Document:

EXECUTION
VERSION

    

    SALES
AGENCY AGREEMENT

    

    THIS AGREEMENT, dated as of
September 27, 2010, by and between deltathree, Inc., a Delaware corporation
(“Inc.”), DME Solutions, Inc., a New York corporation (“DME”), and Delta Three
Israel, Ltd., an Israeli corporation (“Delta Three Israel”) (Inc., DME and Delta
Three Israel are collectively referred to herein as “deltathree”), and LKN
Communications, Inc., doing business as ACN, Inc. (“ACN”), a Michigan
corporation.

    

    EXPLANATORY
STATEMENT

    

    deltathree
is a company that markets and sells telecommunications services throughout the
world.  LKN is the holding company for a group of companies that
together are a leading global network marketing company with relationships with
hundreds of thousands of independent sales representatives.  ACN has
over the years marketed and sold telecommunications services in various
geographic areas, both under its own brand and as a sales agent.

    

    Inc. and
ACN wish to deploy ACN’s sales and marketing experience and expertise in order
to build Inc.’s business, and to that end, have agreed that they will enter into
a definitive agreement for ACN to act as a master agent, and for ACN’s network
of independent sales representatives (the “Representatives”) to act as limited
agents for Inc. to sell Inc.’s application download and callback voice
termination mobile application services (the “Mobile Applications”) to retail
residential and commercial consumers.

    

    NOW, THEREFORE, in
consideration of the mutual covenants contained herein and for other good and
valuable consideration set forth herein, the sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

    

    1. Defined
Terms. The following terms used herein shall have the meaning ascribed to
them below:

    

    “ACN
Commission” shall have the meaning ascribed to such term in Section
6(a).

    

    “ACN
Costs” shall mean the total of the (i) Commissions to be paid by ACN, estimated
to be equal to 9.5% of Revenues and subject to adjustment as set forth in
Section 6(b) below, and (ii) costs incurred by ACN in providing the call center
and services to be provided under Section 4(b) below, estimated to be equal to
2.0% of Revenues and subject to adjustment as set forth in Section 6(b)
below.

    

    “ACN
Indemnified Person” shall have the meaning ascribed to such term in Section
11(b).

    

    “ACN
Customers” shall mean those customers whose orders are entered into the Online
Portal by ACN, or the Representatives, or their customers under this Agreement,
whose orders are accepted by Inc.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    “Agency
Period” shall have the meaning ascribed to such term in Section
3(a).

    

    “Business”
shall have the meaning given to it in Section 2(a), below.

    

    “Commissions”
shall mean the compensation that ACN pays to the Representatives for producing
ACN Customers.

    

    “deltathree
Costs” shall mean the total of the (i) network costs, estimated to be equal to
2.5% of Revenues and subject to adjustment as set forth in Section 6(b) below,
(ii) termination costs, as calculated by deltathree on a monthly
basis,  and (iii) credit card service and credit card vendor costs
incurred by deltathree in providing the service hereunder to the ACN Customers,
estimated to be equal to 3.5% of Revenues and subject to adjustment as set forth
in Section 6(b) below.

    

    “Gross
Margin” shall mean the difference between Revenue minus (i) the deltathree Costs
and (ii) the ACN Costs.

    

    “Inc.
Indemnified Person” shall have the meaning ascribed to such term in Section
11(a).

    

    “Initial
Agency Period” shall have the meaning ascribed to such term in Section
3(a).

    

    “Insolvency
Event” shall mean that Inc., DME or Delta Three Israel:

    

    (a) files
any petition or action for relief under any bankruptcy, reorganization,
insolvency or moratorium law, or any other law for the relief of, or relating
to, debtors, now or hereafter in effect;

    

    (b)  applies
for or consents to the appointment of a custodian, receiver, trustee,
sequestrator, conservator or similar official for Inc., DME or Delta Three
Israel or for a substantial part of their assets;

    

    (c)   makes a general
assignment for the benefit of creditors;

    

    (d)  becomes
unable to, or admits in writing its inability to, pay its debts generally as
they come due;

    

    (e)   takes any action
in furtherance of any of the foregoing; or

    

    (f)  has filed against them
an involuntary petition, which petition is not dismissed or discharged within 60
days of its filing, under any bankruptcy statute now or hereafter in effect, of
custodian, receiver, trustee, sequestrator, conservator, assignee for the
benefit of creditors or other similar official is appointed to take possession,
custody or control of the property of Inc., DME or Delta Three
Israel.

    
      
         

      

      
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    “Mobile
Applications” shall have the meaning ascribed to such term in the Explanatory
Statement

    

    “Online
Portal” shall mean the web-based order entry portal created by Inc. pursuant to
Section 5(i).

    

    “Representatives”
shall have the meaning ascribed to such term in the Explanatory
Statement.

    

    “Revenues”
shall mean the total revenue from ACN Customers in connection with deltathree
providing the services hereunder recognized by deltathree for financial
reporting purposes under generally accepted accounting principles.

    

    “Standards”
shall have the meaning ascribed to such term in Section 2(a).

    

     “Termination
Date” shall have the meaning given to it in Section 3(b).

     

    2. Sales
Agency.

    

    (a)
During the Agency Period, ACN shall provide, or cause to be provided, to Inc.
ACN’s network of Representatives to act as limited agents for Inc. to sell
Mobile Applications on behalf of and for the benefit of Inc. ACN shall use its
commercially reasonable efforts to cause the Representatives: (i) to sell Mobile
Applications and otherwise promote Inc.’s mobile application business (the
“Business”), and (ii) to act as agents for the sale of Mobile Applications, for
and on behalf of Inc. Inc. shall have the right to cause ACN to direct the
Representatives with respect to sales of Mobile Applications, customer service
and regulatory matters in accordance with Inc.'s licenses or certificates, the
statutes, rules, regulations, or policies of the applicable jurisdictions in
which Inc. has authorized ACN and the Representatives to conduct customer
acquisition activities (the “Standards”), but in no event shall it have the
right to cause ACN to take any actions (or inaction) with respect to management
and oversight of, or the Commissions or other fees paid or payable to, the
Representatives.

    

    (b) ACN
shall be responsible for directing the Representatives to adhere to the
Standards in selling the Mobile Applications and otherwise in connection with
the performance of any obligations of ACN under this Agreement. Neither ACN nor
the Representatives shall have the power or authority to act as attorney-in-fact
of Inc. or bind Inc. in any way without the prior written consent of Inc. All
customers acquired by the Representatives shall be subject to acceptance by
Inc.

    

    (c) ACN's
and the Representatives’ agency on behalf of Inc. shall be limited to the
following acts: (i) solicitation of customers, (ii) the offering of Inc.'s
Mobile Applications as set forth in Inc.’s marketing materials, applications,
and sales agreements, and/or (iii) recommending Inc.'s Mobile Applications to
retail customers.

    
      
         

      

      
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    (d) ACN's
and the Representatives' limited agency shall not include (i) the negotiation of
prices or rates, terms or conditions of service for Inc.'s Mobile Applications,
(ii) taking title to Mobile Applications, (iii) arranging for the purchase,
transportation, scheduling or delivery of Mobile Applications, or (iv) execution
of contracts or agreements on behalf of Inc.

    

    (e) Inc.
shall have the right to cause ACN to take appropriate actions with respect to
the conduct of a Representative in order to comply with a notice or inquiry of
any applicable Governmental Authority by providing at least 5 days' prior
written notice (or such lesser period of notice as may be required by such
Governmental Authority) to ACN specifying the applicable remedial or corrective
actions required by the Governmental Authority.

    

    (f) ACN
shall provide Inc. with true and complete copies of all independent
representative form agreements and updates thereto from time to time, upon
Inc.’s request for same.

    

    (g) In
performing this Agreement, ACN agrees to (i)(A) not take any actions that it
knows would be harmful in any material respect to the Business of Inc., (B) use
its commercially reasonable efforts to promote the Business, and (C) comply with
all applicable telecommunications, federal, provincial and local laws, the
Standards, and Inc.'s policies and procedures established in accordance with
Section 5(a) hereof as in effect from time to time, and (ii) recognizing that
ACN’s legal relationship with the Representatives is that of independent
contractor, use its commercially reasonable efforts to cause the Representatives
to do (or not to do, as applicable) the same.

    

    3. Agency
Period; Termination; Wind Down Phase.

    

    (a) This
Agreement is effective as of the date hereof and shall continue for a period of
two (2) years (the “Initial Agency Period”) or until earlier terminated as
provided herein. Upon the expiration of the Initial Agency Period, this
Agreement shall automatically renew on a year-to-year basis unless terminated by
either Inc. or ACN by the giving of written notice of termination to the other
party hereto at least three (3) months prior to the expiration of the Initial
Agency Period, or any successive term, as the case may be. The Initial Agency
Period and any successive term(s) shall be together referred to herein as the
“Agency Period.”

    

    (b) This
Agreement may be terminated at any time prior to the expiration of the Agency
Period or any successive term, as the case may be, by any of the
following:

    

    (i)           by
mutual written agreement of the parties;

    

    (ii)          by
either party upon the occurrence of a material breach by the other party that
remains uncured for a period of thirty (30) days after the breaching party
receives written notice describing the breach in reasonable detail from the
non-breaching party; or

    
      
         

      

      
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    (iii)         by
the giving of proper notice as set forth in Section 3(a), above.

    

    In all
cases of notice given to terminate under this Section 3(b), the party giving
notice shall specify the date on which this Agreement shall terminate (the
“Termination Date”).

    

    (c) In
the case of termination other than as provided in Section 3(b)(ii),
notwithstanding any other provision of this Agreement, any such termination
shall be without liability to either party, and shall be managed in compliance
with the provisions of Section 3(d), below. Any termination as provided in
Section 3(b)(ii) shall be without prejudice to the non-breaching party's right
to seek damages for such breach.

    

    (d) Upon
termination of this Agreement, this Agreement will enter a wind down phase in
which the parties will cooperate to achieve an orderly and gradual cessation (in
whatever Agency Period remains) of the Representatives’ marketing and making
sales of the Mobile Applications, including the joint and mutually agreeable
development of the messaging of such event to the Representatives, and the
management of their expectations regarding receiving the Commissions, which will
remain ACN’s obligation to remit. ACN will cause the Representatives to cease
marketing and selling the Mobile Applications on the Termination Date, but Inc.
agrees that it will continue to accept, process, provision and make ACN
Commission payments to ACN, and continue customary .xml file reporting, on all
orders entered through the Online Portal up through and including the
Termination Date.  After the Termination Date, Inc. will continue to
pay to ACN the ACN Commission payments under Section 6 of this Agreement, and
provide the customary .xml file required by Section
5(e), below, for as long as ACN Customers continue to purchase the Mobile
Applications, and this Agreement will continue in effect as to the remaining
‘tail’ of these ACN Customers’ usage, until there remain no ACN Customers using
Mobile Applications.

    

    (e) Inc.
agrees that during the time this Agreement remains in effect, including the time
during any wind down period and/or after the Termination Date while there remain
active ACN Customers, regardless of what Mobile Application they consume,
regardless of who sold such Mobile Application to them, Inc. will pay to ACN the
ACN Commission payments and, if applicable by circumstances, the Commissions
ramp down on their aggregate usage, and will continue to provide the customary
.xml file required by
Section 5(e).  Inc. will not actively seek to cause ACN Customers to
change the Mobile Applications they purchase (with ‘upselling’ to additional
Mobile Applications being permitted, but ACN Commission and Commission ramp down
payments, if applicable by circumstances, being due thereon), will not change
the account numbers or other unique identifier developed inside of Inc.’s
systems to identify customers as ACN Customers, or otherwise attempt to disguise
or cull out of the ranks of ACN Customers any faster than they would otherwise
out of normal customer-initiated attrition.

    
      
         

      

      
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    4. Duties of
ACN. ACN will use its commercially reasonable efforts to cause the
Representatives to sell standard offer contracts of the Business as approved by
Inc. to pre-approved customer credit classes; and will perform the following
functions:

    

    (a) ACN
will process, reconcile, and make payments to Representatives of Commissions out
of ACN’s Commission;

    

    (b) ACN
will maintain, in accordance with its customary practice, a call center facility
with an adequate number of trained CSRs available to answer inbound calls from
the Representatives (i) relating to Commissions and other Representative issues
and (ii) to provide Tier 1 and Tier 2 support to answer technical questions
relating to the Mobile Applications;

    

    (c) ACN
will give Inc. access to ACN's Representative training events and gatherings at
which ACN's other training and product/service familiarization is scheduled to
occur, as Inc. and ACN may mutually agree, so that Inc. may assist ACN in
training the Representatives about the Mobile Applications, on Inc.’s processes
and procedures to sell the Mobile Applications, and in showcasing the Mobile
Applications to the Representatives;

    

    (d) ACN
and Inc. will from time to time develop together, and Inc. will provide to the
Representatives, material for presentation through ACN's website area(s) serving
the Representatives, including potential links to Inc.'s website area(s),
designed to inform the Representatives about Mobile Applications available for
Representatives to sell;

    

    (e) ACN
will use its commercially reasonable efforts to promote the agency relationship
created hereunder to the Representatives;

    

    (f) ACN
will designate an individual to be the primary interface between ACN and Inc. on
all issues relating to this Agreement, including understanding the Mobile
Applications, answering mobile applications sales questions and generally
assisting with the relationship between the two organizations (ACN and Inc.)
with respect to activities under this Agreement;

    

    (g) ACN
and Inc. will together prepare a training package suitable for ACN to use in
educating the Representatives on the Mobile Applications so as to enable them to
represent Inc. well; and

    

    (h) ACN
will obtain and maintain any licenses or certificates required to perform its
obligations under this Agreement.

    

    5. Duties of
Inc. Inc. shall provide Mobile Applications for the Representatives to
sell in accordance with the following terms:

    

    (a) Inc.
shall determine all Mobile Applications, their terms of service, as well as
establish the policies and procedures for the Representatives to sell the Mobile
Applications, with all of the foregoing being subject to ACN’s input and
suggestions;

    
      
         

      

      
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    (b) Inc.
shall, together with ACN, price the Mobile Applications for retail sale
competitively and keep same current;

    

    (c) Inc.
shall undertake, be responsible for, and bear all risk on, all business
functions relating to ACN Customers, including, but not limited to, order entry,
provisioning, billing, collections;

    

    (d) Inc.
shall assist ACN in preparing a training package suitable for ACN to use in
educating the Representatives on the Mobile Applications so as to enable them to
represent Inc. well;

    

    (e) Inc.
shall provide ACN with an .xml electronic file of ACN
Customer activity and status, including disconnects, no less frequently than
once daily, in a  reasonably satisfactory to ACN and designed by ACN
and Inc. together to allow ACN access to the information it needs to calculate
and verify properly the Commissions, and administer its programs with the
Representative, which file will remain extant and accessible even after an ACN
Customer’s contract termination and for as long as there remain active ACN
Customers;

    

    (f) Inc.
shall be entitled to provide training for Representatives at such times as may
be reasonably acceptable to ACN at ACN's Representative training events and
gatherings at which ACN's other training and product/service familiarization is
scheduled to occur;

    

    (g) Inc.
shall provide all product literature, contractual forms, and any other materials
needed for the Representatives (including web-based information) to be able to
market and sell the Mobile Applications;

    

    (h) Inc.
will designate an individual to be the primary interface between ACN and Inc. on
all issues relating to this Agreement, including understanding the Mobile
Applications, answering mobile application questions and generally assisting
with the relationship between the two organizations (ACN and Inc.) with respect
to activities under this Agreement;

    

    (i) Inc.
will design, provide and host a mutually agreeable co-branded online order entry
portal that the Representatives and their customers will use to place customer
orders for acceptance by Inc., which orders shall bear some unique identifier
inside of Inc.’s systems as ACN-sourced as well as the unique identifier or team
identification number inside ACN’s systems of the Representative submitting or
responsible for such order;

    

    (j) Inc.
will design, to the mutual satisfaction of Inc. and ACN, a ‘Commission Report’
that details the information called for by Section 6(a), below;

    
      
         

      

      
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    (k) Inc.
will maintain an adequate number of trained Network Operation Center
representatives for the purpose of providing Tier 3 and Tier 4 support to ACN’s
CSRs to call to obtain answers to technical questions relating to the Mobile
Applications;

    

    (l) Inc.
will promptly use its best efforts to supply the Mobile Applications to the ACN
Customers;

    

    (m) Inc.
will use its best efforts to cause its Mobile Applications to be available for
sale on or before October 1, 2010; and

    

    (n) Inc.
will comply with all applicable telecommunications, federal, state and local
laws necessary to satisfy the purposes of this Agreement.

    

    6. ACN’s
Commission.

    

    (a)  Inc.
and ACN shall agree upon a retail price at which Mobile Applications will be
offered by ACN to potential ACN Customers (the “Retail Price”).  The
parties shall meet on a regular basis to determine whether the Retail Price of
any particular Mobile Application(s) is/are appropriate for market conditions
and may mutually agree to increase or decrease (i) the Retail Price for any
product(s) and/or (ii) the ACN Commission set forth below.

    

    Inc.
shall pay to ACN as consideration for ACN’s performance of its duties and
obligations under this Agreement an amount of money equal to fifty percent (50%)
of the Gross Margin (the “ACN Commission”). At the conclusion of each calendar
month, Inc. shall calculate the ACN Commission and pay to ACN by wire transfer,
on or before the 15th day of
the end of such month, an amount of money equal to the ACN
Commission.  Additionally, Inc. warrants that in the event that Inc.
offers another agent and/or business partner consideration whereby the aggregate
resulting gross margin paid to said agent and/or business partner exceeds that
which is paid to ACN under this provision that Inc. shall adjust the
consideration paid to ACN to equal that of the other agent and/or business
partner.

    

    (b)
Within thirty (30) days following the completion of each six-month period, ACN
shall calculate the ACN Costs and deltathree shall calculate the deltathree
Costs for the preceding six-month period and each of the parties shall forward
to the other party a report setting forth in reasonable detail such calculation.
In the event that any adjustment to the ACN Costs and/or the deltathree Costs
and, accordingly, the aggregate amount paid by deltathree to ACN for such
six-month period is required, deltathree shall include such adjustment in the
calculation of the monthly payment (or, if necessary, payments) it is required
to make to ACN immediately following the completion of such
calculation.  Such revised calculation of the ACN Costs and/or the
deltathree Costs (as applicable) shall serve as the estimate of the ACN Costs
and/or the deltathree Costs (as applicable) for the following six-month
period.

    
      
         

      

      
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    (c) All
ACN Commission payments shall be made by Inc. directly to ACN. ACN shall be
solely liable for the payment of any and all compensation of whatever kind to
the Representatives. To the extent required, ACN shall, in accordance with its
normal and customary practice, issue an IRS Form 1099 or Revenue Canada Form T4A
to each of the Representatives with respect to any Commissions that any of the
Representatives are paid by ACN for the sale of Mobile
Applications.

    

    (d) If an
ACN Customer disputes the validity of a contract, Inc. shall continue to pay any
associated ACN Commission payments while that ACN Customer continues to flow;
provided, however, if the basis of the dispute relates to or is connected with
the conduct of ACN or its representatives in securing that ACN Customer
contract, then Inc. shall withhold any ACN Commission payments until such time
as it is determined that that ACN Customer Contract is valid.

    

    7. Exclusivity.

    

    (a) The
parties  agree that, during the Agency Period, Inc. shall not appoint
or permit the following network marketing, multi-level marketing company or
direct selling company (other than Inc. itself) to market and sell Mobile
Applications on behalf of Inc. or any of its affiliates: Momentis; 5Linx; and
Lightyear Network Solutions.

    

    (b)
Subject to the foregoing restrictions in Section 7(a), above, nothing herein or
otherwise shall prevent ACN or Inc., as applicable, from pursing or entering
into any relationship of any nature or kind with any other supplier or vendor,
of whatever type of product or service.

    

    8.   Audit
Rights.

    

    ACN shall
have the right, at any time upon reasonable advance notice to Inc., and during
customary business hours, to audit Inc.’s customer and sales revenue accounting
records and applicable transaction documents in order: (i) to verify any report
provided to ACN by Inc. in connection with this Agreement or (ii) to verify any
calculation, payment of, or proposed payment of, ACN Commission to ACN, and Inc.
shall have the right, at any time upon reasonable advance notice to ACN, and
during customary business hours, to audit ACN’s Commission and call center
accounting records and applicable transaction documents in order to verify any
report provided to Inc. by ACN in connection with this
Agreement.  Subject to any restrictions imposed by applicable law, ACN
shall also have the right to request customer detail records, and Inc. shall
promptly provide the same to ACN.  Neither party shall delay unduly or
otherwise attempt to frustrate the other party’s verification
efforts.  All information provided to a party by the other party,
whether under this Section 8 or otherwise under this Agreement, shall be
prepared with full transparency by the providing party, and shall be full,
complete, truthful and not misleading when delivered to the receiving
party.  Each of the party’s rights under this section shall continue
and remain in effect until there are no longer any active ACN
Customers.

    
      
         

      

      
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    ACN
acknowledges that certain of the information that Inc. may provide in respect of
ACN’s audit rights may contain personal information of the ACN Customers and ACN
agrees to use its reasonable commercial efforts to protect and maintain the
confidentiality of such information, not to disclose the information to any
third parties and use such information for the sole and limited purpose of the
verifications set out in (i) through (iii) above; and in any event, ACN agrees
to treat such confidential information with the same care that it treats the
information of its own, non-Inc. related customers similar
information.

    

    9.  Representations
and Warranties.

    

    Each of
the parties hereto represents and warrants to the other that:

    

    (a) it is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the requisite power and authority to
execute, deliver, and perform this Agreement;

    

    (b) this
Agreement, once executed, will constitute a valid and binding agreement of each
party, enforceable in accordance with its terms, subject to bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors’ rights
in general, and subject to general principles of equity;

    

    (c) this
Agreement has been duly authorized by all necessary action on the part of each
party;

    

    (d) it
possesses all licenses, certificates, permits or other similar permissions
necessary to perform its obligations under this Agreement; and

    

    (e)
neither the execution and delivery of this Agreement, nor each of the parties’
performance hereunder, will violate any injunction, judgment, order, decree,
ruling charge, government restriction, rule or law, nor will they conflict with,
result in a material breach of, constitute a default under, or cause or create
any acceleration, cancellation, or modification of any other agreement or
arrangement to which each party is a party.

    

    10. Confidential
Information.

    

    The
parties agree that the provisions of the Nondisclosure Agreement between the
parties dated as of September 2, 2010, shall be deemed to be in full force and
effect and shall be deemed incorporated herein, and each of the parties shall
act in accordance with the terms and conditions thereof.

    
      
         

      

      
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    11. Indemnification.

    

    (a) ACN
hereby agrees to indemnify and hold Inc. and its directors, officers, employees,
stockholders, affiliates and agents (each, an “Inc. Indemnified Person”)
harmless from and against all damages which any Inc. Indemnified Person may
sustain, incur or assume as a result of any allegation, claim, civil or criminal
action, proceeding, charge or prosecution which may be alleged, made, instituted
or maintained against any Inc. Indemnified Person arising out of, resulting from
or based upon (i) any breach by ACN of any of its representations, warranties,
covenants or agreements contained in this Agreement, or (ii) any claim asserted
or threatened to be asserted by any third party in connection with ACN, its
affiliates or the Representatives, selling the Mobile Applications or serving or
having served pursuant to this Agreement; provided, however, ACN shall not be
liable to indemnify and hold any Inc. Indemnified Person harmless from any such
damages to the extent it is the result of the gross negligence, bad faith,
willful misconduct or criminal conduct of, or the breach of this Agreement by,
the party seeking indemnification hereunder.

    

    (b) Inc.
hereby agrees to indemnify and hold ACN and its directors, officers, employees,
stockholders, affiliates and agents (each, an “ACN Indemnified Person” and
collectively, the “ACN Indemnified Persons”) harmless from and against all
damages which any ACN Indemnified Person may sustain, incur or assume as a
result of any allegation, claim, civil or criminal action, proceeding, charge or
prosecution which may be alleged, made, instituted or maintained against any ACN
arising out of, resulting from or based upon (i) any breach by Inc. of any of
its representations, warranties, covenants or agreements contained in this
Agreement, or (ii) any claim asserted or threatened to be asserted by any third
party in connection with Inc.'s obligations pursuant to this Agreement, in each
case solely to the extent that any such damages is the direct result of the
gross negligence, bad faith, willful misconduct or criminal conduct with respect
to any training, sales materials, literature, forms or documents provided by
Inc. for use by the Representatives of, or the breach of this Agreement by, any
of the Inc. Indemnified Persons.

    

    (c) Inc.
acknowledges that the Representatives are third party beneficiaries of this
Agreement, and that ACN is permitted to bring any claim under this Agreement
that may arise on their behalf.

    

    12. Independent
Contractors. The parties
acknowledge that they are entering into this Agreement as independent
contractors and that this Agreement shall not create nor be construed to create
a relationship of joint venturers, co-partners, employer and employee, master
and servant or any similar relationship among the parties.

    

    13. Expenses.
Except as otherwise provided for herein, each party will pay its own expenses in
connection with this Agreement and the completion of the transactions
contemplated hereby.

    

    14. Expenses
Related to Audit Rights. Wherever either party has an audit right, the
party exercising its audit right shall be entitled to reimbursement of its
reasonable and customary expenses associated with such audit from the other
party in the event such audit results in a determination that there was a
material inaccuracy adverse to the party conducting the audit. Further, the
party being audited shall be entitled to reimbursement of its reasonable and
customary expenses associated with supporting such audit from the party
conducting the audit in the event such audit results in a determination that the
subject matter audited was materially accurate. Any inaccuracies determined by
any such audit shall be corrected in the favor of the party to whom the
inaccuracy was adverse.

    
      
         

      

      
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    15. Force
Majeure. In the event that war, fire, explosion, flood, accident, strike,
riot, act of governmental authority, act of terrorism, act of God or other
contingency beyond the reasonable control of either party causes cessation or
interruption of that party’s or the Representatives' performance hereunder,
performance shall be temporarily excused for the period of the disability,
without liability, provided that the party seeking excuse shall promptly, after
it has actual knowledge of the beginning of any excusable delay, notify the
other party of such delay, the reason therefore, and the probable duration and
consequence thereof.  The party seeking excuse shall use its
reasonable commercial efforts to resume performance of its obligations hereunder
with the least possible delay.

    

    16. Contractual
Nature of Obligations.  ACN acknowledges that its rights to ACN
Commission payments are contractual in nature, are not traditional security
interests and do not specifically attach to or encumber any assets of Inc., DME
or Delta Three Israel, including, without limitation, to the ACN Customer
contracts. ACN agrees that it will not assert or attempt to assert these rights
via any UCC-1 or similar filings.

    

    17.  Insolvency
of Inc.  In the event that an Insolvency Event occurs, Inc.
acknowledges that ACN is a general unsecured creditor of Inc., and agrees that,
in consideration for ACN having acknowledged herein that its rights to ACN
Commission payments is unsecured and not attached to any specific assets, Inc.
will use its best efforts to protect ACN’s twin rights to the fullest extent
possible in both the case where the Insolvency Event is instigated by Inc. or is
suffered by Inc. at the hands of any third party.  Examples of the
best efforts that Inc. could use in this instance would include, but not be
limited to, obtaining protection for payments to ACN in any negotiations with
other or secured creditors or debtor-in-possession or other post-filing lenders,
placing this Agreement high upon the list of contracts to be assumed in any
reorganization proceeding offering that option, or otherwise acting to preserve
both the relationship created by this Agreement, the payments to ACN hereunder
and the ability for ACN to realize the value and equity that its efforts
hereunder have created.  Inc. specifically agrees that ACN shall have
the right to intervene in any Insolvency Event proceeding to that same
end.

    

    18.  Miscellaneous.

    

    (a)
Entire Agreement; Amendment; Waiver. This Agreement contains the entire
understanding of the parties as to the subject matter hereof and fully
supersedes all prior agreements and understandings between the parties as to
such subject matter. This Agreement may not be amended, supplemented, canceled
or discharged, except by a written instrument executed by the party as to whom
enforcement is sought. No failure to exercise, and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof. No waiver
of any breach of this Agreement shall be deemed to be a waiver of any preceding
or succeeding breach of this Agreement.

    
      
         

      

      
        Page 12
of 16

        
          

        

      

      
         

      

    

    (b)
Severability. The parties acknowledge that the terms of this Agreement are fair
and reasonable at the date signed by them. However, in light of the possibility
of a change of conditions or differing interpretations by a court of what is
fair and reasonable, the parties stipulate as follows: if any one or more of the
terms, provisions, covenants or restrictions of this Agreement shall be
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; further, if any one or more of
the terms, provisions, covenants, and restrictions contained in this Agreement
shall for any reason be determined by a court of competent jurisdiction to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed, by limiting or reducing it, so as to be enforceable to the
maximum extent compatible with then applicable law.

    

    (c)
Notices. All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and mailed in the United States enclosed in a
registered or certified post-paid envelope, return receipt requested, or
delivered by overnight courier service, and addressed to the addresses of the
respective parties as set forth below, or to such changed addresses as such
parties may fix by notice in accordance therewith:

    

    To
Inc.:

    

    deltathree,
Inc.

    224 West
35th
Street

    New York,
N.Y. 10001

    Attn:
Chief Executive Officer

    Attn:
General Counsel

    

    To
ACN:

    

    ACN,
Inc.

    1000
Progress Place

    Concord,
NC  28025  USA

    Attn:
Vice President – Business Development

    Attn:
General Counsel

    

    (d)
Successors and Assigns. Neither party may assign this Agreement without the
prior written consent of the other party; however, either party may assign this
Agreement to any affiliate without such consent.  Any attempt to
assign this Agreement not in conformance with the foregoing sentence shall be
void.  This Agreement shall be binding upon and inure to the benefit
of Inc. and its successors and assigns and upon and to the benefit of ACN and
its successors and assigns.

    
      
         

      

      
        Page 13
of 16

        
          

        

      

      
         

      

    

    (e)
Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to principles of
conflict of laws.  In the event that any dispute shall have issues
needing resolution that arise out of the formation of an ACN Customer Contract,
then the laws of the province in which the ACN Customer resides may be applied
by the arbitrator, in his sole discretion, solely to answer questions regarding
the validity of that ACN Customer Contract, but all other issues shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflict of laws.

    

    (f)
Arbitration. Any claim, controversy or dispute between the parties shall be
resolved by binding arbitration of the issue in accordance with the following
procedures:

    

    (i)           Either
party may request arbitration by giving the other involved party written notice,
which notice shall describe, in reasonable detail, the nature of the dispute,
controversy or claim. The arbitration shall be governed by the rules of the
American Arbitration Association (“AAA”) and held in New York City, N.Y. or
other mutually agreed upon location.

    

    (ii)          If
both parties agree to an arbitrator within 30 days after a request for
arbitration is made hereunder, that arbitrator shall be selected to hear the
dispute in accordance with AAA rules. If the parties are not able to agree upon
an arbitrator within such 30 day period, then that party who requested
arbitration may request that the AAA select an arbitrator who has business
experience in the sales industry and the selected arbitrator shall hear the
dispute in accordance with AAA rules.

    

    (iii)         Each
of the parties shall bear its own fees, costs and expenses of the arbitration
and its own legal expenses, attorneys' fees and costs of all experts and
witnesses; provided, however, that if the claim of either party is upheld by the
arbitrator in all material respects, the arbitrator may apportion between the
parties as the arbitrator may deem equitable the costs incurred by the
prevailing party. The fees and expenses of the arbitration procedures, including
the fees of the arbitrator, will be shared equally by the parties.

    

    (iv)         Any
award rendered pursuant to an arbitration proceeding shall be final, conclusive,
non-appealable and binding upon the parties, and any judgment thereon may be
entered and enforced in any court of competent jurisdiction

    

    (g)
Headings. The headings in this Agreement are for convenience of reference only
and shall not control or affect the meaning or construction of this
Agreement,

    

    (h)
Further Assurances. Each party agrees at any time, and from time to time, to
execute, acknowledge, deliver and perform, and/or cause to be executed,
acknowledged, delivered and performed, all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and/or assurances as may
be necessary, and/or proper to carry out the provisions and/or intent of this
Agreement.

    
      
         

      

      
        Page 14
of 16

        
          

        

      

      
         

      

    

    (i)
Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original and all such counterparts shall constitute
one and the same instrument.

    

    (j)
Survival.  The provisions of Sections 3(d), 3(e), 4(b), 4(h), 5(c),
5(e), 5(k), 5(n), 5(d), 8, 10, 11 and 18 shall survive the termination of this
Agreement for as long as there are active ACN Customers.

    

    [signatures
on next page]

    
      
         

      

      
        Page 15
of 16

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
parties have caused this Agreement to be duly executed on the day and year first
above written.

    

    
      
        	
                DELTATHREE,
      INC.

              	 
      
	 
      	 
      
	
                By: 

              	
                /s/ Effi Baruch

              	 
      
	
                Name:
      Effi Baruch

              	 
      
	
                Title:
      Interim CEO and President

              	 
      
	 
      	 
      
	
                DME
      SOLUTIONS, INC.

              	 
      
	 
      	 
      
	
                By:

              	
                /s/ Effi Baruch

              	 
      
	
                Name:
      Effi Baruch

              	 
      
	
                Title:
      CEO and President

              	 
      
	 
      	 
      
	
                DELTA
      THREE ISRAEL, LTD.

              	 
      
	 
      	 
      
	
                By:

              	
                /s/ Effi Baruch

              	 
      
	
                Name:
      Effi Baruch

              	 
      
	
                Title:
      Interim CEO and President

              	 
      
	 
      	 
      
	
                LKN
      COMMUNICATIONS, INC.

              	 
      
	
                d/b/a
      ACN, Inc.

              	 
      
	 
      	 
      
	
                By:

              	
                /s/ Robert Stevanovski

              	 
      
	
                Name:
      Robert Stevanovski

              	 
      
	
                Title:
      Chairman

              	 
      

      

    

     

    
      
         

      

      
        Page 16
of 16Exhibit
4.1

     

    EXECUTION
COPY

    

    NOTE
AND WARRANT PURCHASE AGREEMENT

    

    Dated
as of September 29, 2010

    

    among

    

    JUMA
TECHNOLOGY CORP.

    

    and

    

    THE
PURCHASERS LISTED ON EXHIBIT A

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        
          	
                  TABLE
      OF CONTENTS

                
	 
      	
                  Page

                
	
                  ARTICLE
      I   Purchase and Sale of the Notes and
    Warrants

                	 
      
	
                  Section
      1.1

                	 
      	
                  Purchase
      and Sale of Notes

                	
                  1

                
	
                  Section
      1.2

                	 
      	
                  Warrants

                	
                  1

                
	
                  Section
      1.3

                	 
      	
                  Conversion
      Shares

                	
                  1

                
	
                  Section
      1.4

                	 
      	
                  Purchase
      Price and Closing

                	
                  1

                
	 
      	 
      	 
      	 
      
	
                  ARTICLE
      II  Representations and Warranties

                	 
      
	
                  Section
      2.1

                	 
      	
                  Representations
      and Warranties of the Company

                	
                  2

                
	
                  Section
      2.2

                	 
      	
                  Representations
      and Warranties of the Purchasers

                	
                  12

                
	 
      	 
      
	
                  ARTICLE
      III  Covenants

                	 
      
	
                  Section
      3.1

                	 
      	
                  Securities
      Compliance

                	
                  14

                
	
                  Section
      3.2

                	 
      	
                  Registration
      and Listing

                	
                  15

                
	
                  Section
      3.3

                	 
      	
                  Inspection
      Rights

                	
                  15

                
	
                  Section
      3.4

                	 
      	
                  Compliance
      with Laws

                	
                  15

                
	
                  Section
      3.5

                	 
      	
                  Keeping
      of Records and Books of Account

                	
                  15

                
	
                  Section
      3.6

                	 
      	
                  Furnishing
      of Information

                	
                  15

                
	
                  Section
      3.7

                	 
      	
                  Reporting
      Requirements

                	
                  16

                
	
                  Section
      3.8

                	 
      	
                  Amendments

                	
                  16

                
	
                  Section
      3.9

                	 
      	
                  Other
      Agreements

                	
                  16

                
	
                  Section
      3.10

                	 
      	
                  Distributions

                	
                  16

                
	
                  Section
      3.11

                	 
      	
                  Use
      of Proceeds

                	
                  16

                
	
                  Section
      3.12

                	 
      	
                  Reservation
      of Shares

                	
                  16

                
	
                  Section
      3.13

                	 
      	
                  Transfer
      Agent Instructions

                	
                  17

                
	
                  Section
      3.14

                	 
      	
                  Disposition
      of Assets

                	
                  17

                
	
                  Section
      3.15

                	 
      	
                  Reporting
      Status

                	
                  17

                
	
                  Section
      3.16

                	 
      	
                  Disclosure
      of Transaction

                	
                  17

                
	
                  Section
      3.17

                	 
      	
                  Disclosure
      of Material Information

                	
                  18

                
	
                  Section
      3.18

                	 
      	
                  Pledge
      of Securities

                	
                  18

                
	
                  Section
      3.19

                	 
      	
                  Form
      S-1 Eligibility

                	
                  18

                
	
                  Section
      3.20

                	 
      	
                  DTC

                	
                  18

                
	
                  Section
      3.21

                	 
      	
                  Issuance
      of Variable Securities

                	
                  18

                
	
                  Section
      3.22

                	 
      	
                  Approval
      of Acquisitions.

                	
                  18

                
	
                  Section
      3.23

                	 
      	
                  Most
      Favored Nations

                	
                  18

                

        

      

    

     

    
      
         

      

      
        i

        
          

        

      

      
         

      

    

    

    
      
        
          	
                  ARTICLE
      IV  Conditions

                	 
      
	
                  Section
      4.1

                	 
      	
                  Conditions
      Precedent to the Obligation of the Company to Sell the
    Shares

                	
                  19

                
	
                  Section
      4.2

                	 
      	
                  Conditions
      Precedent to the Obligation of the Purchasers to Purchase the
      Shares

                	
                  19

                
	 
      	 
      
	
                  ARTICLE
      V  Stock Certificate Legend

                	 
      
	
                  Section
      5.1

                	 
      	
                  Legend

                	
                  21

                
	 
      	 
      
	
                  ARTICLE
      VI  Indemnification

                	 
      
	
                  Section
      6.1

                	 
      	
                  General
      Indemnity

                	
                  22

                
	
                  Section
      6.2

                	 
      	
                  Indemnification
      Procedure

                	
                  22

                
	 
      	 
      
	
                  ARTICLE
      VII  Registration Rights

                	 
      
	
                  Section
      7.1

                	 
      	
                  Piggyback
      Registration Rights

                	
                  23

                
	
                  Section
      7.2

                	 
      	
                  Assignment
      of Registration Rights

                	
                  24

                
	
                  Section
      7.3

                	 
      	
                  Underwriter
      Status

                	
                  24

                
	 
      	 
      
	
                  ARTICLE
      VIII  Miscellaneous

                	 
      
	
                  Section
      8.1

                	 
      	
                  Specific
      Enforcement

                	
                  24

                
	
                  Section
      8.2

                	 
      	
                  Entire
      Agreement; Amendment

                	
                  25

                
	
                  Section
      8.3

                	 
      	
                  Rescission
      and Withdrawal Right

                	
                  25

                
	
                  Section
      8.4

                	 
      	
                  Notices

                	
                  26

                
	
                  Section
      8.5

                	 
      	
                  Waivers

                	
                  26

                
	
                  Section
      8.6

                	 
      	
                  Headings

                	
                  26

                
	
                  Section
      8.7

                	 
      	
                  Successors
      and Assigns

                	
                  27

                
	
                  Section
      8.8

                	 
      	
                  No
      Third Party Beneficiaries

                	
                  27

                
	
                  Section
      8.9

                	 
      	
                  Governing
      Law; Consent to Jurisdiction

                	
                  27

                
	
                  Section
      8.10

                	 
      	
                  Survival

                	
                  27

                
	
                  Section
      8.11

                	 
      	
                  Counterparts

                	
                  27

                
	
                  Section
      8.12

                	 
      	
                  Publicity

                	
                  27

                
	
                  Section
      8.13

                	 
      	
                  Severability

                	
                  27

                
	
                  Section
      8.14

                	 
      	
                  Further
      Assurances

                	
                  28

                

        

      

    

     

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    

    
      
        	
                EXHIBITS

              
	
                Exhibit
      A

              	 
      	
                List
      of Purchasers

              
	
                Exhibit
      B

              	 
      	
                Form
      of 10% bridge note

              
	
                Exhibit
      C

              	 
      	
                Series
      A Warrant

              
	
                Exhibit
      D

              	 
      	
                Irrevocable
      Transfer Agent Instructions

              
	
                Exhibit
      E

              	 
      	
                Opinion
      of Counsel

              

      

    

     

    
      
         

      

      
        iii

        
          

        

      

      
         

      

    

    NOTE
AND WARRANT PURCHASE AGREEMENT

    

    This NOTE
AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is dated as of
September 29, 2010 by and among Juma Technology Corp., a Delaware corporation
(the “ Company ”), and
each of the Purchasers whose names are set forth on  Exhibit
A  hereto (individually, a “ Purchaser ” and collectively,
the “ Purchasers
”).

    

    NOW, THEREFORE, in
consideration of the covenants, promises and representations set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

    

    ARTICLE
I

    Purchase
and Sale of Note and Warrants

    

    Section
1.1      Purchase and Sale of Note. Upon the
following terms and conditions, (a) the Company and one of its subsidiaries,
Nectar Services Corp., a Delaware Corporation (“ Nectar ” and together with
the Company, the “
Issuers ”) shall jointly issue and sell to the Purchasers and each of the
Purchasers shall purchase from the Company, 10% bridge notes in the aggregate
principal amount of five hundred thousand ($500,000.00) (the “ Note ”). The Note shall be
substantially in the form attached hereto as  Exhibit B
..  The Company and the Purchasers are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded by Rule 506 of Regulation D (“ Regulation D ”) as
promulgated by the United States Securities and Exchange Commission (the “ Commission ”) under the
Securities Act of 1933, as amended (the “ Securities Act ”) or Section
4(2) of the Securities Act.

    

    Section
1.2       Warrants. Upon the following
terms and conditions and for no additional consideration, each of the Purchasers
shall be issued Series A Warrants, in substantially the form attached hereto
as  Exhibit
C  (the “
Series A Warrants ” and/or the “ Warrants ”) to purchase up to
one hundred percent (100%) of that number of shares of the Company’s Common
Stock into which the Note issued to the applicable Purchaser would convert
assuming that the principal sum of the Note were convertible at fifteen cents
($0.15) per share of Common Stock.  Any shares of Common Stock
issuable upon exercise of the Warrants (and such shares when issued) are herein
referred to as the “ Warrant
Shares .” The Warrants shall expire on March 31, 2015 and shall have an
initial exercise price equal to fifteen cents ($0.15) per share.

    

    Section
1.3       Conversion Shares. The
Company has authorized and will reserve and covenants to continue to reserve,
free of preemptive rights and other similar contractual rights of stockholders,
as of the date hereof, such number of shares of Common Stock equal to one
hundred twenty percent (120%) of the number of shares of Common Stock as shall
from time to time be sufficient to effect the exercise of the Warrants then
outstanding. The Notes, the Warrants, and the Warrant Shares are sometimes
collectively referred to as the “ Securities .”

    

    Section
1.4       Purchase Price and Closing.
Subject to the terms and conditions hereof, the Issuers agree to issue and sell
to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the Notes and the
Warrants for an aggregate purchase price of five hundred thousand
($500,000.00) (the “
Purchase Price ”). The closing under this Agreement (the “ Closing ”) shall take place
on or about September 29, 2010 (the “ Closing Date
”).  The Closing under this Agreement shall take place at the offices
of Vision Opportunity Master Fund, Ltd., 20 West 55 th  Street, 5 th  Floor, New York,
New York 10019 at 10:00 a.m., New York time;  provided , that
all of the conditions set forth in  Article
IV  hereof and applicable to the Closing shall have been
fulfilled or waived in accordance herewith.  Subject to the terms and
conditions of this Agreement, at the Closing the Company shall deliver or cause
to be delivered to each Purchaser (x) its Notes for the principal amount set
forth opposite the name of such Purchaser on  Exhibit
A  hereto, (y) its Warrants to purchase such number of shares
of Common Stock as is set forth opposite the name of such Purchaser on  Exhibit
A  attached hereto and (z) any other documents required to
be delivered pursuant to  Article
IV  hereof. At the Closing, each Purchaser shall deliver the
applicable Purchase Price by wire transfer to the Company.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    ARTICLE
II

    Representations
and Warranties

    

    Section
2.1       Representations and
Warranties of the Company. Each of the Issuers hereby represents and
warrants to the Purchasers, as of the date hereof and as of the Closing Date
(except as set forth on the Schedule of Exceptions attached hereto with each
numbered Schedule corresponding to the section number herein), as follows
(unless otherwise specifically stated herein this  Section
2.1  to the contrary, all references to the Company shall be
deemed to refer collectively to the Issuers):

    

    (a)      Organization,
Good Standing and Power. The Company is a corporation duly incorporated, validly
existing and, upon payment of its franchise taxes, in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. Nectar is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power to own, lease and operate its properties and assets
and to conduct its business as it is now being conducted. Except as set forth
in  Schedule
2.1(g)  hereto, the Company does not have any Subsidiaries.
Except as set forth on Schedule
2.1(a) , each of the Company and each such Subsidiary is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary except for any jurisdiction(s) (alone or
in the aggregate) in which the failure to be so qualified will not have a
Material Adverse Effect (as defined in  Section
2.1(c)  hereof) on the Company’s financial
condition.

    

    (b)      Authorization;
Enforcement. The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Notes, the Warrants and the
Irrevocable Transfer Agent Instructions (as defined in  Section 3.13
) substantially in the form of  Exhibit D
 attached hereto (collectively, the “ Transaction Documents ”) and
to issue and sell the Securities in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action, and
except as set forth on  Schedule 2.1(b) ,
no further consent or authorization of the Company or its board of directors or
stockholders is required. This Agreement has been duly executed and delivered by
the Company. The other Transaction Documents will have been duly executed and
delivered by the Company at the Closing. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (c)      Capitalization.
The authorized capital stock of the Company and the shares thereof currently
issued and outstanding as of the date hereof are set forth on  Schedule
2.1(c)  hereto. All of the outstanding shares of capital stock
have been duly and validly authorized and issued in compliance with all
securities laws.  Except as set forth on  Schedule
2.1(c)  hereto, no shares of Common Stock are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. There are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except as set forth on  Schedule
2.1(c)  hereto, the Company is not a party to any agreement
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. The Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable Federal and state securities laws,
and no stockholder has a right of rescission or claim for damages with respect
thereto. The Company has furnished or made available to the Purchasers true and
correct copies of the Company’s Certificate of Incorporation as in effect on the
date hereof (the “
Certificate ”) and the Company’s Bylaws as in effect on the date
hereof (the “ Bylaws ”).
For the purposes of this Agreement, “ Material Adverse Effect ”
means any material adverse effect on the business, operations, properties,
prospects, or financial condition of the Company and its Subsidiaries, taken as
a whole, and/or any condition, circumstance, or situation that would prohibit or
otherwise materially interfere with the ability of the Company to perform any of
its obligations under this Agreement.

    

    (d)      Issuance
of Securities. The Notes and the Warrants to be issued at the Closing have been
duly authorized by all necessary corporate action and when paid for or issued in
accordance with the terms hereof, the Notes and Warrants shall be validly issued
and outstanding, free and clear of all liens, encumbrances and rights of refusal
of any kind.  When the Warrant Shares are issued in accordance with
the terms of this Agreement, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
non-assessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.

    

    (e)      No
Conflicts. The execution, delivery and performance of the Transaction Documents
by the Company, the performance by the Company of its obligations under the
Notes and/or the Warrants and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate any
provision of the Company’s Certificate or Bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which it or its properties or assets are
bound, except for conflicts or defaults, which singularly or in the aggregate do
not and will not have a Material Adverse Effect, (iii) create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any property
of the Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, except for liens, mortgages, security interests,
charges or encumbrances which singularly or in the aggregate do not and will not
have a Material Adverse Effect, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries are bound or affected, except for
violations, which singularly or in the aggregate, do not and will not have a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under Federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under the Transaction Documents, or issue and sell the Notes,
the Warrants and the Warrant Shares in accordance with the terms hereof or
thereof (other than (x) any consent, authorization or order that has been
obtained as of the date hereof, (y) any filing or registration that has been
made as of the date hereof or (z) any filings which may be required to be made
by the Company with the Commission or state securities administrators subsequent
to the Closing, any registration statement which may be filed pursuant hereto or
any other Transaction Document);  provided , that
for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchasers herein.

     

    
      
         

      

      
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    (f)      Commission
Documents, Financial Statements. The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended the (“
Exchange Act ”), including material filed pursuant to Section 13(a) or
15(d) of the Exchange Act (all of the foregoing including filings incorporated
by reference therein being referred to herein as the “ Commission Documents ”). The
Company has delivered or made available via EDGAR or another Internet web-site
to each of the Purchasers true and complete copies of the Commission Documents.
Except for any information provided to Robert Thomson, the Company has not
provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, was required
to have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. At the times of their respective filings, the Commission Documents
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and, as of their respective dates, none of the Commission Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles (“ GAAP ”)
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its Subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).

    

    (g)      Subsidiaries. Schedule 2.1(g) hereto sets
forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person’s
ownership. Each Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation and has the
requisite corporate power to own, lease and operate its properties and assets
and to conduct its business as it is now being conducted. For the purposes of
this Agreement, “
Subsidiary ” shall mean any corporation or other entity of which at least
a majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary for the purchase
or acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.

     

    
      
         

      

      
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    (h)    No
Material Adverse Change. Other than as disclosed in the Company’s Commission
Documents, since December 31, 2008 the Company has not experienced or suffered
any Material Adverse Effect.

    

    (i)     No
Undisclosed Liabilities. Except as set forth on Schedule 2.1(i), since
December 31, 2008 neither the Company nor any of its Subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company’s or its Subsidiaries’
respective businesses and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company or its Subsidiaries, as
the case may be.

    

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

    

    (k)    No
Undisclosed Events or Circumstances. No event or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, 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.

    

    (l)     Indebtedness. Schedule 2.1(l) hereto sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement, “ Indebtedness ” shall mean (a)
any liabilities for borrowed money or amounts owed, whether individually or in
aggregate, in excess of $100,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $25,000 due under
leases required to be capitalized in accordance with GAAP. Except as set forth
on  Schedule
2.1(l) , neither the Company nor any Subsidiary is in default with
respect to any Indebtedness.

    

    (m)   Title
to Assets. Except as set forth on Schedule 2.1(m), each of the
Company and the Subsidiaries has good and marketable title to all of its real
and personal property, free and clear of any mortgages, pledges, charges, liens,
security interests or other encumbrances. Except as set forth on  Schedule 2.1(m) ,
all leases of the Company and each of its Subsidiaries are valid and subsisting
and in full force and effect.

    

    (n)  
 Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and location in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any knowledge that it will be unable to renew its existing insurance
coverage for the Company and the Subsidiaries as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

     

    
      
         

      

      
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    (o)    Actions
Pending. There is no action, suit, claim, investigation, arbitration, alternate
dispute resolution proceeding or any other proceeding pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary which
questions the validity of this Agreement or any of the other Transaction
Documents or the transactions contemplated hereby or thereby or any action taken
or to be taken pursuant hereto or thereto. There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or any other
proceeding pending or, to the knowledge of the Company, threatened, against or
involving the Company, any Subsidiary or any of their respective properties or
assets. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Company or any Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such.

    

    (p)    Compliance
with Law. The business of the Company and the Subsidiaries has been and is
presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except for such
noncompliance that, individually or in the aggregate, would not cause a Material
Adverse Effect. The Company and each of its Subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it unless the failure to possess such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, individually
or in the aggregate, would not have a Material Adverse Effect.

    

    (q)    Taxes.
The Company and each of the Subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any Subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or any Subsidiary for any
period, nor of any basis for any such assessment, adjustment or
contingency.

    

    (r)     Certain
Fees. No brokers, finders or financial advisory fees or commissions will be
payable by the Company or any Subsidiary or any Purchaser with respect to the
transactions contemplated by this Agreement.

    

    (s)    Disclosure.
Neither this Agreement or the Schedules hereto nor any other documents,
certificates or instruments furnished to the Purchasers by or on behalf of the
Company or any Subsidiary in connection with the transactions contemplated by
this Agreement contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein or
therein, not misleading.

    

    (t)     Operation
of Business. Except as set forth in Schedule 2.1(t), the Company
and each of the Subsidiaries owns or possesses all patents, trademarks, domain
names (whether or not registered) and any patentable improvements or
copyrightable derivative works thereof, websites and intellectual property
rights relating thereto, service marks, trade names, copyrights, licenses and
authorizations, and all rights with respect to the foregoing, which are
necessary for the conduct of its business as now conducted without any conflict
with the rights of others.

     

    
      
         

      

      
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    (u)    Environmental
Compliance. The Company and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. Except as set
forth on  Schedule
2.1(u) , the Commission Documents describe all material permits,
licenses and other authorizations issued under any Environmental Laws to the
Company or its Subsidiaries. “
Environmental Laws ” shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature. The
Company has all necessary governmental approvals required under all
Environmental Laws and used in its business or in the business of any of its
Subsidiaries. The Company and each of its Subsidiaries are also in compliance
with all other limitations, restrictions, conditions, standards, requirements,
schedules and timetables required or imposed under all Environmental Laws.
Except for such instances as would not individually or in the aggregate have a
Material Adverse Effect, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its Subsidiaries that violate or may violate any
Environmental Law after the Closing Date or that may give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.

    

    (v)    Books
and Record Internal Accounting Controls. The books and records of the Company
and its Subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the Subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any Subsidiary. The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company, to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

    

    (w)   Material
Agreements. Except for the Transaction Documents (with respect to clause (i)
only), as disclosed in the Commission Documents or as set forth on  Schedule
2.1(w)  hereto, or as would not be reasonably likely to have a
Material Adverse Effect, (i) the Company and each of its Subsidiaries have
performed all obligations required to be performed by them to date under any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, filed or required to be filed with the Commission (the “ Material Agreements ”), (ii)
neither the Company nor any of its Subsidiaries has received any notice of
default under any Material Agreement and, (iii) to the best of the Company’s
knowledge, neither the Company nor any of its Subsidiaries is in default under
any Material Agreement now in effect.

     

    
      
         

      

      
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    (x)     Intellectual
Property.  The Company and its Subsidiaries own, or have rights to
use, all inventions, know-how, patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses, trade
secrets and other similar rights that are necessary or material for use in
connection with their respective businesses now operated by them and presently
contemplated to be operated by them which the failure to so have would have or
reasonably be expected to result in a Material Adverse Effect (collectively, the
“ Intellectual Property
Rights ”).  None of the Company’s or any Subsidiary’s
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate, within three years from the date of this
Agreement.  None of the Company’s nor any Subsidiary has received
written notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person (as defined
below).  To the knowledge of the Company, the Company and its
Subsidiaries’ patents and other Intellectual Property Rights and the present
activities of the Company and its Subsidiaries do not infringe any patent,
copyright, trademark, trade name or other proprietary rights of any third party,
and there is no claim, action or proceeding being made or brought against, or to
the Company’s knowledge, being threatened against, the Company or any Subsidiary
regarding any of the Intellectual Property Rights.  The Company does
not have any knowledge of an infringement by another Person of any of the
Intellectual Property Rights by third parties and has no reason to believe that
any of its Intellectual Property Rights is unenforceable.  The Company
has taken commercially reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties. “ Person ” means an individual
or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.

    

    (y)    Transactions
with Affiliates. Except as set forth in the Commission Documents, there are no
loans, leases, agreements, contracts, royalty agreements, management contracts
or arrangements or other continuing transactions between (a) the Company or any
Subsidiary on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company or any of its Subsidiaries, or any person
owning any capital stock of the Company or any Subsidiary or any member of the
immediate family of such officer, employee, consultant, director or stockholder,
or any corporation or other entity controlled by such officer, employee,
consultant, director or stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder.

    

    (z)     Sarbanes-Oxley;
Disclosure Controls. The Company is in compliance in all material respects with
all of the provisions of the Sarbanes-Oxley Act of 2002 which are applicable to
it as of the Closing Date. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s most recently filed periodic report under the Exchange Act
is being prepared. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the most recent periodic reporting period under the Exchange Act (such date,
the “ Evaluation Date
”). The Company presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls over financial reporting (as such
term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) or, to the
Company’s knowledge, in other factors that could reasonably be expected to
materially affect the Company’s internal controls over financial
reporting

     

    
      
         

      

      
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    (aa)  Securities
Act of 1933. Based in material part upon the representations herein of the
Purchasers, the Company has complied and will comply with all applicable federal
and state securities laws in connection with the offer, issuance and sale of the
Securities hereunder. Neither the Company nor anyone acting on its behalf,
directly or indirectly, has or will sell, offer to sell or solicit offers to buy
any of the Securities or similar securities to, or solicit offers with respect
thereto from, or enter into any preliminary conversations or negotiations
relating thereto with, any person, or has taken or will take any action so as to
bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Securities.

    

    (bb)  Governmental
Approvals. Except for the filing of any notice prior or subsequent to the
Closing Date that may be required under applicable state and/or Federal
securities laws (which if required, shall be filed on a timely basis), including
the filing of a Form D and a registration statement or statements pursuant
to  Section
7.1  herein, no authorization, consent, approval, license,
exemption of, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary for, or in connection with, the execution or delivery of the
Notes and the Warrants, or for the performance by the Company of its obligations
under the Transaction Documents.

    

    (cc)  Employees.
Neither the Company nor any Subsidiary has any collective bargaining
arrangements or agreements covering any of its employees. Except as set forth
on  Schedule
2.1(cc) , neither the Company nor any Subsidiary has any employment
contract, agreement, regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
Subsidiary. No officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.

    

    (dd)  Absence
of Certain Developments. Except as set forth on Schedule 2.1(dd), since
December 31, 2008, neither the Company nor any Subsidiary has:

    

    (i)        issued
any stock, bonds or other corporate securities or any rights, options or
warrants with respect thereto;

    

    (ii)       borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year;

    

    (iii)     
discharged or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business;

    

    (iv)      declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements so
to purchase or redeem, any shares of its capital stock;

    

    (v)       sold,
assigned or transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business;

    

    (vi)      sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any person except to
customers in the ordinary course of business;

     

    
      
         

      

      
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    (vii)    suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
prospective business;

    

    (viii)   made
any changes in employee compensation except in the ordinary course of business
and consistent with past practices;

    

    (ix)      made
capital expenditures or commitments therefor that aggregate in excess of
$100,000;

    

    (x)       entered
into any other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the ordinary
course of business;

    

    (xi)      made
charitable contributions or pledges in excess of $25,000;

    

    (xii)     suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;

    

    (xiii)    experienced
any material problems with labor or management in connection with the terms and
conditions of their employment;

    

    (xiv)    effected
any two or more events of the foregoing kind which in the aggregate would be
material to the Company or its Subsidiaries; or

    

    (xv)     entered
into an agreement, written or otherwise, to take any of the foregoing
actions.

    

    (ee)  Public
Utility Holding Company Act and Investment Company Act Status. The Company is
not a “holding company” or a “public utility company” as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended. The Company is
not, and as a result of and immediately upon the Closing will not be, an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.

    

    (ff)    ERISA.
No liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any Plan (as defined below) by the Company or any of its Subsidiaries
which is or would be materially adverse to the Company and its Subsidiaries. The
execution and delivery of this Agreement and the issuance and sale of the
Securities will not involve any transaction which is subject to the prohibitions
of Section 406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the
“ Code ”);  provided  that
if any of the Purchasers, or any person or entity that owns a beneficial
interest in any of the Purchasers, is an “employee pension benefit plan” (within
the meaning of Section 3(2) of ERISA) with respect to which the Company is a
“party in interest” (within the meaning of Section 3(14) of ERISA), the
requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met.
As used in this  Section 2.1(ff) ,
the term “ Plan ” shall
mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which
is or has been established or maintained, or to which contributions are or have
been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is
under common control, as described in Section 414(b) or (c) of the
Code.

     

    
      
         

      

      
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    (gg)  Dilutive
Effect. The Company understands and acknowledges that its obligation to issue
the Warrant Shares upon the exercise of the Warrants in accordance with this
Agreement and the Warrants are absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interest of other
stockholders of the Company.

    

    (hh)  No
Integrated Offering. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or Subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.

    

    (ii)    Listing
and Maintenance Requirements.  Except as set forth in the Commission
Documents, the Company has not, in the two (2) years preceding the date hereof,
received notice (written or oral) from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading
Market.  Except as set forth in the Commission Documents, the Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements. “ Trading
Market ” means the OTC Bulletin Board or any other Eligible Market, or
any other national securities exchange, market or trading or quotation facility
on which the Common Stock is then listed or quoted. “ Eligible Market ” means any
of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the
Over-the-Counter Bulletin Board.

    

    (jj)    Independent
Nature of Purchasers. The Company acknowledges that the obligations of each
Purchaser under the Transaction Documents are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under the
Transaction Documents. The Company acknowledges that the decision of each
Purchaser to purchase securities pursuant to this Agreement has been made by
such Purchaser independently of any other purchase and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its Subsidiaries
which may have made or given by any other Purchaser or by any agent or employee
of any other Purchaser, and no Purchaser or any of its agents or employees shall
have any liability to any Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. The Company
acknowledges that nothing contained herein, or in any Transaction Document, 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 create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that for reasons of administrative convenience
only, the Transaction Documents have been prepared by counsel for one of the
Purchasers and such counsel does not represent all of the Purchasers but only
such Purchaser and the other Purchasers have retained their own individual
counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.

     

    
      
         

      

      
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    (kk) 
 Questionable Payments. Neither the Company nor any of its Subsidiaries,
nor, to the Company’s knowledge, any directors, officers, employees, agents or
other Persons acting on behalf of the Company or any of its Subsidiaries has, in
the course of its actions for, or on behalf of, the Company: (a) directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to foreign or domestic
political activity; (b) made any direct or indirect unlawful payments to any
foreign or domestic governmental officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds; (c) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended; or (d) made any other unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

    

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

    

    (mm) Transfer
Agent. The name, address, telephone number, fax number, contact person and email
address of the Company’s current transfer agent is set forth on  Schedule
2.1(mm)  hereto.

    

    Section
2.2       Representations and
Warranties of the Purchasers. Each Purchaser hereby makes the following
representations and warranties to the Company (with respect solely to itself and
not with respect to any other Purchaser), as of the date hereof, and as of the
Closing Date:

    

    (a)    Organization
and Standing of the Purchasers. If such Purchaser is an entity, such Purchaser
is a corporation, partnership or limited liability company duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.

    

    (b)    Authorization
and Power. Such Purchaser has the requisite power and authority to enter into
and perform this Agreement and to purchase the Notes and Warrants being sold to
it hereunder. The execution, delivery and performance of this Agreement by such
Purchaser and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership
action, and no further consent or authorization of such Purchaser or its board
of directors, stockholders or partners, as the case may be, is required. This
Agreement has been duly authorized, executed and delivered by such Purchaser and
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with the terms thereof, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.

     

    
      
         

      

      
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    (c)    No
Conflicts. The execution, delivery and performance of this Agreement and the
consummation by such Purchaser of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such
Purchaser’s charter documents or bylaws or other organizational documents or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument or obligation to which such Purchaser is a party or by
which its properties or assets are bound, or result in a violation of any law,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Purchaser or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a material adverse effect on such Purchaser). Such Purchaser is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or to
purchase the Notes or acquire the Warrants in accordance with the terms
hereof; 
provided  that for purposes of the representation made in this
sentence, such Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.

    

    (d)    Acquisition
for Investment. Such Purchaser is acquiring the Securities solely for its own
account for the purpose of investment and not with a view to or for sale in
connection with distribution. Each Purchaser does not have a present intention
to sell the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of the Securities to or through
any person or entity;  provided, however
, that by making the representations herein and subject to Section
2.2(h)  below, such Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with Federal and state
securities laws applicable to such disposition. Such Purchaser acknowledges that
it is able to bear the financial risks associated with an investment in the
Securities and that it has been given full access to such records of the Company
and the Subsidiaries and to the officers of the Company and the Subsidiaries and
received such information as it has deemed necessary or appropriate to conduct
its due diligence investigation and has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company’s stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company.

    

    (e)    Status
of Purchasers. Such Purchaser is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act and such Purchaser is not a broker-dealer.

    

    (f)     Opportunities
for Additional Information. Such Purchaser acknowledges that such Purchaser has
had the opportunity to ask questions of and receive answers from, or obtain
additional information from, the executive officers of the Company concerning
the financial and other affairs of the Company, and to the extent deemed
necessary in light of such Purchaser’s personal knowledge of the Company’s
affairs, such Purchaser has asked such questions and received answers to the
full satisfaction of such Purchaser, and such Purchaser desires to invest in the
Company.

    

    (g)    No
General Solicitation. Such Purchaser acknowledges that the Securities were not
offered to such Purchaser by means of any form of general or public solicitation
or general advertising, or publicly disseminated advertisements or sales
literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of
communications.

    

    (h)    Rule
144. Such Purchaser understands that the Securities must be held indefinitely
unless such Securities are registered under the Securities Act or an exemption
from registration is available. Such Purchaser acknowledges that such Purchaser
is familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act (“ Rule 144 ”), and that such
Purchaser has been advised that Rule 144 permits resales only under certain
circumstances. Such Purchaser understands that to the extent that Rule 144 is
not available, such Purchaser will be unable to sell any Securities without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.

     

    
      
         

      

      
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    (i)     General.
Such Purchaser understands that the Securities are being offered and sold in
reliance on a transactional exemption from the registration requirement of
Federal and state securities laws and the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to determine the
applicability of such exemptions and the suitability of such Purchaser to
acquire the Securities.

    

    (j)     Independent
Investment. Except as may be disclosed in any filings with the Commission by it
under Section 13 and/or Section 16 of the Exchange Act, such Purchaser has not
agreed to act with any other Purchaser for the purpose of acquiring, holding,
voting or disposing of the Securities purchased hereunder for purposes of
Section 13(d) under the Exchange Act, and such Purchaser is acting independently
with respect to its investment in the Securities.

    

    (k)    Short
Sales. Purchaser has not, during the last thirty (30) days prior to the date
hereof, directly or indirectly, nor has any party acting on behalf of or
pursuant to any understanding with such Purchaser, effected or agreed to effect
any short sale, whether or not against the box, established any “put equivalent
position” (as defined in Rule 16(a)-1(h) under the Exchange Act) with respect to
any security of the Company, granted any other right (including, without
limitation, any put or call option) with respect to any security of the Company
or with respect to any security that includes, relates to, or derives any
significant part of its value from any security of the Company or otherwise
sought to hedge its positioning of the Company’s securities.  Such
Purchaser shall not, and shall cause any affiliates not to, engage, directly or
indirectly, in any short sale transactions in the securities of the Company
during the period from the date hereof until such time as one (1) year from the
date of effectiveness of the Registration Statement (as defined in  Section 7.1
). Such Purchaser understands and acknowledges, severally and not jointly
with any other Purchaser, that the Commission currently takes the position that
covering a short position established prior to effectiveness of a resale
registration statement with shares included in such registration statement would
be a violation of Section 5 of the Securities Act, as set forth in Item 65,
Section 5 under Section A, of the Manual of Publicly Available Telephone
Interpretations, dated July 1997, compiled by the Office of Chief Counsel,
Division of Corporation Finance

    

    ARTICLE
III

    Covenants

    

    The
Company covenants with each of the Purchasers as follows, which covenants are
for the benefit of each Purchaser and its permitted assignees (as defined
herein):

    

    Section
3.1       Securities Compliance. The
Company shall notify the Commission in accordance with their rules and
regulations, of the transactions contemplated by any of the Transaction
Documents, including filing a Form D with respect to the Notes,
Warrants and the Warrant Shares as required under Regulation D and
applicable “blue sky” laws, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Notes, the Warrants and
the Warrant Shares to the Purchasers or subsequent holders.

     

    
      
         

      

      
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    Section
3.2       Registration and Listing.
The Company shall (a) comply in all respects with its reporting and filing
obligations under the Exchange Act, (b) comply with all requirements related to
any registration statement filed pursuant to this Agreement, and (c) not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
take all action necessary to continue the listing or trading of its Common Stock
on the OTC Bulletin Board or other exchange or market on which the Common Stock
is trading or may be traded in the future. Subject to the terms of the
Transaction Documents, the Company further covenants that it will take such
further action as the Purchasers may reasonably request, all to the extent
required from time to time to enable the Purchasers to sell the Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act. Upon the
request of the Purchasers, the Company shall deliver to the Purchasers a written
certification of a duly authorized officer as to whether it has complied with
such requirements.

     

    Section
3.3       Inspection Rights. In the event that the
Purchaser no longer has a representative on the Company’s board of directors,
the Company shall permit, during normal business hours and upon reasonable
request and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as any Notes remain outstanding, for purposes
reasonably related to such Purchaser’s interests as a convertible debtholder, to
examine and make reasonable copies of and extracts from the records and books of
account of, and visit and inspect the properties, assets, operations and
business of the Company and any Subsidiary, and to discuss the affairs, finances
and accounts of the Company and any Subsidiary with any of its officers,
consultants, directors, and key employees.  As a condition to such
inspection, Purchasers shall keep such information confidential;  provided  that
such information may be disclosed (i) to the extent required by applicable law,
regulation or legal process, subpoena, civil investigative demand or other
similar process, (ii) to the extent reasonably necessary in connection with the
enforcement of rights under this Agreement, (iii) to any governmental, judicial
or regulatory authority requiring or requesting such information, and (iv) to
its directors, officers, employees, agents, managers and general partners,
consultants, accountants, financial advisers, legal counsel and other
professional advisers.

     

    Section
3.4      Compliance with Laws. The Company
shall comply, and cause each Subsidiary, whether such Subsidiary is in existence
as of the date of this agreement or formed or acquired subsequent to the date of
this agreement, to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse
Effect.

    

    Section
3.5       Keeping of Records and Books
of Account. The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be
made.

    

    Section
3.6      Furnishing of Information. Until
all of the Securities are eligible for sale without limitations concerning
the availability of current public information under Rule 144 promulgated under
the Securities Act, the Company covenants to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Until all of the Securities are eligible for sale without
limitations concerning the availability of current public information under Rule
144 promulgated under the Securities Act, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell the Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule
144.

     

    
      
         

      

      
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    Section
3.7      Reporting Requirements. If the
Commission ceases making periodic reports filed under the Exchange Act available
via the Internet, then at a Purchaser’s request the Company shall furnish the
following to such Purchaser so long as such Purchaser shall be obligated
hereunder to purchase the Notes or shall beneficially own any
Securities:

    

    (a)    quarterly
reports filed with the Commission on Form 10-Q as soon as practical after the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission;

    

    (b)    annual
reports filed with the Commission on Form 10-K as soon as practical after the
document is filed with the Commission, and in any event within five (5) days
after the document is filed with the Commission; and

    

    (c)    copies
of all notices and information, including without limitation notices and proxy
statements in connection with any meetings, that are provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.

    

    Section
3.8       Amendments. The Company
shall not amend or waive any provision of the Certificate or Bylaws of the
Company in any way that would materially and adversely affect the rights of the
holders of the Notes and/or Warrants. No consideration shall be offered or paid
to any holders of the Notes or the Warrants to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration also is offered to all of the parties to the Transaction
Documents, holders of Notes or Warrants, as the case may be.  The
Company has not, directly or indirectly, made any agreements with any Purchasers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction
Documents.  Without limiting the foregoing, the Company confirms that,
except as set forth in this Agreement, no Purchaser has made any commitment or
promise or has any other obligation to provide any financing to the Company or
otherwise.

    

    Section
3.9      Other Agreements. The Company
shall not enter into any agreement in which the terms of such agreement would
materially restrict or impair the right or ability to perform of the Company or
any Subsidiary under any Transaction Document.

    

    Section
3.10    Distributions. So long as any
Notes remain outstanding, the Company agrees that it shall not (i) declare
or pay any dividends or make any distributions to any holder(s) of Common Stock
or (ii) purchase or otherwise acquire for value, directly or indirectly, any
Common Stock or other equity security of the Company.

    

    Section
3.11    Use of Proceeds. The net proceeds from the
sale of the Notes and Warrants hereunder shall be used by the Company
for general corporate purposes, and not to redeem any Common Stock or
securities convertible, exercisable or exchangeable into Common Stock, to
settle any outstanding litigation or to cause any increase in management’s
compensation, direct or otherwise, in a manner other than in the ordinary course
of business.  An estimated allocation of the net proceeds from the
sale of the Securities hereunder is set forth on  Schedule
3.11  hereto.

    

    Section
3.12    Reservation of Shares. So long as any of the
Notes or Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than one hundred twenty percent (120%) of the aggregate number
of shares of Common Stock needed to provide for the issuance of the Warrant
Shares.

     

    
      
         

      

      
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    Section
3.13    Transfer Agent Instructions. The Company
shall issue irrevocable instructions to its transfer agent, and any subsequent
transfer agent, to issue certificates, registered in the name of each Purchaser
or its respective nominee(s), for the Warrant Shares in such amounts as
specified from time to time by each Purchaser to the Company upon exercise of
the Warrants in the form of  Exhibit
D  attached hereto (the “ Irrevocable Transfer Agent
Instructions ”). Prior to registration of the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in  Section
5.1  of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this  Section
3.13  will be given by the Company to its transfer agent and
that the Warrant Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement. If a
Purchaser provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of
theWarrant Shares may be made without registration under the Securities Act or
the Purchaser provides the Company with reasonable assurances that such Warrant
Shares can be sold pursuant to Rule 144 without any restriction as to the number
of securities acquired as of a particular date that can then be immediately
sold, the Company shall permit the transfer, and, in the case of the Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Purchaser and
without any restrictive legend. The Company acknowledges that a breach by it of
its obligations under this  Section
3.13  will cause irreparable harm to the Purchasers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this  Section
3.13  will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this  Section 3.13 ,
that the Purchasers shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.

    

    Section
3.14    Disposition of Assets. So long as any Notes
remain outstanding, neither the Company nor any Subsidiary shall sell, transfer
or otherwise dispose of any of its properties, assets and rights including,
without limitation, its software and intellectual property, to any person except
for (A) sales to customers in the ordinary course of business; (B) sales of
assets not in excess of 25% of the Company’s total assets as shown on its
balance sheet; or (C) with the prior written consent of the holders of a
majority of the holders of the Notes and Warrants then outstanding.

    

    Section
3.15    Reporting Status. So long as a Purchaser
beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the Commission pursuant to the Exchange Act,
and the Company shall not cease filing reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.

    

    Section
3.16    Disclosure of Transaction. The Company shall
issue a press release describing the material terms of the transactions
contemplated hereby (the “
Press Release ”) as soon as practicable after the Closing but in no event
later than four (4) business days after the Closing has been consummated. The
Company shall also file with the Commission a Current Report on Form 8-K (the
“ Form 8-K ”) describing
the material terms of the transactions contemplated hereby (and attaching as
exhibits thereto this Agreement, the form of Note, the form of Warrant and the
Press Release) as soon as practicable following the Closing Date but in no event
more than four (4) Trading Days following the Closing Date, which Press Release
and Form 8-K shall be subject to prior review and comment by counsel for the
Purchasers. “ Trading
Day ” means any day during which the OTC Bulletin Board (or other
quotation venue or principal exchange on which the Common Stock is traded) shall
be open for trading.

     

    
      
         

      

      
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    Section
3.17    Disclosure of Material Information. Except
for any information disclosed to Robert Thomson, the Company represents,
covenants and agrees that neither it nor any other person acting on its behalf
has provided or will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information (other than with respect to the transactions contemplated by this
Agreement), unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.

    

    Section
3.18    Pledge of Securities. The Company
acknowledges and agrees that the Securities may be pledged by a Purchaser in
connection with a  bona
fide  margin agreement or other loan or financing arrangement
that is secured by the Securities. The pledge of Securities shall not be deemed
to be a transfer, sale or assignment of the Securities hereunder, and no
Purchaser effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document;  provided  that
a Purchaser and its pledgee shall be required to comply with the provisions
of  Article
V  hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. At the Purchasers’ expense, the Company hereby
agrees to execute and deliver such documentation as a pledgee of the Securities
may reasonably request in connection with a pledge of the Securities to such
pledgee by a Purchaser.

    

    Section
3.19    Form S-1 Eligibility. The Company currently
meets the “registrant eligibility” and transaction requirements set forth in the
general instructions to Form S-1 applicable to “resale” registrations on Form
S-1 and the Company shall file all reports required to be filed by the Company
with the Commission in a timely manner.

    

    Section
3.20    DTC. Not later than the effective date of the
Registration Statement, the Company shall cause its Common Stock to be eligible
for transfer with its transfer agent pursuant to the Depository Trust Company
Automated Securities Transfer Program.

    

    Section
3.21    Issuance of Variable Securities. The Company shall not
issue any Options or Convertible Securities (each as defined in the Note) with
an exercise price or a conversion price or a number of underlying shares that
floats or resets or otherwise varies or is subject to adjustment based (directly
or indirectly) on market prices of the Common Stock.

    

    Section
3.22    Approval of Acquisitions.  So long
as any Notes remain outstanding, the Company shall not effect, or agree to
effect, an acquisition or buy out of or with any entity (including without
limitation the acquisition of a substantial portion of the outstanding
securities or assets of another entity other than in the ordinary course of
business), or a consolidation or merger of the Company with or into any other
corporation or corporations (or other entity or entities), or a sale of all or
substantially all of the assets of the Company, or the effectuation by the
Company of a transaction or series of related transactions in which more than
50% of the voting shares of the Company is disposed of or conveyed, without
providing the holders of the Notes with ten (10) days’ notice of such
transaction.

    

    Section
3.23    Most Favored Nations. If the Company has, on
or prior to the date of this Agreement, entered into, or shall in the future
enter into, any agreement with any purchaser or holder of capital stock of the
Company, by providing such purchaser or holder with any terms that are more
favorable than the rights made available to the Purchasers pursuant any terms
set out in the Transaction Documents in issue as of the date hereof, the Company
shall promptly notify the Purchasers of such terms in writing and Purchasers
shall have the right to elect in writing within thirty (30) days of the receipt
of such notice to elect to have such terms apply to such Transaction
Documents.  This provision shall only apply to an equity or
convertible debt investment by one or more investors in excess of $3.0 million
and shall terminate upon the earlier to occur of (A) one (1) year from the date
of this Agreement or (B) at any time Purchasers own in the aggregate less than
four (4%) percent of the Company’s outstanding common stock on a fully diluted
basis.

     

    
      
         

      

      
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    ARTICLE
IV

    Conditions

    

    Section
4.1       Conditions Precedent to the
Obligation of the Company to Sell the Securities. The obligation hereunder of
the Company to issue and sell the Securities to the Purchasers at the Closing is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole
discretion.

    

    (a)    Accuracy
of Each Purchaser’s Representations and Warranties. The representations and
warranties of each Purchaser shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made at that time,
except for representations and warranties that are expressly made as of a
particular date, which shall be true and correct in all material respects as of
such date.

    

    (b)    Performance
by the Purchasers. Each Purchaser shall have performed, satisfied and complied
in all respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Purchaser at or
prior to the Closing.

    

    (c)    No
Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this
Agreement.

    

    (d)    Delivery
of Purchase Price. The Purchase Price for the Securities to be issued at
the Closing has been delivered to the Company.

    

    (e)    Delivery
of Transaction Documents. The Transaction Documents have been duly executed and
delivered by the Purchasers to the Company (as of the Closing).

    

    Section
4.2       Conditions Precedent to the
Obligation of the Purchasers to Purchase the Securities. The obligation
hereunder of each Purchaser to acquire and pay for the Securities is subject to
the satisfaction or waiver, at or before the Closing, of each of the conditions
set forth below. These conditions are for each Purchaser’s sole benefit and may
be waived by such Purchaser at any time in its sole discretion.

    

    (a)    Accuracy
of the Company’s and Nectar’s Representations and Warranties. Each of the
representations and warranties of the Company and Nectar in this Agreement shall
be true and correct in all respects as of the date when made and as of the
Closing Date, except for representations and warranties that are expressly made
as of a particular date, which shall be true and correct in all respects as of
such date.

    

    (b)    Performance
by the Company and Nectar. The Company and Nectar shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company and Nectar at or prior to the Closing.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    (c)    No
Suspension, Etc. Trading in the Company’s Common Stock shall not have been
suspended by the Commission or the OTC Bulletin Board (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
(“ Bloomberg ”) shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of such Purchaser, makes it impracticable or inadvisable to purchase
the Securities to be issued as of the Closing.

    

    (d)    No
Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this
Agreement.

    

    (e)    No
Proceedings or Litigation. No action, suit or proceeding before any arbitrator
or any governmental authority shall have been commenced, and no investigation by
any governmental authority shall have been threatened, against the Company or
any Subsidiary, or any of the officers, directors or affiliates of the Company
or any Subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.

    

    (f)     Opinion
of Counsel, Etc. At the Closing, the Purchasers shall have received an opinion
of counsel to the Company, dated the date of the Closing, in substantially the
form of  Exhibit
E  hereto, and such other certificates and documents as the
Purchasers or its counsel shall reasonably require incident to the
Closing.

    

    (g)    Intentionally
omitted.

    

    (h)    Notes
and Warrants. The Company and Nectar, as applicable, shall have executed and
delivered to the Purchasers the certificates (in such denominations as such
Purchaser shall request) for the Notes and Warrants being acquired by such
Purchaser at the Closing (in such denominations as such Purchaser shall
request).

    

    (i)     Resolutions.
The board of directors of the Company and Nectar shall have adopted resolutions
consistent with  Section
2.1(b)  hereof in a form reasonably acceptable to such
Purchaser (the “
Resolutions ”).

    

    (j)     Reservation
of Shares. So long as any of the Notes or Warrants remain outstanding, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than, as of the date hereof, such
number of shares of Common Stock equal to one hundred twenty percent (120%) of
the number of shares of Common Stock as shall from time to time be sufficient to
effect the exercise of the Warrants then outstanding.

    

    (k)    Transfer
Agent Instructions. As of the Closing Date, the Irrevocable Transfer Agent
Instructions, in the form of  Exhibit D
 attached hereto, shall have been delivered to and acknowledged in writing
by the Company’s transfer agent.

    

    (l)     [Intentionally
omitted].

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    

    (m)   Good
Standing Certificates.  The Company and Nectar shall have delivered to
the Purchasers good standing certificates showing it and any subsidiary are
validly existing and in good standing under the laws of the state of their
incorporation and as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by such entity makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not result in a direct and/or indirect
Material Adverse Effect.

    

    (n)    Secretary’s
Certificate. The Company and Nectar shall have delivered to such Purchaser a
secretary’s certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Certificate, (iii) the Bylaws, and (iv) the authority and
incumbency of the officers of the Company executing the Transaction Documents,
the Securities and any other documents required to be executed or delivered in
connection therewith.

    

    (o)    Officer’s
Certificate. The Company and Nectar shall have delivered to the Purchasers a
certificate of an executive officer of the Company, dated as of the Closing
Date, confirming the accuracy of the Company’s representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this  Section
4.2  as of the Closing Date.

    

    (p)    Material
Adverse Effect. No Material Adverse Effect shall have occurred at or before the
Closing Date.

    

    ARTICLE
V

    Stock
Certificate Legend

    

    Section
5.1       Legend. Each certificate
representing the Notes and the Warrants, and, if appropriate, securities issued
upon the exercise thereof, shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required by
applicable state securities or “blue sky” laws):

    

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT
”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE
COMPANY OF A WRITTEN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH SECURITIES MAY BE SOLD,
TRANSFERRED,  OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES
LAWS.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    The
Company agrees to reissue certificates representing any of the Warrant Shares,
without the legend set forth above if at such time, prior to making any transfer
of any such securities, such holder thereof shall give written notice to the
Company describing the manner and terms of such transfer and removal as the
Company may reasonably request. Such proposed transfer and removal will not be
effected until: (a) either (i) the Company has received an opinion of counsel
reasonably satisfactory to the Company, to the effect that the registration of
the Warrant Shares under the Securities Act is not required in connection with
such proposed transfer, (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act, (iii) the Company
has received other evidence reasonably satisfactory to the Company that such
registration and qualification under the Securities Act and state securities
laws are not required, or (iv) the holder provides the Company with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Company has received an opinion of
counsel reasonably satisfactory to the Company, to the effect that registration
or qualification under the securities or “blue sky” laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or “blue sky” laws has been effected or a valid
exemption exists with respect thereto. The Company will respond to any such
notice from a holder within five (5) business days. In the case of any proposed
transfer under this Section
5.1 , the Company will use reasonable efforts to comply with any such
applicable state securities or “blue sky” laws, but shall in no event be
required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject, or (z) to comply
with state securities or “blue sky” laws of any state for which registration by
coordination is unavailable to the Company. The restrictions on transfer
contained in this  Section
5.1  shall be in addition to, and not by way of limitation of,
any other restrictions on transfer contained in any other section of this
Agreement. Whenever a certificate representing the Warrant Shares is required to
be issued to a Purchaser without a legend, in lieu of delivering physical
certificates representing the Warrant Shares (provided that a registration
statement under the Securities Act providing for the resale of the Warrant
Shares is then in effect), the Company shall cause its transfer agent to
electronically transmit the Warrant Shares to a Purchaser by crediting the
account of such Purchaser or such Purchaser’s Prime Broker with the Depository
Trust Company (“ DTC ”)
through its Deposit Withdrawal Agent Commission (“ DWAC ”) system (to the extent
not inconsistent with any provisions of this Agreement).

    

    ARTICLE
VI

    Indemnification

    

    Section
6.1      General Indemnity. The Company
agrees to indemnify and hold harmless the Purchasers (and their respective
directors, officers, managers, partners, members, shareholders, affiliates,
agents, attorneys, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company
herein.

    

    Section
6.2       Indemnification Procedure.
Any party entitled to indemnification under this Article VI (an “ indemnified party ”) will
give written notice to the indemnifying party of any matters giving rise to a
claim for indemnification;  provided  that
the failure of any party entitled to indemnification hereunder to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this  Article
VI  except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the indemnified party a
conflict of interest between it and the indemnifying party may exist with
respect of such action, proceeding or claim, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party’s
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this  Article
VI  to the contrary, the indemnifying party shall not, without
the indemnified party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this  Article
VI  shall be made by periodic payments of the amount thereof
during the course of investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred, so long as the indemnified party
irrevocably agrees to refund such moneys if it is ultimately determined by a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (b) any liabilities the indemnifying party
may be subject to pursuant to the law.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    ARTICLE
VII

    Registration
Rights

    

    Section
7.1       Piggyback Registration
Rights.  If at any time the Company shall determine to prepare and
file with the Commission a registration statement (a “ Registration Statement ”)
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of the Notes and Warrants written notice of such
determination and, if within thirty (30) days after receipt of such notice, or
within such shorter period of time as may be specified by the Company in such
written notice as may be necessary for the Company to comply with its
obligations with respect to the timing of the filing of such Registration
Statement, any such holder shall so request in writing (which request shall
specify the Warrant Shares intended to be disposed of by the Purchasers, if
any), the Company will cause the registration under the Securities Act of all
the Warrant Shares which the Company has been so requested to register by the
holder, to the extent required to permit the disposition of the Warrant Shares
so to be registered;  provided  that
if at any time after giving written notice of its intention to register any
securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to such holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Warrant Shares in connection with such
registration (but not from its obligation to pay fees and expenses in accordance
with  Section
8.1  hereof), and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Warrant Shares being
registered pursuant to this  Section
7.1  for the same period as the delay in registering such other
securities. The Company shall include in such Registration Statement all or any
part of such Warrant Shares such holder requests to be registered;  provided, however
, that the Company shall not be required to register any Warrant Shares pursuant
to this  Section
7.1  that are eligible for resale without limitations
concerning the availability of current public information pursuant to Rule 144
of the Securities Act. In the case of an underwritten public offering, if the
managing underwriter(s) or underwriter(s) should reasonably object to the
inclusion of the Warrant Shares in such Registration Statement, then if the
Company after consultation with the managing underwriter should reasonably
determine that the inclusion of the Warrant Shares would materially adversely
affect the offering contemplated in such Registration Statement, and based on
such determination recommends inclusion in such Registration Statement of fewer
or none of the Warrant Shares of the holders, then (x) the number of Warrant
Shares of the holders included in such Registration Statement shall be reduced
pro-rata among such holders
  (based upon the number of Warrant Shares requested to be included
in the registration), if the Company after consultation with the underwriter(s)
recommends the inclusion of fewer Warrant Shares, or (y) none of the Warrant
Shares of the Holders shall be included in such Registration Statement, if the
Company after consultation with the underwriter(s) recommends the inclusion of
none of such Warrant Shares;  provided, however
, that if securities are being offered for the account of other persons or
entities as well as the Company, such reduction shall not represent a greater
fraction of the number of Warrant Shares intended to be offered by the holders
than the fraction of similar reductions imposed on such other persons or
entities (other than the Company).

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    Section
7.2       Assignment of Registration
Rights. The rights of each Purchaser hereunder, including the right to have the
Company register for resale the Warrant Shares in accordance with the terms of
this Agreement, shall be automatically assignable by each Purchaser to any
Person who acquires all or a portion   of the Warrant Shares
if: (i) the Purchaser agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (A) the name and address of such transferee or assignee, and (B) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment the further disposition
of such securities by the transferee or assignees is restricted under the
Securities Act and applicable state securities laws unless such securities are
registered in a Registration Statement pursuant to  Section 7.1  
(in which case the Company shall be obligated to amend such Registration
Statement to reflect such transfer or assignment) or are otherwise exempt from
registration, (iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this  Section 7.2 , the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of this Agreement. In addition, each
Purchaser shall have the right to assign its rights hereunder to any other
person with the prior written consent of the Company, which consent shall not
unreasonably be withheld.  The rights to assignment shall apply to the
Purchasers (and to subsequent) successors and assigns.

    

    Section
7.3       Underwriter Status. Subject
to compliance with applicable law, the Company may not deem any Purchaser to be
an “underwriter” within the meaning of the Securities Act within any
Registration Statement nor file any such Registration Statement without the
prior written consent of such Purchaser.

    

    ARTICLE VIII

    Miscellaneous

    

    Section
8.1       Specific Enforcement. The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.

     

    
      
         

      

      
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    Section
8.2      Entire Agreement; Amendment. This
Agreement and the Transaction Documents contains the entire understanding and
agreement of the parties with respect to the matters covered hereby and, except
as specifically set forth herein or in the Transaction Documents, neither the
Company nor any of the Purchasers makes any representations, warranty, covenant
or undertaking with respect to such matters and they supersede all prior
understandings and agreements with respect to said subject matter, all of which
are merged herein. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the Company and the holders of at least a
majority of the Notes then outstanding, and no provision hereof may be waived
other than by an a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Notes then outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents or holders of the Notes, as the
case may be.

    

    Section
8.3      Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in (and
without limiting any similar provisions of) the Transaction Documents, whenever
any Purchaser exercises a material right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

     

    
      
         

      

      
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    Section
8.4       Notices. Any notice, demand,
request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery or
facsimile at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

     

    
      	
              If
      to the Company:

            	
              Juma
      Technology Corp.

              154
      Toledo Street

              Farmingdale,
      New York 11735

              Attention:
      Chief Executive Officer

              Tel.
      No.: (631) 300-1000

              Fax
      No.: (631) 270-1105

            
	 
      	 
      
	
              with
      copies to:

            	
              Gersten
      Savage LLP

              600
      Lexington Avenue, 9th Floor

              New
      York, New York 10022

              Attention:
      Jay Kaplowitz, Esq.

              Tel.
      No.: (212) 752-9700

              Fax
      No.: (212) 980-5192

            
	 
      	 
      
	
              If
      to any Purchaser:

            	
              At
      the address of such Purchaser set forth on Exhibit A to this
      Agreement, with copies to Purchaser’s counsel (which copies shall not
      constitute notice to such purchaser) as set forth on  Exhibit
      A  or as specified in writing by such
      Purchaser.

            
	 
      	 
      
	
              with
      copies to:

            	
              Sadis
      & Goldberg LLP

              551
      Fifth Avenue, 21st
      Floor

              New
      York, New York 10176

              Attention:
      Paul Fasciano, Esq.

              Tel.
      No.: (212) 573-8025

              Fax
      No.: (212) 573-8026

            

    

     

    Any party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other parties
hereto.

    

    Section
8.5       Waivers. No waiver by either
party of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provisions, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.

    

    Section
8.6       Headings. The article,
section and subsection headings in this Agreement are for convenience only and
shall not constitute a part of this Agreement for any other purpose and shall
not be deemed to limit or affect any of the provisions hereof.

     

    
      
         

      

      
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    Section
8.7       Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.

    

    Section
8.8       No Third Party
Beneficiaries. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns and is not for the benefit
of, nor may any provision hereof be enforced by, any other person (except as
otherwise provided in  Article VI
).

    

    Section
8.9       Governing Law; Consent to
Jurisdiction. The parties acknowledge and agree that any claim, controversy,
dispute or action relating in any way to this agreement or the subject matter of
this agreement shall be governed solely by the laws of the State of New York,
without regard to any conflict of laws doctrines.  The parties
irrevocably consent to being served with legal process issued from the state and
federal courts located in New York and irrevocably consent to the exclusive
personal jurisdiction of the federal and state courts situated in the State of
New York.  The parties irrevocably waive any objections to the
personal jurisdiction of these courts.  Said courts shall have sole
and exclusive jurisdiction over any and all claims, controversies, disputes and
actions which in any way relate to this agreement or the subject matter of this
agreement.  The parties also irrevocably waive any objections that
these courts constitute an oppressive, unfair, or inconvenient forum and agree
not to seek to change venue on these grounds or any other grounds. The parties
hereby agree that the prevailing party in any suit, action or proceeding arising
out of or relating to this Agreement, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties hereby waive
all rights to a trial by jury. Nothing in this  Section 8.9  
shall affect or limit any right to serve process in any other manner permitted
by law.

    

    Section
8.10     Survival. The representations and
warranties of the Company and the Purchasers shall survive the execution and
delivery hereof and the Closing hereunder.

    

    Section
8.11    Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the same
Agreement, and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile or electronic mail transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

    

    Section
8.12    Publicity. The Company agrees that it will
not disclose, and will not include in any public announcement, the name of the
Purchasers without the consent of the Purchasers unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.

    

    Section
8.13    Severability. The provisions of this
Agreement and the Transaction Documents are severable and, in the event that any
court of competent jurisdiction shall determine that any one or more of the
provisions or part of the provisions contained in this Agreement or the
Transaction Documents shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement or
the Transaction Documents and such provision shall be reformed and construed as
if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    Section
8.14    Further Assurances. From and after the date
of this Agreement, upon the request of any Purchaser or the Company, each of the
Company and the Purchasers shall execute and deliver such instrument, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement, the
Notes, the Warrants and the Warrant Shares and any other Transaction
Documents.

    

    [remainder of page intentionally left
blank]

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

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

    

    
      
        
          	 
      	
                  JUMA
      TECHNOLOGY CORP.

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                
	 
      	 
      
	 
      	
                  NECTAR
      SERVICES CORP.

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                
	 
      	 
      
	 
      	
                  VISION OPPORTUNITY MASTER FUND,
      LTD.

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                

        

      

    

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    EXHIBIT
A

    to
the

    NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR

    JUMA
TECHNOLOGY CORP.

    

    
      
        
          
            
              
                	
                        Names and Addresses of the Purchasers

                      	 	
                        Purchase Price

                      	 	
                        Notes & Warrants Purchased

                      
	 
      	 	 	 	 
      
	
                        Vision
      Opportunity Master Fund, Ltd.

                        c/o
      Vision Capital Advisors, LLC

                        20
      West 55th
      Street

                        New
      York, NY 10019

                        Attn:
      Robert Thomson

                      	 	$	500,000.00	 	
                        $500,000.00
      principal amount of Note

                         

                        Series
      A Warrants:
3,333,333

                      

              

            

          

        

      

    

    

    Exhibit A
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
B

    to
the

    NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR

    JUMA
TECHNOLOGY CORP.

    

    FORM
OF NOTE

    

    Exhibit B
to Note and Warrant Purchase Agreement

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
C

    to
the

    NOTE
AND WARRANT STOCK PURCHASE AGREEMENT FOR

    JUMA
TECHNOLOGY CORP.

    

    FORM
OF SERIES A WARRANT

    

    Exhibit C
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
D

    to
the

    NOTE
AND WARRANT PURCHASE AGREEMENT FOR

    JUMA
TECHNOLOGY CORP.

    

    FORM
OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

    

    [NAME AND ADDRESS OF TRANSFER
AGENT]

    Attn:
____________________________

    

    Re:  Juma Technology
Corp.

    

    Ladies
and Gentlemen:

    

    Reference
is made to that certain Note and Warrant Purchase Agreement (the “Purchase Agreement”), dated as
of September 29, 2010, by and among Juma Technology Corp., a Delaware
corporation (the “
Company ”), and the purchasers named therein (collectively, the “ Purchasers ”) pursuant to
which the Company is issuing to the Purchasers 10% bridge notes (the “ Notes ”) and warrants (the
“ Warrants ”) to
purchase shares of the Company’s common stock, par value $0.0001 per share (the
“ Common Stock ”). This
letter shall serve as our irrevocable authorization and direction to you
provided that you are the transfer agent of the Company at such
time)  to issue shares of Common Stock upon exercise of the Warrants
(the “ Warrant Shares ”)
to or upon the order of a Purchaser from time to time upon (i) surrender to you
of a properly completed and duly executed Exercise Notice, as the case may be,
in the form attached hereto as Exhibit I and Exhibit II, respectively, (ii) in
the case of the Warrants being exercised, a copy of the Warrants (with the
original Warrants delivered to the Company) being exercised (or, in each case,
an indemnification undertaking with respect to such share certificates or the
warrants in the case of their loss, theft or destruction), and (iii) delivery of
a treasury order or other appropriate order duly executed by a duly authorized
officer of the Company. So long as you have previously received (x) written
confirmation from counsel to the Company that a registration statement covering
resales of the Warrant Shares, as applicable, has been declared effective by the
Securities and Exchange Commission (the “ SEC ”) under the Securities
Act of 1933, as amended (the “
1933 Act ”), and no subsequent notice by the Company or its counsel of
the suspension or termination of its effectiveness and (y) a copy of such
registration statement, and if the Purchaser represents in writing that the
Warrant Shares, as the case may be, were sold pursuant to the Registration
Statement, then certificates representing the Warrant Shares, as the case may
be, shall not bear any legend restricting transfer of the Warrant Shares, as the
case may be, thereby and should not be subject to any stop-transfer restriction.
Provided, however, that if you have not previously received those items and
representations listed above, then the certificates for the Warrant Shares shall
bear the following legend:

    

    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT
”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE
COMPANY OF A WRITTEN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH SECURITIES MAY BE SOLD,
TRANSFERRED,  OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES
LAWS.”

    

    Exhibit D
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    and,
provided further, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates the Warrant Shares in the event a
registration statement covering the Warrant Shares is subject to amendment for
events then current.

    

    A form of
written confirmation from counsel to the Company that a registration statement
covering resales of the Warrant Shares has been declared effective by the SEC
under the 1933 Act is attached hereto as Exhibit III.

    

    Please be
advised that the Purchasers are relying upon this letter as an inducement to
enter into the Purchase Agreement and, accordingly, each Purchaser is a third
party beneficiary to these instructions.

    

    Please
execute this letter in the space indicated to acknowledge your agreement to act
in accordance with these instructions. Should you have any questions concerning
this matter, please contact me at ___________.

    

    
      
        	 
      	
                Very
      truly yours,

              
	 
      	 
      
	 
      	
                JUMA
      TECHNOLOGY CORP.

              
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              

      

    

     

    
      
        	
                ACKNOWLEDGED
      AND AGREED:

              	 
      
	 
      	 
      
	
                [TRANSFER
      AGENT]

              	 
      
	 
      	 
      
	
                By:

              	 
      	 
      
	 
      	
                Name:

              	 
      
	 
      	
                Title:

              	 
      
	 
      	
                Date:

              	 
      

      

    

    

    Exhibit D
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
I

    CONVERSION
NOTICE

    JUMA
TECHNOLOGY CORP.

    [Intentionally
omitted].

    

    Exhibit D
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
II

    

    FORM
OF EXERCISE NOTICE

    JUMA
TECHNOLOGY CORP.

    

    The
undersigned_______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase ______ shares of Common Stock of Juma Technology Corp.
covered by the within Warrant.

    

    
      	
              Dated:
      ___________

            	 
      	
              Signature:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              Address:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

    

    

    Number of
shares of Common Stock beneficially owned or deemed beneficially owned by the
Holder on the date of Exercise: ____________________

    

    ASSIGNMENT

    

    FOR VALUE
RECEIVED, ______________________ hereby sells, assigns and transfers unto
_____________________ the within Warrant and all rights evidenced thereby and
does irrevocably constitute and appoint __________________________, attorney, to
transfer the said Warrant on the books of the within named
corporation.

    

    
      	
              Dated:
      ___________

            	 
      	
              Signature:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              Address:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

    

    

    PARTIAL
ASSIGNMENT

    

    FOR VALUE
RECEIVED, ______________________ hereby sells, assigns and transfers unto
_____________________ the right to purchase ___________________ shares of
Warrant Stock evidenced by the within Warrant together with all rights therein,
and does irrevocably constitute and appoint __________________________,
attorney, to transfer that part of the said Warrant on the books of the within
named corporation.

    

    
      	
              Dated:
      ___________

            	 
      	
              Signature:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	
              Address:

            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

    

    

    Exhibit D
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    FOR
USE BY THE ISSUER ONLY:

    

    This
Warrant No. W-__________ canceled (or transferred or exchanged) this _______ day
of ______________, _______, shares of Common Stock issued therefor in the name
of __________________________, Warrant No. W-_________ issued for ______________
shares of Common Stock in the name of ______________________.

    

    Exhibit D
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
III

    

    FORM
OF NOTICE OF EFFECTIVENESS

    OF
REGISTRATION STATEMENT

    

    [NAME AND ADDRESS OF TRANSFER
AGENT]

    Attn:
____________________________

    

    Re:  Juma Technology
Corp.

    

    Ladies
and Gentlemen:

    

    We are
special counsel to Juma Technology Corp., a Delaware corporation (the “Company”), and have
represented the Company in connection with that certain Note and Warrant
Purchase Agreement (the “
Purchase Agreement ”), dated as of September 29, 2010, by and among the
Company, Nectar Services Corp. and the purchasers named therein (collectively,
the “ Purchasers ”)
pursuant to which the Company issued to the Purchasers 10% bridge notes (the
“ Notes ”) and warrants
(the “ Warrants ”) to
purchase shares of the Company’s common stock, par value $0.0001 per share (the
“ Common Stock ”).
Pursuant to the Purchase Agreement, the Company agreed, among other things, in
certain circumstances, to register the shares of Common Stock issuable upon
exercise of the Warrants (the “
Registrable Securities ”), under the Securities Act of 1933, as amended
(the “ 1933 Act ”). In
connection with the Company’s obligations under the Purchase Agreement, on
________________, 200_, the Company filed a Registration Statement on Form S-1
(File No. 333-________) (the “
Registration Statement ”) with the Securities and Exchange Commission
(the “ SEC ”) relating
to the resale of the Registrable Securities which names each of the present
Purchasers as a selling stockholder thereunder.

    

    In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ ENTER TIME OF EFFECTIVENESS ]
on [ ENTER DATE OF
EFFECTIVENESS ] and we have no knowledge, after telephonic inquiry of a
member of the SEC’s staff, that any stop order suspending its effectiveness has
been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and accordingly, the Registrable Securities are available
for resale under the 1933 Act pursuant to the Registration
Statement.

    

    
      
        	 
      	
                Very
      truly yours,

              
	 
      	 
      
	 
      	
                [COMPANY
      COUNSEL]

              
	 
      	 
      
	 
      	
                By:

              	 
      

      

    

    

    cc: [LIST
NAMES OF PURCHASERS]

    

    Exhibit D
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
E

    to
the

    NOTE
AND WARRANT PURCHASE AGREEMENT FOR

    JUMA
TECHNOLOGY CORP.

    

    FORM
OF OPINION OF COUNSEL

    

    1. The
Company is a corporation duly incorporated, validly existing and, upon the
payment of its franchise taxes,  in good standing under the laws of
the State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets, and to carry on its business as presently
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
which the failure to so qualify could have a Material Adverse Effect on the
Company.

    

    2.  Each
of the Subsidiaries of the Company (the “Subsidiaries”) set forth
on Schedule 2.1(g) of
the Note Purchase Agreement is a corporation or limited liability company, as
applicable, duly incorporated or organized and in good standing under the laws
of its state of incorporation or organization.

    

    3.  The
Issuers have the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and, as applicable, to
issue the Notes, the Warrants and the Common Stock issuable upon exercise of the
Warrants. The execution, delivery and performance of each of the Transaction
Documents by the Issuers, as applicable, and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of any Issuer
or its board of directors or stockholders is required. Each of the Transaction
Documents have been duly executed and delivered, and the Notes and the Warrants
have been duly executed, issued and delivered by the Issuers party thereto and
each of the Transaction Documents constitutes a legal, valid and binding
obligation of the Issuers enforceable against it in accordance with its
respective terms. The Common Stock issuable upon the exercise of the Warrants
are not subject to any preemptive rights under the Certificate of Incorporation
or the Bylaws.

    

    4. The
Notes and the Warrants have been duly authorized and, when delivered against
payment in full as provided in the Note Purchase Agreement, will be validly
issued, fully paid and nonassessable. The shares of Common Stock issuable upon
the exercise of the Warrants, have been duly authorized and reserved for
issuance, and, based on the facts and circumstance as they exist on the date of
this opinion and the qualifications contained herein, when delivered
upon  exercise or payment in full as provided in the Warrants, will be
validly issued, fully paid and nonassessable.

    

    5. The
execution, delivery and performance of and compliance with the terms of the
Transaction Documents and the issuance of Notes, the Warrants and the Common
Stock issuable upon the exercise of the Warrants, do not (i) violate any
provision of the Certificate of Incorporation or By-Laws of such Issuer, as
applicable, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which such Issuer is a party, and
which agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation has been disclosed in the Commission
Documents, (iii) to our knowledge, create or impose a lien, charge or
encumbrance on any property of such Issuer under any agreement or any commitment
to which such Issuer is a party or by which such Issuer is bound or by which any
of its respective properties or assets are bound and, in each case, which
agreement or commitment has been disclosed in the Commission Documents, or (iv)
result in a violation of any federal, state, or local statute, rule, regulation
(including federal and state securities laws and regulations) or any order,
judgment, injunction or decree known to us applicable to such Issuer or by which
any property or asset of such Issuer is bound or affected, except, in all of the
foregoing cases (other than (i)) for such conflicts, default, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect.

    

    Exhibit E
to Note and Warrant Purchase Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    6. Based
on the representations of Purchaser contained in the Note Purchase Agreement and
subject to compliance with the filing requirements under the applicable “blue
sky” laws and Regulation D promulgated under the Securities Act of 1933, as
amended, no consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
under federal, state or local law, rule or regulation in connection with the
valid execution and delivery of the Transaction Documents, or the offer, sale or
issuance of the Notes, the Warrants or the Common Stock issuable upon the
exercise of the Warrants or the consummation of the transactions contemplated by
the Note Purchase Agreement other than as may be required under the Registration
Statement.

    

    7. To our
knowledge, there is no action, suit, claim, or proceeding pending or threatened
against any Issuer which questions the validity of the Transaction Documents or
the transactions contemplated thereby or any action taken or to be taken
pursuant thereto. To our knowledge, there is no action, suit, claim, or
proceeding pending or threatened against such Issuer or any of its properties or
assets and which, if adversely determined, is reasonably likely to result in a
Material Adverse Effect. To our knowledge, there are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against such Issuer or any officers or directors
of any Issuer in their capacities as such.

     

    8. Based
upon the representations of the Purchaser, the offer, issuance and sale of the
Notes and the Warrants and, based on the facts and circumstances as they exist
on the date of this opinion, the offer, issuance and sale of the Common Stock
issuable upon exercise of the Warrants pursuant to the Note Purchase Agreement,
the Notes, and the Warrants, as applicable, are exempt from the registration
requirements of the Securities Act.

    

    9. No
Issuer is, and as a result of and immediately upon the Closing no Issuer will
be, an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as
amended.

    

    
      
        	 
      	
                Very
      truly yours,

              
	 
      	 
      
	 
      	
                [COMPANY
      COUNSEL]

              
	 
      	 
      
	 
      	
                By:

              	 
      

      

    

    

    Exhibit E
to Note and Warrant Purchase Agreement

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