Unassociated Document


    SECURITIES
      PURCHASE AGREEMENT

     

    SECURITIES
      PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of November 29, 2007, by and among DigitalFX International, Inc., a Florida
      corporation, with headquarters located at 3035 East Patrick Lane, Suite 9,
      Las
      Vegas, NV 89120 (the "Company"),
      and
      the investors listed on the Schedule of Buyers attached hereto (individually,
      a
      "Buyer"
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. The
      Company and each Buyer is executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Section 4(2) of
      the
      Securities Act of 1933, as amended (the "1933
      Act"),
      and
      Rule 506 of Regulation D ("Regulation D")
      as
      promulgated by the United States Securities and Exchange Commission (the
      "SEC")
      under
      the 1933 Act.

     

    B. The
      Company has authorized a new series of senior secured convertible notes of
      the
      Company, in the form attached hereto as Exhibit
      A
      (the
      "Notes"),
      which
      Notes shall be convertible into the Company's common stock, par value $0.001
      per
      share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares"),
      in
      accordance with the terms of the Notes.

     

    C. Each
      Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, (i) that aggregate principal amount of
      the
      Notes set forth opposite such Buyer's name in column (3) on the Schedule of
      Buyers attached hereto (which aggregate amount for all Buyers shall be
      $7,000,000) and (ii) warrants, in substantially the form attached hereto as
      Exhibit
      B
      (the
      "Warrants"),
      to
      acquire up to that number of additional shares of Common Stock set forth
      opposite such Buyer's name in column (4) of the Schedule of Buyers (as
      exercised, collectively, the "Warrant
      Shares").

     

    D. Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, substantially in
      the
      form attached hereto as Exhibit
      C
      (the
      "Registration
      Rights Agreement"),
      pursuant to which the Company will agree to provide certain registration rights
      with respect to the Registrable Securities (as defined in the Registration
      Rights Agreement) under the 1933 Act and the rules and regulations promulgated
      thereunder, and applicable state securities laws.

     

    E. The
      Notes, the Conversion Shares, the Warrants and the Warrant Shares collectively
      are referred to herein as the "Securities".

     

    F. The
      Notes
      will rank senior to all outstanding and future indebtedness of the Company
      and
      its Subsidiaries (as hereinafter defined) and will be secured by a perfected
      security interest, in all of the assets of the Company, the stock of each
      Subsidiary and the assets of each U.S. Subsidiary, as evidenced by (i) a pledge
      agreement, in the form attached hereto as Exhibit
      H
      (as
      amended or modified from time to time in accordance with its terms, the
      "Pledge
      Agreement"),
      (ii)
      a security agreement, in the form attached hereto as Exhibit
      I
      (as
      amended or modified from time to time in accordance with its terms, the
      "Security
      Agreement"),
      and
      (iii) the guarantees of certain Subsidiaries of the Company in the form attached
      hereto as Exhibit
      J
      (as
      amended or modified from time to time in accordance with its terms, the
      "Guarantees"
      and,
      together with the Pledge Agreement, the Security Agreement, the Letter of Credit
      (as defined in Section 4(r) below) and any ancillary documents related thereto,
      collectively the "Security
      Documents").

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    NOW,
      THEREFORE,
      the
      Company and each Buyer hereby agree as follows:

     

    1.     PURCHASE
      AND SALE OF NOTES AND WARRANTS.

     

    (a)  Purchase
      of Notes and Warrants.

     

    (i)  Notes
      and Warrants. Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, the Company agrees to issue and sell to each Buyer, and each Buyer
      severally, but not jointly, shall purchase from the Company on the Closing
      Date
      (as defined below), (x) a principal amount of Notes as is set forth opposite
      such Buyer's name in column (3) on the Schedule of Buyers and (y) Warrants
      to
      acquire up to that number of Warrant Shares as is set forth opposite such
      Buyer's name in column (4) on the Schedule of Buyers, (the "Closing").

     

    (ii) Closing.
      The
      date and time of the Closing (the "Closing
      Date")
      shall
      be 10:00 a.m., New York City time, on the date hereof (or such later date as
      is
      mutually agreed to by the Company and each Buyer) after notification of
      satisfaction (or waiver) of the conditions to the Closing set forth in Sections
      6 and 7 below at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue,
      New York, New York 10022.

     

    (iii) Purchase
      Price.
      

     

    (1)
       The aggregate purchase price for the Notes and the Warrants to be
      purchased by each such Buyer at the Closing (the "Purchase
      Price")
      shall
      be the amount set forth opposite each Buyer's name in column (5) of the Schedule
      of Buyers. Each Buyer shall pay $1,000 for each $1,000 of principal amount
      of
      Notes and related Warrants to be purchased by such Buyer at the
      Closing.

     

    (2)
       The Buyers and the Company agree that the Notes and the Warrants
      constitute an "investment unit" for purposes of Section 1273(c)(2) of the
      Internal Revenue Code of 1986, as amended (the "Code").
      The
      Buyers and the Company mutually agree that the allocation of the issue price
      of
      such investment unit between the Notes and the Warrants in accordance with
      Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h)
      shall
      be an aggregate amount of $109,375 allocated to the Warrants and the balance
      of
      the Purchase Price allocated to the Notes, and neither the Buyers nor the
      Company shall take any position inconsistent with such allocation in any tax
      return or in any judicial or administrative proceeding in respect of
      taxes.

     

    (b)  Form
      of Payment.
      On the
      Closing Date, (i) each Buyer shall deliver its Purchase Price (less, in the
      case
      of Portside Growth and Opportunity Fund, the amounts withheld pursuant to
      Section 4(g)) to the Escrow Agent (as defined below) pursuant to Section 2
      of
      the Escrow Agreement (as defined below), dated as of November 28, 2007 by and
      among the Company, the Agent (as defined in Section 3(g) herein) and Continental
      Stock Transfer & Trust Company (the "Escrow
      Agent"),
      a
      financial institution chartered under the laws of the State of New York,
      attached hereto as Exhibit
      K
      (the
      "Escrow
      Agreement")
      for
      the Notes and the Warrants to be issued and sold to such Buyer at the Closing,
      by wire transfer of immediately available funds in accordance with the Company's
      written wire instructions and (ii) the Company shall deliver to each Buyer
      the Notes (allocated in the principal amounts as such Buyer shall request)
      which
      such Buyer is then purchasing hereunder along with the Warrants (allocated
      in
      the amounts as such Buyer shall request) which such Buyer is purchasing, in
      each
      case duly executed on behalf of the Company and registered in the name of such
      Buyer or its designee.

     

    
      
        
        

      

      
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    2. BUYER'S
      REPRESENTATIONS AND WARRANTIES.
      Each
      Buyer, severally and not jointly, represents and warrants with respect to only
      itself, as of the date hereof and as of the Closing Date, that:

     

    (a) No
      Sale or Distribution.
      Such
      Buyer is acquiring the Notes, and the Warrants, and upon conversion of the
      Notes
      and exercise of the Warrants will acquire the Conversion Shares issuable upon
      conversion of the Notes and the Warrant Shares issuable upon exercise of the
      Warrants, for its own account and not with a view towards, or for resale in
      connection with, the public sale or distribution thereof, except pursuant to
      sales registered or exempted under the 1933 Act; provided, however, that by
      making the representations herein, such Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act and pursuant to the
      applicable terms of the Transaction Documents (as defined in Section 3(b)).
      Such
      Buyer is acquiring the Securities hereunder in the ordinary course of its
      business. Such Buyer does not presently have any agreement or understanding,
      directly or indirectly, with any Person to distribute any of the
      Securities.

     

    (b) Accredited
      Investor Status.
      Such
      Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
      Regulation D.

     

    (c) Reliance
      on Exemptions.
      Such
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and such Buyer's compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    (d) Information.
      Such
      Buyer and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of the Company and materials relating
      to the offer and sale of the Securities that have been requested by such Buyer.
      Such Buyer and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company. Neither such inquiries nor any other due diligence
      investigations conducted by such Buyer or its advisors, if any, or its
      representatives shall modify, amend or affect such Buyer's right to rely on
      the
      Company's representations and warranties contained herein. Such Buyer
      understands that its investment in the Securities involves a high degree of
      risk
      and is able to afford a complete loss of such investment. Such Buyer has sought
      such accounting, legal and tax advice as it has considered necessary to make
      an
      informed investment decision with respect to its acquisition of the
      Securities.

     

    
      
        
        

      

      
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    (e) No
      Governmental Review.
      Such
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (f) Transfer
      or Resale.
      Such
      Buyer understands that except as provided in the Registration Rights Agreement:
      (i) the Securities have not been and are not being registered under the 1933
      Act
      or any state securities laws, and may not be offered for sale, sold, assigned
      or
      transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
      have delivered to the Company an opinion of counsel, in a generally acceptable
      form, to the effect that such Securities to be sold, assigned or transferred
      may
      be sold, assigned or transferred pursuant to an exemption from such
      registration, or (C) such Buyer provides the Company with reasonable assurance
      that such Securities can be sold, assigned or transferred pursuant to Rule
      144
      or Rule 144A promulgated under the 1933 Act, as amended (or a successor rule
      thereto) (collectively, "Rule
      144");
      (ii)
      any sale of the Securities made in reliance on Rule 144 may be made only in
      accordance with the terms of Rule 144 and further, if Rule 144 is not
      applicable, any resale of the Securities under circumstances in which the seller
      (or the Person (as defined in Section 3(s)) through whom the sale is made)
      may
      be deemed to be an underwriter (as that term is defined in the 1933 Act) may
      require compliance with some other exemption under the 1933 Act or the rules
      and
      regulations of the SEC thereunder; and (iii) neither the Company nor any other
      Person is under any obligation to register the Securities under the 1933 Act
      or
      any state securities laws or to comply with the terms and conditions of any
      exemption thereunder. The Securities may be pledged in connection with a bona
      fide margin account or other loan or financing arrangement secured by the
      Securities and such pledge of Securities shall not be deemed to be a transfer,
      sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
      of Securities shall be required to provide the Company with any notice thereof
      or otherwise make any delivery to the Company pursuant to this Agreement or
      any
      other Transaction Document, including, without limitation, this Section
      2(f).

     

    (g) Legends.
      Such
      Buyer understands that the certificates or other instruments representing the
      Notes and the Warrants and, until such time as the resale of the Conversion
      Shares and the Warrant Shares have been registered under the 1933 Act as
      contemplated by the Registration Rights Agreement, the stock certificates
      representing the Conversion Shares and the Warrant Shares, except as set forth
      below, shall bear any legend as required by the "blue sky" laws of any state
      and
      a restrictive legend in substantially the following form (and a stop-transfer
      order may be placed against transfer of such stock certificates):

     

    [NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
      HAVE
      BEEN][THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
      SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
      OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
      THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
      OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
      SAID
      ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
      BY THE SECURITIES.

     

    
      
        
        

      

      
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    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of the Securities upon which
      it is
      stamped, if, unless otherwise required by state securities laws, (i) such
      Securities are registered for resale under the 1933 Act, (ii) in connection
      with
      a sale, assignment or other transfer, such holder provides the Company with
      an
      opinion of a law firm reasonably acceptable to the Company (with Schulte Roth
      & Zabel LLP being deemed acceptable), in a reasonably acceptable form, to
      the effect that such sale, assignment or transfer of the Securities may be
      made
      without registration under the applicable requirements of the 1933 Act, or
      (iii)
      such holder provides the Company with reasonable assurance that the Securities
      can be sold, assigned or transferred pursuant to Rule 144 or Rule
      144A.

     

    (h) Validity;
      Enforcement.
      This
      Agreement, the Registration Rights Agreement and the Security Documents to
      which
      such Buyer is a party have been duly and validly authorized, executed and
      delivered on behalf of such Buyer and shall constitute the legal, valid and
      binding obligations of such Buyer enforceable against such Buyer in accordance
      with their respective terms, except as such enforceability may be limited by
      general principles of equity or to applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation and other similar laws relating to,
      or
      affecting generally, the enforcement of applicable creditors' rights and
      remedies.

     

    (i) No
      Conflicts.
      The
      execution, delivery and performance by such Buyer of this Agreement, the
      Registration Rights Agreement and the Security Documents to which such Buyer
      is
      a party and the consummation by such Buyer of the transactions contemplated
      hereby and thereby will not (i) result in a violation of the organizational
      documents of such Buyer or (ii) conflict with, or constitute a default (or
      an
      event which with notice or lapse of time or both would become a default) under,
      or give to others any rights of termination, amendment, acceleration or
      cancellation of, any agreement, indenture or instrument to which such Buyer
      is a
      party, or (iii) result in a violation of any law, rule, regulation, order,
      judgment or decree (including federal and state securities laws) applicable
      to
      such Buyer, except in the case of clauses (ii) and (iii) above, for such
      conflicts, defaults, rights or violations which would not, individually or
      in
      the aggregate, reasonably be expected to have a material adverse effect on
      the
      ability of such Buyer to perform its obligations hereunder.

     

    
      
        
        

      

      
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    (j) Residency.
      Such
      Buyer is a resident of that jurisdiction specified below its address on the
      Schedule of Buyers.

     

    (k) Certain
      Trading Activities.
      Other
      than with respect to the transactions contemplated herein, since the time that
      such Buyer was first contacted by the Company, the Agent (as defined below)
      or
      any other Person regarding this investment in the Company neither the Buyer
      nor
      any Affiliate of such Buyer which (x) had knowledge of the transactions
      contemplated hereby, (y) has or shares discretion relating to such Buyer's
      investments or trading or information concerning such Buyer's investments and
      (z) is subject to such Buyer's review or input concerning such Affiliate's
      investments or trading (collectively, "Trading
      Affiliates")
      has
      directly or indirectly, nor has any Person acting on behalf of or pursuant
      to
      any understanding with such Buyer or Trading Affiliate, effected or agreed
      to
      effect any transactions in the securities of the Company. Such Buyer hereby
      covenants and agrees not to, and shall cause its Trading Affiliates not to,
      engage, directly or indirectly, in any transactions in the securities of the
      Company or involving the Company's securities during the period from the date
      hereof until such time as (i) the transactions contemplated by this Agreement
      are first publicly announced as described in Section 4(i) hereof or (ii) this
      Agreement is terminated in full pursuant to Section 8 hereof. Notwithstanding
      the foregoing, for avoidance of doubt, nothing contained herein shall constitute
      a representation or warranty, or preclude any actions, with respect to the
      identification of the availability of, or securing of, available shares to
      borrow in order to effect short sales or similar transactions in the
      future.

     

    3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      The
      Company represents and warrants to each of the Buyers that, as of the date
      hereof and as of the Closing Date:

     

    (a) Organization
      and Qualification.
      The
      Company and its "Subsidiaries"
      (which
      for purposes of this Agreement means any "subsidiary" as defined in Rule 1-02(x)
      of Regulation S-X promulgated by the SEC under the 1934 Act (as defined below)
      and any other entity required to be disclosed in the SEC Reports pursuant to
      Item 601(b)(21) of Regulation S-K) are entities duly organized and validly
      existing and, to the extent legally applicable, in good standing under the
      laws
      of the jurisdiction in which they are formed, and have the requisite power
      and
      authorization to own their properties and to carry on their business as now
      being conducted. Each of the Company and its Subsidiaries is duly qualified
      as a
      foreign entity to do business and, to the extent legally applicable, is in
      good
      standing in every jurisdiction in which its ownership of property or the nature
      of the business conducted by it makes such qualification necessary, except
      to
      the extent that the failure to be so qualified or be in good standing would
      not
      reasonably be expected to have a Material Adverse Effect. As used in this
      Agreement, "Material
      Adverse Effect"
      means
      any material adverse effect on the business, properties, assets, operations,
      results of operations, condition (financial or otherwise) or prospects of the
      Company and its Subsidiaries, individually or taken as a whole, or on the
      transactions contemplated hereby or in the other Transaction Documents or by
      the
      agreements and instruments to be entered into in connection herewith or
      therewith, or on the authority or ability of the Company to perform its
      obligations under the Transaction Documents (as defined below). The Company
      has
      no Subsidiaries except as set forth on Schedule
      3(a).
      Other
      than the Subsidiaries, the Company has no joint venture or any entity in which
      the Company, directly or indirectly, owns any of the capital stock or holds
      an
      equity or similar interest which, individually or in the aggregate, would be
      classified as a "subsidiary" as defined in Rule 1-02(x) of Regulation S-X
      promulgated by the SEC under the 1934 Act (as defined below) or otherwise be
      required to be disclosed in the SEC Reports pursuant to Item 601(b)(21) of
      Regulation S-K.

     

    
      
        
        

      

      
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    (b) Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement, the Notes, the Registration Rights
      Agreement, the Security Documents, the Irrevocable Transfer Agent Instructions
      (as defined in Section 5(b)) in the form attached hereto as Exhibit
      D,
      the
      Warrants and each of the other agreements entered into by the parties hereto
      in
      connection with the transactions contemplated by this Agreement (collectively,
      the "Transaction
      Documents")
      and to
      issue the Securities in accordance with the terms hereof and thereof. The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by the Company of the transactions contemplated hereby and thereby,
      including, without limitation, the issuance of the Notes and the Warrants,
      the
      reservation for issuance and the issuance of the Conversion Shares issuable
      upon conversion of the Notes, the reservation for issuance and issuance of
      Warrant Shares issuable upon exercise of the Warrants, and the granting of
      a
      security interest in the Collateral (as defined in the Security Documents)
      have
      been duly authorized by the Company's Board of Directors and no further filing,
      consent, or authorization is required by the Company, its Board of Directors
      or
      its stockholders. This Agreement and the other Transaction Documents of even
      date herewith have been duly executed and delivered by the Company, and
      constitute the legal, valid and binding obligations of the Company, enforceable
      against the Company in accordance with their respective terms, except as such
      enforceability may be limited by general principles of equity or applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
      laws
      relating to, or affecting generally, the enforcement of applicable creditors'
      rights and remedies.

     

    (c) Issuance
      of Securities.
      The
      issuance of the Notes and the Warrants are duly authorized and upon issuance
      in
      accordance with the terms of the Transaction Documents shall be free from all
      taxes, liens and charges with respect to the issue thereof. As of the Closing,
      a
      number of shares of Common Stock shall have been duly authorized and reserved
      for issuance which equals or exceeds 130% of the aggregate of the maximum number
      of shares of Common Stock issuable (i) upon conversion of the Notes and (ii)
      upon exercise of the Warrants. Upon conversion or exercise in accordance with
      the Notes or the Warrants, as the case may be, the Conversion Shares and the
      Warrant Shares, respectively, will be validly issued, fully paid and
      nonassessable and free from all preemptive or similar rights, taxes, liens
      and
      charges with respect to the issue thereof, with the holders being entitled
      to
      all rights accorded to a holder of Common Stock. Assuming the accuracy of each
      of the representations and warranties set forth in Section 2 of this Agreement,
      the offer and issuance by the Company of the Securities is exempt from
      registration under the 1933 Act.

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance of the Notes and Warrants
      and reservation for issuance and issuance of the Conversion Shares, and the
      Warrant Shares) will not (i) result in a violation of any certificate of
      incorporation, certificate of formation, any certificate of designations or
      other constituent documents of the Company or any of its Subsidiaries, any
      capital stock of the Company or any of its Subsidiaries or bylaws of the Company
      or any of its Subsidiaries or (ii) conflict with, or constitute a default (or
      an
      event which with notice or lapse of time or both would become a default) in
      any
      respect under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any agreement, indenture or instrument to
      which
      the Company or any of its Subsidiaries is a party, or (iii) result in a
      violation of any law, rule, regulation, order, judgment or decree (including
      foreign, federal and state securities laws and regulations and the rules and
      regulations of The American Stock Exchange (the "Principal
      Market")
      applicable to the Company or any of its Subsidiaries or by which any property
      or
      asset of the Company or any of its Subsidiaries is bound or
      affected.

     

    
      
        
        

      

      
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    (e) Consents.
      Neither
      the Company nor any of its Subsidiaries is required to obtain any consent,
      authorization or order of, or make any filing or registration with, any court,
      governmental agency or any regulatory or self-regulatory agency or any other
      Person in order for it to execute, deliver or perform any of its obligations
      under or contemplated by the Transaction Documents, in each case in accordance
      with the terms hereof or thereof, except for the following consents,
      authorizations, orders, filings and registrations: (i) the filing with the
      SEC
      of one or more Registration Statements in accordance with the requirements
      of
      the Registration Rights Agreement (which is not required to be filed or obtained
      before the Closing) and (ii) the filing of a listing application for the
      Conversion Shares and Warrant Shares with the Principal Market, which shall
      be
      done pursuant to the rules of the Principal Market. The Company and its
      Subsidiaries are unaware of any facts or circumstances that might prevent the
      Company from obtaining or effecting any of the registration, application or
      filings pursuant to the preceding sentence. The Company is not in violation
      of
      the listing requirements of the Principal Market and has no knowledge of any
      facts that would reasonably lead to delisting or suspension of the Common Stock
      in the foreseeable future. The issuance by the Company of the Securities shall
      not have the effect of delisting or suspending the Common Stock from the
      Principal Market.

     

    (f) Acknowledgment
      Regarding Buyer's Purchase of Securities.
      The
      Company acknowledges and agrees that each Buyer is acting solely in the capacity
      of an arm's length purchaser with respect to the Transaction Documents and
      the
      transactions contemplated hereby and thereby and that no Buyer is (i) an officer
      or director of the Company, (ii) an "affiliate" of the Company or any of its
      Subsidiaries (as defined in Rule 144) or (iii) to the knowledge of the Company,
      a "beneficial owner" of more than 10% of the shares of Common Stock (as defined
      for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended
      (the "1934
      Act")).
      The
      Company further acknowledges that no Buyer is acting as a financial advisor
      or
      fiduciary of the Company or any of its Subsidiaries (or in any similar capacity)
      with respect to the Transaction Documents and the transactions contemplated
      hereby and thereby, and any advice given by a Buyer or any of its
      representatives or agents in connection with the Transaction Documents and
      the
      transactions contemplated hereby and thereby is merely incidental to such
      Buyer's purchase of the Securities. The Company further represents to each
      Buyer
      that the Company's decision to enter into the Transaction Documents has been
      based solely on the independent evaluation by the Company and its
      representatives.

     

    (g) No
      General Solicitation; Placement Agent's Fees.
      Neither
      the Company, nor any of its Subsidiaries or affiliates, nor any Person acting
      on
      its or their behalf, has engaged in any form of general solicitation or general
      advertising (within the meaning of Regulation D) in connection with the offer
      or
      sale of the Securities. The Company shall be responsible for the payment of
      any
      placement agent's fees, financial advisory fees, or brokers' commissions (other
      than for persons engaged by any Buyer or its investment advisor) relating to
      or
      arising out of the transactions contemplated hereby, including, without
      limitation, placement agent fees payable to Maxim Group LLC as placement agent
      (the "Agent")
      in
      connection with the sale of the Securities. The Company shall pay, and hold
      each
      Buyer harmless against, any liability, loss or expense (including, without
      limitation, attorney's fees and out-of-pocket expenses) arising in connection
      with any such claim. The Company acknowledges that it has engaged the Agent
      in
      connection with the sale of the Securities. Other than the Agent, neither the
      Company nor any of its Subsidiaries has engaged any placement agent or other
      agent in connection with the sale of the Securities.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    (h) No
      Integrated Offering.
      None of
      the Company, its Subsidiaries, any of their affiliates, and any Person acting
      on
      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 require registration of the issuance of any of the Securities under the
      1933 Act, whether through integration with prior offerings or otherwise, or
      cause this offering of the Securities to require approval of stockholders of
      the
      Company for purposes of any applicable stockholder approval provisions,
      including, without limitation, under the rules and regulations of any exchange
      or automated quotation system on which any of the securities of the Company
      are
      listed or designated. None of the Company, its Subsidiaries, their affiliates
      and any Person acting on their behalf will take any action or steps referred
      to
      in the preceding sentence that would require registration of the issuance of
      any
      of the Securities under the 1933 Act or cause the offering of the Securities
      to
      be integrated with other offerings for purposes of any such applicable
      stockholder approval provisions.

     

    (i) Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Conversion Shares
      issuable upon conversion of the Notes and the Warrant Shares issuable upon
      exercise of the Warrants will increase in certain circumstances. The Company
      further acknowledges that its obligation to issue Conversion Shares upon
      conversion of the Notes in accordance with this Agreement and the
      Notes and
      its
      obligation to issue the Warrant Shares upon exercise of the Warrants in
      accordance with this Agreement and the Warrants is, in each case, absolute
      and
      unconditional regardless of the dilutive effect that such issuance may have
      on
      the ownership interests of other stockholders of the Company.

     

    (j) Application
      of Takeover Protections; Rights Agreement.
      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 Certificate of Incorporation
      (as defined in Section 3(r)) or the laws of the state of its incorporation
      which
      is or could become applicable to any Buyer as a result of the transactions
      contemplated by this Agreement, including, without limitation, the Company's
      issuance of the Securities and any Buyer's ownership of the Securities. The
      Company and its board of directors have taken all necessary action, if any,
      in
      order to render inapplicable any stockholder rights plan or similar arrangement
      relating to accumulations of beneficial ownership of Common Stock or a change
      in
      control of the Company.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    (k) SEC
      Documents; Financial Statements.
      During
      the two (2) years prior to the date hereof, the Company has filed all reports,
      schedules, forms, statements and other documents required to be filed by it
      with
      the SEC pursuant to the reporting requirements of the 1934 Act (all of the
      foregoing filed prior to the date hereof and all exhibits included therein
      and
      financial statements, notes and schedules thereto and documents incorporated
      by
      reference therein being hereinafter referred to as the "SEC
      Documents").
      The
      Company has delivered to the Buyers or their respective representatives true,
      correct and complete copies of the SEC Documents not available on the EDGAR
      system. As of their respective filing dates, the SEC Documents complied in
      all
      material respects with the requirements of the 1934 Act and the rules and
      regulations of the SEC promulgated thereunder applicable to the SEC Documents,
      and none of the SEC Documents, at the time they were filed with the SEC,
      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. As of their respective filing dates, the financial statements of
      the
      Company included in the SEC Documents complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto. Such financial statements have
      been
      prepared in accordance with generally accepted accounting principles,
      consistently applied, during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or (ii)
      in the case of unaudited interim statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). No other information provided by or on behalf of the Company
      to
      the Buyers which is not included in the SEC Documents, including, without
      limitation, information referred to in Section 2(d) of this Agreement or in
      any
      disclosure schedules, contains any untrue statement of a material fact or omits
      to state any material fact necessary in order to make the statements therein,
      in
      the light of the circumstance under which they are or were made, not
      misleading.

     

    (l) Absence
      of Certain Changes.
      Since
      December 31, 2006, there has been no material adverse change and no material
      adverse development in the business, properties, operations, condition
      (financial or otherwise), results of operations or prospects of the Company
      or
      its Subsidiaries. Except as disclosed in Schedule
      3(l),
      since
      December 31, 2006, the Company has not (i) declared or paid any dividends,
      (ii)
      sold any assets, individually or in the aggregate, in excess of $100,000 outside
      of the ordinary course of business or (iii) had capital expenditures,
      individually or in the aggregate, in excess of $100,000. Neither the Company
      nor
      any of its Subsidiaries has taken any steps to seek protection pursuant to
      any
      bankruptcy law nor does the Company have any knowledge or reason to believe
      that
      its creditors intend to initiate involuntary bankruptcy proceedings or any
      actual knowledge of any fact that would reasonably lead a creditor to do so.
      The
      Company and its Subsidiaries, individually and on a consolidated basis, are
      not
      as of the date hereof, and after giving effect to the transactions contemplated
      hereby to occur at the Closing, will not be Insolvent (as defined below). For
      purposes of this Section 3(l), "Insolvent"
      means,
      with respect to any Person (as defined in Section 3(s)), (i) the present fair
      saleable value of such Person's assets is less than the amount required to
      pay
      such Person's total Indebtedness (as defined in Section 3(s)), (ii) such Person
      is unable to pay its debts and liabilities, subordinated, contingent or
      otherwise, as such debts and liabilities become absolute and matured, (iii)
      such
      Person intends to incur or believes that it will incur debts that would be
      beyond its ability to pay as such debts mature or (iv) such Person has
      unreasonably small capital with which to conduct the business in which it is
      engaged as such business is now conducted and is proposed to be
      conducted.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (m) No
      Undisclosed Events, Liabilities, Developments or Circumstances.
      No
      event, liability, development or circumstance has occurred or exists, or is
      contemplated to occur with respect to the Company, its Subsidiaries or their
      respective business, properties, prospects, operations or financial condition,
      that would be required to be disclosed by the Company under applicable
      securities laws on a registration statement on Form S-1 filed with the SEC
      relating to an issuance and sale by the Company of its Common Stock and which
      has not been publicly announced.

     

    (n) Conduct
      of Business; Regulatory Permits.
      Neither
      the Company nor any of its Subsidiaries is in violation of any term of or in
      default under its Certificate of Incorporation, any certificate of designations
      of any outstanding series of preferred stock of the Company or the Bylaws or
      their organizational charter or bylaws, respectively. Neither the Company nor
      any of its Subsidiaries is in violation of any judgment, decree or order or
      any
      statute, ordinance, rule or regulation applicable to the Company or its
      Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
      its business in violation of any of the foregoing, except for possible
      violations which could not, individually or in the aggregate, reasonably be
      expected to have a Material Adverse Effect. Without limiting the generality
      of
      the foregoing, the Company is not in violation of any of the rules, regulations
      or requirements of the Principal Market and has no knowledge of any facts or
      circumstances that would reasonably lead to delisting or suspension of the
      Common Stock by the Principal Market in the foreseeable future. During the
      two
      (2) years prior to the date hereof, (i) the Common Stock has been designated
      as
      of August 23, 2007 for quotation on the Principal Market, (ii) trading in the
      Common Stock has not been suspended by the SEC or the Principal Market and
      (iii)
      the Company has received no communication, written or oral, from the SEC or
      the
      Principal Market regarding the suspension or delisting of the Common Stock
      from
      the Principal Market. The Company and its Subsidiaries possess all certificates,
      authorizations and permits issued by the appropriate regulatory authorities
      necessary to conduct their respective businesses, except where the failure
      to
      possess such certificates, authorizations or permits would not have,
      individually or in the aggregate, a Material Adverse Effect, and neither the
      Company nor any such Subsidiary has received any notice of proceedings relating
      to the revocation or modification of any such certificate, authorization or
      permit.

     

    (o) Foreign
      Corrupt Practices.
      Neither
      the Company nor any of its Subsidiaries nor any director, officer, agent,
      employee or other Person acting on behalf of the Company or any of its
      Subsidiaries has, in the course of its actions for, or on behalf of, the Company
      or any of its Subsidiaries (i) used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; (ii) made any direct or indirect unlawful payment to any
      foreign or domestic government official or employee from corporate funds; (iii)
      violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    (p) Sarbanes-Oxley
      Act.
      The
      Company is in compliance with any and all applicable requirements of the
      Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
      and
      all applicable rules and regulations promulgated by the SEC thereunder that
      are
      effective as of the date hereof.

     

    (q) Transactions
      With Affiliates.
      Except
      as set forth in the SEC Documents filed at least ten (10) days prior to the
      date
      hereof and other than the grant of stock options disclosed on Schedule
      3(q),
      none of
      the officers, directors or employees of the Company or any of its Subsidiaries
      is presently a party to any transaction with the Company or any of its
      Subsidiaries (other than for ordinary course services as employees, officers
      or
      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 such
      officer, director or employee or, to the knowledge of the Company or any of
      its
      Subsidiaries, any corporation, partnership, trust or other entity in which
      any
      such officer, director, or employee has a substantial interest or is an officer,
      director, trustee or partner.

     

    (r) Equity
      Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of (i)
      100,000,000 shares of Common Stock, of which as of the date hereof, 24,173,281
      are issued and outstanding, 1,381,184 shares are reserved for issuance pursuant
      to the Company's stock option and purchase plans and 866,851 shares are reserved
      for issuance pursuant to securities (other than the aforementioned options,
      the
      Notes and the Warrants) exercisable or exchangeable for, or convertible into,
      shares of Common Stock and (ii) 5,000,000 shares of preferred stock, $0.01
      par
      value, of which as of the date hereof no shares are issued and outstanding.
      All
      of such outstanding shares have been, or upon issuance will be, validly issued
      and are fully paid and nonassessable. Except as disclosed in Schedule
      3(r):
      (i)
      none of the Company's capital stock is subject to preemptive rights or any
      other
      similar rights or any liens or encumbrances suffered or permitted by the
      Company; (ii) there are no outstanding options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      capital stock of the Company or any of its Subsidiaries, or contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      Subsidiaries is or may become bound to issue additional capital stock of the
      Company or any of its Subsidiaries or options, warrants, scrip, rights to
      subscribe to, calls or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, or exercisable or exchangeable for,
      any
      capital stock of the Company or any of its Subsidiaries; (iii) there are no
      outstanding debt securities, notes, credit agreements, credit facilities or
      other agreements, documents or instruments evidencing Indebtedness of the
      Company or any of its Subsidiaries or by which the Company or any of its
      Subsidiaries is or may become bound; (iv) there are no financing statements
      securing obligations in any material amounts, either singly or in the aggregate,
      filed in connection with the Company or any of its Subsidiaries; (v) there
      are
      no agreements or arrangements under which the Company or any of its Subsidiaries
      is obligated to register the sale of any of their securities under the 1933
      Act
      (except pursuant to the Registration Rights Agreement); (vi) there are no
      outstanding securities or instruments of the Company or any of its Subsidiaries
      which contain any redemption or similar provisions, and there are no contracts,
      commitments, understandings or arrangements by which the Company or any of
      its
      Subsidiaries is or may become bound to redeem a security of the Company or
      any
      of its Subsidiaries; (vii) there are no securities or instruments containing
      anti-dilution or similar provisions that will be triggered by the issuance
      of
      the Securities; (viii) the Company does not have any stock appreciation rights
      or "phantom stock" plans or agreements or any similar plan or agreement; and
      (ix) the Company and its Subsidiaries have no liabilities or obligations
      required to be disclosed in the SEC Documents but not so disclosed in the SEC
      Documents, other than those incurred in the ordinary course of the Company's
      or
      its Subsidiaries' respective businesses and which, individually or in the
      aggregate, do not or would not have a Material Adverse Effect. The Company
      has
      furnished to the Buyers true, correct and complete copies of the Company's
      Certificate of Incorporation, as amended and as in effect on the date hereof
      (the "Certificate
      of Incorporation"),
      and
      the Company's Bylaws, as amended and as in effect on the date hereof (the
      "Bylaws"),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto.

     

    
      
        
        

      

      
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    (s) Indebtedness
      and Other Contracts.
      Except
      as disclosed in Schedule
      3(s),
      neither
      the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
      (as
      defined below), (ii) is a party to any contract, agreement or instrument, the
      violation of which, or default under which, by the other party(ies) to such
      contract, agreement or instrument could reasonably be expected to result in
      a
      Material Adverse Effect, (iii) is in violation of any term of or in default
      under any contract, agreement or instrument relating to any Indebtedness, except
      where such violations and defaults would not result, individually or in the
      aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
      agreement or instrument relating to any Indebtedness, the performance of which,
      in the judgment of the Company's officers, has or is expected to have a Material
      Adverse Effect. Schedule
      3(s)
      provides
      a detailed description of the material terms of any such outstanding
      Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
      of any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services (including, without limitation, "capital leases" in
      accordance with generally accepted accounting principles) (other than trade
      payables entered into in the ordinary course of business), (C) all reimbursement
      or payment obligations with respect to letters of credit, surety bonds and
      other
      similar instruments, (D) all obligations evidenced by notes, bonds, debentures
      or similar instruments, including obligations so evidenced incurred in
      connection with the acquisition of property, assets or businesses, (E) all
      indebtedness created or arising under any conditional sale or other title
      retention agreement, or incurred as financing, in either case with respect
      to
      any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (F)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (G) all
      indebtedness referred to in clauses (A) through (F) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
      or obligations of others of the kinds referred to in clauses (A) through (G)
      above; (y) "Contingent
      Obligation"
      means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto; and (z) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    (t) Absence
      of Litigation.
      Except
      as set forth in Schedule
      3(t),
      there
      is no action, suit, proceeding, inquiry or investigation before or by the
      Principal Market, any court, public board, government agency, self-regulatory
      organization or body pending or, to the knowledge of the Company, threatened
      against or affecting the Company or any of its Subsidiaries, the Common Stock
      or
      any of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
      officers or directors. 

     

    (u) Insurance.
      The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such 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 at a cost that would not have a Material
      Adverse Effect.

     

    (v) Employee
      Relations.

     

    (i) Neither
      the Company nor any of its Subsidiaries is a party to any collective bargaining
      agreement or employs any member of a union. The Company and its Subsidiaries
      believe that their relations with their employees are good. No executive officer
      of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the
      1933
      Act) has notified the Company or any such Subsidiary that such officer intends
      to leave the Company or any such Subsidiary or otherwise terminate such
      officer's employment with the Company or any such Subsidiary. No executive
      officer of the Company or any of its Subsidiaries is, or is now expected to
      be,
      in violation of any material term of any employment contract, confidentiality,
      disclosure or proprietary information agreement, 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.

     

    (ii) The
      Company and its Subsidiaries are in compliance with all federal, state, local
      and foreign laws and regulations respecting labor, employment and employment
      practices and benefits, terms and conditions of employment and wages and hours,
      except where failure to be in compliance would not, either individually or
      in
      the aggregate, reasonably be expected to result in a Material Adverse
      Effect.

     

    (w) Title.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      do not materially affect the value of such property and do not interfere with
      the use made and proposed to be made of such property by the Company and any
      of
      its Subsidiaries. Any real property and facilities held under lease by the
      Company or any of its Subsidiaries are held by them under valid, subsisting
      and
      enforceable leases with such exceptions as are not material and do not interfere
      with the use made and proposed to be made of such property and buildings by
      the
      Company and its Subsidiaries.

     

    
      
        
        

      

      
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    (x) Intellectual
      Property Rights.
      

     

    (i) The
      Company and its Subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, trade names, service marks and all applications and
      registrations therefor, patents, patent rights, copyrights, original works
      of
      authorship (including computer software) and all applications and registrations
      therefor, inventions, trade secrets and other intellectual property rights
      ("Intellectual
      Property Rights")
      necessary to conduct their respective businesses as now conducted. None of
      the
      Company's registered, or applied for, Intellectual Property Rights have expired
      or terminated or have been abandoned, or are expected to expire or terminate
      or
      expected to be abandoned, within three years from the date of this Agreement.
      The Company does not have any knowledge of any infringement by the Company
      or
      its Subsidiaries of Intellectual Property Rights of others. There is no claim,
      action or proceeding being made or brought, or to the knowledge of the Company,
      being threatened, by or against the Company or its Subsidiaries regarding the
      infringement, misappropriation or other violation of any Intellectual Property
      Rights. Neither the Company nor any of its Subsidiaries is aware of any facts
      or
      circumstances which might give rise to any of the foregoing infringements or
      claims, actions or proceedings. The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their Intellectual Property Rights. 

     

    (ii) All
      material computer hardware, software and systems that are used or held for
      use
      in the conduct of the Company's and its Subsidiaries' respective businesses
      is
      in good working condition (normal wear and tear excepted). There has not been
      any material malfunction with respect to such hardware, software and systems
      since January 1, 2005 that has not been remedied or replaced in all material
      respects. 

     

    (iii) All
      material computer software that is used or held for use the conduct of the
      Company's and its Subsidiaries' respective businesses (x) performs in accordance
      with the documentation or other written material used in connection with it,
      (y)
      is in machine readable form and contains all current revisions, and (z) does
      not
      contain any viruses, worms or other disabling devices. The source code for
      all
      computer software that is owned by the Company and its Subsidiaries (A) will
      compile into object code or otherwise be capable of performing the functions
      described in the documentation pertaining thereto, (B) is sufficiently
      documented to enable a computer software developer of reasonable skill to
      understand, modify, repair, maintain, compile and otherwise utilize all aspects
      of such computer software without reference to other sources of information;
      and
      (C) constitutes trade secrets that are valid and protectable and are not part
      of
      the public knowledge or literature.

     

    
      
        
        

      

      
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    (y) Environmental
      Laws.
      The
      Company and its Subsidiaries (i) are in compliance with any and all
      Environmental Laws (as hereinafter defined), (ii) have received all permits,
      licenses or other approvals required of them under applicable Environmental
      Laws
      to conduct their respective businesses and (iii) are in compliance with all
      terms and conditions of any such permit, license or approval where, in each
      of
      the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect. The term "Environmental
      Laws"
      means
      all federal, state, local or foreign laws relating to pollution or protection
      of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants, contaminants, or toxic or
      hazardous substances or wastes (collectively, "Hazardous
      Materials") into
      the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (z) Subsidiary
      Rights.
      The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    (aa) Tax
      Status.
      The
      Company and each of its Subsidiaries (i) has made or filed all foreign, federal
      and state income and all other tax returns, reports and declarations required
      by
      any jurisdiction to which it is subject, (ii) has paid all taxes and other
      governmental assessments and charges that are material in amount, shown or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and (iii) has set aside on its books provision
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply. There are no
      unpaid taxes in any material amount claimed to be due by the taxing authority
      of
      any jurisdiction, and the officers of the Company know of no basis for any
      such
      claim.

     

    (bb)
      Internal
      Accounting and Disclosure Controls.
      The
      Company and each of its 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 generally accepted accounting principles and
      to
      maintain asset and liability accountability, (iii) access to assets or
      incurrence of liabilities is permitted only in accordance with management's
      general or specific authorization and (iv) the recorded accountability for
      assets and liabilities is compared with the existing assets and liabilities
      at
      reasonable intervals and appropriate action is taken with respect to any
      difference. The Company maintains disclosure controls and procedures (as such
      term is defined in Rule 13a-14 under the 1934 Act) that are effective in
      ensuring that information required to be disclosed by the Company in the reports
      that it files or submits under the 1934 Act is recorded, processed, summarized
      and reported, within the time periods specified in the rules and forms of the
      SEC, including, without limitation, controls and procedures designed to ensure
      that information required to be disclosed by the Company in the reports that
      it
      files or submits under the 1934 Act is accumulated and communicated to the
      Company's management, including its principal executive officer or officers
      and
      its principal financial officer or officers, as appropriate, to allow timely
      decisions regarding required disclosure. During the twelve months prior to
      the
      date hereof neither the Company nor any of its Subsidiaries have received any
      notice or correspondence from any accountant relating to any potential material
      weakness in any part of the system of internal accounting controls of the
      Company or any of its Subsidiaries.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    (cc) Ranking
      of Notes.
      Except
      as set forth on Schedule
      3(cc),
      no
      Indebtedness of the Company is senior to or ranks pari
      passu
      with the
      Notes in right of payment, whether with respect of payment of redemptions,
      interest, damages or upon liquidation or dissolution or otherwise.

     

    (dd) Off
      Balance Sheet Arrangements.
      There
      is no transaction, arrangement, or other relationship between the Company and
      an
      unconsolidated or other off balance sheet entity that is required to be
      disclosed by the Company in its 1934 Act filings and is not so disclosed or
      that
      otherwise would be reasonably likely to have a Material Adverse
      Effect.

     

    (ee) Investment
      Company Status.
      The
      Company is not, and upon consummation of the sale of the Securities will not
      be,
      an "investment company," a company controlled by an "investment company" or
      an
      "affiliated person" of, or "promoter" or "principal underwriter" for, an
      "investment company" as such terms are defined in the Investment Company Act
      of
      1940, as amended.

     

    (ff)  Form
      S-3 Eligibility.
      The
      Company is eligible to register the Conversion Shares and the Warrant Shares
      for
      resale by the Buyers using Form S-3 promulgated under the 1933 Act.

     

    (gg) Transfer
      Taxes.
      On the
      Closing Date, all stock transfer or other taxes (other than income or similar
      taxes) which are required to be paid in connection with the sale and transfer
      of
      the Securities to be sold to each Buyer hereunder will be, or will have been,
      fully paid or provided for by the Company, and all laws imposing such taxes
      will
      be or will have been complied with.

     

    (hh) Manipulation
      of Price.
      The
      Company has not, and to its knowledge no one acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result, or
      that could reasonably be expected to cause or 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) other than the Agent, sold, bid for,
      purchased, or paid any compensation for soliciting purchases of, any of the
      Securities or (iii) paid or agreed to pay to any person any compensation for
      soliciting another to purchase any other securities of the Company.

     

    (ii)  U.S.
      Real Property Holding Corporation.
      The
      Company is not, nor has it ever been, a U.S. real property holding corporation
      within the meaning of Section 897 of the Internal Revenue Code of 1986, as
      amended, and the Company shall so certify upon any Buyer's request.

     

    (jj)  Bank
      Holding Company Act.
      Neither
      the Company nor any of its Subsidiaries is subject to the Bank Holding Company
      Act of 1956, as amended (the "BHCA")
      and to
      regulation by the Board of Governors of the Federal Reserve System (the
      "Federal
      Reserve").
      Neither the Company nor any of its Subsidiaries or affiliates owns or controls,
      directly or indirectly, five percent (5%) or more of the outstanding shares
      of
      any class of voting securities or twenty-five (25%) or more of the total equity
      of a bank or any equity that is subject to the BHCA and to regulation by the
      Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates
      exercises a controlling influence over the management or policies of a bank
      or
      any entity that is subject to the BHCA and to regulation by the Federal
      Reserve.

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    (kk)  Disclosure.
      The
      Company confirms that neither it nor any other Person acting on its behalf
      has
      provided any of the Buyers or their agents or counsel with any information
      that
      constitutes or could reasonably be expected to constitute material, nonpublic
      information. The Company understands and confirms that each of the Buyers will
      rely on the foregoing representations in effecting transactions in securities
      of
      the Company. All disclosure provided to the Buyers regarding the Company or
      any
      of its Subsidiaries, their business and the transactions contemplated hereby,
      including the Schedules to this Agreement, furnished by or on behalf of the
      Company 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 the light of the circumstances under which they
      were
      made, not misleading. Each press release issued by the Company or any of its
      Subsidiaries during the twelve (12) months preceding the date of this Agreement
      did not at the time of release contain any untrue statement of a material fact
      or omit to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in the light of the circumstances under
      which they were made, not misleading. No event or circumstance has occurred
      or
      information exists with respect to the Company or any of its Subsidiaries or
      its
      or their business, properties, prospects, operations or financial conditions,
      which, under applicable law, rule or regulation, requires public disclosure
      or
      announcement by the Company but which has not been so publicly announced or
      disclosed. 

     

    (ll) Acknowledgement
      Regarding Buyers' Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
      but subject to compliance by the Buyers with applicable law and the provisions
      of Section 4(t) hereto, it is understood and acknowledged by the Company (i)
      that none of the Buyers have been asked by the Company or its Subsidiaries
      to
      agree, nor has any Buyer agreed with the Company or its Subsidiaries, 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 Buyer, 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 Buyer, and counter parties in
      "derivative" transactions to which any such Buyer is a party, directly or
      indirectly, presently may have a "short" position in the Common Stock, and
      (iv)
      that each Buyer 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 Buyers may engage
      in
      hedging and/or trading activities at various times during the period that the
      Securities are outstanding, including, without limitation, during the periods
      that the value of the Conversion Shares and the Warrant Shares deliverable
      with
      respect to Securities are being determined and (b) such hedging and/or trading
      activities, if any, can reduce the value of the existing stockholders' equity
      interest in the Company both at and after the time the hedging and/or trading
      activities are being conducted. The Company acknowledges that such
      aforementioned hedging and/or trading activities do not constitute a breach
      of
      this Agreement, the Notes, the Warrants or any of the documents executed in
      connection herewith.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    4.  COVENANTS.

     

    (a)  Best
      Efforts.
      Each
      party shall use its best efforts timely to satisfy each of the conditions to
      be
      satisfied by it as provided in Sections 6 and 7 of this Agreement.

     

    (b)  Form
      D
      and Blue Sky.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, 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 Buyers at the Closing
      pursuant to this Agreement under applicable securities or "Blue Sky" laws of
      the
      states of the United States (or to obtain an exemption from such qualification),
      and shall provide evidence of any such action so taken to the Buyers and the
      Agent on or prior to the Closing Date. The Company shall make all filings and
      reports relating to the offer and sale of the Securities required under
      applicable securities or "Blue Sky" laws of the states of the United
      States.

     

    (c)  Reporting
      Status.
      Until
      the date on which the Investors (as defined in the Registration Rights
      Agreement) shall have sold all the Conversion Shares and Warrant
      Shares and
      none
      of the Notes or
      Warrants is outstanding (the "Reporting
      Period"),
      the
      Company shall timely file all reports required to be filed with the SEC pursuant
      to the 1934 Act, and the Company shall not terminate its status as an issuer
      required to file reports under the 1934 Act even if the 1934 Act or the rules
      and regulations thereunder would no longer require or otherwise permit such
      termination, and the Company shall take all actions necessary to maintain its
      eligibility to register the Conversion Shares and Warrant Shares for resale
      by
      the Buyers on Form S-3.

     

    (d)  Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Securities for general
      corporate purposes, including general and administrative expenses and not for
      (i) the repayment of any outstanding Indebtedness of the Company or any of
      its
      Subsidiaries or (ii) the redemption or repurchase of any of its or its
      Subsidiaries' equity securities.

     

    (e)  Financial
      Information.
      As long
      as any Notes or Warrants are outstanding, the Company agrees to send the
      following to each Investor (as defined in the Registration Rights Agreement)
      during the Reporting Period unless the following are filed with the SEC through
      EDGAR and are available to the public through the EDGAR system: (i) within
      three
      (3) Business Days after the filing thereof with the SEC, a copy of its Annual
      Reports and Quarterly Reports on Forms 10-K, 10-KSB, 10-Q or 10-QSB, any interim
      reports or any consolidated balance sheets, income statements, stockholders'
      equity statements and/or cash flow statements for any period other than annual,
      any Current Reports on Form 8-K and any registration statements (other than
      on
      Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day
      as
      the release thereof, facsimile or e-mailed copies of all press releases issued
      by the Company or any of its Subsidiaries, and (iii) copies of any notices
      and
      other information made available or given to the stockholders of the Company
      generally, contemporaneously with the making available or giving thereof to
      the
      stockholders. As used herein, "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    (f)  Listing.
      The
      Company shall promptly secure the listing of all of the Registrable Securities
      (as defined in the Registration Rights Agreement) upon each national securities
      exchange and automated quotation system, if any, upon which the Common Stock
      is
      then listed (subject to official notice of issuance) and shall maintain, in
      accordance with the Notes and Warrants, such listing of all Registrable
      Securities from time to time issuable under the terms of the Transaction
      Documents. The Company shall maintain the Common Stocks' authorization for
      quotation on the Principal Market. Neither the Company nor any of its
      Subsidiaries shall take any action which would be reasonably expected to result
      in the delisting or suspension of the Common Stock on the Principal Market.
      The
      Company shall pay all fees and expenses in connection with satisfying its
      obligations under this Section 4(f).

     

    (g)  Fees.
      Subject
      to Section 8 below, at Closing, the Company shall pay an expense allowance
      to
      Portside Growth and Opportunity Fund (a Buyer) or its designee(s) (in addition
      to any other expense amounts paid to any Buyer prior to the date of this
      Agreement) for all reasonable costs and expenses incurred in connection with
      the
      transactions contemplated by the Transaction Documents (including all reasonable
      legal fees and disbursements in connection therewith, documentation and
      implementation of the transactions contemplated by the Transaction Documents
      and
      due diligence in connection therewith), in an amount not to exceed $45,000
      (in
      addition to any other expense amounts paid to any Buyer prior to the date of
      this Agreement), which amount shall be withheld by such Buyer from its Purchase
      Price at the Closing. The Company shall be responsible for the payment of any
      placement agent's fees, financial advisory fees, or broker's commissions
      relating to or arising out of the transactions contemplated hereby, including,
      without limitation, any fees payable to the Agent. The Company shall pay, and
      hold each Buyer harmless against, any liability, loss or expense (including,
      without limitation, reasonable attorney's fees and out-of-pocket expenses)
      arising in connection with any claim relating to any such payment. 

     

    (h)  Pledge
      of Securities.
      The
      Company acknowledges and agrees that the Securities may be pledged by an
      Investor (as defined in the Registration Rights Agreement) in connection with
      a
      bona fide margin agreement or other loan or financing arrangement that is
      secured by the Securities. The pledge of Securities shall not be deemed to
      be a
      transfer, sale or assignment of the Securities hereunder, and no Investor
      effecting a pledge of Securities shall be required to provide the Company with
      any notice thereof or otherwise make any delivery to the Company pursuant to
      this Agreement or any other Transaction Document, including, without limitation,
      Section 2(f) hereof; provided that an Investor and its pledgee shall be required
      to comply with the provisions of Section 2(f) hereof in order to effect a sale,
      transfer or assignment of Securities to such pledgee. The Company hereby agrees
      to execute and deliver such documentation as a pledgee of the Securities may
      reasonably request in connection with a pledge of the Securities to such pledgee
      by an Investor.

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    (i)  Disclosure
      of Transactions and Other Material Information.
      On or
      before 8:30 a.m., New York City time, on the first Business Day following the
      date of this Agreement, the Company shall issue a press release and file a
      Current Report on Form 8-K, which the Agent shall have approved prior to its
      release and filing, describing the terms of the transactions contemplated by
      the
      Transaction Documents in the form required by the 1934 Act and attaching the
      material Transaction Documents (including, without limitation, this Agreement
      (and all schedules to this Agreement), the form of the Notes, the form of
      Warrant, the form of Security Documents and the form of the Registration Rights
      Agreement) as exhibits to such filing (including all attachments, the
      "8-K
      Filing").
      From
      and after the filing of the 8-K Filing with the SEC, no Buyer shall be in
      possession of any material, nonpublic information received from the Company,
      any
      of its Subsidiaries or any of their respective officers, directors, employees
      or
      agents, that is not disclosed in the 8-K Filing. The Company shall not, and
      shall cause each of its Subsidiaries and its and each of their respective
      officers, directors, employees and agents, not to, provide any Buyer with any
      material, nonpublic information regarding the Company or any of its Subsidiaries
      from and after the filing of the 8-K Filing with the SEC without the express
      prior written consent of such Buyer. If a Buyer has, or believes it has,
      received any such material, nonpublic information regarding the Company or
      any
      of its Subsidiaries, it shall provide the Company with written notice thereof.
      The Company shall, within five (5) Trading Days (as defined in the Notes) of
      receipt of such notice, make public disclosure of such material, nonpublic
      information. In the event of a breach of the foregoing covenant by the Company,
      any of its Subsidiaries, or any of its or their respective officers, directors,
      employees and agents, in addition to any other remedy provided herein or in
      the
      Transaction Documents, a Buyer shall have the right to make a public disclosure,
      in the form of a press release, public advertisement or otherwise, of such
      material, nonpublic information without the prior approval by the Company,
      its
      Subsidiaries, or any of its or their respective officers, directors, employees
      or agents. No Buyer shall have any liability to the Company, its Subsidiaries,
      or any of its or their respective officers, directors, employees, stockholders
      or agents for any such disclosure. Subject to the foregoing, neither the
      Company, its Subsidiaries nor any Buyer shall issue any press releases or any
      other public statements with respect to the transactions contemplated hereby;
      provided, however, that the Company shall be entitled, without the prior
      approval of any Buyer, to make any press release or other public disclosure
      with
      respect to such transactions (i) in substantial conformity with the 8-K Filing
      and contemporaneously therewith and (ii) as is required by applicable law and
      regulations (provided that in the case of clause (i) each Buyer and the Agent
      shall be consulted by the Company in connection with any such press release
      or
      other public disclosure prior to its release). Without the prior written consent
      of any applicable Buyer, neither the Company nor any of its Subsidiaries or
      affiliates shall disclose the name of such Buyer in any filing (other than
      as is
      required by applicable law and regulations), announcement, release or
      otherwise.

     

    (j)  Restriction
      on Redemption and Cash Dividends.
      So long
      as any Notes are outstanding, the Company shall not, directly or indirectly,
      redeem, or declare or pay any cash dividend or distribution on, the Common
      Stock
      without the prior express written consent of the holders of Notes representing
      not less than a majority of the aggregate principal amount of the then
      outstanding Notes.

     

    (k)  Additional
      Notes; Variable Securities; Dilutive Issuances.
      So long
      as any Buyer beneficially owns any Securities, the Company will not issue any
      Notes (other than to the Buyers as contemplated hereby) and the Company shall
      not issue any other securities that would cause a breach or default under the
      Notes. For so long as any Notes or Warrants remain outstanding, the Company
      shall not, in any manner, issue or sell any rights, warrants or options to
      subscribe for or purchase Common Stock or directly or indirectly convertible
      into or exchangeable or exercisable for Common Stock at a price which varies
      or
      may vary with the market price of the Common Stock, including by way of one
      or
      more reset(s) to any fixed price unless the conversion, exchange or exercise
      price of any such security cannot be less than the then applicable Conversion
      Price (as defined in the Notes) with respect to the Common Stock into which
      any
      Note is convertible or the then applicable Exercise Price (as defined in the
      Warrants) with respect to the Common Stock into which any Warrant is
      exercisable. For so long as any Notes or Warrants remain outstanding, the
      Company shall not, in any manner, enter into or affect any Dilutive Issuances
      (as defined in the Notes) if the effect of such Dilutive Issuance is to cause
      the Company to be required to issue upon conversion of any Note or exercise
      of
      any Warrant any shares of Common Stock in excess of that number of shares of
      Common Stock which the Company may issue upon conversion of the Notes and
      exercise of the Warrants without breaching the Company's obligations under
      the
      rules or regulations of the Principal Market or any applicable Eligible Market
      (as defined in the Warrants).

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    (l)  Corporate
      Existence.
      So long
      as any Buyer beneficially owns any Securities, the Company shall not be party
      to
      any Fundamental Transaction (as defined in the Notes) unless the Company is
      in
      compliance with the applicable provisions governing Fundamental Transactions
      set
      forth in the Notes and the Warrants.

     

    (m)  Reservation
      of Shares.
      The
      Company shall take all action necessary to at all times have authorized, and
      reserved for the purpose of issuance, no less than 130% of the sum of the number
      of shares of Common Stock issuable (i) upon conversion of the Notes issued
      at
      the Closing and (ii) upon exercise of the Warrants issued at the Closing
      (without taking into account any limitations on the Conversion of the Notes
      or
      exercise of the Warrants set forth in the Notes and Warrants,
      respectively).

     

    (n)  Conduct
      of Business.
      The
      business of the Company and its Subsidiaries shall not be conducted in violation
      of any law, ordinance or regulation of any governmental entity, except where
      such violations would not result, either individually or in the aggregate,
      in a
      Material Adverse Effect.

     

    (o)  Additional
      Issuances of Securities.

     

    (i)  For
      purposes of this Section 4(o), the following definitions shall
      apply.

     

    (1)  "Convertible
      Securities"
      means
      any stock or securities (other than Options) convertible into or exercisable
      or
      exchangeable for shares of Common
      Stock.

     

    (2)  "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of
Common
      Stock or
      Convertible Securities.

     

    (3)  "Common
      Stock Equivalents"
      means,
      collectively, Options and Convertible Securities.

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    (ii) From
      the
      date hereof until the date that is thirty (30) Trading Days (as defined in
      the
      Notes) following the Effective Date (as defined in the Registration Rights
      Agreement) (the "Trigger
      Date"),
      the
      Company will not, directly or indirectly, file any registration statement with
      the SEC other than the Registration Statement (as defined in the Registration
      Rights Agreement). From the date hereof until the Trigger Date, the Company
      will
      not, directly or indirectly, offer, sell, grant any option to purchase, or
      otherwise dispose of (or announce any offer, sale, grant or any option to
      purchase or other disposition of) any of its or its Subsidiaries' equity or
      equity equivalent securities, including without limitation any debt, preferred
      stock or other instrument or security that is, at any time during its life
      and
      under any circumstances, convertible into or exchangeable or exercisable for
      shares of Common Stock or Common Stock Equivalents (any such offer, sale, grant,
      disposition or announcement being referred to as a "Subsequent
      Placement").

     

    (iii) From
      the
      Trigger Date until the second anniversary of the Closing Date, the Company
      will
      not, directly or indirectly, effect any Subsequent Placement unless the Company
      shall have first complied with this Section 4(o)(iii).

     

    (1)  The
      Company shall deliver to each Buyer an irrevocable written notice
      (the "Offer
      Notice")
      of any
      proposed or intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (w) identify and describe the
      Offered Securities, (x) describe the price and other terms upon which they
      are to be issued, sold or exchanged, and the number or amount of the Offered
      Securities to be issued, sold or exchanged, (y) identify the persons or
      entities (if known) to which or with which the Offered Securities are to be
      offered, issued, sold or exchanged and (z) offer to issue and sell to or
      exchange with such Buyers at least thirty percent (30%) of the Offered
      Securities, allocated among such Buyers (a) based on such Buyer's pro rata
      portion of the aggregate principal amount of Notes purchased hereunder (the
      "Basic
      Amount"),
      and
      (b) with respect to each Buyer that elects to purchase its Basic Amount, any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Buyers as such Buyer shall indicate it will purchase or acquire should
      the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
      Amount"),
      which
      process shall be repeated until the Buyers shall have an opportunity to
      subscribe for any remaining Undersubscription Amount.

     

    (2)  To
      accept
      an Offer, in whole or in part, such Buyer must deliver a written notice to
      the
      Company prior to the end of the tenth (10th)
      Business Day after such Buyer's receipt of the Offer Notice (the "Offer
      Period"),
      setting forth the portion of such Buyer's Basic Amount that such Buyer elects
      to
      purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
      the
      Undersubscription Amount, if any, that such Buyer elects to purchase (in either
      case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Buyers are less than the total of all
      of
      the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
      in its Notice of Acceptance shall be entitled to purchase, in addition to the
      Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
      "Available
      Undersubscription Amount"),
      each
      Buyer who has subscribed for any Undersubscription Amount shall be entitled
      to
      purchase only that portion of the Available Undersubscription Amount as the
      Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
      have subscribed for Undersubscription Amounts, subject to rounding by the
      Company to the extent its deems reasonably necessary. Notwithstanding the
      foregoing, if the Company desires to modify or amend the terms and conditions
      of
      the Offer prior to the expiration of the Offer Period, the Company may deliver
      to the Buyers a new Offer Notice and the Offer Period shall expire on the third
      (3rd)
      Business Day after such Buyer's receipt of such new Offer Notice.

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    (3)  The
      Company shall have fifteen (15) Business Days from the expiration of the Offer
      Period above (i) to offer, issue, sell or exchange all or any part of such
      Offered Securities as to which a Notice of Acceptance has not been given by
      the
      Buyers (the "Refused
      Securities")
      pursuant to a definitive agreement(s) (the "Subsequent
      Placement Agreement"),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer Notice and
      (ii) to publicly announce (a) the execution of such Subsequent Placement
      Agreement, and (b) either (x) the consummation of the transactions contemplated
      by such Subsequent Placement Agreement or (y) the termination of such Subsequent
      Placement Agreement, which shall be filed with the SEC on a Current Report
      on
      Form 8-K with such Subsequent Placement Agreement and any documents contemplated
      therein filed as exhibits thereto.

     

    (4)  In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in Section
      4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole
      discretion, reduce the number or amount of the Offered Securities specified
      in
      its Notice of Acceptance to an amount that shall be not less than the number
      or
      amount of the Offered Securities that such Buyer elected to purchase pursuant
      to
      Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
      shall be the number or amount of Offered Securities the Company actually
      proposes to issue, sell or exchange (including Offered Securities to be issued
      or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
      reduction) and (ii) the denominator of which shall be the original amount of
      the
      Offered Securities. In the event that any Buyer so elects to reduce the number
      or amount of Offered Securities specified in its Notice of Acceptance, the
      Company may not issue, sell or exchange more than the reduced number or amount
      of the Offered Securities unless and until such securities have again been
      offered to the Buyers in accordance with Section 4(o)(iii)(1)
      above.

     

    (5)  Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Buyers shall acquire from the Company, and the Company shall
      issue to the Buyers, the number or amount of Offered Securities specified in
      the
      Notices of Acceptance, as reduced pursuant to Section 4(o)(iii)(4) above if
      the
      Buyers have so elected, upon the terms and conditions specified in the Offer.
      Notwithstanding anything to the contrary contained in this Agreement, if the
      Company does not consummate the closing of the issuance, sale or exchange of
      all
      or less than all of the Refused Securities, within fifteen (15) Business Days
      of
      the expiration of the Offer Period, the Company shall issue to the Buyers,
      the
      number or amount of Offered Securities specified in the Notices of Acceptance,
      as reduced pursuant to Section 4(o)(iii)(4) above if the Buyers have so elected,
      upon the terms and conditions specified in the Offer. The purchase by the Buyers
      of any Offered Securities is subject in all cases to the preparation, execution
      and delivery by the Company and the Buyers of a purchase agreement relating
      to
      such Offered Securities reasonably satisfactory in form and substance to the
      Buyers and their respective counsel.

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    (6)  Any
      Offered Securities not acquired by the Buyers or other persons in accordance
      with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until
      they
      are again offered to the Buyers under the procedures specified in this
      Agreement.

     

    (7)  The
      Company and the Buyers agree that if any Buyer elects to participate in the
      Offer, (x) neither the Subsequent Placement Agreement with respect to such
      Offer
      nor any other transaction documents related thereto (collectively, the
      "Subsequent
      Placement Documents")
      shall
      include any term or provisions whereby any Buyer shall be required to agree
      to
      any restrictions in trading as to any securities of the Company owned by such
      Buyer prior to such Subsequent Placement, and (y) any registration rights set
      forth in such Subsequent Placement Documents shall be similar in all material
      respects to the registration rights contained in the Registration Rights
      Agreement.

     

    (8)  Notwithstanding
      anything to the contrary in this Section 4(o) and unless otherwise agreed to
      by
      the Buyers, the Company shall either confirm in writing to the Buyers that
      the
      transaction with respect to the Subsequent Placement has been abandoned or
      shall
      publicly disclose its intention to issue the Offered Securities, in either
      case
      in such a manner such that the Buyers will not be in possession of material
      non-public information, by the fifteen
      (15th)
      Business Day following delivery of the Offer Notice. If by the fifteen
      (15th)
      following delivery of the Offer Notice no public disclosure regarding a
      transaction with respect to the Offered Securities has been made, and no notice
      regarding the abandonment of such transaction has been received by the Buyers,
      such transaction shall be deemed to have been abandoned and the Buyers shall
      not
      be deemed to be in possession of any material, non-public information with
      respect to the Company. Should the Company decide to pursue such transaction
      with respect to the Offered Securities, the Company shall provide each Buyer
      with another Offer Notice and each Buyer will again have the right of
      participation set forth in this Section 4(o)(iii). The Company shall not be
      permitted to deliver more than one such Offer Notice to the Buyers in any sixty
      (60) day period.

     

    (9)  The
      restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
      not apply in connection with the issuance of any Excluded Securities (as defined
      in the Notes).

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    (p)  Collateral
      Agent.
      Each
      Buyer hereby (a) appoints Portside Growth & Opportunity Fund, as the
      collateral agent hereunder, under the Notes and under the other Security
      Documents (in such capacity, the "Collateral
      Agent"),
      and
      (b) authorizes the Collateral Agent (and its officers, directors, employees
      and
      agents) to take such action on such Buyer's behalf in accordance with the terms
      hereof and thereof. The Collateral Agent shall not have, by reason hereof or
      any
      of the other Transaction Documents, a fiduciary relationship in respect of
      any
      Buyer. Neither the Collateral Agent nor any of its officers, directors,
      employees and agents shall have any liability to any Buyer for any action taken
      or omitted to be taken in connection hereof or any other Transaction Document
      except to the extent caused by its own gross negligence or willful misconduct,
      and each Buyer agrees to defend, protect, indemnify and hold harmless the
      Collateral Agent and all of its officers, directors, employees and agents
      (collectively, the "Indemnitees")
      from
      and against any losses, damages, liabilities, obligations, penalties, actions,
      judgments, suits, fees, costs and expenses (including, without limitation,
      reasonable attorneys' fees, costs and expenses) incurred by such Indemnitee,
      whether direct, indirect or consequential, arising from or in connection with
      the performance by such Indemnitee of the duties and obligations of Collateral
      Agent pursuant hereto or any of the Transaction Documents. The Collateral Agent
      shall not be required to exercise any discretion or take any action, but shall
      be required to act or to refrain from acting (and shall be fully protected
      in so
      acting or refraining from acting) upon the instructions of the holders of a
      majority in principal amount of the Notes then outstanding, and such
      instructions shall be binding upon all holders of Notes; provided,
      however,
      that
      the Collateral Agent shall not be required to take any action which, in the
      reasonable opinion of the Agent, exposes the Agent to liability or which is
      contrary to this Agreement or any other Transaction Document or applicable
      law.
      The Collateral Agent shall be entitled to rely upon any written notices,
      statements, certificates, orders or other documents or any telephone message
      believed by it in good faith to be genuine and correct and to have been signed,
      sent or made by the proper Person, and with respect to all matters pertaining
      to
      this Agreement or any of the other Transaction Documents and its duties
      hereunder or thereunder, upon advice of counsel selected by it.

     

    (q)  Successor
      Collateral Agent .

     

    (i)  The
      Collateral Agent may resign from the performance of all its functions and duties
      hereunder and under the other Transaction Documents at any time by giving at
      least thirty (30) Business Days' prior written notice to the Company and each
      holder of Notes. Such resignation shall take effect upon the acceptance by
      a
      successor Collateral Agent of appointment pursuant to clauses (ii) and (iii)
      below or as otherwise provided below.

     

    (ii)  Upon
      any
      such notice of resignation, the holders of a majority in principal amount of
      the
      Notes then outstanding shall appoint a successor collateral agent. Upon the
      acceptance of any appointment as collateral agent hereunder by a successor
      agent, such successor collateral agent shall thereupon succeed to and become
      vested with all the rights, powers, privileges and duties of the collateral
      agent, and the Collateral Agent shall be discharged from its duties and
      obligations under this Agreement and the other Transaction Documents. After
      the
      Collateral Agent's resignation hereunder as the collateral agent, the provisions
      of this Section 4(s) shall inure to its benefit as to any actions taken or
      omitted to be taken by it while it was the Collateral Agent under this Agreement
      and the other Transaction Documents.

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

    (iii)  If
      a
      successor collateral agent shall not have been so appointed within said thirty
      (30) Business Day period, the Collateral Agent shall then appoint a successor
      collateral agent who shall serve as the collateral agent until such time, if
      any, as the holders of a majority in principal amount of the Notes then
      outstanding appoint a successor collateral agent as provided above.

     

    (r)   Letter
      of Credit.

     

    (i)  On
      or
      prior to the Closing Date, the Company shall obtain an irrevocable letter of
      credit (the "Letter
      of Credit"),
      in
      the amount of $2,000,000 (the "Initial
      LC Amount")
      issued
      in favor of the Collateral Agent by a bank acceptable to such Collateral Agent
      (the "Letter
      of Credit Bank")
      and in
      form and substance acceptable to such Collateral Agent. The Letter of Credit,
      including any renewals, extensions or replacements referred to below, shall
      expire not earlier than the later of (x) the earlier to occur of (A) the date
      as
      of which the Investors may sell all of the Registrable Securities covered by
      the
      Registration Statement without restriction pursuant to Rule 144(k) (or any
      successor thereto) promulgated under the 1933 Act and (B) the Effective Date,
      (y) the Holder Optional Redemption Date (as defined in the Notes), (z) the
      date
      each holder of Notes (each, a "Holder")
      that
      has submitted Holder Optional Redemption Notices (as defined in the Notes)
      to
      the Company on or prior to the Holder Optional Redemption Notice Eligibility
      Date shall have received the payment of the Holder Optional Redemption Amount
      (as defined in the Notes) of each such Holder, whether by payment by the Company
      or withdrawal from the Letter of Credit in accordance herewith (the
      "LC
      Redemption Expiration Date"),
      unless the Letter of Credit shall have been reduced to zero in accordance with
      the terms contained in this Section 4(r) prior to such date. 

     

    (ii)  Upon
      any
      Holder Optional Redemption (as defined in the Notes), any Holder may draw under
      the Letter of Credit, including any renewals, extensions or replacements
      referred to below, such portion of the Letter of Credit not to exceed, in the
      aggregate, the Holder Optional Redemption Amount of such Holder. Upon the
      occurrence and during the continuance of an Event of Default under (and as
      defined in) any of the Notes, the Collateral Agent shall be entitled to draw
      under the Letter of Credit, including any renewals, extensions or replacements
      referred to below, for the full amount then available under the Letter of
      Credit, it being understood that the Collateral Agent shall act for the benefit
      of the Holders of the Notes on a pro rata basis based on the principal amount
      of
      the Notes held by each of the Holders and hold such amount as collateral
      security for the obligations under the Notes for the benefit of the Holders.
      The
      Company shall obtain such renewals, extensions or replacements of the Letter
      of
      Credit as necessary to ensure that the Letter of Credit shall not expire prior
      to the LC Redemption Expiration Date (unless the Letter of Credit shall have
      been reduced to zero in accordance with the terms contained in this Section
      4(p)
      prior to such date). If, at any time, the Company cannot obtain a renewal,
      extension or replacement of the Letter of Credit such that the Letter of Credit
      will expire prior to the LC Redemption Expiration Date (a "Withdrawal
      Event"),
      the
      Company and the Letter of Credit Bank shall each give the Collateral Agent
      written notice of the occurrence of a Withdrawal Event at least forty-five
      (45)
      days prior to the then current expiration date of the Letter of Credit.
      Following a Withdrawal Event, the Collateral Agent shall be entitled to draw
      down the Letter of Credit Amount in its entirety (whether or not an Event of
      Default shall have occurred or be continuing under any of the Notes) and hold
      such amount as collateral security for the obligations under the Notes for
      the
      benefit of the Holders.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

    (iii)  At
      such
      time that less than $2,000,000 aggregate amount of the Notes are outstanding
      (the "Reduction
      Threshold Event"),
      the
      Company may deliver a notice to the Collateral Agent (the "LC
      Reduction Notice"),
      certifying as to the occurrence of the Reduction Threshold Event, that no Event
      of Default (or event that with the passage of time or giving of notice would
      constitute an Event of Default) has occurred or is pending and the aggregate
      amount then outstanding under the Notes. Within seven (7) Business Days after
      the Collateral Agent's receipt of the LC Reduction Notice, unless the Collateral
      Agent reasonably objects to such LC Reduction Notice, the Collateral Agent
      shall
      issue a written instruction to the Letter of Credit Bank to request the
      reduction of the Letter of Credit Amount as set forth in the LC Reduction
      Notice, such reduction amount to equal to the difference between $2,000,000
      and
      the aggregate amount of the Notes outstanding at such time.

     

    (s)  Closing
      Documents.
      On or
      prior to fourteen (14) calendar days after the Closing Date, the Company agrees
      to deliver, or cause to be delivered, to each Buyer and Schulte Roth & Zabel
      LLP executed copies of the Transaction Documents, Securities and other document
      required to be delivered to any party pursuant to Section 7 hereof.


     

    (t) Lock-Up.
      The
      Company shall not amend or waive any provision of any of the Lock-Up Agreements
      (as defined below) except to extend the term of the lock-up period.

     

    5.  REGISTER;
      TRANSFER AGENT INSTRUCTIONS.

     

    (a) Register.
      The
      Company shall maintain at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to each holder of
      Securities), a register for the Notes and the Warrants in which the Company
      shall record the name and address of the Person in whose name the Notes
      and the
      Warrants have been issued (including the name and address of each transferee),
      the principal amount of Notes held by such Person, the number of Conversion
      Shares issuable upon conversion of the Notes and the number of Warrant Shares
      issuable upon exercise of the Warrants held by such Person. The Company shall
      keep the register open and available at all times during business hours for
      inspection of any Buyer or its legal representatives.

     

    (b) Transfer
      Agent Instructions.
      The
      Company shall issue irrevocable instructions to its transfer agent, and any
      subsequent transfer agent, to issue certificates or credit shares to the
      applicable balance accounts at The Depository Trust Company ("DTC"),
      registered in the name of each Buyer or its respective nominee(s), for the
      Conversion Shares and the Warrant Shares issued at the Closing or upon
      conversion of the Notes or exercise of the Warrants in such amounts as specified
      from time to time by each Buyer to the Company upon conversion of the Notes
      or
      exercise of the Warrants in the form of Exhibit
      D
      attached
      hereto (the "Irrevocable
      Transfer Agent Instructions").
      The
      Company warrants that no instruction other than the Irrevocable Transfer Agent
      Instructions referred to in this Section 5(b), and stop transfer instructions
      to
      give effect to Section 2(g) hereof, will be given by the Company to its transfer
      agent, and that the Securities shall otherwise be freely transferable on the
      books and records of the Company as and to the extent provided in this Agreement
      and the other Transaction Documents. If a Buyer effects a sale, assignment
      or
      transfer of the Securities in accordance with Section 2(f), the Company shall
      permit the transfer and shall promptly instruct its transfer agent to issue
      one
      or more certificates or credit shares to the applicable balance accounts at
      DTC
      in such name and in such denominations as specified by such Buyer to effect
      such
      sale, transfer or assignment. In the event that such sale, assignment or
      transfer involves Conversion Shares or Warrant Shares sold, assigned or
      transferred pursuant to an effective registration statement or pursuant to
      Rule
      144, the transfer agent shall issue such Securities to the Buyer, assignee
      or
      transferee, as the case may be, without any restrictive legend. The Company
      acknowledges that a breach by it of its obligations hereunder will cause
      irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
      remedy at law for a breach of its obligations under this Section 5(b) will
      be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Section 5(b), that a Buyer shall be entitled,
      in addition to all other available remedies, to an order and/or injunction
      restraining any breach and requiring immediate issuance and transfer, without
      the necessity of showing economic loss and without any bond or other security
      being required.

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

    6. CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL.

     

    The
      obligation of the Company hereunder to issue and sell the Notes and the related
      Warrants to each Buyer at the Closing is subject to the satisfaction, at or
      before the Closing Date, of each of the following conditions, provided that
      these conditions are for the Company's sole benefit and may be waived by the
      Company at any time in its sole discretion by providing each Buyer with prior
      written notice thereof:

     

    (a) Such
      Buyer shall have executed each of the Transaction Documents to which it is
      a
      party and delivered the same to the Company.

     

    (b) Such
      Buyer and each other Buyer shall have delivered to the Company the Purchase
      Price (less, in the case of Portside Growth and Opportunity Fund, the amounts
      withheld pursuant to Section 4(g)) for the Notes and the related Warrants being
      purchased by such Buyer at the Closing by wire transfer of immediately available
      funds pursuant to the wire instructions provided by the Company.

     

    (c) The
      representations and warranties of such Buyer shall be true and correct in all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall be true and correct as of such specified
      date), and such Buyer shall have performed, satisfied and complied in all
      material respects with the covenants, agreements and conditions required by
      this
      Agreement to be performed, satisfied or complied with by such Buyer at or prior
      to the Closing Date.

     

    7. CONDITIONS
      TO EACH BUYER'S OBLIGATION TO PURCHASE.

     

    The
      obligation of each Buyer hereunder to purchase the Notes and
      the
      related Warrants at the Closing is subject to the satisfaction, at or before
      the
      Closing Date, of each of the following conditions, provided that these
      conditions are for each Buyer's sole benefit and may be waived by such Buyer
      at
      any time in its sole discretion by providing the Company with prior written
      notice thereof:

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

    (a)  The
      Company shall have duly executed and delivered to such Buyer (i) each of the
      Transaction Documents and (ii) the Notes (allocated in such principal amounts
      as
      such Buyer shall request), being purchased by such Buyer at the Closing pursuant
      to this Agreement, and (iii) the related Warrants (allocated in such amounts
      as
      such Buyer shall request) being purchased by such Buyer at the Closing pursuant
      to this Agreement.

     

    (b)  Such
      Buyer shall have received the opinion of Stubbs Alderton & Markiles, LLP,
      the Company's outside counsel, dated as of the Closing Date, in substantially
      the form of Exhibit E
      attached
      hereto.

     

    (c)  The
      Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
      Agent Instructions, in the form of Exhibit D
      attached
      hereto, which instructions shall have been delivered to and acknowledged in
      writing by the Company's transfer agent.

     

    (d)  The
      Company shall have delivered to such Buyer a certificate evidencing the
      formation and good standing of the Company and each of its Subsidiaries in
      such
      entity's jurisdiction of formation issued by the Secretary of State (or
      comparable office) of such jurisdiction, as of a date within ten (10) days
      of
      the Closing Date.

     

    (e)  The
      Company shall have delivered to such Buyer a certificate evidencing the
      Company's qualification as a foreign corporation and good standing issued by
      the
      Secretary of State (or comparable office) of each jurisdiction in which the
      Company conducts business, as of a date within ten (10) days of the Closing
      Date.

     

    (f)  The
      Company shall have delivered to such Buyer a certified copy of the Certificate
      of Incorporation as certified by the Secretary of State of the State of Florida
      within ten (10) days of the Closing Date.

     

    (g)  The
      Company shall have delivered to such Buyer a certificate, executed by the
      Secretary of the Company and dated as of the Closing Date, as to (i) the
      resolutions consistent with Section 3(b) as adopted by the Company's Board
      of
      Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
      of
      Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
      form attached hereto as Exhibit F.

     

    (h)  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall be true and correct as of such specified
      date) and the Company shall have performed, satisfied and complied in all
      material respects with the covenants, agreements and conditions required by
      the
      Transaction Documents to be performed, satisfied or complied with by the Company
      at or prior to the Closing Date. Such Buyer shall have received a certificate,
      executed by the Chief Executive Officer of the Company, dated as of the Closing
      Date, to the foregoing effect and as to such other matters as may be reasonably
      requested by such Buyer in the form attached hereto as Exhibit
      G.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

    (i)  The
      Company shall have delivered to such Buyer a letter from the Company's transfer
      agent certifying the number of shares of Common Stock outstanding as of a date
      within five days of the Closing Date.

     

    (j)  The
      Common Stock (I) shall be designated for quotation or listed on the Principal
      Market and (II) shall not have been suspended, as of the Closing Date, by the
      SEC or the Principal Market from trading on the Principal Market nor shall
      suspension by the SEC or the Principal Market have been threatened, as of the
      Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
      by
      falling below the minimum listing maintenance requirements of the Principal
      Market.

     

    (k)  The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities.

     

    (l)  In
      accordance with the terms of the Security Documents, the Company shall have
      delivered to the Collateral Agent (i) certificates representing the
      Subsidiaries' shares of capital stock to the extent such subsidiary is a
      corporation or otherwise has certificated capital stock, along with duly
      executed blank stock powers and (ii) appropriate financing statements on Form
      UCC-1 to be duly filed in such office or offices as may be necessary or, in
      the
      opinion of the Collateral Agent, desirable to perfect the security interests
      purported to be created by each Security Document.

     

    (m)  Within
      two (2) Business Days prior to the Closing, the Company shall have delivered
      or
      caused to be delivered to each Buyer (i) true copies of UCC search results,
      listing all effective financing statements which name as debtor the Company
      or
      any of its Subsidiaries filed in the prior five years to perfect an interest
      in
      any assets thereof, together with copies of such financing statements, none
      of
      which, except as otherwise agreed in writing by the Buyers, shall cover any
      of
      the Collateral (as defined in the Security Documents) and the results of
      searches for any tax lien and judgment lien filed against such Person or its
      property, which results, except as otherwise agreed to in writing by the Buyers
      shall not show any such Liens (as defined in the Security Documents); and (ii)
      a
      perfection certificate, duly completed and executed by the Company and each
      of
      its Subsidiaries, in form and substance satisfactory to the Buyers.

     

    (n)  The
      Company shall have delivered to such Buyer such other documents relating to
      the
      transactions contemplated by this Agreement as such Buyer or its counsel may
      reasonably request.

     

    (o)  VM
      Investors LLC shall have entered into a Lock-Up Agreement in the form attached
      hereto as Exhibit
      L
      (the
      "Lock-Up
      Agreement").

     

    8. TERMINATION.
      In the
      event that the Closing shall not have occurred with respect to a Buyer on or
      before five (5) Business Days from the date hereof due to the Company's or
      such
      Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
      (and the nonbreaching party's failure to waive such unsatisfied condition(s)),
      the nonbreaching party shall have the option to terminate this Agreement with
      respect to such breaching party at the close of business on such date without
      liability of any party to any other party; provided,
      however,
      that if
      this Agreement is terminated pursuant to this Section 8, the Company shall
      remain obligated to reimburse the non-breaching Buyers for the expenses
      described in Section 4(g) above.

     

    
      
        
        

      

      
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    9. MISCELLANEOUS.

     

    (a) Governing
      Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      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, 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 brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. 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 to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    (b) Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      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;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    (c) Headings.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    (d) Severability.
      If any
      provision of this Agreement is prohibited by law or otherwise determined to
      be
      invalid or unenforceable by a court of competent jurisdiction, the provision
      that would otherwise be prohibited, invalid or unenforceable shall be deemed
      amended to apply to the broadest extent that it would be valid and enforceable,
      and the invalidity or unenforceability of such provision shall not affect the
      validity of the remaining provisions of this Agreement so long as this Agreement
      as so modified continues to express, without material change, the original
      intentions of the parties as to the subject matter hereof and the prohibited
      nature, invalidity or unenforceability of the provision(s) in question does
      not
      substantially impair the respective expectations or reciprocal obligations
      of
      the parties or the practical realization of the benefits that would otherwise
      be
      conferred upon the parties. The parties will endeavor in good faith negotiations
      to replace the prohibited, invalid or unenforceable provision(s) with a valid
      provision(s), the effect of which comes as close as possible to that of the
      prohibited, invalid or unenforceable provision(s).

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

    (e) Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents supersede all other prior oral
      or
      written agreements between the Buyers, the Company, their affiliates and Persons
      acting on their behalf with respect to the matters discussed herein, and this
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein contain the entire understanding of the parties with respect to
      the
      matters covered herein and therein and, except as specifically set forth herein
      or therein, neither the Company nor any Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters. No provision
      of
      this Agreement may be amended other than by an instrument in writing signed
      by
      the Company and the holders of at least a majority of the aggregate number
      of
      Registrable Securities issued and issuable hereunder and under the Notes, and
      any amendment to this Agreement made in conformity with the provisions of this
      Section 9(e) shall be binding on all Buyers and holders of Securities as
      applicable. No provision hereof may be waived other than by an instrument in
      writing signed by the party against whom enforcement is sought. No such
      amendment shall be effective to the extent that it applies to less than all
      of
      the holders of the applicable Securities then outstanding. 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 also is offered to all of the parties to the Transaction
      Documents, holders of Notes or holders of the Warrants, as the case may be.
      The
      Company has not, directly or indirectly, made any agreements with any Buyers
      relating to the terms or conditions of the transactions contemplated by the
      Transaction Documents except as set forth in the Transaction Documents. Without
      limiting the foregoing, the Company confirms that, except as set forth in this
      Agreement, no Buyer has made any commitment or promise or has any other
      obligation to provide any financing to the Company or otherwise. 

     

    (f) Notices.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with an overnight courier service,
      in
      each case properly addressed to the party to receive the same. The addresses
      and
      facsimile numbers for such communications shall be:

     

    If
      to the
      Company:

     

    DigitalFX
      International, Inc.

    3035
      East
      Patrick Lane, Suite 9

    Las
      Vegas, Nevada 89120

    Telephone: (702)
      478-3475

    Facsimile:  
      (702)
      939-1115

    Attention: 
       Mickey
      Elfenbein

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

    Copy
      (for
      informational purposes only) to:

     

    Stubbs
      Alderton & Markiles, LLP

    15260
      Ventura Boulevard

    20th
      Floor

    Sherman
      Oaks, California 91403

    Telephone:
       (818) 444-4500

    Facsimile:   
      (818) 444-6303

    Attention:   
      Gregory Akselrud

     

    If
      to the
      Transfer Agent:

     

    Continental
      Stock Transfer & Trust Company

    17
      Battery Place

    New
      York,
      NY 10004

    Telephone: 
      (212) 509-4000

    Facsimile:   
      (212) 509-5150

    Attention:  
       Gregory P. Denman

     

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
      with copies to such Buyer's representatives as set forth on the Schedule of
      Buyers, 

     

    with
      a
      copy (for informational purposes only) to:

     

    Schulte
      Roth & Zabel LLP 

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Telephone: 
      (212)
      756-2000

    Facsimile:   
      (212)
      593-5955

    Attention:   
      Eleazer
      N. Klein, Esq.

     

    or
      to
      such other address and/or facsimile number and/or to the attention of such
      other
      Person as the recipient party has specified by written notice given to each
      other party five (5) days prior to the effectiveness of such change. Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender's facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    (g) Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of the Notes
      or the Warrants. The Company shall not assign this Agreement or any rights
      or
      obligations hereunder without the prior written consent of the holders of at
      least a majority of the aggregate number of Registrable Securities issued and
      issuable hereunder and under the Notes, including by way of a Fundamental
      Transaction (unless the Company is in compliance with the applicable provisions
      governing Fundamental Transactions set forth in the Notes and the Warrants).
      A
      Buyer may assign some or all of its rights hereunder without the consent of
      the
      Company, in which event such assignee shall be deemed to be a Buyer hereunder
      with respect to such assigned rights.

     

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

    (h) No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    (i) Survival.
      Unless
      this Agreement is terminated under Section 8, the representations and warranties
      of the Company and the Buyers contained in Sections 2 and 3 and the agreements
      and covenants set forth in Sections 4, 5 and 9 shall survive the Closing and
      the
      delivery and exercise of Securities, as applicable. Each Buyer shall be
      responsible only for its own representations, warranties, agreements and
      covenants hereunder.

     

    (j) Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (k) Indemnification.
      In
      consideration of each Buyer's execution and delivery of the Transaction
      Documents and acquiring the Securities thereunder and in addition to all of
      the
      Company's other obligations under the Transaction Documents, the Company shall
      defend, protect, indemnify and hold harmless each Buyer and each other holder
      of
      the Securities and all of their stockholders, partners, members, officers,
      directors, employees and direct or indirect investors and any of the foregoing
      Persons' agents or other representatives (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the "Indemnitees")
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages, and expenses in connection therewith
      (irrespective of whether any such Indemnitee is a party to the action for which
      indemnification hereunder is sought), and including reasonable attorneys' fees
      and disbursements (the "Indemnified
      Liabilities"),
      incurred by any Indemnitee as a result of, or arising out of, or relating to
      (a)
      any misrepresentation or breach of any representation or warranty made by the
      Company in the Transaction Documents or any other certificate, instrument or
      document contemplated hereby or thereby, (b) any breach of any covenant,
      agreement or obligation of the Company contained in the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby
      or
      (c) any cause of action, suit or claim brought or made against such Indemnitee
      by a third party (including for these purposes a derivative action brought
      on
      behalf of the Company) and arising out of or resulting from (i) the execution,
      delivery, performance or enforcement of the Transaction Documents or any other
      certificate, instrument or document contemplated hereby or thereby, (ii) any
      transaction financed or to be financed in whole or in part, directly or
      indirectly, with the proceeds of the issuance of the Securities, (iii) any
      disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status
      of
      such Buyer or holder of the Securities as an investor in the Company pursuant
      to
      the transactions contemplated by the Transaction Documents. To the extent that
      the foregoing undertaking by the Company may be unenforceable for any reason,
      the Company shall make the maximum contribution to the payment and satisfaction
      of each of the Indemnified Liabilities that is permissible under applicable
      law.
      Except as otherwise set forth herein, the mechanics and procedures with respect
      to the rights and obligations under this Section 9(k) shall be the same as
      those
      set forth in Section 6 of the Registration Rights Agreement.

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

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

     

    (m) Remedies.
      Each
      Buyer and each holder of the Securities shall have all rights and remedies
      set
      forth in the Transaction Documents and all rights and remedies which such
      holders have been granted at any time under any other agreement or contract
      and
      all of the rights which such holders have under any law. Any Person having
      any
      rights under any provision of this Agreement shall be entitled to enforce such
      rights specifically (without posting a bond or other security), to recover
      damages by reason of any breach of any provision of this Agreement and to
      exercise all other rights granted by law. Furthermore, the Company recognizes
      that in the event that it fails to perform, observe, or discharge any or all
      of
      its obligations under the Transaction Documents, any remedy at law may prove
      to
      be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
      shall be entitled to seek temporary and permanent injunctive relief in any
      such
      case without the necessity of proving actual damages and without posting a
      bond
      or other security.

     

    (n) Rescission
      and
      Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever any Buyer 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 Buyer 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.

     

    (o) Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to the Buyers hereunder
      or
      pursuant to any of the other Transaction Documents or the Buyers enforce or
      exercise their rights hereunder or 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, foreign, 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.

     

    
      
        
        

      

      
        -36-

        
          

        

      

      
        
        

      

    

    (p) Independent
      Nature of Buyers' Obligations and Rights.
      The
      obligations of each Buyer under any Transaction Document are several and not
      joint with the obligations of any other Buyer, and no Buyer shall be responsible
      in any way for the performance of the obligations of any other Buyer under
      any
      Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Buyer pursuant hereto or thereto, shall
      be
      deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
      do not so constitute, a partnership, an association, a joint venture or any
      other kind of entity, or create a presumption that the Buyers are in any way
      acting in concert or as a group, and the Company will not assert any such claim
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents and the Company acknowledges that the Buyers are not
      acting in concert or as a group with respect to such obligations or the
      transactions contemplated by the Transaction Documents. The Company acknowledges
      and each Buyer confirms that it has independently participated in the
      negotiation of the transaction contemplated hereby with the advice of its own
      counsel and advisors. Each Buyer shall be entitled to independently protect
      and
      enforce its rights, including, without limitation, the rights arising out of
      this Agreement or out of any other Transaction Documents, and it shall not
      be
      necessary for any other Buyer to be joined as an additional party in any
      proceeding for such purpose.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        -37-

        
          

        

      

      
        
        

      

    

    


    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	
              COMPANY:

            
	 	 	 
	 	 	DIGITALFX
              INTERNATIONAL, INC.
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Craig
              Ellins 
	 	
              
Name:
              Craig Ellins
	 	Title:
              Chief Executive Officer


    

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
       

      
        	 	 	
                BUYERS:

              
	 	 	 
	 	 	PORTSIDE
                GROWTH AND OPPORTUNITY FUND
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Jeffrey C. Smith 
	 	
                
Name:
                Jeffrey C. Smith
	 	Title:
                Authorized Signatory


      

      


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        



    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	 	 
	 	 	HIGHBRIDGE
              INTERNATIONAL LLC
	 	 
	 
 	 
 	 
 
	 	By:  	/s/ Adam
              J.
              Chill 
	 	
              
Name:
              Adam J. Chill
	 	Title:
              


    

    


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
       

      
        	 	 	 
	 	 	 
	 	 	IROQUOIS
                MASTER FUND, LTD.
	 	 
	 
 	 
 	 
 
	 	By:  	/s/
                Richard Abbe
	 	
                
Name:
                Richard Abbe
	 	Title:
                Authorized Signator


      

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    SCHEDULE
      OF BUYERS

     

    


    
      	
              (1)

            	
              (2)

            	
              (3)

            	
              (4)

            	
              (5)

            	
              (6)

            
	
              Buyer

            	
              Address
                and

              Facsimile
                Number

            	
              Aggregate

              Principal

              Amount
                of

              Notes

            	
              Number
                of

              Warrant
                Shares

            	
              Purchase
                Price

            	
              Legal
                Representative's Address and Facsimile Number

            
	
               

              Portside
                Growth & Opportunity Fund

            	
               

              c/o
                Ramius Capital Group, L.L.C.

              666
                Third Avenue, 26th Floor

              New
                York, New York 10017

              Attention:  
                Jeffrey Smith

                          
                Owen Littman 

              Facsimile:   
                (212) 201-4802

                     
                      (212) 845-7995

              Telephone: 
                (212) 845-7955

                        
                   (212) 201-4841

              Residence: Cayman
                Islands

            	
               

              $5,000,000

            	
               

              625,000

            	
               

              $5,000,000

            	
               

              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

            
	
               

              Highbridge
                International LLC

            	
               

              c/o
                Highbridge Capital Management, LLC

              9
                West 57th St, 27th Floor

              New
                York, NY 10019

              Attn:
                Ari J. Storch / Adam J. Chill

              Tel: 
                212-287-4720

              Fax: 
                212-751-0755

              Residence:
                Cayman Islands

            	
               

              $1,500,000

            	
               

              187,500

            	
               

              $1,500,000

            	
               

              N/A

            
	
               

              Iroquois
                Master Fund, Ltd.

            	
               

              641
                Lexington Avenue

              26th
                Floor 

              New
                York, New York 10022

              Attention:  
                Joshua Silverman

              Facsimile:    (212)
                207-3452

              Telephone:
                 (212) 974-3070

              Residence:  Cayman
                Islands

            	
               

              $500,000

            	
               

              62,500

            	
               

              $500,000

            	
               

              N/A

            
	
              TOTAL  

            	
               

            	
              $7,000,000

            	
              875,000

            	
              $7,000,000

            	
               

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    

      EXHIBITS

       

      
        	
                Exhibit
                  A

              	
                Form
                  of Notes

              
	
                Exhibit
                  B

              	
                Form
                  of Warrants

              
	
                Exhibit
                  C

              	
                Registration
                  Rights Agreement

              
	
                Exhibit
                  D

              	
                Irrevocable
                  Transfer Agent Instructions

              
	
                Exhibit
                  E

              	
                Form
                  of Outside Company Counsel Opinion

              
	
                Exhibit
                  F

              	
                Form
                  of Secretary's Certificate

              
	
                Exhibit
                  G

              	
                Form
                  of Officer's Certificate

              
	
                Exhibit
                  H

              	
                Form
                  of Pledge Agreement

              
	
                Exhibit
                  I

              	
                Form
                  of Security Agreement

              
	
                Exhibit
                  J

              	
                Form
                  of Guarantee 

              
	
                Exhibit
                  K

              	
                Form
                  of Escrow Agreement between the Company, Maxim Group LLC and American
                  Stock Transfer & Trust Company

              
	
                Exhibit
                  L

              	
                Form
                  of Lock-Up Agreement

              


      

      SCHEDULES

       

      
        	
                Schedule
                  3(a)

              	
                Subsidiaries

              
	
                Schedule
                  3(l)

              	
                Absence
                  of Certain Changes

              
	
                Schedule
                  3(q)

              	
                Transactions
                  with Affiliates

              
	
                Schedule
                  3(r)

              	
                Capitalization

              
	
                Schedule
                  3(s)

              	
                Indebtedness
                  and Other Contracts

              
	
                Schedule
                  3(t)

              	
                Litigation

              
	
                Schedule
                  3(cc)

              	
                Ranking
                  of Notes