgees or secured parties. Such a pledge or transfer would not be subject
        to
        approval of the Company and no legal opinion of legal counsel of the pledgee,
        secured party or pledgor shall be required in connection therewith. Further,
        no
        notice shall be required of such pledge. At the appropriate Purchaser’s expense,
        the Company will execute and deliver such reasonable documentation as a pledgee
        or secured party of Securities may reasonably request in connection with
        a
        pledge or transfer of the Securities, including, if the Securities are subject
        to registration pursuant to the Registration Rights Agreement, the preparation
        and filing of any required prospectus supplement under Rule 424(b)(3) under
        the
        Securities Act or other applicable provision of the Securities Act to
        appropriately amend the list of Selling Stockholders thereunder.

       

      
        
          
          

        

        
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      (c)  Certificates
        evidencing the Shares and Warrant Shares shall not contain any legend (including
        the legend set forth in Section 4.1(b)), (i) while a registration statement
        (including the Registration Statement) covering the resale of such security
        is
        effective under the Securities Act, or (ii) following any sale of such Shares
        or
        Warrant Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares
        are eligible for sale under Rule 144(k), or (iv) if such legend is not required
        under applicable requirements of the Securities Act (including judicial
        interpretations and pronouncements issued by the staff of the Commission).
        The
        Company shall cause its counsel to issue a legal opinion to the Company’s
        transfer agent promptly after the Effective Date if required by the Company’s
        transfer agent to effect the removal of the legend hereunder. If all or any
        portion of a Warrant is exercised at a time when there is an effective
        registration statement to cover the resale of the Warrant Shares, such Warrant
        Shares shall be issued free of all legends. The Company agrees that following
        the Effective Date or at such time as such legend is no longer required under
        this Section 4.1(c), it will, no later than three Trading Days following
        the
        delivery by a Purchaser and receipt by the Company or the Company’s transfer
        agent of a certificate representing Shares or Warrant Shares, as the case
        may
        be, issued with a restrictive legend (such third Trading Day, the “Legend
        Removal Date”),
        deliver or cause to be delivered to such Purchaser a certificate representing
        such shares that is free from all restrictive and other legends. The Company
        may
        not make any notation on its records or give instructions to any transfer
        agent
        of the Company that enlarge the restrictions on transfer set forth in this
        Section. Certificates for Securities subject to legend removal hereunder
        shall
        be transmitted by the transfer agent of the Company to the Purchasers by
        crediting the account of the Purchaser’s prime broker with the Depository Trust
        Company System.

      


      (d)  In
        addition to such Purchaser’s other available remedies, the Company shall pay to
        a Purchaser, in cash, as partial liquidated damages and not as a penalty,
        for
        each $1,000 of Shares or Warrant Shares (based on the Closing Price of the
        Common Stock on the date such Securities are submitted to the Company’s transfer
        agent) delivered for removal of the restrictive legend and subject to Section
        4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading
        Days after such damages have begun to accrue) for each Trading Day after
        the
        Legend Removal Date until such certificate is delivered without a legend.
        Nothing herein shall limit such Purchaser’s right to pursue actual damages for
        the Company’s failure to deliver certificates representing any Securities as
        required by the Transaction Documents, and such Purchaser shall have the
        right
        to pursue all remedies available to it at law or in equity including, without
        limitation, a decree of specific performance and/or injunctive
        relief.

       

      (e)  Each
        Purchaser, severally and not jointly with the other Purchasers, agrees that
        the
        removal of the restrictive legend from certificates representing Securities
        as
        set forth in this Section 4.1 is predicated upon the Company’s reliance that the
        Purchaser will sell any Securities pursuant to either the registration
        requirements of the Securities Act, including any applicable prospectus delivery
        requirements, or an exemption therefrom.

       

      4.2     
        Furnishing of Information.
        As long
        as any Purchaser owns Securities, the Company covenants to timely file (or
        obtain extensions in respect thereof and file within the applicable grace
        period) all reports required to be filed by the Company after the date hereof
        pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
        the
        Company is not required to file reports pursuant to the Exchange Act, it
        will
        prepare and furnish to the Purchasers and make publicly available in accordance
        with Rule 144(c) such information as is required for the Purchasers to sell
        the
        Securities under Rule 144. The Company further covenants that it will take
        such
        further action as any holder of Securities may reasonably request, all to
        the
        extent required from time to time to enable such Person to sell such Securities
        without registration under the Securities Act within the limitation of the
        exemptions provided by Rule 144.

       

      
        
          
          

        

        
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      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 in a manner that would require the registration under the Securities
        Act of the sale of the Securities to the Purchasers.

       

      4.4  Securities
        Laws Disclosure; Publicity.
        The
        Company shall, on the 4th
        Trading
        Day following the date hereof, issue a Current Report on Form 8-K, disclosing
        the material terms of the transactions contemplated hereby, and shall attach
        the
        Transaction Documents thereto. The Company and each Purchaser shall consult
        with
        each other in issuing any other press releases with respect to the transactions
        contemplated hereby, and neither the Company nor any Purchaser shall issue
        any
        such press release or otherwise make any such public statement without the
        prior
        consent of the Company, with respect to any press release of any Purchaser,
        or
        without the prior consent of each Purchaser, with respect to any press release
        of the Company, which consent shall not unreasonably be withheld, except
        if such
        disclosure is required by law, in which case the disclosing party shall promptly
        provide the other party with prior notice of such public statement or
        communication. 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 (i) as required by federal
        securities law in connection with the registration statement contemplated
        by the
        Registration Rights Agreement and (ii) 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 subclause
        (i) or (ii).

       

      4.5  Shareholder
        Rights Plan. No claim will be made or enforced by the Company or, to the
        knowledge of the Company, any other Person that any Purchaser is an “Acquiring
        Person” under any shareholder rights plan or similar plan or arrangement in
        effect or hereafter adopted by the Company, or that any Purchaser could be
        deemed to trigger the provisions of any such plan or arrangement, by virtue
        of
        receiving Securities under the Transaction Documents or under any other
        agreement between the Company and the Purchasers. The Company shall conduct
        its
        business in a manner so that it will not become subject to the Investment
        Company Act.

       

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

       

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

       

      4.8  [RESERVED]

       

      
        
          
          

        

        
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      4.9  Indemnification
        of Purchasers. Subject to the provisions of this Section 4.9, the Company
        will indemnify and hold the Purchasers and their directors, officers,
        shareholders, members, partners, employees and agents (each, a “Purchaser
        Party”) harmless from any and all losses, liabilities, obligations, claims,
        contingencies, damages, costs and expenses, including all judgments, amounts
        paid in settlements, court costs and reasonable attorneys’ fees and costs of
        investigation that any such Purchaser Party may suffer or incur as a result
        of
        or relating to (a) any breach of any of the representations, warranties,
        covenants or agreements made by the Company in this Agreement or in the other
        Transaction Documents or (b) any action instituted against a Purchaser, or
        any
        of them or their respective Affiliates, by any stockholder of the Company
        who is
        not an Affiliate of such Purchaser, with respect to any of the transactions
        contemplated by the Transaction Documents (unless such action is based upon
        a
        breach of such Purchaser’s representations, warranties or covenants under the
        Transaction Documents or any agreements or understandings such Purchaser
        may
        have with any such stockholder or any violations by the Purchaser of state
        or
        federal securities laws or any conduct by such Purchaser which constitutes
        fraud, gross negligence, willful misconduct or malfeasance). If any action
        shall
        be brought against any Purchaser Party in respect of which indemnity may
        be
        sought pursuant to this Agreement, such Purchaser Party shall promptly notify
        the Company in writing, and the Company shall have the right to assume the
        defense thereof with counsel of its own choosing. Any Purchaser Party shall
        have
        the right to employ separate counsel in any such action and participate in
        the
        defense thereof, but the fees and expenses of such counsel shall be at the
        expense of such Purchaser Party except to the extent that (i) the employment
        thereof has been specifically authorized by the Company in writing, (ii)
        the
        Company has failed after a reasonable period of time to assume such defense
        and
        to employ counsel or (iii) in such action there is, in the reasonable opinion
        of
        such separate counsel, a material conflict on any material issue between
        the
        position of the Company and the position of such Purchaser Party. The Company
        will not be liable to any Purchaser Party under this Agreement (i) for any
        settlement by a Purchaser Party effected without the Company’s prior written
        consent, which shall not be unreasonably withheld or delayed; or (ii) to
        the
        extent, but only to the extent that a loss, claim, damage or liability is
        attributable to any Purchaser Party’s breach of any of the representations,
        warranties, covenants or agreements made by the Purchasers in this Agreement
        or
        in the other Transaction Documents.

       

      4.10  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 Shares pursuant to this Agreement and Warrant Shares pursuant to any
        exercise of the Warrants. 

       

      4.11    
        Listing of Common Stock.The
        Company hereby agrees to use best efforts to maintain the listing of the
        Common
        Stock on a Trading Market, and as soon as reasonably practicable following
        the
        Closing (but not later than the earlier of the Effective Date and the first
        anniversary of the Closing Date) to list all of the Shares and Warrant 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 include in such
        application all of the Shares and Warrant Shares, and will take such other
        action as is necessary to cause all of the Shares and Warrant Shares to be
        listed on such other Trading Market as promptly as possible. The Company
        will
        take all action reasonably necessary to continue the listing and trading
        of its
        Common Stock on a Trading Market and will comply in all respects with the
        Company’s reporting, filing and other obligations under the bylaws or rules of
        the Trading Market.

       

      
        
          
          

        

        
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      4.12  Equal
        Treatment of Purchasers. No consideration shall be offered or paid to any
        Person to amend or consent to a waiver or modification of any provision of
        any
        of the Transaction Documents unless the same consideration is also offered
        to
        all of the parties to the Transaction Documents. 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 to treat
        for the Company the Purchasers as a class and shall not in any way be construed
        as the Purchasers acting in concert or as a group with respect to the purchase,
        disposition or voting of Securities or otherwise.

       

      4.13  [RESERVED]
        

       

      4.14  [RESERVED]

       

      4.15  Short
        Sales and Confidentiality After The Date Hereof.Each
        Purchaser severally and not jointly with the other Purchasers covenants that
        neither it nor any affiliates acting on its behalf or pursuant to any
        understanding with it will execute any Short Sales during the period after
        the
        Discussion Time and ending at the time that the transactions contemplated
        by
        this Agreement are first publicly announced 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 as described in Section 4.4, such Purchaser will
        maintain, the confidentiality of all disclosures made to it in connection
        with
        this transaction (including the existence and terms of this transaction).
        Each
        Purchaser understands and acknowledges, severally and not jointly with any
        other
        Purchaser, that the Commission currently takes the position that coverage
        of
        short sales of shares of the Common Stock “against the box” prior to the
        Effective Date of the Registration Statement with the Securities is a violation
        of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under
        Section A, of the Manual of Publicly Available Telephone Interpretations,
        dated
        July 1997, compiled by the Office of Chief Counsel, Division of Corporation
        Finance. Notwithstanding
        the foregoing, no Purchaser makes any representation, warranty or covenant
        hereby that it will not engage in Short Sales in the securities of the Company
        after the time that the transactions contemplated by this Agreement are first
        publicly announced 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.

       

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

       

      4.17  [RESERVED].

       

      
        
          
          

        

        
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      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 March 1, 2006;
        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. 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.

       

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

       

      5.4  Notices.
        Any and all notices or other communications or deliveries required or permitted
        to be provided hereunder shall be in writing and shall be deemed given and
        effective on the earliest of (a) the date of transmission, if such notice
        or
        communication is delivered via facsimile at the facsimile number set forth
        on
        the signature pages attached hereto prior to 11:00 a.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 11:00 a.m. (New York City time) on any Trading Day, (c) the
        3rd
        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.

       

      5.5  Amendments;
        Waivers. No provision of this Agreement may be waived or amended except in a
        written instrument signed, in the case of an amendment, by the Company and
        each
        Purchaser or, in the case of a waiver, by the party against whom enforcement
        of
        any such waiver is sought. No waiver of any default with respect to any
        provision, condition or requirement of this Agreement shall be deemed to
        be a
        continuing waiver in the future or a waiver of any subsequent default or
        a
        waiver of any other provision, condition or requirement hereof, nor shall
        any
        delay or omission of either party to exercise any right hereunder in any
        manner
        impair the exercise of any such right.

       

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

       

      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. Any Purchaser may assign any or all of
        its
        rights under this Agreement to any Person, with the exclusion of any Person
        that
        is an operating company and that is a direct competitor of the Company, to
        whom
        such Purchaser assigns or transfers any Securities, provided such transferee
        agrees in writing to be bound, with respect to the transferred Securities,
        by
        the provisions in this Agreement and the other Transaction Documents that
        apply
        to the “Purchasers”.

       

      
        
          
          

        

        
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      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 4.9.

       

      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 inconvenient venue for such
        proceeding. Each party hereby irrevocably waives personal service of process
        and
        consents to process being served in any such suit, action or proceeding by
        mailing a copy thereof via registered or certified mail or overnight delivery
        (with evidence of delivery) to such party at the address in effect for notices
        to it under this Agreement and agrees that such service shall constitute
        good
        and sufficient service of process and notice thereof. Nothing contained herein
        shall be deemed to limit in any way any right to serve process in any manner
        permitted by law. The parties hereby waive all rights to a trial by jury.
        If
        either party shall commence an action or proceeding to enforce any provisions
        of
        the Transaction Documents, then the prevailing party in such action or
        proceeding shall be reimbursed by the other party for its attorneys’ fees and
        other costs and expenses incurred with the investigation, preparation and
        prosecution of such action or proceeding.

       

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

       

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

       

      5.12  Severability.
        If any provision of this Agreement is held to be invalid or unenforceable
        in any
        respect, the validity and enforceability of the remaining terms and provisions
        of this Agreement shall not in any way be affected or impaired thereby and
        the
        parties will attempt to agree upon a valid and enforceable provision that
        is a
        reasonable substitute therefor, and upon so agreeing, shall incorporate such
        substitute provision in this Agreement.

       

      
        
          
          

        

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

       

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

       

      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 described in the foregoing
        sentence and hereby agrees to waive in any action for specific performance
        of
        any such obligation the defense that a remedy at law would be
        adequate.

       

      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 of the obligations of any other Purchaser under any
        Transaction Document. Nothing contained herein or in any Transaction Document,
        and no action taken by any Purchaser pursuant thereto, shall be deemed to
        constitute the Purchasers as a partnership, an association, a joint venture
        or
        any other kind of entity, or create a presumption that the Purchasers are
        in any
        way acting in concert or as a group with respect to such obligations or the
        transactions contemplated by the Transaction Documents. Each Purchaser shall
        be
        entitled to independently protect and enforce its rights, including without
        limitation, the rights arising out of this Agreement or out of the other
        Transaction Documents, and it shall not be necessary for any other Purchaser
        to
        be joined as an additional party in any proceeding for such purpose. Each
        Purchaser has been represented by its own separate legal counsel in their
        review
        and negotiation of the Transaction Documents. The Company has elected to
        provide
        all Purchasers with the same terms and Transaction Documents for the convenience
        of the Company and not because it was required or requested to do so by the
        Purchasers.

       

      
        
          
          

        

        
          -24-

          
            

          

        

        
          
          

        

      

      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.

       

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

       

      (Signature
        Pages Follow)

       

      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

      



      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.

       

      


      
        	
                XFONE,
                  INC.

                 

              	
                
                  Address
                    for Notice:

                

              
	
                By:_/s/
                  Guy Nissenson________________________

                Name:
                  Guy Nissenson

                Title:
                  President & CEO

                 

                Address
                  for Notice:

                 

                Attn:
                  Alon Mualem, CFO

                C/O
                  Xfone 018 Ltd.

                1
                  Haodem Street, 3rd Floor

                Kiryat
                  Matalon, Petach Tikva

                Israel

                Fax:
                  + 972-39238838

                 

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

                 

                Attn:
                  Guy Nissenson, CEO

                C/O
                  Xfone USA, Inc.

                2506
                  Lakeland Drive Suite 405 Jackson, 

                Mississippi
                  39232

              	 


      

      


      


      


      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASER FOLLOWS]

      
        
          
          

        

        
          -26-

          
            

          

        

        
          
          

        

      



      [PURCHASER
        SIGNATURE PAGES TO XFN 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
        Purchaser:________________________________________________

      


      Address
        for Notice of Purchaser:

      


      


      


      


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

      


      


      


      


      


      Subscription
        Amount:

      Shares:

      Warrant
        Shares:

       

      

        [SIGNATURE
          PAGES CONTINUE]