Exhibit 10.1


SECURITIES PURCHASE AGREEMENT


                    SECURITIES
PURCHASE AGREEMENT, dated as of October 18, 2007, between Viewpoint
Corporation, a Delaware corporation (the “COMPANY”), and the investors listed
on Schedule of Purchasers (the “SCHEDULE OF PURCHASERS”) attached hereto as
Exhibit A (individually, a “PURCHASER” and collectively, the “PURCHASERS”).


PREAMBLE


                    The
Company has duly authorized (i) the issuance of 15,714,285 shares of the
Company’s common stock, par value $.001 per share (the “COMMON STOCK”)
(ii) the issuance of warrants to purchase 4,714,285 shares of Common Stock to
the Purchasers (such number being thirty percent (30%) of the total number of
shares of Common Stock issuable to the Purchasers as described above) (the
“WARRANTS”) and (iii) the issuance of warrants to the Company’s financial
advisor as provided in Schedule 3.01(v), pursuant to the provisions of this
Securities Purchase Agreement and the Warrants to be entered into
simultaneously with this Securities Purchase Agreement, the form of which is
attached as Exhibit B hereto.


                    Each
party hereto agrees as follows for the benefit of the other party:


ARTICLE ONE


DEFINITIONS


	
 

	
 

	
 


	
 

	
SECTION
 1.01.

	
DEFINITIONS.





                    “8-K
FILING” has the meaning set forth in Section 4.09 of the Securities Purchase
Agreement.


                    “AFFILIATE”
has the meaning as set forth in Rule 144.


                    “AGENT”
means Merriman Curhan Ford & Co.


                    “AVAILABLE
UNDERSUBSCRIPTION AMOUNT” has the meaning set forth in Section 4.10(b)(i)
of the Securities Purchase Agreement. 


                    “BASIC
AMOUNT” has the meaning set forth in Section 4.10(b)(i) of the Securities
Purchase Agreement. 


                    “BOARD
OF DIRECTORS” means, as to any Person, the board of directors of such Person or
any duly authorized committee thereof.


                    “BUSINESS
DAY” means any day other than a Saturday, Sunday or any other day on which
banking institutions in The City of New York are required or authorized by law
or other governmental action to be closed.


                    “BUY-IN
PRICE” has the meaning set forth in Section 3.02(f) of the Securities Purchase
Agreement.






                    “BUY-IN
PRICE” has the meaning set forth in Section 3.02(f) of the Securities Purchase
Agreement.


                    “CAPITAL
STOCK” means (1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents, however designated, of
corporate stock, including each class of common stock and preferred stock of
such Person and (2) with respect to any Person that is not a corporation, any
and all partnership or other equity interests of such Person.


                    “CLOSING”
has the meaning set forth in Section 2.02 of the Securities Purchase
Agreement.


                    “CLOSING
BID PRICE” shall mean the closing bid price of the Company’s Common Stock on
the Principal Market.


                    “CLOSING
DATE” has the meaning set forth in Section 2.02 of the Securities Purchase
Agreement.


                    “COMMON
STOCK” has the meaning set forth in the Preamble of the Securities Purchase
Agreement. 


                    “COMMISSION”
means the Securities and Exchange Commission, or any successor agency thereto
with respect to the regulation or registration of securities.


                    “COMPANY”
means the party named as such in the Preamble until a successor replaces it
pursuant to this Securities Purchase Agreement.


                    “COMPANY
COMMISSION FILINGS” has the meaning set forth in Section 3.01(d) of the
Securities Purchase Agreement.


                    “EXCHANGE
ACT” means the Securities Exchange Act of 1934, as amended, or any successor
statute or statutes thereto.


                    “GAAP”
is defined to mean generally accepted accounting principles in the United
States of America as in effect from time to time, including, without
limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession.


                    “INTELLECTUAL
PROPERTY” has the meaning set forth in Section 3.01(r) of the Securities
Purchase Agreement.


                    “KNOWLEDGE
OF THE COMPANY” means the actual knowledge of any executive officer of the
Company.


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                    “LIEN”
means any lien, mortgage, deed of trust, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).


                    “MATERIAL
ADVERSE EFFECT” has the meaning set forth in Section 3.01(b) of the
Securities Purchase Agreement. 


                    “NOTICE
OF ACCEPTANCE” has the meaning set forth in Section 4.10(b)(ii) of the Securities
Purchase Agreement. 


                    “OFFER”
has the meaning set forth in Section 4.10(b)(i) of the Securities Purchase
Agreement. 


                    “OFFER
NOTICE” has the meaning set forth in Section 4.10(b)(i) of the Securities
Purchase Agreement. 


                    “OFFER
PERIOD” has the meaning set forth in Section 4.10(b)(ii) of the Securities
Purchase Agreement. 


                    “OFFERED
SECURITIES” has the meaning set forth in Section 4.10(b)(i) of the
Securities Purchase Agreement. 


                    “OPINION
OF COUNSEL” means a written opinion from legal counsel which counsel may be
counsel to or an employee of the Company.


                    “PERSON”
means an individual, partnership, corporation, unincorporated organization,
trust or joint venture, or a governmental agency or political subdivision
thereof.


                    “PRINCIPAL
MARKET” means The NASDAQ Capital Market.


                    “PURCHASE
PRICE” has the meaning set forth in Section 2.01 of the Securities Purchase
Agreement.


                    “PURCHASER”
or “PURCHASERS” has the meaning set forth in the Preamble of the Securities
Purchase Agreement.


                    “REFUSED
SECURITIES” has the meaning set forth in Section 4.10(b)(iii) of the
Securities Purchase Agreement. 


                    “REGISTRATION
RIGHTS AGREEMENT” means that certain Registration Rights Agreement, dated as of
October 18, 2007, by and between the Company and the Purchasers, as amended
from time to time.


                    “REGISTRATION
STATEMENT” has the meaning set forth in Section 3.01(f) of the Securities
Purchase Agreement.


                    “REMOVAL
DATE” has the meaning set forth in 3.02(f) of the Securities Purchase
Agreement.


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                    “RULE
144” has the meaning set forth in Section 3.02(f) of the Securities Purchase
Agreement.


                    “SCHEDULE
OF PURCHASERS” has the meaning set forth in the Preamble of the Securities
Purchase Agreement.


                    “SECURITIES”
means the Common Stock and the Warrants to be issued pursuant to the provisions
of the Securities Purchase Agreement and the Warrant.


                    “SECURITIES
ACT” means the Securities Act of 1933, as amended, or any successor statute or
statutes thereto.


                    “SECURITIES
PURCHASE AGREEMENT” means this Securities Purchase Agreement, dated as of
October 18, 2007, by and between the Company and the Purchasers, as amended
from time to time.


                    “SHORT
SALES” has the meaning set forth in Section 3.02(d) of the Securities
Purchase Agreement.


                    “SUBSIDIARY”
with respect to any Person, means (i) any corporation of which the
outstanding Capital Stock having at least a majority of the votes entitled to
be cast in the election of directors under ordinary circumstances shall at the
time be owned, directly or indirectly, by such Person, or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.


                    “TRADING
DAY” has the meaning set forth in the Form of Warrant, attached as Exhibit B to
the Securities Purchase Agreement.


                    “TRANSACTION
DOCUMENTS” means, collectively, this Agreement, the Warrants and the
Registration Rights Agreement.


                    “UNDERSUBSCRIPTION
AMOUNT” has the meaning set forth in Section 4.10(b)(i) of the Securities
Purchase Agreement. 


                    “WARRANT
EXERCISE PRICE” has the meaning set forth in Section 2.01 of the
Securities Purchase Agreement. 


                    “WARRANTS”
has the meaning set forth in the Preamble of the Securities Purchase Agreement,
which such Warrants shall be exercisable six months after the Closing Date and
have a term equal to five and one-half (5.5) years.


	
 

	
 

	
 


	
 

	
SECTION
 1.02.

	
RULES OF
 CONSTRUCTION.





                    Unless
the context otherwise requires:


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          (1)
 an accounting term not otherwise defined has the meaning assigned to it in
 accordance with GAAP;


	
 

	
 


	
 

	
          (2)
 “or” is not exclusive;


	
 

	
 


	
 

	
          (3)
 words in the singular include the plural, and words in the plural include the
 singular;


	
 

	
 


	
 

	
          (4)
 provisions apply to successive events and transactions; and


	
 

	
 


	
 

	
          (5)
 “herein,” “hereof” and other words of similar import refer to this Securities
 Purchase Agreement as a whole and not to any particular Article,
 Section or other subdivision.





ARTICLE TWO


THE SECURITIES


	
 

	
 

	
 


	
 

	
SECTION
 2.01.

	
PURCHASE AND
 SALE OF THE SECURITIES.





                    Subject
to the terms and conditions of this Securities Purchase Agreement and in
reliance on the representations, warranties and covenants of the parties
contained herein, the Company shall issue and deliver to each Purchaser, and
each Purchaser severally, but not jointly, agrees to purchase from the Company
on the Closing Date (as defined below) at a purchase price per unit
(representing one share of Common Stock and a Warrant to purchase 0.3 shares of
Common Stock) of $0.70 (a) the number of shares of Common Stock as set forth
opposite such Purchaser’s name in column (3) on the Schedule of Purchasers and
(b) a Warrant to purchase the number of shares of Common Stock set forth
opposite such Purchaser’s name in column (4) on the Schedule of Purchasers, such
number being thirty percent (30%) of the total number of shares of Common Stock
issuable to such Purchaser as described above in this Section 2.01, which
warrants shall be exercisable six (6) months after the issuance date hereof and
shall have a term of five and one-half (5.5) years from the issuance date
hereof, and an exercise price (the “WARRANT EXERCISE PRICE”) equal to the
greater of (i) $0.70 or (ii) the Closing Bid Price on the Nasdaq Stock Market
on the date immediately preceding the date hereof, for an aggregate purchase
price (the “PURCHASE PRICE”) as set forth opposite such Purchaser’s name in
column (5) on the Schedule of Purchasers.


	
 

	
 

	
 


	
 

	
SECTION
 2.02.

	
CLOSING.





                    The
closing of the transactions contemplated by Section 2.01 (the “CLOSING”) shall
take place at 3:00 p.m. on the date hereof (the “CLOSING DATE”) at the offices
of Merriman Curhan Ford & Co. or at such other place and time as the
Company and the Purchasers shall mutually agree.


                    At
the Closing, the Company shall deliver to each Purchaser (i) certificates
representing the Common Stock and (ii) Warrants, in substantially the form
attached as Exhibit B hereto and to be purchased by such Purchaser at
the Closing duly registered in the name of such Purchaser. Delivery of such
certificates to each Purchaser shall be made against receipt by 


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the Company
from such Purchaser of the aggregate purchase price set forth opposite such
Purchaser’s name in column (5) on the Schedule of Purchasers by wire transfer
of immediately available funds to an account designated by the Company in
writing for such purpose.


ARTICLE THREE


REPRESENTATIONS AND WARRANTIES


	
 

	
 

	
 


	
 

	
SECTION
 3.01.

	
REPRESENTATIONS
 AND WARRANTIES OF THE COMPANY. 





                    In
order to induce each Purchaser to enter into this Securities Purchase Agreement
and purchase the Securities, the Company represents and warrants to each
Purchaser as follows:


	
 

	
 


	
 

	
          (a)
 Organization, Good Standing and Corporate Power. The Company is a
 corporation duly organized, validly existing and in good standing under the
 laws of the State of Delaware, with all requisite corporate power and
 authority to own its properties and to conduct its business as presently
 conducted. The Company is qualified to do business and is in good standing
 (or has active status) in each jurisdiction in which the failure to be so
 qualified could have a Material Adverse Effect (as hereinafter defined). 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. The Company has all requisite corporate power and
 authority to enter into this Securities Purchase Agreement and to perform its
 obligations hereunder, including, without limitation, the issuance and sale
 of the Common Stock and Warrants. 


	
 

	
 


	
 

	
          (b)
 Due Authorization; Enforceability; No Conflicts. The Company has taken
 all corporate and stockholder action necessary to authorize the execution,
 delivery and performance by it of this Securities Purchase Agreement, the
 Registration Rights Agreement and the Warrant. Assuming the due execution and
 delivery of this Securities Purchase Agreement and the Registration Rights
 Agreement by the Purchaser, this Securities Purchase Agreement and the
 Registration Rights Agreement each constitutes a valid and binding obligation
 of the Company, enforceable against the Company in accordance with its terms,
 subject to applicable bankruptcy, insolvency, reorganization, moratorium and
 other similar laws relating to the enforcement of creditors’ rights
 generally, the availability of equitable remedies and to general equity
 principles. The execution, delivery and performance by the Company of this
 Securities Purchase Agreement and the Registration Rights Agreement and
 compliance by the Company with the terms hereof and thereof will not
 (i) violate or result in a violation of the Company’s Certificate of
 Incorporation or the Company’s Bylaws, or any resolutions of the Company’s Board
 of Directors or stockholders or (ii) violate or result in a violation of, or
 constitute a material breach of or constitute a default under, any indenture,
 deed of trust, mortgage, loan agreement, or other agreement or instrument,
 judgment, order, law, rule or regulation applicable to the Company or by
 which the Company is bound or to which any of the Company’s properties are
 subject, except in the case of clause (ii), where such violation, conflict or
 event of default would not result in a material adverse effect on the
 Company’s business, financial condition, results of operations or properties
 (a 





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“MATERIAL
 ADVERSE EFFECT”). The Common Stock, upon issuance in accordance with the
 terms of this Securities Purchase Agreement and the issuance of the Warrants
 and the reservation for issuance and the issuance of the shares of Common
 Stock issuable upon exercise thereof, as the case may be, are and will
 continue upon issuance to be duly authorized, validly issued, fully-paid and
 nonassessable and free of any Liens, claims or encumbrances and rights of
 first refusal, preemptive rights, co-sale rights, registration rights, or
 other similar rights. No further approval or authorization of any
 stockholder, the Board of Directors of the Company or other third party is
 required for the issuance and sale of the Securities.


	
 

	
 


	
 

	
          (c)
 Capitalization. As of the date hereof and prior to giving effect to
 the issuance of the Securities, the authorized Capital Stock of the Company
 consists of (i) 5,000,000 shares of preferred stock, par value $.001 per
 share, of which no shares are issued and outstanding, and (ii) 150,000,000
 shares of Common Stock, of which 82,622,584 shares are issued and
 outstanding. Except with respect to any Securities to be issued in connection
 with this Securities Purchase Agreement, including the Warrants or as set
 forth on SCHEDULE 3.01(c) annexed hereto, there are no outstanding
 subscriptions, rights, options, warrants, conversion rights, agreements or
 other claims for the purchase or acquisition from the Company of any shares
 of its Capital Stock or obligating the Company to issue, repurchase, register
 or otherwise acquire, any shares of its Capital Stock or any securities
 convertible into, exercisable or exchangeable for, or otherwise entitling the
 holder to acquire, any shares of Capital Stock of the Company. The
 outstanding shares of Capital Stock of the Company have been duly and validly
 issued and are fully paid and nonassessable, have been issued in compliance
 with all federal and state securities laws, and were not issued in violation
 of any preemptive rights or similar rights.


	
 

	
 


	
 

	
          (d)
 Reports and Financial Statements. The Company has previously furnished
 the Purchaser with true and complete copies, as amended or supplemented, of
 the following documents, to the extent not available on the EDGAR system (i)
 Annual Report on Form 10-K, Amendment No. 1 to the Annual Report and
 Amendment No. 2 to the Annual Report for the year ended December 31, 2006, as
 filed with the Commission, (ii) proxy statements relating to all meetings of
 its shareholders (whether annual or special) since June 1, 2006 and (iii) all
 other reports or registration statements filed by the Company with the SEC
 since December 31, 2005 (such reports, registration statements and other
 filings, together with any amendments or supplements thereto, are
 collectively referred to as the “COMPANY COMMISSION FILINGS”). Except as set
 forth on SCHEDULE 3.01(d), the Company Commission Filings constituted all of
 the documents required to be filed by the Company with the Commission since
 December 31, 2005. As of their respective dates, such Company’s Commission
 Filings (as amended or supplemented) complied in all material respects with
 the requirements of the Securities Act and the Exchange Act and the rules and
 regulations of the Commission promulgated thereunder, and did not contain any
 untrue statement of a material fact or omit to state a material fact required
 to be stated therein or necessary to make the statements therein, in the
 light of the circumstances under which they were made, not misleading. The
 audited consolidated financial statements and any unaudited interim financial
 statements of the Company included in such Company’s Commission Filings
 comply as to form in all 





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material
 respects with applicable accounting requirements and the published rules and
 regulations of the Commission with respect thereto, and have been prepared in
 accordance with GAAP (except as may be indicated therein or in the notes
 thereto and, in the case of the quarterly financial statements, as permitted
 by Form 10-Q under the Exchange Act) and fairly present in all material
 respects the financial position of the Company at the dates thereof and the
 results of its operations and its cash flows for the periods then ended.


	
 

	
 


	
 

	
          (e)
 Absence of Certain Changes or Events. Except as publicly disclosed or
 otherwise disclosed in writing to each Purchaser prior to the date of this
 Securities Purchase Agreement or as otherwise contemplated by this Securities
 Purchase Agreement, since March 16, 2007, there has not been any material
 adverse change or material adverse development in the financial condition,
 results of operations, or the business or properties of the Company.


	
 

	
 


	
 

	
          (f)
 Information in the Registration Statement. None of the information
 relating to the Company, its executive officers or directors, supplied by the
 Company for inclusion or incorporation by reference in the registration
 statement (the “REGISTRATION STATEMENT”) to be filed with the Commission by
 the Company pursuant to the Registration Rights Agreement to be entered into
 between the Company and the Purchasers or any amendments or supplements
 thereto, will, at the time it becomes effective under the Securities Act and
 at the effective date, contain any untrue statement of material fact or omit
 to state any 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. If at any time prior to the effective
 date any event with respect to the Company, its executive officers or
 directors should occur which is required to be described in an amendment, or
 a supplement to, the Registration Statement, such event shall be so described
 and such description in such amendment or supplement of such information will
 not contain any statement which, at the time and in the light of
 circumstances under which it is made, is false or misleading with respect to
 any material fact or omits to state any material fact required to be stated
 therein or in the Registration Statement or necessary to make the statements
 therein or in the Registration Statement not false or misleading.


	
 

	
 


	
 

	
          (g)
 Compliance With Laws. The conduct of the business of the Company
 complies in all material respects with all statutes, laws, regulations,
 ordinances, rules, judgments, orders or decrees applicable thereto. Except as
 set forth on SCHEDULE 3.01(g) annexed hereto, the Company has not received
 notice of any alleged material violation of any statute, law, regulation,
 ordinance, rule, judgment, order or decree from any governmental authority
 applicable to the Company or any of its assets or properties.


	
 

	
 


	
 

	
          (h)
 Consents. Except as set forth on SCHEDULE 3.01(h) annexed hereto, no
 consent or waiver of, order or approval by, or registration, qualification or
 filing with, any regulatory body, administrative agency, or other
 governmental authority or other third party is required in connection with
 the Company’s execution and delivery of this Securities Purchase Agreement
 and the Registration Rights Agreement, and the valid





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issuance and
 sale of the Securities to be sold and issued pursuant to this Securities
 Purchase Agreement.


	
 

	
 


	
 

	
          (i)
 Litigation Proceedings. Except as set forth on SCHEDULE 3.01(i)
 annexed hereto, there is no action, suit, notice of violation, proceeding or
 investigation pending or, to the Knowledge of the Company, threatened against
 or affecting the Company or any of its properties before or by any court,
 governmental or administrative agency or regulatory authority (federal,
 state, county, local or foreign) which (i) adversely affects or
 challenges the legality, validity or enforceability of any of this Securities
 Purchase Agreement or (ii) could reasonably be expected to, individually or
 in the aggregate, have a Material Adverse Effect.


	
 

	
 


	
 

	
          (j)
 No Default or Violation. Except as set forth on SCHEDULE 3.01(j)
 annexed hereto, the Company (i) is not in default under or in violation of
 any indenture, loan or other 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, (ii) is not in violation of any order of any court, arbitrator or
 governmental body applicable to it, (iii) is not in violation of any statute,
 rule or regulation of any governmental authority to which it is subject or
 (iv) is not in default under or in violation of its Certificate of
 Incorporation, Bylaws or other organizational documents, respectively, except
 in the case of clause (i), (ii) and (iii), for defaults and violations which
 individually or in the aggregate would not reasonably be expected to have a
 Material Adverse Effect. The business of the Company is not being conducted,
 and shall not be conducted in violation of any law, ordinance, rule or
 regulation of any governmental entity, except where such violations have not
 resulted or would not reasonably be expected to result, individually or in
 the aggregate, in a Material Adverse Effect. The Company is not in breach of
 any agreement where such breach, individually or in the aggregate, would not reasonably
 be expected to have a Material Adverse Effect.


	
 

	
 


	
 

	
          (k)
 Private Offering. Neither the Company nor any person acting on its
 behalf has taken or will take any action which might subject the offering,
 issuance or sale of the Securities to each Purchaser hereunder to the
 registration requirements of the Securities Act. The offer, sale and issuance
 of the Common Stock to the Purchasers will not be integrated with any other
 offer, sale and issuance of the Company’s securities (past, current, or
 future) under the Securities Act or any regulations of any exchange or
 automated quotation system on which any of the securities of the Company are
 listed or designated or for purposes of any stockholder approval provision
 applicable to the Company or its securities. Subject to the accuracy and
 completeness of the representations and warranties of each Purchaser
 contained in Section 3.02 hereof, the offer, sale and issuance by the Company
 to each Purchaser of the Securities hereunder is exempt from the registration
 requirements of the Securities Act.


	
 

	
 


	
 

	
          (l)
 Investment Company. The Company is not, and is not controlled by or
 under common control with an affiliate of an “investment company” within the
 meaning of the Investment Company Act of 1940, as amended.





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          (m)
 No General Solicitation. The Company has not solicited any offer to
 buy or sell the Securities hereunder by means of any form of general
 solicitation or advertising.


	
 

	
 


	
 

	
          (n)
 Listing and Maintenance Requirements Compliance. Except as set forth
 on SCHEDULE 3.01(n) annexed hereto, the Company has not in the two years
 preceding the date hereof received written notice from any stock exchange or
 market on which the Common Stock is or has been listed (or on which it has
 been quoted) to the effect that the Company is not in compliance with the
 listing or maintenance requirements of such exchange or market.


	
 

	
 


	
 

	
          (o)
 Registration Rights; Rights of Participation. Except as set forth on
 SCHEDULE 3.01(o) annexed hereto, the Company has not granted or agreed to
 grant to any person any rights (including “piggy-back” registration rights)
 to have any securities of the Company registered with the Commission or any
 other governmental authority which has not been satisfied, and no person,
 including, but not limited to, current or former stockholders of the Company,
 underwriters, brokers or agents, has any right of first refusal, preemptive
 right, right of participation, or any similar right to participate in the
 transactions contemplated by this Securities Purchase Agreement.


	
 

	
 


	
 

	
          (p)
 Issuance of Securities. The Common Shares and the Warrants are duly
 authorized and, upon issuance in accordance with the terms hereof, shall be
 validly issued and free from all taxes, liens and charges with respect to the
 issue thereof and the Common Shares shall be fully paid and nonassessable
 with the holders being entitled to all rights accorded to a holder of Common
 Stock. As of the Closing Date, the Company shall have duly authorized and
 reserved for issuance a number of shares of Common Stock which equals the
 number of Warrant Shares. The Company shall, so long as any of the Warrants
 are outstanding, take all action necessary to reserve and keep available out
 of its authorized and unissued Capital Stock, solely for the purpose of
 effecting the exercise of the Warrants, the number of shares of Common Stock
 issuable upon exercise of the Warrants. Upon exercise in accordance with the
 Warrants, the Warrant Shares will be validly issued, fully paid and
 nonassessable and free from all taxes, liens and charges with respect to the
 issue thereof, with the holders being entitled to all rights accorded to a
 holder of Common Stock. The offer and issuance by the Company of the
 Securities is exempt from registration under the Securities Act.


	
 

	
 


	
 

	
          (q)
 Transactions With Affiliates. None of the executive officers or
 directors of the Company is presently a party to any transaction with the
 Company or any of its Subsidiaries (other than for ordinary course services
 as executive officers or directors), including any contract, agreement or
 other arrangement providing for the furnishing of services to or by,
 providing for rental of real or personal property to or from, or otherwise
 requiring payments to or from any such executive officer or director or, to
 the Knowledge of the Company, any corporation, partnership, trust or other
 entity in which any such executive officer or director has a substantial
 interest or is an officer, director, trustee or partner.





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          (r)
 Intellectual Property. Except as set forth in on SCHEDULE 3.01(r)
 annexed hereto, (i) the Company owns or possesses sufficient rights to use
 all material patents, patent rights, trademarks, copyrights, licenses,
 inventions, trade secrets, trade names, designs, manufacturing or other
 processes, systems, data compilation, research results, know-how or other
 proprietary rights (collectively, “INTELLECTUAL PROPERTY”) that are necessary
 for the conduct of its business as now conducted as described in the
 Company’s filings under the Exchange Act except where the failure to
 currently own or possess such rights would not have a Material Adverse
 Effect, (ii) the Company has not received any notice of, nor to the Knowledge
 of the Company is there, any asserted infringement by the Company of, any
 rights of a third party with respect to any Intellectual Property that,
 individually or in the aggregate, would have a Material Adverse Effect and
 (iii) to the Knowledge of the Company, it is not infringing, nor has it
 received any notice of, infringement by a third party with respect to any
 Intellectual Property rights of the Company that, individually or in the
 aggregate, would have a Material Adverse Effect.


	
 

	
 


	
 

	
                    Except
 as would not have a Material Adverse Effect, all material licenses or other
 material agreements under which the Company is granted rights in Intellectual
 Property, other than Intellectual Property generally available on commercial
 terms from other sources are in full force and effect and, to the Knowledge
 of the Company, there is no material default by the Company thereunder.


	
 

	
 


	
 

	
                    To
 the Knowledge of the Company, the Company is not making unauthorized use of
 any confidential information or trade secrets of any person. Except as would
 not have a Material Adverse Effect, neither the Company nor, to the Knowledge
 of the Company, any of its employees have any agreements or arrangements with
 any persons other than the Company related to confidential information or
 trade secrets of such persons or restricting any such employee’s engagement
 in business activities of the kind engaged in by the Company.


	
 

	
 


	
 

	
          (s)
 Reporting Status. Except as set forth on SCHEDULE 3.01(s), the Company
 has filed in a timely manner all documents that the Company was required to
 file under the Exchange Act during the 12 months preceding the date of this
 Securities Purchase Agreement. Except as set forth on SCHEDULE 3.01(s), the
 following documents complied in all material respects with the SEC’s
 requirements as of their respective filing dates, and the information
 contained therein as of the date thereof did not contain an untrue statement
 of a material fact or omit to state a material fact required to be stated
 therein or necessary to make the statements therein, in light of the
 circumstances under which they were made, not misleading:


	
 

	
 


	
 

	
                    (1)
 Annual Report on Form 10-K, Amendment No. 1 to Form 10-K and Amendment No. 2
 to Form 10-K for the year ended December 31, 2006;


	
 

	
 


	
 

	
                    (2)
 Definitive Proxy Statement for the Annual Meeting held on October 16, 2006;





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                    (3)
 Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007 and June
 30, 2007;


	
 

	
 


	
 

	
                    (4)
 Current Reports on Form 8-K, filed subsequent to December 31, 2006;
 and


	
 

	
 


	
 

	
                    (5)
 All other documents, if any, filed by the Company with the SEC during the 12
 months preceding the date of this Agreement pursuant to the reporting
 requirements of the Exchange Act.


	
 

	
 


	
 

	
          (t)
 Foreign Corrupt Practices; Sarbanes-Oxley Act.


	
 

	
 


	
 

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


	
 

	
 


	
 

	
                    The
 Company is in compliance in all material respects with all provisions of the
 Sarbanes-Oxley Act of 2002 that are applicable to it.


	
 

	
 


	
 

	
          (u)
 Taxes. Except as set forth on SCHEDULE 3.01(u) annexed hereto, the
 Company has filed all necessary federal, state and foreign income and
 franchise tax returns and has paid or accrued all taxes shown as due thereon,
 and to the Knowledge of the Company there is no tax deficiency which has been
 or might be asserted or threatened against it which would have a Material
 Adverse Effect.


	
 

	
 


	
 

	
          (v)
 Brokers or Finders. Except as on SCHEDULE 3.01(v) annexed hereto, the
 Company has not dealt with any broker or finder in connection with the
 transactions contemplated by this Securities Purchase Agreement, and Company
 has not incurred, and shall not incur, directly or indirectly, any liability
 for any brokerage or finders’ fees or agents commissions or any similar
 charges in connection with the transactions contemplated by this Securities
 Purchase Agreement.


	
 

	
 


	
 

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


	
 

	
 


	
 

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





12







	
 

	
 


	
 

	
          (y)
 U.S. Real Property Holding Corporation. The Company is not, has never
 been, and so long as any Common Shares remain outstanding, shall not become,
 a U.S. real property holding corporation within the meaning of Section 897 of
 the Internal Revenue Code of 1986, as amended, and the Company shall so
 certify upon Purchaser’s request.


	
 

	
 


	
 

	
          (z)
 No Misleading Statements. The representations and warranties of the
 Company contained in this Securities Purchase Agreement, Exhibits and the
 Schedules hereto are true and correct in all material respects and do not
 omit to state any material fact required by such representations and
 warranties, Exhibits and Schedules that are necessary in order to prevent
 such representations and warranties, in light of the circumstances, from
 being misleading. Each press release issued by the Company during the twelve
 (12) months preceding the date of this Agreement did not at the time of
 release contain any untrue statement of a material fact or omit to state a
 material fact required to be stated therein or necessary in order to make the
 statements therein, in the light of the circumstances under which they are
 made, not misleading. No event or circumstance has occurred or information
 exists with respect to the Company or any Subsidiary or either of its or
 their respective business, properties, operations or financial conditions,
 which, under applicable law, rule or regulation, requires public disclosure
 or announcement by the Company but which has not been so publicly announced
 or disclosed (assuming for this purpose that the Company’s reports filed
 under the Exchange Act of 1934, as amended, are being incorporated into an
 effective registration statement filed by the Company under the Securities
 Act). 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 3.02.


	
 

	
 


	
 

	
          (aa)
 Leases. Neither the Company nor its Subsidiaries own any real
 property. Except as on SCHEDULE 3.01(aa), any real property and facilities
 held under lease by the Company or any of its Subsidiaries are held by them
 under valid, subsisting and enforceable leases with such exceptions as are
 not material and do not interfere with the use made and proposed to be made
 of such property and buildings by the Company and its Subsidiaries.


	
 

	
 


	
 

	
          (bb)
 Disclosure Controls and Procedures, Internal Controls. The Company and
 each of its Subsidiaries maintain a system of internal accounting controls
 sufficient to provide reasonable assurance that (i) transactions are executed
 in accordance with management’s general or specific authorizations, (ii)
 transactions are recorded as necessary to permit preparation of financial
 statements in conformity with generally accepted accounting principles and to
 maintain asset and liability accountability, (iii) access to assets or
 incurrence of liabilities is permitted only in accordance with management’s
 general or specific authorization and (iv) the recorded accountability for
 assets and liabilities is compared with the existing assets and liabilities
 at reasonable intervals and appropriate action is taken with respect to any
 difference. The Company maintains disclosure controls and procedures (as such
 term is defined in Rule 13a-15 under the 1934 Act) that are effective in
 ensuring that information required to be disclosed by the Company in the
 reports that it files or submits under the 1934 Act is recorded, processed,
 summarized and reported, within the time periods specified in the





13







	
 

	
 


	
 

	
rules and
 forms of the SEC, including, without limitation, controls and procedures
 designed in to ensure that information required to be disclosed by the
 Company in the reports that it files or submits under the 1934 Act is
 accumulated and communicated to the Company’s management, including its
 principal executive officer or officers and its principal financial officer
 or officers, as appropriate, to allow timely decisions regarding required
 disclosure. During the twelve months prior to the date hereof neither the
 Company nor any of its Subsidiaries has received any written notice or
 written correspondence from the Company’s independent registered public
 accounting firm relating to any material weakness in any part of the system
 of internal accounting controls of the Company or any of its Subsidiaries.


	
 


	
 

	
          (cc)
 Manipulation of Price. The Company has not, and to its knowledge no
 one acting on its behalf has, (i) taken, directly or indirectly, any action
 designed to cause or to result in the stabilization or manipulation of the
 price of any security of the Company to facilitate the sale or resale of any
 of the Common Shares, (ii) other than the Agent sold, bid for, purchased, or
 paid any compensation for soliciting purchases of, any of the Common Shares,
 or (iii) other than the Agent paid or agreed to pay to any person any
 compensation for soliciting another to purchase any other securities of the
 Company.








	
 

	
 

	
 


	
 

	
SECTION 3.02.

	
REPRESENTATIONS
 AND WARRANTIES OF EACH PURCHASER.





                    In
order to induce the Company to enter into this Securities Purchase Agreement
and issue the Securities, each Purchaser represents and warrants to the
Company, only with respect to itself, as follows:


	
 

	
 


	
 

	
          (a)
 Organization, Good Standing and Corporate Power. Such Purchaser is an
 entity duly formed, validly existing and in good standing under the laws of
 the State of its organization, with all requisite corporate power and
 authority to own its properties, conduct its business, enter into this
 Securities Purchase Agreement and perform its obligations hereunder.


	
 

	
 


	
 

	
          (b)
 Due Authorization; Enforceability; No Conflicts. Such Purchaser has
 taken all action necessary to authorize the execution, delivery and
 performance by it of this Securities Purchase Agreement. Assuming the due
 execution and delivery of this Securities Purchase Agreement by the Company,
 this Securities Purchase Agreement constitutes a valid and binding obligation
 of such Purchaser, enforceable against such Purchaser in accordance with its
 terms, subject to applicable bankruptcy, insolvency, reorganization,
 moratorium and other similar laws relating to the enforcement of creditors’
 rights generally, the availability of equitable remedies and general equity
 principles. The execution, delivery and performance by such Purchaser of this
 Securities Purchase Agreement and compliance by such Purchaser with the terms
 hereof will not violate, conflict with or cause an event of default under
 such Purchaser’s organizational documents or any other agreement, instrument,
 judgment, order, law, rule or regulation by which such Purchaser is bound or
 to which any properties of such Purchaser are subject, except where such
 violation, conflict or event of default would not result in a





14







	
 

	
 


	
 

	
material
 adverse effect on such Purchaser’s business, financial condition, results of
 operations or properties.


	
 

	
 


	
 

	
          (c)
 Accredited Investor. Such Purchaser is an “accredited investor” as
 that term is defined in Rule 501(a) under the Securities Act and such
 Purchaser is also knowledgeable, sophisticated and experienced in making, and
 is qualified to make decisions with respect to investments in shares
 presenting an investment decision like that involved in the purchase of the
 Securities.


	
 

	
 


	
 

	
          (d)
 Investment. Such Purchaser is acquiring the Securities in the ordinary
 course of its business and for investment for its own account and not with a
 present view to, or for resale in connection with, any distribution thereof.
 Such Purchaser understands that the Securities have not been registered under
 the Securities Act or applicable state securities laws by reason of certain
 exemptions from the registration provisions thereof that depend upon, among
 other things, the truth and accuracy of such Purchaser’s representations and
 warranties herein. Such Purchaser acknowledges that until the earlier to
 occur of (x) ninety days (90) from the Closing Date and (y) the date the
 Registration Statement (as defined in the Registration Rights Agreement) is
 declared effective, such Purchaser shall not engage in any Short Sales of the
 Company’s common stock, will not use any of the Securities acquired in
 connection with the transactions contemplated hereby to cover any short
 position in the Common Stock of the Company in violation of applicable
 securities laws and will not sell any of the Securities acquired in
 connection with the transactions contemplated hereby. For purposes hereof,
 “Short Sales” shall mean “short sales” as defined in Regulation SHO adopted
 by the Commission under the 1934 Act and all types of direct and indirect
 stock pledges or similar arrangements having the effect of hedging the
 securities or investment made hereunder.


	
 

	
 


	
 

	
          (e)
 Restricted Transferability. Such Purchaser acknowledges that the
 Securities are being offered and sold hereunder in a private placement that
 is exempt from the registration requirements of the Securities Act and that
 certificates or other instruments for the Securities will bear the legend set
 forth in Section 3.02(f) below. 


	
 

	
 


	
 

	
          (f)
 Legends. The Purchaser understands that the certificates or other
 instruments representing the Securities, except as set forth below, shall
 bear any legend as required by the “blue sky” laws of any state and a
 restrictive legend in substantially the following form (and a stop-transfer
 order may be placed against transfer of such stock certificates):








	
 

	
 

	
 


	
 

	
[NEITHER THE
 ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
 SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN] [THE
 SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER
 THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
 THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
 THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE 

	
 





15







	
 

	
 

	
 


	
 

	
SECURITIES
 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
 LAWS, OR (B) AN OPINION OF COUNSEL ADDRESSED TO THE COMPANY, IN A GENERALLY
 ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
 APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THE
 SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
 OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

	
 








	
 

	
 


	
 

	
The legend
 set forth above shall be removed and the Company shall issue a certificate
 without such legend to the holder of the Securities upon which it is stamped,
 if, unless otherwise required by state securities laws, (i) such Securities
 are registered for sale under the Securities Act, (ii) in connection with a
 sale, assignment or other transfer, such holder provides the Company with an
 opinion of counsel, in a generally acceptable form, to the effect that such
 sale, assignment or transfer of the Securities may be made without
 registration under the Securities Act, or (iii) such holder provides the Company
 with reasonable assurance that the Securities can be sold, assigned or
 transferred pursuant to Rule 144 promulgated under the Securities Act (or a
 successor rule thereto) (collectively, “RULE 144”). If the Company shall fail
 for any reason or for no reason to issue to the holder of the Common Shares
 within three (3) Trading Days after the occurrence of any of (i) through
 (iii) above (the date of such occurrence, the “REMOVAL DATE”), a certificate
 without such legend to the holder or to issue such Common Shares to such
 holder by electronic delivery at the applicable balance account at DTC, and
 if on or after such Trading Day the holder purchases (in an open market
 transaction or otherwise) shares of Common Stock to deliver in satisfaction
 of a sale by the holder of such Common Shares that the holder anticipated
 receiving without legend from the Company (a “BUY-IN”), then the Company shall, within
 three (3) Business Days after the holder’s request and in the holder’s
 discretion, either (i) pay cash to the holder in an amount equal to the
 holder’s total purchase price (including brokerage commissions, if any) for
 the shares of Common Stock so purchased (the “BUY-IN PRICE”), at which point the Company’s
 obligation to deliver such unlegended Common Shares shall terminate, or (ii)
 promptly honor its obligation to deliver to the holder such unlegended Common
 Shares as provided above and pay cash to the holder in an amount equal to the
 excess (if any) of the Buy-In Price over the product of (A) such number of shares
 of Common Stock, times (B) the Weighted Average Price on the Removal Date.


	
 

	
 


	
 

	
          (g)
 The Purchaser understands that except as provided in the Registration Rights
 Agreement: (i) the Securities have not been and are not being registered
 under the Securities Act or any state securities laws, and may not be offered
 for sale, sold, assigned or transferred unless (A) subsequently registered
 thereunder, or (B) the Purchaser shall have delivered to the Company an
 opinion of counsel, in a generally acceptable form, to the effect that such
 Securities to be sold, assigned or transferred may be sold, assigned or
 transferred pursuant to an exemption from such registration, (ii) any sale of
 the Securities made in reliance on Rule 144 may be made in accordance with
 the terms of Rule 144 and further, if Rule 144 is not applicable, any resale
 of the Securities under circumstances in which the seller or Person through
 whom the sale is made may be deemed to be an





16







	
 

	
 


	
 

	
underwriter
 (as that term is defined in the Securities Act) may require compliance with
 some other exemption under the Securities Act or the rules and regulations of
 the Commission thereunder; and (iii) neither the Company nor any other Person
 is under any obligation to register the Securities under the Securities Act
 or any state securities laws or to comply with the terms and conditions of
 any exemption thereunder.





ARTICLE FOUR


COVENANTS


	
 

	
 

	
 


	
 

	
SECTION
 4.01.

	
PAYMENT OF
 TAXES AND OTHER CLAIMS.





                    The
Company will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any of its Subsidiaries or
upon the income, profits or property of it or any of its Subsidiaries and (b)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, would reasonably be expected, by law, to become a material liability or
Lien upon the property of it or any of its Subsidiaries; provided, however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made or for
which adequate reserves, to the extent required under GAAP, have been taken.


	
 

	
 

	
 


	
 

	
SECTION
 4.02.

	
MAINTENANCE
 OF PROPERTIES AND INSURANCE.





                    (a)
The Company shall cause all material properties owned by or leased by it or any
of its Subsidiaries used or useful to the conduct of its business or the
business of any of its Subsidiaries to be maintained and kept in normal
condition, repair and working order and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals and replacements
thereof, all as in its judgment may be reasonably necessary, so that the
business carried on in connection therewith may be properly conducted at all
times; provided, however, that nothing in this Section 4.02 shall prevent
the Company or any of its Subsidiaries from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if such
properties are, in the reasonable and good faith judgment of the Board of
Directors of the Company or such Subsidiary, as the case may be, no longer
reasonably necessary in the conduct of their respective businesses or such
disposition is otherwise permitted by this Securities Purchase Agreement.


                    (b)
The Company shall provide or cause to be provided, for itself and each of its
Subsidiaries, insurance (including appropriate self-insurance) against loss or
damage of the kinds that, in the reasonable, good faith judgment of the Board
of Directors of the Company, are adequate and appropriate for the conduct of
the business of the Company and such Subsidiaries in a prudent manner, with
reputable insurers or with the government of the United States of America or an
agency or instrumentality thereof, in such amounts, with such deductibles and
by such methods as shall be customary, in the good faith judgment of the Board
of Directors of the Company, for companies similarly situated in the industry.


17







	
 

	
 

	
 


	
 

	
SECTION
 4.03.

	
COMPLIANCE
 WITH LAWS.





                    The
Company will comply, and will cause each of its Subsidiaries to comply, with
all applicable statutes, rules, regulations, orders and restrictions of the
United States, all states and municipalities thereof, and of any governmental
department, commission, board, regulatory authority, bureau, agency and
instrumentality of the foregoing, in respect of the conduct of their respective
businesses and the ownership of their respective properties, except for such
noncompliances as are being contested in good faith and by appropriate
proceedings and except for such noncompliances as would not in the aggregate
reasonably be expected to have a Material Adverse Effect.


	
 

	
 

	
 


	
 

	
SECTION
 4.04.

	
COMMISSION
 REPORTS.





                    (a)
The Company will deliver to each Purchaser promptly, but in any event no later
than 5 Business Days after it files with the Commission, to the extent not
available on the EDGAR system, copies of the quarterly and annual reports and
of the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act.


                    (b)
In the event the Company is not required to furnish such reports to its
stockholders pursuant to the Exchange Act, the Company (at its own expense)
shall cause its consolidated financial statements, comparable to those which
would have been required to appear in annual or quarterly reports, to be
delivered to each Purchaser.


	
 

	
 

	
 


	
 

	
SECTION
 4.05.

	
SECURITIES
 MATTERS.








	
 

	
 


	
 

	
          (a)
 The Company shall file all periodic reports required to be filed with the
 Commission pursuant to the Exchange Act in a timely manner and shall not
 terminate its status as an issuer required to file periodic reports under the
 Exchange Act. 


	
 

	
 


	
 

	
          (b)
 The Company shall promptly secure the listing of all Registrable Securities
 (as defined in the Registration Rights Agreement) upon each national
 securities exchange and automated quotation system, if any, upon which shares
 of Common Stock are listed (subject to official notice of issuance) and shall
 maintain such listing. The Company shall maintain the Common Stock’s
 authorization for quotation on the The NASDAQ Capital Market, or obtain a
 listing on The NASDAQ Global Market, The NASDAQ Global Select Market, The New
 York Stock Exchange or the American Stock Exchange. 


	
 

	
 


	
 

	
          (c)
 The Company shall timely file a Form D with respect to the Securities as
 required under Regulation D and provide a copy thereof to the Purchaser
 promptly after such filing. The Company shall, on or before the date of the
 Closing, take such actions as shall be reasonably necessary in order to
 obtain an exemption for or to qualify the Securities for sale to the
 Purchaser pursuant to this Securities Purchase Agreement under applicable
 securities or “blue sky” laws of the states of the United States (or to
 obtain an exemption from such qualification) and shall provide evidence of
 any such action so taken to the Purchaser on or prior to the date of the
 Closing. The Company shall make all 





18








	
 

	
 


	
 

	
filings and
 reports relating to the offer and sale of the Securities required under
 applicable securities or “blue sky” laws of the states of the United States
 following the date of the Closing. 


	
 

	
 


	
 

	
          (d)
 The Company agrees that, in connection with the issuance and sale of
 Securities pursuant to this Securities Purchase Agreement, it will not issue
 Common Stock (excluding the Common Stock underlying the Warrants)
 representing more than 19.99% of its outstanding capital stock. 






	
 

	
 

	
 


	
 

	
SECTION 4.06.

	
USE OF
 PROCEEDS. 






                    The
Company will use (i) $5.3 million of the proceeds from the sale of the
Securities to fund a strategic acquisition and (ii) the remainder of the
proceeds from the sale of the Securities to expand its overseas operations and
for general corporate purposes. 


	
 

	
 

	
 


	
 

	
SECTION
 4.07.

	
FEES 






                    The
Company shall be responsible for the payment of any placement agent’s fees or
commissions, financial advisory fees, or broker’s commissions (other than for
Persons engaged by any Purchaser) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment. 


	
 

	
 

	
 


	
 

	
SECTION
 4.08.

	
ISSUANCES
 BELOW PURCHASE PRICE. 






                    For
a period of six months following the date hereof, the Company shall not,
without the prior written consent of the each of the Purchasers, issue or sell
any shares of the Company’s capital stock or other securities exercisable for,
convertible into or otherwise giving the holder thereof the right to acquire
the Company’s capital stock at a price per share, including the exercise or
conversion price per share, which is below $0.70 per share; provided, however,
that this restriction shall not apply to any capital stock issued pursuant to:
(i) employee benefit plans set forth on SCHEDULE 3.01(c) annexed hereto, (ii)
outstanding warrants, options or other securities set forth on SCHEDULE 3.01(c)
annexed hereto or the Company filings under the Exchange Act or (iii) a merger
or acquisition or strategic transaction or partnership; provided that such
strategic transaction or partnership does not include a capital raise by the
Company below $0.70 per share. 


	
 

	
 

	
 


	
 

	
SECTION 4.09

	
DISCLOSURE
 OF TRANSACTIONS. 






          On
or before 5:30 p.m., New York City time, on the
fourth Business Day following the date of this Agreement, the Company shall
issue a press release and file a Current Report on Form 8-K describing the
terms of the transactions contemplated by the Transaction Documents in the form
required by the 1934 Act and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this
Agreement), the form of Warrant and the form of Registration Rights Agreement)
as exhibits to such filing (including all attachments, the “8-K FILING”). From
and after the filing of an 8-K with respect to the Company’s third quarter
earnings with the SEC, which shall be filed no later than December 31,


19






2007, no
Purchaser shall be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in the 8-K
Filing or the 8-K filed with respect to the Company’s third quarter earnings.
The Company shall not, and shall cause each of its Subsidiaries and its and
each of their respective officers, directors, employees and agents, not to,
provide any Purchaser with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the 8-K with
respect to the Company’s third quarter earnings with the SEC without the
express written consent of such Purchaser. Without the prior written consent of
any applicable Purchaser, neither the Company nor any of its Subsidiaries or
affiliates shall disclose the name of such Purchaser in any filing,
announcement, release or otherwise, except as may be required by law, rule,
regulation, court order or similar action. 


	
 

	
 

	
 


	
 

	
SECTION 4.10

	
ADDITIONAL
 ISSUANCES OF SECURITIES.






                    (a)
For purposes of this Section 4.10, the following definitions shall apply. 


                              (i)
“APPROVED STOCK PLAN” means any contract, plan or arrangement which has been
approved by the Board of Directors of the Company, pursuant to which the
Company’s securities may be issued to any employee, officer, director or
consultant for services provided to the Company. 


                              (ii)
“COMMON STOCK EQUIVALENTS” means, collectively, Options and Convertible
Securities. 


                              (iii)
“CONVERTIBLE SECURITIES” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Shares. 


                              (iv)
“EXCLUDED SECURITIES” means any shares of Common Stock or Common Stock Equivalents
issued or issuable: (i) in connection with any Approved Stock Plan (ii) upon
exercise of the Warrants, (iii) upon conversion of any Options or Convertible
Securities which are outstanding on the day immediately preceding the Closing
Date, provided that the terms of such Options or Convertible Securities are not
amended, modified or changed on or after the Closing Date, (iii) in connection
with any strategic acquisition or strategic transaction by the Company, whether
through an acquisition of stock or assets or a merger of any business, assets
or technologies the primary purpose of which is not to raise equity capital,
and (iv) pursuant to a bona fide firm commitment underwritten public offering
with a nationally recognized underwriter (excluding any equity line). 


                              (v)
“OPTIONS” means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities. 


                              (vi)
“SUBSEQUENT PLACEMENT” the direct or indirect, offer, sale, grant of any option
to purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of the Company’s or its
Subsidiaries’ equity or equity equivalent securities, including without limitation
any debt, preferred stock or other instrument or security that is, at any time
during its life and under any circumstances, convertible into or exchangeable
or exercisable for shares of Common Stock or Common Stock Equivalents. 


20






                    (b)
From the Closing Date until the two (2) year anniversary thereof and for so
long as a Purchaser holds 50% of the number of shares of Common Stock
originally purchased by such Purchaser pursuant hereto, the Company will not,
directly or indirectly, effect any Subsequent Placement unless the Company
shall have first complied with this
Section 4.10(b). 


                              (i)
The Company shall deliver to each Purchaser a written notice, which may be
revoked by the Company at any time prior to the execution of definitive
documentation relating to a Subsequent Placement (the “OFFER NOTICE”), of any
proposed or intended issuance or sale or exchange (the “OFFER”) of the
securities being offered (the “OFFERED SECURITIES”) in a Subsequent Placement, which
Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities to be issued,
sold or exchanged, (y) identify the persons or entities (if known) to which or
with which the Offered Securities are to be offered, issued, sold or exchanged
and (z) offer to issue and sell to or exchange with such Purchaser (A) such
number of Offered Securities equal to the product of (1) seven-tenths (0.70)
multiplied by (2) such Purchaser’s pro rata portion of Common Shares purchased
hereunder multiplied by (3) the number or amount of securities to be sold in
the contemplated Subsequent Placement (the “BASIC AMOUNT”), and (B) with
respect to each Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Purchasers as such Purchaser shall indicate it will purchase or
acquire should the other Purchasers subscribe for less than their Basic Amounts
(the “UNDERSUBSCRIPTION AMOUNT”), which process shall be repeated until the
Purchasers shall have an opportunity to subscribe for any remaining
Undersubscription Amount; provided that in no event shall any Purchaser
purchase any Offered Securities if such Purchaser’s beneficial ownership
interest (together with such Purchaser’s affiliates) would immediately
following such purchase of Offered Securities, equal or exceed 15% of the then
outstanding shares of Common Stock. 


                              (ii)
To accept an Offer, in whole or in part, such Purchaser must deliver a written
notice to the Company prior to the end of the seventh (7th) Business
Day after such Purchaser’s receipt of the Offer Notice (the “OFFER PERIOD”),
setting forth the portion of such Purchaser’s Basic Amount that such Purchaser
elects to purchase and, if such Purchaser shall elect to purchase all of its
Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects
to purchase (in either case, the “NOTICE OF ACCEPTANCE”). If the Basic Amounts
subscribed for by all Purchasers are less than the total of all of the Basic
Amounts, then each Purchaser who has set forth an Undersubscription Amount in
its Notice of Acceptance shall be entitled to purchase, in addition to the
Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, that if the Undersubscription Amounts
subscribed for exceed the difference between the total of all the Basic Amounts
and the Basic Amounts subscribed for (the “AVAILABLE UNDERSUBSCRIPTION
AMOUNT”), each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Purchaser bears to the
total Basic Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Company to the extent its
deems reasonably necessary. 


21






                              (iii)
The Company shall have twenty (20) Business Days from the expiration of the
Offer Period above to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
eligible Purchasers (the “REFUSED SECURITIES”), but only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring person or persons than those set forth
in the Offer Notice. 


                              (iv)
In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4.10(b)(iii) above), then each Purchaser may, at its sole option and in
its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that such Purchaser elected to
purchase pursuant to Section 4.10(b)(ii) above multiplied by a fraction, (i)
the numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Purchasers pursuant to Section 4.10(b)(iii)
above prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities. In the event that any Purchaser so
elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with Section
4.10(b)(i) above. 


                              (v)
Upon the closing of the issuance, sale or exchange of all or less than all of
the Refused Securities, the Purchasers shall acquire from the Company, and the
Company shall issue to the Purchasers, the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to Section
4.10(b)(iv) above if the Purchasers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Purchasers of, and the
obligations of the Company to sell, any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Offered Securities
satisfactory in all respects to the Company and such Purchasers. 


                              (vi)
Any Offered Securities not acquired by the Purchasers or other persons in accordance
with Sections 4.10(b)(iii) or 4.10(b)(v) above may not be issued, sold or
exchanged until they are again offered to the Purchasers under the procedures
specified in this Agreement. 


	
 

	
 


	
 

	
          (c)
 The restrictions contained in subsection (b) of this Section 4.10 shall not
 apply in connection with the issuance of any Excluded Securities. 





22






ARTICLE FIVE


CONDITIONS


	
 

	
 

	
 


	
 

	
SECTION
 5.01.

	
CONDITIONS
 TO THE COMPANY’S OBLIGATION. 






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


	
 

	
 


	
 

	
          (a)
 Such Purchaser shall have delivered to the Company the Registration Rights
 Agreement duly executed by such Purchaser. 


	
 

	
 


	
 

	
          (b)
 Such Purchaser and each other Purchaser shall have delivered to the Company
 the Purchase Price for the Securities, by wire transfer of immediately available
 funds pursuant to the wire instructions provided by the Company. 


	
 

	
 


	
 

	
          (c)
 The representations and warranties of each Purchaser contained in Section
 3.02 of this Securities Purchase Agreement shall be true and correct in all
 material respects (other than representations and warranties that are
 qualified by materiality or Material Adverse Effect which shall be true and
 correct in all respects), in each case as of the Closing Date as though made
 at and as of such date, except to the extent that they expressly refer to an
 earlier or specific time, in which case they shall be true and correct in all
 material respects as of such time. 


	
 

	
 


	
 

	
          (d)
 Each Purchaser shall have performed and complied with, in all material
 respects, the agreements, covenants and obligations required by this
 Securities Purchase Agreement to be so performed or complied with by such
 Purchaser at or before the Closing. 








	
 

	
 

	
 


	
 

	
SECTION
 5.02.

	
CONDITIONS
 TO THE PURCHASER’S OBLIGATION. 






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


	
 

	
 


	
 

	
          (a)
 Such Purchaser shall have received the Registration Rights Agreement and the
 Warrant duly executed by the Company. 


	
 

	
 


	
 

	
          (b)
 Such Purchaser shall have received certificates for shares of Common Stock to
 be purchased by it at the Closing. 


	
 

	
 


	
 

	
          (c)
 Such Purchaser shall have received an Opinion of Counsel from the Company in
 substantially the form of Exhibit C attached hereto. 





23







	
 

	
 


	
 

	
          (d)
 Such Purchaser shall have received a certified copy of the Certificate of
 Incorporation of the Company, together with a Good Standing Certificate with
 respect to the Company issued by the Secretary of State of such state of incorporation
 as of a date within ten (10) days of the date of the Closing. 


	
 

	
 


	
 

	
          (e)
 Such Purchaser shall have received a copy of the certificate evidencing the
 Company’s qualification as a foreign corporation in good standing issued by
 the Secretary of State of the State of New York as of a date within ten (10)
 days of the date of the Closing. 


	
 

	
 


	
 

	
          (f)
 Such Purchaser shall have received a certificate executed by the Secretary of
 the Company and dated as of the date of the Closing, certifying as to (i) the
 resolutions as adopted by the Company’s Board of Directors in connection with
 the authorization of the transactions contemplated hereby, (ii) the
 Certificate of Incorporation of the Company and (iii) the Bylaws of the
 Company, each as in effect at the time of the Closing Date. 


	
 

	
 


	
 

	
          (g)
 Such Purchaser shall have received a copy of all governmental, regulatory or
 third party consents and approvals, if any, necessary for the sale of the
 Securities. 


	
 

	
 


	
 

	
          (h)
 Such Purchaser shall have received a copy of such other documents relating to
 the transactions contemplated by this Securities Purchase Agreement, the
 Registration Rights Agreement and the Warrant as the Purchaser or its counsel
 may reasonably request. 


	
 

	
 


	
 

	
          (i)
 The representations and warranties of the Company contained in Section 3.01
 of this Securities Purchase Agreement shall be true and correct in all
 material respects, in each case as of the Closing Date as though made at and
 as of such date, except to the extent that they expressly refer to an earlier
 or specific time, in which case they shall be true and correct in all
 material respects as of such time. 


	
 

	
 


	
 

	
          (j)
 The Company shall have performed and complied with, in all material respects,
 the agreements, covenants and obligations required by this Securities
 Purchase Agreement to be so performed or complied with by the Company at or
 before the Closing. 





ARTICLE SIX


MISCELLANEOUS


	
 

	
 

	
 


	
 

	
SECTION
 6.01.

	
NOTICES. 





                    Any
notices or other communications required or permitted hereunder shall be in
writing, and shall be sufficiently given if made by hand delivery, by
verifiable facsimile transmission or by reputable overnight delivery service,
addressed as follows: 


                    if
to the Company: 


                              Viewpoint
Corporation


24







	
 

	
 


	
 

	
498 Seventh
 Avenue, Suite 1810

 New York, New York 10018

 Facsimile: (212) 201-0846

 Attention: General Counsel 






                    with
a copy to: 


	
 

	
 


	
 

	
Milbank,
 Tweed, Hadley & McCloy LLP

 1 Chase Manhattan Plaza

 New York, New York 10005

 Facsimile: (212) 822-5171

 Attention: Alexander M. Kaye, Esq. 






                    If
to a Purchaser, to its address and facsimile number set forth on the Schedule
of Purchasers, with copies to such Purchaser’s representatives as set forth on
the Schedule of Purchasers. 



                    with
a copy (for informational purposes only) to: 


	
 

	
 


	
 

	
Schulte Roth
 & Zabel LLP

 919 Third Avenue

 New York, NY 10022

 Telephone: (212) 756-2000

 Facsimile: (212) 593-5955

 Attention: Eleazer N. Klein, Esq. 






                    The
Company and each Purchaser by written notice to each other may designate
additional or different addresses for notices to such Person. Any notice or
communication to a party shall be deemed to have been given or made as of the
date so delivered if personally delivered; when received if by facsimile
transmission or electronic mail; and one (1) business day after mailing by
reputable overnight courier (except that, notwithstanding the foregoing, a
notice of change of address shall not be deemed to have been given until
actually received by the addressee). 


	
 

	
 

	
 


	
 

	
SECTION
 6.02.

	
GOVERNING
 LAW. 





                    THIS
SECURITIES PURCHASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. THE PARTIES HERETO AGREE TO SUBMIT TO THE JURISDICTION OF THE
FEDERAL OR STATE COURTS LOCATED IN THE CITY OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITIES PURCHASE AGREEMENT. 


25







	
 

	
 

	
 


	
 

	
SECTION
 6.03.

	
SUCCESSORS. 






                    All
agreements of the Company in this Securities Purchase Agreement shall bind its
successors. 


	
 

	
 

	
 


	
 

	
SECTION
 6.04.

	
COUNTERPARTS.
 






                    The
parties may sign any number of copies of this Securities Purchase Agreement.
Each signed copy or counterpart shall be an original, but all of them together
shall represent the same agreement. Delivery by facsimile of an executed
counterpart of any signature page to this Securities Purchase Agreement to be
executed hereunder shall have the same effectiveness as delivery of a manually
executed counterpart thereof. 


	
 

	
 

	
 


	
 

	
SECTION 6.05.

	
SEVERABILITY.
 






                    In
case any one or more of the provisions in this Securities Purchase Agreement
shall be held invalid, illegal or unenforceable, in any respect for any reason,
the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law. 


	
 

	
 

	
 


	
 

	
SECTION
 6.06.

	
INDEPENDENT
 NATURE OF PURCHASER’S OBLIGATIONS AND RIGHTS. 





                    The
obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or a
“group” as described in Section 13(d) of the Exchange Act, or create a
presumption that the Purchasers are in any way acting in concert with respect
to such obligations or the transactions contemplated by this Securities
Purchase Agreement. Each Purchaser has been represented by its own separate
counsel in connection with the transactions contemplated hereby, shall be
entitled to protect and enforce its rights, including without limitation rights
arising out of this Securities Purchase Agreement or the other transaction
documents, individually, and shall not be required to join any other Purchaser
as an additional party in any proceeding for such purpose. 


[SIGNATURE PAGES TO FOLLOW]


26






SIGNATURES


                    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. 


	
 

	
 

	
 


	
 

	
THE COMPANY:


	
 

	
 


	
 

	
VIEWPOINT
 CORPORATION 


	
 

	
 


	
 

	
By: 

	
/s/
 Christopher C. Duignan


	
 

	
 

	



	
 

	
 

	
Name:
 Christopher C. Duignan 


	
 

	
 

	
Title: CFO













SIGNATURES


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


Name of
Purchaser:

Signature
of Authorized Signatory of Purchaser: 

Name of Authorized Signatory: 

Title of Authorized Signatory: 

Email Address of Purchaser: 


Address for
Notice of Purchaser:



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


Subscription
Amount: 

Shares of Common Stock: 

Warrants: 

EIN/Social Security Number: 








Exhibit A


Schedule of Purchasers










Exhibit B


Form of Warrant

Filed as Exhibit 10.3 to this Form 8-K





Exhibit C


Opinion of Counsel 

	
 

	
 


	
 

	
October 18,
  2007





The Investors
Listed on the Schedule 

of Purchasers Attached to the Securities 

Purchase Agreement


Dear Sirs:


          I
am General Counsel of Viewpoint Corporation, a Delaware corporation (the “Company”),
and I am delivering this opinion letter in connection with the Securities
Purchase Agreement, dated as of October 18, 2007 (the “Purchase Agreement”),
by and between the Company and the investors listed on the Schedule of
Purchasers attached thereto (individually, the “Purchaser” and
collectively, the “Purchasers”). Capitalized terms used but not
otherwise defined herein shall have the respective meanings given to such terms
in the Purchase Agreement. This opinion letter is delivered to you pursuant to
Section 5.02(c) of the Purchase Agreement.


          In
rendering the opinions expressed below, I have examined the following
agreements, instruments and other documents:


	
 

	
 

	
 


	
 

	
(a)

	
the
  Securities Purchase Agreement;


	
 

	
 

	
 


	
 

	
(b)

	
the
  Registration Rights Agreement;


	
 

	
 

	
 


	
 

	
(c)

	
the Common
  Stock to be issued on the date hereof; 


	
 

	
 

	
 


	
 

	
(d)

	
the
  Warrants; and


	
 

	
 

	
 


	
 

	
(e)

	
such records
  of the Company and such other documents as I have deemed necessary as a basis
  for the opinions expressed below.





          In
my examination, I have assumed the genuineness of all signatures (other than
signatures on behalf of the Company), the legal capacity of all natural
persons, the authenticity of all documents submitted to me as originals and the
conformity with authentic original documents of all documents submitted to me
as copies. When relevant facts were not independently established, I have
relied upon representations and warranties made in or pursuant to the Purchase
Agreement, Registration Rights Agreement and the Warrants and certificates of
governmental officials.


          In
rendering the opinions expressed below, I have assumed (except as to the
Company), with respect to all of the documents referred to in this opinion
letter, that:







	
 

	
 

	
 


	
 

	
(i)

	
such
  documents (x) have been duly authorized by, (y) have been duly executed and
  delivered by, and (z) constitute legal, valid, binding and enforceable
  obligations of, all of the parties to such documents;


	
 

	
 

	
 


	
 

	
(ii)

	
all
  signatories to such documents have been duly authorized;


	
 

	
 

	
 


	
 

	
(iii)

	
all of the
  parties to such documents are duly organized and validly existing; and


	
 

	
 

	
 


	
 

	
(iv)

	
all of the
  parties have the power and authority (corporate, partnership or other) to
  execute, deliver and perform such documents.





          Based
upon and subject to the foregoing and subject also to the comments and
qualifications set forth below, and having considered such questions of law as
I have deemed necessary as a basis for the opinions expressed below, I am of
the opinion that:


          1. The
Company is a corporation validly existing and in good standing under the laws
of the State of Delaware. The Company has the requisite corporate power to own,
lease and operate its properties and to conduct its business as presently
conducted. The Company is duly qualified as a foreign corporation to do
business in the State of New York. Each of the Company’s Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power to own, lease and operate its properties and to conduct its business as
presently conducted, except, with respect to all of the foregoing, as would not
be reasonably expected to have a Material Adverse Effect. 


          2. The
Company has the requisite corporate power and authority to execute, deliver and
perform its obligations under the Purchase Agreement, the Registration Rights
Agreement and the Warrants including, without limitation, the issuance of the
Common Stock in accordance with the terms thereof.


          3. The
execution and delivery by the Company of the Purchase Agreement, the
Registration Rights Agreement and the Warrants and the performance by it of its
obligations thereunder have been duly authorized by all necessary corporate
action on its part and do not violate (i) its certificate of incorporation and
by-laws or (ii) any applicable Federal law, rule or regulation of the United
States or the State of New York.


          4. When
issued in accordance with the terms of the Purchase Agreement, the Common Stock
will (i) be free of any liens created by the Company and (ii) be validly
issued. 


          5. Subject
to the accuracy as to factual matters of the Purchaser’s representations in
Section 3.02 of the Purchase Agreement, the offer and sale of the Common Stock
in the manner contemplated by the Purchase Agreement do not require
registration under the 1933 Act.


          6. No
consent or authorization of, filing with, notice to or registration with, any
federal or New York State court, or any third party is required to be obtained
by the Company (i) to enter into and perform its obligations under the Purchase
Agreement, the Registration Rights Agreement or the Warrants or (ii) for the
issuance and sale of the Common Stock as contemplated thereby, except for the
listing of shares of Common Stock on the NASDAQ






National
Market and the filing of the Registration Statement with the Commission and a
Form D with the Commission.


          7. The
Purchase Agreement, the Registration Rights Agreement and the Warrants have
been duly executed and delivered on behalf of the Company, and constitute a
valid and binding obligation of the Company enforceable against the Company in
accordance with its respective terms, except as may be limited by bankruptcy, insolvency,
liquidation, reorganization, moratorium, fraudulent conveyance or transfer or
other similar laws relating to or affecting the rights of creditors generally
and except as the enforceability thereof is subject to the application of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law), including, without limitation, (a) the possible
unavailability of specific performance, injunctive relief or any other
equitable remedy and (b) concepts of materiality, reasonableness, good faith
and fair dealing.


          8. Except
as disclosed in the Purchase Agreement, no action, suit, proceeding or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization is pending or, to my knowledge, threatened against the Company or any of the
properties or assets of the Company which (i) adversely affects or challenges
the legality, validity or enforceability of the Purchase Agreement and (ii)
could reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.


          9. The
execution, delivery and performance by the Company of the Purchase Agreement,
the Registration Rights Agreement and the Warrants, the consummation by the
Company of the transactions contemplated thereby and the compliance by the
Company with the terms thereof do not violate, conflict with or constitute a
default (or an event which, with the giving of notice or lapse of time or both,
constitutes or would constitute a default) under,
give rise to any right of termination, cancellation or acceleration under, or
result in the creation of any lien, charge or encumbrance on or against any of
the properties of the Company pursuant
to, any agreement, note, lease, mortgage, deed or other instrument (other than
the Certificate of Incorporation or By-laws of the Company, as to which I
express no opinion in this paragraph) to which the Company is a party or by
which the Company is bound or affected, or any statute, law, rule or regulation
applicable to the Company or, to my knowledge, any order, writ, injunction or
decree.


	
 

	
 


	
 

	
The
  foregoing opinions are subject to the following comment and qualification:


	
 

	
 


	
 

	
The
  enforceability of provisions in the Purchase Agreement, the Registration Rights
  Agreement and the Warrants to the effect that terms may not be waived or
  modified except in writing may be limited under certain circumstances.





          The
foregoing opinions are limited to matters involving the Federal laws of the
United States of America, the Delaware General Corporation Law and the law of
the State of New York, and I do not express any opinion as to the laws of any
other jurisdiction. I do not express any opinion as to the insurance laws,
rules, regulations or determinations of any jurisdiction (including, without
limitation, the State of New York).






          This
opinion letter is provided to you by me in my capacity as General Counsel to
the Company, and this opinion letter may not be relied upon by any other Person
or for any purpose other than in connection with the transactions contemplated
by the Purchase Agreement, the Registration Rights Agreement and the Warrants
without, in each instance, my prior written consent.


	
 

	
 

	
 


	
 

	
Very truly
  yours,

	
 


	
 

	
 

	
 


	
 

	
Andrew J.
  Graf

	
 


	
 

	
EVP and

  General Counsel