SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of February 14, 2011, between Derycz Scientific, Inc., a Nevada corporation
(the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns in accordance with Section 5.7 hereof, a “Purchaser” and
collectively, the “Purchasers”).

     

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

     

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

     

    ARTICLE
I.

    DEFINITIONS

     

    1.1           Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:

     

    “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.5.

     

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

     

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.

     

    “Board of Directors”
means the board of directors of the Company.

     

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

     

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

     

    “Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
satisfied or waived, but in no event later than the third Trading Day following
the date hereof.  Notwithstanding anything herein to the contrary, the
Company and T.R. Winston & Company, LLC, in their sole discretion, may elect
to have multiple Closings under this Agreement in which case the terms Closing
and Closing Date shall apply to the Purchasers closing on the sale of the
Securities at such Closing.


    
      
         


      

      
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    “Commission” means the
United States Securities and Exchange Commission.

     

    “Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed.

     

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

     

    “Company Counsel”
means Law Office of Jennifer A. Post, with offices located at 9320 Wilshire
Boulevard, Suite 306, Beverly Hills, CA 90212.

     

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

     

     “Effective Date” means
the earliest of the date that (a) the initial Registration Statement has been
declared effective by the Commission, (b) all of the Registrable Securities have
been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the
requirement for the Company to be in compliance with the current public
information required under Rule 144 and without volume or manner-of-sale
restrictions or (c) following the one year anniversary of the Closing Date
provided that a holder of Registrable Securities is not an Affiliate of the
Company, all of the Registrable Securities may be sold pursuant to an exemption
from registration under Section 4(1) of the Securities Act without volume or
manner-of-sale restrictions and Company counsel has delivered to such holders a
written opinion that resales may then be made by such holders of the Registrable
Securities pursuant to such exemption which opinion shall be in form and
substance reasonably acceptable to the Transfer Agent.

     

     “Escrow Agent” means
Signature Bank, a New York State chartered bank, with offices at 261 Madison
Avenue, New York, New York 10016.

     

    “Escrow Agreement”
means the escrow agreement entered into prior to the date hereof, by and among
the Company, the Escrow Agent and T.R. Winston & Company, LLC pursuant to
which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to
be applied to the transactions contemplated hereunder.

     

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

     

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

    


    “FCPA” means the
Foreign Corrupt Practices Act of 1977, as amended.


    
      
         


      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Per Share Purchase
Price” equals $2.50, subject to adjustment
for reverse and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the date of this
Agreement.

     

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

     

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

     

    “Public Information
Failure” shall have the meaning ascribed to such term in Section
4.2(b).

     

    “Public Information Failure
Payments” shall have the meaning ascribed to such term in Section
4.2(b).

     

     “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.

     

    “Registration
Statement” means a registration statement filed pursuant to Section 4.18,
registering the resale, by the Purchasers, of all of the Shares and Warrant
Shares.

     

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

     

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


    
      
         


      

      
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    “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.


     

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

     

    “Securities” means the
Shares, the Warrants and the Warrant Shares.

     

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

     

    “Shares” means the
shares of Common Stock issued or issuable to each Purchaser pursuant to this
Agreement.

     

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

     

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

     

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

     

    “Trading Day” means a
day on which the principal Trading Market is open for trading.

     

    “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing).

     

    “Transaction
Documents” means this Agreement, the Warrants, all exhibits and schedules
thereto and hereto.

     

    “Transfer Agent” means
American Stock Transfer & Trust Company, LLC, the current transfer agent of
the Company, with a mailing address of 6201 15th Avenue,
Brooklyn, NY 11219 and a facsimile number of (718) 765-8718, and any successor
transfer agent of the Company.


    
      
         


      

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

     

    “Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchasers at
the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to 3 years, in the
form of Exhibit
B attached hereto.

     

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

     

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

     

    ARTICLE
II.

    PURCHASE
AND SALE

     

    2.1           Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly,  agree to purchase, up to an aggregate of $3,000,000
of units (the “Units”) at a per Unit
price of $2.50, with each Unit consisting of (i) one share of Common Stock and
(ii) one Warrant to purchase one-quarter of a share of Common Stock (in the form
of that attached hereto as Exhibit
B).  Each Purchaser shall deliver to the Escrow Agent, via wire
transfer or a certified check, immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser, and the Company shall deliver to each Purchaser its
respective Units, as determined pursuant to Section 2.2(a), and the Company and
each Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of WS or such other location as the parties shall mutually
agree.


    
      
         


      

      
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    2.2           Deliveries.

     

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

     

    (i)           this
Agreement duly executed by the Company;

     

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

     

    (iii)         a
copy of the irrevocable instructions to the Transfer Agent instructing the
Transfer Agent to deliver, on an expedited basis, a certificate evidencing a
number of Shares equal to such Purchaser’s Subscription Amount divided by the
Per Share Purchase Price, registered in the name of such Purchaser;
and

     

    (iv)         a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 25% of such Purchaser’s Shares, with an exercise
price equal to $3.00, subject to adjustment therein (such Warrant certificate
may be delivered within three Trading Days of the Closing Date).

     

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

     

    (i)           this
Agreement duly executed by such Purchaser; and

     

    (ii)          to
Escrow Agent, such Purchaser’s Subscription Amount by wire transfer to the
account specified in writing by the Escrow Agreement.

     

    2.3           Closing
Conditions.

     

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

     

    (i)           the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless such representations and
warranties are made as of a specific date therein in which case they shall be
accurate as of such date);

     

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

     

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

     

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

     

    
      
         


      

      
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    (i)           the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless such
representations and warranties are made as of a specific date in which case they
shall be accurate as of such date, in which case an amended Disclosure Schedule
will be delivered at such Closing to the extent necessary to support the
accuracy of the representation and warranties);

     

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

     

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

     

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

     

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

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

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

     

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


    
      
         


      

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

     

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


    
      
         


      

      
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    (d)           No
Conflicts.  The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents to which it is a
party, the issuance and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.

     

    (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii)
if required, the notice and/or application(s) to each applicable Trading Market
for the issuance and sale of the Securities and the listing of the Shares and
Warrant Shares for trading thereon in the time and manner required thereby and
(iii) the filing of Form D with the Commission and such filings as are required
to be made under applicable state securities laws (collectively, the “Required
Approvals”).

     

    (f)           Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents and under the Securities Act.  The
Warrant Shares, when issued in accordance with the terms of the Transaction
Documents including the due exercise of the Warrant and the payment in full of
the exercise price thereunder, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents and under the
Securities Act.  The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement and the Warrants.


    
      
         


      

      
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    (g)           Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
The Company has not issued any capital stock since December 31, 2010, other than
pursuant to the exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees pursuant to
the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of December 31,
2010.  No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.  Except as a result of the
purchase and sale of the Securities and except as set forth on Schedule 3.1(g),
there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents.  The issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  Except as set forth on Schedule 3.1(g), no
further approval or authorization of any stockholder, the Board of Directors or
others is required for the issuance and sale of the Securities.  There
are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or,
to the knowledge of the Company and without investigation, between or among any
of the Company’s stockholders.

     

    (h)          SEC Reports; Financial
Statements.  The Company has filed all reports on Form 10-Q and
Form 10-K, together with all schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, together with such
forms, for the two years preceding the date hereof (or such shorter period as
the Company was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents incorporated
by reference therein, being collectively referred to herein as the “SEC Reports”) on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports, together
with any Current Reports on Form 8-K filed during the same period, complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The Company has never been an issuer subject to Rule
144(i) under the Securities Act. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to year-end audit
adjustments.

     

    
      
         


      

      
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    (i)           Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report or Current Report on
Form 8-K filed prior to the date hereof: (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the Commission,
(iii) the Company has not altered its method of accounting, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans.  The Company does not have
pending before the Commission any request for confidential treatment of
information.  Except for the issuance of the Securities contemplated
by this Agreement, no event, liability, fact, circumstance, occurrence or
development has occurred or exists, or is reasonably expected to occur or exist,
with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets or financial condition, that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is
made.

     

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


    
      
         


      

      
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    (k)           Labor
Relations.  No labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company, which
could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are
good.  Except as set forth on Schedule 3.1(k), to the knowledge of the
Company, no executive officer of the Company or any Subsidiary is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance in all material respects with all U.S.
federal, state, local and, to the Company’s knowledge, foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

     

    (l)           Compliance.  Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree, or
order of any court, arbitrator or other governmental authority or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation, to the Company’s
knowledge, all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not have
or reasonably be expected to result in a Material Adverse Effect.

     

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


    
      
         


      

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

     

    (o)           Intellectual
Property.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or required for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”).  None of, and neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to
expire or terminate or be abandoned, within two (2) years from the date of this
Agreement.  Neither the Company nor any Subsidiary has received, since
the date of the latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as could not have or reasonably be expected to not have a Material
Adverse Effect.  To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights.  The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, except where failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     

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


    
      
         


      

      
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    (q)           Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company or any Subsidiary and, to the knowledge
of the Company, none of the employees of the Company or any Subsidiary is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, providing for
the borrowing of money from or lending of money to or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee, stockholder,
member or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii) reimbursement
for expenses incurred on behalf of the Company and (iii) other employee
benefits, including stock option agreements under any stock option plan of the
Company.

     

    (r)           Sarbanes-Oxley; Internal
Accounting Controls.  Except as set forth in Schedule 3.1(r), the
Company and the Subsidiaries are in compliance with all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof and
which are applicable to “smaller reporting companies,” as defined in Rule 12b-2
of the Exchange Act, and/or issuers that trade capital stock exclusively on the
OTCBB or the “Pink Sheets” but not on a national securities or “SRO” exchange,
and any and all applicable rules and regulations promulgated by the Commission
as applicable thereunder that are effective as of the date hereof and as of the
Closing Date.  Except as set forth in Schedule 3.1(r), the
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company and the Subsidiaries have
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms.  The Company’s
certifying officers have evaluated the effectiveness of the disclosure controls
and procedures of the Company and the Subsidiaries as of the end of the period
covered by the most recently filed annual report under the Exchange Act (such
date, the “Evaluation
Date”).  The Company presented in its most recently filed
annual report under the Exchange Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date,
there have been no changes in the internal control over financial reporting (as
such term is defined in the Exchange Act) of the Company and its Subsidiaries
that have materially affected, or is reasonably likely to materially affect, the
internal control over financial reporting of the Company or its
Subsidiaries.


    
      
         


      

      
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    (s)           Certain
Fees.  Except for the fees and expenses paid to T.R. Winston
& Company, LLC, no brokerage or finder’s fees or commissions are or will be
payable by the Company or  any Subsidiary to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the Transaction
Documents.  The Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.

     

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

     

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

     

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

     

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

     

    (x)           Application of Takeover
Protections.  The Company and the Board of Directors have not
taken any action 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.

     

    
      
         


      

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

     

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

     

    (aa)          Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature and (ii) the Company is able to pay its Indebtedness
as is becomes due.  The Company does not presently intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its
debt).  The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year
from the Closing Date.  Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s consolidated balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (z) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

     

    (bb)         Tax
Status.  Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and its Subsidiaries each (i) has made or filed all United
States federal, state and local income and, to the Company’s knowledge, all
foreign income and franchise 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 and (iii) has set
aside on its books provision reasonably adequate for the payment of all material
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 neither the
Company nor any Subsidiary knows of a basis for any such claim.

     

    
      
         


      

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

     

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

     

    (ee)         Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm: is a registered public accounting firm as required by the
Exchange Act.

     

    (ff)           No Disagreements with
Accountants and Lawyers.  Except as set forth on Schedule 3.1(ff),
there are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants and
lawyers formerly or presently employed by the Company and the Company is current
with respect to any fees owed to its accountants and lawyers which could affect
the Company’s ability to perform any of its obligations under any of the
Transaction Documents.

     

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


    
      
         


      

      
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    (hh)         Acknowledgment Regarding
Purchaser’s Trading Activity. Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and
4.14 hereof), it is understood and acknowledged by the Company that: (i) none of
the Purchasers has been asked by the Company to agree, nor has any
Purchaser agreed hereunder, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser, specifically
including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities
and (iii) any Purchaser, and counter-parties in “derivative” transactions to
which any such Purchaser is a party, directly or indirectly, may presently have
a “short” position in the Common Stock.  The Company further
understands and acknowledges that (y) one or more Purchasers may engage in
hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Warrant Shares deliverable with respect to Securities are being determined,
and (z) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the
hedging activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents; provided, however, the Company does not waive any rights
it may have with respect to any damages it may incur if the trading activities
of the Purchasers violate any federal, state local or foreign laws and
regulations applicable to such activities or such Purchasers.

     

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

     

    (jj)           Stock Option Plans.
Each stock option granted by the Company under the Company’s stock option plan
was granted (i) in accordance with the terms of the Company’s stock option plan
and (ii) with an exercise price at least equal to the fair market value of the
Common Stock on the date such stock option would be considered granted under
GAAP and applicable law. No stock option granted under the Company’s stock
option plan has been backdated.  The Company has not knowingly
granted, and there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results
or prospects.

     

    
      
         


      

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

     

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

     

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

     

    (c)           Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises
any Warrants, it will be an “accredited investor” as defined in Rule
501.

     

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


    
      
         


      

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

     

    (f)           Certain
Transactions
and Confidentiality.  Other than consummating the transactions
contemplated hereunder, such Purchaser has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that such
Purchaser first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
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.

     

    The
Company acknowledges and agrees that the representations contained in Section
3.2 shall not modify, amend or affect such Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated
hereby.

     

    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1           Transfer
Restrictions.

     

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


    
      
         


      

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

     

    THIS
SECURITY HAS NOT BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

     

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

     


    
      
         


      

      
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    (c)           Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b) hereof), (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, (ii) following any sale of such
Shares or Warrant Shares pursuant to Rule 144, (iii) if such Shares or Warrant
Shares are eligible for sale under Rule 144, without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 as to such Shares and Warrant Shares and without volume or
manner-of-sale restrictions, or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission).  The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent promptly after the Effective Date if required by
the Transfer Agent to effect the removal of the legend hereunder at the request
of a Purchaser.  If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the resale of
the Warrant Shares, or if such Shares or Warrant Shares may be sold under Rule
144 and the Company is then in compliance with the current public information
required under Rule 144, or if the Shares or Warrant Shares may be sold under
Rule 144 without the requirement for the Company to be in compliance with the
current public information required under Rule 144 as to such Shares or Warrant
Shares or if such legend is not otherwise required under applicable requirements
of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission) then such Warrant Shares shall be issued
free of all legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three Trading Days following the delivery by a Purchaser to
the Company or the Transfer Agent of a certificate representing Shares or
Warrant Shares, as the case may be, issued with a restrictive legend (such third
Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered Shares by DWAC issuance to such
Purchaser free from all restrictive and other legends provided such Purchaser
has furnished all reasonable and customary information, documentation and
certifications required by the Transfer Agent and/or the Company's counsel
necessary to cause the removal of the legend in form and substance reasonably
satisfactory to such persons.  The Company may not make any notation
on its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section 4.  Certificates
for Securities subject to legend removal hereunder shall be transmitted by the
Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company System as directed by such
Purchaser.

    


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


    
      
         


      

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

     

    4.2           Furnishing of
Information;
Public Information.

     

    (a)           Until
the earliest of the time that (i) no Purchaser owns Securities or (ii) the
Warrants have expired, the Company covenants to maintain the registration of the
Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act even if the Company is not then subject to the
reporting requirements of the Exchange Act.

     

    (b)           At
any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold
without the requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, if the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities on the day of a
Public Information Failure and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required  for the Purchasers
to transfer the Shares and Warrant Shares pursuant to Rule 144.  The
payments to which a Purchaser shall be entitled pursuant to this Section 4.2(b)
are referred to herein as “Public Information Failure
Payments.”  Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.


    
      
         


      

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

     

    4.4          Securities Laws Disclosure;
Publicity.  The Company shall, by 9:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, file a press
release disclosing the material terms of the transactions contemplated hereby
and, within the time period required by law, file with the Commission a Current
Report on Form 8-K, including the Transaction Documents as exhibits
thereto.  From and after the issuance of such press release, the
Company represents to the Purchasers that it shall have publicly disclosed all
material, non-public information delivered to any of the Purchasers by the
Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents.  The Company and each Purchaser shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Purchaser, or without the prior consent of each Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal or state securities laws in
connection with (i) any registration statement or “blue sky” filings and
applications and (ii) the filing of final Transaction Documents (including
signature pages thereto) with the Commission and (b) to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).

     

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

     

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

     

    
      
         


      

      
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    4.7          Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and shall not use such
proceeds: (a)  for the satisfaction of any portion of the Company’s
debt (other than payment of trade payables in the ordinary course of the
Company’s business and prior practices and schedules payments of principal and
interest to the Company’s secured lender, Silicon Valley Bank), (b) for the
redemption of any Common Stock or Common Stock Equivalents, (c) for the
settlement of any outstanding litigation or (d) in violation of FCPA or
OFAC regulations.

     

    4.8          Indemnification of
Purchasers.   Subject to the provisions of this Section
4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser Parties, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Parties may have
with any such stockholder or any violations by such Purchaser Parties of state
or federal securities laws or any conduct by such Purchaser Parties which
constitutes fraud, gross negligence, willful misconduct or
malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party, in
which case the Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel.  The Company will not be
liable to any Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents or any agreements or understandings such Purchaser
Parties may have with any stockholder or any violations by such Purchaser
Parties of state or federal securities laws or any conduct by such Purchaser
Parties which constitutes fraud, gross negligence, willful misconduct or
malfeasance.  The indemnification required by this Section 4.8 shall
be made upon the entry of a final judgment but only after the deadlines for
appeal of such judgment have passed or such appeals have failed and been
exhausted or upon the award of damages in arbitration which award is not subject
to further litigation in any forum, or upon the agreement of parties as part of
a settlement agreement which terminates the underlying claims. The indemnity
agreements contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others, and (y) any
liabilities the Company may be subject to pursuant to law.

     

    
      
         


      

      
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    4.9          Reservation of Common
Stock. As of the date hereof, the Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Shares pursuant to this Agreement and Warrant
Shares pursuant to any exercise of the Warrants.

     

    4.10        Listing of Common
Stock. The Company hereby agrees to use best efforts to maintain the
listing or quotation of the Common Stock on the Trading Market on which it
is currently listed, and concurrently with the Closing, the Company shall apply
to list or quote all of the Shares and Warrant Shares on such Trading Market and
promptly secure the listing of all of the Shares and Warrant Shares on such
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and Warrant Shares to be
listed or quoted on such other Trading Market as promptly as
possible.  The Company will then take all action reasonably necessary
to continue the listing or quotation and trading of its Common Stock on a
Trading Market and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading
Market.

     

    4.11        [INTENTIONALLY
DELETED]

     

    4.12        [INTENTIONALLY
DELETED]

     

    4.13        [INTENTIONALLY
DELETED]

     

    
      
         


      

      
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    4.14        Certain
Transactions
and Confidentiality. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that neither it, nor any Affiliate acting on its
behalf or pursuant to any understanding with it will execute any purchases or
sales, including Short Sales, of any of the Company’s securities during the
period commencing with the execution of this Agreement and ending at such time
that the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in Section
4.4.  Each Purchaser, severally and not jointly with the other Purchasers,
covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company pursuant to the initial press
release as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Transaction Documents and the Disclosure
Schedules.  Notwithstanding the foregoing, and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly acknowledges
and agrees that (i) no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in effecting transactions in any securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release as described
in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from
effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.4 and (iii) no Purchaser shall
have any duty of confidentiality to the Company or its Subsidiaries after the
issuance of the initial press release as described in Section 4.4. 
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Agreement.

     

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

     

    4.16        Capital
Changes.  From the date hereof until the Registration Statement
registering the Shares and Warrant Shares pursuant to Section 4.18 herein is
declared effective by the Commission, the Company shall not undertake a reverse
or forward stock split or reclassification of the Common Stock.

     

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

     


    
      
         


      

      
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    4.18        Registration Rights.
If at any time after the date hereof until the one year anniversary of the date
hereof, and subject to the exceptions and limitations below, the Company shall
determine to prepare and file with the Commission a Registration Statement
relating to an offering for its own account or the account of others of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act), or their then equivalents, relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, then the Company shall send a written notice of
such determination to each Purchaser and, if within ten calendar days after the
date of delivery of such notice, any such Purchaser shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Shares and Warrant Shares as the Purchaser requests to be registered so long as
such Shares and Warrant Shares are proposed to be disposed in the same manner as
those securities set forth in the Registration Statement; provided, however, if the
offering is an underwritten offering and was initiated by the Company or at the
request of a shareholder, and if the managing underwriters advise the Company
that the inclusion of Shares and Warrant Shares requested to be included in the
Registration Statement would cause an adverse effect on the success of any such
offering, based on market conditions or otherwise (an “Adverse Effect”),
then the Company shall be required to include in such Registration Statement, to
the extent of the amount of securities that the managing underwriters advise may
be sold without causing such Adverse Effect, (a) first, the securities of the
Company and (b) the Warrant Shares and those shares (excluding the Shares) which
the Company is obligated by contract  to include in the Registration
Statement and (c) third, the Shares and the shares the Company is obligated by
contract to include in the Registration Statement; provided, further, however,
to the extent that all of the Shares and Warrant Shares are not included in the
initial Registration Statement, the Purchaser shall have the right to request
the inclusion of its Shares and Warrant Shares in subsequent Registration
Statements until all such Shares and Warrant Shares have been registered in
accordance with the terms hereof.  If the offering in which the Shares
and Warrant Shares are being included in a Registration Statement is a firm
commitment underwritten offering, unless otherwise agreed by the Company and the
underwriters, the Purchaser shall sell its Shares and Warrant Shares in such
offering using the same underwriters and, subject to the provisions hereof, on
the same terms and conditions as the other shares of Common Stock that are
included in such underwritten offering including becoming a party to the
underwriting agreements as requested by the underwriters.  The Company
shall use its best efforts to cause any Registration Statement to be declared
effective by the Commission as promptly as is possible following it being filed
with the Commission and to remain effective until the one year anniversary of
the date hereof.  All fees and expenses incident to the performance of
or compliance with this Section 4.18 by the Company shall be borne by the
Company whether or not any Shares and Warrant Shares are sold pursuant to the
Registration Statement.  The Company shall indemnify and hold harmless
the Purchaser, the officers, directors, members, partners, agents, brokers,
investment advisors and employees of each of them, each person who controls the
Purchaser (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act), and the officers, directors, members, shareholders,
partners, agents and employees of each such controlling person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorneys’ fees) and expenses (collectively, the “Losses”), as
incurred, arising out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
prospectus included therein or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading or (ii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act or
any state securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Section 4.18, except to the
extent, but only to the extent, that such untrue statements or omissions
referred to in (i) above are based solely upon information regarding the
Purchaser furnished in writing to the Company by the Purchaser expressly for use
therein, or to the extent that such information relates to the Purchaser or the
Purchaser’s proposed method of distribution of Shares and Warrant Shares and was
reviewed and expressly approved in writing by the Purchaser expressly for use in
the Registration Statement, such prospectus or such form of prospectus or in any
amendment or supplement thereto. The rights of the Purchaser under this Section
4.18 shall survive until all Shares and Warrant Shares have been either
registered under a Registration Statement or been sold pursuant to an exemption
to the registration requirements of the Securities Act.


    
      
         


      

      
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    4.19        Additional
Issuances and
Novation.  The Purchasers, acknowledges that the Company may
raise additional funds at subsequent Closings of up to an amount of Units equal
to the difference between $3,000,000 and the aggregate Subscription Amounts
hereunder (“Additional
Securities”) through T.R. Winston & Company, LLC as it placement
agent (or assignees of T.R. Winston & Company, LLC) the same prices, terms
and conditions as provided for in this Agreement (such purchasers of the
Additional Securities, the “Additional
Purchasers”); and further acknowledges that the Additional Purchasers
shall become parties to this Agreement in respect of the purchase of Additional
Securities upon execution thereof and that the Company and the Additional
Purchasers shall be bound in writing, with respect to the Additional Securities,
by the provisions of this Agreement, as if the Additional Purchasers were
original signatories to this Agreement. 

     

    ARTICLE
V.

    MISCELLANEOUS

     

    5.1         Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before March 31, 2011;
provided, however, that such
termination will not affect the right of any party to sue for any breach by any
other party (or parties) and the Company and T.R. Winston & Company, LLC
may, in their sole discretion, extend such termination date upon notice to the
Purchasers.

     

    5.2         Fees and
Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchasers.

     

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

     

    
      
         


      

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

     

    5.5         Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least 51% in
interest of the Shares then outstanding or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

     

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

     

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

     

    5.8         No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.8.

     

    
      
         


      

      
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    5.9         Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law.  If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then in addition to the obligations of the Company
under Section 4.8, the prevailing party in such action, suit or proceeding shall
be reimbursed by the other party for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.

     

    5.10        Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities.

     

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

     

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

     

    
      
         


      

      
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    5.13        Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, that in the
case of a rescission of an exercise of a Warrant, the applicable Purchaser shall
be required to return any shares of Common Stock subject to any such rescinded
exercise notice concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such
restored right).

     

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

     

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

     

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

     

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

     

    
      
         


      

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

     

    5.19        Saturdays, Sundays,
Holidays, etc.   If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

     

    5.20        Construction. The
parties agree that each of them and/or their respective counsel have reviewed
and had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in any
Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.

     

    5.21        WAIVER OF
JURY TRIAL.  IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

     

    (Signature
Pages Follow)


    
      
         


      

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

     

    
      
        
          
            
              	
                      DERYCZ
      SCIENTIFIC, INC.

                    	 
      	
                      Address for Notice:

                    
	 
      	 
      	 
      
	
                      By:

                    	 
      	 
      	
                      Fax:

                    
	 
      	
                      Name:

                    	 
      	 
      
	 
      	
                      Title:

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


            

          

        

      

    

    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]


    
      
         


      

      
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    [PURCHASER
SIGNATURE PAGES TO DYSC SECURITIES PURCHASE AGREEMENT]

    


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

     

    Name of
Purchaser: ________________________________________________________

     

    Signature of Authorized Signatory of
Purchaser: __________________________________

     

    Name of
Authorized Signatory:
____________________________________________________

     

    Title of
Authorized Signatory:
_____________________________________________________

     

    Email
Address of Authorized Signatory:
_____________________________________________

     

    Facsimile
Number of Authorized Signatory:
__________________________________________

     

    Address
for Notice to Purchaser:

     

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

     

    Subscription
Amount: $_________________

     


    Shares:
_________________

     


    Warrant
Shares: __________________

     


    EIN
Number:

     

    [SIGNATURE
PAGES CONTINUE]


    
      
         


      

      
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