Document:

Exhibit 10.1

    

      SECURITIES
        PURCHASE AGREEMENT

      

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of October 20, 2005, among eMagin Corporation, a Delaware corporation
        (the “Company”),
        and
        each purchaser identified on the signature pages hereto (each, including
        its
        successors and assigns, a “Purchaser”
        and
        collectively the “Purchasers”).

      

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

      

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

      

      ARTICLE
        I.

      DEFINITIONS

      

      1.1 Definitions

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

      

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

      

      “Affiliate”
        means
        any Person that, directly or indirectly through one or more intermediaries,
        controls or is controlled by or is under common control with a Person as
        such
        terms are used in and construed under Rule 144 under the Securities Act.
        With
        respect to a Purchaser, any investment fund or managed account that is managed
        on a discretionary basis by the same investment manager as such Purchaser
        will
        be deemed to be an Affiliate of such Purchaser.

      

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

      

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

      

      “Closing
        Date”
        means
        the Trading Day when all of the Transaction Documents have been executed
        and
        delivered by the applicable parties thereto, and all conditions set forth
        in
        Sections 2.3 hereof are satisfied, or such other date as the parties may
        agree.

      

      “Closing
        Price”
        means
        on any particular date (a) the last reported closing bid price per
        share of
        Common Stock on such date on the Trading Market (as reported by Bloomberg
        L.P.
        at 4:15 PM (Eastern Time)), or (b) if there is no such price on such date,
        then
        the closing bid price on the Trading Market on the date nearest preceding
        such
        date (as reported by Bloomberg L.P. at 4:15 PM (Eastern Time)), or (c) if
        the Common Stock is not then listed or quoted on the Trading Market and if
        prices for the Common Stock are then reported in the “pink sheets” published by
        the National Quotation Bureau Incorporated (or a similar organization or
        agency
        succeeding to its functions of reporting prices), the most recent bid price
        per
        share of the Common Stock so reported, or (d) if the shares of Common
        Stock
        are not then publicly traded the fair market value of a share of Common Stock
        as
        determined by an appraiser selected in good faith by the Purchasers of a
        majority in interest of the Shares then outstanding.

       

      
 

      
        
          
          

        

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

      

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

      

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

      

      “Company
        Counsel”
        means
        Sichenzia Ross Friedman Ference LLP.

      

      “Disclosure
        Schedules”
        means
        the Disclosure Schedules of the Company delivered concurrently herewith.
        

      

      “Effective
        Date”
        means
        the date that the initial Registration Statement filed by the Company pursuant
        to the Registration Rights Agreement is first declared effective by the
        Commission.

      

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

      

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

      

      “Exempt
        Issuance”
        means
        the issuance of (a) shares of Common Stock or options to employees, officers,
        directors or consultants of the Company pursuant to (i) any existing stock
        or
        option plan, or (ii) any stock or option plan duly adopted by a majority
        of the
        non-employee members of the Board of Directors of the Company or a majority
        of
        the members of a committee of non-employee directors established for such
        purpose, (b) the issuance of shares of Common Stock under the Company’s existing
        Non-Employee Stock Compensation Plan, (c) options issued to new employees
        pursuant to the rules and regulations of The American Stock Exchange, (d)
        securities upon the exercise or exchange of or conversion of any Securities
        issued hereunder and/or securities exercisable or exchangeable for or
        convertible into shares of Common Stock issued and outstanding on the date
        of
        this Agreement, provided that such securities have not been amended since
        the
        date of this Agreement to increase the number of such securities or to decrease
        the exercise, exchange or conversion price of any such securities, and (e)
        securities issued pursuant to acquisitions or strategic transactions, provided
        any such issuance shall only be to a Person which is, itself or through its
        subsidiaries, an operating company in a business synergistic with the business
        of the Company and in which the Company receives benefits in addition to
        the
        investment of funds, but shall not include a transaction in which the Company
        is
        issuing securities primarily for the purpose of raising capital or to an
        entity
        whose primary business is investing in securities.

       

      
 

      
        
          
          

        

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

      

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

      

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

      

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

      

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

      

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

      

      “Per
        Share Purchase Price”
        equals
        $0.55.

      

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

      

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

      

      “Purchaser
        Party”
        shall
        have the meaning ascribed to such term in Section 4.9.

      

      “Registration
        Rights Agreement”
        means
        the Registration Rights Agreement, dated the date hereof, among the Company
        and
        the Purchasers, in the form of Exhibit
        A
        attached
        hereto.

      

      “Registration
        Statement”
        means a
        registration statement meeting the requirements set forth in the Registration
        Rights Agreement and covering the resale by the Purchasers of the Shares
        and the
        Warrant Shares. 

      

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

       

      
 

      
        
          
          

        

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

      

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

      

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

      

      “Securities
        Act”
        means
        the Securities Act of 1933, as amended.

      

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

      

      “Short
        Sales”
        shall
        include, without limitation, all “short sales” as defined in Rule 200
        promulgated under Regulation SHO under the Exchange Act and all types of
        direct
        and indirect stock pledges, forward sale contracts, options, puts, calls,
        swaps
        and similar arrangements (including on a total return basis), and sales and
        other transactions through non-US broker dealers or foreign regulated
        brokers. 

      

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

      

      “Subsidiary”
        means
        any subsidiary of the Company as set forth on Schedule
        3.1(a).

      

      “Trading
        Day”
        means
        (i) a day on which the Common Stock is traded on a Trading Market, or (ii)
        if
        the Common Stock is not quoted on any Trading Market, a day on which the
        Common
        Stock is quoted in the over-the-counter market as reported by the Pink Sheets,
        LLC (or any similar organization or agency succeeding to its functions of
        reporting prices); provided, that in the event that the Common Stock is not
        listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall
        mean a Business Day.

      

      “Trading
        Market”
        means
        whichever of the New York Stock Exchange, the American Stock Exchange, the
        NASDAQ National Market, the NASDAQ SmallCap Market or OTC Bulletin Board
        on
        which the Common Stock is listed or quoted for trading on the date in
        question.

      

      “Transaction
        Documents”
        means
        this Agreement, the Warrants, the Registration Rights Agreement, the Escrow
        Agreement and any other documents or agreements executed in connection with
        the
        transactions contemplated hereunder.

      

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

       

      
 

      
        
          
          

        

        
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      “Warrants”
        means
        collectively the Common Stock purchase warrants, in the form of Exhibit
        C
        delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
        hereof, two-thirds of which Warrants shall be exercisable commencing seven
        months from the Closing Date and the balance of which will become exercisable,
        if at all, on March 31, 2007, and have a term of exercise equal to five years
        from the Closing Date.

      

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

      

      ARTICLE
        II.

      PURCHASE
        AND SALE

      

      2.1  
         Closing.
        On the Closing Date, upon the terms and subject to the conditions set forth
        herein, concurrent with the execution and delivery of this Agreement by the
        parties hereto, the Company agrees to sell, and each Purchaser agrees to
        purchase in the aggregate, severally and not jointly, up to $9,100,000 of
        Shares
        and Warrants. Subject to the terms and conditions set forth in this Agreement,
        each Purchaser shall deliver to the Company via wire transfer or a certified
        check immediately available funds equal to their Subscription Amount and
        the
        Company shall deliver to each Purchaser their respective Shares and Warrants
        as
        determined pursuant to Section 2.2(a) and the other items set forth in Section
        2.2 issuable at the Closing. Upon satisfaction of the conditions set forth
        in
        Sections 2.2 and 2.3, the Closing shall occur at the offices of Sichenzia
        Ross
        Friedman Ference LLP, or such other location as the parties shall mutually
        agree.

      

      2.2  
         Deliveries.

      

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

      

      (i) this
        Agreement duly executed by the Company;

      

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

       

      
        
          
          

        

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

      

      (iv) a
        Warrant
        registered in the name of such Purchaser to purchase up to a number of shares
        of
        Common Stock equal to 60% of the number of Shares purchased, with an exercise
        price equal to $1.00 subject to adjustment therein;

      

      (v) the
        Lockup Agreement in the form of Exhibit D hereto executed by each director
        and
        each of the five senior executive officers named as such in the Company’s most
        recent proxy statement; and

      

      (vi) the
        Registration Rights Agreement duly executed by the Company.

      

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

      

      (i) this
        Agreement duly executed by such Purchaser;

      

      (ii) such
        Purchaser’s Subscription Amount by wire transfer to the account as specified in
        writing by the Company; and

      

      (iii) the
        Registration Rights Agreement duly executed by such Purchaser.

      

      2.3  
         Closing
        Conditions. 

      

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

      

      (i) the
        accuracy in all material respects when made and on the Closing Date of the
        representations and warranties of the Purchasers contained herein; 

      

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

      

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

      

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

      

      (i) the
        accuracy in all material respects when made and on the Closing Date of the
        representations and warranties of the Company contained herein;

       

      
 

      
        
          
          

        

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

      

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

      

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

      

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

      

      ARTICLE
        III.

      REPRESENTATIONS
        AND WARRANTIES

      

      3.1  
         Representations
        and Warranties of the Company. 

       

      Except
        as
        set forth under the corresponding section of the Disclosure Schedules which
        Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
        the
        representations and warranties set forth below to each Purchaser:

      

      (a) Subsidiaries.
        All
        direct and indirect subsidiaries of the Company are set forth on Schedule
        3.1(a).
        Except
        as set forth on Schedule
        3.1(a),
        the
        Company owns, directly or indirectly, all of the capital stock or other equity
        interests of each Subsidiary free and clear of any Liens, and all the issued
        and
        outstanding shares of capital stock of each Subsidiary are validly issued
        and
        are fully paid, non-assessable and free of preemptive and similar rights
        to
        subscribe for or purchase securities.

      

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

       

      
 

      
        
          
          

        

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

      

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

       

      
 

      
        
          
          

        

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

      

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

      

      (g) Capitalization.
        The
        capitalization of the Company is as set forth on Schedule
        3.1(g).
        The
        Company has not issued any capital stock since its most
        recently filed periodic report under the Exchange Act, other
        than pursuant to the exercise of employee stock options under the Company’s
        stock option plans, the issuance of shares of Common Stock to employees pursuant
        to the Company’s employee stock purchase plan, the issuance of shares of Common
        Stock pursuant to the Company’s existing Non-Employee Stock Compensation Plan,
        and pursuant to the conversion or exercise of outstanding Common Stock
        Equivalents. No Person has any right of first refusal, preemptive right,
        right
        of participation, or any similar right to participate in the transactions
        contemplated by the Transaction Documents. Except as a result of the purchase
        and sale of the Securities, there are no outstanding options, warrants, script
        rights to subscribe to, calls or commitments of any character whatsoever
        relating to, or securities, rights or obligations convertible into or
        exercisable or exchangeable for, or giving any Person any right to subscribe
        for
        or acquire, any shares of Common Stock, or contracts, commitments,
        understandings or arrangements by which the Company or any Subsidiary is
        or may
        become bound to issue additional shares of Common Stock or Common Stock
        Equivalents. Except as set forth on Schedule
        3.1(g),
        the
        issuance and sale of the Securities will not obligate the Company to issue
        shares of Common Stock or other securities to any Person (other than the
        Purchasers) and will not result in a right of any holder of Company securities
        to adjust the exercise, conversion, exchange or reset price under such
        securities. All of the outstanding shares of capital stock of the Company
        are
        validly issued, fully paid and nonassessable, have been issued in compliance
        with all federal and state securities laws, and none of such outstanding
        shares
        was issued in violation of any preemptive rights or similar rights to subscribe
        for or purchase securities. No further approval or authorization of any
        stockholder, the Board of Directors of the Company or others is required
        for the
        issuance and sale of the Securities. There are no stockholders agreements,
        voting agreements or other similar agreements with respect to the Company’s
        capital stock to which the Company is a party or, to the knowledge of the
        Company, between or among any of the Company’s stockholders.

       

      
 

      
        
          
          

        

        
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      (h) SEC
        Reports; Financial Statements.
        The
        Company has filed all reports, schedules, forms, statements and other documents
        required to be filed by it under the Securities Act and the Exchange Act,
        including pursuant to Section 13(a) or 15(d) thereof, for the two years
        preceding the date hereof (or such shorter period as the Company was required
        by
        law to file such material) (the foregoing materials, including the exhibits
        thereto and documents incorporated by reference therein, being collectively
        referred to herein as the “SEC
        Reports”)
        on a
        timely basis or has received a valid extension of such time of filing and
        has
        filed any such SEC Reports prior to the expiration of any such extension.
        As of
        their respective dates, the SEC Reports complied in all material respects
        with
        the requirements of the Securities Act and the Exchange Act and the rules
        and
        regulations of the Commission promulgated thereunder, and none of the SEC
        Reports, when filed, contained any untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or necessary
        in
        order to make the statements therein, in the light of the circumstances under
        which they were made, not misleading. The financial statements of the Company
        included in the SEC Reports comply in all material respects with applicable
        accounting requirements and the rules and regulations of the Commission with
        respect thereto as in effect at the time of filing. Such financial statements
        have been prepared in accordance with United States generally accepted
        accounting principles (“GAAP”)
        applied on a consistent basis during the periods involved, except as may
        be
        otherwise specified in such financial statements or the notes thereto and
        except
        that unaudited financial statements may not contain all footnotes required
        by
        GAAP, and fairly present in all material respects the financial position
        of the
        Company and its consolidated Subsidiaries as of and for the dates thereof
        and
        the results of operations and cash flows for the periods then ended, subject,
        in
        the case of unaudited statements, to normal, immaterial, year-end audit
        adjustments.

      

      (i) Material
        Changes.
        Since
        the date of the latest audited financial statements included within the SEC
        Reports, except as specifically disclosed in the SEC Reports, (i) there has
        been
        no event, occurrence or development that has had or that could reasonably
        be
        expected to result in a Material Adverse Effect, (ii) the Company has not
        incurred any liabilities (contingent or otherwise) other than (A) trade payables
        and accrued expenses incurred in the ordinary course of business consistent
        with
        past practice and (B) liabilities not required to be reflected in the Company’s
        financial statements pursuant to GAAP or required to be disclosed in filings
        made with the Commission, (iii) the Company has not altered its method of
        accounting, (iv) the Company has not declared or made any dividend or
        distribution of cash or other property to its stockholders or purchased,
        redeemed or made any agreements to purchase or redeem any shares of its capital
        stock and (v) the Company has not issued any equity securities to any officer,
        director or Affiliate, except pursuant to existing Company stock option or
        stock
        plans. The Company does not have pending before the Commission any request
        for
        confidential treatment of information.

       

      
 

      
        
          
          

        

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

      

      (k) Labor
        Relations.
        No
        material labor dispute exists or, to the knowledge of the Company, is imminent
        with respect to any of the employees of the Company which could reasonably
        be
        expected to result in a Material Adverse Effect.

      

      (l) Compliance.
        Neither
        the Company nor any Subsidiary (i) is in default under or in violation of
        (and
        no event has occurred that has not been waived that, with notice or lapse
        of
        time or both, would result in a default by the Company or any Subsidiary
        under),
        nor has the Company or any Subsidiary received notice of a claim that it
        is in
        default under or that it is in violation of, any indenture, loan or credit
        agreement or any other agreement or instrument to which it is a party or
        by
        which it or any of its properties is bound (whether or not such default or
        violation has been waived), (ii) is in violation of any order of any court,
        arbitrator or governmental body, or (iii) is or has been in violation of
        any
        statute, rule or regulation of any governmental authority, including without
        limitation all foreign, federal, state and local laws applicable to its business
        except in each case as could not have a Material Adverse Effect.

      

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

      

      (n) Title
        to Assets.
        The
        Company and the Subsidiaries have good and marketable title in fee simple
        to all
        real property owned by them that is material to the business of the Company
        and
        the Subsidiaries and good and marketable title in all personal property owned
        by
        them that is material to the business of the Company and the Subsidiaries,
        in
        each case free and clear of all Liens, except for Liens as do not materially
        affect the value of such property and do not materially interfere with the
        use
        made and proposed to be made of such property by the Company and the
        Subsidiaries and Liens for the payment of federal, state or other taxes,
        the
        payment of which is neither delinquent nor subject to penalties. Any real
        property and facilities held under lease by the Company and the Subsidiaries
        are
        held by them under valid, subsisting and enforceable leases of which the
        Company
        and the Subsidiaries are in compliance, except as could not have or reasonably
        be expected to result in a Material Adverse Effect.

       

      
 

      
        
          
          

        

        
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      (o) Patents
        and Trademarks.
        The
        Company and the Subsidiaries have, or have rights to use, all patents, patent
        applications, trademarks, trademark applications, service marks, trade names,
        copyrights, licenses and other similar rights that are necessary or material
        for
        use in connection with their respective businesses as described in the SEC
        Reports and which the failure to so have could have or reasonably be expected
        to
        result in a Material Adverse Effect (collectively, the “Intellectual
        Property Rights”).
        Neither the Company nor any Subsidiary has received a written notice that
        the
        Intellectual Property Rights used by the Company or any Subsidiary violates
        or
        infringes upon the rights of any Person. Except as set forth in Schedule
        3.1(o),
        to the
        knowledge of the Company, all such Intellectual Property Rights are enforceable
        and there is no existing infringement by another Person of any of the
        Intellectual Property Rights of others.

      

      (p) Insurance.
        The
        Company and the Subsidiaries are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as are prudent
        and customary in the businesses in which the Company and the Subsidiaries
        are
        engaged, including, but not limited to, directors and officers insurance
        coverage at least equal to the aggregate Subscription Amount. To the best
        knowledge of the Company, such insurance contracts and policies are accurate
        and
        complete. Neither the Company nor any Subsidiary has any reason to believe
        that
        it will not be able to renew its existing insurance coverage as and when
        such
        coverage expires or to obtain similar coverage from similar insurers as may
        be
        necessary to continue its business on terms consistent with market for the
        Company’s and such Subsidiaries respective lines of business.

      

      (q) Transactions
        With Affiliates and Employees.
        Except
        as set forth in the SEC Reports, none of the officers or directors of the
        Company and, to the knowledge of the Company, none of the employees of the
        Company is presently a party to any transaction with the Company or any
        Subsidiary (other than for services as employees, officers and directors),
        including any contract, agreement or other arrangement providing for the
        furnishing of services to or by, providing for rental of real or personal
        property to or from, or otherwise requiring payments to or from any officer,
        director or such employee or, to the knowledge of the Company, any entity
        in
        which any officer, director, or any such employee has a substantial interest
        or
        is an officer, director, trustee or partner, in each case in excess of $60,000
        other than (i) for payment of salary or consulting fees for services rendered,
        (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
        for
        other employee benefits, including stock option agreements under any stock
        option plan of the Company.

       

      
 

      
        
          
          

        

        
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      (r) Sarbanes-Oxley;
        Internal Accounting Controls.
        The
        Company is in material compliance with all provisions of the Sarbanes-Oxley
        Act
        of 2002 which are applicable to it as of the Closing Date. The
        Company and the Subsidiaries maintain a system of internal accounting controls
        sufficient to provide reasonable assurance that (i) transactions are executed
        in
        accordance with management’s general or specific authorizations, (ii)
        transactions are recorded as necessary to permit preparation of financial
        statements in conformity with GAAP and to maintain asset accountability,
        (iii)
        access to assets is permitted only in accordance with management’s general or
        specific authorization, and (iv) the recorded accountability for assets is
        compared with the existing assets at reasonable intervals and appropriate
        action
        is taken with respect to any differences. The Company has established disclosure
        controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
        15d-15(e)) for the Company and designed such disclosure controls and procedures
        to ensure that material information relating to the Company, including its
        Subsidiaries, is made known to the certifying officers by others within those
        entities, particularly during the period in which the Company’s most recently
        filed periodic report under the Exchange Act, as the case may be, is being
        prepared. The Company’s certifying officers have evaluated the effectiveness of
        the Company’s controls and procedures as of the date prior to the filing date of
        the most recently filed periodic report under the Exchange Act (such date,
        the
“Evaluation
        Date”).
        The
        Company presented in its most recently filed periodic report under the Exchange
        Act the conclusions of the certifying officers about the effectiveness of
        the
        disclosure controls and procedures based on their evaluations as of the
        Evaluation Date. Since the Evaluation Date, there have been no significant
        changes in the Company’s internal controls (as such term is defined in Item
        307(b) of Regulation S-K under the Exchange Act) or, to the knowledge of
        the
        Company, in other factors that could significantly affect the Company’s internal
        controls.

      

      (s) Certain
        Fees.
        Except
        for the fees payable to Roth Capital Partners, no brokerage or finder’s fees or
        commissions are or will be payable by the Company to any broker, financial
        advisor or consultant, finder, placement agent, investment banker, bank or
        other
        Person with respect to the transactions contemplated by the Transaction
        Documents. The Purchasers shall have no obligation with respect to any fees
        or
        with respect to any claims (other than such fees or commissions owed by an
        Purchaser pursuant to written agreements executed by such Purchaser which
        fees
        or commissions shall be the sole responsibility of such Purchaser) made by
        or on
        behalf of other Persons for fees of a type contemplated in this Section that
        may
        be due in connection with the transactions contemplated by the Transaction
        Documents.

      

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

       

      
 

      
        
          
          

        

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

      

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

      

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

      

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

      

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

       

       

      
        
          
          

        

        
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      (z) No
        Integrated Offering.
        Assuming
        the accuracy of the Purchasers’ representations and warranties set forth in
        Section 3.2, neither the Company, nor any of its affiliates, nor any Person
        acting on its or their behalf has, directly or indirectly, made any offers
        or
        sales of any security or solicited any offers to buy any security, under
        circumstances that would cause this offering of the Securities to be integrated
        with prior offerings by the Company for purposes of the Securities Act or
        any
        applicable stockholder approval provisions, including, without limitation,
        under
        the rules and regulations of any Trading Market on which any of the securities
        of the Company are listed or designated. 

      

      (aa) Solvency.
        Based
        on the financial condition of the Company as of the Closing Date after giving
        effect to the receipt by the Company of the proceeds from the sale of the
        Securities hereunder, (i) the Company’s fair saleable value of its assets
        exceeds the amount that will be required to be paid on or in respect of the
        Company’s existing debts and other liabilities (including known contingent
        liabilities) as they mature; (ii) the Company’s assets do not constitute
        unreasonably small capital to carry on its business for the current fiscal
        year
        as now conducted and as proposed to be conducted including its capital needs
        taking into account the particular capital requirements of the business
        conducted by the Company, and projected capital requirements and capital
        availability thereof; and (iii) the current cash flow of the Company, together
        with the proceeds the Company would receive, were it to liquidate all of
        its
        assets, after taking into account all anticipated uses of the cash, would
        be
        sufficient to pay all amounts on or in respect of its debt when such amounts
        are
        required to be paid. The Company does not intend to incur debts beyond its
        ability to pay such debts as they mature (taking into account the timing
        and
        amounts of cash to be payable on or in respect of its debt). The Company
        has no
        knowledge of any facts or circumstances which lead it to believe that it
        will
        file for reorganization or liquidation under the bankruptcy or reorganization
        laws of any jurisdiction within one year from the Closing Date. The SEC Reports
        set forth as of the dates thereof all outstanding secured and unsecured
        Indebtedness of the Company or any Subsidiary, or for which the Company or
        any
        Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
        shall
        mean (a) any liabilities for borrowed money or amounts owed in excess of
        $50,000
        (other than trade accounts payable incurred in the ordinary course of business),
        (b) all guaranties, endorsements and other contingent obligations in respect
        of
        Indebtedness of others, whether or not the same are or should be reflected
        in
        the Company’s balance sheet (or the notes thereto), except guaranties by
        endorsement of negotiable instruments for deposit or collection or similar
        transactions in the ordinary course of business; and (c) the present value
        of
        any lease payments
        in excess of $50,000 due under leases required to be capitalized in accordance
        with GAAP. Neither
        the Company nor any Subsidiary is in default with respect to any
        Indebtedness.

       

      
 

      
        
          
          

        

        
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      (bb) Form
        S-3 Eligibility.
        The
        Company is eligible to register the resale of the Securities for resale by
        the
        Purchaser on Form S-3 promulgated under the Securities Act.

       

      (cc) Tax
        Status.
        Except
        for matters that would not, individually or in the aggregate, have or reasonably
        be expected to result in a Material Adverse Effect, the Company and each
        Subsidiary has filed all necessary federal, state and foreign income and
        franchise tax returns and has paid or accrued all taxes shown as due thereon,
        and the Company has no knowledge of a tax deficiency which has been asserted
        or
        threatened against the Company or any Subsidiary.

      

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

      

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

      

      (ff) Accountants.
        The
        Company’s accountants are set forth in the SEC Reports. To the knowledge of the
        Company, such accountants, who the Company expects will express their opinion
        with respect to the financial statements to be included in the Company’s Annual
        Report on Form 10-K for the year ending December 31, 2005, are a registered
        public accounting firm as required by the Securities Act.

      

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

      

      (hh) Acknowledgement
        Regarding Purchasers’ Trading Activity.
        Anything in this Agreement or elsewhere herein to the contrary notwithstanding
        (except for Section 4.14 hereof), it is understood and agreed by the Company
        (i)
        that none of the Purchasers have been asked to agree, nor has any Purchaser
        agreed, to desist from purchasing or selling, long and/or short, securities
        of
        the Company, or derivative securities based on securities issued by the Company
        or to hold the Securities for any specified term; (ii) that past or future
        open
        market or other transactions by any Purchaser, including Short Sales, and
        specifically including, without limitation, Short Sales or derivative
        transactions, before or after the closing of this or future private placement
        transactions, may negatively impact the market price of the Company’s
        publicly-traded securities; (iii) that any Purchaser, and counter parties
        in
        derivative transactions to which any such Purchaser is a party, directly
        or
        indirectly, presently may have a short position in the Common Stock, and
        (iv)
        that each Purchaser shall not be deemed to have any affiliation with or control
        over any arm’s length counter-party in any derivative transaction. The
        Company further understands and acknowledges that (a) one or more Purchasers
        may
        engage in hedging activities at various times during the period that the
        Securities are outstanding, including, without limitation, during the periods
        that the value of the Warrant Shares deliverable with respect to Securities
        are
        being determined and (b) such hedging activities (if any) could reduce the
        value
        of the existing stockholders' equity interests in the Company at and after
        the
        time that the hedging activities are being conducted.  The Company
        acknowledges that such aforementioned hedging activities do not constitute
        a
        breach of any of the Transaction Documents.

       

      
 

      
        
          
          

        

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

      

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

      

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

       

       

      
        
          
          

        

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

      

      (c) Purchaser
        Status.
        At the
        time such Purchaser was offered the Securities, it was, and at the date hereof
        it is, and on each date on which it exercises any Warrants, it will be either:
        (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
        (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
        buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is
        not required to be registered as a broker-dealer under Section 15 of the
        Exchange Act. 

      

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

      

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

       

      
 

      
        
          
          

        

        
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      (f) Access
        to Information.
        Such
        Purchaser acknowledges that it has reviewed the Disclosure Schedules and
        has
        been afforded (i) the opportunity to ask such questions as it has deemed
        necessary of, and to receive answers from, representatives of the Company
        concerning the terms and conditions of the offering of the Shares and the
        merits
        and risks of investing in the Securities; (ii) access to information about
        the
        Company and the Subsidiaries and their respective financial condition, results
        of operations, business, properties, management and prospects sufficient
        to
        enable it to evaluate its investment; and (iii) the opportunity to obtain
        such
        additional information that the Company possesses or can acquire without
        unreasonable effort or expense that is necessary to make an informed investment
        decision with respect to the investment. Neither such inquiries nor any other
        investigation conducted by or on behalf of such Purchaser or its representatives
        or counsel shall modify, amend or affect such Purchaser's right to rely on
        the
        truth, accuracy and completeness of the Disclosure Schedules and the Company's
        representations and warranties contained in the Transaction
        Documents.

      

      (g) Certain
        Trading Activities. 
        Such Purchaser has not directly or indirectly, nor has any Person acting
        on
        behalf of or pursuant to any understanding with such Purchaser, engaged in
        any
        transactions in the securities of the Company (including, without limitations,
        any Short Sales involving the Company's securities) since the time that such
        Purchaser was first contacted by the Company, Roth Capital Partners, LLC
        or any
        other Person regarding an investment in the Company.  Such Purchaser
        covenants that neither it nor any Person acting on its behalf or pursuant
        to any
        understanding with it will engage in any transactions in the securities of
        the
        Company (including Short Sales) prior to the time that the transactions
        contemplated by this Agreement are publicly disclosed by the Company. 
        Such
        Purchaser has maintained, and covenants that until such time as the transactions
        contemplated by this Agreement are publicly disclosed by the Company such
        Purchaser will maintain, the confidentiality of all disclosures made to it
        in
        connection with this transaction (including the existence and terms of this
        transaction). Notwithstanding the foregoing, in the case of a Purchaser that
        is
        a multi-managed investment vehicle whereby separate portfolio managers manage
        separate portions of such Purchaser's assets and the portfolio managers have
        no
        direct knowledge of the investment decisions made by the portfolio managers
        managing other portions of such Purchaser's assets, the representation set
        forth
        above shall only apply with respect to the portion of assets managed by the
        portfolio manager that made the investment decision to purchase the Securities
        covered by this Agreement. Other than to other Persons party to this Agreement,
        such Purchaser has maintained the confidentiality of all disclosures made
        to it
        in connection with this transaction (including the existence and terms of
        this
        transaction).

      

      (h) Independent
        Investment Decision.
        Such
        Purchaser has independently evaluated the merits of its decision to purchase
        Securities pursuant to the Transaction Documents, and such Purchaser confirms
        that it has not relied on the advice of any other Purchaser’s business and/or
        legal counsel in making such decision. Such Purchaser has not relied on the
        business or legal advice of Roth Capital Partners, LLC or any of its agents,
        counsel or Affiliates in making its investment decision hereunder, and confirms
        that none of such Persons has made any representations or warranties to such
        Purchaser in connection with the transactions contemplated by the Transaction
        Documents.

      

      The
        Company acknowledges and agrees that each Purchaser does not make or has
        not
        made any representations or warranties with respect to the transactions
        contemplated hereby other than those specifically set forth in this Section
        3.2.

       

      
        
          
          

        

        
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      ARTICLE
        IV.

      OTHER
        AGREEMENTS OF THE PARTIES

      

      4.1 Transfer
        Restrictions. 

       

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

      

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

      

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

      

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

       

      
 

      
        
          
          

        

        
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      (c) Certificates
        evidencing the Shares and Warrant Shares shall not contain any legend (including
        the legend set forth in Section 4.1(b)), (i) while a registration statement
        (including the Registration Statement) covering the resale of such security
        is
        effective under the Securities Act, or (ii) following any sale of such Shares
        or
        Warrant Shares pursuant to Rule 144 (assuming the transferor is not an Affiliate
        of the Company), or (iii) if such Shares or Warrant Shares are eligible for
        sale
        under Rule 144(k), or (iv) if such legend is not required under applicable
        requirements of the Securities Act and the rules and regulations promulgated
        thereunder (including judicial interpretations and pronouncements issued
        by the
        staff of the Commission). The Company shall cause its counsel to issue a
        legal
        opinion to the Company’s transfer agent promptly after the Effective Date if
        required by the Company’s transfer agent to effect the removal of the legend
        hereunder. If all or any portion of a Warrant is exercised at a time when
        there
        is an effective registration statement to cover the resale of the Warrant
        Shares, such Warrant Shares shall be issued free of all legends. The Company
        agrees that following the Effective Date or at such time as such legend is
        no
        longer required under this Section 4.1(c), it will, no later than three Trading
        Days following the delivery by a Purchaser to the Company or the Company’s
        transfer agent of a certificate representing Shares or Warrant Shares, as
        the
        case may be, issued with a restrictive legend (such third Trading Day, the
        “Legend
        Removal Date”),
        deliver or cause to be delivered to such Purchaser a certificate representing
        such shares that is free from all restrictive and other legends. The Company
        may
        not make any notation on its records or give instructions to any transfer
        agent
        of the Company that enlarge the restrictions on transfer set forth in this
        Section. Certificates for Securities subject to legend removal hereunder
        shall
        be transmitted by the transfer agent of the Company to the Purchasers by
        crediting the account of the Purchaser’s prime broker with the Depository Trust
        Company System.

      

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

       

      
 

      
        
          
          

        

        
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      (e) Each
        Purchaser, severally and not jointly with the other Purchasers, agrees, and
        represent and covenants to the Company, that the removal of the restrictive
        legend from certificates representing Securities as set forth in this Section
        4.1 is predicated upon the Company’s reliance that the Purchaser will sell any
        Securities pursuant to either the registration requirements of the Securities
        Act, including any applicable prospectus delivery requirements, or an exemption
        therefrom.

      

      (f) Until
        the
        six month anniversary of the Effective Date, the Company shall not undertake
        a
        reverse or forward stock split or reclassification of the Common Stock without
        the prior written consent of the Purchasers holding a then majority in interest
        of the Shares.

      

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

      

      4.3 Integration
        .
        The
        Company shall not sell, offer for sale or solicit offers to buy or otherwise
        negotiate in respect of any security (as defined in Section 2 of the Securities
        Act) that would be integrated with the offer or sale of the Securities in
        a
        manner that would require the registration under the Securities Act of the
        sale
        of the Securities to the Purchasers or that would be integrated with the
        offer
        or sale of the Securities for purposes of the rules and regulations of any
        Trading Market such that it would require stockholder approval of the sale
        of
        the Securities to the Purchasers unless stockholder approval is obtained
        before
        the closing of such subsequent transaction.

      

      4.4 Securities
        Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. Eastern time on
        the Trading Day following the date hereof, issue a Current Report on Form
        8-K,
        disclosing the material terms of the transactions contemplated hereby, and
        shall
        attach the Transaction Documents thereto. In
        addition, the Company will make such other filings and notices in the manner
        and
        time required by the Commission and the Trading Market on which the Common
        Stock
        is listed. Notwithstanding the foregoing, the Company shall not publicly
        disclose the name of any Purchaser, or include the name of any Purchaser
        in any
        filing with the Commission (other than the Registration Statement and any
        exhibits to filings made in respect of this transaction in accordance with
        periodic filing requirements under the Exchange Act) or any regulatory agency
        or
        Trading Market, without the prior written consent of such Purchaser, except
        to
        the extent such disclosure is required by law or Trading Market
        regulations.

       

      
 

      
        
          
          

        

        
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      4.5 Stockholder
        Rights Plan. No claim will be made or enforced by the Company or, to the
        knowledge of the Company, any other Person that any Purchaser is an
“Acquiring
        Person”
        under
        any stockholder rights plan or similar plan or arrangement in effect or
        hereafter adopted by the Company, or that any Purchaser could be deemed to
        trigger the provisions of any such plan or arrangement, by virtue of receiving
        Securities under the Transaction Documents. The Company shall conduct its
        business in a manner so that it will not become subject to the Investment
        Company Act.

      

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

      

      4.7 Use
        of
        Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company
        shall use the net proceeds from the sale of the Securities hereunder for
        working
        capital purposes and not for the satisfaction of any portion of the Company’s
        debt (other than payment of trade payables in the ordinary course of the
        Company’s business and prior practices), to redeem any Common Stock or Common
        Stock Equivalents or to settle any outstanding litigation.

      

      4.8 Reimbursement.
        If any Purchaser becomes involved in any capacity in any Proceeding by or
        against any Person who is a stockholder of the Company (except as a result
        of
        sales, pledges, margin sales and similar transactions by such Purchaser to
        or
        with any current stockholder), solely as a result of such Purchaser’s
        acquisition of the Securities under this Agreement, the Company will reimburse
        such Purchaser for its reasonable legal and other expenses (including the
        cost
        of any investigation preparation and travel in connection therewith) incurred
        in
        connection therewith, as such expenses are incurred. The reimbursement
        obligations of the Company under this paragraph shall be in addition to any
        liability which the Company may otherwise have, shall extend upon the same
        terms
        and conditions to any Affiliates of the Purchasers who are actually named
        in
        such action, proceeding or investigation, and partners, directors, agents,
        employees and controlling persons (if any), as the case may be, of the
        Purchasers and any such Affiliate, and shall be binding upon and inure to
        the
        benefit of any successors, assigns, heirs and personal representatives of
        the
        Company, the Purchasers and any such Affiliate and any such Person. The Company
        also agrees that neither the Purchasers nor any such Affiliates, partners,
        directors, agents, employees or controlling persons shall have any liability
        to
        the Company or any Person asserting claims on behalf of or in right of the
        Company solely as a result of acquiring the Securities under this Agreement,
        except to the extent that such claims are based on a breach of any
        representations and warranties or covenants made by the Purchasers in
        Transaction Documents.

       

      
 

      
        
          
          

        

        
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      4.9 Indemnification
        of Purchasers. Subject to the provisions of this Section 4.9, the Company
        will indemnify and hold the Purchasers and their directors, officers,
        stockholders, members, partners, employees and agents (each, a “Purchaser
        Party”)
        harmless from any and all losses, liabilities, obligations, claims,
        contingencies, damages, costs and expenses, including all judgments, amounts
        paid in settlements, court costs and reasonable attorneys’ fees and costs of
        investigation that any such Purchaser Party may suffer or incur as a result
        of
        or relating to (a) any breach of any of the representations, warranties,
        covenants or agreements made by the Company in this Agreement or in the other
        Transaction Documents or (b) any action instituted against a Purchaser, or
        any
        of them or their respective Affiliates, by any stockholder of the Company
        who is
        not an Affiliate of such Purchaser, with respect to any of the transactions
        contemplated by the Transaction Documents (unless such action is based upon
        a
        breach of such Purchaser’s representations, warranties or covenants under the
        Transaction Documents or any agreements or understandings such Purchaser
        may
        have with any such stockholder or any violations by the Purchaser of state
        or
        federal securities laws or any conduct by such Purchaser which constitutes
        fraud, gross negligence, willful misconduct or malfeasance). If any action
        shall
        be brought against any Purchaser Party in respect of which indemnity may
        be
        sought pursuant to this Agreement, such Purchaser Party shall promptly notify
        the Company in writing, and the Company shall have the right to assume the
        defense thereof with counsel of its own choosing. Any Purchaser Party shall
        have
        the right to employ separate counsel in any such action and participate in
        the
        defense thereof, but the fees and expenses of such counsel shall be at the
        expense of such Purchaser Party except to the extent that (i) the employment
        thereof has been specifically authorized by the Company in writing, (ii)
        the
        Company has failed after a reasonable period of time to assume such defense
        and
        to employ counsel or (iii) in such action there is, in the reasonable opinion
        of
        such separate counsel, a material conflict on any material issue between
        the
        position of the Company and the position of such Purchaser Party. The Company
        will not be liable to any Purchaser Party under this Agreement (i) for any
        settlement by a Purchaser Party effected without the Company’s prior written
        consent, which shall not be unreasonably withheld or delayed; or (ii) to
        the
        extent, but only to the extent that a loss, claim, damage or liability is
        attributable to any Purchaser Party’s breach of any of the representations,
        warranties, covenants or agreements made by the Purchasers in this Agreement
        or
        in the other Transaction Documents.

      

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

      

      4.11 Listing
        of Common Stock.The
        Company hereby agrees to use best efforts to maintain the listing of the
        Common
        Stock on a Trading Market, and as soon as reasonably practicable following
        the
        Closing (but not later than the earlier of the Effective Date and the first
        anniversary of the Closing Date) to list all of the Shares and Warrant Shares
        on
        such Trading Market. The Company further agrees, if the Company applies to
        have
        the Common Stock traded on any other Trading Market, it will include in such
        application all of the Shares and Warrant Shares, and will take such other
        action as is necessary to cause all of the Shares and Warrant Shares to be
        listed on such other Trading Market as promptly as possible. The Company
        will
        take all action reasonably necessary to continue the listing and trading
        of its
        Common Stock on a Trading Market and will comply in all material respects
        with
        the Company’s reporting, filing and other obligations under the bylaws or rules
        of the Trading Market.

       

      
 

      
        
          
          

        

        
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      4.12 Equal
        Treatment of Purchasers. No consideration shall be offered or paid to any
        person to amend or consent to a waiver or modification of any provision of
        any
        of the Transaction Documents unless the same consideration is also offered
        to
        all of the parties to the Transaction Documents. For clarification purposes,
        this provision constitutes a separate right granted to each Purchaser by
        the
        Company and negotiated separately by each Purchaser, and is intended to treat
        for the Company the Purchasers as a class and shall not in any way be construed
        as the Purchasers acting in concert or as a group with respect to the purchase,
        disposition or voting of Securities or otherwise.

      

      4.13 Subsequent
        Equity Sales. 

      

      (a) From
        the
        date hereof until 90 days after the Effective Date, neither the Company nor
        any
        Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
        provided, however, the 90 day period set forth in this Section 4.13 shall
        be
        extended for the number of Trading Days during such period in which (i) trading
        in the Common Stock is suspended by any Trading Market, or (ii) following
        the
        Effective Date, the Registration Statement is not effective or the prospectus
        included in the Registration Statement may not be used by the Purchasers
        for the
        resale of the Shares and Warrant Shares. 

      

      (b) From
        the
        date hereof until the Securities become eligible for resale under the Rule
        144(k), the Company shall be prohibited from effecting or entering into an
        agreement to effect any subsequent financing involving a Variable Rate
        Transaction. The term “Variable
        Rate Transaction”
        shall
        mean a transaction in which the Company issues or sells (i) any debt or equity
        securities that are convertible into, exchangeable or exercisable for, or
        include the right to receive additional shares of Common Stock either (A)
        at a
        conversion, exercise or exchange rate or other price that is based upon and/or
        varies with the trading prices of or quotations for the shares of Common
        Stock
        at any time after the initial issuance of such debt or equity securities,
        or (B)
        with a conversion, exercise or exchange price that is subject to being reset
        at
        some future date after the initial issuance of such debt or equity security
        or
        upon the occurrence of specified or contingent events directly or indirectly
        related to the business of the Company or the market for the Common Stock
        or
        (ii) enters into any agreement, including, but not limited to, an equity
        line of
        credit, whereby the Company may sell securities at a future determined price.
        Any Purchaser shall be entitled to obtain injunctive relief against the Company
        to preclude any such issuance, which remedy shall be in addition to any right
        to
        collect damages. 

      

      (c) Notwithstanding
        the foregoing, this Section 4.13 shall not apply in respect of an Exempt
        Issuance, except that no Variable Rate Transaction shall be an Exempt
        Issuance.

      

      
        
          
          

        

        
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      4.14 Short
        Sales and Confidentiality After The Date Hereof. Such
        Investor has not directly or indirectly, nor has any Person acting on behalf
        of
        or pursuant to any understanding with such Investor, engaged in any transactions
        in the securities of the Company (including, without limitations, any Short
        Sales involving the Company's securities) since the time that such Investor
        was
        first contacted by the Company, Roth Capital Partners, LLC or any other Person
        regarding an investment in the Company. Such Investor covenants that neither
        it
        nor any Person acting on its behalf or pursuant to any understanding with
        it
        will engage in any transactions in the securities of the Company (including
        Short Sales) prior to the time that the transactions contemplated by this
        Agreement are publicly disclosed by the Company. Such Investor has maintained,
        and covenants that until such time as the transactions contemplated by this
        Agreement are publicly disclosed by the Company such Investor will maintain,
        the
        confidentiality of all disclosures made to it in connection with this
        transaction (including the existence and terms of this transaction). Notwithstanding
        the foregoing, no Purchaser makes any representation, warranty or covenant
        hereby that it will not engage in Short Sales in the securities of the Company
        after the time that the transactions contemplated by this Agreement are first
        publicly announced as described in Section 4.4 to the extent permitted by
        applicable rules. Notwithstanding
        the foregoing, in the case of a Purchaser that is a multi-managed investment
        vehicle whereby separate portfolio managers manage separate portions of such
        Purchaser's assets and the portfolio managers have no direct knowledge of
        the
        investment decisions made by the portfolio managers managing other portions
        of
        such Purchaser's assets, the covenant set forth above shall only apply with
        respect to the portion of assets managed by the portfolio manager that made
        the
        investment decision to purchase the Securities covered by this
        Agreement.

      

      4.15 Delivery
        of Securities After Closing. The Company shall deliver, or cause to be
        delivered, the respective Securities purchased by each Purchaser to such
        Purchaser within 3 Trading Days of the Closing Date.

      

      ARTICLE
        V.

      MISCELLANEOUS

      

      5.1 Termination. 
        This Agreement may be terminated by any Purchaser, as to such Purchaser’s
        obligations hereunder only and without any effect whatsoever on the obligations
        between the Company and the other Purchasers, by written notice to the other
        parties, if the Closing has not been consummated on or before November 30,
        2005;
        provided, however, that no such termination will affect the right of any
        party
        to sue for any breach by the other party (or parties).

      

      5.2 Fees
        and Expenses. At the Closing, the Company has agreed to reimburse Bonanza
        Capital Partners, Ltd. (“Bonanza”) $20,000 for the legal fees and expenses of
        its counsel, $10,000 of which has previously been paid. Accordingly, in lieu
        of
        the foregoing payments, the aggregate amount that Bonanza is to pay for the
        Securities at the Closing shall be reduced by $10,000 in lieu thereof. The
        Company shall deliver, prior to the Closing, a completed and executed copy
        of
        the Closing Statement, attached hereto as Annex A. Except as expressly set
        forth
        in the Transaction Documents to the contrary, each party shall pay the fees
        and
        expenses of its advisers, counsel, accountants and other experts, if any,
        and
        all other expenses incurred by such party incident to the negotiation,
        preparation, execution, delivery and performance of this Agreement. The Company
        shall pay all transfer agent fees, stamp taxes and other taxes and duties
        levied
        in connection with the delivery of any Securities.

       

      
 

      
        
          
          

        

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

      

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

      

      5.5 Amendments;
        Waivers. No provision of this Agreement may be waived or amended except in a
        written instrument signed, in the case of an amendment, by the Company and
        each
        Purchaser or, in the case of a waiver, by the party against whom enforcement
        of
        any such waiver is sought. No waiver of any default with respect to any
        provision, condition or requirement of this Agreement shall be deemed to
        be a
        continuing waiver in the future or a waiver of any subsequent default or
        a
        waiver of any other provision, condition or requirement hereof, nor shall
        any
        delay or omission of either party to exercise any right hereunder in any
        manner
        impair the exercise of any such right.

      

      5.6 Headings.
        The headings herein are for convenience only, do not constitute a part of
        this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof. The language used in this Agreement will be deemed to be the language
        chosen by the parties to express their mutual intent, and no rules of strict
        construction will be applied against any party.

      

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

      

      5.8 No
        Third-Party Beneficiaries. This Agreement is intended for the benefit of the
        parties hereto and their respective successors and permitted assigns and
        is not
        for the benefit of, nor may any provision hereof be enforced by, any other
        Person, except as otherwise set forth in Section 4.9.

       

      
 

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

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

      

      5.10 Survival.
        The representations, warranties, agreements and covenants contained herein
        shall
        survive the Closing and the delivery of the Shares and Warrant
        Shares.

      

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

      

      5.12 Severability.
        If any provision of this Agreement is held to be invalid or unenforceable
        in any
        respect, the validity and enforceability of the remaining terms and provisions
        of this Agreement shall not in any way be affected or impaired thereby and
        the
        parties will attempt to agree upon a valid and enforceable provision that
        is a
        reasonable substitute therefor, and upon so agreeing, shall incorporate such
        substitute provision in this Agreement.

      

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

       

      
 

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

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

      

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

      

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

      

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

       

      
 

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

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

      

      5.19 Construction.
        The parties agree that each of them and/or their respective counsel has reviewed
        and had an opportunity to revise the Transaction Documents and, therefore,
        the
        normal rule of construction to the effect that any ambiguities are to be
        resolved against the drafting party shall not be employed in the interpretation
        of the Transaction Documents or any amendments hereto.

      

      (Signature
        Pages Follow)

      

      
         

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

      

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

      

      

      
        	
                eMAGIN
                  CORPORATION

                 

              	
                Address
                  for Notice:

                2070
                  Route 52 

                Hopewell
                  Junction, New York 12533 

              
	
                By: /s/
                  John Atherly 

                
                  

                

                      
                  Name: John
                  Atherly

                      
                  Title: Chief Financial Officer 

              	 
	
                 

                With
                  a copy to:

                 

                Sichenzia
                  Ross Friedman Ference LLP

                1065
                  Avenue of the Americas, 21st Floor 

                New
                  York, New York 10018 

                Attn:
                  Richard A. Friedman

              	 

      

      

      

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASER FOLLOWS]

      
         

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

      

      [PURCHASER
        SIGNATURE PAGES TO eMAGIN CORPORATION

      SECURITIES
        PURCHASE AGREEMENT]

      

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

      

      

      Name
        of
        Purchaser:
        _____________________________________________________________

      Signature
        of Authorized Signatory of Purchaser:
        ______________________________________

      Name
        of
        Authorized Signatory:
        ____________________________________________________

      Title
        of
        Authorized Signatory:
        _____________________________________________________

      Email
        Address of
        Purchaser:_______________________________________________________

      

      Address
        for Notice of Purchaser:

      

      

      

      

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

      

       

      

      Subscription
        Amount:

      Shares:

      Warrant
        Shares:

      EIN
        Number: 

      

      [SIGNATURE
        PAGES CONTINUE]

       

      
         

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

      

      Annex
        A 

      

      CLOSING
        STATEMENT

      

      Pursuant
        to the attached Securities Purchase Agreement, dated as of the date hereto,
        the
        purchasers shall purchase up to $___________ of Common Stock and Warrants
        from
        eMagin Corporation, a Delaware corporation (the “Company”).
        All
        funds will be wired into a trust account maintained by ____________, counsel
        to
        the Company. All funds will be disbursed in accordance with this Closing
        Statement. 

      

      Disbursement
        Date: ________
        ___, 2005

      

      
        	
                I.
                  PURCHASE
                  PRICE

              	 
	
                Gross
                  Proceeds to be Received in Trust

              	
                $

              
	 	 
	
                II. DISBURSEMENTS

              	 
	
                 

              	
                $

              
	
                 

              	
                $

              
	 	
                $

              
	 	
                $

              
	 	
                $

              
	 	 
	
                Total
                  Amount Disbursed:

              	
                $

              
	 	 
	 	 
	 	 
	
                WIRE
                  INSTRUCTIONS:

                 

              	 
	
                To:
                  _____________________________________

                 

                 

                 

                 

              	 
	
                To:
                  _____________________________________

                 

                 

                 

                 

              	 

      

      

      
33Exhibit 10.2

    

      REGISTRATION
        RIGHTS AGREEMENT

      

      

      This
        Registration Rights Agreement (this “Agreement”)
        is
        made and entered into as of October 20, 2005, among eMagin Corporation, a
        Delaware corporation (the “Company”),
        and
        the purchasers signatory hereto (each such purchaser is a “Purchaser”
        and
        collectively, the “Purchasers”).

      

      This
        Agreement is made pursuant to the Securities Purchase Agreement, dated as
        of the
        date hereof among the Company and the Purchasers (the “Purchase
        Agreement”).

      

      The
        Company and the Purchasers hereby agree as follows:

      

      1. Definitions.
        Capitalized terms used and not otherwise defined herein that are defined
        in the
        Purchase Agreement shall have the meanings given such terms in the Purchase
        Agreement. As used in this Agreement, the following terms shall have the
        following meanings:

      

      “Advice”
        shall
        have the meaning set forth in Section 6(d).

      

      “Commission”
        shall
        mean the United States Securities and Exchange Commission.

      

      “Effectiveness
        Date”
        means,
        with respect to the initial Registration Statement required to be filed
        hereunder, the 90th
        calendar
        day following the date hereof (the 120th
        calendar
        day in the case of a “full review” by the Commission) and, with respect to any
        additional Registration Statements which may be required pursuant to Section
        3(c), the 90th
        calendar
        day following the date on which the Company first knows, or reasonably should
        have known, that such additional Registration Statement is required hereunder;
        provided,
        however,
        in the
        event the Company is notified by the Commission that one of the above
        Registration Statements will not be reviewed or is no longer subject to further
        review and comments, the Effectiveness Date as to such Registration Statement
        shall be the fifth Trading Day following the date on which the Company is
        so
        notified if such date precedes the dates required above.

      

      “Effectiveness
        Period”
        shall
        have the meaning set forth in Section 2(a).

       

      
 

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Event”
        shall
        have the meaning set forth in Section 2(b).

      

      “Event
        Date”
        shall
        have the meaning set forth in Section 2(b).

      

      “Filing
        Date”
        means,
        with respect to the initial Registration Statement required hereunder, the
        30th
        calendar
        day following the date hereof and, with respect to any additional Registration
        Statements which may be required pursuant to Section 3(c), the 30th
        day
        following the date on which the Company first knows, or reasonably should
        have
        known that such additional Registration Statement is required
        hereunder.

      

      “Holder”
        or
“Holders”
        means
        the holder or holders, as the case may be, from time to time of Registrable
        Securities.

      

      “Indemnified
        Party”
        shall
        have the meaning set forth in Section 5(c).

      

      “Indemnifying
        Party”
        shall
        have the meaning set forth in Section 5(c).

      

      “Losses”
        shall
        have the meaning set forth in Section 5(a).

      

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

      

      “Prospectus”
        means
        the prospectus included in a Registration Statement (including, without
        limitation, a prospectus that includes any information previously omitted
        from a
        prospectus filed as part of an effective registration statement in reliance
        upon
        Rule 430A promulgated under the Securities Act), as amended or supplemented
        by
        any prospectus supplement, with respect to the terms of the offering of any
        portion of the Registrable Securities covered by a Registration Statement,
        and
        all other amendments and supplements to the Prospectus, including post-effective
        amendments, and all material incorporated by reference or deemed to be
        incorporated by reference in such Prospectus.

      

      “Registrable
        Securities”
        means
        all of (i) the Shares issuable and (ii) the Warrant Shares issuable, together
        with any shares of Common Stock issued or issuable upon any stock split,
        dividend or other distribution, recapitalization or similar event with respect
        to the foregoing. 

      

      “Registration
        Statement”
        means
        the registration statements required to be filed hereunder and any additional
        registration statements contemplated by Section 3(c), including (in each
        case)
        the Prospectus, amendments and supplements to such registration statement
        or
        Prospectus, including pre- and post-effective amendments, all exhibits thereto,
        and all material incorporated by reference or deemed to be incorporated by
        reference in such registration statement.

      

      “Rule
        415”
        means
        Rule 415 promulgated by the Commission pursuant to the Securities Act, as
        such
        Rule may be amended from time to time, or any similar rule or regulation
        hereafter adopted by the Commission having substantially the same purpose
        and
        effect as such Rule.

      

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

      

      “Selling
        Stockholder Questionnaire”
        shall
        have the meaning set forth in Section 3(a).

      

      2. Registration.

       

      
 

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (a) On
        or
        prior to each Filing Date, the Company shall prepare and file with the
        Commission a Registration Statement covering the resale of 100% of the
        Registrable Securities on such Filing Date for an offering to be made on
        a
        continuous basis pursuant to Rule 415. The Registration Statement shall be
        on
        Form S-3 (except if the Company is not then eligible to register for resale
        the
        Registrable Securities on Form S-3, in which case such registration shall
        be on
        another appropriate form in accordance herewith) and shall contain substantially
        the “Plan of Distribution” attached hereto as Annex A. Subject to the terms of
        this Agreement, the Company shall use its best efforts to cause a Registration
        Statement to be declared effective under the Securities Act as promptly as
        possible after the filing thereof, but in any event prior to the applicable
        Effectiveness Date, and shall use its best efforts to keep such Registration
        Statement continuously effective under the Securities Act until all Registrable
        Securities covered by such Registration Statement have been sold or may be
        sold
        without volume restrictions pursuant to Rule 144(k) as determined by the
        counsel
        to the Company pursuant to a written opinion letter to such effect, addressed
        and acceptable to the Company’s transfer agent and the affected Holders (the
“Effectiveness
        Period”).
        The
        Company shall immediately notify the Holders via facsimile or e-mail of the
        effectiveness of a Registration Statement on the same Trading Day that the
        Company telephonically confirms effectiveness with the Commission, which
        shall
        be the date requested for effectiveness of a Registration Statement. The
        Company
        shall, by 9:30 am Eastern Time on the Trading Day after the Effective Date
        (as
        defined in the Purchase Agreement), file a Form 424(b)(5) with the Commission.
        Failure to so notify the Holder within 2 Trading Days of such notification
        shall
        be deemed an Event under Section 2(b).

      

      (b) If:
        (i) a
        Registration Statement is not filed on or prior to its Filing Date (if the
        Company files a Registration Statement without affording the Holders the
        opportunity to review and comment on the same as required by Section 3(a),
        the
        Company shall not be deemed to have satisfied this clause (i)), or (ii) the
        Company fails to file with the Commission a request for acceleration in
        accordance with Rule 461 promulgated under the Securities Act, within five
        Trading Days of the date that the Company is notified (orally or in writing,
        whichever is earlier) by the Commission that a Registration Statement will
        not
        be “reviewed,” or not subject to further review, or (iii) prior to its
        Effectiveness Date, the Company fails to file a pre-effective amendment and
        otherwise respond in writing to comments made by the Commission in respect
        of
        such Registration Statement within 10 Trading Days after the receipt of comments
        by or notice from the Commission that such amendment is required in order
        for a
        Registration Statement to be declared effective, or (iv) a Registration
        Statement filed or required to be filed hereunder is not declared effective
        by
        the Commission by its Effectiveness Date, or (v) after the Effectiveness
        Date, a
        Registration Statement ceases for any reason to remain continuously effective
        as
        to all Registrable Securities for which it is required to be effective, or
        the
        Holders are not permitted to utilize the Prospectus therein to resell such
        Registrable Securities for 10 consecutive Trading Days but no more than an
        aggregate of 25 Trading Days during any 12-month period (which need not be
        consecutive Trading Days) (any such failure or breach being referred to as
        an
“Event”,
        and
        for purposes of clause (i) or (iv) the date on which such Event occurs, or
        for
        purposes of clause (ii) the date on which such five Trading Day period is
        exceeded, or for purposes of clause (iii) the date which such 10 Trading
        Day
        period is exceeded, or for purposes of clause (v) the date on which such
        10 or
        25 Trading Day period, as applicable, is exceeded being referred to as
“Event
        Date”),
        then
        in addition to any other rights the Holders may have hereunder or under
        applicable law, on each such Event Date and on each monthly anniversary of
        each
        such Event Date (if the applicable Event shall not have been cured by such
        date)
        until the applicable Event is cured, the Company shall pay to each Holder
        an
        amount in cash, as partial liquidated damages and not as a penalty, equal
        to 2%
        of the aggregate purchase price paid by such Holder pursuant to the Purchase
        Agreement for any Registrable Securities then held by such Holder. If the
        Company fails to pay any partial liquidated damages pursuant to this Section
        in
        full within seven days after the date payable, the Company will pay interest
        thereon at a rate of 15% per annum (or such lesser maximum amount that is
        permitted to be paid by applicable law) to the Holder, accruing daily from
        the
        date such partial liquidated damages are due until such amounts, plus all
        such
        interest thereon, are paid in full. The partial liquidated damages pursuant
        to
        the terms hereof shall apply on a daily pro-rata basis for any portion of
        a
        month prior to the cure of an Event.

       

      
 

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      3. Registration
        Procedures

      

      In
        connection with the Company’s registration obligations hereunder, the Company
        shall:

      

      (a) Not
        less
        than four Trading Days prior to the filing of each Registration Statement
        or any
        related Prospectus or two Trading Days prior to the filing of any amendment
        or
        supplement thereto (including any document that would be incorporated or
        deemed
        to be incorporated therein by reference), the Company shall, (i) furnish
        to each
        Holder copies of all such documents proposed to be filed, which documents
        (other
        than those incorporated or deemed to be incorporated by reference) will be
        subject to the review of such Holders, and (ii) cause its officers and
        directors, counsel and independent certified public accountants to respond
        to
        such inquiries as shall be necessary, in the reasonable opinion of respective
        counsel to conduct a reasonable investigation within the meaning of the
        Securities Act. The Company shall not file a Registration Statement or any
        such
        Prospectus or any amendments or supplements thereto to which the Holders
        of a
        majority of the Registrable Securities shall reasonably object in good faith,
        provided that, the Company is notified of such objection in writing no later
        than 2 Trading Days after the Holders have been so furnished copies of such
        documents. The Company shall be given a reasonable additional period of time
        after the receipt of any such objections to revise the Registration Statement
        to
        accommodate such Holders’ concerns, and such additional period shall not
        constitute an “Event” for purposes of Section 2(b). Each Holder agrees to
        furnish to the Company a completed Questionnaire in the form attached to
        this
        Agreement as Annex B (a “Selling
        Stockholder Questionnaire”)
        not
        less than two Trading Days prior to the Filing Date or by the end of the
        first
        Trading Day following the date on which such Holder receives draft materials
        in
        accordance with this Section.

      

      (b) (i)
        Prepare and file with the Commission such amendments, including post-effective
        amendments, to a Registration Statement and the Prospectus used in connection
        therewith as may be necessary to keep a Registration Statement continuously
        effective as to the applicable Registrable Securities for the Effectiveness
        Period and prepare and file with the Commission such additional Registration
        Statements in order to register for resale under the Securities Act all of
        the
        Registrable Securities; (ii) cause the related Prospectus to be amended or
        supplemented by any required Prospectus supplement (subject to the terms
        of this
        Agreement), and as so supplemented or amended to be filed pursuant to Rule
        424;
        (iii) respond as promptly as reasonably possible to any comments received
        from
        the Commission with respect to a Registration Statement or any amendment
        thereto
        and as promptly as reasonably possible provide the Holders true and complete
        copies of all correspondence from and to the Commission relating to a
        Registration Statement; and (iv) comply in all material respects with the
        provisions of the Securities Act and the Exchange Act with respect to the
        disposition of all Registrable Securities covered by a Registration Statement
        during the applicable period in accordance (subject to the terms of this
        Agreement) with the intended methods of disposition by the Holders thereof
        set
        forth in such Registration Statement as so amended or in such Prospectus
        as so
        supplemented.

       

      
 

      
        
          
          

        

        
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      (c) If
        for
        any reason the Commission does not permit the registration of all of the
        Warrant
        Shares in the initial Registration Statement, then the Company shall file
        as
        soon as reasonably practicable but in any case prior to the applicable Filing
        Date, an additional Registration Statement covering the resale by the Holders
        of
        any previously unregistered Warrant Shares on the first date after which
        the
        Commission will permit the filing of a Registration Statement covering any
        such
        remaining Warrant Shares.

      

      (d) Notify
        the Holders of Registrable Securities to be sold (which notice shall, pursuant
        to clauses (ii) through (vi) hereof, be accompanied by an instruction to
        suspend
        the use of the Prospectus until the requisite changes have been made) as
        promptly as reasonably possible (and, in the case of (i)(A) below, not less
        than
        three Trading Days prior to such filing) and (if requested by any such Person)
        confirm such notice in writing no later than one Trading Day following the
        day
        (i)(A) when a Prospectus or any Prospectus supplement or post-effective
        amendment to a Registration Statement is proposed to be filed; (B) when the
        Commission notifies the Company whether there will be a “review” of such
        Registration Statement and whenever the Commission comments in writing on
        such
        Registration Statement (the Company shall provide true and complete copies
        thereof and all written responses thereto to each of the Holders); and (C)
        with
        respect to a Registration Statement or any post-effective amendment, when
        the
        same has become effective; (ii) of any request by the Commission or any other
        Federal or state governmental authority for amendments or supplements to
        a
        Registration Statement or Prospectus or for additional information; (iii)
        of the
        issuance by the Commission or any other federal or state governmental authority
        of any stop order suspending the effectiveness of a Registration Statement
        covering any or all of the Registrable Securities or the initiation of any
        Proceedings for that purpose; (iv) of the receipt by the Company of any
        notification with respect to the suspension of the qualification or exemption
        from qualification of any of the Registrable Securities for sale in any
        jurisdiction, or the initiation or threatening of any Proceeding for such
        purpose; (v) of the occurrence of any event or passage of time that makes
        the
        financial statements included in a Registration Statement ineligible for
        inclusion therein or any statement made in a Registration Statement or
        Prospectus or any document incorporated or deemed to be incorporated therein
        by
        reference untrue in any material respect or that requires any revisions to
        a
        Registration Statement, Prospectus or other documents so that, in the case
        of a
        Registration Statement or the Prospectus, as the case may be, it will not
        contain any untrue statement of a material fact or omit to state any 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;
        and
        (vi) the occurrence or existence of any pending corporate development with
        respect to the Company that the Company believes may be material and that,
        in
        the determination of the Company, makes it not in the best interest of the
        Company to allow continued availability of a Registration Statement or
        Prospectus; provided that any and all of such information shall remain
        confidential to each Holder until such information otherwise becomes public,
        unless disclosure by a Holder is required by law; provided,
        further,
        notwithstanding each Holder’s agreement to keep such information confidential,
        the Holders make no acknowledgement that any such information is material,
        non-public information.

       

      
 

      
        
          
          

        

        
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      (e) Use
        its
        best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
        of
        (i) any order suspending the effectiveness of a Registration Statement, or
        (ii)
        any suspension of the qualification (or exemption from qualification) of
        any of
        the Registrable Securities for sale in any jurisdiction, at the earliest
        practicable moment.

      

      (f) Furnish
        to each Holder, without charge, at least one conformed copy of each such
        Registration Statement and each amendment thereto, including financial
        statements and schedules, all documents incorporated or deemed to be
        incorporated therein by reference to the extent requested by such Person,
        and
        all exhibits to the extent requested by such Person (including those previously
        furnished or incorporated by reference) promptly after the filing of such
        documents with the Commission, which may be furnished in electronic
        format.

      

      (g) Promptly
        deliver to each Holder, without charge, as many copies of the Prospectus
        or
        Prospectuses (including each form of prospectus) and each amendment or
        supplement thereto as such Persons may reasonably request in connection with
        resales by the Holder of Registrable Securities. Subject to the terms of
        this
        Agreement, the Company hereby consents to the use of such Prospectus and
        each
        amendment or supplement thereto by each of the selling Holders in connection
        with the offering and sale of the Registrable Securities covered by such
        Prospectus and any amendment or supplement thereto, except after the giving
        on
        any notice pursuant to Section 3(d).

      

      (h) If
        NASD
        Rule 2710 requires any broker-dealer to make a filing prior to executing
        a sale
        by a Holder, the Company shall make an Issuer Filing with the NASD, Inc.
        Corporate Financing Department pursuant to NASD Rule 2710(b)(10)(A)(i) and
        respond within five Trading Days to any comments received from NASD in
        connection therewith, and pay the filing fee required in connection
        therewith.

      

      (i) Prior
        to
        any resale of Registrable Securities by a Holder, use its commercially
        reasonable efforts to register or qualify or cooperate with the selling Holders
        in connection with the registration or qualification (or exemption from the
        Registration or qualification) of such Registrable Securities for the resale
        by
        the Holder under the securities or Blue Sky laws of such jurisdictions within
        the United States as any Holder reasonably requests in writing, to keep each
        registration or qualification (or exemption therefrom) effective during the
        Effectiveness Period and to do any and all other acts or things reasonably
        necessary to enable the disposition in such jurisdictions of the Registrable
        Securities covered by each Registration Statement; provided, that the Company
        shall not be required to qualify generally to do business in any jurisdiction
        where it is not then so qualified, subject the Company to any material tax
        in
        any such jurisdiction where it is not then so subject or file a general consent
        to service of process in any such jurisdiction.

       

      
 

      
        
          
          

        

        
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      (j) If
        requested by the Holders, cooperate with the Holders to facilitate the timely
        preparation and delivery of certificates representing Registrable Securities
        to
        be delivered to a transferee pursuant to a Registration Statement, which
        certificates shall be free, to the extent permitted by the Purchase Agreement,
        of all restrictive legends, and to enable such Registrable Securities to
        be in
        such denominations and registered in such names as any such Holders may
        request.

       

      (k) Upon
        the
        occurrence of any event contemplated by this Section 3, as promptly as
        reasonably possible under the circumstances taking into account the Company’s
        good faith assessment of any adverse consequences to the Company and its
        stockholders of the premature disclosure of such event, prepare a supplement
        or
        amendment, including a post-effective amendment, to a Registration Statement
        or
        a supplement to the related Prospectus or any document incorporated or deemed
        to
        be incorporated therein by reference, and file any other required document
        so
        that, as thereafter delivered, neither a Registration Statement nor such
        Prospectus will contain an untrue statement of a material fact or omit to
        state
        a material fact required to be stated therein or necessary to make the
        statements therein, in light of the circumstances under which they were made,
        not misleading. If the Company notifies the Holders in accordance with clauses
        (ii) through (vi) of Section 3(d) above to suspend the use of any Prospectus
        until the requisite changes to such Prospectus have been made, then the Holders
        shall suspend use of such Prospectus. The Company will use its best efforts
        to
        ensure that the use of the Prospectus may be resumed as promptly as is
        practicable. The Company shall be entitled to exercise its right under this
        Section 3(j) to suspend the availability of a Registration Statement and
        Prospectus, subject to the payment of partial liquidated damages pursuant
        to
        Section 2(b), for a period not to exceed 60 days (which need not be consecutive
        days) in any 12 month period.

      

      (l) Comply
        with all applicable rules and regulations of the Commission.

      

      (m) The
        Company may require each selling Holder to furnish to the Company a certified
        statement as to the number of shares of Common Stock beneficially owned by
        such
        Holder and, if required by the Commission, the person thereof that has voting
        and dispositive control over the Shares. During any periods that the Company
        is
        unable to meet its obligations hereunder with respect to the registration
        of the
        Registrable Securities solely because any Holder fails to furnish such
        information within three Trading Days of the Company’s request, any liquidated
        damages that are accruing at such time as to such Holder only shall be tolled
        and any Event that may otherwise occur solely because of such delay shall
        be
        suspended as to such Holder only, until such information is delivered to
        the
        Company.

       

      
 

      
        
          
          

        

        
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      4. Registration
        Expenses.
        All
        fees and expenses incident to the performance of or compliance with this
        Agreement by the Company shall be borne by the Company whether or not any
        Registrable Securities are sold pursuant to a Registration Statement. The
        fees
        and expenses referred to in the foregoing sentence shall include, without
        limitation, (i) all registration and filing fees (including, without limitation,
        fees and expenses (A) with respect to filings required to be made with the
        Trading Market on which the Common Stock is then listed for trading, (B)
        in
        compliance with applicable state securities or Blue Sky laws reasonably agreed
        to by the Company in writing (including, without limitation, fees and
        disbursements of counsel for the Company in connection with Blue Sky
        qualifications or exemptions of the Registrable Securities and determination
        of
        the eligibility of the Registrable Securities for investment under the laws
        of
        such jurisdictions as requested by the Holders) and (C) if not previously
        paid
        by the Company in connection with an Issuer Filing, with respect to any filing
        that may be required to be made by any broker through which a Holder intends
        to
        make sales of Registrable Securities with NASD Regulation, Inc. pursuant
        to the
        NASD Rule 2710, so long as the broker is receiving no more than a customary
        brokerage commission in connection with such sale, (ii) printing expenses
        (including, without limitation, expenses of printing certificates for
        Registrable Securities and of printing prospectuses if the printing of
        prospectuses is reasonably requested by the holders of a majority of the
        Registrable Securities included in a Registration Statement), (iii) messenger,
        telephone and delivery expenses, (iv) fees and disbursements of counsel for
        the
        Company, (v) Securities Act liability insurance, if the Company so desires
        such
        insurance, and (vi) fees and expenses of all other Persons retained by the
        Company in connection with the consummation of the transactions contemplated
        by
        this Agreement. In addition, the Company shall be responsible for all of
        its
        internal expenses incurred in connection with the consummation of the
        transactions contemplated by this Agreement (including, without limitation,
        all
        salaries and expenses of its officers and employees performing legal or
        accounting duties), the expense of any annual audit and the fees and expenses
        incurred in connection with the listing of the Registrable Securities on
        any
        securities exchange as required hereunder. In no event shall the Company
        be
        responsible for any broker or similar commissions or, except to the extent
        provided for in the Transaction Documents, any legal fees or other costs
        of the
        Holders.

      

      5. Indemnification

      

      (a) Indemnification
        by the Company.
        The
        Company shall, notwithstanding any termination of this Agreement, indemnify
        and
        hold harmless each Holder, the officers, directors, agents, brokers (including
        brokers who offer and sell Registrable Securities as principal as a result
        of a
        pledge or any failure to perform under a margin call of Common Stock),
        investment advisors and employees of each of them, each Person who controls
        any
        such Holder (within the meaning of Section 15 of the Securities Act or Section
        20 of the Exchange Act) and the officers, directors, agents and employees
        of
        each such controlling Person, to the fullest extent permitted by applicable
        law,
        from and against any and all losses, claims, damages, liabilities, costs
        (including, without limitation, reasonable attorneys’ fees) and expenses
        (collectively, “Losses”),
        as
        incurred, arising out of or relating to any untrue or alleged untrue statement
        of a material fact contained in a Registration Statement, any Prospectus
        or any
        form of prospectus or in any amendment or supplement thereto or in any
        preliminary prospectus, or arising out of or relating to any omission or
        alleged
        omission of a material fact required to be stated therein or necessary to
        make
        the statements therein (in the case of any Prospectus or form of prospectus
        or
        supplement thereto, in light of the circumstances under which they were made)
        not misleading, except to the extent, but only to the extent, that (i) such
        untrue statements or omissions are based solely upon information regarding
        such
        Holder furnished in writing to the Company by such Holder expressly for use
        therein, or to the extent that such information relates to such Holder or
        such
        Holder’s proposed method of distribution of Registrable Securities and was
        reviewed and expressly approved in writing by such Holder expressly for use
        in a
        Registration Statement, such Prospectus or such form of Prospectus or in
        any
        amendment or supplement thereto (it being understood that the Holder has
        approved Annex A hereto for this purpose) or (ii) in the case of an occurrence
        of an event of the type specified in Section 3(d)(ii)-(vi), the use by such
        Holder of an outdated or defective Prospectus after the Company has notified
        such Holder in writing that the Prospectus is outdated or defective and prior
        to
        the receipt by such Holder of the Advice contemplated in Section 6(d). The
        Company shall notify the Holders promptly of the institution, threat or
        assertion of any Proceeding arising from or in connection with the transactions
        contemplated by this Agreement of which the Company is aware.

       

      
 

      
        
          
          

        

        
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      (b) Indemnification
        by Holders.
        Each
        Holder shall, severally and not jointly, indemnify and hold harmless the
        Company, its directors, officers, agents and employees, each Person who controls
        the Company (within the meaning of Section 15 of the Securities Act and Section
        20 of the Exchange Act), and the directors, officers, agents or employees
        of
        such controlling Persons, to the fullest extent permitted by applicable law,
        from and against all Losses, as incurred, to the extent arising out of or
        based
        solely upon: (x) such Holder’s failure to comply with the prospectus delivery
        requirements of the Securities Act or (y) any untrue or alleged untrue statement
        of a material fact contained in any Registration Statement, any Prospectus,
        or
        any form of prospectus, or in any amendment or supplement thereto or in any
        preliminary prospectus, or arising out of or relating to any omission or
        alleged
        omission of a material fact required to be stated therein or necessary to
        make
        the statements therein not misleading (i) to the extent, but only to the
        extent,
        that such untrue statement or omission is contained in any information so
        furnished in writing by such Holder to the Company specifically for inclusion
        in
        such Registration Statement or such Prospectus or (ii) to the extent that
        (1)
        such untrue statements or omissions are based solely upon information regarding
        such Holder furnished in writing to the Company by such Holder expressly
        for use
        therein, or to the extent that such information relates to such Holder or
        such
        Holder’s proposed method of distribution of Registrable Securities and was
        reviewed and expressly approved in writing by such Holder expressly for use
        in a
        Registration Statement (it being understood that the Holder has approved
        Annex A
        hereto for this purpose), such Prospectus or such form of Prospectus or in
        any
        amendment or supplement thereto or (2) in the case of an occurrence of an
        event
        of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of
        an
        outdated or defective Prospectus after the Company has notified such Holder
        in
        writing that the Prospectus is outdated or defective and prior to the receipt
        by
        such Holder of the Advice contemplated in Section 6(d). In no event shall
        the
        liability of any selling Holder hereunder be greater in amount than the dollar
        amount of the net proceeds received by such Holder upon the sale of the
        Registrable Securities giving rise to such indemnification
        obligation.

       

      
 

      
        
          
          

        

        
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      (c) Conduct
        of Indemnification Proceedings.
        If any
        Proceeding shall be brought or asserted against any Person entitled to indemnity
        hereunder (an “Indemnified
        Party”),
        such
        Indemnified Party shall promptly notify the Person from whom indemnity is
        sought
        (the “Indemnifying
        Party”)
        in
        writing, and the Indemnifying Party shall have the right to assume the defense
        thereof, including the employment of counsel reasonably satisfactory to the
        Indemnified Party and the payment of all fees and expenses incurred in
        connection with defense thereof; provided, that the failure of any Indemnified
        Party to give such notice shall not relieve the Indemnifying Party of its
        obligations or liabilities pursuant to this Agreement, except (and only)
        to the
        extent that it shall be finally determined by a court of competent jurisdiction
        (which determination is not subject to appeal or further review) that such
        failure shall have prejudiced the Indemnifying Party.

      

      An
        Indemnified Party shall have the right to employ separate counsel in any
        such
        Proceeding and to participate in the defense thereof, but the fees and expenses
        of such counsel shall be at the expense of such Indemnified Party or Parties
        unless: (1) the Indemnifying Party has agreed in writing to pay such fees
        and
        expenses; (2) the Indemnifying Party shall have failed promptly to assume
        the
        defense of such Proceeding and to employ counsel reasonably satisfactory
        to such
        Indemnified Party in any such Proceeding; or (3) the named parties to any
        such
        Proceeding (including any impleaded parties) include both such Indemnified
        Party
        and the Indemnifying Party, and such Indemnified Party shall reasonably believe
        that a material conflict of interest is likely to exist if the same counsel
        were
        to represent such Indemnified Party and the Indemnifying Party (in which
        case,
        if such Indemnified Party notifies the Indemnifying Party in writing that
        it
        elects to employ separate counsel at the expense of the Indemnifying Party,
        the
        Indemnifying Party shall not have the right to assume the defense thereof
        and
        the reasonable fees and expenses of one separate counsel shall be at the
        expense
        of the Indemnifying Party). The Indemnifying Party shall not be liable for
        any
        settlement of any such Proceeding effected without its written consent, which
        consent shall not be unreasonably withheld. No Indemnifying Party shall,
        without
        the prior written consent of the Indemnified Party, effect any settlement
        of any
        pending Proceeding in respect of which any Indemnified Party is a party,
        unless
        such settlement includes an unconditional release of such Indemnified Party
        from
        all liability on claims that are the subject matter of such
        Proceeding.

      

      Subject
        to the terms of this Agreement, all reasonable fees and expenses of the
        Indemnified Party (including reasonable fees and expenses to the extent incurred
        in connection with investigating or preparing to defend such Proceeding in
        a
        manner not inconsistent with this Section) shall be paid to the Indemnified
        Party, as incurred, within ten Trading Days of written notice thereof to
        the
        Indemnifying Party; provided,
        that
        the Indemnified Party shall promptly reimburse the Indemnifying Party for
        that
        portion of such fees and expenses applicable to such actions for which such
        Indemnified Party is not entitled to indemnification hereunder, determined
        based
        upon the relative faults of the parties.

      

      (d) Contribution.
        If the
        indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified
        Party or insufficient to hold an Indemnified Party harmless for any Losses,
        then
        each Indemnifying Party shall contribute to the amount paid or payable by
        such
        Indemnified Party, in such proportion as is appropriate to reflect the relative
        fault of the Indemnifying Party and Indemnified Party in connection with
        the
        actions, statements or omissions that resulted in such Losses as well as
        any
        other relevant equitable considerations. The relative fault of such Indemnifying
        Party and Indemnified Party shall be determined by reference to, among other
        things, whether any action in question, including any untrue or alleged untrue
        statement of a material fact or omission or alleged omission of a material
        fact,
        has been taken or made by, or relates to information supplied by, such
        Indemnifying Party or Indemnified Party, and the parties’ relative intent,
        knowledge, access to information and opportunity to correct or prevent such
        action, statement or omission. The amount paid or payable by a party as a
        result
        of any Losses shall be deemed to include, subject to the limitations set
        forth
        in this Agreement, any reasonable attorneys’ or other reasonable fees or
        expenses incurred by such party in connection with any Proceeding to the
        extent
        such party would have been indemnified for such fees or expenses if the
        indemnification provided for in this Section was available to such party
        in
        accordance with its terms.

       

      
 

      
        
          
          

        

        
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      The
        parties hereto agree that it would not be just and equitable if contribution
        pursuant to this Section 5(d) were determined by pro rata allocation or by
        any
        other method of allocation that does not take into account the equitable
        considerations referred to in the immediately preceding paragraph.
        Notwithstanding the provisions of this Section 5(d), no Holder shall be required
        to contribute, in the aggregate, any amount in excess of the amount by which
        the
        proceeds actually received by such Holder from the sale of the Registrable
        Securities subject to the Proceeding exceeds the amount of any damages that
        such
        Holder has otherwise been required to pay by reason of such untrue or alleged
        untrue statement or omission or alleged omission, except in the case of fraud
        by
        such Holder.

      

      The
        indemnity and contribution agreements contained in this Section are in addition
        to any liability that the Indemnifying Parties may have to the Indemnified
        Parties.

      

      6. Miscellaneous

      

      (a) Remedies.
        In the
        event of a breach by the Company or by a Holder, of any of their obligations
        under this Agreement, each Holder or the Company, as the case may be, in
        addition to being entitled to exercise all rights granted by law and under
        this
        Agreement, including recovery of damages, will be entitled to specific
        performance of its rights under this Agreement. The Company and each Holder
        agree that monetary damages would not provide adequate compensation for any
        losses incurred by reason of a breach by it of any of the provisions of this
        Agreement and hereby further agrees that, in the event of any action for
        specific performance in respect of such breach, it shall waive the defense
        that
        a remedy at law would be adequate.

      

      (b) No
        Piggyback on Registrations.
        Except
        as set forth on Schedule
        6(b)
        attached
        hereto, neither the Company nor any of its security holders (other than the
        Holders in such capacity pursuant hereto) may include securities of the Company
        in the initial Registration Statement other than the Registrable Securities.
        No
        Person has any right to cause the Company to effect the registration under
        the
        Securities Act of any securities of the Company. The Company shall not file
        any
        other registration statements, other than registration statements on Form
        S-8,
        until the initial Registration Statement required hereunder is declared
        effective by the Commission, provided that this Section 6(b) shall not prohibit
        the Company from filing amendments to registration statements already
        filed.

       

      
 

      
        
          
          

        

        
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      (c) Compliance.
        Each
        Holder covenants and agrees that it will comply with the prospectus delivery
        requirements of the Securities Act as applicable to it in connection with
        sales
        of Registrable Securities pursuant to a Registration Statement.

      

      (d) Discontinued
        Disposition.
        Each
        Holder agrees by its acquisition of such Registrable Securities that, upon
        receipt of a notice from the Company of the occurrence of any event of the
        kind
        described in Section 3(d), such Holder will forthwith discontinue disposition
        of
        such Registrable Securities under a Registration Statement until such Holder’s
        receipt of the copies of the supplemented Prospectus and/or amended Registration
        Statement or until it is advised in writing (the “Advice”)
        by the
        Company that the use of the applicable Prospectus may be resumed, and, in
        either
        case, has received copies of any additional or supplemental filings that
        are
        incorporated or deemed to be incorporated by reference in such Prospectus
        or
        Registration Statement. The Company will use its best efforts to ensure that
        the
        use of the Prospectus may be resumed as promptly as it practicable. The
        Company agrees and acknowledges that any periods during which the Holder
        is
        required to discontinue the disposition of the Registrable Securities hereunder
        shall be subject to the provisions of Section 2(b).

      

      (e) Piggy-Back
        Registrations.
        If at
        any time during the Effectiveness Period there is not an effective Registration
        Statement covering all of the Registrable Securities and the Company shall
        determine to prepare and file with the Commission a registration statement
        relating to an offering for its own account or the account of others under
        the
        Securities Act of any of its equity securities, other than on Form S-4 or
        Form
        S-8 (each as promulgated under the Securities Act) or their then equivalents
        relating to equity securities to be issued solely in connection with any
        acquisition of any entity or business or equity securities issuable in
        connection with the stock option or other employee benefit plans, then the
        Company shall send to each Holder a written notice of such determination
        and, if
        within fifteen days after the date of such notice, any such Holder shall
        so
        request in writing, the Company shall include in such registration statement
        all
        or any part of such Registrable Securities such Holder requests to be
        registered; provided,
        however,
        that,
        the Company shall not be required to register any Registrable Securities
        pursuant to this Section 6(e) that are eligible for resale pursuant to Rule
        144(k) promulgated under the Securities Act or that are the subject of a
        then
        effective Registration Statement.

      

      (f) Amendments
        and Waivers.
        The
        provisions of this Agreement, including the provisions of this sentence,
        may not
        be amended, modified or supplemented, and waivers or consents to departures
        from
        the provisions hereof may not be given, unless the same shall be in writing
        and
        signed by the Company and each Holder of the then outstanding Registrable
        Securities. Notwithstanding the foregoing, a waiver or consent to depart
        from
        the provisions hereof with respect to a matter that relates exclusively to
        the
        rights of Holders and that does not directly or indirectly affect the rights
        of
        other Holders may be given by Holders of all of the Registrable Securities
        to
        which such waiver or consent relates; provided,
        however,
        that
        the provisions of this sentence may not be amended, modified, or supplemented
        except in accordance with the provisions of the immediately preceding
        sentence.

       

      
 

      
        
          
          

        

        
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      (g) Notices.
        Any and
        all notices or other communications or deliveries required or permitted to
        be
        provided hereunder shall be delivered as set forth in the Purchase
        Agreement.

      

      (h) Successors
        and Assigns.
        This
        Agreement shall inure to the benefit of and be binding upon the successors
        and
        permitted assigns of each of the parties and shall inure to the benefit of
        each
        Holder. The Company may not assign its rights or obligations hereunder without
        the prior written consent of all of the Holders of the then-outstanding
        Registrable Securities. Each Holder may assign their respective rights hereunder
        in the manner and to the Persons as permitted under the Purchase
        Agreement.

      

      (i) No
        Inconsistent Agreements.
        Neither
        the Company nor any of its subsidiaries has entered, as of the date hereof,
        nor
        shall the Company or any of its subsidiaries, on or after the date of this
        Agreement, enter into any agreement with respect to its securities, that
        would
        have the effect of impairing the rights granted to the Holders in this Agreement
        or otherwise conflicts with the provisions hereof. Except as set forth on
        Schedule
        6(i),
        neither
        the Company nor any of its subsidiaries has previously entered into any
        agreement granting any registration rights with respect to any of its securities
        to any Person that have not been satisfied in full.

      

      (j) Execution
        and Counterparts.
        This
        Agreement may be executed in any number of counterparts, each of which when
        so
        executed shall be deemed to be an original and, all of which taken together
        shall constitute one and the same Agreement. In the event that any signature
        is
        delivered by facsimile transmission, such signature shall create a valid
        binding
        obligation of the party executing (or on whose behalf such signature is
        executed) the same with the same force and effect as if such facsimile signature
        were the original thereof.

      

      (k) Governing
        Law.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Agreement shall be determined with the provisions of the Purchase
        Agreement.

      

      (l) Cumulative
        Remedies.
        The
        remedies provided herein are cumulative and not exclusive of any remedies
        provided by law.

      

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

       

      
 

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      (n) Headings.
        The
        headings in this Agreement are for convenience of reference only and shall
        not
        limit or otherwise affect the meaning hereof.

      

      (o) Independent
        Nature of Holders’ Obligations and Rights.
        The
        obligations of each Holder hereunder are several and not joint with the
        obligations of any other Holder hereunder, and no Holder shall be responsible
        in
        any way for the performance of the obligations of any other Holder hereunder.
        Nothing contained herein or in any other agreement or document delivered
        at any
        closing, and no action taken by any Holder pursuant hereto or thereto, shall
        be
        deemed to constitute the Holders as a partnership, an association, a joint
        venture or any other kind of entity, or create a presumption that the Holders
        are in any way acting in concert with respect to such obligations or the
        transactions contemplated by this Agreement. Each Holder shall be entitled
        to
        protect and enforce its rights, including without limitation the rights arising
        out of this Agreement, and it shall not be necessary for any other Holder
        to be
        joined as an additional party in any proceeding for such purpose.

      

      *************************

      

      
 

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      

      

      IN
        WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
        as
        of the date first written above.

       

       

      
        
          	 	 	 
	 	
                  eMAGIN
                    CORPORATION

                
	 
 	 
 	 
 
	
                	By:  	/s/ 
                  John Atherly 
	 	
                  

                  Name: John
                    Atherly

                
	 	Title:
                   Chief Financial Officer

        

      

      

      

      [SIGNATURE
        PAGE OF HOLDERS FOLLOWS]

      
         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

      

      [SIGNATURE
        PAGE OF HOLDERS TO EMAGIN RRA]

      

      Name
        of
        Holder: _________________________________________________

      Signature
        of Authorized Signatory of Holder:
        ___________________________

      Name
        of
        Authorized Signatory: ______________________________________

      Title
        of
        Authorized Signatory: _______________________________________

      

      

      [SIGNATURE
        PAGES CONTINUE]

      
         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

      

      ANNEX
        A

      

      Plan
        of Distribution

      

      Each
        Selling Stockholder (the “Selling
        Stockholders”)
        of the
        common stock (“Common
        Stock”)
        and
        any of their pledgees, assignees and successors-in-interest may, from time
        to
        time, sell any or all of their shares of Common Stock on the Trading Market
        or
        any other stock exchange, market or trading facility on which the shares
        are
        traded or in private transactions. These sales may be at fixed or negotiated
        prices. A Selling Stockholder may use any one or more of the following methods
        when selling shares:

      

      
        	 	
                ·

              	
                ordinary
                  brokerage transactions and transactions in which the broker-dealer
                  solicits purchasers;

              

      

      

      
        	 	
                ·

              	
                block
                  trades in which the broker-dealer will attempt to sell the shares
                  as agent
                  but may position and resell a portion of the block as principal
                  to
                  facilitate the transaction;

              

      

      

      
        	 	
                ·

              	
                purchases
                  by a broker-dealer as principal and resale by the broker-dealer
                  for its
                  account;

              

      

      

      
        	 	
                ·

              	
                an
                  exchange distribution in accordance with the rules of the applicable
                  exchange;

              

      

      

      
        	 	
                ·

              	
                privately
                  negotiated transactions;

              

      

      

      
        	 	
                ·

              	
                settlement
                  of short sales entered into after the effective date of the registration
                  statement of which this prospectus is a
                  part;

              

      

      

      
        	 	
                ·

              	
                broker-dealers
                  may agree with the Selling Stockholders to sell a specified number
                  of such
                  shares at a stipulated price per
                  share;

              

      

      

      
        	 	
                ·

              	
                a
                  combination of any such methods of
                  sale;

              

      

      

      
        	 	
                ·

              	
                through
                  the writing or settlement of options or other hedging transactions,
                  whether through an options exchange or otherwise;
                  or

              

      

      

      
        	 	
                ·

              	
                any
                  other method permitted pursuant to applicable
                  law.

              

      

      

      The
        Selling Stockholders may also sell shares under Rule 144 under the Securities
        Act of 1933, as amended (the “Securities
        Act”),
        if
        available, rather than under this prospectus.

      

      Broker-dealers
        engaged by the Selling Stockholders may arrange for other brokers-dealers
        to
        participate in sales. Broker-dealers may receive commissions or discounts
        from
        the Selling Stockholders (or, if any broker-dealer acts as agent for the
        purchaser of shares, from the purchaser) in amounts to be negotiated, but,
        except as set forth in a supplement to this Prospectus, in the case of an
        agency
        transaction not in excess of a customary brokerage commission in compliance
        with
        NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
        in compliance with NASDR IM-2440. 

       

      
 

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      In
        connection with the sale of the Common Stock or interests therein, the Selling
        Stockholders may enter into hedging transactions with broker-dealers or other
        financial institutions, which may in turn engage in short sales of the Common
        Stock in the course of hedging the positions they assume. The Selling
        Stockholders may also sell shares of the Common Stock short and deliver these
        securities to close out their short positions, or loan or pledge the Common
        Stock to broker-dealers that in turn may sell these securities. The Selling
        Stockholders may also enter into option or other transactions with
        broker-dealers or other financial institutions or the creation of one or
        more
        derivative securities which require the delivery to such broker-dealer or
        other
        financial institution of shares offered by this prospectus, which shares
        such
        broker-dealer or other financial institution may resell pursuant to this
        prospectus (as supplemented or amended to reflect such
        transaction).

      

      The
        Selling Stockholders and any broker

      

      The
        Company is required to pay certain fees and expenses incurred by the Company
        incident to the registration of the shares. The Company has agreed to indemnify
        the Selling Stockholders against certain losses, claims, damages and
        liabilities, including liabilities under the Securities Act. 

      

      Because
        Selling Stockholders may be deemed to be “underwriters” within the meaning of
        the Securities Act, they will be subject to the prospectus delivery requirements
        of the Securities Act. In addition, any securities covered by this prospectus
        which qualify for sale pursuant to Rule 144 under the Securities Act may
        be sold
        under Rule 144 rather than under this prospectus. Each Selling Stockholder
        has
        advised us that they have not entered into any written or oral agreements,
        understandings or arrangements with any underwriter or broker-dealer regarding
        the sale of the resale shares. There is no underwriter or coordinating broker
        acting in connection with the proposed sale of the resale shares by the Selling
        Stockholders.

      

      We
        agreed
        to keep this prospectus effective until the earlier of (i) the date on which
        the
        shares may be resold by the Selling Stockholders without registration and
        without regard to any volume limitations by reason of Rule 144(e) under the
        Securities Act or any other rule of similar effect or (ii) all of the shares
        have been sold pursuant to the prospectus or Rule 144 under the Securities
        Act
        or any other rule of similar effect. The resale shares will be sold only
        through
        registered or licensed brokers or dealers if required under applicable state
        securities laws. In addition, in certain states, the resale shares may not
        be
        sold unless they have been registered or qualified for sale in the applicable
        state or an exemption from the registration or qualification requirement
        is
        available and is complied with.

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      

      Under
        applicable rules and regulations under the Exchange Act, any person engaged
        in
        the distribution of the resale shares may not simultaneously engage in market
        making activities with respect to the Common Stock for the applicable restricted
        period, as defined in Regulation M, prior to the commencement of the
        distribution. In addition, the Selling Stockholders will be subject to
        applicable provisions of the Exchange Act and the rules and regulations
        thereunder, including Regulation M, which may limit the timing of purchases
        and
        sales of shares of the Common Stock by the Selling Stockholders or any other
        person. We will make copies of this prospectus available to the Selling
        Stockholders and have informed them of the need to deliver a copy of this
        prospectus to each purchaser at or prior to the time of the sale.

      

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      Annex
        B

      

      eMagin
        Corporation 

      

      Selling
        Securityholder Notice and Questionnaire

      

      The
        undersigned beneficial owner of common stock, par value $0.001 per share
        (the
“Common
        Stock”),
        of
        eMagin Corporation, a Delaware corporation (the “Company”),
        (the
“Registrable
        Securities”)
        understands that the Company has filed or intends to file with the Securities
        and Exchange Commission (the “Commission”)
        a
        registration statement on Form S-3 (the “Registration
        Statement”)
        for
        the registration and resale under Rule 415 of the Securities Act of 1933,
        as
        amended (the “Securities
        Act”),
        of
        the Registrable Securities, in accordance with the terms of the Registration
        Rights Agreement, dated as of October 20, 2005 (the “Registration
        Rights Agreement”),
        among
        the Company and the Purchasers named therein. A copy of the Registration
        Rights
        Agreement is available from the Company upon request at the address set forth
        below. All capitalized terms not otherwise defined herein shall have the
        meanings ascribed thereto in the Registration Rights Agreement.

      

      Certain
        legal consequences arise from being named as a selling securityholder in
        the
        Registration Statement and the related prospectus. Accordingly, holders and
        beneficial owners of Registrable Securities are advised to consult their
        own
        securities law counsel regarding the consequences of being named or not being
        named as a selling securityholder in the Registration Statement and the related
        prospectus.

      

      NOTICE

      

      The
        undersigned beneficial owner (the “Selling
        Securityholder”)
        of
        Registrable Securities hereby elects to include the Registrable Securities
        owned
        by it and listed below in Item 3 (unless otherwise specified under such Item
        3)
        in the Registration Statement.

      

      
         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

      

      The
        undersigned hereby provides the following information to the Company and
        represents and warrants that such information is accurate:

      

      QUESTIONNAIRE

      

      1. Name.

      

      
        
          	 	
                  (a)

                	
                  Full
                    Legal Name of Selling
                    Securityholder

                

        

        
          	 	 	______________________________________________________________________________________________________________

        

      

       

      

      
        
          	 	
                  (b)

                	
                  Full
                    Legal Name of Registered Holder (if not the same as (a) above)
                    through
                    which Registrable Securities Listed in Item 3 below are
                    held:

                

        

        
          	 	 	______________________________________________________________________________________________________________

        

      

       

      

      
        
          	 	
                  (c)

                	
                  Full
                    Legal Name of Natural Control Person (which means a natural person
                    who
                    directly or indirectly alone or with others has power to vote
                    or dispose
                    of the securities covered by the
                    questionnaire):

                

        

        
          	 	 	______________________________________________________________________________________________________________

        

      

       

      

      

      2.
        Address for Notices to Selling Securityholder:

      
        	 
                
                

                

                

                Telepone:__________________________________________________________________________________________________________________
	
                Fax:_______________________________________________________________________________________________________________________________________

              
	
                Contact
                  Person:______________________________________________________________________________________________________________________________ 

              

      

      

      3.
        Beneficial Ownership of Registrable Securities:

      

      
        
          	 	
                  (a)

                	
                  Type
                    and Number of Registrable Securities beneficially
                    owned:

                

        

        
          	 	 	
                  

                  

                  

                   

        

      

       

      

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      4.
        Broker-Dealer Status:

      

      
        	 	
                (a)

              	
                Are
                  you a broker-dealer?

              

      

              

        
          	 	Yes  r	No
                  r	 

        

      

      

      
        	 	
                (b)

              	
                If
                  “yes” to Section 4(a), did you receive your Registrable Securities as
                  compensation for investment banking services to the
                  Company.

              

      

       

      
        
          	 	Yes r 	r No  	 

        

      

                       

      
        	 	
                Note:

              	
                If
                  no, the Commission’s staff has indicated that you should be identified as
                  an underwriter in the Registration
                  Statement.

              

      

      

      
        	 	
                (c)

              	
                Are
                  you an affiliate of a
                  broker-dealer?

              

      

       

      
        
          	 	Yesr 	No r 	 
	 

        

      

      

      
        	 	
                (d)

              	
                If
                  you are an affiliate of a broker-dealer, do you certify that you
                  bought
                  the Registrable Securities in the ordinary course of business,
                  and at the
                  time of the purchase of the Registrable Securities to be resold,
                  you had
                  no agreements or understandings, directly or indirectly, with any
                  person
                  to distribute the Registrable
                  Securities?

              

      

       

      
        
          	 	Yesr 	Nor 	 
	 

        

      
        	 	
                Note:

              	
                If
                  no, the Commission’s staff has indicated that you should be identified as
                  an underwriter in the Registration
                  Statement.

              

      

      

      5.
        Beneficial Ownership of Other Securities of the Company Owned by the Selling
        Securityholder.

      

      Except
        as set forth below in this Item 5, the undersigned is not the beneficial
        or
        registered owner of any securities of the Company other than the Registrable
        Securities listed above in Item 3.

      

      
        
          	 	
                  (a)

                	
                  Type
                    and Amount of Other Securities beneficially owned by the Selling
                    Securityholder:

                

        

        
          	 	 	
                  

                  

                   

        

      

       

      

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      6.
        Relationships with the Company:

      

      Except
        as set forth below, neither the undersigned nor any of its affiliates, officers,
        directors or principal equity holders (owners of 5% of more of the equity
        securities of the undersigned) has held any position or office or has had
        any
        other material relationship with the Company (or its predecessors or affiliates)
        during the past three years.

       

      State
        any
        exceptions here:

      
        	 	 

                

                

                

              

      

      

      

      The
        undersigned agrees to promptly notify the Company of any inaccuracies or
        changes
        in the information provided herein that may occur subsequent to the date
        hereof
        at any time while the Registration Statement remains effective.

      

      By
        signing below, the undersigned consents to the disclosure of the information
        contained herein in its answers to Items 1 through 6 and the inclusion of
        such
        information in the Registration Statement and the related prospectus
and
        any
        amendments or supplements thereto.
        The
        undersigned understands that such information will be relied upon by the
        Company
        in connection with the preparation or amendment of the Registration Statement
        and the related prospectus.

      

      IN
        WITNESS WHEREOF the undersigned, by authority duly given, has caused this
        Notice
        and Questionnaire to be executed and delivered either in person or by its
        duly
        authorized agent.

       

      
        	 	 	 
	Date:  	Beneficial
                Owner: 
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Name:
	 	Title 

      

       

      PLEASE
        FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
        THE ORIGINAL BY OVERNIGHT MAIL, TO:

      

      

      

      Sichenzia
        Ross Friedman Ference LLP

      1065
        Avenue of the Americas, 21st Floor 

      New
        York,
        New York 10018 

      Attn:
        Richard A. Friedman

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