Purchase Agreement


     

    Exhibit
      10.1

    

      
        
          

        

      

       

      PURCHASE
        AGREEMENT

       

      Between

       

      MTM
        TECHNOLOGIES, INC.

       

      and

       

      PEQUOT
        PRIVATE EQUITY FUND III, L.P.

       

      and

       

      PEQUOT
        OFFSHORE PRIVATE EQUITY PARTNERS III, L.P.

       

      and

       

      CONSTELLATION
        VENTURE CAPITAL II, L.P.

       

      and

       

      CONSTELLATION
        VENTURE CAPITAL OFFSHORE II, L.P.

       

      and

       

      THE
        BSC EMPLOYEE FUND VI, L.P.

       

      and

       

      CVC
        II PARTNERS, LLC

       

       

       

      Dated
        May 24, 2007

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Table
        of Contents

       

      Page

       

      
        	
                1.

              	
                Purchase
                  and Sale of the Series A-7 Purchased Shares and Warrants

              	
                2

              
	 	 	 	 
	 	
                1.1

              	
                Authorization
                  of Issuance of the Series A-7 Purchased Shares and
                  Warrants

              	
                2

              
	 	
                1.2

              	
                Purchase
                  and Sale of Series A-7 Purchased Shares and Warrants

              	
                2

              
	 	
                1.3

              	
                Use
                  of Proceeds

              	
                2

              
	 	
                1.4

              	
                Closing

              	
                2

              
	 	
                1.5

              	
                Additional
                  Issuance

              	
                3

              
	 	 	 	 
	
                2.

              	
                Representations
                  and Warranties of the Company

              	
                3

              
	 	 	 	 
	 	
                2.1

              	
                Organization
                  and Qualification

              	
                3

              
	 	
                2.2

              	
                Certificate
                  of Incorporation and Bylaws

              	
                3

              
	 	
                2.3

              	
                Corporate
                  Power and Authority

              	
                3

              
	 	
                2.4

              	
                Capitalization

              	
                4

              
	 	
                2.5

              	
                Authorization

              	
                6

              
	 	
                2.6

              	
                Consents

              	
                6

              
	 	
                2.7

              	
                Brokers
                  or Finders

              	
                6

              
	 	
                2.8

              	
                Offering
                  Exemption

              	
                6

              
	 	
                2.9

              	
                Offering
                  of Purchased Shares and Warrants

              	
                7

              
	 	
                2.10

              	
                SEC
                  Reports

              	
                7

              
	 	
                2.11

              	
                Financial
                  Statements

              	
                7

              
	 	
                2.12

              	
                Absence
                  of Conflicts

              	
                7

              
	 	 	 	 
	
                3.

              	
                Representations
                  and Warranties of the Purchasers

              	
                8

              
	 	 	 	 
	 	
                3.1

              	
                Organization
                  and Qualification

              	
                8

              
	 	
                3.2

              	
                Power
                  and Authority

              	
                8

              
	 	
                3.3

              	
                Authorization

              	
                8

              
	 	
                3.4

              	
                Purchase
                  Entirely for Own Account

              	
                9

              
	 	
                3.5

              	
                Disclosure
                  of Information

              	
                9

              
	 	
                3.6

              	
                Investment
                  Experience

              	
                9

              
	 	
                3.7

              	
                Accredited
                  Investor

              	
                9

              
	 	
                3.8

              	
                Restricted
                  Securities; Legends

              	
                9

              
	 	
                3.9

              	
                No
                  General Solicitation

              	
                10

              
	 	
                3.10

              	
                Absence
                  of Conflicts

              	
                10

              
	 	
                3.11

              	
                Brokers
                  or Finders

              	
                10

              
	 	 	 	 
	
                4.

              	
                Conditions
                  of the Parties

              	
                11

              
	 	 	 	 
	 	
                4.1

              	
                Conditions
                  of Purchasers’ Obligations at the Closing

              	
                11

              
	 	
                4.2

              	
                Conditions
                  of Company’s Obligations at the Closing

              	
                12

              


      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                5.

              	
                Covenants

              	
                13

              
	 	 	 	 
	 	
                5.1

              	
                Financial
                  Statements

              	
                13

              
	 	
                5.2

              	
                Certain
                  Other Reports and Information

              	
                13

              
	 	
                5.3

              	
                Further
                  Information; Further Assurances

              	
                14

              
	 	
                5.4

              	
                Notice
                  of Certain Events

              	
                14

              
	 	
                5.5

              	
                Visitation;
                  Verification

              	
                14

              
	 	
                5.6

              	
                Insurance

              	
                15

              
	 	
                5.7

              	
                Payment
                  of Taxes and Other Potential Charges and Priority Claims

              	
                15

              
	 	
                5.8

              	
                Preservation
                  of Corporate Status

              	
                16

              
	 	
                5.9

              	
                Governmental
                  Approvals and Filings

              	
                16

              
	 	
                5.10

              	
                Financial
                  Accounting Practices

              	
                16

              
	 	 	 	 
	
                6.

              	
                Indemnification

              	
                16

              
	 	 	 	 
	 	
                6.1

              	
                General
                  Indemnification

              	
                16

              
	 	
                6.2

              	
                Indemnification
                  Principles

              	
                17

              
	 	
                6.3

              	
                Claim
                  Notice; Right to Defend

              	
                17

              
	 	 	 	 
	
                7.

              	
                Certain
                  Definitions

              	
                18

              
	 	 	 	 
	
                8.

              	
                Miscellaneous

              	
                22

              
	 	 	 	 
	 	
                8.1

              	
                Survival
                  of Representations and Warranties

              	
                22

              
	 	
                8.2

              	
                Successors
                  and Assigns

              	
                22

              
	 	
                8.3

              	
                Governing
                  Law

              	
                22

              
	 	
                8.4

              	
                Counterparts

              	
                22

              
	 	
                8.5

              	
                Titles
                  and Subtitles

              	
                22

              
	 	
                8.6

              	
                Notices

              	
                22

              
	 	
                8.7

              	
                Expenses

              	
                23

              
	 	
                8.8

              	
                Consents,
                  Amendments and Waivers

              	
                23

              
	 	
                8.9

              	
                Severability

              	
                23

              
	 	
                8.10

              	
                Entire
                  Agreement

              	
                23

              
	 	
                8.11

              	
                Delays
                  or Omissions

              	
                24

              
	 	
                8.12

              	
                Facsimile
                  Signatures

              	
                24

              
	 	
                8.13

              	
                Other
                  Remedies

              	
                24

              
	 	
                8.14

              	
                Further
                  Assurances

              	
                24

              
	 	
                8.15

              	
                Exchanges;
                  Lost, Stolen or Mutilated Stock Certificates and Warrants

              	
                24

              
	 	
                8.16

              	
                Certain
                  Waivers

              	
                24

              
	 	
                8.17

              	
                Nasdaq
                  Compliance

              	
                25

              
	 	
                8.18

              	
                Further
                  Assurances.

              	
                25

              


      

      


      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      Exhibit
        & Schedules List

      

        
          	
                  Exhibit
                    A

                	
                  -

                	
                  Form
                    of Registration Rights Agreement Amendment

                
	
                  Exhibit
                    B

                	
                  -

                	
                  Form
                    of Certificate of Amendment

                
	
                  Exhibit
                    C

                	
                  -

                	
                  Form
                    of Warrant

                
	
                  Exhibit
                    D

                   

                	
                  -

                   

                	
                  Pro-Forma
                    Capitalization Table

                   

                
	
                  Schedule
                    I

                	
                  -

                	
                  Names
                    and Addresses of Purchasers

                
	
                  Schedule
                    II

                   

                	
                  -

                   

                	
                  Schedule
                    of Securities Purchased

                   

                


        

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      MTM
        TECHNOLOGIES, INC.

       

      PURCHASE
        AGREEMENT

       

      THIS
        PURCHASE AGREEMENT (this “Agreement”)
        is
        made on the 24th day of May, 2007, by and among MTM Technologies, Inc., a
        New
        York corporation (the “Company”),
        and
        the following purchasers: Pequot
        Private Equity Fund III, LLP (“Pequot”),
        Pequot Offshore Private Equity Partners III, L.P, (“Pequot
        Offshore”,
        collectively with Pequot, the “Pequot
        Funds”),
        Constellation Venture Capital II, L.P., (“Constellation”),
        Constellation Venture Capital Offshore II, L.P., (“Constellation
        Offshore”),
        The
        BSC Employee Fund VI, L.P. (“BSC”)
        and
        CVC Partners II, LLC, (“CVC,
        collectively with Constellation, Constellation Offshore, BSC and CVC, the
        “Constellation
        Funds”).
        The
        Pequot Funds and the Constellation Funds are collectively referred to herein
        as
        the “Purchasers”,
        and
        each referred to herein as a “Purchaser”.

       

      W
        I T N E
        S S E T H:

       

      WHEREAS,
        subject to the terms and conditions set forth herein, the Company desires
        to
        issue and sell to the Pequot Funds on the Closing Date (i) 3,753,127 shares
        of
        Series A-7 Preferred Stock (the “Series
        A-7 Purchased Shares”)
        and
        detachable warrants to purchase up to 1,125,939 shares (as such amount may
        be
        adjusted in accordance with the terms thereof) of Common Stock (each, a
“Warrant”
and,
        collectively, the “Warrants”),
        and
        the Pequot Funds shall purchase the Series A-7 Purchased Shares and Warrants
        from the Company on the terms and conditions set forth herein;

       

      WHEREAS,
        pursuant to that certain Amended and Restated Shareholders’ Agreement, dated as
        of August 1, 2005, as amended, among the Company, the Purchasers and certain
        other shareholders of the Company (the “Shareholders’
        Agreement”),
        the
        parties thereto agreed to the imposition of certain restrictions and obligations
        on such parties including, among other things, certain transfer restrictions
        of
        the Company’s capital stock owned by such parties, certain co-sale and right of
        first refusal rights and the agreement between such parties to vote their
        shares
        of the Company’s capital stock to elect certain individuals to the board of
        directors of the Company (the “Board
        of Directors”);

       

      WHEREAS,
        subject to the terms and conditions set forth herein, the Company desires
        to
        grant certain registration rights to the Purchasers with respect to the shares
        of Common Stock issuable from time to time upon conversion of the Series
        A-7
        Purchased Shares purchased by the Purchasers and the exercise of the Warrants
        and, on or prior to the Closing Date, the Company will cause that certain
        Registration Rights Agreement, dated December 10, 2004, as amended, among
        the
        Company, the Purchasers and certain individuals named therein, to be amended
        by
        an amendment in substantially the form attached hereto as Exhibit
        A
        (the
“Registration
        Rights Agreement Amendment”),
        to
        grant the Purchasers such registration rights;

       

      WHEREAS,
        the Independent Committee of the Board of Directors has approved the execution
        and delivery of this Agreement and the transactions contemplated hereby,
        including without limitation, the issuance of the Certificate of Amendment
        with
        respect to the Series A-7 Preferred Stock attached hereto as Exhibit
        B
        (the
“Certificate
        of Amendment”),
        the

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      issuance
        of Series A-7 Purchased Shares and the Warrants and the issuance of any Common
        Stock issuable upon conversion or exercise of the foregoing, all on the terms
        and conditions set forth below;

       

      NOW,
        THEREFORE, in consideration of the premises and agreements contained in this
        Agreement, and for good and valuable consideration, the receipt and sufficiency
        of which are hereby acknowledged, THE PARTIES HEREBY AGREE AS
        FOLLOWS:

       

      1.    
Purchase
        and Sale of the Series A-7 Purchased Shares and Warrants.

       

      1.1   Authorization
        of Issuance of the Series A-7 Purchased Shares and Warrants.
        Subject
        to the terms and conditions of this Agreement, on or prior to the Closing
        Date,
        the Company shall have authorized the issuance and sale to the Purchasers
        of (i)
        the Series A-7 Purchased Shares and (i) the Warrants, substantially in the
        form
        attached hereto as Exhibit
        C.

       

      1.2   Purchase
        and Sale of Series A-7 Purchased Shares and Warrants.
        Subject
        to the terms and conditions of this Agreement, the Pequot Funds agree to
        purchase at the Closing, and the Company agrees to issue and sell to each
        such
        Purchaser at the Closing (i) the number of Series A-7 Purchased Shares set
        forth
        opposite such Purchaser’s name under the heading “Number
        of Series A-7 Purchased Shares”
on
        Schedule
        II
        and (ii)
        Warrants for the number of shares of Common Stock set forth opposite such
        Purchaser’s name under the heading “Number
        of Warrant Shares”
on
        Schedule
        II
        hereto,
        in exchange for the amount set forth opposite such Purchaser’s name under the
        heading “Series
        A-7 Shares Purchase Price”
and
        “Warrant
        Purchase Price”
on
        Schedule
        II
        hereto.


       

      1.3   Use
        of
        Proceeds.
        The
        Company agrees to use the net proceeds from the sale and issuance of the
        Series
        A-7 Purchased Shares and the Warrants (together, the “Purchased
        Securities”)
        pursuant to this Agreement for working capital and other general corporate
        purposes.

       

      1.4   Closing.
        The
        initial purchase and sale of the Purchased Securities shall take place at
        the
        offices of Thelen Reid Brown Raysman & Steiner LLP, 875 Third Avenue, New
        York, New York 10022, promptly upon the satisfaction or waiver of the closing
        conditions set forth in Section 4.1 and 4.2 hereto, but not later than May
        25,
        2007, or on such other date and at such other time as the Company and the
        Pequot
        Funds mutually agree in writing (which time and place are designated as the
        “Closing”).
        The
        date of the Closing is referred to herein as the “Closing
        Date.”
At
        the
        Closing, the Company shall deliver to each of the Pequot Funds (i) shares
        of
        Series A-7 Purchased Shares in the amount set forth opposite such Purchaser’s
        name under the heading “Number
        of Series A-7 Purchased Shares”
on
        Schedule
        II
        hereto
        and (ii) Warrants entitling such Purchaser to purchase the number of shares
        of
        Common Stock set forth opposite such Purchaser’s name under the heading
“Number
        of Warrant Shares”
on
        Schedule
        II
        hereto,
        all against payment in the amounts set forth opposite such Purchaser’s name
        under the heading “Series
        A-7 Shares and Warrant Purchase Price”
on
        Schedule
        II
        hereto,
        by wire transfer of immediately available funds to such account as the Company
        designates. The Closing shall not occur, and the Company shall have no
        obligation to make such deliveries, unless the Pequot Funds purchase and
        pay for
        the aggregate number of Series A-7 Purchased Shares and the Warrants set
        forth
        on Schedule
        II
        hereto.
        The Company shall pay any documentary stamp or

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      similar
        issue or transfer taxes due as a result of the issuance and sale of the Series
        A-7 Purchased Shares and the Warrants. 

       

      1.5   Additional
        Issuance. 

       

      (a)   Subject
        to the terms and conditions of this Agreement, the Company agrees to issue
        and
        sell and the Constellation Funds shall have the right but not the obligation,
        on
        or prior to May 30, 2007, to purchase additional shares of Series A-7 Preferred
        Stock and detachable warrants to purchase shares of Common Stock on the same
        terms and conditions as set forth herein with respect to the Series A-7
        Purchased Shares and the Warrants (the “Additional
        Series A-7 Purchased Shares and Additional Warrants”)
        

       

      (b)   The
        Constellation Funds may purchase up to $500,000 worth of Additional Series
        A-7
        Purchased Shares and Additional Warrants, allocated among themselves as set
        forth in Schedule II or in such manner as the Constellation Funds may agree.
        

       

      (c)   The
        Constellation Funds may exercise the right to purchase Additional Series
        A-7
        Purchased Shares and Additional Warrants by giving notice to the Company,
        at
        least one business day prior to the date of such purchase which date shall
        be
        set forth in such notice. Such date of purchase shall be a Closing Date and
        the
        time and place of such purchase shall be a Closing for purposes of this
        Agreement. The Additional Series A-7 Purchased Shares and Additional Warrants
        purchased at such Closing shall be deemed to be Series A-7 Purchased Shares
        and
        Warrants for all purposes of this Agreement. The obligations of each of the
        Purchasers and the Company at such Closing shall be subject to satisfaction
        of
        the respective conditions of the Constellation Funds’ obligations and the
        Company’s obligations, as set forth in Section 4 hereof.

       

      2.    
Representations
        and Warranties of the Company.
        The
        Company hereby represents and warrants to each Purchaser the
        following:

       

      2.1   Organization
        and Qualification.
        Each of
        the Company and the Subsidiaries is duly organized, validly existing and
        in good
        standing under the laws of its respective jurisdiction of incorporation or
        organization and has the requisite power and authority to own, lease and
        operate
        its assets, properties and business and to carry on its business as it is
        now
        being conducted or proposed to be conducted. Each of the Company and the
        Subsidiaries is duly qualified as a foreign corporation to transact business,
        and is in good standing, in each jurisdiction where it owns or leases real
        property or maintains employees or where the nature of its activities make
        such
        qualification necessary, except where such failure to qualify would not have
        a
        Material Adverse Effect.

       

      2.2   Certificate
        of Incorporation and Bylaws.
        The
        Company has delivered to the Purchasers true, correct, and complete copies
        of
        the Company’s certificate of incorporation as in effect on the date hereof (the
“Existing
        Certificate”)
        and
        the Company’s bylaws as in effect on the date hereof (the “Bylaws”).

       

      2.3   Corporate
        Power and Authority.
        The
        Company has all requisite corporate power and authority to execute and deliver
        the Transaction Documents to which it is a party. The Company has all requisite
        corporate power and authority to issue and sell the Series A-7

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      Purchased
        Shares and the Warrants to the Purchasers hereunder. The Company has all
        requisite corporate power and authority to carry out and perform its obligations
        under the terms of the Transaction Documents. The Company has all requisite
        corporate power and authority to sell and issue the Common Stock issuable
        upon
        conversion of the Series A-7 Preferred Stock and the exercise of the Warrants
        (together, the “Conversion
        Shares”).
        The
        Conversion Shares have been duly reserved for issuance and when issued will
        be
        duly and validly issued, fully paid and nonassessable.

       

      2.4   Capitalization. 
        (a)
        Immediately
        prior to the first Closing occurring pursuant to this Agreement, the authorized
        capital stock of the Company consists of 120,000,000, of which (i) 80,000,000
        are designated as Common Stock; and (ii) 40,000,000 are designated as Preferred
        Stock, of which (A) 38,500,000 are designated as “Series A Preferred Stock” as
        follows: 4,200,000 are designated Series A-1 Preferred Stock of which 3,453,264
        are issued and outstanding, 2,600,000 of which are designated Series A-2
        Preferred Stock of which 2,121,290 are issued and outstanding, 7,200,000
        of
        which are designated Series A-3 Preferred Stock of which 4,079,403 are issued
        and outstanding, 9,000,000 of which are designated Series A-4 Preferred Stock
        of
        which 8,321,758 are issued and outstanding, 8,000,000 of which are designated
        Series A-5 Preferred Stock of which 3,263,519 are issued and outstanding,
        3,000,000 of which are designated Series A-6 Preferred Stock of which 2,558,481
        are issued and outstanding, and 4,500,000 of which are designated Series
        A-7
        Preferred Stock none of which of which are issued and outstanding. Shares
        of the
        authorized Common Stock have been reserved as follows: (i) 250,000 shares
        of the
        authorized Common Stock have been reserved for issuance pursuant to the exercise
        of stock options granted or to be granted after the date hereof under the
        1993
        Stock Option Plan of the Company, (ii) 350,000 shares of the authorized Common
        Stock have been reserved for issuance pursuant to the exercise of stock options
        granted or to be granted after the date hereof under the 1996 Stock Option
        Plan
        of the Company, (iii) 250,000 shares of the authorized Common Stock have
        been
        reserved for issuance pursuant to the exercise of stock options granted or
        to be
        granted after the date hereof under the 1998 Stock Option Plan of the Company,
        (iv) 350,000 shares of the authorized Common Stock have been reserved for
        issuance pursuant to the exercise of stock options granted or to be granted
        after the date hereof under the 2000 Long-Term Performance Plan of the Company,
        (v) 250,000 shares of the authorized Common Stock have been reserved for
        issuance pursuant to the exercise of stock options granted or to be granted
        after the date hereof under the 2002 Long-Term Performance Plan of the Company,
        (vi) 4,000,000 shares of the authorized Common Stock have been reserved for
        issuance pursuant to the exercise of stock options granted or to be granted
        after the date hereof under the 2004 Equity Incentive Plan of the Company
        (the
        stock options described in clauses (i) through (vi), collectively, the
“Options”), (vii) 4,200,000 shares of the authorized Common Stock have been
        reserved for issuance upon conversion of the Series A-1 Preferred Stock,
        (viii)
        2,600,000 shares of the authorized Common Stock have been reserved for issuance
        upon conversion of the Series A-2 Preferred Stock, (ix) 7,200,000 shares
        of the
        authorized Common Stock have been reserved for issuance upon conversion of
        the
        Series A-3 Preferred Stock, (x) 9,000,000 shares of the authorized Common
        Stock
        have been reserved for issuance upon conversion of the Series A-4 Preferred
        Stock, (xi) 8,000,000 shares of the authorized Common Stock have been reserved
        for issuance upon conversion of the Series A-5 Preferred Stock, (xii) 3,000,000
        shares of the Common Stock have been reserved for issuance upon conversion
        of
        the Series A-6 Preferred Stock, (xiii) 500,000 shares of the Common Stock
        have
        been reserved for issuance pursuant to the exercise of the Series A-1 Warrants,
        , (xiv) 400,000 shares of the

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      authorized
        Common Stock have been reserved for issuance pursuant to the exercise of
        the
        Series A-2 Warrants, (xv) 769,232 shares of the authorized Common Stock have
        been reserved for issuance pursuant to the exercise of the Series A-3 Warrants,
        (xvi) 1,538,461 shares of the authorized Common Stock have been reserved
        for
        issuance pursuant to the exercise of the Series A-4 Warrants, (xvii) 450,000
        shares of the authorized Common Stock have been reserved for issuance pursuant
        to the exercise of the Series A-5 Warrants, (xviii) 765,258 shares of the
        authorized Common Stock have been reserved for issuance pursuant to the exercise
        of the Series A-6 Warrants, (xix) 700,000 shares of the authorized Common
        Stock
        have been reserved for issuance pursuant to the exercise of warrants issued
        to
        Columbia Partners, Investment Management, (xx) 746,736 shares of Series A-1
        Preferred Stock have been reserved for issuance as dividends with respect
        to the
        Series A-1 Preferred Stock, (xxi) 478,710 shares of Series A-2 Preferred
        Stock
        have been reserved for issuance as dividends with respect to the Series A-2
        Preferred Stock, (xxii) 3,120,597 shares of Series A-3 Preferred Stock have
        been
        reserved for issuance as dividends with respect to the Series A-3 Preferred
        Stock, (xxiii) 678,242 shares of Series A-4 Preferred Stock have been reserved
        for issuance as dividends with respect to the Series A-4 Preferred Stock,
        (xxiv)
        4,736,491 shares of Series A-5 Preferred Stock have been reserved for issuance
        as dividends with respect to the Series A-5 Preferred Stock, (xxv) 441,519
        shares of Series A-6 Preferred Stock have been reserved for issuance as
        dividends with respect to the Series A-6 Preferred Stock (xxvi) 250,000 shares
        of authorized Common Stock have been reserved for issuance in connection
        with
        the Company’s acquisition of Nexl Inc. The rights, privileges and preferences of
        the Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred
        Stock, Series A-4 Preferred Stock, Series A-5 Preferred Stock and Series
        A-6
        Preferred Stock are as stated in the Existing Certificate. As of the date
        hereof, all issued and outstanding shares of the Company’s capital stock are
        duly authorized and validly issued, are fully paid and nonassessable. Except
        with respect to (i) 3,145,753 options to purchase shares of Common Stock
        and
        412,900 restricted stock units representing the right to acquire shares of
        Common Stock, in each case issued pursuant to the Company’s equity incentive
        plans, (ii) 4,422,951 warrants to purchase shares of Common Stock issued
        to the
        Purchasers in connection with the original issuance and sale of the Series
        A-1
        Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock,
        Series
        A-4 Preferred Stock, Series A-5 Preferred Stock, and Series A-6 Preferred
        Stock,
        and (iii) 700,000 warrants to purchase shares of Common Stock issued to Columbia
        Partners Investment Management, there are no options, warrants, conversion
        privileges, or preemptive or other rights or agreements presently outstanding
        to
        purchase or otherwise acquire from the Company any shares of the capital
        stock
        or other securities of the Company. Except for the Voting Agreement and the
        Shareholders Agreement, the Company has not entered into any agreements with
        any
        of its shareholders with respect to the voting of capital shares of the Company
        and to the Knowledge of the Company none of its shareholders are parties
        to such
        agreements. Except as aforesaid and as contemplated in the Transaction
        Documents, the Company is not a party to any agreement or understanding,
        and to
        its Knowledge, no shareholders are a party to such an agreement or
        understanding, that affects or relates to the voting or giving of written
        consents with respect to any security, or the voting by a director, of the
        Company. Except as aforesaid, to the Company’s Knowledge, no shareholder has
        granted options or other rights to any entity (other than the Company) to
        purchase any shares of Common Stock or other equity securities of the Company
        from such shareholder. The Company is not subject to any obligation (contingent
        or otherwise) to repurchase or otherwise to acquire or retire any shares
        of its
        capital stock. Except with respect to the issuance of 600,732

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      shares
        of
        Series A Preferred Stock on November 11, 2006 and 634,423 shares of Series
        A
        Preferred Stock on May 21, 2007 in satisfaction of the dividend obligations
        under the terms of the Series A Preferred Stock, the Company has not declared
        or
        paid any dividend or made any other distribution of cash, stock or other
        property to its shareholders. 

       

      (b)   Upon
        acceptance of the Certificate of Amendment by the Secretary of State of the
        State of New York the Series A-7 Preferred Stock shall be designated and
        shall
        have all such rights, including, without limitation, voting rights as set
        forth
        in the Certificate of Amendment.

       

      2.5   Authorization.
        The
        execution, delivery and performance by the Company of the Transaction Documents,
        the sale, issuance and delivery of the Purchased Securities and the performance
        of all of the obligations of the Company under each of the Transaction Documents
        have been authorized by the Board of Directors (or a duly authorized committee
        thereof), and, other than approvals required by the Nasdaq Stock Market
        (“Nasdaq”),
        no
        other corporate action on the part of the Company or any Subsidiary and no
        other
        corporate or other approval or authorization is required on the part of the
        Company, or any Person by Law or otherwise in order to make the Transaction
        Documents the valid, binding and enforceable obligations (subject to (i)
        laws of
        general application relating to bankruptcy, insolvency, and the relief of
        debtors, and (ii) rules of law governing specific performance, injunctive
        relief, or other equitable remedies) of the Company. Each of the Transaction
        Documents, when executed and delivered by the Company, will constitute a
        valid
        and legally binding obligation of the Company, enforceable against the Company
        in accordance with its respective terms, subject to (i) laws of general
        application relating to bankruptcy, insolvency, and the relief of debtors,
        and
        (ii) rules of law governing specific performance, injunctive relief, or other
        equitable remedies. 

       

      2.6   Consents.
        Except
        for the consents of the majority of the holders the Company’s Series A Preferred
        Stock, no consent, approval, waiver or authorization, or designation,
        declaration, notification, or filing with any person or entity (governmental
        or
        private), on the part of the Company is required in connection with the valid
        execution, delivery and performance of the Transaction Documents, the offer,
        sale or issuance of the Purchased Securities or the consummation of any other
        transaction contemplated hereby (other than such notifications or filings
        required under applicable federal or state securities laws, if any), except
        for
        such consents, approvals, waivers, authorizations, designations, declarations,
        notifications, or filings that will be received prior to or as of the Closing
        Date.

       

      2.7   Brokers
        or Finders.
        The
        Company has not incurred, directly or indirectly, as a result of any action
        taken by the Company, any liability for brokerage or finders’ fees or agents’
commissions or any similar charges in connection with this Agreement or the
        issuance of the Purchased Securities or any transaction contemplated hereby
        or
        thereby. The Company agrees to indemnify and hold harmless each Purchaser
        from
        any liability for any commission or compensation in the nature of a finder’s fee
        (and the costs and expenses of defending against such liability or asserted
        liability) for which the Company or any of its officers, employees or
        representatives is responsible.

       

      2.8   Offering
        Exemption.
        Assuming the truth and accuracy of the representations and warranties contained
        in Section 3, the offer and sale of the Purchased

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      Securities
        as contemplated hereby and the issuance and delivery to the Purchasers of
        the
        Purchased Securities and the Conversion Shares, are exempt from registration
        under the Securities Act of 1933, as amended (the “Securities
        Act”),
        and
        will be registered or qualified (or exempt from registration or qualification)
        under applicable state securities and “blue sky” laws, as currently in
        effect.

       

      2.9   Offering
        of Purchased Shares and Warrants.
        No form
        of general solicitation or general advertising was used by the Company or
        any of
        its agents or representatives in connection with the offer and sale of the
        Purchased Securities. Neither the Company nor, to the Company’s Knowledge, any
        agent acting on the Company’s behalf has, directly or indirectly, offered the
        Purchased Securities of the Company for sale to or solicited any offers to
        buy
        the Purchased Securities of the Company from, or otherwise approached or
        negotiated with respect thereto with any other potential purchaser.

       

      2.10   SEC
        Reports.  (a)
         The
        Company has filed all required forms, reports and documents with the Securities
        and Exchange Commission (the “SEC”)
        since
        April 1, 2001, each of which has complied in all material respects with all
        applicable requirements of the Securities and the Securities Exchange Act
        of
        1934, as amended (the “Exchange
        Act”),
        and
        the rules and regulations promulgated thereunder, each as in effect on the
        date
        such forms, reports and documents were filed. 

       

      (b)    None
        of
        the following contains any untrue statement of a material fact or omits to
        state
        a material fact necessary in order to make the statements contained herein
        in
        light of the circumstances under which they were made not misleading: (i)
        this
        Agreement (including, the Schedules and Exhibits attached hereto), (ii) the
        Existing Certificate, (iii) the Bylaws, or (iv) the SEC Reports. There is
        no
        fact which, to the Knowledge of the Company, has not been disclosed to the
        Purchasers, which could be expected to have a Material Adverse Effect on
        the
        ability of the Company to perform its obligations under the Existing
        Certificate, the Bylaws or this Agreement.

       

      (c)    The
        Company is not aware of any correspondence (other than routine communications),
        action or proposed or threatened action by the SEC or Nasdaq with regard
        to the
        Company since April 1, 2006.

       

      2.11   Financial
        Statements.
        Included in the Company’s filings with the SEC are the audited financial
        statements of the Company and its Subsidiaries as at and for the years ended
        March 31, 2006, 2005 and 2004 and the unaudited financial statements of the
        Company and its Subsidiaries for the fiscal quarters ended June 30, September
        30
        and December 31, 2006 (the “Financial
        Statements”).
        The
        Financial Statements have been prepared in accordance with GAAP and fairly
        present the financial condition and operating results of the Company and
        its
        Subsidiaries as of the date, and for the period, indicated therein, except
        that
        the unaudited financial statements as at and for the quarters ended June
        30,
        September 30 and December 31, 2006 are subject to normal year-end adjustments
        and do not contain all notes required under GAAP.

       

      2.12   Absence
        of Conflicts.
        The
        Company is not in violation of or default under any provision of its Existing
        Certificate or Bylaws. The execution, delivery, and performance of,

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      and
        compliance with this Agreement and the consummation of the transactions
        contemplated hereby, have not and will not:

       

      (a)   violate,
        conflict with or result in a breach of any provision of or constitute a default
        (or an event which, with notice or lapse of time or both, would constitute
        a
        default), under, or result in the termination of, or accelerate the performance
        required by, or result in the creation of any Lien upon any of the assets,
        properties or business of the Company and the Subsidiaries under, any of
        the
        terms, conditions or provisions of the Existing Certificate or the Bylaws,
        or
        any material contract of the Company (for purposes of this Section 2.12(a)
        a
        material contract of the Company shall be only those agreements that are
        included as exhibits to the Company filings with the SEC); or

       

      (b)   violate
        any judgment, ruling, order, writ, injunction, award, decree, or any Law
        or
        regulation of any court or federal, state, county or local government or
        any
        other governmental, regulatory or administrative agency or authority which
        is
        applicable to the Company or any Subsidiary or any of their assets, properties
        or business, which violation would have a Material Adverse Effect. 

       

      3.    
Representations
        and Warranties of the Purchasers.
        Each
        Purchaser hereby represents and warrants that:

       

      3.1   Organization
        and Qualification.
        Each
        Purchaser is duly organized, validly existing and in good standing under
        the
        laws of its jurisdiction of incorporation or organization and its Agreement
        of
        Limited Partnership to carry on its business as it is now being conducted
        or
        proposed to be conducted.

       

      3.2   Power
        and Authority.
        Each
        Purchaser has all requisite power and authority as a limited partnership
        to
        execute and deliver the Transaction Documents to which it is a party, to
        purchase the Purchased Securities from the Company hereunder, and to carry
        out
        and perform its obligations under the terms of the Transaction
        Documents.

       

      3.3   Authorization.
        The
        execution, delivery and performance by such Purchaser of the Transaction
        Documents to which it is a party, and the performance of all of the obligations
        of such Purchaser under each of such Transaction Documents have been duly
        and
        validly authorized, and no other action, approval or authorization is required
        on the part of such Purchaser or any Person by Law or otherwise in order
        to make
        the Transaction Documents the valid, binding and enforceable obligations
        (subject to (i) laws of general application relating to bankruptcy, insolvency,
        and the relief of debtors, and (ii) rules of law governing specific performance,
        injunctive relief, or other equitable remedies) of such Purchaser that is
        a
        party thereto. Each of the Transaction Documents, when executed and delivered
        by
        such Purchaser that is a party thereto, will constitute a valid and legally
        binding obligation of such Purchaser that is a party thereto, enforceable
        against such Purchaser that is a party thereto in accordance with its terms
        subject to: (i) laws of general application relating to bankruptcy, insolvency,
        and the relief of debtors, and (ii) rules of law governing specific performance,
        injunctive relief, or other equitable remedies.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      3.4   Purchase
        Entirely for Own Account.
        The
        Purchased Securities and the Conversion Shares (collectively, the “New
        Securities”)
        will
        be acquired for investment for such Purchaser’s own account, not as a nominee or
        agent, and not with a view to the resale or distribution of any part thereof.
        Such Purchaser’s principal office is listed on Exhibit
        I
        attached
        hereto. Such Purchaser is aware that the Company is issuing the New Securities
        pursuant to Section 4(2) of the Securities Act and Regulation D promulgated
        thereunder without complying with the registration provisions of the Securities
        Act or other applicable federal or state securities laws. Such Purchaser
        is also
        aware that the Company is relying upon, among other things, the representations
        and warranties of the Purchasers contained in this Agreement for purposes
        of
        complying with Regulation D. 

       

      3.5   Disclosure
        of Information.
        Such
        Purchaser has received and carefully reviewed all the information it considers
        necessary or appropriate for deciding whether to purchase the New Securities.
        Such Purchaser further represents that the Company has made available to
        such
        Purchaser, at a reasonable time prior to the date of this Agreement, an
        opportunity to (a) ask questions and receive answers from the Company regarding
        the terms and conditions of the offering of the New Securities and the business,
        properties and financial condition of the Company, all of which questions
        (if
        any) have been answered to the reasonable satisfaction of such Purchaser,
        and
        (b) obtain additional information, all of which was furnished by the Company
        to
        the reasonable satisfaction of such Purchaser. The foregoing, however, does
        not
        limit or modify the representations and warranties of the Company in Section
        2
        of this Agreement or the right of the Purchasers to rely thereon.

       

      3.6   Investment
        Experience.
        Such
        Purchaser acknowledges that it is able to fend for itself, can bear the economic
        risk of its investment, and has such knowledge and experience in investing
        in
        companies similar to the Company and in financial or business matters such
        that
        it is capable of evaluating the merits and risks of the investment in the
        New
        Securities. Such Purchaser has made the determination to enter into this
        Agreement and the other agreements contemplated hereby and to acquire the
        New
        Securities based upon its own independent evaluation and assessment of the
        value
        of the Company and its present and prospective business prospects.

       

      3.7   Accredited
        Investor.
        Such
        Purchaser is an “accredited
        investor”
within
        the meaning of SEC Rule 501 of Regulation D, as presently in
        effect.

       

      3.8   Restricted
        Securities; Legends.
        Such
        Purchaser recognizes that the New Securities will not be registered under
        the
        Securities Act or other applicable federal or state securities laws. Such
        Purchaser understands that the New Securities it is purchasing are characterized
        as “restricted securities” under the federal securities laws inasmuch as they
        are being acquired from the Company in a transaction not involving a public
        offering. Such Purchaser acknowledges that it may not to sell or transfer
        the
        New Securities unless such New Securities are registered under the Securities
        Act and under any other applicable securities laws and that certificates
        evidencing the New Securities will bear the following legend or similar
        legend:

       

      THIS
        SECURITY AND THE SHARES OF STOCK WHICH MAY BE PURCHASED UPON THE [EXERCISE]
        [CONVERSION] OF THIS

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      SECURITY
        HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
        “ACT”),
        AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
        HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION AND REGISTRATION UNDER
        APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM UNDER THE ACT
        AND THE
        RULES AND REGULATIONS THEREUNDER AND SUCH APPLICABLE STATE SECURITIES
        LAWS.

       

      THIS
        SECURITY AND THE SHARES OF STOCK WHICH MAY BE PURCHASED UPON THE [EXERCISE]
        [CONVERSION] OF THIS SECURITY ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON
        THE
        TRANSFER THEREOF PURSUANT TO A SHAREHOLDERS AGREEMENT WITH THE
        ISSUER.

       

      3.9   No
        General Solicitation.
        Such
        Purchaser acknowledges that the New Securities were not offered to such
        Purchaser means of: (a) any advertisement, article, notice or other
        communication published in any newspaper, magazine or similar medium, or
        broadcast over television or radio, or (b) any other form of general
        solicitation or advertising.

       

      3.10   Absence
        of Conflicts.
        Such
        Purchaser’s execution, delivery, and performance of, and compliance with the
        Transaction Documents and the consummation of the transactions contemplated
        hereby and thereby, have not and will not: 

       

      (a)   violate,
        conflict with or result in a breach of any provision of or constitute a default
        (or an event which, with notice or lapse of time or both, would constitute
        a
        default) under, or result in the termination of, or accelerate the performance
        required by, or result in the creation of any Lien upon any of the assets,
        properties or business of such Purchaser under, any of the terms, conditions
        or
        provisions of (i) its certificate/articles of formation or organization or
        any
        of its other formation or organizational documents, or (ii) any material
        contract to which it is a party; or

       

      (b)   violate
        any judgment, ruling, order, writ, injunction, award, decree, or any Law
        or
        regulation of any court or federal, state, county or local government or
        any
        other governmental, regulatory or administrative agency or authority which
        is
        applicable to such Purchaser or any of its assets, properties or businesses,
        which violation would have a Material Adverse Effect.

       

      3.11   Brokers
        or Finders.
        Such
        Purchaser has not incurred, nor will it incur, directly or indirectly, as
        a
        result of any action taken by such Purchaser, any liability for brokerage
        or
        finders’ fees or agents’ commissions or any similar charges in connection with
        this Agreement or the issuance of the New Securities or any transaction
        contemplated hereby or thereby. Such Purchaser agrees to indemnify and hold
        the
        Company harmless from any liability for any commission or compensation in
        the
        nature of a finders’ fee (and the costs and expenses of defending against such
        liability or asserted liability) for which such Purchaser, or any of its
        respective officers, employees or representatives is responsible.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      4.    
Conditions
        of the Parties.

       

      4.1   Conditions
        of Purchasers’ Obligations at the Closing.
        The
        obligations of each Purchaser under Section 1 of this Agreement are subject
        to
        the satisfaction by the Company on or before the Closing of each of the
        following conditions:

       

      (a)   Representations
        and Warranties.
        The
        representations and warranties of the Company contained in Section 2 shall
        be
        true and correct on and as of the Closing with the same force and effect
        as
        though such representations and warranties had been made on and as of the
        date
        of the Closing except as a result of events and changes thereto that do not
        result in a Material Adverse Effect (except where such representation is
        made as
        of a specific date, it shall be true and correct as of such date except as
        a
        result of events and changes thereto that do not result in a Material Adverse
        Effect).

       

      (b)   Performance.
        The
        Company shall have performed and complied with all conditions contained in
        this
        Agreement that are required to be performed or complied with by it on or
        before
        the Closing.

       

      (c)   Consents
        and Approvals.
        All
        authorizations, approvals, permits, or consents, if any, of any governmental
        authority or regulatory body of the United States or of any state or any
        creditor of the Company or any other Person that are required in connection
        with
        the lawful issuance and sale of the Purchased Securities at the Closing pursuant
        to this Agreement shall be duly obtained and effective as of each the Closing
        and the purchase and payment of the Purchased Securities to be purchased
        by the
        Purchasers at each the Closing on the terms and conditions as provided herein
        shall not violate any applicable Law.

       

      (d)   Good
        Standing; Qualification to do Business.
        The
        Company shall have delivered to the Purchasers certificates of good standing
        with respect to the Company dated as of a date no earlier than 15 days prior
        to
        the any the Closing from the jurisdiction of incorporation of the Company
        and
        from each jurisdiction in which it has qualified to do business and evidence
        of
        telephone confirmation thereof as of the close of business immediately prior
        to
        the Closing Date.

       

      (e)   Secretary’s
        Certificate.
        The
        Company shall have delivered to the Purchasers a certificate executed by
        its
        Secretary dated the Closing Date certifying with respect to (i) a copy of
        its
        Existing Certificate, the Certificate of Amendment and its Bylaws as amended
        to
        and in effect on the Closing Date and that the Company is not in violation
        of or
        default under any provision of its Existing Certificate, Certificate of
        Amendment or Bylaws as of and on the Closing Date, (ii) board (or committee)
        resolutions authorizing the transactions contemplated by this Agreement and
        the
        Transaction Documents, (iii) copies of all minutes of all meetings (or excerpts
        thereof) and all actions by written consent of the shareholders of the Company
        authorizing the transactions contemplated in the Transaction Documents and
        (iv)
        incumbency matters and such other proceedings relating to the authorization,
        execution and delivery of the Transaction Documents as may be reasonably
        requested by the Purchasers.

       

      (f)   Cross-Receipts
        of the Purchasers.
        The
        Company and the Purchasers shall have executed and delivered a cross-receipt
        acknowledging the Company’s

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      delivery
        to the Purchasers of the documents and certificates representing the Purchased
        Securities issued and sold to the Purchasers on the Closing Date to the
        Purchasers and the Purchasers’ payment therefor.

       

      (g)   Conversion
        Shares.
        The
        Conversion Shares with respect to Purchased Securities being purchased at
        the
        Closing, have been duly reserved for issuance and when issued will be duly
        and
        validly issued, fully paid and nonassessable.

       

      (h)   Listing
        on Stock Exchange.
        Appropriate filings shall have been made to list the Common Stock on Nasdaq,
        any
        other national securities exchange as identified under the Exchange Act,
        or the
        Nasdaq OTC Bulletin Board (or comparable substitute quotation system) as
        of the
        Closing and no action shall have been taken by Nasdaq or such national
        securities exchange to terminate such listing prior to the Closing.

       

      (i)   Registration
        Rights Agreement; etc.
        The
        Company and each other Purchaser shall have executed the Registration Rights
        Agreement Amendment.

       

      (j)   Series
        A-7 Purchased Shares.
        The
        Company shall deliver to each Purchaser its respective Series A-7 Purchased
        Shares.

       

      (k)   Warrants.
        The
        Company shall deliver to each Purchaser its respective Warrants. 

       

      (l)   Charter
        Amendment .
        The
        Company shall have filed at the Closing the Certificate of
        Amendment.

       

      4.2   Conditions
        of Company’s Obligations at the Closing.
        The
        obligations of the Company to consummate the transactions contemplated by
        this
        Agreement are subject to the satisfaction by the Purchasers on or before
        any the
        Closing of each of the following conditions:

       

      (a)   Representations
        and Warranties.
        The
        representations and warranties of the Purchasers contained in Section 3 shall
        be
        true and correct in all material respects on and as of the Closing (except
        where
        another date or period of time is specifically stated herein for a
        representation or warranty and in such case such representation or warranty
        shall be true and correct in all material respects on and as of such
        date) with
        the
        same force and effect as though such representations and warranties had been
        made on and as of the date of the Closing; provided, however, that
        representations and warranties that contain a materiality qualification shall
        be
        true and correct in all respects.

       

      (b)   Performance.
        The
        Purchasers shall have performed and complied with all conditions contained
        in
        this Agreement that are required to be performed or complied with by it on
        or
        before the Closing.

       

      (c)   Consents
        and Approvals.
        All
        authorizations, approvals, or permits, if any, of any governmental authority
        or
        regulatory body of the United States or of any state or any other Person
        that
        are required in connection with the lawful issuance and sale of the Purchased
        Securities pursuant to this Agreement shall be duly obtained and effective
        as of
        the Closing and the purchase and payment of the Purchased Securities to be
        purchased by the

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Purchasers
        at the Closing on the terms and conditions as provided herein shall not violate
        any applicable Law. 

       

      (d)   Cross-Receipts
        of the Purchasers.
        The
        Company and the Purchasers shall have executed and delivered a cross-receipt
        acknowledging the Company’s delivery to the Purchasers of the certificates
        representing the Purchased Securities issued and sold to the Purchasers on
        the
        Closing Date to the Purchasers and the Purchasers’ payment
        therefor.

       

      (e)   Purchase
        Price.
        The
        Purchasers shall have delivered to the Company the applicable purchase price
        for
        the Purchased Securities being purchased on the Closing Date as provided
        in
        Section 1.4.

       

      (f)   Complete
        Purchase.
        If more
        than one Purchaser is purchasing Purchased Securities at any the Closing,
        then
        each such Purchaser shall have satisfied all of the foregoing conditions
        in this
        Section 4.3 and shall have purchased the Purchased Securities that each such
        Purchaser has agreed to purchase.

       

      (g)   Consent
        of Series A Preferred Stockholders.
        The
        Consent of the Series A Preferred Stockholders required pursuant to the
        Company’s Certificate of Incorporation shall have been delivered to the Company.
        

       

      5.    
Covenants. So
        long
        as any Purchaser together with any entity affiliated with it owns at least
        750,000 shares of Series A Preferred Stock (as
        appropriately
        adjusted for any stock splits, stock dividends, combinations, and the
        like),
        the
        Company covenants and agrees that it will comply with each of the following
        covenants.

       

      5.1   Financial
        Statements.
        The
        Company shall furnish to each Purchaser, within five Business Days after
        filing,
        a true and complete signed copy of its Form 10-Q as filed with the SEC pursuant
        to the Exchange Act, all in such form, and together with such other information
        with respect to the business of the Company, as the Purchasers may request,
        which shall present fairly, in all material respects, the financial position
        of
        the Company as of the end of each such period and the results of its operations
        and cash flows during such period, all in accordance with GAAP. Annually,
        but
        not later than five Business Days after filing, the Company shall deliver
        to the
        Purchasers (i) a true and complete signed copy of its Form 10-K as filed
        with
        the SEC pursuant to the Exchange Act and (ii) audited financial statements
        which
        shall present fairly, in all material respects, the financial position of
        the
        Company as of the end of each such period and the results of its operations
        and
        cash flows during such period, all in accordance with GAAP and accompanied
        by
        the unqualified report and opinion thereon of the Company’s independent
        certified public accountant.

       

      5.2   Certain
        Other Reports and Information.
        The
        Company shall deliver to the Purchasers, within 30 days of issuance, all
        accountants’ management letters pertaining to, all other reports submitted by
        accountants in connection with any audit of, and all other reports from outside
        accountants with respect to, the Company and its Subsidiaries (and, in any
        event, any

       

      
        
          
          

        

        
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      independent
        auditors’ annual management letters, if issued, will be delivered to the
        Purchasers concurrently with the financial statements referred to in Section
        5.1).

       

      5.3   Further
        Information; Further Assurances.
        The
        Company will, with reasonable promptness, provide to the Purchasers such
        further
        assurances and additional information, reports and statements respecting
        its
        business, operations, properties and financial condition and respecting its
        Affiliates and investments, as the Purchasers may from time to time reasonably
        request. The Company shall use its reasonable commercial efforts to assist
        each
        Purchaser with respect to the necessary Securities Act and/or Exchange Act
        filings with respect to the Purchased Securities at the cost and expense
        of such
        Purchaser. 

       

      5.4   Notice
        of Certain Events.
        Promptly upon becoming aware of any of the following, the Company shall give
        the
        Purchasers notice thereof, together with a written statement of a Responsible
        Officer of the Company setting forth the details thereof and any action with
        respect thereto taken or proposed to be taken by the Company:

       

      (i)   Any
        pending action, suit, proceeding or investigation by or before any Governmental
        Authority against or affecting the Company (or any such action, suit, proceeding
        or investigation threatened in writing) to the extent that it would result
        in a
        Material Adverse Effect.

       

      (ii)   Any
        material violation, breach or default by the Company or any of its Subsidiaries
        of or under any agreement or instrument material to its business, assets,
        properties, operations or condition, financial or otherwise (it being expressly
        understood and agreed that the Company need not provide notice to the Purchasers
        pursuant to this Section 5.4(ii) of the termination of any such agreement
        or
        instrument in accordance with its terms).

       

      (iii)   (A)
        Any
        Environmental Claim made or threatened in writing against the Company, or
        (B)
        the Company’s becoming aware of any past or present acts, omissions, events or
        circumstances (including any Release, disposition, removal, abandonment or
        escape of any Hazardous Materials on, at, in, under, above, to, from or about
        any facility or property now or previously owned, operated or leased by the
        Company or any of its Subsidiaries) which could form the basis of any such
        Environmental Claim, which Environmental Claim, in the case of either clause
        (A)
        or (B), if adversely resolved, would reasonably be expected, either individually
        or in the aggregate, to have a Material Adverse Effect.

       

      (iv)   The
        occurrence of any Material Adverse Effect or any deviation in or change from
        the
        representations, warranties or covenants of the Company in this Agreement
        or in
        the other Transaction Documents. 

       

      5.5   Visitation;
        Verification.
        The
        Company shall permit such Persons as the Purchasers may designate from time
        to
        time to visit and inspect any of the properties of the Company to examine
        their
        respective assets, properties, offices and other facilities, and books and
        records and take copies and extracts therefrom, and access to the outside
        auditors of the Company and their work papers relating thereto, in each case,
        as
        the Purchasers may from time to time reasonably request, and to discuss their
        affairs with their directors, officers, employees and independent accountants
        at
        such times and as often as the Purchasers may reasonably

       

      
        
          
          

        

        
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      request;
        provided
        that (i)
        any such Person shall provide at least two days’ prior advance notice to the
        Company of its intention to visit or inspect any of the properties of the
        Company; and (ii) all such visits or inspections shall be conducted during
        the
        normal business hours of the Company and without undue interference with
        the
        conduct of the Company’s business. The Company shall reimburse the Purchasers
        for reasonable out-of-pocket costs and expenses of for all inspections in
        any
        calendar year; for all other times all such visits or inspections shall be
        at
        the sole cost and expense of the Purchasers. The parties hereto agree that
        no
        investigation by the Purchasers or their representatives shall affect or
        limit
        the scope of the representations and warranties of the Company contained
        herein
        or in any Transaction Document delivered pursuant hereto or limit liability
        for
        breach of any such representation or warranty.

       

      The
        Purchasers shall have the right to examine and verify accounts, inventory
        and
        other properties and liabilities of the Company and its Subsidiaries from
        time
        to time, and the Company shall cooperate with the Purchasers in such
        verification. Without limitation of the foregoing, subject to limitations
        required due to the nature of any classified work, contracts or customer
        relationships, the Company hereby authorizes its officers, employees and
        independent accountants to discuss with the Purchasers the affairs of the
        Company and its Subsidiaries.

       

      5.6   Insurance.

       

      (a)   The
        Company shall, and shall cause each of its Subsidiaries to (i) maintain with
        financially sound and reputable insurers insurance with respect to its
        properties and business and against such liabilities, workers’ compensation,
        casualties and contingencies and of such types and in such amounts as are
        customary in the case of corporations engaged in the same or similar businesses
        or having similar properties similarly situated and naming each Purchaser
        as an
        additional insured and a loss payee, (ii) furnish to the Purchasers from
        time to
        time upon request copies of the policies under which such insurance is issued,
        original certificates of insurance and such other information relating to
        such
        insurance as the Purchasers may reasonably request, and (iii) provide such
        other
        insurance and endorsements as are required by this Agreement and the other
        Transaction Documents. 

       

      (b)   The
        Company shall maintain in effect an errors and omissions insurance policy
        for
        the Company and its Subsidiaries with (i) coverage extending to all officers
        and
        directors of the Company, (ii) policy limits not less than those maintained
        by
        the Company and its Subsidiaries on the date hereof, and (iii) deductibles
        not
        greater than those as are reasonable for companies engaged in the same or
        similar businesses and similarly situated.

       

      5.7   Payment
        of Taxes and Other Potential Charges and Priority Claims.
        The
        Company shall, and shall cause each of its Subsidiaries to, pay or
        discharge:

       

      (i)    on
        or
        prior to the date on which material penalties attach thereto, all taxes,
        assessments and other governmental charges imposed upon it or any of its
        properties;

       

      (ii)   on
        or
        prior to the date when due, all lawful claims of materialmen, mechanics,
        carriers, warehousemen, landlords and other like Persons which, if unpaid,
        might
        result in the creation of a material Lien upon any such property;
        and

       

      
        
          
          

        

        
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      (iii)   on
        or
        prior to the date when due, all other lawful claims which, if unpaid, might
        result in the creation of a Lien upon any such property or which, if unpaid,
        might give rise to a claim entitled to priority over general creditors of
        the
        Company in a case under Title 11 (Bankruptcy) of the United States Code,
        as
        amended; 

       

      provided
        that
        unless and until foreclosure, distraint, levy, sale or similar proceedings
        shall
        have been commenced it need not pay or discharge any such tax, assessment,
        charge or claim so long as (x) the validity thereof is contested in good
        faith
        and by appropriate proceedings diligently conducted, and (y) such reserves
        or
        other appropriate provisions as may be required by GAAP shall have been made
        therefor. 

       

      5.8   Preservation
        of Corporate Status.
        The
        Company shall maintain its status as a corporation or other entity duly
        organized, validly existing and in good standing under the laws of its
        jurisdiction of incorporation or formation, and to be duly qualified to do
        business as a foreign entity and in good standing in all jurisdictions in
        which
        the ownership of its properties or the nature of its business or both make
        such
        qualification necessary.

       

      5.9   Governmental
        Approvals and Filings.
        The
        Company shall obtain, keep and maintain in full force and effect all
        Governmental Approvals necessary in connection with or to facilitate the
        execution and delivery of this Agreement or any other Transaction Document,
        consummation of the transactions herein or therein contemplated, performance
        of
        or compliance with the terms and conditions hereof or thereof or to ensure
        the
        legality, validity, binding effect, enforceability or admissibility in evidence
        hereof or thereof. 

       

      5.10   Financial
        Accounting Practices.
        The
        Company shall, and shall cause each of its Subsidiaries to, make and keep
        books,
        records and accounts which, in reasonable detail, accurately and fairly reflect
        its transactions and dispositions of its assets and maintain systems of internal
        accounting controls sufficient to provide reasonable assurances that (a)
        transactions are executed in accordance with management’s general or specific
        authorization, (b) transactions are recorded as necessary (i) to permit
        preparation of financial statements in conformity with GAAP and (ii) to maintain
        accountability for assets, (c) access to assets is permitted only in accordance
        with management’s general or specific authorization and (d) the recorded
        accountability for assets is compared with the existing assets at reasonable
        intervals and appropriate action is taken with respect to any
        differences.

       

      6.    
Indemnification.

       

      6.1   General
        Indemnification.
        The
        Company shall indemnify, defend and hold each Purchaser, its affiliates and
        their respective officers, directors, partners (general and limited), employees,
        agents, attorneys successors and assigns (each a “Purchaser
        Entity”)
        harmless from and against all Losses incurred or suffered by a Purchaser
        Entity
        as a result of the breach of any of the representations, warranties, covenants
        or agreements made by the Company in this Agreement or any of the other
        Transaction Documents, except to the extent that such Losses are the result
        of
        the gross negligence, willful misconduct or fraud of such Purchaser Entity.
        Each
        Purchaser, severally and not jointly, shall indemnify, defend and hold the
        Company, its affiliates, their respective officers, directors, employees,
        agents, attorneys, successors and assigns (each a “Company
        Entity”)
        harmless against all Losses as a result of the

       

      
        
          
          

        

        
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      breach
        of
        any of the representations, warranties, covenants or agreements made by such
        Purchaser in this Agreement or any of the other Transaction Documents, except
        to
        the extent that such Losses are a result of the gross negligence, willful
        misconduct or fraud of such Company Entity. 

       

      6.2   Indemnification
        Principles.
        For
        purposes of this Section 6, “Losses”
shall
        mean each and all of the following items: claims, losses (including, without
        limitation, losses of earnings), liabilities, obligations, payments, damages
        (actual, punitive or consequential to the extent provided in this Section
        6.2),
        charges, judgments, fines, penalties, amounts paid in settlement, costs and
        expenses (including, without limitation, interest which may be imposed in
        connection therewith, costs and expenses of investigation, actions, suits,
        proceedings, demands, assessments and reasonable fees, expenses and
        disbursements of counsel, consultants and other experts). Each
        Purchaser and the Company hereby agree that Losses shall not include punitive
        or
        consequential damages except to the extent that such Losses are the result
        of
        the gross negligence, willful misconduct or fraud of the party from whom
        the
        indemnification is being sought (the “Indemnifying
        Party”).

       

      6.3   Claim
        Notice; Right to Defend.
        A party
        seeking indemnification (the “Indemnified
        Party”)
        under
        this Section 6 shall promptly upon becoming aware of the facts indicating
        that a
        claim for indemnification may be warranted, give to the Indemnifying Party
        a
        claim notice relating to such Loss (a “Claim
        Notice”).
        Each
        Claim Notice shall specify the nature of the claim, the applicable provision(s)
        of this Agreement or other instrument under which the claim for indemnity
        arises, and, if possible, the amount or the estimated amount thereof. No
        failure
        or delay in giving a Claim Notice (so long as the same is given prior to
        expiration of the representation or warranty upon which the claim is based)
        and
        no failure to include any specific information relating to the claim (such
        as
        the amount or estimated amount thereof) or any reference to any provision
        of
        this Agreement or other instrument under which the claim arises shall affect
        the
        obligation of the Indemnifying Party unless such failure materially and
        adversely prejudices the Indemnifying Party. If such Loss relates to the
        commencement of any action or proceeding by a third person, the Indemnified
        Party shall give a Claim Notice to the Indemnifying Party regarding such
        action
        or proceeding and the Indemnifying Party shall be entitled to participate
        therein to assume the defense thereof with counsel reasonably satisfactory
        to
        the Indemnified Party. After the delivery of notice from the Indemnifying
        Party
        to the Indemnified Party of its election to assume the defense of such action
        or
        proceeding, the Indemnifying Party shall not be liable (except to the extent
        the
        proviso to this sentence is applicable, in which event it will be so liable)
        to
        the Indemnified Party under this Section 8 for any legal or other expenses
        subsequently incurred by the Indemnified Party in connection with the defense
        thereof other than reasonable costs of investigation, provided
        that
        each Indemnified Party shall have the right to employ separate counsel to
        represent it and assume its defense (in which case, the Indemnifying Party
        shall
        not represent it) if (i) upon the advice of counsel, the representation of
        both
        parties by the same counsel would be inappropriate due to actual or potential
        differing interests between them, (ii) in the event the Indemnifying Party
        has
        not assumed the defense thereof within 10 days of receipt of notice of such
        claim or commencement of action, and in which case the fees and expenses
        of one
        such separate counsel shall be paid by the Indemnifying Party or (iii) if
        such
        Indemnified Party who is a defendant in any action or proceeding which is
        also
        brought against the Indemnifying Party reasonably shall have concluded that
        there may be one or more legal defenses available to such Indemnified
        Party

       

      
        
          
          

        

        
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      which
        are
        not available to the Indemnifying Party. If any Indemnified Party employs
        such
        separate counsel it will not enter into any settlement agreement which is
        not
        approved by the Indemnifying Party, such approval not to be unreasonably
        withheld. If the Indemnifying Party so assumes the defense thereof, it may
        not
        agree to any settlement of any such claim or action as the result of which
        any
        remedy or relief, other than monetary damages for which the Indemnifying
        Party
        shall be responsible hereunder, shall be applied to or against the Indemnified
        Party, without the prior written consent of the Indemnified Party. In any
        action
        hereunder as to which the Indemnifying Party has assumed the defense thereof
        with counsel reasonably satisfactory to the Indemnified Party, the Indemnified
        Party shall continue to be entitled to participate in the defense thereof,
        with
        counsel of its own choice, but, except as set forth above, the Indemnifying
        Party shall not be obligated hereunder to reimburse the Indemnified Party
        for
        the costs thereof.

       

      7.    
Certain
        Definitions.
        For the
        purposes of this Agreement the following terms will have the following
        meanings:

       

      “Affiliate(s)”
shall
        mean, with respect to any Person, any other Person directly or indirectly
        controlling (including but not limited to all directors and executive officers
        of such Person), controlled by, or under direct or indirect common control
        with
        such Person. A Person shall be deemed to control a corporation for the purposes
        of this definition if such Person possesses, directly or indirectly, the
        power
        (i) to vote 10% or more of the securities having ordinary voting power for
        the
        election of directors of such corporation or (ii) to direct or cause the
        direction of the management and policies of such corporation, whether through
        the ownership of voting securities, by contract or otherwise. 

       

      “Agreement”
shall
        have the meaning ascribed to it in the preliminary paragraph.

       

      “Approval”
shall
        have the meaning ascribed to it in Section 8.8(a).

       

      “Board
        of Directors”
shall
        have the meaning ascribed to it in the recitals.

       

      “Business
        Day”
shall
        mean any day other than a Saturday, Sunday, public holiday under the laws
        of the
        State of New York or any other day on which banking institutions are authorized
        to close in New York City.

       

      “Bylaws”
shall
        have the meaning ascribed to it in Section 2.2.

       

      “Certificate
        of Amendment”
shall
        have the meaning ascribed to it in the recitals.

       

      “Claim
        Notice”
shall
        have the meaning ascribed to it in Section 6.3.

       

      “Closing”
shall
        have the meaning ascribed to it in Section 1.4.

       

      “Closing
        Date”
shall
        have the meaning ascribed to it in Section 1.4.

       

      
        
          
          

        

        
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      “Company”
shall
        have the meaning ascribed to it in the preliminary paragraph.

       

      “Company
        Entity”
shall
        have the meaning ascribed to it in Section 6.1.

       

      “Common
        Stock”
shall
        mean the common stock, par value $0.01 per share, of the Company.

       

      “Conversion
        Shares”
shall
        have the meaning ascribed to it in Section 2.3.

       

      “Environmental
        Claim”
shall
        mean, with respect to any Person, any action, suit, proceeding, notice, claim,
        complaint, demand, request for information or other communication (written
        or
        oral) against, of or to such Person by or from any other Person (including
        any
        Governmental Authority, citizens’ group or present or former employee of such
        Person) alleging, asserting or claiming any actual or potential (a) violation
        of
        or liability under any applicable environmental Law or regulation or (b)
        liability for investigatory costs, cleanup costs, governmental response costs,
        natural resources damages, personal injuries, fines or penalties arising
        out of,
        based on or resulting from the presence, or release into the environment,
        of any
        Hazardous Materials at any location, whether or not owned by such
        Person.

       

      “Exchange
        Act”
shall
        have the meaning ascribed to it in Section 2.10.

       

      “Existing
        Certificate”
shall
        have the meaning ascribed to it in Section 2.2.

       

      “Financial
        Statements”
shall
        have the meaning ascribed to it in Section 2.11.

       

      “GAAP”
shall
        mean generally accepted accounting principles for financial reporting in
        the
        United States, applied on a consistent basis.

       

      “Governmental
        Approval”
shall
        mean any approval, order, consent, waiver, authorization, certificate, license,
        permit or validation of, or exemption or other action by, or filing, recording
        or registration with, or notice to, any Governmental Authority.

       

      “Governmental
        Authority”
shall
        mean any government or political subdivision or any agency, authority, bureau,
        central bank, commission, department or instrumentality of either, or any
        court,
        tribunal, grand jury or arbitrator, in each case whether foreign or
        domestic.

       

      “Hazardous
        Material(s)”
shall
        mean any element, compound, substance or other material (including, without
        limitation, any pollutant, contaminant, hazardous waste, hazardous substance,
        chemical substance, or product) that is listed, classified or regulated pursuant
        to any Environmental Law, including, without limitation, any petroleum product,
        by-product or additive, asbestos, presumed asbestos-containing material,
        asbestos-containing material, medical waste, chlorofluorocarbon,
        hydrochlorofluorocarbon, lead-containing paint, polychlorinated biphenyls,
        radioactive material or radon.

       

      
        
          
          

        

        
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      “Hereof”,
        “hereto”,
        “hereunder”
and
        similar terms shall refer to this Agreement and not to any particular paragraph
        or provision of this Agreement.

       

      “Indemnified
        Party”
shall
        have the meaning ascribed to it in Section 6.3.

       

      “Indemnifying
        Party”
shall
        have the meaning ascribed to it in Section 6.2.

       

      “Knowledge”
shall
        mean with respect to the Company, the knowledge, after diligent investigation,
        of the directors, officers and senior management of the Company and of the
        person or persons in such entity with responsibility for the matter with
        respect
        to which the knowledge is applicable.

       

      “Law”
shall
        mean the Company’s certificate of incorporation, as amended, the By-laws and any
        foreign, federal, state or local law, statute, rule, regulation, ordinance,
        code, directive, writ, injunction, decree, judgment or order applicable to
        the
        Company or the Subsidiaries.

       

      “Lien(s)”
shall
        mean any mortgage, deed of trust, pledge, lien, security interest, charge
        or
        other encumbrance or security arrangement of any nature whatsoever, including
        any conditional sale or title retention arrangement, and any assignment,
        deposit
        arrangement or lease intended as, or having the effect of, security, other
        than
        those which together do not have a Material Adverse Effect.

       

      “Losses”
shall
        have the meaning ascribed to it in Section 6.2.

       

      “Lien(s)”
shall
        mean any mortgage, deed of trust, pledge, lien, security interest, charge
        or
        other encumbrance or security arrangement of any nature whatsoever, including
        any conditional sale or title retention arrangement, and any assignment,
        deposit
        arrangement or lease intended as, or having the effect of,
        security.

       

      “Material
        Adverse Effect”
shall
        mean an effect which is materially adverse to the business, assets, properties,
        operations, results of operations or condition (financial or otherwise) of
        the
        Company individually or of the Company and the Subsidiaries taken as a whole
        (excluding general economic conditions or acts of war or terrorism).


       

      “Nasdaq”
shall
        have the meaning ascribed to it in Section 2.5.

       

      “New
        Securities”
shall
        have the meaning ascribed to it in Section 3.4.

       

      “Options”
shall
        have the meaning ascribed to it in Section 2.4.

       

      “Person”
shall
        mean an individual, corporation, limited liability company, partnership,
        trust,
        incorporated or unincorporated organization, joint venture, joint stock company,
        or a government or any agency or political subdivision thereof or other entity
        of any kind.

       

      “Purchased
        Securities”
shall
        have the meaning ascribed to it in Section 1.3.

       

      
        
          
          

        

        
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      “Purchaser(s)”
shall
        have the meaning ascribed to it in the preliminary paragraph.

       

      “Purchaser
        Entity”
shall
        have the meaning ascribed to it in Section 6.1. 

       

      “Registration
        Rights Agreement Amendment”
shall
        have the meaning ascribed to it in the recitals.

       

      “Release”
shall
        mean any past or present release, spill, leak, leaching, pumping, pouring,
        emitting, emptying, discharging, injecting, escaping, disposing or
        dumping.

       

      “Responsible
        Officer”
shall
        mean the President, Chief Executive Officer, Vice President of Finance or
        Chief
        Financial Officer of the Company.

       

      “SEC”
shall
        have the meaning ascribed to it in Section 2.10.

       

      “SEC
        Reports”
shall
        mean the Company’s (i) Annual Report on Form 10-K for the years ended March 31,
        2006, 2005, and 2004, (ii) all definitive proxy statements relating to the
        Company’s meeting of shareholders (whether annual or special) held since April
        1, 2006 and (iii) all other reports or registration statements filed by the
        Company with the SEC since April 1, 2006.

       

      “Securities
        Act”
shall
        have the meaning ascribed to it in Section 2.8.

       

      “Series
        A Preferred Stock”
shall
        mean, collectively, the Series A-1 Preferred Stock, Series A-2 Preferred
        Stock,
        Series A-3 Preferred Stock, Series A-4 Preferred Stock, Series A-5 Preferred
        Stock, Series A-6 Preferred Stock and Series A-7 Preferred Stock, each $0.001
        par value per share, of the Company.

       

      “Series
        A-7 Preferred Stock”
shall
        mean the Series A-7 Preferred Stock, $0.001 par value per share, of the
        Company.

       

      “Series
        A-7 Purchased Shares”
shall
        have the meaning ascribed to it in the recitals.

       

      “Shareholders’
        Agreement”
shall
        have the meaning ascribed to it in the recitals.

       

      “63%
        in
        Interest Purchasers”
shall
        mean the Purchasers owning Purchased Securities, the original purchase price
        of
        which constitutes at least 63% of the amounts invested by all of the Purchasers
        in all of the then outstanding Purchased Securities.

       

      “Subsidiary(ies)”
shall
        mean any other corporation, limited liability company, association, joint
        stock
        company, joint venture or business trust of which, as of the date hereof
        or
        hereafter, (i) more than fifty percent (50%) of the outstanding voting stock,
        share capital or other equity interests is owned either directly or indirectly
        by any Person or one or more of its Subsidiaries, or (ii) the management
        of
        which is otherwise controlled, directly, or indirectly through one or more
        intermediaries, or both, by any Person and/or its Subsidiaries. 

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      Unless
        otherwise specified to the contrary herein,
        Subsidiary(ies) shall refer to the Company’s Subsidiary(ies).

       

      “Transaction
        Document(s)”
shall
        mean, collectively, this Agreement, the Purchased Securities, the Registration
        Rights Agreement Amendment and all other agreements and instruments and any
        other documents, certificates, instruments or agreements executed pursuant
        to or
        in connection with any such document or this Agreement, as such documents
        may be
        amended from time to time.

       

      “Warrants”
shall
        have the meaning ascribed to it in the recitals.

       

      8.    
Miscellaneous.

       

      8.1   Survival
        of Representations and Warranties.
        The
        representations and warranties of the Company and Purchasers contained in
        or
        made pursuant to this Agreement shall survive the execution and delivery
        of this
        Agreement and the other Transaction Documents until the date that is three
        months following the end of the second fiscal year of the Company ending
        after
        the Closing Date.

       

      8.2   Successors
        and Assigns.
        Except
        as otherwise provided herein, the terms and conditions of this Agreement
        shall
        inure to the benefit of and be binding upon the respective successors and
        assigns of the parties (including transferees of any Purchased Securities).
        Nothing in this Agreement, express or implied, is intended to confer upon
        any
        party other than the parties hereto or their respective successors and assigns
        any rights, remedies, obligations, or liabilities under or by reason of this
        Agreement, except as expressly provided in this Agreement. Subject to applicable
        securities laws and the Shareholders’ Agreement, each Purchaser shall have the
        right to assign all of the rights, title and interest of such Purchaser pursuant
        to this Agreement, including, without limitation, the right to purchase the
        Purchased Securities and any shares of Common Stock issuable upon conversion
        or
        exercise thereof, to any third party reasonably acceptable to the
        Company.

       

      8.3   Governing
        Law.
        This
        Agreement shall be governed by and construed under the laws of the State
        of New
        York, excluding the application of any conflicts of laws principles which
        would
        require the application of the laws of another state.

       

      8.4   Counterparts.
        This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument.

       

      8.5   Titles
        and Subtitles.
        The
        titles and subtitles used in this Agreement are used for convenience only
        and
        are not to be considered in construing or interpreting this Agreement.


       

      8.6   Notices.
        All
        notices and other communications required or permitted hereunder shall be
        in
        writing. Notices shall be delivered personally, via recognized overnight
        courier
        (such as Federal Express, DHL or Airborne Express) or via certified or
        registered mail. Notices may be delivered via facsimile or e-mail, provided
        that
        by no later than two days

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      thereafter
        such notice is confirmed in writing and sent via one of the methods described
        in
        the previous sentence. Notices shall be addressed as follows:

       

      (a)   if
        to a
        Purchaser, to such Purchaser’s address set forth on Schedule I
        hereto;
        and 

       

      (b)   if
        to the
        Company, to MTM Technologies, Inc., 1200 High Ridge Road, Stamford, Connecticut
        06905, Attention: General Counsel, facsimile number (203) 975-3701, or at
        such
        other address or facsimile number as the Company shall have furnished in
        writing
        to the Purchasers, with a copy to Thelen Reid Brown Raysman & Steiner LLP,
        875 Third Avenue, New York, New York 10022, Attention: E. Ann Gill, facsimile
        number (212) 603.2001.

       

      All
        notices shall be effective upon receipt.

       

      8.7   Expenses.
        The
        Company shall pay all costs and expenses that it incurs with respect to the
        negotiation, execution, delivery and performance of this Agreement and the
        transactions contemplated hereby. If the transactions contemplated hereby
        are
        consummated on the Closing Date or if the Company enters into a transaction
        with
        another potential purchaser not affiliated with any Purchaser on substantially
        the terms set forth in this Agreement, the Company shall reimburse the
        Purchasers for the reasonable out-of-pocket expenses (including legal fees
        and
        disbursements paid to counsel to the Purchasers), which the Purchasers have
        incurred with respect to the negotiation, execution, delivery and performance
        of
        this Agreement, the other Transaction Documents and the transactions
        contemplated hereby and thereby in an amount not exceeding twenty-five thousand
        dollars ($25,000).

       

      8.8   Consents,
        Amendments and Waivers.
        Any term
        of this Agreement may be amended, and the observance of any term hereof may
        be
        waived (either generally or in a particular instance), only with the written
        consent of the 63% in Interest Purchasers and the written consent of the
        Company. Any amendment or waiver effected in accordance with this Section
        8.8
        shall be binding upon each of the parties hereto.

       

      8.9   Severability.
        Whenever possible, each provision of this Agreement will be interpreted in
        such
        manner as to be effective and valid under applicable law, but if any provision
        of this Agreement is held to be invalid, illegal or unenforceable in any
        respect
        under any applicable Law or rule in any jurisdiction, such invalidity,
        illegality or unenforceability will not affect any other provision or any
        other
        jurisdiction, but this Agreement will be reformed, construed and enforced
        in
        such jurisdiction to the greatest extent possible to carry out the intentions
        of
        the parties hereto.

       

      8.10   Entire
        Agreement.
        Each
        party hereby acknowledges that no other party or any other person or entity
        has
        made any promises, warranties, understandings or representations whatsoever,
        express or implied, not contained in the Transaction Documents and acknowledges
        that it has not executed the Transaction Documents in reliance upon any such
        promises, representations, understandings or warranties not contained herein
        or
        therein and that the Transaction Documents supersede all prior agreements
        and
        understandings between the parties with respect thereto. There are no promises,
        covenants or undertakings other than those expressly set forth or provided
        for
        in the Transaction Documents.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      8.11   Delays
        or Omissions.
        No
        delay or omission to exercise any right, power or remedy accruing to any
        party
        under this Agreement, upon any breach or default of any other party under
        this
        Agreement, shall impair any such right, power or remedy of such nonbreaching
        or
        nondefaulting party nor shall it be construed to be a waiver of any such
        breach
        or default, or an acquiescence therein, or of or in any similar breach or
        default thereafter occurring; nor shall any waiver of any single breach or
        default be deemed a waiver of any other breach or default theretofore or
        thereafter occurring. 

       

      8.12   Facsimile
        Signatures.
        Any
        signature page delivered by a fax machine shall be binding to the same extent
        as
        an original signature page, with regard to any agreement subject to the terms
        hereof or any amendment thereto. Any party who delivers such a signature
        page
        agrees to deliver promptly an original counterpart to each party to whom
        the
        faxed signature page was sent.

       

      8.13   Other
        Remedies.
        In
        addition to those remedies specifically set forth herein and in the Transaction
        Documents, if any, each party may proceed to protect and enforce its rights
        under this Agreement and the Transaction Documents either by suit in equity
        and/or by action at law, including, but not limited to, an action for damages
        as
        a result of any such breach and/or an action for specific performance of
        any
        such covenant or agreement contained in this Agreement or in the Transaction
        Documents. No right or remedy conferred upon or reserved to any party under
        this
        Agreement or the Transaction Documents is intended to be exclusive of any
        other
        right or remedy, and every right and remedy shall be cumulative and in addition
        to every other right and remedy given under this Agreement and the Transaction
        Documents or now and hereafter existing under applicable law. 

       

      8.14   Further
        Assurances.
        At any
        time or from time to time after the Closing, the Company, on the one hand,
        and
        the Purchasers, on the other hand, agree to cooperate with each other, and
        at
        the request of the other party, to execute and deliver any further instruments
        or documents and to take all such further action as the other party may
        reasonably request in order to evidence or effectuate the consummation of
        the
        transactions contemplated hereby relating to the purchase contemplated herein
        and to otherwise carry out the intent of the parties hereunder.

       

      8.15   Exchanges;
        Lost, Stolen or Mutilated Stock Certificates and Warrants.
        Upon
        surrender by any Purchaser to the Company of any stock certificate or Warrant,
        the Company at its expense shall issue in exchange therefor, and deliver
        to such
        Purchaser, a replacement stock certificate or Warrant. Upon receipt of evidence
        satisfactory to the Company of the loss, theft, destruction or mutilation
        of any
        stock certificate or Warrant and in case of any such loss, theft or destruction,
        upon delivery of an indemnity agreement, satisfactory to the Company, or
        in case
        of any such mutilation, upon surrender and cancellation of such stock
        certificate or Warrant, the Company shall issue and deliver to such Purchaser
        a
        new stock certificate or Warrant of like tenor, in lieu of such lost, stolen
        or
        mutilated stock certificate or Warrant.

       

      8.16   Certain
        Waivers. (a) To
        the
        extent that any Purchaser has or holds preemptive rights, such Purchaser
        hereby
        waives any and all preemptive rights that it may have with respect to the
        Purchased Securities and the issuance of any Common Stock issuable upon
        conversion or exercise of the Purchased Securities pursuant to this Agreement.
        

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      8.17   Nasdaq
        Compliance.
        Article
        FOURTH (B)(4)(a)(v) of the Existing Certificate provides for certain adjustments
        to be made to the Series A Conversion Price (as defined therein) upon the
        occurrence of certain events listed therein. The Company shall not issues
        any
        Series A-7 Preferred Shares or Warrants or common stock of the Company pursuant
        to such provision without compliance with Rule 4350 of the Nasdaq Rules,
        specifically, obtaining shareholder approval prior to such issuance, if so
        required.

       

      8.18   Further
        Assurances.
        If
        shareholder approval is required for any securities to be issued pursuant
        to the
        provisions of Article FOURTH (B)(4)(a)(v) of the Existing Certificate the
        Company shall request such shareholder consent in its next annual shareholders
        meeting held after such requirement arises. Such annual meeting of the Company’s
        shareholders shall be held in compliance with the rules of the SEC regarding
        proxies, consents and authorizations of shareholders in Section 14 of the
        Exchange Act, and the rules and regulations promulgated thereunder and shall
        make all appropriate filings related thereto with the SEC to give effect
        thereto, and to approve the authorization and issuance of such
        securities. 

       

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the parties have executed this Agreement as of the date
        first
        above written.

       

      
        	 	
                The
                  Company:

                 

                MTM
                  TECHNOLOGIES, INC.

                 

                 

              
	 	
                By:

              	/s/
J.W.
                Braukman III
	 	 	
                Name:    J.W.
                  Braukman III

                Title:  SVP
                  and Chief Financial Officer

              


      

      


      
        
          
          

        

        
          Signature
            Page to Purchase Agreement

          
            

          

        

        
          
          

        

      

       

      
        	 	
                The
                  Purchasers:

                 

                PEQUOT
                  PRIVATE EQUITY FUND III, L.P.

                 

              
	 	
                By:

              	
                Pequot
                  Capital Management, Inc.,

                its
                  Investment Manager

                 

                 

              
	 	 	
                By:

              	/s/ 
	 	 	 	
                Name:

                Title:

              
	 	 	 	
                 

                 

              
	 	
                PEQUOT
                  OFFSHORE PRIVATE EQUITY PARTNERS III, L.P.

                 

              
	 	
                By:

              	
                Pequot
                  Capital Management, Inc.,

                its
                  Investment Manager

                 

                 

              
	 	 	
                By:

              	/s/ 
	 	 	 	
                Name:

                Title:

              


      

      


      
        
          
          

        

        
          Signature
            Page to Purchase Agreement

          
            

          

        

        
          
          

        

      

       

      
        	 	
                The
                  Purchasers:

                 

                CONSTELLATION
                  VENTURE CAPITAL II, L.P.

                 

              
	 	
                By:

              	
                Constellation
                  Ventures Management II, LLC

                Its
                  General Partner

                 

                 

              
	 	 	
                By:

              	/s/ 
	 	 	 	
                Name:

                Title:

              
	 	 	 	
                 

                 

              
	 	
                CONSTELLATION
                  VENTURE CAPITAL OFFSHORE II, L.P.

                 

              
	 	
                By:

              	
                Constellation
                  Ventures Management II, LLC

                Its
                  General Partner

                 

                 

              
	 	 	
                By:

              	/s/ 
	 	 	 	
                Name:

                Title:

              
	 	 	 	
                 

                 

              
	 	
                THE
                  BSC EMPLOYEE FUND VI, L.P.

                 

              
	 	
                By:

              	
                Constellation
                  Ventures Management II, LLC

                Its
                  General Partner

                 

                 

              
	 	 	
                By:

              	/s/ 
	 	 	 	
                Name:

                Title:

              
	 	 	 	
                 

                 

              
	 	
                CVC
                  II PARTNERS, LLC

                 

              
	 	
                By:

              	
                The
                  Bear Stearns Companies Inc.

                Its
                  Managing Member

                 

                 

              
	 	 	
                By:

              	/s/ 
	 	 	 	
                Name:

                Title:

              


      

      


      
        
          
          

        

        
          Signature
            Page to Purchase Agreement

          
            

          

        

        
          
          

        

      

       

      Schedule
        I

       

      Names
        and Addresses of Purchasers

       

      Pequot
        Private Equity Fund III, L.P.

      c/o
        Pequot Capital Management, Inc.

      500
        Nyala
        Farm Road

      Westport,
        Connecticut 06880

      Attention:
        Carlos Rodrigues

      Fax:
        (203) 429-2420

       

      with
        a
        copy to:

       

      Aryeh
        Davis

      c/o
        Pequot Capital Management, Inc.

      153
        East
        53rd Street

      New
        York,
        New York 10022

      Fax:
        (212) 651-3481

       

      Pequot
        Offshore Private Equity Partners III, L.P.

      c/o
        Pequot Capital Management, Inc.

      500
        Nyala
        Farm Road

      Westport,
        Connecticut 06880

      Attention:
        Carlos Rodrigues

      Fax:
        (203) 429-2420

       

      with
        a
        copy to:

       

      Aryeh
        Davis

      c/o
        Pequot Capital Management, Inc.

      153
        East
        53rd Street

      New
        York,
        New York 10022

      Fax:
        (212) 651-3481

       

      Constellation
        Venture Capital II, L.P.

      c/o
        Constellation Ventures

      383
        Madison Avenue

      28th
        Floor

      New
        York,
        New York 10179

       

      
        with
          a
          copy to:

         

      

      
        
          
          

        

        
          Schedule
            I
            - Page 1

          
            

          

        

        
          
          

        

      

       

      Heather
        M. Stone, Esq.

      Edwards
        Angell Palmer & Dodge LLP

      111
        Huntington Avenue

      Boston,
        MA 02199-7613 USA

      Fax:
        888.325.9712


       

      Constellation
        Venture Capital Offshore II, L.P.

      c/o
        Constellation Ventures

      383
        Madison Avenue

      28th
        Floor

      New
        York,
        New York 10179

       

      The
        BSC
        Employee Fund VI, L.P.

      c/o
        Constellation Ventures

      383
        Madison Avenue

      28th
        Floor

      New
        York,
        New York 10179

       

      CVC
        Partners II, LLC

       

      c/o
        Constellation Ventures

      383
        Madison Avenue

      28th
        Floor

      New
        York,
        New York 10179

       

      
        
          
          

        

        
          Schedule
            I
            - Page 2

          
            

          

        

        
          
          

        

      

       

      Schedule
        II

       

      Schedule
        of Securities Purchased

       

      
        	
                 

                NAME
                  OF PURCHASER

                 

              	
                 

                NUMBER
                  OF SERIES A-7

                PURCHASED
                  SHARES

                 

              	
                 

                NUMBER
                  OF

                WARRANT
                  SHARES

                 

              	
                 

                SERIES
                  A-7 SHARES AND

                WARRANT
                  PURCHASE PRICE

                 

              
	
                 

                Pequot
                  Private Equity Fund III, L.P.

                 

              	
                 

                3,289,425

                 

              	
                 

                986,828

                 

              	
                 

                $3,944,020.58

                 

              
	
                 

                Pequot
                  Offshore Private Equity Partners III, L.P.

                 

              	
                 

                463,702

                 

              	
                 

                139,111

                 

              	
                 

                $555,978.70

                 

              
	
                 

                Constellation
                  Venture Capital II, L.P.

                 

              	
                 

                208,189

                 

              	
                 

                62,457

                 

              	
                 

                $249,618.61

                 

              
	
                 

                Constellation
                  Venture Capital Offshore II, L.P.

                 

              	
                 

                110,788

                 

              	
                 

                33,236

                 

              	
                 

                $132,848.81

                 

              
	
                 

                The
                  BSC Employee Fund VI, L.P.

                 

              	
                 

                92,839

                 

              	
                 

                27,852

                 

              	
                 

                $111,313.96

                 

              
	
                 

                CVC
                  Partners II, LLC

                 

              	
                 

                5,199

                 

              	
                 

                1,560

                 

              	
                 

                $6,233.60

                 

              
	
                 

                Totals

                 

              	
                 

                4,170,142

                 

              	
                 

                1,251,044

                 

              	
                 

                $5,000,000

                 

              


      

      


      
        
          
          

        

        
          Schedule
            II - Page 1