EX 10.1


    EXHIBIT
      10.1

    


    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of May 25, 2007, among OmniReliant Holdings, Inc., a Nevada corporation
      (the “Company”)
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

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

     

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

     

    ARTICLE
      I

    DEFINITIONS

     

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

     

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

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 405 under the Securities Act. With
      respect to a Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of such Purchaser.

     

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

     

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

     

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


    
      
         

      

      
         

        
          

        

      

      
         

      

    


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

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $.00001 per share, and any other
      class of securities into which such securities may hereafter be reclassified
      or
      changed into.

     

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

     

    “Company
      Counsel”
means
      Sichenzia Ross Friedman Ference LLP, with offices located at 61 Broadway, New
      York, New York 10006. 

     

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

     

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

     

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

     

    “Evaluation
      Date”
shall
      have the meaning ascribed to such term in Section 3.1(r). 

    


    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

    


    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan duly adopted
      for
      such purpose by a majority of the non-employee members of the Board of Directors
      of the Company or a majority of the members of a committee of non-employee
      directors established, (b) securities upon the exercise or exchange of or
      conversion of any Securities issued hereunder and/or other securities
      exercisable or exchangeable for or convertible into shares of Common Stock
      issued and outstanding on the date of this Agreement, provided that such
      securities have not been amended since the date of this Agreement to increase
      the number of such securities or to decrease the exercise, exchange or
      conversion price of such securities, (c) securities issued pursuant to
      acquisitions or strategic transactions approved by a majority of the
      disinterested directors


    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    


    of
      the
      Company, provided that any such issuance shall only be to a Person which is,
      itself or through its subsidiaries, an operating company in a business
      synergistic with the business of the Company and in which the Company receives
      benefits in addition to the investment of funds, but shall not include a
      transaction in which the Company is issuing securities primarily for the purpose
      of raising capital or to an entity whose primary business is investing in
      securities and (d) with the prior written consent of Midtown, up to an amount
      of
      Preferred Stock and warrants equal to the difference between $1,000,000 and
      the
      aggregate Subscription Amounts hereunder, on the same terms, conditions and
      prices as hereunder, with investors executing definitive agreements for the
      purchase of such securities and such transactions having closed on or before
      the
      earlier of (i) the Filing Date (as defined in the Registration Rights Agreement)
      or (ii) the date that the initial Registration Statement (as defined in the
      Registration Rights Agreement) is actually filed with the
      Commission.

    


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

    


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

    


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

    


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

    


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

    


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

     

    “Material
      Adverse Effect”
shall
      have the meaning assigned to such term in Section 3.1(b).

    


    “Material
      Permits”
shall
      have the meaning ascribed to such term in Section 3.1(m).

    


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

    


    “Midtown”
shall
      mean Midtown Partners & Co., LLC, a Florida limited liability
      company.

     

    “Participation
      Maximum”
shall
      have the meaning ascribed to such term in Section 4.13. 


    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    


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

    


    “Preferred
      Stock”
means
      the up to 1,000 shares of the Company’s 10% Series B Convertible Preferred Stock
      issued hereunder having the rights, preferences and privileges set forth in
      the
      Certificate of Designation, in the form of Exhibit
      A
      hereto.

    


    “Pre-Notice”
shall
      have the meaning ascribed to such term in Section 4.13. 

    


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

    


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

    


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

    


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

    


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

    “Required
      Minimum”
means,
      as of any date, the maximum aggregate number of shares of Common Stock then
      issued or potentially issuable in the future pursuant to the Transaction
      Documents, including any Underlying Shares issuable upon exercise or conversion
      in full of all Warrants and shares of Preferred Stock, ignoring any conversion
      or exercise limits set forth therein, and assuming that any previously
      unconverted shares of Preferred Stock are held until the third anniversary
      of
      the Closing Date and all dividends are paid in shares of Common Stock until
      such
      third anniversary.

     

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    


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

    


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

    


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


    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


    “Transfer
      Agent” means Register & Transfer Co., the current transfer agent of the
      Company, with a mailing address of _______________________ and a facsimile
      number of ________________________, and any successor transfer agent of the
      Company.

    


    “Underlying
      Shares”
means
      the shares of Common Stock issued and issuable upon conversion of the Preferred
      Stock, upon exercise of the Warrants and issued and issuable in lieu of the
      cash
      payment of dividends on the Preferred Stock in accordance with the terms of
      the
      Certificate of Designation.


    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    


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

    “Warrants”
means
      collectively the Common Stock purchase warrants delivered to the Purchasers
      at
      the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
      be
      exercisable in the form of Exhibit
      C
      attached
      hereto.

     

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

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1 
      Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      substantially concurrent with the execution and delivery of this Agreement
      by
      the parties hereto, the Company agrees to sell, and the Purchasers agree,
      severally and not jointly, to purchase up to an aggregate of, $1,000,000 of
      shares of Preferred Stock with an aggregate Stated Value equal to such
      Purchaser’s Subscription Amount and Warrants as determined by pursuant to
      Section 2.2(a). The aggregate number of shares of Preferred Stock sold hereunder
      shall be up to 1,000. Each Purchaser shall deliver to the Company via wire
      transfer or a certified check of immediately available funds equal to their
      Subscription Amount and the Company shall deliver to each Purchaser their
      respective shares of Preferred Stock and Warrants as determined pursuant to
      Section 2.2(a) and the other items set forth in Section 2.2 issuable at the
      Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and
      2.3,
      the Closing shall occur at the offices of FWS, or such other location as the
      parties shall mutually agree.

     

    
      
        2.2 
          Deliveries.

      

    

     

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

     

    
      
        (i) 
          this
          Agreement duly executed by the Company;

      

    


    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    


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

      

    

     

    (iii) a
      certificate evidencing a number of shares of Preferred Stock equal to such
      Purchaser’s Subscription Amount divided by the Stated Value, registered in the
      name of such Purchaser;

     

    (iv) a
      Warrant
      (a “Series
      B-1 Warrant”)
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 100% of such Purchaser’s Subscription Amount divided by
      $1.25, with an exercise price equal to $1.87,
      subject
      to adjustment therein, which warrants shall be immediately exercisable and
      have
      a term of exercise expiring the earlier of the three year anniversary of the
      Effective Date or 37 months following their issuance;

     

    (v) a
      Warrant
      (a “Series
      B-2 Warrant”)
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 100% of such Purchaser’s Subscription Amount divided by
      $1.25, with an exercise price equal to $3.75,
      subject
      to adjustment therein, which warrants shall be immediately exercisable and
      have
      a term of exercise expiring the earlier of the five year anniversary of the
      Effective Date or 61 months following their issuance;

     

    (vi) a
      certified copy of the Certificate of Designation as filed with the Secretary
      of
      State of Nevada; and

     

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

     

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

     

    
      
        (i) 
          this
          Agreement duly executed by such Purchaser;

      

    

     

    
      
        (ii) 
          such
          Purchaser’s Subscription Amount by wire transfer; and

      

    

     

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

     

    
      
        2.3 
          Closing
          Conditions.

      

    

     

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

     

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

     

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


    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    


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

     

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

     

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

     

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

     

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

     

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

     

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

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1 
      Representations
      and Warranties of the Company.
      Except
      as set forth under the corresponding section of the disclosure schedules
      delivered to the Purchasers concurrently herewith (the “Disclosure
      Schedules”)
      which
      Disclosure Schedules shall be deemed a part hereof and to qualify any
      representation or warranty otherwise made herein to the extent of such
      disclosure, the Company hereby makes the following representations and
      warranties to each Purchaser.

     

    (a) 
      Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all of the issued
      and outstanding shares of capital stock of each Subsidiary are
      validly


    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    


    issued
      and are fully paid, non-assessable and free of preemptive and similar rights
      to
      subscribe for or purchase securities. If the Company has no subsidiaries, all
      other references to the Subsidiaries or any of them in the Transaction Documents
      shall be disregarded.

     

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

     

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

     

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


    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    


    transactions
      contemplated hereby and thereby do not and will not: (i) conflict with or
      violate any provision of the Company’s or any Subsidiary’s certificate or
      articles of incorporation, bylaws or other organizational or charter documents,
      or (ii) conflict with, or constitute a default (or an event that with notice
      or
      lapse of time or both would become a default) under, result in the creation
      of
      any Lien upon any of the properties or assets of the Company or any Subsidiary,
      or give to others any rights of termination, amendment, acceleration or
      cancellation (with or without notice, lapse of time or both) of, any agreement,
      credit facility, debt or other instrument (evidencing a Company or Subsidiary
      debt or otherwise) or other understanding to which the Company or any Subsidiary
      is a party or by which any property or asset of the Company or any Subsidiary
      is
      bound or affected, or (iii) subject to the Required Approvals, conflict with
      or
      result in a violation of any law, rule, regulation, order, judgment, injunction,
      decree or other restriction of any court or governmental authority to which
      the
      Company or a Subsidiary is subject (including federal and state securities
      laws
      and regulations), or by which any property or asset of the Company or a
      Subsidiary is bound or affected; except in the case of each of clauses (ii)
      and
      (iii), such as could not have or reasonably be expected to result in a Material
      Adverse Effect.

     

    (e) 
      Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.6,
      (ii) the filing with the Commission of the Registration Statement, (iii) the
      notice and/or application(s) to each applicable Trading Market for the issuance
      and sale of the Securities and the listing of the Underlying Shares for trading
      thereon in the time and manner required thereby and (iv) the filing of Form
      D
      with the Commission and such filings as are required to be made under applicable
      state securities laws (collectively, the “Required
      Approvals”).

     

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

     

    (g) 
      Capitalization.
      The
      capitalization of the Company is as set forth on Schedule
      3.1(g)
      (which
      schedule shall also include the number of shares of Common Stock owned by
      Affiliates of the Company and the number of shares of Common Stock owned by
      non-Affiliates of the Company). The Company has not issued any capital stock
      since its most
      recently filed periodic report under the Exchange Act,
      other
      than pursuant to the exercise of employee stock options under the Company’s
      stock option


    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    


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

     

    (h) 
      SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by the Company under the Securities Act and the Exchange
      Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
      preceding the date hereof (or such shorter period as the Company was required
      by
      law or regulation to file such material) (the foregoing materials, including
      the
      exhibits thereto and documents incorporated by reference therein, being
      collectively referred to herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act, as applicable,
      and
      none of the SEC Reports, when filed, contained any untrue statement of a
      material fact or omitted to state a material fact required to be stated therein
      or necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading. The financial
      statements of the Company included in the SEC Reports comply in all material
      respects with applicable accounting requirements and the rules and regulations
      of the Commission with respect thereto as in effect at the time of filing.
      Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited

     


    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    


    financial
      statements may not contain all footnotes required by GAAP, and fairly present
      in
      all material respects the financial position of the Company and its consolidated
      Subsidiaries as of and for the dates thereof and the results of operations
      and
      cash flows for the periods then ended, subject, in the case of unaudited
      statements, to normal, immaterial, year-end audit adjustments. 

     

    (i) 
      Material
      Changes
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in a subsequent SEC Report filed
      prior
      to the date hereof, (i) there has been no event, occurrence or development
      that
      has had or that could reasonably be expected to result in a Material Adverse
      Effect, (ii) the Company has not incurred any liabilities (contingent or
      otherwise) other than (A) trade payables and accrued expenses incurred in the
      ordinary course of business consistent with past practice and (B) liabilities
      not required to be reflected in the Company’s financial statements pursuant to
      GAAP or disclosed in filings made with the Commission, (iii) the Company has
      not
      altered its method of accounting, (iv) the Company has not declared or made
      any
      dividend or distribution of cash or other property to its stockholders or
      purchased, redeemed or made any agreements to purchase or redeem any shares
      of
      its capital stock and (v) the Company has not issued any equity securities
      to
      any officer, director or Affiliate, except pursuant to existing Company stock
      option plans. The Company does not have pending before the Commission any
      request for confidential treatment of information. Except for the issuance
      of
      the Securities contemplated by this Agreement or as set forth on Schedule
      3.1(i),
      no
      event, liability or development has occurred or exists with respect to the
      Company or its Subsidiaries or their respective business, properties, operations
      or financial condition, that would be required to be disclosed by the Company
      under applicable securities laws at the time this representation is made that
      has not been publicly disclosed at least 1 Trading Day prior to the date that
      this representation is made. 

     

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


    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    


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

     

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


     

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

     

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


    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    


    the
      payment of federal, state or other taxes, the payment of which is neither
      delinquent nor subject to penalties. Any real property and facilities held
      under
      lease by the Company and the Subsidiaries are held by them under valid,
      subsisting and enforceable leases with which the Company and the Subsidiaries
      are in compliance.

     

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

     

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

     

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


    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    


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

     

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

     

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

     

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


    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    


    (v) 
      Registration
      Rights.
      Other
      than each of the Purchasers, no Person has any right to cause the Company to
      effect the registration under the Securities Act of any securities of the
      Company.

     

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

     

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

     

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


    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    


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

     

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

     

    (bb) 
      Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect, the Company and each
      Subsidiary has filed all necessary federal, state and foreign income and
      franchise tax returns and has paid or accrued all taxes shown as due thereon,
      and the Company has no knowledge of a tax deficiency which has been asserted
      or
      threatened against the Company or any Subsidiary.


    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    


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

     

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

     

    (ee) 
      Accountants.
      The
      Company’s accounting firm is set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedule. To the knowledge of the Company, such accounting firm
      (i)
      is a registered public accounting firm as required by the Exchange Act and
      (ii)
      shall express its opinion with respect to the financial statements to be
      included in the Company’s Annual Report on Form 10-KSB for the year ending June
      30, 2007.

     

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

     

    (gg) 
      No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company and the Company is current with
      respect to any fees owed to its accountants and lawyers.

     

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


    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    


    independent
      evaluation of the transactions contemplated hereby by the Company and its
      representatives.

     

    (ii) 
      Acknowledgement
      Regarding Purchasers’ Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding
      (except for Sections 3.2(f) and 4.16 hereof), it is understood and acknowledged
      by the Company (i) that none of the Purchasers have been asked to agree, nor
      has
      any Purchaser agreed, to desist from purchasing or selling, long and/or short,
      securities of the Company, or “derivative” securities based on securities issued
      by the Company or to hold the Securities for any specified term; (ii) that
      past
      or future open market or other transactions by any Purchaser, including Short
      Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
      placement transactions, may negatively impact the market price of the Company’s
      publicly-traded securities; (iii) that any Purchaser, and counter-parties in
      “derivative” transactions to which any such Purchaser is a party, directly or
      indirectly, presently may have a “short” position in the Common Stock; and (iv)
      that each Purchaser shall not be deemed to have any affiliation with or control
      over any arm’s length counter-party in any “derivative” transaction.
The
      Company further understands and acknowledges that (a) one or more Purchasers
      may
      engage in hedging activities at various times during the period that the
      Securities are outstanding, including, without limitation, during the periods
      that the value of the Underlying Shares deliverable with respect to Securities
      are being determined and (b) such hedging activities (if any) could reduce
      the
      value of the existing stockholders' equity interests in the Company at and
      after
      the time that the hedging activities are being conducted.  The Company
      acknowledges that such aforementioned hedging activities do not constitute
      a
      breach of any of the Transaction Documents.

     

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

     

    (kk) 
      FDA.
      To the
      knowledge of the Company, as to each product subject to the jurisdiction of
      the
      U.S. Food and Drug Administration (“FDA”)
      under
      the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
      thereunder (“FDCA”)
      that
      is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed
      by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical
      Product”), such Pharmaceutical Product is being manufactured, packaged, labeled,
      tested, distributed, sold and/or marketed by the Company in compliance with
      all
      applicable requirements under FDCA and similar laws, rules and regulations
      relating to registration, investigational use, premarket clearance, licensure,
      or application approval, good manufacturing practices, good laboratory
      practices, good clinical practices, product


    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    


    listing,
      quotas, labeling, advertising, record keeping and filing of reports, except
      where the failure to be in compliance would not have a Material Adverse Effect.
      There is no pending, completed or, to the Company's knowledge, threatened,
      action (including any lawsuit, arbitration, or legal or administrative or
      regulatory proceeding, charge, complaint, or investigation) against the Company
      or any of its Subsidiaries, and none of the Company or any of its Subsidiaries
      has received any notice, warning letter or other communication from the FDA
      or
      any other governmental entity, which (i) contests the premarket clearance,
      licensure, registration, or approval of, the uses of, the distribution of,
      the
      manufacturing or packaging of, the testing of, the sale of, or the labeling
      and
      promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
      requests the recall, suspension, or seizure of, or withdraws or orders the
      withdrawal of advertising or sales promotional materials relating to, any
      Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
      investigation by the Company or any of its Subsidiaries, (iv) enjoins production
      at any facility of the Company or any of its Subsidiaries, (v) enters or
      proposes to enter into a consent decree of permanent injunction with the Company
      or any of its Subsidiaries, or (vi) otherwise alleges any violation of any
      laws,
      rules or regulations by the Company or any of its Subsidiaries, and which,
      either individually or in the aggregate, would have a Material Adverse Effect.
      The
      properties, business and operations of the Company have been and are being
      conducted in all material respects in accordance with all applicable laws,
      rules
      and regulations of the FDA.  The Company has not been informed by the FDA
      that the FDA will prohibit the marketing, sale, license or use in the United
      States of any product proposed to be developed, produced or marketed by the
      Company nor has the FDA expressed any concern as to approving or clearing for
      marketing any product being developed or proposed to be developed by the
      Company.

     

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

     

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

     


    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    


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

     

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

     

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

     

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

     

    (f) 
      Short
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than the transaction contemplated hereunder, such Purchaser has not directly
      or
      indirectly, nor has any Person acting on behalf of or pursuant to any
      understanding with such Purchaser, executed any disposition, including Short
      Sales, in the securities of the Company during the period commencing
      from
      the time
      that such Purchaser first received a term sheet (written or oral) from the
      Company or any other Person setting forth the material terms of the transactions
      contemplated hereunder until the date hereof (“Discussion
      Time”).
      Notwithstanding the foregoing, in the case of a Purchaser that is a
      multi-managed investment vehicle whereby separate portfolio managers manage
      separate portions of such Purchaser's assets and the portfolio managers have
      no
      direct knowledge of the investment decisions made by the portfolio managers
      managing other portions of such


    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    


    Purchaser's
      assets, the representation set forth above shall only apply with respect to
      the
      portion of assets managed by the portfolio manager that made the investment
      decision to purchase the Securities covered by this Agreement. Other than to
      other Persons party to this Agreement, such Purchaser has maintained the
      confidentiality of all disclosures made to it in connection with this
      transaction (including the existence and terms of this
      transaction).

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 
      Transfer
      Restrictions.

     

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

     

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

     

    [NEITHER]
      THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
      [CONVERTIBLE]] HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION]
      OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
      OR
      OTHER LOAN SECURED BY SUCH SECURITIES.


    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    


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

     

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


    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    


    Purchasers
      by crediting the account of the Purchaser’s prime broker with the Depository
      Trust Company System.

    


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

    


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

    


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

     

    4.3 
      Furnishing
      of Information.
      As long
      as any Purchaser owns Securities, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company after the date hereof
      pursuant to the Exchange Act. As long as any Purchaser owns Securities, if
      the
      Company is not required to file reports pursuant to the Exchange Act, it will
      prepare and furnish to the Purchasers and make publicly available in accordance
      with Rule 144(c) such information as is required for the Purchasers to sell
      the
      Securities under Rule 144. The Company further covenants that it will take
      such
      further action as any holder of Securities may reasonably request, to the extent
      required from time to time to enable such Person to sell such Securities without
      registration under the Securities Act within the requirements of the exemption
      provided by Rule 144.


    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    


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

     

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

     

    4.6 
      Securities
      Laws Disclosure;
      Publicity.
      The
      Company shall, by 8:30 a.m. New York City time on the Trading Day immediately
      following the date hereof, issue a Current Report on Form 8-K, disclosing the
      material terms of the transactions contemplated hereby and including the
      Transaction Documents as exhibits thereto. The Company and each Purchaser shall
      consult with each other in issuing any other press releases with respect to
      the
      transactions contemplated hereby, and neither the Company nor any Purchaser
      shall issue any such press release or otherwise make any such public statement
      without the prior consent of the Company, with respect to any press release
      of
      any Purchaser, or without the prior consent of each Purchaser, with respect
      to
      any press release of the Company, which consent shall not unreasonably be
      withheld or delayed, except if such disclosure is required by law, in which
      case
      the disclosing party shall promptly provide the other party with prior notice
      of
      such public statement or communication. Notwithstanding the foregoing, the
      Company shall not publicly disclose the name of any Purchaser, or include the
      name of any Purchaser in any filing with the Commission or any regulatory agency
      or Trading Market, without the prior written consent of such Purchaser, except
      (i) as required by federal securities law in connection with (A) any
      registration statement contemplated by the Registration Rights Agreement and
      (B)
      the filing of final Transaction Documents (including signature pages thereto)
      with the Commission and (ii) to the extent such disclosure is required by law
      or
      Trading Market regulations, in which case the Company shall provide the
      Purchasers with prior notice of such disclosure permitted under this subclause
      (ii).

     

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


    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    


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

     

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

     

    4.10 
      Reimbursement.
      If any
      Purchaser becomes involved in any capacity in any Proceeding by or against
      any
      Person who is a stockholder of the Company (except as a result of sales,
      pledges, margin sales and similar transactions by such Purchaser to or with
      any
      other stockholder), solely as a result of such Purchaser’s acquisition of the
      Securities under this Agreement, the Company will reimburse such Purchaser
      for
      its reasonable legal and other expenses (including the cost of any investigation
      preparation and travel in connection therewith) incurred in connection
      therewith, as such expenses are incurred. The reimbursement obligations of
      the
      Company under this paragraph shall be in addition to any liability which the
      Company may otherwise have, shall extend upon the same terms and conditions
      to
      any Affiliates of the Purchasers who are actually named in such action,
      proceeding or investigation, and partners, directors, agents, employees and
      controlling persons (if any), as the case may be, of the Purchasers and any
      such
      Affiliate, and shall be binding upon and inure to the benefit of any successors,
      assigns, heirs and personal representatives of the Company, the Purchasers
      and
      any such Affiliate and any such Person. The Company also agrees that neither
      the
      Purchasers nor any such Affiliates, partners, directors, agents, employees
      or
      controlling persons shall have any liability to the Company or any Person
      asserting claims on behalf of or in right of the Company solely as a result
      of
      acquiring the Securities under this Agreement, except if such claim arises
      primarily from a breach of such Purchaser’s representations, warranties or
      covenants under the Transaction Documents or any agreements or understandings
      such Purchaser may have with any such stockholder or any violations by the
      Purchaser of state or federal securities laws or any conduct by such Purchaser
      which constitutes fraud, gross negligence, willful misconduct or
      malfeasance.

     

    4.11 
      Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 4.11, the Company will indemnify and hold
      each
      Purchaser and its directors, officers, shareholders, members, partners,
      employees and agents (and any other Persons with a functionally equivalent
      role
      of a Person holding such titles notwithstanding a lack of such title or any
      other title), each Person who controls such Purchaser (within the meaning of
      Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
      directors, officers, shareholders, agents, members, partners or employees (and
      any other Persons with a functionally equivalent role of a Person holding such
      titles notwithstanding a lack of such title or any other title) of such
      controlling person (each, a “Purchaser
      Party”)
      harmless from any and all losses, liabilities, obligations,


    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    


    claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Purchaser Party may suffer or incur as a result
      of
      or relating to (a) any breach of any of the representations, warranties,
      covenants or agreements made by the Company in this Agreement or in the other
      Transaction Documents or (b) any action instituted against a Purchaser, or
      any
      of them or their respective Affiliates, by any stockholder of the Company who
      is
      not an Affiliate of such Purchaser, with respect to any of the transactions
      contemplated by the Transaction Documents (unless such action is based upon
      a
      breach of such Purchaser’s representations, warranties or covenants under the
      Transaction Documents or any agreements or understandings such Purchaser may
      have with any such stockholder or any violations by the Purchaser of state
      or
      federal securities laws or any conduct by such Purchaser which constitutes
      fraud, gross negligence, willful misconduct or malfeasance). If any action
      shall
      be brought against any Purchaser Party in respect of which indemnity may be
      sought pursuant to this Agreement, such Purchaser Party shall promptly notify
      the Company in writing, and the Company shall have the right to assume the
      defense thereof with counsel of its own choosing reasonably acceptable to the
      Purchaser Party. Any Purchaser Party shall have the right to employ separate
      counsel in any such action and participate in the defense thereof, but the
      fees
      and expenses of such counsel shall be at the expense of such Purchaser Party
      except to the extent that (i) the employment thereof has been specifically
      authorized by the Company in writing, (ii) the Company has failed after a
      reasonable period of time to assume such defense and to employ counsel or (iii)
      in such action there is, in the reasonable opinion of such separate counsel,
      a
      material conflict on any material issue between the position of the Company
      and
      the position of such Purchaser Party, in which case the Company shall be
      responsible for the reasonable fees and expenses of no more than one such
      separate counsel. The Company will not be liable to any Purchaser Party under
      this Agreement (i) for any settlement by a Purchaser Party effected without
      the
      Company’s prior written consent, which shall not be unreasonably withheld or
      delayed; or (ii) to the extent, but only to the extent that a loss, claim,
      damage or liability is attributable to any Purchaser Party’s breach of any of
      the representations, warranties, covenants or agreements made by such Purchaser
      Party in this Agreement or in the other Transaction Documents.

     

    4.12 
      Reservation
      and Listing of Securities.

     

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

     

    (b) 
      If,
      on
      any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than 130% of (i) the Required Minimum on
      such date, minus (ii) the number of shares of Common Stock previously issued
      pursuant to the Transaction Documents, then the Board of Directors of the
      Company shall use commercially reasonable efforts to amend the Company’s
      certificate or articles of incorporation to increase the number of authorized
      but unissued shares of Common Stock to at least the Required Minimum at such
      time (minus the number of shares of Common Stock previously issued pursuant
      to
      the Transaction Documents), as soon as possible and in any event not later
      than
      the 75th day after such date; provided that the Company will not be required
      at
      any time to authorize a number of shares of Common Stock
      greater


    
      
         

      

      
        -27-

        
          

        

      

      
         

      

    


    than
      the
      maximum remaining number of shares of Common Stock that could possibly be issued
      after such time pursuant to the Transaction Documents.

     

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

     

    4.13 
      Participation
      in Future Financing.
      

     

    (a) 
      From
      the
      date hereof until the date that is the 12 month anniversary of the Effective
      Date, upon any issuance by the Company or any of its Subsidiaries of Common
      Stock or Common Stock Equivalents for cash consideration (a “Subsequent
      Financing”),
      each
      Purchaser shall have the right to participate in up to an amount of the
      Subsequent Financing equal to 100% of the Subsequent Financing (the
“Participation
      Maximum”)
      on the
      same terms, conditions and price provided for in the Subsequent
      Financing.

    


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

    


    (c) 
      Any
      Purchaser desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. (New York City time)
      on the 10th
      Trading
      Day after all of the Purchasers have received the Pre-Notice that the Purchaser
      is willing to participate in the Subsequent Financing, the amount of the
      Purchaser’s participation, and that the Purchaser has such funds ready, willing,
      and available for investment on the terms set forth in the Subsequent Financing
      Notice. If the Company receives no notice from a Purchaser as of such
      10th
      Trading
      Day, such Purchaser shall be deemed to have notified the Company that it does
      not elect to participate. 

    


    (d) 
      If
      by
      5:30 p.m. (New York City time) on the 10th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, notifications
      by
      the Purchasers of their


    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    


    willingness
      to participate in the Subsequent Financing (or to cause their designees to
      participate) is, in the aggregate, less than the total amount of the Subsequent
      Financing, then the Company may effect the remaining portion of such Subsequent
      Financing on the terms and with the Persons set forth in the Subsequent
      Financing Notice. 

    


    (e) 
      If
      by
      5:30 p.m. (New York City time) on the 10th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, the Company
      receives responses to a Subsequent Financing Notice from Purchasers seeking
      to
      purchase more than the aggregate amount of the Participation Maximum, each
      such
      Purchaser shall have the right to purchase its Pro Rata Portion (as defined
      below) of the Participation Maximum. “Pro
      Rata Portion”
is
      the
      ratio of (x) the Subscription Amount of Securities purchased on the Closing
      Date
      by a Purchaser participating under this Section 4.13 and (y) the sum of the
      aggregate Subscription Amounts of Securities purchased on the Closing Date
      by
      all Purchasers participating under this Section 4.13.

    


    (f) 
      The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.13, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice. 

    


    (g) 
      Notwithstanding
      the foregoing, this Section 4.13 shall not apply in respect of (i) an Exempt
      Issuance or (ii) an underwritten public offering of Common Stock. 

    


    4.14 
      Subsequent
      Equity Sales.
      

    


    (a) 
      From
      the
      date hereof until 90 days after the Effective Date, neither the Company nor
      any
      Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
      provided, however, the 90 day period set forth in this Section 4.14 shall be
      extended for the number of Trading Days during such period in which (i) trading
      in the Common Stock is suspended by any Trading Market, or (ii) following the
      Effective Date, the Registration Statement is not effective or the prospectus
      included in the Registration Statement may not be used by the Purchasers for
      the
      resale of the Underlying Shares. 

    


    (b) 
      From
      the
      date hereof until such time as no Purchaser holds any of the Securities, the
      Company shall be prohibited from effecting or entering into an agreement to
      effect any Subsequent Financing involving a Variable Rate Transaction. The
      term
“Variable
      Rate Transaction”
means
      a
      transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion, exercise or exchange rate or other price that is based upon and/or
      varies with the trading prices of or quotations for the shares of Common Stock
      at any time after the initial issuance of such debt or equity securities, or
      (B)
      with a conversion, exercise or


    
      
         

      

      
        -29-

        
          

        

      

      
         

      

    


    exchange
      price that is subject to being reset at some future date after the initial
      issuance of such debt or equity security or upon the occurrence of specified
      or
      contingent events directly or indirectly related to the business of the Company
      or the market for the Common Stock or (ii) enters into any agreement, including,
      but not limited to, an equity line of credit, whereby the Company may sell
      securities at a future determined price. 

    


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

    


    4.15 
      Equal
      Treatment of Purchasers.
      No
      consideration shall be offered or paid to any Person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      unless the same consideration is also offered to all of the parties to the
      Transaction Documents. For clarification purposes, this provision constitutes
      a
      separate right granted to each Purchaser by the Company and negotiated
      separately by each Purchaser, and is intended for the Company to treat the
      Purchasers as a class and shall not in any way be construed as the Purchasers
      acting in concert or as a group with respect to the purchase, disposition or
      voting of Securities or otherwise.

     

    4.16 
      Short
      Sales and Confidentiality After The Date Hereof.
      Each
      Purchaser severally and not jointly with the other Purchasers covenants that
      neither it nor any Affiliate acting on its behalf or pursuant to any
      understanding with it will execute any Short Sales during the period commencing
      at the Discussion Time and ending at the time that the transactions contemplated
      by this Agreement are first publicly announced as described in Section
      4.6. Each
      Purchaser, severally and not jointly with the other Purchasers, covenants that
      until such time as the transactions contemplated by this Agreement are publicly
      disclosed by the Company as described in Section 4.6, such Purchaser will
      maintain the confidentiality of all disclosures made to it in connection with
      this transaction (including the existence and terms of this transaction). Each
      Purchaser understands and acknowledges, severally and not jointly with any
      other
      Purchaser, that the Commission currently takes the position that coverage of
      short sales of shares of the Common Stock “against the box” prior to the
      Effective Date of the Registration Statement with the Securities is a violation
      of Section 5 of the Securities Act, as set forth in Item 65, Section A, of
      the
      Manual of Publicly Available Telephone Interpretations, dated July 1997,
      compiled by the Office of Chief Counsel, Division of Corporation Finance.
Notwithstanding
      the foregoing, no Purchaser makes any representation, warranty or covenant
      hereby that it will not engage in Short Sales in the securities of the Company
      after the time that the transactions contemplated by this Agreement are first
      publicly announced as described in Section 4.6. Notwithstanding
      the foregoing, in the case of a Purchaser that is a multi-managed investment
      vehicle whereby separate portfolio managers manage separate portions of such
      Purchaser's assets and the portfolio managers have no direct knowledge of the
      investment decisions made by the portfolio managers managing other portions
      of
      such Purchaser's assets, the covenant set forth above shall only apply with
      respect to the portion of assets managed by the portfolio manager that made
      the
      investment decision to purchase the Securities covered by this
      Agreement.

     

    4.17 
      Form
      D; Blue Sky Filings.
      The
      Company agrees to timely file a Form D with respect to the Securities as
      required under Regulation D and to provide a copy thereof,
      promptly


    
      
         

      

      
        -30-

        
          

        

      

      
         

      

    


    upon
      request of any Purchaser. The Company shall take such action as the Company
      shall reasonably determine is necessary in order to obtain an exemption for,
      or
      to qualify the Securities for, sale to the Purchasers at the Closing under
      applicable securities or “Blue Sky” laws of the states of the United States, and
      shall provide evidence of such actions promptly upon request of any
      Purchaser.

     

    4.18 
      Capital
      Change.
      Until
      the one-year anniversary of the Effective Date, the Company shall not undertake
      a reverse or forward stock split or reclassification of the Common Stock without
      the prior written consent of the Purchasers holding a majority in interest
      of
      the shares of Preferred Stock.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1 
      Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before May ___, 2007;
      provided,
      however,
      that
      such termination will not affect the right of any party to sue for any breach
      by
      the other party (or parties).

     

    5.2 
      Fees
      and Expenses.
      At the
      Closing, the Company has agreed to reimburse Midtown the non-accountable sum
      of
      $15,000 for its legal fees and expenses. Except as expressly set forth in the
      Transaction Documents to the contrary, each party shall pay the fees and
      expenses of its advisers, counsel, accountants and other experts, if any, and
      all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this Agreement. The Company
      shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
      in connection with the delivery of any Securities to the
      Purchasers.

     

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

     

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


    
      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

    

    


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

     

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

     

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

     

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

     

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


    
      
         

      

      
        -32-

        
          

        

      

      
         

      

    


    shall
      commence an action or proceeding to enforce any provisions of the Transaction
      Documents, then the prevailing party in such action or proceeding shall be
      reimbursed by the other party for its reasonable attorneys’ fees and other costs
      and expenses incurred with the investigation, preparation and prosecution of
      such action or proceeding.

     

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

     

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

     

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

     

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

     

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


    
      
         

      

      
        -33-

        
          

        

      

      
         

      

    


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

     

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

     

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

     

    5.18 
      Independent
      Nature of Purchasers’ Obligations and Rights.
      The
      obligations of each Purchaser under any Transaction Document are several and
      not
      joint with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance or non-performance of the obligations
      of any other Purchaser under any Transaction Document. Nothing contained herein
      or in any other Transaction Document, and no action taken by
      any


    
      
         

      

      
        -34-

        
          

        

      

      
         

      

    


    Purchaser
      pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
      an association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents. Each Purchaser shall be entitled to independently protect
      and enforce its rights, including without limitation, the rights arising out
      of
      this Agreement or out of the other Transaction Documents, and it shall not
      be
      necessary for any other Purchaser to be joined as an additional party in any
      proceeding for such purpose. Each Purchaser has been represented by its own
      separate legal counsel in their review and negotiation of the Transaction
      Documents. For reasons of administrative convenience only, Purchasers and their
      respective counsel have chosen to communicate with the Company through FWS.
      FWS
      does not represent any of the Purchasers but only Midtown. The Company has
      elected to provide all Purchasers with the same terms and Transaction Documents
      for the convenience of the Company and not because it was required or requested
      to do so by the Purchasers.

     

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

     

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

     

    


     

    [Signature
      Page Follows]


    
      
         

      

      
        -35-

        
          

        

      

      
         

      

    


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

     

    


    
      	
              OMNIRELIANT
                HOLDINGS, INC.

            	
              Address/Facsimile
                Number/E-mail Address for Notice:

            
	 	 
	 	 
	 	 
	
              By: 
                __________________________________________

              Name:

              Title:

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

            	 


    

    


    


    [PURCHASER
      SIGNATURE PAGES FOLLOW]

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     


    
      
         

      

      
        -36-

        
          

        

      

      
         

      

    


    [PURCHASER
      SIGNATURE PAGES TO ORHI SECURITIES PURCHASE AGREEMENT]

    


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

     

    Name
      of
      Purchaser: ________________________________________________________

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

    Name
      of
      Authorized Signatory:
      ____________________________________________________

    Title
      of
      Authorized Signatory:
      _____________________________________________________

    Email
      Address of
      Purchaser:________________________________________________

    Fax
      Number of Purchaser:
      ________________________________________________

    Address
      for Notice of Purchaser:

     

     

     

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

     

     

     

    Subscription
      Amount: $_________________

    


    Preferred
      Shares: _________________

    


    B-1
      Warrant Shares: __________________

    


    B-2
      Warrant Shares: _________________

    


    EIN
      Number:

     

    
      
         

      

        -37-