EX 10.1


    
      SECURITIES
        PURCHASE AGREEMENT

       

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of May 25, 2007 among Celsia Technologies, 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 Saturday, Sunday, any day which shall be a federal legal holiday
        in the United States or any day on which banking institutions in the State
        of
        New York are authorized or required by law or other governmental action to
        close.

       

      “Closing”
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 $.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
        DLA Piper US LLP.

       

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

       

      “Debentures”
means
        the 8% Secured Convertible Debentures due, subject to the terms therein,
        3 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
        directors

       


      
        
           

        

        
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      of
        the
        Company not having a direct financial interest in such transaction, provided
        that any such issuance shall only be to a Person which is, itself or through
        its
        subsidiaries, engaged 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.

       

      “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).

       

      “Korean
        Security Agreement”
means
        the Security Agreement, dated the date hereof, among the Company, Celsia
        Technologies Korea, Inc. (“Celsia
        Korea”)
        and
        the Purchasers, in the form of Exhibit
        E-2
        attached
        hereto.

      


      “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. 

       

      “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 4.13. 

       

      “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 4.13. 

       

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

       


      
        
           

        

        
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      “Purchaser
        Party”
shall
        have the meaning ascribed to such term in Section 4.11.

       

      “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 hereunder.

       

      “Security
        Agreement”
means
        the Security Agreement, dated the date hereof, among the Company and the
        Purchasers, in the form of Exhibit
        E-1
        attached
        hereto.

      


      “Security
        Documents”
shall
        mean the Security Agreement, the UK Security Agreement, the Korean Security
        Agreement, the Subsidiary Guarantees and any other documents and filing required
        thereunder in order to grant the Purchasers a first priority security interest
        in the assets of the Company and the Subsidiaries as provided in the Security
        Agreement, including all UCC-1 filing receipts and all filings required under
        the UK Security Agreement and Korean Security Agreement. 

       

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

       


      
        
           

        

        
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      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.

       

      “Subsequent
        Financing”
shall
        have the meaning ascribed to such term in Section 4.13.

       

      “Subsequent
        Financing Notice”
shall
        have the meaning ascribed to such term in Section 4.13. 

       

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

       

      “Subsidiary
        Guarantee”
means
        those certain Subsidiary Guarantee(s), dated the date hereof, executed by
        each
        Subsidiary in favor of the Purchasers, in the form of Exhibit
        F
        attached
        hereto.

       

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

       

      “Transaction
        Documents”
means
        this Agreement, the Debentures, the Warrants, the Registration Rights Agreement,
        the Security Agreement, the Subsidiary Guarantee, all exhibits and schedules
        hereto and thereto and any other documents or agreements executed pursuant
        thereto.

       

      “Transfer
        Agent”
means
        Interwest Transfer Co. Inc., with a mailing address of 1981 East 4800 South,
        Suite 100, Salt Lake City, Utah 84117 and a facsimile number of (801) 277-3147,
        and any successor transfer agent of the Company.

       

      “UK
        Security Agreement”
means
        the third party Security Agreement, dated the date hereof, between the Company,
        Celsia Technologies UK Limited and the agent named therein, in the form of
        Exhibit
        E-3
        attached
        hereto.

      


      “UK
        Share Charge”
means
        the Charge on Shares, dated the date hereof, between Celsia Technologies
        UK
        Limited and the agent named therein, in the form of Exhibit
        E-4,
        attached hereto.

       

      “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

       


      
        
           

        

        
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      issued
        and issuable in lieu of the cash payment of interest on the Debentures in
        accordance with the terms of the Debentures.

       

      “Variable
        Rate Transaction”
        shall
        have the meaning ascribed to such term in Section 4.14(b).

       

      “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
        Common Stock is not then listed or quoted on a Trading Market 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 (c) in all other cases, the fair market value of a share of
        Common Stock as determined by an independent appraiser selected in good faith
        by
        the Purchaser and reasonably acceptable to the Company, the fees and expenses
        of
        which shall be paid by the Company.

       

      “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.

       

      (a) 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 each Purchaser, severally
        and not jointly, agrees to purchase Debentures and Warrants with an aggregate
        Subscription Amount of up to $8,500,000. 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.

       

      (b) Notwithstanding
        anything in this Agreement to the contrary, on February

       


      
        
           

        

        
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      21,
        2007,
        and April 20, 2007, the Company issued secured convertible promissory notes
        (the
“Bridge
        Notes”)
        in the
        aggregate principal amount of $1,150,000 to certain Purchasers (as to such
        Purchasers that were issued Bridge Notes on February 21, 2007, the “February
        Bridge Purchasers”,
        and as
        to such Purchasers that were issued Bridge Notes on April 20, 2007, the
“April
        Bridge Purchasers”,
        and
        together with the February Bridge Purchasers, the “Bridge
        Purchasers”)
        in the
        amounts set forth on the signature pages hereto executed by such Bridge
        Purchasers. Pursuant to the transactions contemplated hereby, the Bridge
        Notes
        will be exchanged, as to the principal amount of the Bridge Notes, on a $1
        for
        $1.10 basis, and as to accrued but unpaid interest on the Bridge Notes, on
        a $1
        for $1 basis, in consideration for and for the purchase of an aggregate
        principal amount of the Debentures equal to 110% of the original principal
        amount of such Bridge Notes, plus accrued but unpaid interest thereon through
        the Closing Date, with the specific amount of each such Debenture set forth
        on
        the signature page of each such Bridge Purchaser, which amount will equal
        such
        Bridge Purchaser’s Subscription Amount hereunder. Each Bridge Purchaser agrees
        and acknowledges that by exchanging its Bridge Notes for Debentures and Warrants
        as provided herein, such Bridge Purchaser is transferring to the Company
        all
        right, title and interest to (i) such Bridge Notes, (ii) any security
        interest relating to such Bridge Notes, including, without limitation, all
        rights of such Bridge Purchaser under the Security Agreement entered into
        by the
        Company in connection with the issuance of the Bridge Notes (the “Bridge
        Security Agreement”)
        and
        (iii) the Securities Purchase Agreement entered into by the Company and the
        Bridge Purchasers related to the issuance of the Bridge Notes (the “Bridge
        Purchase Agreement”).
        Each
        Bridge Purchaser, together with Axiom Capital Management, Inc. (“Axiom”),
        as
        Agent under the Bridge Security Agreement, agrees to execute any documentation
        reasonably required in order to evidence the release of any security interest
        relating to the Bridge Notes (the “Bridge
        Release Documentation”).
        By
        their respective signature hereto, each Bridge Purchaser hereby authorizes
        the
        Company to file Uniform Commercial Code financing statement amendments
        evidencing the release and termination of the Bridge Purchaser’s liens in any
        assets under the Bridge Security Agreement, and agrees to deliver the Company
        all stock certificates, stock powers or other collateral, if any, held in
        any
        Bridge Purchaser’s (or Axiom’s) possession, as well as such Bride Purchaser’s
        original Bridge Note for cancellation.

       

      2.2  Deliveries.

       

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

       

      
        
          (i)
            this
            Agreement duly executed by the Company;

        

      

       

      (ii) a
        legal
        opinion or opinions of Company counsel, in the form attached hereto as
Exhibit
        D;
        

       

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

       

      
        
           

        

        
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      (iv) a
        Warrant
        registered in the name of such Purchaser to purchase up to a number of shares
        of
        Common Stock equal to 100% of the principal amount of the Debenture issuable
        to
        such Purchaser hereunder divided by 0.125, with an exercise price equal to
        $0.144,
        subject
        to adjustment therein;

       

      (v) as
        to all
        February Bridge Purchasers, an additional Warrant registered in the name
        of such
        Purchaser to purchase up to a number of shares of Common Stock equal to 50%
        of
        the original principal amount of such Bridge Purchaser’s Bridge Note divided by
        0.125, with an exercise price equal to $0.144, subject to adjustment therein
        (it
        being understood that for administrative purposes, the Company may issue
        each
        February Bridge Purchasers a single Warrant certificate for the Warrants
        to
        purchase shares of Common Stock described in Section 2.2(a)(iv) above and
        this
        Section 2.2(a)(v));

       

      (vi) as
        to all
        April Bridge Purchasers, an additional Warrant registered in the name of
        such
        Purchaser to purchase up to a number of shares of Common Stock equal to 30%
        of
        the original principal amount of such Bridge Purchaser’s Bridge Note divided by
        0.125, with an exercise price equal to $0.144, subject to adjustment therein
        (it
        being understood that for administrative purposes, the Company may issue
        each
        April Bridge Purchasers a single Warrant certificate for the Warrants to
        purchase shares of Common Stock described in Section 2.2(a)(iv) above and
        this
        Section 2.2(a)(vi));

       

      (vii) the
        Security Agreement, duly executed by the Company and each Subsidiary, along
        with
        all of the Security Documents, including the Subsidiary Guarantees, the UK
        Security Agreement and the Korean Security Agreement (including, without
        limitation, Bank of Korea approval of such agreement and evidence of all
        applicable filings to be made under the Korean Patent Act with respect to
        the
        Purchasers’ security interest in the Company’s (and its Subsidiaries’) Korean
        patents and patent applications), duly executed by the parties thereto;


       

      (viii) a
        Warrant
        registered in the name of Midsummer Ventures, L.P., to purchase up to 1,250,000
        shares of Common Stock, with an exercise price equal to $0.144,
        subject
        to adjustment therein; and

       

      (ix) 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 or, in the case of the Bridge Purchasers,
        such Bridge Purchaser’s Bridge Note together with the appropriate Bridge Release
        Documentation, if any;

       

      
        
           

        

        
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      (iii) the
        Security 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 when made and on the Closing Date of the
        representations and warranties of the Purchasers contained herein;

       

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

       

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

       

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

       

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

       

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

       

      (iii)the
        Company and its shareholders shall have approved an amendment to the Company’s
        certificate of incorporation to increase the number of authorized shares
        of
        Common Stock to 500,000,000 shares;

       

      (iv) the
        holders of the Company’s Series A and Series B Preferred Shares (and any
        warrants to purchase shares of Common Stock issued in connection with the
        Series
        A or Series B Preferred Share transactions) shall have executed and delivered
        a
        consent agreement in the form of Exhibit
        G
        attached
        hereto, which agreement shall be in form and substance satisfactory to the
        Purchasers, and the Company shall have filed an Amended and Restated Articles
        of
        Incorporation, in the form attached thereto (which amendment shall also reflect
        the share increase described in Section 2.3(b)(iii)) with the Secretary of
        State
        of Nevada with respect thereto, and shall have delivered evidence of such
        filings to the Purchasers;


      
        
           

        

        
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      (v)receipt
        of all Bridge Release Documentation, in form and substance satisfactory to
        the
        Purchasers;

       

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

       

      (vii)the
        Company shall have obtained aggregate Subscription Amounts of at least $7
        million; 

       

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

       

      (ix)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 Debentures 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, 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. 

       

      (b) Organization
        and Qualification.
        The
        Company and each of the Subsidiaries is an entity duly incorporated or otherwise
        organized, validly existing and in


      
        
           

        

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

       

      (c) Authorization;
        Enforcement.
        The
        Company has the requisite corporate power and authority to enter into and
        to
        consummate the transactions contemplated by each of the Transaction Documents
        and otherwise to carry out its obligations hereunder and thereunder. The
        execution and delivery of each of the Transaction Documents by the Company
        and
        the consummation by it of the transactions contemplated 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 (other
        than Liens resulting from the Security Agreement), or give to others any
        rights
        of termination, amendment, acceleration or


      
        
           

        

        
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      cancellation
        (with or without notice, lapse of time or both) of, any agreement, credit
        facility, debt or other instrument (evidencing a Company or Subsidiary debt
        or
        otherwise) or other understanding to which the Company or any Subsidiary
        is a
        party or by which any property or asset of the Company or any Subsidiary
        is
        bound or affected, or (iii) subject to the Required Approvals, conflict with
        or
        result in a violation of any law, rule, regulation, order, judgment, injunction,
        decree or other restriction of any court or governmental authority to which
        the
        Company or a Subsidiary is subject (including federal and state securities
        laws
        and regulations), or by which any property or asset of the Company or a
        Subsidiary is bound or affected; except in the case of each of clauses (ii)
        and
        (iii), such as could not have or reasonably be expected to result in a Material
        Adverse Effect.

       

      (e) Filings,
        Consents and Approvals.
        The
        Company is not required to obtain any consent, waiver, authorization or order
        of, give any notice to, or make any filing or registration with, any court
        or
        other federal, state, local or other governmental authority or other Person
        in
        connection with the execution, delivery and performance by the Company of
        the
        Transaction Documents, other than (i) filings required pursuant to Section
        4.6,
        (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, (iv) the filing of Form
        D with
        the Commission and such filings as are required to be made under applicable
        state securities laws and (v) filings required under the Security Documents
        (collectively, the “Required
        Approvals”).

       

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

       

      (g) Capitalization.
        The
        capitalization of the Company is as set forth on Schedule
        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. In addition,
        attached hereto as Schedule
        3.1(g)(ii),
        is a
        schedule of the fully-diluted capitalization of the Company immediately prior
        to
        the time the transactions contemplated hereunder are consummated, and a
        pro-forma fully-diluted capitalization (assuming the maximum amount of
        Debentures and Warrants are sold hereunder). The Company has not issued any
        capital stock since its most
        recently filed periodic report under the Exchange Act,
        other
        than pursuant to the exercise of employee stock options under the Company’s
        stock option plans, the issuance of shares of Common Stock to employees pursuant
        to the Company’s employee stock purchase plan and pursuant to the conversion or
        exercise of Common Stock Equivalents outstanding as of the date of
        the


      
        
           

        

        
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      most
        recently filed periodic report under the Exchange Act. No Person has any
        right
        of first refusal, preemptive right, right of participation, or any similar
        right
        to participate in the transactions contemplated by the Transaction Documents.
        Except as set forth on Schedule 3.1(g), or as a result of the purchase and
        sale
        of the Securities, there are no outstanding options, warrants, scrip rights
        to
        subscribe to, calls or commitments of any character whatsoever relating to,
        or
        securities, rights or obligations convertible into or exercisable or
        exchangeable for, or giving any Person any right to subscribe for or acquire,
        any shares of Common Stock, or contracts, commitments, understandings or
        arrangements by which the Company or any Subsidiary is or may become bound
        to
        issue additional shares of Common Stock or Common Stock Equivalents. Except
        as
        described on Schedule 3.1(g), 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.

       

      (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


      
        
           

        

        
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      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 or on Schedule 3.1(i) hereto, (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
        that
        has not been publicly disclosed at least one Trading Day prior to the date
        that
        this representation is made.

       

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


      
        
           

        

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

       

      (l) Compliance.
        Neither
        the Company nor any Subsidiary (i) is in material default under or in violation
        of (and, to the knowledge of the Company, 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 relating
        to
        the Company, or (iii) to the knowledge of the Company 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 have
        or
        reasonably be expected to result in a Material Adverse Effect (“Material
        Permits”),
        and
        neither the Company nor any Subsidiary has received any notice of proceedings
        relating to the revocation or modification of any Material Permit.

       

      (n) Title
        to Assets.
        The
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them that is material to the business of the Company
        and
        the Subsidiaries and good and marketable title in all personal property owned
        by
        them that is material to the business of the Company and the Subsidiaries,
        in
        each case free and clear of all Liens, except for Liens as do not materially
        affect the value of such property and do not materially interfere with the
        use
        made and


      
        
           

        

        
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      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 therewith.

       

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

       

      (p) Insurance.
        Schedule
        3.1(p)
        sets
        forth a complete list of all insurance policies maintained by the Company
        and
        its Subsidiaries, including, but not limited to, directors and officers
        insurance coverage at least equal to the amount set forth on Schedule
        3.1(p).
        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 or Schedule
        3.1(q)
        attached
        hereto, 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.


      
        
           

        

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

       

      (s) Certain
        Fees.
        Except
        as described 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.


      
        
           

        

        
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      (v) Registration
        Rights.
        Except
        as set forth on Schedule 3.1(v), other than each of the Purchasers, 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 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. Except as set forth on
Schedule
        3.1(w),
        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.

       

      (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 (i) the material terms and conditions of the transactions
        contemplated by the Transaction Documents and (ii) Purchasers that have executed
        a written non-disclosure agreement with the Company as set forth on Schedule
        3.1(y), 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, taken as a
        whole,
        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 do not contain
        any
        untrue statement of a material fact or omit to state a material fact required
        to
        be stated therein or necessary in order to make the statements, in light
        of the
        circumstances under which they were made and when made, not misleading. The
        Company acknowledges and agrees that no Purchaser makes or has made any
        representations or warranties with respect to the transactions contemplated
        hereby other than those specifically set forth in Section 3.2
        hereof.

       

      (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


      
        
           

        

        
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      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) Solvency.
        Except
        as set forth on Schedule 3.1(aa), based on the financial condition of the
        Company as of the Closing Date after giving effect to the receipt by the
        Company
        of the proceeds from the sale of the Securities hereunder, the Company’s assets
        do not constitute unreasonably small capital to carry on its business as
        now
        conducted and as proposed to be conducted including its capital needs taking
        into account the particular capital requirements of the business conducted
        by
        the Company, and projected capital requirements and capital availability
        thereof. 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 dates thereof all outstanding secured and unsecured Indebtedness
        of the Company or any Subsidiary, or for which the Company or any Subsidiary
        has
        commitments and includes the Company’s and its consolidated Subsidiaries’
balance sheet included in its most recently filed SEC Report. 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.

       

      (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.


      
        
           

        

        
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      (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 is a registered public accounting firm as required by the Exchange
        Act.

       

      (ff) Seniority.
        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).

       

      (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 which could affect the Company’s
        ability to perform any of its obligations under any of the Transaction
        Documents, and, except as set forth on Schedule
        3.1(gg),
        the
        Company is current with respect to any fees owed to its accountants and lawyers.
         

       

      (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.
        Anything in this Agreement or elsewhere herein to the contrary notwithstanding
        (except for Sections 3.2(f) and 4.16 hereof), it is understood and acknowledged
        by the Company (i) that none

       


      
        
           

        

        
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      of
        the
        Purchasers have been asked to agree, nor has any Purchaser agreed, to desist
        from purchasing or selling, long and/or short, securities of the Company,
        or
“derivative” securities based on securities issued by the Company or to hold the
        Securities for any specified term; (ii) that past or future open market or
        other
        transactions by any Purchaser, including Short Sales, and specifically
        including, without limitation, Short Sales or “derivative” transactions, before
        or after the closing of this or future private placement transactions, may
        negatively impact the market price of the Company’s publicly-traded securities;
        (iii) that any Purchaser, and counter-parties in “derivative” transactions to
        which any such Purchaser is a party, directly or indirectly, presently may
        have
        a “short” position in the Common Stock, and (iv) that each Purchaser shall not
        be deemed to have any affiliation with or control over any arm’s length
        counter-party in any “derivative” transaction. The
        Company further understands and acknowledges that (a) one or more Purchasers
        may
        engage in hedging activities at various times during the period that the
        Securities are outstanding, including, without limitation, during the periods
        that the value of the Underlying Shares deliverable with respect to Securities
        are being determined and (b) such hedging activities (if any) could reduce
        the
        value of the existing stockholders' equity interests in the Company at and
        after
        the time that the hedging activities are being conducted.  The Company
        acknowledges that such aforementioned hedging activities do not constitute
        a
        breach of any of the Transaction Documents.

       

      (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, delivery and
        performance by such Purchaser of the transactions contemplated by this Agreement
        have been duly authorized by all necessary corporate or similar action on
        the
        part of such Purchaser. Each Transaction Document to which it is a party
        has
        been duly executed by such Purchaser, and when delivered by such Purchaser
        in
        accordance with the terms hereof, will constitute the valid and legally binding
        obligation of such Purchaser, enforceable against it in accordance with its
        terms, except (i) as limited by general


      
        
           

        

        
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      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.

       

      (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 an “accredited investor” as defined in Rule 501 under the
        Securities Act. Such Purchaser is not required to be registered as a
        broker-dealer under Section 15 of the Exchange Act.

       

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

       

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

       

      (f) Short
        Sales and Confidentiality Prior To The Date Hereof.
        Other
        than the transaction contemplated hereunder, such Purchaser has not directly
        or
        indirectly, nor has any Person acting on behalf of or pursuant to any
        understanding with such Purchaser, executed any transaction, including Short
        Sales, in 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 setting forth the material terms of the transactions
        contemplated hereunder until the date hereof (“Discussion
        Time”).
        


      
        
           

        

        
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      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). 

       

      (g) Information. Such
        Purchaser represents that it has been afforded the opportunity to review
        the
        Company’s SEC Reports and to ask questions of, and receive answers from, duly
        authorized officers or other representatives of the Company (including the
        placement agents engaged by the Company) concerning the Company and the terms
        and conditions of the transaction contemplated hereby.

       

      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.

       

      
        
           

        

        
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      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.

       

      (c) The
        Company shall not require certificates evidencing the Underlying Shares to
        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 Purchasers by crediting the account
        of
        the Purchaser’s prime broker with the Depository Trust Company
        System.

       

      
        
           

        

        
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      (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.

       

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

       

      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.
        As long
        as any Purchaser owns Securities, the Company covenants to timely file (or
        obtain extensions in respect thereof and file within the applicable grace
        period) all reports required to be filed 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.

       

      
        
           

        

        
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      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 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 applicable to the Company.

       

      4.5 [RESERVED].

       

      4.6 Securities
        Laws Disclosure; Publicity.
        The
        Company shall, by 8:30 a.m. (New York City time) on or before the 4th
        Trading
        Day following the date hereof, issue a Current Report on Form 8-K disclosing
        the
        material terms of the transactions contemplated hereby and 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 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 representations in effecting transactions in
        securities of the Company.

       

      
        
           

        

        
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      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 (including allocating a portion of
        the
        proceeds hereunder to obtain comprehensive insurance policies for the Company
        and its Subsidiaries as approved by the Board of Directors of the Company
        (including any board members designated pursuant to Sections 4.19 and 4.20
        hereunder)) and shall not use such proceeds for the satisfaction of any portion
        of the Company’s debt (other than payment of trade payables in the ordinary
        course of the Company’s business and prior practices), the redemption of any
        Common Stock or Common Stock Equivalents or the settlement of any outstanding
        litigation.

       

      4.10 [Reserved]

       

      4.11 Indemnification
        of Purchasers.
        Subject
        to the provisions of this Section 4.11, 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, 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.

       

      
        
           

        

        
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      4.12 Reservation
        and Listing of Securities.

       

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

       

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

       

      (c) The
        Company shall, if applicable: (i) in the time and manner required by the
        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. 

       

      4.13 Participation
        in Future Financing.
        

       

      (a) From
        the
        date hereof until the date that the Debenture are no longer outstanding,
        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 the lesser of (i) the aggregate principal amount
        of the Debentures then outstanding or (ii) 100% of the Subsequent Financing
        (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.

       

      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

       

      (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. 

       

      (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 4.13 and (y) the sum
        of the
        aggregate Subscription Amounts of Securities purchased on the Closing Date
        by
        all Purchasers participating under this Section 4.13.

       

      (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 4.13, 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 4.13 shall not apply in respect of (i) an Exempt
        Issuance or (ii) an underwritten public offering of Common Stock.

       

      4.14 Subsequent
        Equity Sales.
        

       

      (a) From
        the
        date hereof until the earlier of (i) 90 days after the Effective Date or
        (ii) 12
        months after the Closing Date, neither the Company nor any Subsidiary shall
        issue shares of Common Stock or Common Stock Equivalents without the prior
        written consent from the Purchasers holding at least 70% in interest of the
        then
        outstanding Securities; provided,
        however,
        the 90
        day period set forth in this Section 4.14 shall be extended for the number
        of
        Trading Days during such period in which (i) trading in the Common Stock
        is
        suspended by any Trading Market, or (ii) following the Effective Date, the
        Registration Statement is not effective or the prospectus included in the
        Registration Statement may not be used by the Purchasers for the resale of
        the
        Underlying Shares.

       

      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

       

      (b) From
        the
        date hereof until such time as no Purchaser holds any of the Securities,
        the
        Company shall be prohibited from effecting or entering into an agreement
        to
        effect any Subsequent Financing involving a Variable Rate Transaction.
“Variable
        Rate Transaction”
means
        a
        transaction in which the Company issues or sells (i) any debt or equity
        securities that are convertible into, exchangeable or exercisable for, or
        include the right to receive additional shares of Common Stock either (A)
        at a
        conversion, exercise or exchange rate or other price that is based upon and/or
        varies with the trading prices of or quotations for the shares of Common
        Stock
        at any time after the initial issuance of such debt or equity securities,
        or (B)
        with a conversion, exercise or exchange price that is subject to being reset
        at
        some future date after the initial issuance of such debt or equity security
        or
        upon the occurrence of specified or contingent events directly or indirectly
        related to the business of the Company or the market for the Common Stock
        or
        (ii) enters into any agreement, including, but not limited to, an equity
        line of
        credit, whereby the Company may sell securities at a future determined price.
        

       

      (c) Notwithstanding
        the foregoing, this Section 4.14 shall not apply in respect of an Exempt
        Issuance, except that no Variable Rate Transaction shall be an Exempt
        Issuance. 

       

      4.15 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.

       

      4.16 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 all disclosures made to it in connection
        with
        this transaction (including the existence and terms of this transaction).
        Each
        Purchaser understands and acknowledges, severally and not jointly with any
        other
        Purchaser, that the Commission currently takes the position that coverage
        of
        short sales of shares of the Common Stock “against the box” prior to the
        Effective Date of the Registration Statement with the Securities is a violation
        of Section 5 of the Securities Act, as set forth in Item 65, Section 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.

       

      
        
           

        

        
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      4.17 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 40% or more of the then
        outstanding principal amount of the Debentures.

       

      4.19 Board
        of Directors.
        So long
        as the Debentures are outstanding, at any time following the date hereof,
        Midsummer Ventures, L.P. (“Midsummer
        Ventures”)
        or its
        designees shall have the right, in their sole discretion, to appoint two
        members
        to the Board of Directors of the Company. The Board of Directors of the Company
        shall not exceed 7 members following any such appointment. The Company agrees
        that it shall have its Board of Directors or nominating committee, if it
        has
        one, to re-nominate the individuals designated by Midsummer Ventures or its
        designees, as directors pursuant to this Section 4.19 or, if applicable,
        Section
        4.20 below for re-election at each meeting of shareholders called for such
        purpose, to recommend to the Company’s shareholders that that they vote “for”
such nominees, and that all proxies given to management are voted in favor
        of
        such nominees. If Midsummer Ventures shall exercise its right to appoint
        a
        member to the Company’s Board of Directors (including any right pursuant to
        Section 4.20), the Company shall use best efforts to obtain and maintain
        directors and officers liability insurance in such amounts as are customary
        for
        companies of the Company’s size; and shall enter into indemnification contracts
        with the individuals designated by Midsummer Ventures, or its designees,
        as
        members of the Board of Directors, in form and substance reasonably satisfactory
        to such individuals. The right of Midsummer Ventures, its designees, to appoint
        members of the Board of Directors pursuant to Section 4.19 and Section 4.20
        below shall terminate the earlier of (i) written notice of such termination
        by
        the appointing Purchaser to the Company or (ii) the date the Debentures are
        no
        longer outstanding.

       

      
        
           

        

        
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      4.20
         Corporate
        Milestones.
        As used
        herein, “EBITDA”
means,
        for the applicable period, the net income (or net loss) of the Company and
        its
        consolidated Subsidiaries, determined in accordance with GAAP, consistently
        applied, plus (i) any provision for (or less any benefit from) income taxes,
        (ii) any deduction for interest expense, net of interest income, and (ii)
        depreciation and amortization expense (all determinations of the components
        of
        EBITDA shall be derived from the Company’s most recently filed Form 10-QSB or
        Form 10-KSB, as applicable) and “Corporate
        Milestone(s)”
means
        each of the First Quarter Milestone, Second Quarter Milestone, Third Quarter
        Milestone and Fourth Quarter Milestone, each as defined below. The Company
        hereby agrees to use its best efforts to satisfy each of the following Corporate
        Milestones:

      


      (a)       
        for the three month period ending June 30, 2007 (the “Second
        Quarter Milestone”),
        (i)
        sales of at least 150,000 NanoSpreaders, (ii) gross revenues of at least
        $540,000 and (iii) EBITDA of at least negative $1,390,000, each as reported
        in
        the Company’s Form 10-QSB for the quarter ending on June 30, 2007 as filed with
        the Commission;

      


      (b)       
        for the three month period ending September 30, 2007 (the “Third
        Quarter Milestone”),
        (i)
        sales of at least 624,000 NanoSpreaders, (ii) gross revenues of at least
        $2,556,000 and (iii) EBITDA of at least negative $732,000, each as reported
        in
        the Company’s Form 10-QSB for the quarter ending on September 30, 2007 as filed
        with the Commission;

      


      (c)       
        for the three month period ending December 31,  2007 (the “Fourth
Quarter
        Milestone”),
        (i)
        sales of at least 1,152,000 NanoSpreaders, (ii) gross revenues of at least
        $5,296,500 and (iii) EBITDA of at least $200,000 each as reported in the
        Company’s Form 10-KSB for the year ending on December 31, 2007 as filed with the
        Commission; and

      


      (d)       
        for the three month period ending March 31, 2008 (the “First
        Quarter Milestone”),
        (i)
        sales of at least 1,092,000 NanoSpreaders, (ii) gross revenues of at least
        $4,952,000 and (iii) EBITDA of at least $90,000 each as reported in the
        Company’s Form 10-QSB for the quarter ending on March 31, 2008 as filed with the
        Commission.

      


                 
         If
        the
        Company fails to achieve at least 90% of any one of the above Corporate
        Milestones set forth in Sections 4.20(a), (b), (c), (d) (as an example, if
        the
        Company fails to achieve any one of the following for the three month period
        ending June 30, 2007: (i) sales of at least 135,000 NanoSpreaders, (ii) gross
        revenues of at least $486,000 and (iii) EBITDA of at least negative $1,529,000,
        then the Company shall have failed to achieve the Second Quarter Milestone),
        Midsummer Ventures shall have the right to appoint an additional member to
        the
        Board of Directors of the Company, which shall consist of 7 members following
        any such appointment as follows: two members designated by Midsummer Ventures
        pursuant to Section 4.19, one member designated by Midsummer Ventures pursuant
        to this Section 4.20 and 4 other members.  If the Company fails to achieve
        any one of the above milestones for two quarterly periods, Midsummer Ventures
        shall have the right to appoint one additional member to the Board of Directors
        of the Company, which shall consist of 7 members as follows: 2 members
        designated by Midsummer Ventures pursuant to Section 4.19, 2 members designated
        by Midsummer Ventures pursuant to this Section 4.20 and 3 other members.
        In
        addition, in the event the Company fails to file a Form 10-Q, 10-QSB, 10-K
        or
        10-KSB (or successor forms) for any of the reporting periods for the
        above-referenced Corporate Milestones on or before the last date such form
        is
        required to be filed (after permitted extensions under the Exchange Act)
        or a
        Current Report on Form 8-K (on or before the last date such Form 10-Q, 10-QSB,
        10-K or 10-KSB, as applicable, is required to be filed (after permitted
        extensions under the Exchange Act)) with financial and other information
        for the
        applicable period evidencing satisfaction of the applicable Corporate Milestone,
        the Company shall irrevocably be deemed to have failed to achieve the Corporate
        Milestones as to such period. Notwithstanding anything herein to the contrary,
        the impact of the acquisition of another entity or business by the Company
        or
        any of its Subsidiaries in a business combination transaction effected by
        the
        Company or any of its Subsidiaries (whether by stock or asset acquisition,
        merger, consolidation or otherwise) during any of the above periods (other
        than
        with respect to the financial impact of subsequent sales of NanoSpreaders
        by
        such newly acquired entity or business) shall be excluded in determining
        whether
        or not the Company has satisfied any of the foregoing Corporate
        Milestones.

       

      
        
           

        

        
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      ARTICLE
        V.

      MISCELLANEOUS

       

      5.1 Termination. 
        This Agreement may be terminated by any Purchaser, as to such Purchaser’s
        obligations hereunder only and without any effect whatsoever on the obligations
        between the Company and the other Purchasers, by written notice to the other
        parties, if the Closing has not been consummated on or before May 31, 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).

       

      5.2 Fees
        and Expenses.
        At the
        Closing, the Company has agreed to reimburse Midsummer Capital, LLC
        (“Midsummer”)
        the
        non-accountable sum of $50,000, for its legal fees and expenses, $20,000
        of
        which has been paid prior to the Closing. The Company shall deliver to each
        Purchaser, prior to the Closing, a completed and executed copy of the Closing
        Statement attached hereto as Annex
        A.
        Except
        as expressly set forth in the Transaction Documents to the contrary, each
        party
        shall pay the fees and expenses of its advisers, counsel, accountants and
        other
        experts, if any, and all other expenses incurred by such party incident to
        the
        negotiation, preparation, execution, delivery and performance of this Agreement.
        The Company shall pay all transfer agent fees, stamp taxes and other taxes
        and
        duties levied in connection with the delivery of any Securities to the
        Purchasers.

       

      5.3 Entire
        Agreement.
        The
        Transaction Documents, together with the exhibits and schedules thereto,
        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.

       

      
        
           

        

        
          -33-

          
            

          

        

        
           

        

      

       

      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 holding at least 70% in interest of the then
        outstanding Securities or, in the case of a waiver, by the party against
        whom
        enforcement of any such waived provision is sought. No waiver of any default
        with respect to any provision, condition or requirement of this Agreement
        shall
        be deemed to be a continuing waiver in the future or a waiver of any subsequent
        default or a waiver of any other provision, condition or requirement hereof,
        nor
        shall any delay or omission of any party to exercise any right hereunder
        in any
        manner impair the exercise of any such right.

       

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

       

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

       

      5.8 No
        Third-Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        successors and permitted assigns and is not for the benefit of, nor may any
        provision hereof be enforced by, any other Person, except as otherwise set
        forth
        in Section 4.11.

       

      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. The parties hereby waive all rights to a trial by
        jury.
        If either party shall commence an action or proceeding to enforce any provisions
        of the Transaction Documents, then the prevailing party in such action or
        proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
        and prosecution of such action or proceeding.

       

      
        
           

        

        
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      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.

       

      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.

       

      
        
           

        

        
          -35-

          
            

          

        

        
           

        

      

       

      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.

       

      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.

       

      
        
           

        

        
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      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 Midsummer. The Company
        has
        elected to provide all Purchasers with the same terms and Transaction Documents
        for the convenience of the Company and not because it was required or requested
        to do so by the Purchasers.

       

      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.

       

      (Signature
        Pages Follow)

       


      
        
           

        

        
          -37-

          
            

          

        

        
           

        

      


      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.

       

      
        	
                CELSIA
                  TECHNOLOGIES, INC.

              	
                Address
                  for Notice:

              
	 	 
	 	 
	
                By: 
                  /s/
                  Michael Karpheden

                
                  

                

                Name:
                  Michael Karpheden

                Title:
                  Chief Financial Officer

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

              	
              


      

      


      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASER FOLLOWS]

       


      
        
           

        

        
          -38-

          
            

          

        

        
           

        

      


      [PURCHASER
        SIGNATURE PAGES TO CSAT 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 above):

       

       

       

      Subscription
        Amount: _____________

      


      Principal
        Amount of Bridge Note (if applicable):    

      


      Warrant
        Shares: _________________

      


      Principal
        Amount of Bridge Notes Surrendered (if applicable):
        __________________

      


      


      EIN
        Number: [PROVIDE
        THIS UNDER SEPARATE COVER]

      


      [SIGNATURE
        PAGES CONTINUE]

      


      *
        Executed by each Purchaser

       

      
        
           

        

          -39-