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     Exhibit 10.1 

ASPEN EXPLORATION CORPORATION

2008 EQUITY PLAN

     1. Purposes of and Benefits Under the Plan. This 2008 Equity Plan (the “Plan”) is intended to compensate new, continuing, and existing employees, officers, consultants, and advisors of Aspen Exploration Corporation and its controlled, affiliated and subsidiary entities (collectively, the “Corporation”), so that they may acquire or increase their proprietary interest in the Corporation. The Plan is intended to facilitate the Corporation’s efforts to: (i) induce qualified persons to become employees, officers, directors, consultants and advisors of the Corporation; (ii) compensate new, continuing and exiting employees, officers, directors, consultants and advisors for services provided to the Corporation; and (iii) encourage such persons to remain in the employ of or associated with the Corporation and to put forth maximum efforts for the success of the Corporation. Options granted by the Committee pursuant to this Plan do not constitu

te “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code and instead are “non-qualified stock options” (“Non-qualified Stock Options”).

     2. Definitions. As used in this Plan, the following words and phrases shall have the meanings indicated:

          (a) “Board” shall mean the Board of Directors of the Corporation.

          (b) “Bonus” shall mean the grant of shares of Common Stock pursuant to Section 8 of this Plan.

          (c) “Committee” shall mean any committee appointed by the Board to administer this Plan, if one has been appointed. If no Committee has been appointed, the term “Committee” shall mean the Board.

          (d) “Common Stock” shall mean the Corporation’s $0.005 par value common stock.

          (e) “Disability” shall mean a Recipient’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months. If the Recipient has a disability insurance policy, the term “Disability” shall be as defined therein.

          (f) “Fair Market Value” per share as of a particular date shall mean the last sale price of the Corporation’s Common Stock as reported on a national securities exchange, or on the OTC – Bulletin Board, or if the quotation for the last sale reported is not available for the Corporation’s Common Stock, the average of the closing bid and asked prices of the Corporation’s Common Stock as so reported or, if such quotations are unavailable, the value determined by the Committee in accordance with its discretion in making a bona fide, good faith determination of fair market value. Fair Market Value shall be determined without regard to any restriction other than a restriction which, by its terms never will lapse. 

     (g) “Option” shall mean a Non-qualified Stock Option granted pursuant to Sections 6 and 7 of this Plan.

     (h) “Recipient” means any person granted an Option or awarded a Bonus hereunder.

     (i) “Internal Revenue Code” shall mean the United States Internal Revenue Code of 1986, as amended from time to time.

3. Administration.

     (a) The Plan shall be administered by the Committee. The Committee shall have the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically conferred under the Plan or necessary or advisable in the administration of the Plan, including the authority:

·      to grant Options and Bonuses; 

·      to determine the vesting schedule and other restrictions, if any, relating to Options and Bonuses; 

·      to determine the purchase price of the shares of Common Stock covered by each Option (the “Option Price”); 

·      to determine the persons to whom, and the time or times at which, Options and Bonuses shall be granted; 

·      to determine the number of shares to be covered by each Option or Bonus; 

·      to determine Fair Market Value per share; 

·      to interpret the Plan; 

·      to prescribe, amend and rescind rules and regulations relating  to the Plan;

·      to determine the terms and provisions of the Option agreements (which need not be identical) entered into in connection with Options granted under the Plan; and 

·      to make all other determinations deemed necessary or advisable for the administration of the Plan. 

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The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan.

     (b) Options and Bonuses granted under the Plan shall be evidenced by duly adopted resolutions of the Committee included in the minutes of the meeting at which they are adopted or in a unanimous written consent. 

     (c) The Committee shall endeavor to administer the Plan and grant Options and Bonuses hereunder in a manner that is compatible with the obligations of persons subject to Section 16 of the U.S. Securities Exchange Act of 1934 (the “1934 Act”), although compliance with Section 16 is the obligation of the Recipient, not the Corporation. Neither the Committee, the Board nor the Corporation can or does assume any legal responsibility for a Recipient’s compliance with his obligations under Section 16 of the 1934 Act.

     (d) No member of the Committee or the Board shall be liable for any action taken or determination made in good faith with respect to the Plan or any Option or Bonus granted hereunder.

4. Eligibility.

     (a) Subject to certain limitations hereinafter set forth, Options and Bonuses may be granted to employees, officers, directors, consultants and advisors of the Corporation. In determining the persons to whom Options or Bonuses shall be granted and the number of shares to be covered by each Option or Bonus, the Committee shall take into account the duties of the respective persons, their present and potential contributions to the success of the Corporation, and such other factors as the Committee shall deem relevant to accomplish the purposes of the Plan.

     (b) A Recipient shall be eligible to receive more than one grant of an Option or Bonus during the term of the Plan, on the terms and subject to the restrictions herein set forth.

5. Stock Reserved.

     (a) The stock subject to Options or Bonuses hereunder shall be shares of Common Stock. Such shares, in whole or in part, may be authorized but unissued shares or shares that shall have been or that may be reacquired by the Corporation. The aggregate number of shares of Common Stock as to which Options and Bonuses may be granted from time to time under the Plan shall not exceed 1,000,000 subject to adjustment as provided in Section 7(h) hereof.

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          (b) If any Option outstanding under the Plan for any reason expires or is terminated without having been exercised in full, or if any Bonus granted is forfeited because of vesting or other restrictions imposed at the time of grant, the shares of Common Stock allocable to the unexercised portion of such Option or the forfeited portion of the Bonus shall become available for subsequent grants of Options and Bonuses under the Plan.

     6. Non-qualified Stock Options. Options granted pursuant to the Plan are intended to constitute Non-qualified Stock Options and shall be subject to the general terms and conditions specified in Section 7 hereof.

     7. Terms and Conditions of Options. Each Option granted pursuant to the Plan shall be evidenced by a written Option agreement between the Corporation and the Recipient, which agreement shall, unless otherwise determined by the Committee, be substantially in the form of Exhibit A hereto as modified from time to time by the Committee in its discretion, and which shall, unless otherwise determined by the Committee, comply with and be subject to the following terms and conditions:

          (a) Number of Shares. Each Option agreement shall state the number of shares of Common Stock covered by the Option.

          (b) Option Price. Subject to adjustment as provided in Section 7 (h) hereof, each Option agreement shall state the Option Price, which shall be determined by the Committee subject only to the following restrictions:

               (1) Each Option agreement shall state the Option Price, which shall be not less than 100% of the Fair Market Value per share on the effective date of grant of the Option.

               (2) The date on which the Committee adopts a resolution expressly granting an Option shall be considered the day on which such option is granted, unless a future date is specified in the resolution.

          (c) Term of Option. Each Option Agreement shall state the period during and times at which the Option shall be exercisable, in accordance with the following limitations:

               (1) The date on which the Committee adopts a resolution expressly granting an Option shall be considered the day on which such Option is granted, unless a future date is specified in the resolution, although any such grant shall not be effective until the Recipient has executed an Option Agreement with respect to such Option.

               (2) The exercise period of any Option shall not exceed ten years from the date of grant of the Option.

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               (3) The Committee shall have the authority to accelerate or extend the exercisability of any outstanding Option at such time and under such circumstances as it, in its sole discretion, deems appropriate, but no option may be extended beyond ten years for the date of grant.

               (4) The exercise period shall be subject to earlier termination as provided in Sections 7(e) and 7(f) hereof, and, furthermore, shall be terminated upon surrender of the Option by the holder thereof if such surrender has been authorized in advance by the Committee.

     (d) Method of Exercise and Medium and Time of Payment.

               (1) An Option may be exercised as to any or all whole shares of Common Stock as to which it then is exercisable; provided, however, that no Option may be exercised as to less than 100 shares (or such number of shares as to which the Option is then exercisable if such number of shares is less than 100) or $1,000, whichever is greater.

               (2) Each exercise of an Option granted hereunder, whether in whole or in part, shall be effected by written notice to the Secretary of the Corporation designating the number of shares as to which the Option is being exercised, and shall be accompanied by payment in full of the Option Price for the number of shares so designated or by notice that Recipient is exercising the Option by use of the cashless exercise rights provided in Section 7(d)(5) hereof, together with any written statements required by, or deemed by the Corporation’s counsel to be advisable pursuant to, any applicable securities laws.

               (3) The Option Price shall be paid in cash, or in accordance with the cashless exercise rights of Section 7(d)(5) hereof, or in shares of Common Stock having a Fair Market Value equal to such Option Price, or in property or in a combination of cash, shares and property and, subject to approval of the Committee, may be effected in whole or in part with funds received from the Corporation at the time of exercise as a compensatory cash payment for services previously rendered. 

               (4) The Committee shall have the sole and absolute discretion to determine whether or not property other than cash, a cashless exercise as described in Section 7(d)(5), or shares of Common Stock may be used to purchase the shares of Common Stock hereunder and, if so, to determine the value of the property received.

               (5) Recipient may exercise an Option granted under this Plan through a “cashless exercise right”, whereby if the notice of exercise to the Corporation by Recipient specifies that the exercise of an Option is made pursuant to the cashless exercise rights of this Section 7(d)(5), then the Corporation shall deliver to Recipient, without further payment by Recipient of the Option Price or any cash or other consideration, the number of shares of the Common Stock computed using the following formula:

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			X =		Y(A-B)
	  	  	  	  	    A  
	Where:  	  	  	  	  
	  	  	X =  	  	the number of Option Shares to be issued to the Recipient  
					pursuant to the exercise of the Option; 
	  	  	Y =  	  	the number of Shares that may be purchased upon exercise  
	  	  	  	  	of the Option;  
	  	  	A =  	  	the Fair Market Value of one share of Common Stock; and  
	  	  	B =  	  	the Option’s exercise price per share of Common Stock.  

     (6) The Recipient shall make provision for the withholding of taxes as required by Section 9 hereof.

          (e) Termination of Relationship With Corporation. 

               (1) Unless otherwise provided in the Option agreement by and between the Corporation and the Recipient, if the Recipient ceases to be an employee, officer, advisor, or consultant of the Corporation (other than by reason of death, Disability or retirement), all Options theretofore granted to such Recipient but not theretofore exercised shall terminate three months following the date the Recipient ceased to be an employee, officer, advisor or consultant of the Corporation; provided, however, that notwithstanding any other provision in this Paragraph 7(e)(1), if the Recipient’s relationship with the Corporation is terminated for “Cause” (as such term is defined in Section 7(k)), then the Recipient’s Options shall terminate upon the date of termination of employment or termination of the Recipient’s other relationship with the Corporation.

               (2) Nothing in the Plan or in any Option or Bonus granted hereunder shall confer upon an individual any right to continue in the employ of or continue any other relationship with the Corporation or interfere in any way with the right of the Corporation to terminate such employment or other relationship between the individual and the Corporation.

          (f) Death, Disability or Retirement of Recipient. Unless otherwise provided in the Option agreement by and between the Corporation and the Recipient: 

               (1) if a Recipient shall die: (A) while an employee, officer, advisor, or consultant of the Corporation; or (B) within ninety days after the termination of such Recipient as an employee, officer, advisor or consultant, other than termination for Cause; or

                (2) if the Recipient’s relationship with the Corporation shall terminate by reason of Disability or retirement; 

then all Options theretofore granted to such Recipient (whether or not otherwise exercisable) unless earlier terminated in accordance with their terms, may be exercised at any time within one year after the date of death, Disability or retirement of the Recipient by the Recipient or by the Recipient's estate or by a person who acquired the right to exercise such Options by bequest or inheritance. 

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     (g) Transferability Restriction.

               (1) Options granted under the Plan shall not be transferable other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code or Title I of the Employee Retirement Income Security Act of 1974, or the rules thereunder. Options may be exercised during the lifetime of the Recipient only by the Recipient and thereafter only by Recipient’s legal representative.

               (2) Any attempted sale, pledge, assignment, hypothecation or other transfer of an Option contrary to the provisions hereof and/or the levy of any execution, attachment or similar process upon an Option, shall be null and void and without force or effect and shall result in a termination of the Option.

               (3) (A) As a condition to the transfer of any shares of Common Stock issued upon exercise of an Option granted under this Plan or granted as a Bonus, the Corporation may require (x) an opinion of counsel, reasonably satisfactory to the Corporation, to the effect that such transfer will not be in violation of the U.S. Securities Act of 1933, as amended (the “1933 Act”) or any other applicable securities laws or (y) that transfer of such shares has been registered under federal and all applicable state securities laws. (B) The Corporation shall be authorized to refrain from delivering or transferring shares of Common Stock until the Committee determines that such delivery or transfer will not violate applicable securities laws and the Recipient has tendered to the Corporation any federal, state or local tax owed by the Recipient as a result of exercising the Option or disposing of any Common Stock when

the Corporation has a legal liability to satisfy such tax. (C) The Corporation shall not be liable for damages due to delay in the delivery or issuance of any stock certificate for any reason whatsoever, including, but not limited to, a delay caused by listing requirements of any securities exchange or any registration requirements under the 1933 Act, the 1934 Act, or under any other state, federal or provincial law, rule or regulation, except where such delay is due to the Corporation’s failure to act in good faith. (D) The Corporation is under no obligation to take any action or incur any expense in order to register or qualify the delivery or transfer of shares of Common Stock under applicable securities laws or to perfect any exemption from such registration or qualification. (E) The Corporation will not be liable to any Recipient for failure to deliver or transfer shares of Common Stock if such failure is based upon the provisions of this paragraph 7(g)(3).

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     (h) Effect of Certain Changes.

               (1) If there is any change in the number of shares of outstanding Common Stock through the declaration of stock dividends, or through a recapitalization resulting in stock splits or combinations or exchanges of such shares, the number of shares of Common Stock available for Options and the number of such shares covered by outstanding Options, and the exercise price per share of the outstanding Options, shall be proportionately adjusted by the Committee to reflect any increase or decrease in the number of issued shares of Common Stock; provided, however, that any fractional shares resulting from such adjustment shall be eliminated.

               (2) In the event of the proposed dissolution or liquidation of the Corporation, or any corporate separation or division, including, but not limited to, split-up, split-off or spin-off, or a merger or consolidation of the Corporation with another corporation, the Committee may provide that the holder of each Option then exercisable shall have the right to exercise such Option (at its then current Option Price) solely for the kind and amount of shares of stock and other securities, property, cash or any combination thereof receivable upon such dissolution, liquidation, corporate separation or division, or merger or consolidation by a holder of the number of shares of Common Stock for which such Option might have been exercised immediately prior to such dissolution, liquidation, corporate separation or division, or merger or consolidation; or, in the alternative the Committee may provide that each Option granted u

nder the Plan shall terminate as of a date fixed by the Committee; provided, however, that not less than 30 days’ written notice of the date so fixed shall be given to each Recipient, who shall have the right, during the period of 30 days preceding such termination, to exercise the Option as to all or any part of the shares of Common Stock covered thereby, including shares as to which such Option would not otherwise be exercisable.

               (3) Paragraph 2 of this Section 7(h) shall not apply to a merger or consolidation in which the Corporation is the surviving corporation and shares of Common Stock are not converted into or exchanged for stock, securities of any other corporation, cash or any other thing of value. Notwithstanding the preceding sentence, in case of any consolidation or merger of another corporation into the Corporation in which the Corporation is the surviving corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (excluding a change in par value, or any change as a result of a subdivision or combination, but including any change in such shares into two or more classes or series of shares) or the holders of all of the outstanding voting securities of the Corporation immediately prior to such consolidation or merger do not con

stitute the holders of a majority of the outstanding voting securities of the Corporation immediately following such consolidation or merger, the Committee may provide that the holder of each Option then exercisable shall have the right to exercise such Option solely for the kind and amount of shares of stock and other securities (including those of any new direct or indirect parent of the Corporation), property, cash or any combination thereof receivable upon such reclassification, change, consolidation or merger by the holder of the number of shares of Common Stock for which such Option might have been exercised.

               (4) In the event of a change in the Common Stock of the Corporation as presently constituted into the same number of shares with a different par value, the shares resulting from any such change shall be deemed to be the Common Stock of the Corporation within the meaning of the Plan. 

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               (5) To the extent that the foregoing adjustments relate to stock or securities of the Corporation, such adjustments shall be made by the Committee, whose determination in that respect shall, in absence of bad faith or mathematical error, be final, binding and conclusive.

               (6) Except as expressly provided in this Section 7(h) or the applicable Option agreement, the Recipient shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation; and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or b

usiness structures, or to merge or consolidate, or to dissolve, liquidate, or sell or transfer all or any part of its business or assets.

     (i) No Rights as Shareholder - Non-Distributive Intent.

               (1) Neither a Recipient of an Option nor such Recipient’s legal representative or heir shall be deemed to be the holder of, or to have any rights of a holder with respect to, any shares subject to such Option until after the Option is exercised and the shares are issued.

               (2) No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 8(i) hereof.

               (3) Upon exercise of an Option at a time when there is no registration statement in effect under the 1933 Act relating to the shares issuable upon exercise, shares may be issued to the Recipient only if the Recipient represents and warrants in writing to the Corporation that the shares purchased are being acquired for investment and not with a view to the distribution thereof and provides the Corporation with sufficient information to establish an exemption from the registration requirements of the 1933 Act. A form of subscription agreement containing representations and warranties deemed sufficient as of the date of adoption of this Plan is attached hereto as Exhibit B.

               (4) No shares shall be issued upon the exercise of an Option unless and until there shall have been compliance with any then applicable requirements of the U.S. Securities and Exchange Commission or any other regulatory agencies having jurisdiction over the Corporation.

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          (j) Other Provisions. Option agreements authorized under the Plan may contain such other provisions as the Committee deems advisable, including, without limitation, the imposition of restrictions upon the exercise.,

          (k) Definition of “Cause.” For the purposes of this Plan, the term “Cause” shall mean (a) with respect to a specific Recipient, the definition assigned to such term in an agreement between the Recipient and the Corporation, and (b) bad faith or willful misconduct by the Recipient.

     8. Grant of Stock Bonuses. In addition to, or in lieu of, the grant of an Option, the Committee may grant Bonuses.

          (a) At the time of grant of a Bonus, the Committee may impose a vesting period of up to ten years, and such other restrictions which it deems appropriate. Unless otherwise directed by the Committee at the time of grant of a Bonus, the Recipient shall be considered a shareholder of the Corporation as to the Bonus shares which have vested in the grantee at any time regardless of any forfeiture provisions which have not yet arisen.

          (b) The grant of a Bonus and the issuance and delivery of shares of Common Stock pursuant thereto shall be subject to reasonable approval by the Corporation’s counsel of all legal matters in connection therewith, including compliance with the requirements of the 1933 Act, the 1934 Act, other applicable securities laws, rules and regulations, and the requirements of any stock exchanges upon which the Common Stock then may be listed. Any certificates prepared to evidence Common Stock issued pursuant to a Bonus grant shall bear legends as the Corporation’s counsel may reasonably deem necessary or advisable. Included among the foregoing requirements, but without limitation, any Recipient of a Bonus at a time when a registration statement relating thereto is not effective under the 1933 Act shall execute a Subscription Agreement substantially in the form of Exhibit B.

          (c) Transferability of shares granted as a Bonus shall be restricted as set forth in Section 7(g)(3), above.

     9. Agreement by Recipient Regarding Taxes.

          (a) By accepting an Option or Bonus, each Recipient agrees that the Corporation, to the extent permitted or required by law, shall have the right to deduct a sufficient number of shares due to the Recipient upon exercise of the Option or the grant of a Bonus to allow the Corporation to pay federal, provincial, state and local taxes of any kind required by law to be withheld upon the exercise of such Option or payment of such Bonus from any payment of any kind otherwise due to the Recipient. The Corporation shall not be obligated to advise any Recipient of the existence of any tax or the amount which the Corporation will be so required to withhold.

          (b) By accepting an Option or Bonus, each Recipient acknowledges that the Corporation has advised such Recipient to discuss the grant of such Option or Bonus with Recipient's tax, legal, investment, and other advisors as Recipient and such advisors determined to be appropriate, and that such consolutation shall include (to the extent determined by the Recipient and such advisors to be appropriate or necessary) a discussion of the advisability of making an election under Section 83 of the Internal Revenue Code. 

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          (c) In connection with any Option or receiving any shares underlying a Bonus, the Corporation may require Recipient to affirm as correct the matters set forth in Sections 9(a) and 9(b). 

     10. Term of Plan. Options and Bonuses may be granted under this Plan from time to time within a period of ten years from the date the Plan is adopted by the Board.

     11. Amendment and Termination of the Plan.

          (a) Subject to the policies, rules and regulations of any lawful authority having jurisdiction (including any exchange with which the shares of the Corporation are listed for trading), the Board may at any time, without further action by the shareholders, amend the Plan or any Option granted hereunder in such respects as it may consider advisable and, without limiting the generality of the foregoing, it may do so to ensure that Options granted hereunder will comply with any provisions respecting stock options in the income tax and other laws in force in any country or jurisdiction of which any Option holders may from time to time be a resident or citizen, or it may at any time without action by shareholders terminate the Plan; provided, however, that any amendment that would require shareholder approval under applicable state law, the rules and regulations of any national securities exchange on which the Corporation’s securities

 then may be listed, the Internal Revenue Code or any other applicable law, shall be subject to the approval of the shareholders of the Corporation; further, provided, however, that any such modification that may result from adjustments authorized by Section 7(h) hereof or which are required for compliance with the 1934 Act, the Internal Revenue Code, their rules or other laws or judicial order, shall not require such approval of the shareholders.

          (b) Except as provided in Section 7 hereof, no suspension, termination, modification or amendment of the Plan may adversely affect any Option previously granted, unless the written consent of the Recipient is obtained.

     12. Termination of Right of Action. Every right of action arising out of or in connection with the Plan by or on behalf of the Corporation, or by any shareholder of the Corporation against any past, present or future member of the Board, or against any employee, or by an employee (past, present or future) against the Corporation will, irrespective of the place where an action may be brought and irrespective of the place of residence of any such shareholder, director or employee, cease and be barred by the expiration of three years from the date of the act or omission in respect of which such right of action is alleged to have risen.

     13. Tax Litigation. The Corporation shall have the right, but not the obligation, to contest, at its expense, any tax ruling or decision, administrative or judicial, on any issue which is related to the Plan and which the Board believes to be important to holders of Options andBonuses issued under the Plan and to conduct any such contest or any litigation arising therefrom to a final decision.

     14.  No Shareholder Approval. The effectiveness of this Plan and the right of the Committee to grant any Options or Bonuses hereunder is not subject to approval by the Shareholders of the Corporation.

[End of Plan] 

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	Exhibit A

	FORM OF STOCK OPTION AGREEMENT

	STOCK OPTION AGREEMENT

     STOCK OPTION AGREEMENT made as of this ___ day of ____________,______, by and between Aspen Exploration Corporation a Delaware corporation (the “Corporation”), and __________________________________________ (the “Recipient”).

     In accordance with the Corporation’s 2008 Equity Plan (the “Plan”), the provisions of which are incorporated herein by reference, the Corporation desires, in connection with the services of the Recipient, to provide the Recipient with an opportunity to acquire shares of the Corporation’s $0.005 par value common stock (“Common Stock”) on favorable terms and thereby increase the Recipient’s proprietary interest in the Corporation and incentive to put forth maximum efforts for the success of the business of the Corporation. Capitalized terms used but not defined herein are used as defined in the Plan.

     NOW, THEREFORE, in consideration of the premises and mutual covenants herein set forth and other good and valuable consideration, the Corporation and the Recipient agree as follows:

     1. Confirmation of Grant of Option. Pursuant to a determination of the Committee or, in the absence of a Committee, by the Board of Directors of the Corporation made on________________ (the “Date of Grant”), the Corporation, subject to the terms of the Plan and written acceptance by the Recipient of this Agreement by not later than__________, ____ (the “Acceptance Date”), confirms that the Recipient has been irrevocably granted on the Date of Grant, as a matter of separate inducement and agreement, and in addition to and not in lieu of salary or other compensation for services, a Stock Option (the “Option”) exercisable to purchase _______ shares of Common Stock on the terms and conditions herein set forth, subject to adjustment as provided in Paragraph 8 hereof. If the Recipient does not accept this Agreement by returning a signed copy hereof to the Corporation by not later than the Acceptance Date, the Options granted by the Bo

ard or the Committee shall be of no further force and effect.

     2. Option Price. The Option Price of shares of Common Stock covered by the Option will be $_____per share (the “Option Price”) subject to adjustment as provided in Paragraph 8 hereof. 

     3. Vesting and Exercise of Option.

     a. Except as otherwise provided herein or in Section 8 of the Plan, the Option shall vest and become exercisable as follows: (immediately upon acceptance by the Optionee executing the signature page to this Stock Option Agreement and returning it to the 

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Corporation (which must occur no later than __________), or insert other vesting schedule __________________________________); provided, however, that no portion of the Option shall vest or become exercisable unless the Recipient is an employee, officer, advisor, or consultant of the Corporation on such vesting date.

          b. The Option may not be exercised at any one time as to fewer than 100 shares (or such number of shares as to which the Option is then exercisable if such number of shares is less than 100) or a total Option Price of $1,000, whichever is greater.

          c. As provided in Section 7 of the Plan, the Option may be exercised by written notice to the Secretary of the Corporation accompanied by payment in full of the Option Price, or accompanied by notice that Recipient is exercising such Option in accordance with the “cashless exercise rights” as provided in Section 7(d)(5) of the Plan.

     4. Term of Option. The term of the Option will be through __________, ____, subject to earlier termination or cancellation as provided in this Agreement and the Plan. The holder of the Option will not have any rights to dividends or any other rights of a shareholder with respect to any shares of Common Stock subject to the Option until such shares shall have been issued (as evidenced by the appropriate transfer agent of the Corporation) upon purchase of such shares through exercise of the Option. 

     5. Transferability Restriction. The Option may not be assigned, transferred or otherwise disposed of, or pledged or hypothecated in any way (whether by operation of law or otherwise) except in strict compliance with the Plan. Any assignment, transfer, pledge, hypothecation or other disposition of the Option or any attempt to make any levy of execution, attachment or other process will cause the Option to terminate immediately upon the happening of any such event; provided, however, that any such termination of the Option under the provisions of this Paragraph 5 will not prejudice any rights or remedies which the Corporation may have under this Agreement or otherwise.

     6. Exercise Upon Termination. The Recipient’s rights to exercise this Option upon termination of employment or cessation of service as an employee, officer, advisor or consultant shall be as set forth in Section 7(e) of the Plan.

     7. Death, Disability or Retirement of Recipient. The exercisability of this Option upon the death, Disability or retirement of the Recipient shall be as set forth in Section 7(f) of the Plan. 

     8. Adjustments. The Option shall be subject to adjustment upon the occurrence of certain events as set forth in Section 7(h) of the Plan. 

     9. No Registration Obligation. The Recipient understands that the Option is not registered under the 1933 Act and, unless by separate written agreement, the Corporation has no obligation to so register the Option or any of the shares of Common Stock subject to and issuable upon the exercise of the Option, although it may from time to time register under the 1933 Act the shares issuable upon exercise of Options granted pursuant to the Plan. The Recipient 

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represents that the Option is being acquired for the Recipient’s own account and that unless registered by the Corporation, the shares of Common Stock issued on exercise of the Option will be acquired by the Recipient for investment. The Recipient understands that the Option is, and the underlying securities may be, issued to the Recipient in reliance upon exemptions from the 1933 Act, and acknowledges and agrees that all certificates for the shares issued upon exercise of the Option may bear the following legend unless such shares are registered under the 1933 Act prior to their issuance: 

		 	
		 	The shares represented by this Certificate have not been registered  
		 	under the Securities Act of 1933 (the “1933 Act”), and are  
		 	“restricted securities” as that term is defined in Rule 144 under the  
		 	1933 Act. The shares may not be offered for sale, sold or  
		 	otherwise transferred except pursuant to an effective registration  
		 	statement under the 1933 Act or pursuant to an exemption from  
		 	registration under the 1933 Act, the availability of which is to be  
		 	established to the satisfaction of the Company.  

     The Recipient further understands and agrees that the Option may be exercised only if at the time of such exercise the underlying shares are registered and/or the Recipient and the Corporation are able to establish the existence of an exemption from registration under the 1933 Act and applicable state or other laws. 

     10. Notices. Each notice relating to this Agreement will be in writing and delivered in person or by certified mail to the proper address. Notices to the Corporation shall be addressed to the Corporation, attention: Chief Executive Officer, at 2050 S. Oneida St., Suite 208, Denver, Colorado 80224, or at such other address as may constitute the Corporation’s principal place of business at the time, with a copy to: Herrick K. Lidstone, Jr., Esq., Burns, Figa & Will, P.C., 6400 S. Fiddlers Green Circle, Suite 1000, Greenwood Village, CO 80111. Notices to the Recipient or other person or persons then entitled to exercise the Option shall be addressed to the Recipient or such other person or persons at the Recipient’s address below specified. Anyone to whom a notice may be given under this Agreement may designate a new address by notice to that effect given pursuant to this Paragraph 10.

     11. Approval of Counsel. The exercise of the Option and the issuance and delivery of shares of Common Stock pursuant thereto shall be subject to the reasonable approval by the Corporation’s counsel of all legal matters in connection therewith, including compliance with the registration and reporting requirements of the 1933 Act, the Securities Exchange Act of 1934, as amended, applicable state and other securities laws, the rules and regulations thereunder, and the requirements of any national securities exchange(s) upon which the Common Stock then may be listed. 

     12. Recipient Representation. The Recipient represents to the Company that he or she has reviewed the Plan, the Recipient understands that the Options are subject to the Plan as well as this Agreement, and that the representations and warranties of the Recipient in the Plan (including, without limitation, representations with respect to consultation by the Recipient with his or her advisors and obligation to provide for taxes as set forth in Section 9 of the Plan).

14

     13. Benefits of Agreement. This Agreement will inure to the benefit of and be binding upon each successor and assignee of the Corporation. All obligations imposed upon the Recipient and all rights granted to the Corporation under this Agreement will be binding upon the Recipient’s heirs, legal representatives and successors. 

     14. Effect of Governmental and Other Regulations. The exercise of the Option and the Corporation’s obligation to sell and deliver shares upon the exercise of the Option are subject to all applicable federal and state laws, rules and regulations, and to such approvals by any regulatory or governmental agency which may, in the opinion of counsel for the Corporation, be required.

     15. Plan Governs. In the event that any provision in this Agreement conflicts with a provision in the Plan, the provision of the Plan shall govern.

     Executed in the name and on behalf of the Corporation by one of its duly authorized officers and by the Recipient all as of the date first above written.

			
	  	  	ASPEN EXPLORATION CORPORATION  
	  
	  
	

Date   ______________, ________________	  	By:  
	  	  	Title:________________________________________________________________________  

     The undersigned Recipient has read and understands the terms of this Option Agreement and the attached Plan and hereby agrees to comply therewith.

			
	

Date   ______________, ________________  	  	  
	  	  	Signature of Recipient  
	  
	  	  	Tax ID Number:  _____________________________________________________________
	  	  	Address: ___________________________________________________________________ 

15

	Exhibit B

	SUBSCRIPTION AGREEMENT

THE SECURITIES BEING ACQUIRED BY THE UNDERSIGNED HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 OR ANY OTHER LAWS AND ARE OFFERED UNDER EXEMPTIONS FROM THE REGISTRATION PROVISIONS OF SUCH LAWS. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER CONTAINED IN THIS STOCK SUBSCRIPTION AGREEMENT AND APPLICABLE SECURITIES LAWS.

     This Subscription Agreement is entered for the purpose of the undersigned acquiring _____________ shares of the $0.005 common stock (the “Securities”) of Aspen Exploration Corporation, a Delaware corporation (the “Corporation”), from the Corporation as a Bonus or pursuant to exercise of an Option granted pursuant to the Corporation's 2008 Equity Plan (the “Plan”). All capitalized terms not otherwise defined herein shall be as defined in the Plan.

     It is understood that no grant of any Bonus or exercise of any Option at a time when no registration statement relating thereto is effective under the U.S. Securities Act of 1933, as amended (the “1933 Act”) can be completed until the undersigned executes this Subscription Agreement and delivers it to the Corporation, and that such grant or exercise is effective only in accordance with the terms of the Plan and this Subscription Agreement.

     In connection with the undersigned’s acquisition of the Securities, the undersigned represents and warrants to the Corporation as follows:

     1. The undersigned has been provided with, and has reviewed the Plan, and such other information as the undersigned may have requested of the Corporation regarding its business, operations, management, and financial condition (all of which is referred to herein as the “Available Information”).

     2. The Corporation has given the undersigned the opportunity to ask questions of and to receive answers from persons acting on the Corporation’s behalf concerning the terms and conditions of this transaction and the opportunity to obtain any additional information regarding the Corporation, its business and financial condition or to verify the accuracy of the Available Information which the Corporation possesses or can acquire without unreasonable effort or expense.

     3. The Securities are being acquired by the undersigned for the undersigned’s own account and not on behalf of any other person or entity.

16

     4. [If there is a Form S-8 registration statement effective and current, or another appropriate registration statement effective and current, this paragraph is not applicable.] The undersigned understands that the Securities being acquired hereby have not been registered under the 1933 Act or any state or foreign securities laws, and are, and unless registered will continue to be, restricted securities within the meaning of Rule 144 of the General Rules and Regulations under the 1933 Act and other statutes, and the undersigned consents to the placement of appropriate restrictive legends on any certificates evidencing the Securities and any certificates issued in replacement or exchange therefor and acknowledges that the Corporation will cause its stock transfer records to note such restrictions.

     5. By the undersigned’s execution below, it is acknowledged and understood that the Corporation is relying upon the accuracy and completeness hereof in complying with certain obligations under applicable securities laws.

     6. This Agreement binds and inures to the benefit of the representatives, successors and permitted assigns of the respective parties hereto.

     7. The undersigned acknowledges that the grant of any Bonus or Option and the issuance and delivery of shares of Common Stock pursuant thereto shall be subject to the prior reasonable approval by the Corporation’s counsel of all legal matters in connection therewith, including compliance with the requirements of the 1933 Act and other applicable securities laws, the rules and regulations thereunder, and the requirements of any national securities exchange(s) upon which the Common Stock then may be listed.

     8. The undersigned acknowledges and agrees that the Corporation has withheld ___________ shares for the payment of taxes as a result of the grant of the Bonus or the exercise of an Option [or] the undersigned agrees to indemnify and hold the Corporation harmless for any and all tax liability that may result from the grant or issuance of the Bonus to the undersigned.

     9. The Plan is incorporated herein by reference. In the event that any provision in this Agreement conflicts with ANY provision in the Plan, the provisions of the Plan shall govern.

		 	
	Date:  __________________, _________________	 	Signature of Recipient  __________________________________________________________
		 	Tax ID Number:  _______________________________________________________________
		 	Address:  ____________________________________________________________________

17<PAGE>

EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT
                          -----------------------------

                        LV ADMINISTRATIVE SERVICES, INC.,
                     AS ADMINISTRATIVE AND COLLATERAL AGENT

                                 THE PURCHASERS
                         FROM TIME TO TIME PARTY HERETO

                                       AND

                                RETAIL PRO, INC.

                            DATED: FEBRUARY 29, 2008

<PAGE>

<TABLE>
<S>     <C>

                                                 TABLE OF CONTENTS
                                                 -----------------

                                                                                                               Page
                                                                                                               ----

1.       Agreement to Sell and Purchase...........................................................................1

2.       Fees and Warrant.........................................................................................1

3.       Closing, Delivery and Payment............................................................................2
         3.1      Closing.........................................................................................2
         3.2      Delivery........................................................................................2

4.       Representations and Warranties of the Company............................................................2
         4.1      Organization, Good Standing and Qualification...................................................3
         4.2      Subsidiaries....................................................................................4
         4.3      Capitalization; Voting Rights...................................................................4
         4.4      Authorization; Binding Obligations..............................................................5
         4.5      Liabilities; Solvency...........................................................................5
         4.6      Agreements; Action..............................................................................6
         4.7      Obligations to Related Parties..................................................................7
         4.8      Changes.........................................................................................8
         4.9      Title to Properties and Assets; Liens, Etc......................................................9
         4.10     Intellectual Property..........................................................................10
         4.11     Compliance with Other Instruments..............................................................11
         4.12     Litigation.....................................................................................11
         4.13     Tax Returns and Payments.......................................................................12
         4.14     Employees......................................................................................12
         4.15     Registration Rights and Voting Rights..........................................................13
         4.16     Compliance with Laws; Permits..................................................................13
         4.17     Environmental and Safety Laws..................................................................13
         4.18     Valid Offering.................................................................................14
         4.19     Full Disclosure................................................................................14
         4.20     Insurance......................................................................................15
         4.21     SEC Reports....................................................................................15
         4.22     Listing........................................................................................15
         4.23     No Integrated Offering.........................................................................15
         4.24     Stop Transfer..................................................................................15
         4.25     Dilution.......................................................................................16
         4.26     Patriot Act....................................................................................16
         4.27     ERISA..........................................................................................16

5.       Representations and Warranties of each Purchaser........................................................17
         5.1      No Shorting....................................................................................17
         5.2      Requisite Power and Authority..................................................................17
         5.3      Investment Representations.....................................................................17
         5.4      The Purchaser Bears Economic Risk..............................................................18
         5.5      Acquisition for Own Account....................................................................18
         5.6      The Purchaser Can Protect Its Interest.........................................................18
         5.7      Accredited Investor............................................................................18
         5.8      Legends........................................................................................18

                                                         i
<PAGE>

                                                 TABLE OF CONTENTS
                                                 -----------------

                                                                                                               Page
                                                                                                               ----

6.       Covenants of the Company................................................................................19
         6.1      Stop-Orders....................................................................................19
         6.2      Listing........................................................................................19
         6.3      Market Regulations.............................................................................20
         6.4      Reporting Requirements.........................................................................20
         6.5      Use of Funds...................................................................................21
         6.6      Access to Facilities...........................................................................21
         6.7      Taxes..........................................................................................22
         6.8      Insurance......................................................................................24
         6.9      Intellectual Property..........................................................................24
         6.10     Properties.....................................................................................25
         6.11     Confidentiality................................................................................25
         6.12     Required Approvals.............................................................................26
         6.13     Reissuance of Securities.......................................................................27
         6.14     Opinion........................................................................................28
         6.15     Margin Stock...................................................................................28
         6.16     FIRPTA.........................................................................................28
         6.17     Financing Right of First Refusal...............................................................28
         6.18     Authorization and Reservation of Shares........................................................29
         6.19     Investor Relations/Public Relations............................................................29

7.       Covenants of the Purchasers.............................................................................29
         7.1      Confidentiality................................................................................29
         7.2      Non-Public Information.........................................................................29
         7.3      Limitation on Acquisition of Common Stock of the Company.......................................29

8.       Covenants of the Company and the Purchasers Regarding Indemnification...................................30
         8.1      Company Indemnification........................................................................30
         8.2      Purchaser Indemnification......................................................................30

10.      Registration Rights.....................................................................................30
         10.2     Offering Restrictions..........................................................................30

11.      Miscellaneous...........................................................................................31
         11.1     Governing Law, Jurisdiction and Waiver of Jury Trial...........................................31
         11.2     Severability...................................................................................32
         11.3     Survival.......................................................................................32
         11.4     Successors.....................................................................................32
         11.5     Entire Agreement; Maximum Interest.............................................................33
         11.6     Amendment and Waiver...........................................................................34
         11.7     Delays or Omissions............................................................................34
         11.8     Notices........................................................................................34
         11.9     Attorneys' Fees................................................................................36
         11.10    Titles and Subtitles...........................................................................36
         11.11    Signatures; Counterparts.......................................................................36
         11.12    Broker's Fees..................................................................................36
         11.13    Construction...................................................................................36
         11.14    Agency.........................................................................................36

                                                        ii
<PAGE>

                                                  LIST OF EXHIBITS

Form of Term Note.........................................................................................Exhibit A
Form of Warrant...........................................................................................Exhibit B
Form of Opinion...........................................................................................Exhibit C
Form of Escrow Agreement..................................................................................Exhibit D
Form of Compliance Certificate............................................................................Exhibit E

                     LIST OF INFORMATION REQUIRED TO BE INCLUDED IN THE SUPPLEMENTAL SCHEDULE

Schedule 1                                            Purchaser Commitments
Schedule 2                                            Warrant Holders and Warrant Shares
Schedule 4.2                                          Subsidiaries
Schedule 4.3                                          Capitalization
Schedule 4.6                                          Extraordinary Agreements
Schedule 4.7                                          Obligations to Related Parties
Schedule 4.9                                          Title to Properties; Liens
Schedule 4.10                                         IP Registration
Schedule 4.12                                         Litigation
Schedule 4.13                                         Taxes
Schedule 4.14                                         Employees
Schedule 4.15                                         Registration and Voting Rights
Schedule 4.21                                         SEC Reports
Schedule 6.12(e)                                      Indebtedness
Schedule 11.12                                        Brokers

                                                        iii
</TABLE>
<PAGE>

                          SECURITIES PURCHASE AGREEMENT

         THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of February 29, 2008, among Retail Pro, Inc., a Delaware
corporation (f/k/a Island Pacific, Inc.) (the "COMPANY"), the purchasers from
time to time a party hereto (each a "PURCHASER" and collectively, the
"PURCHASERS"), LV Administrative Services, Inc., a Delaware corporation, as
administrative and collateral agent for each Purchaser, (the "AGENT" and
together with the Purchasers, the "CREDITOR PARTIES").

                                    RECITALS

         WHEREAS, the Company has authorized the sale to each Purchaser of a
Secured Term Note in the form of EXHIBIT A hereto in the principal amount set
forth opposite such Purchaser's name on SCHEDULE 1 hereto (each as amended,
restated, modified and/or supplemented from time to time, a "NOTE" and,
collectively, the "NOTES");

         WHEREAS, the Company wishes to issue to each Purchaser a warrant in the
form of EXHIBIT B hereto (each as amended, restated, modified and/or
supplemented from time to time, a "WARRANT" and, collectively the "Warrants") to
purchase up to the number of shares of the Company's common stock, $0.0001 par
value per share (the "COMMON STOCK"), set forth opposite such Purchaser's name
on SCHEDULE 2 (subject to adjustment as set forth therein) in connection with
such Purchaser's purchase of the applicable Note;

         WHEREAS, each Purchaser desires to purchase the applicable Note and
Warrant on the terms and conditions set forth herein; and

         WHEREAS, the Company desires to issue and sell the applicable Note and
Warrant to each Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

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

         1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company shall sell to each Purchaser, and each Purchaser shall purchase from the
Company, the applicable Note. The sale of the Notes on the Closing Date shall be
known as the "OFFERING." The Notes will mature on the Maturity Date (as defined
in the Note). Collectively, the Notes and Warrants and Common Stock issuable
upon exercise of the Warrants are referred to as the "Securities."

         2. FEES AND WARRANT. On the Closing Date:

                           (a) The Company will issue and deliver to each
         Purchaser a Warrant to purchase up to the number of shares of Common
         Stock set forth opposite its name on SCHEDULE 2 (subject to adjustment

<PAGE>

         as set forth therein) in connection with the Offering pursuant to
         Section 1 hereof. All the representations, covenants, warranties,
         undertakings, and indemnification, and other rights made or granted to
         or for the benefit of each Creditor Party by the Company are hereby
         also made and granted for the benefit of the holder of the related
         Warrant and shares of the Common Stock issuable upon exercise of such
         Warrant (the "WARRANT SHARES"); provided however, that except as may be
         expressly provided herein all such representations and warranties are
         made as of the Closing Date and the Company makes no undertaking to
         advise the Purchaser of any changes to the representations and
         warranties after the Closing Date.

                           (b) Subject to the terms of Section 2(c) below, the
         Company shall pay (i) to Valens Capital Management, LLC, the investment
         manager of the Purchasers ("VCM"), a non-refundable payment in an
         amount equal to $37,500; (ii) to the Purchasers, pro rata in accordance
         with their respective investments as set forth on Schedule 1 hereto, a
         non-refundable payment in an amount equal to one percent (1.00%) of the
         aggregate principal amount of the Notes; and (iii) to the Purchasers,
         pro rata in accordance with their respective investments as set forth
         on Schedule 1 hereto, an advance prepayment discount deposit equal to
         one percent (1.00%) of the aggregate principal amount of the Notes.
         Each of the foregoing payments in clauses (i) and (ii) shall be deemed
         fully earned on the Closing Date and shall not be subject to (iii)
         rebate or (iv) proration (other than as set forth in this Section
         2(b)(ii) and 2(b)(iii)) for any reason.

                           (c) The payments and the expenses referred to in the
         preceding clause (b) (net of deposits previously paid by the Company)
         shall be paid at closing out of funds held pursuant to the Escrow
         Agreement (as defined below) and a disbursement letter (the
         "DISBURSEMENT LETTER").

         3. CLOSING, DELIVERY AND PAYMENT.

                  3.1 CLOSING. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "CLOSING"), shall take
place on the date hereof, at such time or place as the Company and the Agent may
mutually agree (such date is hereinafter referred to as the "CLOSING DATE").

                  3.2 DELIVERY. Pursuant to the Escrow Agreement, at the Closing
on the Closing Date, the Company will deliver to each Purchaser, among other
things, the applicable Note and Warrant and such Purchaser will deliver to the
Company, among other things, the amounts set forth opposite its name in the
Disbursement Letter by certified funds or wire transfer.

         4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Creditor Party: that on the date hereof, and
except as may be set forth herein, all representations, warranties and covenants
made by the Company in connection with the Secured Convertible Term Note issued
by the Company to Laurus Master Fund, Ltd, ("Laurus") dated as of June 15, 2005
(as amended, modified and/or supplemented from time to time, ("Term Note") are
true, correct and complete except as qualified or limited in any manner by the
information set forth in the Company's Form 10-K for the year ended March 31,

                                       2
<PAGE>

2007 and other reports filed with the Securities Exchange Commission ("SEC")
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934 ("Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof
("Exchange Act Filings"). Within thirty (30) days following the Closing Date,
the Company shall make such specific representations and warranties as to matter
omitted herein (reference to title of omitted matter) as are required , and
provide a disclosure schedule thereto or hereto, all as in effect as of the
Closing Date ("Supplemental Schedule"). The Company may address a matter in the
Supplemental Schedule even though no cross reference is made to the Supplemental
Schedule in the body of the representations set forth in this Article 4:

                  4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
and except as may be set forth in the Supplemental Schedule each of its
Subsidiaries is a corporation, partnership or limited liability company, as the
case may be, duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. The Company and except as may be set
forth in the Supplemental Schedule and each of its Subsidiaries has the
corporate, limited liability company or partnership, as the case may be, power
and authority to own and operate its properties and assets and, insofar as it is
or shall be a party thereto, to (1) execute and deliver (i) this Agreement, (ii)
the Notes and the Warrants to be issued in connection with this Agreement, (iii)
the Master Security Agreement dated as of the date hereof among the Company,
certain Subsidiaries of the Company and the Agent (as amended, restated,
modified and/or supplemented from time to time, the "MASTER SECURITY
AGREEMENT"), [(iv) the Subsidiary Guaranty dated as of the date hereof made by
certain Subsidiaries of the Company (as amended, restated, modified and/or
supplemented from time to time, the "SUBSIDIARY GUARANTY"), (vi) the Stock
Pledge Agreement dated as of the date hereof among the Company, certain
Subsidiaries of the Company and the Purchaser (as amended, restated, modified
and/or or supplemented from time to time, the "STOCK PLEDGE AGREEMENT")], (vii)
the Funds Escrow Agreement dated as of the date hereof among the Company, the
Purchasers and the escrow agent referred to therein, substantially in the form
of EXHIBIT D hereto (as amended, restated, modified and/or supplemented from
time to time, the "ESCROW AGREEMENT") and (viii) all other documents,
instruments and agreements entered into in connection with the transactions
contemplated hereby and thereby (the preceding clauses (ii) through (viii),
collectively, the "RELATED AGREEMENTS"); (2) issue and sell the Notes; (3) issue
and sell the Warrants and the Warrant Shares; and (4) carry out the provisions
of this Agreement and the Related Agreements and to carry on its business as
presently conducted. Each of the Company and each of its Subsidiaries is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation, partnership or limited liability company, as the case may be, in
all jurisdictions in which the nature or location of its activities and of its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of the Company and its
Subsidiaries, taken individually and as a whole (a "MATERIAL ADVERSE EFFECT").

                  4.2 SUBSIDIARIES. Each direct and indirect Subsidiary of the
Company, the direct owner of such Subsidiary and its percentage ownership
thereof, is set forth on Supplemental SCHEDULE 4.2. For the purpose of this
Agreement, a "SUBSIDIARY" of any person or entity means (i) a corporation or
other entity whose shares of stock or other ownership interests having ordinary
voting power (other than stock or other ownership interests having such power

                                       3
<PAGE>

only by reason of the happening of a contingency) to elect a majority of the
directors of such corporation, or other persons or entities performing similar
functions for such person or entity, are owned, directly or indirectly, by such
person or entity or (ii) a corporation or other entity in which such person or
entity owns, directly or indirectly, more than 50% of the equity interests at
such time.

                  4.3      CAPITALIZATION; VOTING RIGHTS.

                           (a) The authorized capital stock of the Company, as
         of the date hereof consists of shares, of which are 250,000,000 shares
         of Common Stock, par value $0.0001 per share, 60,509,964 shares of
         which are issued and outstanding , and 5,000,000 are shares of Series A
         Convertible Preferred stock, par value $0.0001 per share of which
         141,000 shares of Series A Convertible Preferred stock are issued and
         outstanding, and 2,571,233 are shares of Series B Convertible Preferred
         stock, par value $0.0001 per share of which 2,571,232 shares of Series
         B Convertible Preferred stock are issued and outstanding The
         authorized, issued and outstanding capital stock of each Subsidiary of
         the Company is set forth on Supplemental SCHEDULE 4.3.

                           (b) Except as set forth in Section 4.1 or as may be
         disclosed in the Supplemental SCHEDULE , other than: (i) the shares
         reserved for issuance under the Company's stock option plans; and (ii)
         shares which may be granted pursuant to this Agreement and the Related
         Agreements, there are no outstanding options, warrants, rights
         (including conversion or preemptive rights and rights of first
         refusal), proxy or stockholder agreements, or arrangements or
         agreements of any kind for the purchase or acquisition from the Company
         of any of its securities. Except as disclosed in the Supplemental
         Schedule, neither the offer, issuance or sale of any of the Notes or
         the Warrants, or the issuance of any of Warrant Shares, nor the
         consummation of any transaction contemplated hereby will result in a
         change in the price or number of any securities of the Company
         outstanding, under anti-dilution or other similar provisions contained
         in or affecting any such securities.

                           (c) All issued and outstanding shares of the
         Company's Common Stock: (i) have been duly authorized and validly
         issued and are fully paid and non-assessable; and (ii) were issued in
         compliance with all applicable state and federal laws concerning the
         issuance of securities.

                           (d) The rights, preferences, privileges and
         restrictions of the shares of the Common Stock are as stated in the
         Company's Certificate of Incorporation (the "CHARTER"). The Warrant
         Shares have been duly and validly reserved for issuance. When issued in
         compliance with the provisions of this Agreement and the Company's
         Charter, the Securities will be validly issued, fully paid and
         non-assessable, and will be free of any liens or encumbrances;
         provided, however, that the Securities may be subject to restrictions
         on transfer under state and/or federal securities laws as set forth
         herein or as otherwise required by such laws at the time a transfer is
         proposed.

                  4.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate,
partnership or limited liability company, as the case may be, action on the part
of the Company and each of its Subsidiaries (including their respective officers

                                       4
<PAGE>

and directors) necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company and its
Subsidiaries hereunder and under the other Related Agreements at the Closing
and, the authorization, sale, issuance and delivery of the Notes and Warrants
has been taken or will be taken prior to the Closing. This Agreement and the
Related Agreements, when executed and delivered and to the extent it is a party
thereto, will be valid and binding obligations of the Company and each of its
Subsidiaries, enforceable against each such person or entity in accordance with
their terms, except:

                           (a) as limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or other laws of general application
         affecting enforcement of creditors' rights; and

                           (b) general principles of equity that restrict the
         availability of equitable or legal remedies.

The sale of the Notes are not and will not be subject to any preemptive rights
or rights of first refusal that have not been properly waived or complied with.
The issuance of the Warrants and the subsequent exercise of the Warrants for
Warrant Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.

                  4.5      LIABILITIES; SOLVENCY.

                           (a) Neither the Company nor any of its Subsidiaries
         has any liabilities, except current liabilities incurred in the
         ordinary course of business and liabilities disclosed in any of the
         Company's filings under the Exchange Act made prior to the date of this
         Agreement (collectively, the "EXCHANGE ACT FILINGS"), copies of which
         are available to the Agent.

                           (b) Both before and after giving effect to (a) the
         transactions contemplated hereby that are to be consummated on the
         Closing Date, (b) the disbursement of the proceeds of, or the
         assumption of the liability in respect of, the Notes pursuant to the
         instructions or agreement of the Company and (c) the payment and
         accrual of all transaction costs in connection with the foregoing, the
         Company and except as may be set forth in the Supplemental Schedule
         each Subsidiary of the Company, is and will be, Solvent. For purposes
         of this Section 4.5(b), "Solvent" means, with respect to any Person (as
         hereinafter defined) on a particular date, that on such date (a) the
         fair value of the property of such Person is greater than the total
         amount of liabilities, including contingent liabilities, of such
         Person; (b) the present fair salable value of the assets of such Person
         is not less than the amount that will be required to pay the probable
         liability of such Person on its debts as they become absolute and
         matured; (c) such Person does not intend to, and does not believe that
         it will, incur debts or liabilities beyond such Person's ability to pay
         as such debts and liabilities mature; and (d) such Person is not
         engaged in a business or transaction, and is not about to engage in a
         business or transaction, for which such Person's property would
         constitute and unreasonably small capital. The amount of contingent
         liabilities (such as litigation, guaranties and pension plan
         liabilities) at any time shall be computed as the amount that, in light
         of all the facts and circumstances existing at the time, represents the
         amount that can reasonably be expected to become an actual or matured
         liability.

                                       5
<PAGE>

                  4.6 AGREEMENTS; ACTION. Except as set forth on the
Supplemental SCHEDULE or as disclosed in any Exchange Act Filings:

                           (a) there are no agreements, understandings,
         instruments, contracts, proposed transactions, judgments, orders, writs
         or decrees to which the Company or any of its Subsidiaries is a party
         or by which it is bound which may involve: (i) obligations (contingent
         or otherwise) of, or payments to, the Company or any of its
         Subsidiaries in excess of $50,000 (other than obligations of, or
         payments to, the Company or any of its Subsidiaries arising from
         purchase or sale agreements entered into in the ordinary course of
         business); or (ii) the transfer or license of any patent, copyright,
         trade secret or other proprietary right to or from the Company or any
         of its Subsidiaries (other than licenses arising from the purchase of
         "off the shelf" or other standard products); or (iii) provisions
         restricting the development, manufacture or distribution of the
         Company's or any of its Subsidiaries products or services; or (iv)
         indemnification by the Company or any of its Subsidiaries with respect
         to infringements of proprietary rights.

                           (b) Since March 31, 2007 and except as may be set
         forth in the Exchange Act Filings or the Supplemental Schedule (the
         "BALANCE SHEET DATE"), neither the Company nor any of its Subsidiaries
         has: (i) declared or paid any dividends, or authorized or made any
         distribution upon or with respect to any class or series of its capital
         stock; (ii) incurred any indebtedness for money borrowed or any other
         liabilities (other than ordinary course obligations) individually in
         excess of $50,000 or, in the case of indebtedness and/or liabilities
         individually less than $50,000, in excess of $100,000 in the aggregate;
         (iii) made any loans or advances to any person or entity not in excess,
         individually or in the aggregate, of $100,000, other than ordinary
         course advances for travel expenses; or (iv) sold, exchanged or
         otherwise disposed of any of its assets or rights, other than the sale
         of its inventory in the ordinary course of business.

                           (c) For the purposes of subsections (a) and (b)
         above, all indebtedness, liabilities, agreements, understandings,
         instruments, contracts and proposed transactions involving the same
         person or entity (including persons or entities the Company or any
         Subsidiary of the Company has reason to believe are affiliated
         therewith) shall be aggregated for the purpose of meeting the
         individual minimum dollar amounts of such subsections.

                           (d) The Company maintains disclosure controls and
         procedures ("DISCLOSURE Controls") designed to ensure that information
         required to be disclosed by the Company in the reports that it files or
         submits under the Exchange Act is recorded, processed, summarized, and
         reported, within the time periods specified in the rules and forms of
         the SEC.

                           (e) The Company makes and keep books, records, and
         accounts, that, in reasonable detail, accurately and fairly reflect the
         transactions and dispositions of the Company's assets. The Company
         maintains internal control over financial reporting ("FINANCIAL

                                       6
<PAGE>

         REPORTING CONTROLS") designed by, or under the supervision of, the
         Company's principal executive and principal financial officers, and
         effected by the Company's board of directors, management, and other
         personnel, to provide reasonable assurance regarding the reliability of
         financial reporting and the preparation of financial statements for
         external purposes in accordance with generally accepted accounting
         principles ("GAAP"), including that:

                                    (i) transactions are executed in accordance
                  with management's general or specific authorization;

                                    (ii) unauthorized acquisition, use, or
                  disposition of the Company's assets that could have a material
                  effect on the financial statements are prevented or timely
                  detected;

                                    (iii) transactions are recorded as necessary
                  to permit preparation of financial statements in accordance
                  with GAAP, and that the Company's receipts and expenditures
                  are being made only in accordance with authorizations of the
                  Company's management and board of directors;

                                    (iv) transactions are recorded as necessary
                  to maintain accountability for assets; and

                                    (v) the recorded accountability for assets
                  is compared with the existing assets at reasonable intervals,
                  and appropriate action is taken with respect to any
                  differences.

                           (f) There is no weakness in any of the Company's
         Disclosure Controls or Financial Reporting Controls that is required to
         be disclosed in any of the Exchange Act Filings, except as so
         disclosed.

                  4.7 OBLIGATIONS TO RELATED PARTIES. Except as set forth on the
Supplemental Schedule, there are no obligations of the Company or any of its
Subsidiaries to officers, directors, stockholders or employees of the Company or
any of its Subsidiaries other than:

                           (a) for payment of salary for services rendered and
         for bonus payments;

                           (b) reimbursement for reasonable expenses incurred on
         behalf of the Company and its Subsidiaries;

                           (c) for other standard employee benefits made
         generally available to all employees (including stock option agreements
         outstanding under any stock option plan approved by the Board of
         Directors of the Company and each Subsidiary of the Company, as
         applicable); and

                           (d) obligations listed in the Company's and each of
         its Subsidiary's financial statements or disclosed in any of the
         Company's Exchange Act Filings.

                                       7
<PAGE>

Except as described above or set forth on the Supplemental Schedule , none of
the officers, directors or, to the best of the Company's knowledge, key
employees or stockholders of the Company or any of its Subsidiaries or any
members of their immediate families, are indebted to the Company or any of its
Subsidiaries, individually or in the aggregate, in excess of $50,000 or have any
direct or indirect ownership interest in any firm or corporation with which the
Company or any of its Subsidiaries is affiliated or with which the Company or
any of its Subsidiaries has a business relationship, or any firm or corporation
which competes with the Company or any of its Subsidiaries, other than passive
investments in publicly traded companies (representing less than one percent
(1%) of such company) which may compete with the Company or any of its
Subsidiaries. Except as described above, no officer, director or stockholder of
the Company or any of its Subsidiaries, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
the Company or any of its Subsidiaries and no agreements, understandings or
proposed transactions are contemplated between the Company or any of its
Subsidiaries and any such person. Except as set forth on the Supplemental
Schedule, neither the Company nor any of its Subsidiaries is a guarantor or
indemnitor of any indebtedness of any other person or entity.

                  4.8 CHANGES. Since the Balance Sheet Date, except as disclosed
in any Exchange Act Filing or in any Schedule to this Agreement or to any of the
Related Agreements, including the Supplemental Schedule, there has not been:

                           (a) any change in the business, assets, liabilities,
         condition (financial or otherwise), properties, operations or prospects
         of the Company or any of its Subsidiaries, which individually or in the
         aggregate has had, or could reasonably be expected to have,
         individually or in the aggregate, a Material Adverse Effect;

                           (b) any resignation or termination of any officer,
         key employee or group of employees of the Company or any of its
         Subsidiaries;

                           (c) any material change, except in the ordinary
         course of business, in the contingent obligations of the Company or any
         of its Subsidiaries by way of guaranty, endorsement, indemnity,
         warranty or otherwise;

                           (d) any damage, destruction or loss, whether or not
         covered by insurance, which has had, or could reasonably be expected to
         have, individually or in the aggregate, a Material Adverse Effect;

                           (e) any waiver by the Company or any of its
         Subsidiaries of a valuable right or of a material debt owed to it;

                           (f) any direct or indirect loans made by the Company
         or any of its Subsidiaries to any stockholder, employee, officer or
         director of the Company or any of its Subsidiaries, other than advances
         made in the ordinary course of business;

                           (g) any material change in any compensation
         arrangement or agreement with any employee, officer, director or
         stockholder of the Company or any of its Subsidiaries;

                                       8
<PAGE>

                           (h) any declaration or payment of any dividend or
         other distribution of the assets of the Company or any of its
         Subsidiaries;

                           (i) any labor organization activity related to the
         Company or any of its Subsidiaries;

                           (j) any debt, obligation or liability incurred,
         assumed or guaranteed by the Company or any of its Subsidiaries, except
         those for immaterial amounts and for current liabilities incurred in
         the ordinary course of business;

                           (k) any sale, assignment, transfer, abandonment or
         other disposition of any patents, trademarks, copyrights, trade secrets
         or other intangible assets owned by the Company or any of its
         Subsidiaries;

                           (l) any change in any material agreement to which the
         Company or any of its Subsidiaries is a party or by which either the
         Company or any of its Subsidiaries is bound which either individually
         or in the aggregate has had, or could reasonably be expected to have,
         individually or in the aggregate, a Material Adverse Effect;

                           (m) any other event or condition of any character
         that, either individually or in the aggregate, has had, or could
         reasonably be expected to have, individually or in the aggregate, a
         Material Adverse Effect; or

                           (n) any arrangement or commitment by the Company or
         any of its Subsidiaries to do any of the acts described in subsection
         (a) through (m) above.

                  4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set
forth on the Supplemental Schedule, the Company and each of its Subsidiaries has
good and marketable title to its properties and assets, and good title to its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge (each for the foregoing, a "LIEN") , other than the
following (each a "PERMITTED ENCUMBRANCE"):

                           (a) those in favor of the Agent, for the ratable
         benefit of the Creditor Parties;

                           (b) those resulting from taxes which have not yet
         become delinquent;

                           (c) minor Liens which do not materially detract from
         the value of the property subject thereto or materially impair the
         operations of the Company or any of its Subsidiaries, so long as in
         each such case, such Liens have no effect on the Lien priority of the
         Agent, for the ratable benefit of the Creditor Parties, in such
         property; and

                           (d) those that have otherwise arisen in the ordinary
         course of business, so long as they have no effect on the Lien priority
         of the Purchaser therein.

                                       9
<PAGE>

All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Supplemental Schedule, the
Company and its Subsidiaries are in compliance with all material terms of each
lease to which it is a party or is otherwise bound.

                  4.10     INTELLECTUAL PROPERTY.

                           (a) The Company and each of its Subsidiaries owns or
         possesses sufficient legal rights to use all patents, trademarks,
         service marks, trade names, copyrights, trade secrets, licenses,
         information and other proprietary rights and processes necessary for
         its business as now conducted and, to the Company's knowledge, as
         presently proposed to be conducted (the "INTELLECTUAL PROPERTY"). There
         are no settlements or consents, covenants not to sue, non-assertion
         assurances, or releases to which the Company or any of its Subsidiaries
         is bound which adversely affects its rights to own or use any
         Intellectual Property.

                           (b) To the Company's knowledge, the conduct of the
         Company's and each of its Subsidiaries' business as now conducted, and
         as presently proposed to be conducted, does not (and will not) result
         in any infringement or other violation of the rights of others.

                           (c) THE SUPPLEMENTAL SCHEDULE sets forth a true and
         complete list of (i) all registrations and applications for
         Intellectual Property owned by the Company and each of its Subsidiaries
         filed or issued by any Intellectual Property registry and (ii) all
         Intellectual Property licenses which are either material to the
         business of the Company or relate to any material portion of the
         Company's or any of its Subsidiaries' inventory, including licenses for
         standard software having a replacement value of more than $50,000. None
         of such Intellectual Property licenses are reasonably likely to be
         construed as an assignment of the licensed Intellectual Property to the
         Company or any of its Subsidiaries.

                           (d) There are no claims pending or, to the best of
         the Company's knowledge, threatened and neither the Company nor any of
         its Subsidiaries has received any other communications, alleging that,
         the Company or any of its Subsidiaries has infringed, diluted,
         misappropriated, or otherwise violated any Intellectual Property of any
         other person or entity, nor is the Company or any of its Subsidiaries
         aware of any basis therefore.

                           (e) The Company is not aware of any infringement
         diluted, misappropriated, or other violation of its Intellectual
         Property by any other person or entity.

                           (f) Neither the Company nor any of its Subsidiaries
         utilizes any inventions, trade secrets or other Intellectual Property
         of any of its employees, officers, or contractors) except for
         inventions, trade secrets or other Intellectual Property that is owned
         by the Company or any Subsidiary as a matter of law or have been
         rightfully assigned to the Company or any of its Subsidiaries.

                                       10
<PAGE>

                  4.11 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company
nor any of its Subsidiaries is in violation or default of (x) any term of its
Charter or Bylaws, or (y) any provision of any indebtedness, mortgage,
indenture, contract, agreement or instrument to which it is party or by which it
is bound or of any judgment, decree, order or writ, which violation or default,
in the case of this clause (y), has had, or could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. The
execution, delivery and performance of and compliance with this Agreement and
the Related Agreements to which it is a party, and the issuance and sale of the
Notes by the Company and the other Securities by the Company each pursuant
hereto and thereto, will not, with or without the passage of time or giving of
notice, result in any such material violation, or be in conflict with or
constitute a default under any such term or provision, or result in the creation
of any Lien upon any of the properties or assets of the Company or any of its
Subsidiaries or the suspension, revocation, impairment, forfeiture or
non-renewal of any permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.

                  4.12 LITIGATION. Except as set forth on the Supplemental
Schedule, there is no action, suit, proceeding or investigation pending or, to
the Company's knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the Company or any of its Subsidiaries from entering
into this Agreement or the other Related Agreements, or from consummating the
transactions contemplated hereby or thereby, or which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or any change in the current equity ownership of the
Company or any of its Subsidiaries, nor is the Company aware that there is any
basis to assert any of the foregoing. Neither the Company nor any of its
Subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. Except as may be set forth in the Supplemental Schedule, there
is no action, suit, proceeding or investigation by the Company or any of its
Subsidiaries currently pending or which the Company or any of its Subsidiaries
intends to initiate.

                  4.13 TAX RETURNS AND PAYMENTS. Except as may be set forth in
the Supplemental Schedule, the Company and each of its Subsidiaries has timely
filed all tax returns (federal, state and local) required to be filed by it. All
taxes shown to be due and payable on such returns, any assessments imposed, and
all other taxes due and payable by the Company or any of its Subsidiaries on or
before the Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on the Supplemental Schedule, neither the
Company nor any of its Subsidiaries has been advised:

                           (a) that any of its returns, federal, state or other,
         have been or are being audited as of the date hereof; or

                           (b) of any adjustment, deficiency, assessment or
         court decision in respect of its federal, state or other taxes.

The Company has no knowledge of any liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.

                                       11
<PAGE>

                  4.14 EMPLOYEES. Except as set forth on the Supplemental
Schedule, neither the Company nor any of its Subsidiaries has any collective
bargaining agreements with any of its employees. There is no labor union
organizing activity pending or, to the Company's knowledge, threatened with
respect to the Company or any of its Subsidiaries. Except as disclosed in the
Exchange Act Filings or on the Supplemental Schedule , neither the Company nor
any of its Subsidiaries is a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
plan or agreement. To the Company's knowledge, no employee of the Company or any
of its Subsidiaries, nor any consultant with whom the Company or any of its
Subsidiaries has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company or any of its Subsidiaries because of the nature of the business to be
conducted by the Company or any of its Subsidiaries; and to the Company's
knowledge the continued employment by the Company and its Subsidiaries of their
present employees, and the performance of the Company's and its Subsidiaries'
contracts with its independent contractors, will not result in any such
violation. Neither the Company nor any of its Subsidiaries is aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would interfere with
their duties to the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries has received any notice alleging that any such violation
has occurred. Except for employees who have a current effective employment
agreement with the Company or any of its Subsidiaries, no employee of the
Company or any of its Subsidiaries has been granted the right to continued
employment by the Company or any of its Subsidiaries or to any material
compensation following termination of employment with the Company or any of its
Subsidiaries. Except as set forth on the Supplemental Schedule , the Company is
not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company or any of its
Subsidiaries, nor does the Company or any of its Subsidiaries have a present
intention to terminate the employment of any officer, key employee or group of
employees.

                  4.15 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as set
forth on the Supplemental Schedule and except as disclosed in Exchange Act
Filings, neither the Company nor any of its Subsidiaries is presently under any
obligation, and neither the Company nor any of its Subsidiaries has granted any
rights, to register any of the Company's or its Subsidiaries' presently
outstanding securities or any of its securities that may hereafter be issued.
Except as set forth on the Supplemental Schedule and except as disclosed in
Exchange Act Filings, to the Company's knowledge, no stockholder of the Company
or any of its Subsidiaries has entered into any agreement with respect to the
voting of equity securities of the Company or any of its Subsidiaries.

                  4.16 COMPLIANCE WITH LAWS; PERMITS. Except as set forth on the
Supplemental Schedule, neither the Company nor any of its Subsidiaries is in
violation of any provision of the Sarbanes-Oxley Act of 2002 or any SEC related
regulation or rule or any rule of the Principal Market (as hereafter defined)
promulgated thereunder or any other applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its

                                       12
<PAGE>

properties which has had, or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No governmental
orders, permissions, consents, approvals or authorizations are required to be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Agreement or any other
Related Agreement and the issuance of any of the Securities, except such as have
been duly and validly obtained or filed, or with respect to any filings that
must be made after the Closing, as will be filed in a timely manner. The Company
and its Subsidiaries has all material franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

                  4.17 ENVIRONMENTAL AND SAFETY LAWS. There are no pending
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending, or to the knowledge of Company threatened against the Company
or any of its Subsidiaries under Environmental Law. The Company and its
Subsidiaries (i) are and have been in full compliance with Environmental Law and
have no knowledge or any material expenditure that will be required to maintain
such compliance in the future; (ii) have not received any notice or claim
alleging that they are not in full compliance with or otherwise have liability
under Environmental Law; and (iii) have not knowledge of any facts or
circumstances that could reasonably be expected to form the basis of any such
claim. No Hazardous Materials are present or are used or have been used, stored,
or released by the Company or its Subsidiaries, or to their knowledge by any
other Person, at any property currently or formerly owned, leased or operated by
the Company or its Subsidiaries or disposed of at any other location by the
Company or its Subsidiaries except (i) in compliance with Environmental Law; and
(2) in quantities and under circumstances that would not require investigation
or remediation by the Company or its Subsidiaries. The Company and its
Subsidiaries have not assumed by contract or by operation of law the liabilities
arising under Environmental Law of any other Person. The Company and its
Subsidiaries have provided to the Agent all material report, audits and
assessments in their possession or control regarding the environmental condition
of any property currently or formerly owned or operated by the Company or any
Subsidiary. "ENVIRONMENTAL LAW" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to pollution or the environment , preservation or
reclamation of natural resources, the management, generation, use, handling,
treatment, transportation, storage, disposal or release or threatened release of
or exposure to Hazardous Materials, or occupational health and safety.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. "HAZARDOUS MATERIALS" means materials,
wastes or pollutants listed or defined as "hazardous substances", "hazardous
wastes" ,"toxic substances" or by words of similar import or any other substance
or waste otherwise regulated by applicable Environmental Law, including nuclear
materials and radioactive substances or wastes, petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes, and toxic mold. "PERSON"
means any individual, sole proprietorship, partnership, limited liability
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or department
thereof), and shall include such Person's successors and assigns.

                                       13
<PAGE>

                  4.18 VALID OFFERING. Assuming the accuracy of the
representations and warranties of the Purchasers contained in this Agreement,
the offer, sale and issuance of the Securities will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.

                  4.19 FULL DISCLOSURE. The Company and each of its Subsidiaries
has provided the Purchasers with its Exchange Act Reports which contain all
information requested by the Purchasers in connection with the Purchasers'
decision to purchase the Notes and Warrants, including all information the
Company and its Subsidiaries believe is reasonably necessary to make such
investment decision. Neither this Agreement, the Related Agreements, the
exhibits and schedules hereto and thereto nor any other document including,
without limitation, the responses contained in any questionnaire provided to the
Company by the Agent, delivered by the Company or any of its Subsidiaries to
Purchasers or their attorneys or agents in connection herewith or therewith or
with the transactions contemplated hereby or thereby as qualified by the
Exchange Act Filings and the Supplemental Schedule contain any untrue statement
of a material fact nor omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances in
which they are made, not misleading.

                  4.20 INSURANCE. The Company and each of its Subsidiaries has
general commercial, product liability, fire and casualty insurance policies with
coverages which the Company and each of its Subsidiaries believe are customary
for companies similarly situated to the Company and its Subsidiaries in the same
or similar business.

                  4.21 SEC REPORTS. Except as set forth on the Supplemental
Schedule , the Company has filed all proxy statements, reports and other
documents required to be filed by it under the Exchange Act. The Company has
made available to the Agent copies of: (i) its Annual Reports on Form 10-KSB for
its fiscal years ended March 31, 2007 ; and (ii) all Quarterly Reports on Form
10-QSBfiled to date (which Form 10-Qs not having been filed identified on the
Supplemental Schedule), and the Form 8-K filings which it has made during the
fiscal year April 1, 2006] to date (collectively, the "SEC REPORTS"). Except as
set forth on the Supplemental Schedule , each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

                  4.22 LISTING. Except as set forth on the Supplemental
Schedule, the Common Stock is listed or quoted, as applicable, on a Principal
Market (as hereafter defined) and satisfies and at all times hereafter will
satisfy, all requirements for the continuation of such listing or quotation, as
applicable. Except as set forth on the Supplemental Schedule, the Company has
not received any notice that its Common Stock will be delisted from, or no

                                       14
<PAGE>

longer quoted on, as applicable, the Principal Market or that its Common Stock
does not meet all requirements for such listing or quotation, as applicable. For
purposes hereof, the term "PRINCIPAL MARKET" means the NASD Over The Counter
Bulletin Board, NASDAQ Capital Market, NASDAQ National Markets System, American
Stock Exchange, New York Stock Exchange or Pink Sheets (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock).

                  4.23 NO INTEGRATED OFFERING. Neither the Company, nor any of
its Subsidiaries or 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 or any of the Related Agreements 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.

                  4.24 STOP TRANSFER. The Securities are restricted securities
as of the date of this Agreement. Neither the Company nor any of its
Subsidiaries will issue any stop transfer order or other order impeding the sale
and delivery of any of the Securities at such time as the Securities are
registered for public sale or an exemption from registration is available,
except as required by state and federal securities laws.

                  4.25 DILUTION. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon exercise of the Warrants is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.

                  4.26 PATRIOT ACT. The Company certifies that, to the best of
Company's knowledge, neither the Company nor any of its Subsidiaries has been
designated, nor is or shall be owned or controlled, by a "suspected terrorist"
as defined in Executive Order 13224. The Company hereby acknowledges that each
of the Creditor Parties seeks to comply with all applicable laws concerning
money laundering and related activities. In furtherance of those efforts, the
Company hereby represents, warrants and covenants that: (i) none of the cash or
property that the Company or any of its Subsidiaries will pay or will contribute
to any Creditor Party has been or shall be derived from, or related to, any
activity that is deemed criminal under United States law; and (ii) no
contribution or payment by the Company or any of its Subsidiaries to any
Creditor Party, to the extent that they are within the Company's and/or its
Subsidiaries' control shall cause any Creditor Party to be in violation of the
United States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly

                                       15
<PAGE>

notify the Agent if any of these representations, warranties or covenants ceases
to be true and accurate regarding the Company or any of its Subsidiaries. The
Company shall provide any Creditor Party all additional information regarding
the Company or any of its Subsidiaries that such Creditor Party deems necessary
or convenient to ensure compliance with all applicable laws concerning money
laundering and similar activities. The Company understands and agrees that if at
any time it is discovered that any of the foregoing representations, warranties
or covenants are incorrect, or if otherwise required by applicable law or
regulation related to money laundering or similar activities, the Creditor
Parties may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
any Purchaser's investment in the Company. The Company further understands that
the Creditor Parties may release confidential information about the Company and
its Subsidiaries and, if applicable, any underlying beneficial owners, to proper
authorities if such Creditor Party, in its sole discretion, determines that it
is in the best interests of such Creditor Party in light of relevant rules and
regulations under the laws set forth in subsection (ii) above.

                  4.27 ERISA. Based upon the Employee Retirement Income Security
Act of 1974 ("ERISA"), and the regulations and published interpretations
thereunder to the Company's knowledge: (i) neither the Company nor any of its
Subsidiaries has engaged in any Prohibited Transactions (as defined in Section
406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code")); (ii) each of the Company and each of its Subsidiaries has met all
applicable minimum funding requirements under Section 302 of ERISA in respect of
its plans; (iii) neither the Company nor any of its Subsidiaries has any
knowledge of any event or occurrence which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Title IV of ERISA to
terminate any employee benefit plan(s); (iv) neither the Company nor any of its
Subsidiaries has any fiduciary responsibility for investments with respect to
any plan existing for the benefit of persons other than the Company's or such
Subsidiary's employees; and (v) neither the Company nor any of its Subsidiaries
has withdrawn, completely or partially, from any multi-employer pension plan so
as to incur liability under the Multiemployer Pension Plan Amendments Act of
1980.

         5. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER. Each Purchaser
hereby represents and warrants, severally and not jointly, to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):

                  5.1 NO SHORTING. Neither such Purchaser nor any of its
affiliates and investment partners has, nor will cause any person or entity, to
directly engage in "short sales" of the Common Stock as long as any Note shall
be outstanding.

                  5.2 REQUISITE POWER AND AUTHORITY. Such Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on such Purchaser's part required for the
lawful execution and delivery of this Agreement and the Related Agreements have
been or will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of such Purchaser, enforceable in accordance with their terms,
except:

                           (a) as limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or other laws of general application
         affecting enforcement of creditors' rights; and

                                       16
<PAGE>

                           (b) as limited by general principles of equity that
         restrict the availability of equitable and legal remedies.

                  5.3 INVESTMENT REPRESENTATIONS. Such Purchaser understands
that the Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon such Purchaser's
representations contained in this Agreement, including, without limitation, that
such Purchaser is an "accredited investor" within the meaning of Regulation D
under the Securities Act. Such Purchaser confirms that it has received or has
had full access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the applicable Note and
Warrant to be purchased by it under this Agreement and the Warrant Shares
acquired by it upon the exercise of such Warrant, respectively. Such Purchaser
further confirms that it has had an opportunity to ask questions and receive
answers from the Company regarding the Company's and its Subsidiaries' business,
management and financial affairs and the terms and conditions of the Offering,
the Notes, the Warrants and the Securities and to obtain additional information
(to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify any information
furnished to such Purchaser or to which such Purchaser had access.

                  5.4 THE PURCHASER BEARS ECONOMIC RISK. Such Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Such Purchaser must bear the
economic risk of this investment until the Securities are sold pursuant to: (i)
an effective registration statement under the Securities Act; or (ii) an
exemption from registration is available with respect to such sale.

                  5.5 ACQUISITION FOR OWN ACCOUNT. Such Purchaser is acquiring
the applicable Note and Warrant and the Warrant Shares for such Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.

                  5.6 THE PURCHASER CAN PROTECT ITS INTEREST. Such Purchaser
represents that by reason of its, or of its management's, business and financial
experience, such Purchaser has the capacity to evaluate the merits and risks of
its investment in the applicable Note, the Warrant and the Securities and to
protect its own interests in connection with the transactions contemplated in
this Agreement and the Related Agreements. Further, such Purchaser is aware of
no publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Related Agreements.

                  5.7 ACCREDITED INVESTOR. Such Purchaser represents that it is
an accredited investor within the meaning of Regulation D under the Securities
Act.

                  5.8      LEGENDS.

                           (a) The applicable Note shall bear substantially the
following legend:

                                       17
<PAGE>

                  "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
                  1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
                  THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
                  STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE
                  SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH REGISTRATION."

                          (b) The applicable Warrant Shares, if not issued by
         DWAC system (as hereinafter defined), shall bear a legend which shall
         be in substantially the following form until such shares are covered by
         an effective registration statement filed with the SEC:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
                  ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
                  SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
                  OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
                  SECURITIES ACT AND APPLICABLE STATE LAWS OR (B) AN EXEMPTION
                  FROM SUCH REGISTRATION."

                         (c) The applicable Warrant shall bear substantially the
         following legend:

                  "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
                  THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
                  STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF
                  COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
                  LAWS OR (B) AN EXEMPTION FROM SUCH REGISTRATION."

         6. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
Creditor Party as follows:

                  6.1 STOP-ORDERS. The Company will, by written notice, advise
the Agent, promptly after it receives notice of issuance by the SEC, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.

                                       18
<PAGE>

                  6.2 LISTING. The Company will maintain the listing or
quotation, as applicable, of its Common Stock on the Principal Market, and will
comply in all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable.

                  6.3 MARKET REGULATIONS. The Company shall notify the SEC, NASD
and applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, 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 applicable Securities to
each Purchaser and promptly provide copies thereof to such Purchaser.

                  6.4 REPORTING REQUIREMENTS. The Company will deliver, or cause
to be delivered, to the Agent each of the following, which shall be in form and
detail acceptable to the Agent:

                           (a) As soon as available, and in any event within
         ninety (90) days after the end of each fiscal year of the Company, the
         Company's and each of its Subsidiaries' audited financial statements
         with a report of independent certified public accountants of recognized
         standing selected by the Company and acceptable to the Agent (the
         "ACCOUNTANTS"), which annual financial statements shall be without
         qualification and shall include the Company's and each of its
         Subsidiaries' balance sheet as at the end of such fiscal year and the
         related statements of the Company's and each of its Subsidiaries'
         income, retained earnings and cash flows for the fiscal year then
         ended, prepared on a consolidating and consolidated basis to include
         the Company, each Subsidiary of the Company and each of their
         respective affiliates, all in reasonable detail and prepared in
         accordance with GAAP, together with (i) if and when available, copies
         of any management letters prepared by the Accountants; and (ii) a
         certificate of the Company's President, Chief Executive Officer or
         Chief Financial Officer stating that such financial statements have
         been prepared in accordance with GAAP and whether or not such officer
         has knowledge of the occurrence of any Event of Default (as defined in
         each Note) and, if so, stating in reasonable detail the facts with
         respect thereto;

                           (b) As soon as available and in any event within
         forty five (45) days after the end of each fiscal quarter of the
         Company, an unaudited/internal balance sheet and statements of income,
         retained earnings and cash flows of the Company and each of its
         Subsidiaries as at the end of and for such quarter and for the year to
         date period then ended, prepared on a consolidating and consolidated
         basis to include all the Company, each Subsidiary of the Company and
         each of their respective affiliates, in reasonable detail and stating
         in comparative form the figures for the corresponding date and periods
         in the previous year, all prepared in accordance with GAAP, subject to
         year-end adjustments and accompanied by a certificate of the Company's
         President, Chief Executive Officer or Chief Financial Officer, stating
         (i) that such financial statements have been prepared in accordance
         with GAAP, subject to year-end audit adjustments, and (ii) whether or
         not such officer has knowledge of the occurrence of any Event of
         Default (as defined in each Note) not theretofore reported and remedied
         and, if so, stating in reasonable detail the facts with respect
         thereto;

                                       19
<PAGE>

                           (c) As soon as available and in any event within
         fifteen (15) days after the end of each calendar month, an
         unaudited/internal balance sheet and statements of income, retained
         earnings and cash flows of the Company and its Subsidiaries as at the
         end of and for such month and for the year to date period then ended,
         prepared on a consolidating and consolidated basis to include the
         Company, each Subsidiary of the Company and each of their respective
         affiliates, in reasonable detail and stating in comparative form the
         figures for the corresponding date and periods in the previous year,
         all prepared in accordance with GAAP, subject to year-end adjustments
         and accompanied by a certificate of the Company's President, Chief
         Executive Officer or Chief Financial Officer, stating (i) that such
         financial statements have been prepared in accordance with GAAP,
         subject to year-end audit adjustments, and (ii) whether or not such
         officer has knowledge of the occurrence of any Event of Default (as
         defined in each Note) not theretofore reported and remedied and, if so,
         stating in reasonable detail the facts with respect thereto;

                           (d) The Company shall timely file with the SEC all
         reports required to be filed pursuant to the Exchange Act and refrain
         from terminating its status as an issuer required by the Exchange Act
         to file reports thereunder even if the Exchange Act or the rules or
         regulations thereunder would permit such termination. Promptly after
         (i) the filing thereof, copies of the Company's most recent
         registration statements and annual, quarterly, monthly or other regular
         reports which the Company files with the SEC, and (ii) the issuance
         thereof, copies of such financial statements, reports and proxy
         statements as the Company shall send to its stockholders;

                           (e) Together with each delivery of any financial
         statement pursuant to Section 6.4(a), 6.4(b) or 6.4(c), a Compliance
         Certificate, substantially in the form of EXHIBIT E hereto, duly
         executed by the President, Chief Executive Officer or Chief Financial
         Officer of the Company that, among other things, (i) states that such
         financial statements have been prepared in accordance with GAAP,
         subject to year-end audit adjustments, and (ii) states that no Event of
         Default (as defined in each Note) is continuing as of the date of
         delivery of such Compliance Certificate or, if an Event of Default is
         continuing, states the nature thereof and the action that the Company
         proposes to take with respect thereto; and

                           (f) The Company shall deliver, or cause the
         applicable Subsidiary of the Company to deliver, such other information
         as any Creditor Party shall reasonably request.

                  6.5 USE OF FUNDS. The Company shall use the proceeds of the
sale of the Notes and the Warrants for general working capital purposes only.

                  6.6 ACCESS TO FACILITIES. The Company and each of its
Subsidiaries will permit any representatives designated by the Agent (or any
successor of the Agent), upon reasonable notice and during normal business
hours, at such person's expense and accompanied by a representative of the
Company or any Subsidiary (provided that no such prior notice shall be required
to be given and no such representative of the Company or any Subsidiary shall be
required to accompany the Agent in the event the Agent believes such access is
necessary to preserve or protect the Collateral (as defined in the Master
Security Agreement) or following the occurrence and during the continuance of an
Event of Default (as defined in each Note)), to:

                                       20
<PAGE>

                           (a) visit and inspect any of the properties of the
         Company or any of its Subsidiaries;

                           (b) examine the corporate and financial records of
         the Company or any of its Subsidiaries (unless such examination is not
         permitted by federal, state or local law or by contract) and make
         copies thereof or extracts therefrom; and

                           (c) discuss the affairs, finances and accounts of the
         Company or any of its Subsidiaries with the directors, officers and
         independent accountants of the Company or any of its Subsidiaries.

Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
will provide any material, non-public information to any Creditor Party unless
such Creditor Party signs a confidentiality agreement and otherwise complies
with Regulation FD, under the federal securities laws.

                  6.7      TAXES.

                           (a) The Company and each of its Subsidiaries will
         promptly pay and discharge, or cause to be paid and discharged, when
         due and payable, all taxes, assessments and governmental charges or
         levies imposed upon the income, profits, property or business of the
         Company and its Subsidiaries; provided, however, that any such tax,
         assessment, charge or levy need not be paid currently if (i) the
         validity thereof shall currently and diligently be contested in good
         faith by appropriate proceedings, (ii) such tax, assessment, charge or
         levy shall have no effect on the lien priority of the Agent in any
         property of the Company or any of its Subsidiaries and (iii) if the
         Company and/or such Subsidiary shall have set aside on its books
         adequate reserves with respect thereto in accordance with GAAP; and
         provided, further, that the Company and its Subsidiaries will pay all
         such taxes, assessments, charges or levies forthwith upon the
         commencement of proceedings to foreclose any lien which may have
         attached as security therefor.

                           (b) All payments made by the Company under this
         Agreement or any Note shall be made free and clear of, and without
         deduction or withholding for or on account of, any present or future
         Taxes (as defined below) now or hereafter imposed, levied, collected,
         withheld or assessed by any Governmental Authority, other than Excluded
         Taxes (as defined below). If any Non-Excluded Taxes (as defined below)
         or Other Taxes (as defined below) are required to be withheld from any
         amounts payable to any Creditor Party under this Agreement or any Note,
         the amounts so payable to such Creditor Party shall be increased to the
         extent necessary to yield to such Creditor Party (after payment of all
         Non-Excluded Taxes and Other Taxes, including those imposed on payments
         made pursuant to this paragraph (b) of this Section 6.7 or any such
         other amounts payable in this Agreement or any Note at the rates or in
         the amounts specified herein or therein), an amount equal to the sum it
         would have received had no such withholding or deductions been made

                                       21
<PAGE>

         provided, however, that no Company shall be required to increase any
         such amounts payable to any Creditor Party with respect to any
         Non-Excluded Taxes that are directly attributable to such Creditor
         Party's failure to comply with the requirements of paragraph (e) of
         this Section 6.7.

                           (c) In addition, the Company shall pay any Other
         Taxes to the relevant Governmental Authority in accordance with
         applicable law.

                           (d) Whenever any Non-Excluded Taxes or Other Taxes
         are payable by the Company, as promptly as possible thereafter the
         Company shall send to the Agent for its own account or for the account
         of the relevant Lender, as the case may be, a certified copy of an
         original official receipt received by the Company showing payment
         thereof (or such other evidence reasonably satisfactory to the Agent).
         If the Company fails to pay any Non-Excluded Taxes or Other Taxes when
         due to the appropriate taxing authority or fails to remit to the Agent
         the required receipts or other required documentary evidence, the
         Company shall indemnify the Creditor Parties for any incremental taxes,
         interest or penalties that may become payable by any Creditor Party as
         a result of any such failure.

                           (e) Each Purchaser (or its assignee) that is not a
         "United States Person" as defined in Section 7701(a)(30) of the Code (a
         "NON-U.S. PURCHASER") shall deliver to the Company and the Agent two
         completed originals of an appropriate U.S. Internal Revenue Service
         Form W-8, as applicable, or any subsequent versions thereof or
         successors thereto, properly completed and duly executed by such
         Non-U.S. Purchaser. Such forms shall be delivered by each Non-U.S.
         Purchaser on or before the date it becomes a party to this Agreement.
         In addition, each Non-U.S. Purchaser shall deliver such forms promptly
         upon the obsolescence or invalidity of any form previously delivered by
         such Non-U.S. Purchaser. Each Non-U.S. Purchaser shall promptly notify
         the Company at any time it determines that it is no longer in a
         position to provide any previously delivered certificate to the Company
         (or any other form of certification adopted by the U.S. taxing
         authorities for such purpose). Notwithstanding any other provision of
         this paragraph (e), a Non-U.S. Purchaser shall not be required to
         deliver any form pursuant to this paragraph that such Non-U.S.
         Purchaser is not legally able to deliver.

                           (f) The agreements in the preceding paragraphs (b),
         (c), (d), (e) and this paragraph (f) shall survive the termination of
         this Agreement and the payment of the Notes and all other amounts
         payable hereunder or thereunder or under any other Related Agreement.

         As used in this Section 6.7, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

         "EXCLUDED TAXES" means, with respect to any Creditor Party, taxes
imposed on or measured by its overall net income and franchise taxes imposed on
it in lieu of net income taxes, by the jurisdiction (or any political
subdivision thereof) under the laws of which such Creditor Party is incorporated
or organized or by the jurisdiction (or any political subdivision thereof) in
which the principal place of management or applicable lending office of such
Creditor Party is located.

                                       22
<PAGE>

         "NON-EXCLUDED TAXES" means all Taxes other than (i) Excluded Taxes and
(ii) Other Taxes.

         "OTHER TAXES" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Related Agreement.

         "TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges, and all
liabilities with respect thereto.

                  6.8 INSURANCE. (i) The Company shall bear the full risk of
loss from any loss of any nature whatsoever with respect to the Collateral (as
defined in each of the Master Security Agreement, the Stock Pledge Agreement and
each other security agreement entered into by the Company and/or any of its
Subsidiaries for the benefit of the Creditor Parties) and the Company and each
of its Subsidiaries will, jointly and severally, bear the full risk of loss from
any loss of any nature whatsoever with respect to the assets pledged to the
Agent, for the ratable benefit of the Creditor Parties, as security for the
Obligations (as defined in the Master Security Agreement). Furthermore, the
Company will insure or cause the Collateral to be insured in the Agent's name as
an additional insured and lender loss payee, with an appropriate loss payable
endorsement in form and substance satisfactory to the Agent, against loss or
damage by fire, flood, sprinkler leakage, theft, burglary, pilferage, loss in
transit and other risks customarily insured against by companies in similar
business similarly situated as the Company and its Subsidiaries including but
not limited to workers compensation, public and product liability and business
interruption, and such other hazards as the Agent shall specify in amounts and
under insurance policies and bonds by insurers acceptable to the Agent and all
premiums thereon shall be paid by the Company and the policies delivered to the
Agent. If the Company or any of its Subsidiaries fails to obtain the insurance
and in such amounts of coverage as otherwise required pursuant to this Section
6.8, the Agent may procure such insurance and the cost thereof shall be promptly
reimbursed by the Company and shall constitute Obligations.

                                    (ii) The Company's insurance coverage shall
                  not be impaired or invalidated by any act or neglect of the
                  Company or any of its Subsidiaries and the insurer will
                  provide the Agent with no less than thirty (30) days notice
                  prior of cancellation;

                                    (iii) The Agent, in connection with its
                  status as a lender loss payee, will be assigned at all times
                  to a first lien position until such time as all the
                  Obligations have been indefeasibly satisfied in full.

                  6.9 INTELLECTUAL PROPERTY.

                           (a) The Company and each of its Subsidiaries shall
         maintain in full force and effect its existence, rights and franchises
         and all licenses and other rights to own or use Intellectual Property
         including registrations and applications therefore, that are necessary

                                       23
<PAGE>

         to the conduct of its business, as now conducted or as presently
         proposed to be conducted, and shall not do any act or omit to do any
         act whereby any of such Intellectual Property may lapse, or become
         abandoned, dedicated to the public, or unenforceable, or the Lien
         therein in favor of the Agent, for the ratable benefit of the Creditor
         Parties, would be adversely affected,

                           (b) The Company shall report to the Agent (i) the
         filing by the Company or any of its Subsidiaries of any application to
         register a Copyright no later than ten (10) days after such filing
         occurs (ii) the filing of any application to register any other
         Intellectual Property with any other Intellectual Property registry,
         and the issuance thereof, no later than thirty (30) days after such
         filing or issuance occurs and, in each case, shall, simultaneously with
         such report, deliver to the Agent fully-executed documents required to
         acknowledge, confirm, register, record or perfect the Lien in such
         Intellectual Property. In addition, the Company and its Subsidiaries
         hereby authorize the Agent to modify this Agreement by amending the
         Supplemental Schedule to include any registrations or applications for
         Intellectual Property inadvertently omitted from such Schedule or
         filed, registered, acquired by the Company or any of its Subsidiaries
         after the date hereof and agree to cooperate with the Agent in
         effecting any such amendment to include any new item of Intellectual
         Property included in the Collateral.

                           (c) The Company shall, and shall cause each of its
         Subsidiaries to, promptly upon the reasonable request of the Agent,
         execute and deliver to the Agent any document or instrument required to
         acknowledge, confirm, register, record, or perfect the Lien of the
         Agent in any part of the Intellectual Property owned by the Company and
         its Subsidiaries.

                           (d) The Company shall, and shall cause of each of its
         Subsidiaries to, not sell, assign, transfer, license, grant any option,
         or create or suffer to exist any Lien upon or with respect to
         Intellectual Property, except for the Permitted Encumbrances.

                  6.10 PROPERTIES. The Company and each of its Subsidiaries will
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and each of the
Company and each of its Subsidiaries will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

                  6.11 CONFIDENTIALITY. The Company will not, and will not
permit any of its Subsidiaries to, disclose, and will not include in any public
announcement, the name of any Creditor Party, unless expressly agreed to by such
Creditor Party or unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
Notwithstanding the foregoing, (i) the Company may disclose any Creditor Party's
identity and the terms of this Agreement and the Related Agreements to its
current and prospective debt and equity financing sources, and (ii) the Company
(and each employee, representative, or other agent of the Company) may disclose
to any and all Persons, without limitation of any kind, the tax treatment and
any facts that may be relevant to the tax structure of the transactions
contemplated by this Agreement and the Related Agreements and the agreements
referred to therein; provided, however, that the Company (and no employee,
representative or other agent of the Company) disclose pursuant to this clause
(ii) any other information that is not relevant to understanding the tax

                                       24
<PAGE>

treatment or tax structure of such transactions (including the identity of any
party or any information that could lead another to determine the identity of
any party); and, provided, further, that the Company will not, and will not
permit any of its Subsidiaries to, disclose any information to the extent that
such disclosure could reasonably be expected to result in a violation of any
U.S. federal or state securities law or similar law of another jurisdiction.
Each Creditor Party shall be permitted to discuss, distribute or otherwise
transfer any non-public information of the Company and its Subsidiaries in such
Creditor Party's possession now or in the future to potential or actual (i)
direct or indirect investors in such Creditor Party and (ii) third party
assignees or transferees of all or a portion of the obligations of the Company
and/or any of its Subsidiaries hereunder and under the Related Agreements.

                  6.12 REQUIRED APPROVALS. (I) The Company, without the prior
written consent of the Agent, shall not, and shall not permit any of its
Subsidiaries to:

                           (a) (i) directly or indirectly declare or pay any
         dividends, other than dividends paid to the Company or any of its
         wholly-owned Subsidiaries or dividends otherwise permitted to be paid,
         if any, on the Company's Series A Preferred Stock, , (ii) issue any
         preferred stock that is mandatorily redeemable prior to the one year
         anniversary of the Maturity Date (as defined in each Note) or (iii)
         redeem any of its preferred stock or other equity interests;

                           (b) liquidate, dissolve or effect a material
         reorganization (it being understood that in no event shall the Company
         or any of its Subsidiaries dissolve, liquidate or merge with any other
         person or entity (unless, in the case of such a merger, the Company or,
         in the case of merger not involving the Company, such Subsidiary, as
         applicable, is the surviving entity);

                           (c) become subject to (including, without limitation,
         by way of amendment to or modification of) any agreement or instrument
         which by its terms would (under any circumstances) restrict the
         Company's or any of its Subsidiaries, right to perform the provisions
         of this Agreement, any Related Agreement or any of the agreements
         contemplated hereby or thereby;

                           (d) materially alter or change the scope of the
         business of the Company and its Subsidiaries taken as a whole; or

                           (e) (i) create, incur, assume or suffer to exist any
         indebtedness (exclusive of trade debt and debt incurred to finance the
         purchase of equipment (not in excess of five percent (5%) of the fair
         market value of the Company's and its Subsidiaries' assets)) whether
         secured or unsecured other than (x) the Company's obligations owed to
         each Purchaser, (y) indebtedness set forth on the Supplemental Schedule

                                       25
<PAGE>

         AND attached hereto and made a part hereof and any refinancings or
         replacements thereof on terms no less favorable to the Purchasers than
         the indebtedness being refinanced or replaced, and (z) any indebtedness
         incurred in connection with the purchase of assets (other than
         equipment) in the ordinary course of business, or any refinancings or
         replacements thereof on terms no less favorable to the Purchasers than
         the indebtedness being refinanced or replaced, so long as any lien
         relating thereto shall only encumber the fixed assets so purchased and
         no other assets of the Company or any of its Subsidiaries; (ii) cancel
         any indebtedness owing to it in excess of $50,000 in the aggregate
         during any twelve (12) month period; (iii) assume, guarantee, endorse
         or otherwise become directly or contingently liable in connection with
         any obligations of any other person or entity, except the endorsement
         of negotiable instruments by the Company or any Subsidiary thereof for
         deposit or collection or similar transactions in the ordinary course of
         business or guarantees of indebtedness otherwise permitted to be
         outstanding pursuant to this clause (e); (iv) make any payment or
         distribution in respect of any subordinated indebtedness of the Company
         or its Subsidiaries in violation of any subordination or other
         agreement made in favor of any Creditor Party; and (v) make any
         optional payment or prepayment on or redemption (including, without
         limitation, by making payments to a sinking fund or analogous fund) or
         repurchase of any indebtedness for borrowed money other than
         indebtedness pursuant to this Agreement; and

         (II) The Company, without the prior written consent of the Agent, shall
not, and shall not permit any of its Subsidiaries to, create or acquire any
Subsidiary after the date hereof unless (i) such Subsidiary is a wholly-owned
Subsidiary of the Company and (ii) such Subsidiary becomes a party to (A) the
Master Security Agreement, the Stock Pledge Agreement and the Intellectual
Property Security Agreement (either by executing a counterpart thereof or an
assumption or joinder agreement in respect thereof); (B) a Subsidiary Guaranty
in favor of the Purchasers in form and substance satisfactory to the Agent and
(c) to the extent required by the Agent, satisfies each condition of this
Agreement and the Related Agreements as if such Subsidiary were a Subsidiary on
the Closing Date.

                  6.13 REISSUANCE OF SECURITIES. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.8 above at such time as:

                           (a) the holder thereof is permitted to dispose of
         such Securities pursuant to Rule 144(k) under the Securities Act; or

                           (b) upon resale subject to an effective registration
         statement after such Securities are registered under the Securities
         Act.

The Company agrees to cooperate with the Purchasers in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the applicable Purchasers and broker,
if any.

                  6.14 OPINION. Within thirty (30) days of the Closing Date, the
Company will deliver to the Creditor Parties substantially in the form of
EXHIBIT C hereto an opinion acceptable to the Agent from the Company's external
legal counsel. The Company will provide, at the Company's expense, such other
legal opinions in the future as are deemed reasonably necessary by the Agent
(and acceptable to the Agent) in connection with the conversion of any Note and
exercise of the any Warrant.

                                       26
<PAGE>

                  6.15 MARGIN STOCK. The Company will not permit any of the
proceeds of the Notes or the Warrants to be used directly or indirectly to
"purchase" or "carry" "margin stock" or to repay indebtedness incurred to
"purchase" or "carry" "margin stock" within the respective meanings of each of
the quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect.

                  6.16 FIRPTA. Neither the Company, nor any of its Subsidiaries,
is a "United States real property holding corporation" as such term is defined
in Section 897(c)(2) of the Code and Treasury Regulation Section 1.897-2
promulgated thereunder and neither the Company nor any of its Subsidiaries shall
at any time take any action or otherwise acquire any interest in any asset or
property to the extent the effect of which shall cause the Company and/or such
Subsidiary, as the case may be, to be a "United States real property holding
corporation" as such term is defined in Section 897(c)(2) of the Code and
Treasury Regulation Section 1.897-2 promulgated thereunder.

                  6.17     FINANCING RIGHT OF FIRST REFUSAL.

                           (a) The Company hereby grants to the Purchasers a
         right of first refusal to provide any Additional Financing (as defined
         below) to be issued by the Company and/or any of its Subsidiaries,
         subject to the following terms and conditions. From and after the date
         hereof, prior to the incurrence of any additional indebtedness and/or
         the sale or issuance of any equity interests of the Company or any of
         its Subsidiaries (an "ADDITIONAL FINANCING"), the Company and/or any
         Subsidiary of the Company, as the case may be, shall notify the Agent
         of its intention to enter into such Additional Financing. In connection
         therewith, the Company and/or the applicable Subsidiary thereof shall
         submit a term sheet (a "PROPOSED TERM SHEET") to the Agent setting
         forth the terms, conditions and pricing of any such Additional
         Financing (such financing to be negotiated on "arm's length" terms and
         the terms thereof to be negotiated in good faith) proposed to be
         entered into by the Company and/or such Subsidiary. The Agent shall
         have the right, but not the obligation, to deliver its own proposed
         term sheet (the "PURCHASER TERM SHEET") setting forth the terms and
         conditions upon which the Purchasers would be willing to provide such
         Additional Financing to the Company and/or such Subsidiary. The
         Purchaser Term Sheet shall contain terms no less favorable to the
         Company and/or such Subsidiary than those outlined in Proposed Term
         Sheet. The Agent shall deliver such Purchaser Term Sheet within ten
         (10) business days of receipt of each such Proposed Term Sheet. If the
         provisions of the Purchaser Term Sheet are at least as favorable to the
         Company and/or such Subsidiary, as the case may be, as the provisions
         of the Proposed Term Sheet, the Company and/or such Subsidiary shall
         enter into and consummate the Additional Financing transaction outlined
         in the Purchaser Term Sheet.

                                       27
<PAGE>

                           (b) The Company will not, and will not permit its
         Subsidiaries to, agree, directly or indirectly, to any restriction with
         any person or entity which limits the ability of the Purchasers to
         consummate an Additional Financing with the Company or any of its
         Subsidiaries.

                  6.18 AUTHORIZATION AND RESERVATION OF SHARES. The Company
shall at all times have authorized and reserved a sufficient number of shares of
Common Stock to provide for the conversion of the Notes and exercise of the
Warrants.

         7. COVENANTS OF THE PURCHASERS. Each Purchaser covenants and agrees
with the Company as follows:

                  7.1 CONFIDENTIALITY. No Purchaser will disclose, nor will it
include in any public announcement, the name of the Company, unless expressly
agreed to by the Company or unless and until such disclosure is required by law
or applicable regulation, and then only to the extent of such requirement. The
Supplemental Schedule may include confidential information of the Company and
Purchasers shall keep all such information confidential and not disclose any
such information, unless compelled by applicable law or regulation, without the
prior written consent of the Company or until such time as the Company publicly
discloses such information.

                  7.2 NON-PUBLIC INFORMATION. No Purchaser will effect any sales
in the shares of the Common Stock while in possession of material, non-public
information regarding the Company if such sales would violate applicable
securities law.

                  7.3 LIMITATION ON ACQUISITION OF COMMON STOCK OF THE COMPANY.
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions entered into by a Purchaser and the
Company (and/or Subsidiaries or Affiliates of the Company), such Purchaser
(and/or Subsidiaries or Affiliates of such Purchaser) shall not acquire stock in
the Company (including, without limitation, pursuant to a contract to purchase,
by exercising an option or warrant, by converting any other security or
instrument, by acquiring or exercising any other right to acquire, shares of
stock or other security convertible into shares of stock in the Company, or
otherwise, and such contracts, options, warrants, conversion or other rights
shall not be enforceable or exercisable) to the extent such stock acquisition
would cause any interest (including any original issue discount) payable by the
Company to a Non-U.S. Purchaser not to qualify as "portfolio interest" within
the meaning of Section 871(h)(2) or Section 881(c)(2) of the Code, by reason of
Section 871(h)(3) or Section 881(c)(3)(B) of the Code, as applicable, taking
into account the constructive ownership rules under Section 871(h)(3)(C) of the
Code (the "STOCK ACQUISITION LIMITATION"). The Stock Acquisition Limitation
shall automatically become null and void with respect to a Purchaser, without
any notice to the Company, on and after the first date upon which such Purchaser
and each of its Affiliates which qualify as a Non-U.S. Purchaser no longer owns
any indebtedness (including, without limitation, principal, interest, fees and
charges) of the Company.

         8. COVENANTS OF THE COMPANY AND THE PURCHASERS REGARDING
INDEMNIFICATION.

                  8.1 COMPANY INDEMNIFICATION. The Company agrees to indemnify,
hold harmless, reimburse and defend each Creditor Party, each of such Creditor
Party's officers, directors, agents, affiliates, control persons, and principal

                                       28
<PAGE>

shareholders, against all claims, costs, expenses, liabilities, obligations,
losses or damages (including reasonable legal fees) of any nature, incurred by
or imposed upon such Creditor Party which result, arise out of or are based
upon: (i) any misrepresentation by the Company or any of its Subsidiaries or
breach of any warranty by the Company or any of its Subsidiaries in this
Agreement, any other Related Agreement or in any exhibits or schedules attached
hereto or thereto; or (ii) any breach or default in performance by Company or
any of its Subsidiaries of any covenant or undertaking to be performed by
Company or any of its Subsidiaries hereunder, under any other Related Agreement
or any other agreement entered into by the Company and/or any of its
Subsidiaries and such Creditor Party relating hereto or thereto.

                  8.2 PURCHASER INDEMNIFICATION. Each Purchaser Party agrees to
indemnify, hold harmless, reimburse and defend the Company and each of the
Company's officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which result, arise out of or are based
upon: (i) any misrepresentation by such Purchaser or breach of any warranty by
such Purchaser in this Agreement or in any exhibits or schedules attached hereto
or any Related Agreement; or (ii) any breach or default in performance by such
Purchaser of any covenant or undertaking to be performed by such Purchaser
hereunder, or any other agreement entered into by the Company and such Purchaser
relating hereto.

         9.       OFFERING RESTRICTIONS.

                  9.1 OFFERING RESTRICTIONS. Except as previously disclosed in
the SEC Reports or in the Exchange Act Filings, or stock or stock options
granted to employees or directors of the Company (these exceptions hereinafter
referred to as the "EXCEPTED ISSUANCES"), neither the Company nor any of its
Subsidiaries will, prior to the full repayment of the Notes (together with all
accrued and unpaid interest and fees related thereto), (x) enter into any equity
line of credit agreement or similar agreement or (y) issue, or enter into any
agreement to issue, any securities with a variable/floating conversion and/or
pricing feature which are or could be (by conversion or registration)
free-trading securities (i.e. common stock subject to a registration statement).

         10.      MISCELLANEOUS.

                  10.1     GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.

                           (a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS
         SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
         LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
         PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
         LAWS.

                           (b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE
         STATE AND/OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF
         NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
         CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND ANY

                                       29
<PAGE>

         CREDITOR PARTY, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY
         OF THE RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO
         THIS AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT
         EACH CREDITOR PARTY AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM
         THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE
         COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT,
         NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY
         CREDITOR PARTY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
         OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
         COLLATERAL (AS DEFINED IN THE MASTER SECURITY AGREEMENT) OR ANY OTHER
         SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY
         AGREEMENT), OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
         ANY CREDITOR PARTY. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
         ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
         SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY
         HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
         NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
         SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
         AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS
         MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT
         THE ADDRESS SET FORTH IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE
         DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT
         THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
         POSTAGE PREPAID.

                           (c) THE PARTIES DESIRE THAT THEIR DISPUTES BE
         RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
         ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM
         AND/OR OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY
         JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
         WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN ANY CREDITOR
         PARTY AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR
         INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
         WITH THIS AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS
         RELATED HERETO OR THERETO.

                  10.2 SEVERABILITY. Wherever possible each provision of this
Agreement and the Related Agreements shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement or any Related Agreement shall be prohibited by or invalid or illegal
under applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity or illegality, without invalidating the remainder of
such provision or the remaining provisions thereof which shall not in any way be
affected or impaired thereby.

                                       30
<PAGE>

                  10.3 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Creditor
Party and the closing of the transactions contemplated hereby to the extent
provided therein. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument. All indemnities set forth herein
shall survive the execution, delivery and termination of this Agreement and the
Notes and the making and repayment of the obligations arising hereunder, under
the Notes and under the other Related Agreements.

                  10.4     SUCCESSORS.

                           (a) Except as otherwise expressly provided herein,
         the provisions hereof shall inure to the benefit of, and be binding
         upon, the successors, heirs, executors and administrators of the
         parties hereto and shall inure to the benefit of and be enforceable by
         each person or entity which shall be a holder of the Securities from
         time to time, other than the holders of Common Stock which has been
         sold by any Purchaser pursuant to Rule 144 or an effective registration
         statement. Each Purchaser may assign any or all of the Obligations to
         any Person and, subject to acceptance and recordation thereof by the
         Agent pursuant to Section 11.4(b) and receipt by the Agent of a copy of
         the agreement or instrument pursuant to which such assignment is made
         (each such agreement or instrument, an "Assignment Agreement"), any
         such assignee shall succeed to all of such Purchaser's rights with
         respect thereto; provided that no Purchaser shall be permitted to
         assign its rights hereunder or under any Related Agreement to a direct
         competitor of the Company unless an Event of Default (as defined in
         each Note) has occurred and is continuing. Upon such assignment, such
         Purchaser shall be released from all responsibility for the Collateral
         (as defined in the Master Security Agreement, the Stock Pledge
         Agreement and each other security agreement, mortgage, cash collateral
         deposit letter, pledge and other agreements which are executed by the
         Company or any of its Subsidiaries in favor of any Creditor Party) to
         the extent same is assigned to any transferee. Each Purchaser may from
         time to time sell or otherwise grant participations in any of the
         Obligations (as defined in the Master Security Agreement) and the
         holder of any such participation shall, subject to the terms of any
         agreement between such Purchaser and such holder, be entitled to the
         same benefits as such Purchaser with respect to any security for the
         Obligations (as defined in the Master Security Agreement) in which such
         holder is a participant. The Company agrees that each such holder may
         exercise any and all rights of banker's lien, set-off and counterclaim
         with respect to its participation in the Obligations (as defined in the
         Master Security Agreement) as fully as though the Company were directly
         indebted to such holder in the amount of such participation. The
         Company may not assign any of its rights or obligations hereunder
         without the prior written consent of the Agent. All of the terms,
         conditions, promises, covenants, provisions and warranties of this
         Agreement shall inure to the benefit of each of the undersigned, and
         shall bind the representatives, successors and permitted assigns of the
         Company.

                                       31
<PAGE>

                           (b) The Agent shall maintain, or cause to be
         maintained, for this purpose only as agent of the Company, (i) a copy
         of each Assignment Agreement delivered to it and (ii) a book entry
         system, within the meaning of U.S. Treasury Regulation Sections
         15f.103-1(c) and 1.871-14(c) (the "REGISTER"), in which it will
         register the name and address of each Purchase and the name and address
         of each assignee of each Purchaser under this Agreement, and the
         principal amount of, and stated interest on, the Notes owing to each
         such Purchaser and assignee pursuant to the terms hereof and each
         Assignment Agreement. The right, title and interest of the Purchasers
         and their assignees in and to such Notes shall be transferable only
         upon notation of such transfer in the Register, and no assignment
         thereof shall be effective until recorded therein. The Company and each
         Creditor Party shall treat each Person whose name is recorded in the
         Register as a Purchaser pursuant to the terms hereof as a Purchaser and
         owner of an interest in the Obligations hereunder for all purposes of
         this Agreement, notwithstanding notice to the contrary or any notation
         of ownership or other writing or any Note. The Register shall be
         available for inspection by the Company or any Purchaser, at any
         reasonable time and from time to time, upon reasonable prior notice.

                  10.5 ENTIRE AGREEMENT; MAXIMUM INTEREST. This Agreement, the
Related Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein. Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Company to the Purchasers and thus refunded to the Company.

                  10.6     AMENDMENT AND WAIVER.

                           (a) This Agreement may be amended or modified only
         upon the written consent of the Company and the Agent.

                           (b) The obligations of the Company and the rights of
         the Creditor Parties under this Agreement may be waived only with the
         written consent of the Agent.

                           (c) The obligations of the Creditor Parties and the
         rights of the Company under this Agreement may be waived only with the
         written consent of the Company.

                  10.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance

                                       32
<PAGE>

thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.

                  10.8 NOTICES. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given:

                           (a) upon personal delivery to the party to be
         notified;

                           (b) when sent by confirmed facsimile if sent during
         normal business hours of the recipient, if not, then on the next
         business day;

                           (c) three (3) business days after having been sent by
         registered or certified mail, return receipt requested, postage
         prepaid; or

                           (d) one (1) day after deposit with a nationally
         recognized overnight courier, specifying next day delivery, with
         written verification of receipt.

All communications shall be sent as follows:

         If to the Company, to:         Retail Pro, Inc.
                                        3252 Holiday Court, Suite 226
                                        La Jolla, CA, 92037
                                        Attention: Barry Schechter, CEO
                                        Facsimile No.: 858- 550-3359

         with a copy to:                Solomon Ward Seidenwurm & Smith
                                        401 B Street, Suite 1200
                                        San Diego CA 92101
                                        Attention: Harry J. Proctor, Esq.
                                        Facsimile No.: 619-231-4755

         If to the Agent, to:           LV Administrative Services, Inc.
                                        c/o Laurus Capital Management, LLC
                                        335 Madison Avenue, 10th Floor
                                        New York, NY 10017
                                        Facsimile No.:  212-581-5037

                                       33
<PAGE>

         with a copy to:                Loeb & Loeb, LLP
                                        345 Park Avenue
                                        New York, NY 10154
                                        Attention: Scott J. Giordano, Esq.
                                        Facsimile No.: 212-407-4990

         If to a Purchaser:             To the address indicated under its
                                        signature on the signature pages hereto

or at such other address as the Company or the applicable Creditor Party may
designate by written notice to the other parties hereto given in accordance
herewith.

                  10.9 ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement or any Related Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement and/or such Related
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

                  10.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

                  10.11 SIGNATURES; COUNTERPARTS. This Agreement may be executed
by facsimile or electronic signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.

                  10.12 BROKER'S FEES. Except as set forth on the SUPPLEMENTAL
SCHEDULE hereof, each party hereto represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of or under the
authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 10.12 being
untrue.

                                       34
<PAGE>

                  10.13 CONSTRUCTION. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Agreement or any Related Agreement to favor any
party against the other.

                  10.14 AGENCY. Each Purchaser has pursuant to an Administrative
and Collateral Agency Agreement designated and appointed the Agent as the
administrative and collateral agent of such Purchaser under this Agreement and
the Related Agreements.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       35
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANY:                                        PURCHASER:

RETAIL PRO, INC.                                VALENS OFFSHORE SPV II, CORP.

By:_______________________________              By: ____________________________
   Name:                                            Name:
   Title:                                           Title:

AGENT:

LV ADMINISTRATIVE SERVICES, INC.,
as Agent

By:_______________________________
   Name:
   Title:

                                                               SIGNATURE PAGE TO
                                                   SECURITIES PURCHASE AGREEMENT

<PAGE>

                                    EXHIBIT A

                                FORM OF TERM NOTE

<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

<PAGE>

                                    EXHIBIT C

                                 FORM OF OPINION

         1. The Company and each of its Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted.

         2. The Company and each of its Subsidiaries has the requisite corporate
power and authority to execute, deliver and perform its obligations under the
Agreement and the Related Agreements. All corporate action on the part of the
Company and each of its Subsidiaries and its officers, directors and
stockholders necessary has been taken for: (i) the authorization of the
Agreement and the Related Agreements and the performance of all obligations of
the Company and each of its Subsidiaries thereunder; and (ii) the authorization,
sale, issuance and delivery of the Securities pursuant to the Agreement and the
Related Agreements. The [Note Shares and the] Warrant Shares, when issued
pursuant to and in accordance with the terms of the Agreement and the Related
Agreements and upon delivery shall be validly issued and outstanding, fully paid
and non assessable.

         3. The execution, delivery and performance by the Company and each of
its Subsidiaries of the Agreement and the Related Agreements (to which it is a
party) and the consummation of the transactions on its part contemplated by any
thereof, will not, with or without the giving of notice or the passage of time
or both:

                  (a) Violate the provisions of their respective Charter or
bylaws; or

                  (b) Violate any judgment, decree, order or award of any court
         binding upon the Company or any of its Subsidiaries; or

                  (c) Violate any [insert jurisdictions in which counsel is
         qualified] or federal law

         4. The Agreement and the Related Agreements will constitute, valid and
legally binding obligations of the Company and each of its Subsidiaries (to the
extent such entity is a party thereto), and are enforceable against the Company
and each of its Subsidiaries party thereto in accordance with their respective
terms, except:

                  (a) as limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or other laws of general application
         affecting enforcement of creditors' rights; and

                  (b) general principles of equity that restrict the
         availability of equitable or legal remedies.

<PAGE>

         5. To such counsel's knowledge, the sale of each Note are not subject
to any preemptive rights or rights of first refusal that have not been properly
waived or complied with. To such counsel's knowledge, the sale of the Warrants
and the subsequent exercise of the Warrants for Warrant Shares are not subject
to any preemptive rights or, to such counsel's knowledge, rights of first
refusal that have not been properly waived or complied with.

         6. Assuming the accuracy of the representations and warranties of each
Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities on the Closing Date will be exempt from the registration requirements
of the Securities Act. To such counsel's knowledge, 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 and security under circumstances that would cause the offering of the
Securities pursuant to the Agreement or any Related 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.

         7. There is no action, suit, proceeding or investigation pending or, to
such counsel's knowledge, currently threatened against the Company or any of its
Subsidiaries that prevents the right of the Company or any of its Subsidiaries
to enter into this Agreement or any Related Agreement, or to consummate the
transactions contemplated thereby. To such counsel's knowledge, the Company is
not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality; nor is
there any action, suit, proceeding or investigation by the Company currently
pending or which the Company intends to initiate.

         8. The terms and provisions of the Master Security Agreement [and the
Stock Pledge Agreement create a valid security interest in favor of the Agent,
in the respective rights, title and interests of the Company and its
Subsidiaries in and to the Collateral (as defined in each of the Master Security
Agreement and the Stock Pledge Agreement). Each UCC-1 Financing Statement naming
the Company or any Subsidiary thereof as debtor and the Agent as secured party
are in proper form for filing and assuming that such UCC-1 Financing Statements
have been filed with the Secretary of State of Delaware, the security interest
created under the Master Security Agreement will constitute a perfected security
interest under the Uniform Commercial Code in favor of the Agent in respect of
the Collateral that can be perfected by filing a financing statement. After
giving effect to the delivery to the Agent of the stock certificates
representing the ownership interests of each Subsidiary of the Company (together
with effective endorsements) and assuming the continued possession by the Agent
of such stock certificates in the State of New York, the security interest
created in favor of the Agent under the Stock Pledge Agreement constitutes a
valid and enforceable first perfected security interest in such ownership
interests (and the proceeds thereof) in favor of the Agent, subject to no other
security interest. No filings, registrations or recordings are required in order
to perfect (or maintain the perfection or priority of) the security interest
created under the Stock Pledge Agreement in respect of such ownership
interests].

<PAGE>

                                    EXHIBIT D

                            FORM OF ESCROW AGREEMENT

<PAGE>

                                    EXHIBIT E

                         FORM OF COMPLIANCE CERTIFICATE

                                 [See Attached]

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