ex10_1.htm


    Exhibit
      10.1

    


    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”) is dated as of May
      24, 2007 between Impart Media Group, 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: (a) capitalized
      terms
      that are not otherwise defined herein have the meanings given to such terms
      in
      the Debentures (as defined herein), and (b) the following terms have the
      meanings set forth 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 405 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.

     

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

     

    “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.

     

    
      
        
        

      

      
        
          

        

      

      
        
        

      

    

     

    “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
      be
      reclassified or changed into.

     

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

     

    “Company
      Counsel” means Pryor Cashman LLP, with offices located at 410 Park Avenue,
      New York, NY 10022.

     

    “Conversion
      Price” shall have the meaning ascribed to such term in the
      Debentures.

     

    “Debentures”
      means the 6% Convertible Debentures due, subject to the terms therein, 2 years
      from their date of issuance, issued by the Company to the Purchasers hereunder,
      in the form of Exhibit A attached hereto.

     

    “Disclosure
      Schedules” shall have the meaning ascribed to such term in Section
      3.1.

     

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

     

    “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.

    


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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    “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.

     

    “Lock-up
      Agreement” means the Lock-Up Agreement, dated as of the date hereof,
      between the Company and the directors, officers and 10% shareholders of the
      Company, in the form of Exhibit E attached hereto.

     

    “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).

     

    “Maximum
      Rate” shall have the meaning ascribed to such term in Section
      5.17.

     

    “Participation
      Maximum” shall have the meaning ascribed to such term in Section
      4.12.

     

    “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.

     

    “Pre-Notice”
      shall have the meaning ascribed to such term in Section 4.12.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

    “Purchaser
      Party” shall have the meaning ascribed to such term in Section
      4.10.

     

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

     

    “Registration
      Statement” means a registration statement meeting the requirements set forth
      in the Registration Rights Agreement and covering the resale of the Underlying
      Shares by each Purchaser as provided for in the Registration Rights
      Agreement.

     

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

     

    “Required
      Minimum” means, as of any date, the maximum aggregate number of shares of
      Common Stock then issued or potentially issuable in the future pursuant to
      the
      Transaction Documents, including any Underlying Shares issuable upon exercise
      or
      conversion in full of all Warrants and Debentures (including Underlying Shares
      issuable as payment of interest), ignoring any conversion or exercise limits
      set
      forth therein, and assuming that the Conversion Price is at all times on and
      after the date of determination 75% of the then Conversion Price on the Trading
      Day immediately prior to the date of determination.

     

    “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 Debentures, the Warrants, the Warrant Shares and the Underlying
      Shares.

     

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

     

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

     

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

     

    
      
        
        

      

      
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    “Subsequent
      Financing” shall have the meaning ascribed to such term in Section
      4.12.

     

    “Subsequent
      Financing Notice” shall have the meaning ascribed to such term in Section
      4.12.

     

    “Subsidiary”
      means any subsidiary of the Company as set forth on Schedule 3.1(a) and
      shall, where applicable, include any direct or indirect subsidiary of the
      Company formed or acquired after the date hereof.

     

    “Subordination
      Agreement” means the Subordination Agreement, dated as of the date hereof,
      between the Company, each Purchaser and Laurus Master Funds, Ltd.
      (“Laurus”).

     

    “Trading
      Day” means a day on which the New York Stock Exchange is open for
      trading.

     

    “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 Over the Counter
      Bulletin Board, the American Stock Exchange, the Nasdaq Capital Market, the
      Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock
      Exchange.

     

     “Transaction
      Documents” means this Agreement, the Debentures, the Warrants, the
      Registration Rights Agreement, the Lock-up Agreement, all exhibits and schedules
      thereto and hereto and any other documents or agreements executed in connection
      with the transactions contemplated hereunder.

     

    “Transfer
      Agent” means First American Stock Transfer, Inc., the current transfer agent
      of the Company, with a mailing address of 706 East Bell Rd., Suite
      202, Phoenix, Arizona 85022 and a facsimile number of 602-788-0423, and any
      successor transfer agent of the Company.

     

    “Underlying
      Shares” means the shares of Common Stock issued and issuable upon conversion
      or redemption of the Debentures and upon exercise of the Warrants and issued
      and
      issuable in lieu of the cash payment of interest on the Debentures in accordance
      with the terms of the Debentures.

     

    “VWAP”
      means, for any date, the price determined by the first of the following clauses
      that applies: (a) if the Common Stock is then listed or quoted on a Trading
      Market, the daily volume weighted average price of the Common Stock for such
      date (or the nearest preceding date) on the Trading Market on which the Common
      Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
      Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time);
      (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted
      average price of the Common Stock for such date (or the nearest preceding date)
      on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted
      on the OTC Bulletin Board and if prices for the Common Stock are then reported
      in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or
      agency succeeding to its functions of reporting prices), the most recent bid
      price per share of the Common Stock so reported; or (d) in all other cases,
      the fair market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Purchasers of a majority in interest
      of
      the Securities then outstanding and reasonably acceptable to the Company, the
      fees and expenses of which shall be paid by the Company.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Warrants”
      means, collectively, the Common Stock purchase warrants 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, in the form of Exhibit C attached hereto.

     

    “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,
        substantially concurrent with the execution and delivery of this Agreement
        by
        the parties hereto, the Company agrees to sell, and the Purchasers, severally
        and not jointly, agree to purchase, in the aggregate, up to $3,000,000 in
        principal amount of the Debentures.  Each Purchaser shall deliver to
        the Company, via wire transfer or a certified check, immediately available
        funds
        equal to its Subscription Amount and the Company shall deliver to each Purchaser
        its respective Debenture and a Warrant, as determined pursuant to Section
        2.2(a), and the Company and each Purchaser shall deliver the other items
        set
        forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of
        the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur
        at the
        offices of FWS or such other location as the parties shall mutually
        agree.

       

      2.2    Deliveries

       

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

         

        (i)    this
          Agreement duly executed by the Company;

         

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

         

        (iii)    a
          Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
          registered in the name of such Purchaser;

         

        (iv)    a
          Warrant
          registered in the name of such Purchaser to purchase up to a number of
          shares of
          Common Stock equal to 50% of such Purchaser’s Subscription Amount divided by
          $0.75, with an exercise price equal to $0.52, subject to adjustment
          therein;

      

      
         

      

      
        
          
            
            

          

          
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      (v)    the
        Subordination Agreement duly executed by the Company and Laurus;

       

      (vi)    the
        Lock-up
        Agreement duly executed by the Company and  each director, officer and
        10% shareholder of the Company; and

       

      (vii)    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
        Company the following:

       

      (i)    this
        Agreement duly executed by such Purchaser;

       

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

       

      (iii)           the
        Subordination Agreement duly executed by such Purchaser; and

       

      (iv)           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 on the Closing Date of the representations and
        warranties of the Purchasers contained herein;

       

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

       

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

       

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

       

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

       

    

    
      
        
        

      

    

    
      
        
        

      

      
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      (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; and

       

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

       

    

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

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

     

    (a)    Subsidiaries.  All
      of the direct and indirect subsidiaries of the Company are set forth on
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 except as otherwise set forth on Schedule 3.1(a), and all of the
      issued and outstanding shares of capital stock of each Subsidiary are validly
      issued and are fully paid, non-assessable and free of preemptive and similar
      rights to subscribe for or purchase securities.  If the Company has no
      subsidiaries, all other references to the Subsidiaries or any of them in the
      Transaction Documents shall be disregarded.

     

    
      
        
        

      

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

         

        (c)           Authorization;
          Enforcement.  The Company has the requisite corporate power and
          authority to enter into and to consummate the transactions contemplated
          by each
          of the Transaction Documents and otherwise to carry out its obligations
          hereunder and thereunder.  The execution and delivery of each of the
          Transaction Documents by the Company and the consummation by it of the
          transactions contemplated hereby and thereby have been duly authorized
          by all
          necessary action on the part of the Company and no further action is required
          by
          the Company, its board of directors or its stockholders in connection therewith
          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.

         

        (d)           No
          Conflicts.  The execution, delivery and performance of the
          Transaction Documents by the Company 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.

         

      

      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      (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 4.6, (ii) the filing with the
        Commission of the Registration Statement, (iii) the notice and/or application(s)
        to each applicable Trading Market for the issuance and sale of the Securities
        and the listing of the Underlying Shares for trading thereon in the time
        and
        manner required thereby and (iv) the filing of Form D with the Commission
        and
        such filings as are required to be made under applicable state securities
        laws
        (collectively, the “Required Approvals”).

       

      (f)           Issuance
        of the Securities.  The Securities are duly authorized and, when
        issued and paid for in accordance with the applicable Transaction Documents,
        will be duly and validly issued, fully paid and nonassessable, free and clear
        of
        all Liens imposed by the Company other than restrictions on transfer provided
        for in the Transaction Documents.  The Underlying Shares, when issued
        in accordance with the terms of the Transaction Documents, will be validly
        issued, fully paid and nonassessable, free and clear of all Liens imposed
        by the
        Company other than restrictions on transfer provided for in the Transaction
        Documents.  The Company has reserved from its duly authorized capital
        stock a number of shares of Common Stock for issuance of the Underlying Shares
        at least equal to the Required Minimum on the date hereof.

       

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

       

    

    
      
        
        

      

      
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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
        the
        Company under the Securities Act and the Exchange Act, including pursuant
        to
        Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
        (or
        such shorter period as the Company was required by law or regulation to file
        such material) (the foregoing materials, including the exhibits thereto and
        documents incorporated by reference therein, being collectively referred
        to
        herein as the “SEC Reports”) on a timely basis or has received a valid
        extension of such time of filing and has filed any such SEC Reports prior
        to the
        expiration of any such extension.  As of their respective dates, the
        SEC Reports complied in all material respects with the requirements of the
        Securities Act and the Exchange Act, as applicable, and none of the SEC Reports,
        when filed, contained any untrue statement of a material fact or omitted
        to
        state a material fact required to be stated therein or necessary in order
        to
        make the statements therein, in the light of the circumstances under which
        they
        were made, not misleading.  The 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
        a subsequent SEC Report filed prior to the date hereof, (i) there has been
        no
        event, occurrence or development that has had or that could reasonably be
        expected to result in a Material Adverse Effect, (ii) the Company has not
        incurred any liabilities (contingent or otherwise) other than (A) trade payables
        and accrued expenses incurred in the ordinary course of business consistent
        with
        past practice and (B) liabilities not required to be reflected in the Company’s
        financial statements pursuant to GAAP or disclosed in filings made with the
        Commission, (iii) the Company has not altered its method of accounting, (iv)
        the
        Company has not declared or made any dividend or distribution of cash or
        other
        property to its stockholders or purchased, redeemed or made any agreements
        to
        purchase or redeem any shares of its capital stock and (v) the Company has
        not
        issued any equity securities to any officer, director or Affiliate, except
        pursuant to existing Company stock option plans. The Company does not have
        pending before the Commission any request for confidential treatment of
        information.  Except for the issuance of the Securities contemplated
        by this Agreement or as set forth on Schedule 3.1(i), no event, liability
        or development has occurred or exists with respect to the Company or its
        Subsidiaries or their respective business, properties, operations or financial
        condition, that would be required to be disclosed by the Company under
        applicable securities laws at the time this representation is made or deemed
        made that has not been publicly disclosed at least one Trading Day prior
        to the
        date that this representation is made.

       

    

    
      
        
        

      

      
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      (j)           Litigation.  There
        is no action, suit, inquiry, notice of violation, proceeding or investigation
        pending or, to the knowledge of the Company, threatened against or affecting
        the
        Company, any Subsidiary or any of their respective properties before or by
        any
        court, arbitrator, governmental or administrative agency or regulatory authority
        (federal, state, county, local or foreign) (collectively, an “Action”)
        which (i) adversely affects or challenges the legality, validity or
        enforceability of any of the Transaction Documents or the Securities or (ii)
        could, if there were an unfavorable decision, have or reasonably be expected
        to
        result in a Material Adverse Effect.  Neither the Company nor any
        Subsidiary, nor any director or officer thereof, is or has been the subject
        of
        any Action involving a claim of violation of or liability under federal or
        state
        securities laws or a claim of breach of fiduciary duty.  There has not
        been, and to the knowledge of the Company, there is not pending or contemplated,
        any investigation by the Commission involving the Company or any current
        or
        former director or officer of the Company.  Except as set forth on
        Schedule 3.1(j), 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.  None of the Company’s or its Subsidiaries’ employees is a
        member of a union that relates to such employee’s relationship with the Company
        or such Subsidiary, and neither the Company nor any of its Subsidiaries is
        a
        party to a collective bargaining agreement, and the Company and its Subsidiaries
        believe that their relationships with their employees are good.  No
        executive officer, to the knowledge of the Company, is, or is now expected
        to
        be, in violation of any material term of any employment contract,
        confidentiality, disclosure or proprietary information agreement or
        non-competition agreement, or any other contract or agreement or any restrictive
        covenant in favor of any third party, and the continued employment of each
        such
        executive officer does not subject the Company or any of its Subsidiaries
        to any
        liability with respect to any of the foregoing matters.  The Company
        and its Subsidiaries are in compliance with all U.S. federal, state, local
        and
        foreign laws and regulations relating to employment and employment practices,
        terms and conditions of employment and wages and hours, except where the
        failure
        to be in compliance could not, individually or in the aggregate, reasonably
        be
        expected to have a Material Adverse Effect.

       

    

    
      
        
        

      

      
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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
        and all such laws that affect the environment, except in each case as could
        not
        have or reasonably be expected to result in a Material Adverse
        Effect.

       

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

       

      (n)           Title
        to Assets.  The Company and the Subsidiaries have good and
        marketable title in fee simple to all real property owned by them and good
        and
        marketable title in all personal property owned by them that is material
        to the
        business of the Company and the Subsidiaries, in each case free and clear
        of all
        Liens, except as set forth on Schedule 3.1(n) or for Liens as do not materially
        affect the value of such property and do not materially interfere with the
        use
        made and proposed to be made of such property by the Company and the
        Subsidiaries and Liens for the payment of federal, state or other taxes,
        the
        payment of which is neither delinquent nor subject to penalties.  Any
        real property and facilities held under lease by the Company and the
        Subsidiaries are held by them under valid, subsisting and enforceable leases
        with which the Company and the Subsidiaries are in compliance.

       

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

       

    

    
      
        
        

      

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

       

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

       

      (r)           Sarbanes-Oxley;
        Internal Accounting Controls.  The Company is in material
        compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are
        applicable to it as of the Closing Date.  The Company has established
        disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
        and 15d-15(e)) for the Company and designed such disclosure controls and
        procedures to ensure that information required to be disclosed by the Company
        in
        the reports it files or submits under the Exchange Act is recorded, processed,
        summarized and reported, within the time periods specified in the Commission’s
        rules and forms.  The Company’s certifying officers have evaluated the
        effectiveness of the Company’s disclosure controls and procedures as of the end
        of the period covered by the Company’s most recently filed periodic report under
        the Exchange Act (such date, the “Evaluation Date”).  The
        Company presented in its most recently filed periodic report under the Exchange
        Act the conclusions of the certifying officers about the effectiveness of
        the
        disclosure controls and procedures based on their evaluations as of the
        Evaluation Date.  Since the Evaluation Date, there have been no
        changes in the Company’s internal control over financial reporting (as such term
        is defined in the Exchange Act) that has materially affected, or is reasonably
        likely to materially affect, the Company’s internal control over financial
        reporting.

       

    

    
      
        
        

      

      
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      (s)           Certain
        Fees.  Except as set forth on Schedule 3.1(s), 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.

       

      (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 of 1940,
        as
        amended.

       

      (v)           Registration
        Rights.  Other than each of the Purchasers and except as set forth
        on Schedule 3.1(v), no Person has any right to cause the Company to effect
        the
        registration under the Securities Act of any securities of the
        Company.

       

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

       

    

    
      
        
        

      

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

       

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

       

      (aa)           Indebtedness.  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.  Schedule 3.1(aa) sets
        forth as of the date hereof all outstanding secured and unsecured Indebtedness
        of the Company or any Subsidiary, or for which the Company or any Subsidiary
        has
        commitments.  For the purposes of this Agreement,
“Indebtedness” means (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.

       

    

    
      
        
        

      

      
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      (bb)           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.

       

      (cc)           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.

       

      (dd)           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.

       

      (ee)           Accountants.  The
        Company’s accounting firm is set forth on Schedule 3.1(ee) of the
        Disclosure Schedule.  To the knowledge and belief of the Company, such
        accounting firm (i) is a registered public accounting firm as required by
        the
        Exchange Act and (ii) shall express its opinion with respect to the financial
        statements to be included in the Company’s Annual Report on Form 10-KSB for the
        year ending May 31, 2007.

       

      (ff)           Seniority.   Except
        as set forth on Schedule 3.1(ff), as of the Closing Date, no Indebtedness
        or
        other claim against the Company is senior to the Debentures in right of payment,
        whether with respect to interest or upon liquidation or dissolution, or
        otherwise, other than indebtedness secured by purchase money security interests
        (which is senior only as to underlying assets covered thereby) and capital
        lease
        obligations (which is senior only as to the property covered
        thereby).

       

    

    
      
        
        

      

      
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      (gg)           No
        Disagreements with Accountants and Lawyers.  There are no
        disagreements of any kind presently existing, or reasonably anticipated by
        the
        Company to arise, between the Company and the accountants and lawyers formerly
        or presently employed by the Company and the Company is current with respect
        to
        any fees owed to its accountants and lawyers which could affect the Company’s
        ability to perform any of its obligations under any of the Transaction
        Documents.

       

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

       

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

       

    

    
      
        
        

      

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

       

    

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

     

    
      (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 and delivery of the Transaction Documents and performance by
        such
        Purchaser of the transactions contemplated by the Transaction Documents 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 direct or indirect arrangement or understandings
        with
        any other persons to distribute or 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.

       

    

    
      
        
        

      

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

       

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

       

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

       

      (f)           Short
        Sales and Confidentiality Prior To The Date Hereof.  Other than
        consummating the transactions 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 purchases or sales,
        including Short Sales, of the securities of the Company during the period
        commencing from the time that such Purchaser first received a term sheet
        (written or oral) from the Company or any other Person representing the Company
        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).

       

    

    
      
        
        

      

      
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        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.

       

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

       

    

    [NEITHER]
      THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
      [CONVERTIBLE]] HAS [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 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.  THIS SECURITY [AND THE SECURITIES ISSUABLE
      UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION
      WITH
      A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

     

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and the Registration Rights Agreement and, if required under the terms of such
      arrangement, such Purchaser may transfer pledged or secured Securities to the
      pledgees or secured parties.  Such a pledge or transfer would not be
      subject to approval of the Company and no legal opinion of legal counsel of
      the
      pledgee, secured party or pledgor shall be required in connection
      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 Underlying Shares shall not contain any legend (including
        the
        legend set forth in Section 4.1(b) hereof): (i) while a registration statement
        (including the Registration Statement) covering the resale of such security
        is
        effective under the Securities Act, or (ii) following any sale of such
        Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
        are
        eligible for sale under Rule 144(k), or (iv) if such legend is not required
        under applicable requirements of the Securities Act (including judicial
        interpretations and pronouncements issued by the staff of the Commission).
        The
        Company shall cause its counsel to issue a legal opinion to the Transfer
        Agent
        promptly after the Effective Date if required by the Transfer Agent to effect
        the removal of the legend hereunder.  If all or any portion of a
        Debenture or Warrant is converted or exercised (as applicable) at a time
        when
        there is an effective registration statement to cover the resale of the
        Underlying Shares, or if such Underlying Shares may be sold under Rule 144(k)
        or
        if such legend is not otherwise required under applicable requirements of
        the
        Securities Act (including judicial interpretations and pronouncements issued
        by
        the staff of the Commission) then such Underlying Shares shall be issued
        free of
        all legends.  The Company agrees that following the Effective Date or
        at such time as such legend is no longer required under this Section 4.1(c),
        it
        will, no later than three Trading Days following the delivery by a Purchaser
        to
        the Company or the Transfer Agent of a certificate representing Underlying
        Shares, as applicable, 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 the Transfer Agent that enlarge the
        restrictions on transfer set forth in this Section.  Certificates for
        Underlying Shares subject to legend removal hereunder shall be transmitted
        by
        the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
        prime broker with the Depository Trust Company System as directed by such
        Purchaser.

      


      (d)           In
        addition to such Purchaser’s other available remedies, the Company shall pay to
        a Purchaser, in cash, as partial liquidated damages and not as a penalty,
        for
        each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on
        the
        date such Securities are submitted to the 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 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.

       

    

    
      
        
        

      

      
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      (e)           Each
        Purchaser, severally and not jointly with the other Purchasers, agrees that
        such
        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, and that if Securities are sold
        pursuant to a Registration Statement, they will be sold in compliance with
        the
        plan of distribution set forth therein, and acknowledges 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 upon this
        understanding.

       

    

    4.2    Acknowledgment
      of Dilution.  The Company acknowledges that the issuance of the
      Securities may result in dilution of the outstanding shares of Common Stock,
      which dilution may be substantial under certain market
      conditions.  The Company further acknowledges that its obligations
      under the Transaction Documents, including without limitation its obligation
      to
      issue the Underlying Shares pursuant to the Transaction Documents, are
      unconditional and absolute and not subject to any right of set off,
      counterclaim, delay or reduction, regardless of the effect of any such dilution
      or any claim the Company may have against any Purchaser and regardless of the
      dilutive effect that such issuance may have on the ownership of the other
      stockholders of the Company.

     

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

     

    4.4    Integration.  The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Securities to the
      Purchasers in a manner that would require the registration under the Securities
      Act of the sale of the Securities to the Purchasers or that would be integrated
      with the offer or sale of the Securities for purposes of the rules and
      regulations of any Trading Market.

     

    4.5    Conversion
      and Exercise Procedures.  The form of Notice of Exercise included
      in the Warrants and the form of Notice of Conversion included in the
      Debentures set forth the totality of the procedures
      required of the Purchasers in order to exercise the Warrants or convert the
      Debentures.  No additional legal opinion or other information or
      instructions shall be required of the Purchasers to exercise their Warrants
      or
      convert their Debentures.  The Company shall honor exercises of the
      Warrants and conversions of the Debentures and shall deliver Underlying Shares
      in accordance with the terms, conditions and time periods set forth in the
      Transaction Documents.

     

    
      
        
        

      

      
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    4.6    Securities
      Laws Disclosure; Publicity.  The Company shall, by 8:30 a.m. (New
      York City time) on the Trading Day following the date hereof, issue a Current
      Report on Form 8-K disclosing the material terms of the transactions
      contemplated hereby and attaching the Transaction Documents as exhibits
      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 or delayed,
      except if such disclosure is required by law, in which case the disclosing
      party
      shall promptly provide the other party with prior notice of such public
      statement or communication.  Notwithstanding the foregoing, the
      Company shall not publicly disclose the name of any Purchaser, or include the
      name of any Purchaser in any filing with the Commission or any regulatory agency
      or Trading Market, without the prior written consent of such Purchaser, except
      (i) as required by federal securities law in connection with (A) any
      registration statement contemplated by the Registration Rights Agreement and (B)
      the filing of final Transaction Documents (including signature pages thereto)
      with the Commission 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 this clause
      (ii).

     

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

     

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

     

    4.9    Use
      of
      Proceeds.  Except as set forth on Schedule 4.9 attached
      hereto, the Company shall use the net proceeds from the sale of the Securities
      hereunder for working capital purposes and shall not use such proceeds for
      (a)
      the satisfaction of any portion of the Company’s debt (other than payment of
      trade payables in the ordinary course of the Company’s business and prior
      practices), (b) the redemption of any Common Stock or Common Stock Equivalents
      or (c) the settlement of any outstanding litigation.

     

    
      
        
        

      

      
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    4.10    Indemnification
      of Purchasers.   Subject to the provisions of this Section
      4.10, the Company will indemnify and hold each Purchaser and its directors,
      officers, shareholders, members, partners, employees and agents (and any other
      Persons with a functionally equivalent role of a Person holding such titles
      notwithstanding a lack of such title or any other title), each Person who
      controls such Purchaser (within the meaning of Section 15 of the Securities
      Act
      and Section 20 of the Exchange Act), and the directors, officers, shareholders,
      agents, members, partners or employees (and any other Persons with a
      functionally equivalent role of a Person holding such titles notwithstanding
      a
      lack of such title or any other title) of such controlling person (each, a
      “Purchaser Party”) harmless from any and all losses, liabilities,
      obligations, claims, contingencies, damages, costs and expenses, including
      all
      judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation that any such Purchaser Party may suffer or
      incur as a result of or relating to (a) any breach of any of the
      representations, warranties, covenants or agreements made by the Company in
      this
      Agreement or in the other Transaction Documents or (b) any action instituted
      against a Purchaser in any capacity, or any of them or their respective
      Affiliates, by any stockholder of the Company who is not an Affiliate of such
      Purchaser, with respect to any of the transactions contemplated by the
      Transaction Documents (unless such action is based upon a breach of such
      Purchaser’s representations, warranties or covenants under the Transaction
      Documents or any agreements or understandings such Purchaser may have with
      any
      such stockholder or any violations by 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 reasonably acceptable to the
      Purchaser Party.  Any Purchaser Party shall have the right to employ
      separate counsel in any such action and participate in the defense thereof,
      but
      the fees and expenses of such counsel shall be at the expense of such Purchaser
      Party except to the extent that (i) the employment thereof has been specifically
      authorized by the Company in writing, (ii) the Company has failed after a
      reasonable period of time to assume such defense and to employ counsel or (iii)
      in such action there is, in the reasonable opinion of such separate counsel,
      a
      material conflict on any material issue between the position of the Company
      and
      the position of such Purchaser Party, in which case the Company shall be
      responsible for the reasonable fees and expenses of no more than one such
      separate counsel.  The Company will not be liable to any Purchaser
      Party under this Agreement (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 such
      Purchaser Party in this Agreement or in the other Transaction
      Documents.

     

    4.11    Reservation
      and Listing of Securities.

     

    
      (a)    The
        Company
        shall maintain a reserve from its duly authorized shares of Common Stock
        for
        issuance pursuant to the Transaction Documents in such amount as may be required
        to fulfill its obligations in full under the Transaction Documents.

       

    

    
      
        
        

      

      
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      (b)           If,
        on any date, the number of authorized but unissued (and otherwise unreserved)
        shares of Common Stock is less than the Required Minimum on such date, then
        the
        Board of Directors of the Company shall use commercially reasonable efforts
        to
        amend the Company’s certificate or articles of incorporation to increase the
        number of authorized but unissued shares of Common Stock to at least the
        Required Minimum at such time, as soon as possible and in any event not later
        than the 75th day after such date.

       

      (c)           The
        Company shall, if applicable: (i) in the time and manner required by the
        principal Trading Market, prepare and file with such Trading Market an
        additional shares listing application covering a number of shares of Common
        Stock at least equal to the Required Minimum on the date of such application,
        (ii) take all steps necessary to cause such shares of Common Stock to be
        approved for listing on such Trading Market as soon as possible thereafter,
        (iii) provide to the Purchasers evidence of such listing, and (iv) maintain
        the
        listing of such Common Stock on any date at least equal to the Required Minimum
        on such date on such Trading Market or another Trading Market.

       

    

    4.12    Participation
      in Future Financing.

     

    
      (a)           From
        the date hereof until the date that is the 12 month anniversary of the Effective
        Date, upon any issuance by the Company or any of its Subsidiaries of Common
        Stock or Common Stock Equivalents (a “Subsequent Financing”), each
        Purchaser shall have the right to participate in up to an amount of the
        Subsequent Financing equal to 100% of the Subsequent Financing (less the
        amount
        of the Subsequent Financing as to which Laurus Master Fund Ltd.
        (“Laurus”) has exercised their rights set forth in that certain Security
        Agreement, dated January 27, 2006, by and between Laurus and the Company
        as in
        effect as of the date hereof)  (the “Participation Maximum”) on
        the same terms, conditions and price provided for in the Subsequent
        Financing.

       

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

       

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

       

    

    
      
        
        

      

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

       

      (e)           If
        by 5:30 p.m. (New York City time) on the 5th Trading
        Day after
        all of the Purchasers have received the Pre-Notice, the Company receives
        responses to a Subsequent Financing Notice from Purchasers seeking to purchase
        more than the aggregate amount of the Participation Maximum, each such Purchaser
        shall have the right to purchase its Pro Rata Portion (as defined below)
        of the
        Participation Maximum.  “Pro Rata Portion” means the ratio of (x)
        the Subscription Amount of Securities purchased on the Closing Date by a
        Purchaser participating under this Section 4.12 and (y) the sum of the aggregate
        Subscription Amounts of Securities purchased on the Closing Date by all
        Purchasers participating under this Section 4.12.

       

      (f)           The
        Company must provide the Purchasers with a second Subsequent Financing Notice,
        and the Purchasers will again have the right of participation set forth above
        in
        this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
        Financing Notice is not consummated for any reason on the terms set forth
        in
        such Subsequent Financing Notice within 60 Trading Days after the date of
        the
        initial Subsequent Financing Notice.

       

      (g)           Notwithstanding
        the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
        Issuance or (ii) an underwritten public offering of Common Stock.

       

    

    4.13    [RESERVED]

     

    4.14    Equal
      Treatment of Purchasers.  No consideration shall be offered or
      paid to any Person to amend or consent to a waiver or modification of any
      provision of any of the Transaction Documents unless the same consideration
      is
      also offered to all of the parties to the Transaction Documents. Further, the
      Company shall not make any payment of principal or interest on the Debentures
      in
      amounts which are disproportionate to the respective principal amounts
      outstanding on the Debentures at any applicable time.  For
      clarification purposes, this provision constitutes a separate right granted
      to
      each Purchaser by the Company and negotiated separately by each Purchaser,
      and
      is intended for the Company to treat the Purchasers as a class and shall not
      in
      any way be construed as the Purchasers acting in concert or as a group with
      respect to the purchase, disposition or voting of Securities or
      otherwise.

     

    
      
        
        

      

      
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    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
      Affiliate acting on its behalf or pursuant to any understanding with it will
      execute any Short Sales during the period commencing at the Discussion Time
      and
      ending at the time that the transactions contemplated by this Agreement are
      first publicly announced as described in Section 4.6.  Each Purchaser,
      severally and not jointly with the other Purchasers, covenants that until such
      time as the transactions contemplated by this Agreement are publicly disclosed
      by the Company as described in Section 4.6, such Purchaser will maintain the
      confidentiality of the existence and terms of this transaction and the
      information included in the Disclosure Schedules.  Each Purchaser severally
      and not jointly with any other Purchaser understands and acknowledges, and
      agrees, to act in a manner that will not violate the positions of the Commission
      as set forth in Item 65, 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 4.6.  Notwithstanding the foregoing, in the case of a
      Purchaser that is a multi-managed investment vehicle whereby separate portfolio
      managers manage separate portions of such Purchaser’s assets and the portfolio
      managers have no direct knowledge of the investment decisions made by the
      portfolio managers managing other portions of such Purchaser’s assets, the
      covenant set forth above shall only apply with respect to the portion of assets
      managed by the portfolio manager that made the investment decision to purchase
      the Securities covered by this Agreement.

     

    4.16    Form
      D; Blue Sky Filings.  The Company agrees to timely file a Form D
      with respect to the Securities as required under Regulation D and to provide
      a
      copy thereof, promptly upon request of any Purchaser. The Company shall take
      such action as the Company shall reasonably determine is necessary in order
      to
      obtain an exemption for, or to qualify the Securities for, sale to the
      Purchasers at the Closing under applicable securities or “Blue Sky” laws of the
      states of the United States, and shall provide evidence of such actions promptly
      upon request of any Purchaser.

     

    4.18    Capital
      Changes.  Until the one year anniversary of the Effective Date,
      the Company shall not undertake a reverse or forward stock split or
      reclassification of the Common Stock without the prior written consent of the
      Purchasers holding a majority in principal amount outstanding of the
      Debentures.

     

    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 May 25, 2007;
provided, however, that such termination will not affect the right
      of any party to sue for any breach by the other party (or parties).

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    5.2    Fees
      and Expenses.  At the Closing, the Company has agreed to reimburse
      Enable Capital Management, LP (“Enable”) the non-accountable sum of
      $17,500 for its legal fees and expenses, none of which has been paid prior
      to
      the Closing.  In addition, if the transactions contemplated by this
      Agreement shall not be consummated by the date set forth in Section 5.1, and
      such failure of consummation is not caused by Enable, the Company shall pay
      upon
      demand $17,500 to Enable at any time after the date set forth in Section
      5.1.  The Company shall deliver to each Purchaser, prior to the
      Closing, a completed and executed copy of the Closing Statement attached hereto
      as Annex A.  Except as expressly set forth in the Transaction
      Documents to the contrary, each party shall pay the fees and expenses of its
      advisers, counsel, accountants and other experts, if any, and all other expenses
      incurred by such party incident to the negotiation, preparation, execution,
      delivery and performance of this Agreement.  The Company shall pay all
      transfer agent fees, stamp taxes and other taxes and duties levied in connection
      with the delivery of any Securities to the Purchasers.

     

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

     

    5.4    Notices.  Any
      and all notices or other communications or deliveries required or permitted
      to
      be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
      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, modified,
      supplemented or amended except in a written instrument signed, in the case
      of an
      amendment, by the Company and the Purchasers of at least 75% in interest of
      the
      Securities still held by Purchasers or, in the case of a waiver, by the party
      against whom enforcement of any such waived provision is sought.  No
      waiver of any default with respect to any provision, condition or requirement
      of
      this Agreement shall be deemed to be a continuing waiver in the future or a
      waiver of any subsequent default or a waiver of any other provision, condition
      or requirement hereof, nor shall any delay or omission of any party to exercise
      any right hereunder in any manner impair the exercise of any such
      right.

     

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

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

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

     

    5.8    No
      Third-Party Beneficiaries.  This Agreement is intended for the
      benefit of the parties hereto and their respective successors and permitted
      assigns and is not for the benefit of, nor may any provision hereof be enforced
      by, any other Person, except as otherwise set forth in Section
      4.10.

     

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

     

    5.10    Survival.  The
      representations and warranties shall survive the Closing and the delivery of
      the
      Securities for the applicable statue of limitations.

     

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

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

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

     

    5.13    Rescission
      and Withdrawal Right.  Notwithstanding anything to the contrary
      contained in (and without limiting any similar provisions of) any of the other
      Transaction Documents, whenever any Purchaser exercises a right, election,
      demand or option under a Transaction Document and the Company does not timely
      perform its related obligations within the periods therein provided, then such
      Purchaser may rescind or withdraw, in its sole discretion from time to time
      upon
      written notice to the Company, any relevant notice, demand or election in whole
      or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of a conversion of a Debenture
      or
      exercise of a Warrant, the Purchaser shall be required to return any shares
      of
      Common Stock delivered in connection with any such rescinded conversion or
      exercise notice.

     

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

     

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

     

    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.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    5.17    Usury.  To
      the extent it may lawfully do so, the Company hereby agrees not to insist upon
      or plead or in any manner whatsoever claim, and will resist any and all efforts
      to be compelled to take the benefit or advantage of, usury laws wherever
      enacted, now or at any time hereafter in force, in connection with any claim,
      action or proceeding that may be brought by any Purchaser in order to enforce
      any right or remedy under any Transaction Document.  Notwithstanding
      any provision to the contrary contained in any Transaction Document, it is
      expressly agreed and provided that the total liability of the Company under
      the
      Transaction Documents for payments in the nature of interest shall not exceed
      the maximum lawful rate authorized under applicable law (the “Maximum
      Rate”), and, without limiting the foregoing, in no event shall any rate of
      interest or default interest, or both of them, when aggregated with any other
      sums in the nature of interest that the Company may be obligated to pay under
      the Transaction Documents exceed such Maximum Rate.  It is agreed that
      if the maximum contract rate of interest allowed by law and applicable to the
      Transaction Documents is increased or decreased by statute or any official
      governmental action subsequent to the date hereof, the new maximum contract
      rate
      of interest allowed by law will be the Maximum Rate applicable to the
      Transaction Documents from the effective date forward, unless such application
      is precluded by applicable law.  If under any circumstances
      whatsoever, interest in excess of the Maximum Rate is paid by the Company to
      any
      Purchaser with respect to indebtedness evidenced by the Transaction Documents,
      such excess shall be applied by such Purchaser to the unpaid principal balance
      of any such indebtedness or be refunded to the Company, the manner of handling
      such excess to be at such Purchaser’s election.

     

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

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    5.19    Liquidated
      Damages.  The Company’s obligations to pay any partial liquidated
      damages or other amounts owing under the Transaction Documents is a continuing
      obligation of the Company and shall not terminate until all unpaid partial
      liquidated damages and other amounts have been paid notwithstanding the fact
      that the instrument or security pursuant to which such partial liquidated
      damages or other amounts are due and payable shall have been
      canceled.

     

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

     

    5.21    Waiver
      of Jury Trial.  In any action, suit or proceeding in any
      jurisdiction brought by any party against any other party, the parties each
      knowingly and intentionally, to the greatest extent permitted by applicable
      law,
      hereby absolutely, unconditionally, irrevocably and expressly waives forever
      trial by jury.

     

     

    (Signature
      Pages Follow)

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    


    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.

     

    
      
        
          	 IMPART
                  MEDIA GROUP, INC.	 	
                  Address
                    for Notice:

                
	 	 	 
	 	 	 
	
                  By: 
                    

                	
                            /s/Thomas
                    C.Muniz

                	 	
                  1300
                    N. Northlake Way

                  Seattle,
                    WA 98103

                  Attn:
                    Tom Muniz, President

                
	 	
                   Name:
                    Thomas C. Muniz

                	 
	 	
                   Title:
                    President

                	 


        

      

       

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

       

    

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

    

    


    [PURCHASER
      SIGNATURE PAGES TO IMMG 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:

            	 
	 	 
	
              Facsimile
                Number of Purchaser:

            	 


    

    
 

    Address
      for Notice of Purchaser:

    


    


     

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

     

    


    


    


    
      
        
          
            
              
                	 Subscription
                        Amount:	 
	
                         

                      	 
	 Warrant
                        Shares:	 
	 	 


              

            

          

        

      

    

     

    


    
 

    EIN
      Number:  [PROVIDE THIS UNDER SEPARATE
      COVER]

    


    [SIGNATURE
      PAGES CONTINUE]

    

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

Annex
      A

    


    CLOSING
      STATEMENT

    


    Pursuant
      to the attached Securities Purchase Agreement, dated as of the date hereto,
      the
      purchasers shall purchase up to $3,000,000 of Debentures and Warrants from
      Impart Media Group, Inc. (the “Company”).  All funds will be
      wired into an account maintained by the Company.  All funds will be
      disbursed in accordance with this Closing Statement.

    


    
      	
              
                Disbursement Date:

              

            	
              May ___,
                2007

            


    

    
      	 	 
	 	 
	
              I.   PURCHASE
                PRICE

            	 
	 	 
	 	
              Gross
                Proceeds to be Received

            	
              $

            
	 	 
	
              II.  DISBURSEMENTS

            	 
	 	 	
              $

            
	 	
              Enable
                Capital

            	
              $ 
                17,500

            
	 	 	
              $

            
	 	 	
              $

            
	 	 	
              $

            
	 	 
	
              Total
                Amount Disbursed:

            	
              $

            
	 	 
	 	 
	 	 
	
              WIRE
                INSTRUCTIONS:

            	 
	 	 
	 	 
	
              To:
                _____________________________________

            	 
	 	 
	 	 
	 	 
	 	 
	
              To:
                _____________________________________

            	 


    

     

     

     36