Document:

ex-10_1.htm

    Exhibit
      10.1

     

    

     

    SECURITIES
      PURCHASE AGREEMENT

     

    

     

    SECURITIES
      PURCHASE AGREEMENT (this “Agreement”), dated as of September 13, 2007, by and
      among Juniper Group, Inc. a Nevada corporation, with headquarters located at
      20283 State Road, Suite 400, Boca Raton, Florida 33498 (the “Company”), and each
      of the purchasers set forth on the signature pages hereto (the
“Buyers”).

     

    WHEREAS:

     

    A.  The
      Company and the Buyers are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by the rules and
      regulations as promulgated by the United States Securities and Exchange
      Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
      Act”);

     

    B.  Buyers
      desire to purchase and the Company desires to issue and sell, upon the terms
      and
      conditions set forth in this Agreement (i) 8% convertible debentures of the
      Company, in the form attached hereto as Exhibit “A”, in the aggregate principal
      amount of Six Hundred Thousand Dollars ($600,000) (together with any
      debenture(s) issued in replacement thereof or as a dividend thereon or otherwise
      with respect thereto in accordance with the terms thereof, the “Debentures”),
      convertible into shares of common stock, par value $.001 per share, of the
      Company (the “Common Stock”), upon the terms and subject to the limitations and
      conditions set forth in such Debentures and (ii) warrants, in the form attached
      hereto as Exhibit “B”, to purchase 20,000,000 shares of Common Stock (the
“Warrants”).

     

    C.  Each
      Buyer wishes to purchase, upon the terms and conditions stated in this
      Agreement, such principal amount of Debentures and number of Warrants as is
      set
      forth immediately below its name on the signature pages hereto; and

     

    D.  Contemporaneous
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, in the form attached
      hereto as Exhibit “C” (the “Registration Rights Agreement”), pursuant to which
      the Company has agreed to provide certain registration rights under the 1933
      Act
      and the rules and regulations promulgated thereunder, and applicable state
      securities laws.

     

    NOW
      THEREFORE, the Company and each of the Buyers severally (and not jointly) hereby
      agree as follows:

     

    1.  PURCHASE
      AND SALE OF DEBENTURES AND WARRANTS.

     

    a.  Purchase
      of Debentures and Warrants.  On the Closing Date (as defined
      below), the Company shall issue and sell to each Buyer and each Buyer severally
      agrees to purchase from the Company such principal amount of Debentures and
      number of Warrants as is set forth immediately below such Buyer’s name on the
      signature pages hereto.

     

    b.  Form
      of Payment.  On the Closing Date (as defined below), (i) each
      Buyer shall pay the purchase price for the Debentures and the Warrants to be
      issued and sold to it at the Closing (as defined below) (the “Purchase Price”)
      by wire transfer of immediately available funds to the Company, in accordance
      with the Company’s written wiring instructions, against delivery of the
      Debentures in the principal amount equal to the Purchase Price and the number
      of
      Warrants as is set forth immediately below such Buyer’s name on the signature
      pages hereto, and (ii) the Company shall deliver such Debentures and Warrants
      duly executed on behalf of the Company, to such Buyer, against delivery of
      such
      Purchase Price.

     

    c.  Closing
      Date.  Subject to the satisfaction (or written waiver) of the
      conditions thereto set forth in Section 6 and Section 7 below, the date and
      time
      of the issuance and sale of the Debentures and the Warrants pursuant to this
      Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on
      September 13, 2007, or such other mutually agreed upon time.  The
      closing of the transactions contemplated by this Agreement (the “Closing”) shall
      occur on the Closing Date at such location as may be agreed to by the
      parties.

     

    2.  BUYERS’
      REPRESENTATIONS AND WARRANTIES.  Each Buyer severally (and not
      jointly) represents and warrants to the Company solely as to such Buyer
      that:

     

    a.  Investment
      Purpose.  As of the date hereof, the Buyer is purchasing the
      Debentures and the shares of Common Stock issuable upon conversion of or
      otherwise pursuant to the Debentures (including, without limitation, such
      additional shares of Common Stock, if any, as are issuable (i) on account of
      interest on the Debentures, (ii) as a result of the events described in Sections
      1.3 and 1.4(g) of the Debentures and Section 2(c) of the Registration Rights
      Agreement or (iii) in payment of the Standard Liquidated Damages Amount (as
      defined in Section 2(f) below) pursuant to this Agreement, such shares of Common
      Stock being collectively referred to herein as the “Conversion Shares”) and the
      Warrants and the shares of Common Stock issuable upon exercise thereof (the
      “Warrant Shares” and, collectively with the Debentures, Warrants and Conversion
      Shares, the “Securities”) for its own account and not with a present view
      towards the public sale or distribution thereof, except pursuant to sales
      registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does
      not
      agree to hold any of the Securities for any minimum or other specific term
      and
      reserves the right to dispose of the Securities at any time in accordance with
      or pursuant to a registration statement or an exemption under the 1933
      Act.

     

    b.  Accredited
      Investor Status.  The Buyer is an “accredited investor” as that
      term is defined in Rule 501(a) of Regulation D (an “Accredited
      Investor”).

     

    c.  Reliance
      on Exemptions.  The Buyer understands that the Securities are
      being offered and sold to it in reliance upon specific exemptions from the
      registration requirements of United States federal and state securities laws
      and
      that the Company is relying upon the truth and accuracy of, and the Buyer’s
      compliance with, the representations, warranties, agreements, acknowledgments
      and understandings of the Buyer set forth herein in order to determine the
      availability of such exemptions and the eligibility of the Buyer to acquire
      the
      Securities.

     

    d.  Information.  The
      Buyer and its advisors, if any, have been, and for so long as the Debentures
      and
      Warrants remain outstanding will continue to be, furnished with all materials
      relating to the business, finances and operations of the Company and materials
      relating to the offer and sale of the Securities which have been requested
      by
      the Buyer or its advisors.  The Buyer and its advisors, if any, have
      been, and for so long as the Debentures and Warrants remain outstanding will
      continue to be, afforded the opportunity to ask questions of the
      Company.  Notwithstanding the foregoing, the Company has not disclosed
      to the Buyer any material nonpublic information and will not disclose such
      information unless such information is disclosed to the public prior to or
      promptly following such disclosure to the Buyer.  Neither such
      inquiries nor any other due diligence investigation conducted by Buyer or any
      of
      its advisors or representatives shall modify, amend or affect Buyer’s right to
      rely on the Company’s representations and warranties contained in Section 3
      below.  The Buyer understands that its investment in the Securities
      involves a significant degree of risk.

     

    e.  Governmental
      Review.  The Buyer understands that no United States federal or
      state agency or any other government or governmental agency has passed upon
      or
      made any recommendation or endorsement of the Securities.

     

    f.  Transfer
      or Re-sale.  The Buyer understands that (i) except as provided in
      the Registration Rights Agreement, the sale or re-sale of the Securities has
      not
      been and is not being registered under the 1933 Act or any applicable state
      securities laws, and the Securities may not be transferred unless (a) the
      Securities are sold pursuant to an effective registration statement under the
      1933 Act, (b) the Buyer shall have delivered to the Company an opinion of
      counsel that shall be in form, substance and scope customary for opinions of
      counsel in comparable transactions to the effect that the Securities to be
      sold
      or transferred may be sold or transferred pursuant to an exemption from such
      registration, which opinion shall be accepted by the Company, (c) the Securities
      are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated
      under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees
      to sell or otherwise transfer the Securities only in accordance with this
      Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
      pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation
      S
      under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall
      have delivered to the Company an opinion of counsel that shall be in form,
      substance and scope customary for opinions of counsel in corporate transactions,
      which opinion shall be accepted by the Company; (ii) any sale of such Securities
      made in reliance on Rule 144 may be made only in accordance with the terms
      of
      said Rule and further, if said Rule is not applicable, any re-sale of such
      Securities under circumstances in which the seller (or the person through whom
      the sale is made) may be deemed to be an underwriter (as that term is defined
      in
      the 1933 Act) may require compliance with some other exemption under the 1933
      Act or the rules and regulations of the SEC thereunder; and (iii) neither the
      Company nor any other person is under any obligation to register such Securities
      under the 1933 Act or any state securities laws or to comply with the terms
      and
      conditions of any exemption thereunder (in each case, other than pursuant to
      the
      Registration Rights Agreement).  Notwithstanding the foregoing or
      anything else contained herein to the contrary, the Securities may be pledged
      as
      collateral in connection with a bonafide margin account or other
      lending arrangement.  In the event that the Company does not accept
      the opinion of counsel provided by the Buyer with respect to the transfer of
      Securities pursuant to an exemption from registration, such as Rule 144 or
      Regulation S, within three (3) business days of delivery of the opinion to
      the
      Company, the Company shall pay to the Buyer liquidated damages of three percent
      (3%) of the outstanding amount of the Debentures per month plus accrued and
      unpaid interest on the Debentures, prorated for partial months, in cash or
      shares at the option of the Company (“Standard Liquidated Damages
      Amount”).  If the Company elects to pay the Standard Liquidated
      Damages Amount in shares of Common Stock, such shares shall be issued at the
      Conversion Price at the time of payment. Notwithstanding anything herein to
      the
      contrary, in the event the Company has to pay the Standards Liquidated Damages
      Amount pursuant to any provision of this Agreement, the Buyers shall first
      have
      to give the Company advance written notice of such breach and in such event,
      the
      Company shall have 30 days from the receipt of such notice to cure such breach
      before the Standard Liquidated Damages Amount shall be due and payable to the
      Buyers.

     

    g.  Legends.  The
      Buyer understands that the Debentures and the Warrants and, until such time
      as
      the Conversion Shares and Warrant Shares have been registered under the 1933
      Act
      as contemplated by the Registration Rights Agreement or otherwise may be sold
      pursuant to Rule 144 or Regulation S without any restriction as to the number
      of
      securities as of a particular date that can then be immediately sold, the
      Conversion Shares and Warrant Shares may bear a restrictive legend in
      substantially the following form (and a stop-transfer order may be placed
      against transfer of the certificates for such Securities):

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended.  The securities may not be sold,
      transferred or assigned in the absence of an effective registration statement
      for the securities under said Act, or an opinion of counsel, in form, substance
      and scope customary for opinions of counsel in comparable transactions, that
      registration is not required under said Act or unless sold pursuant to Rule
      144
      or Regulation S under said Act.”

     

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of any Security upon which it
      is
      stamped, if, unless otherwise required by applicable state securities laws,
      (a)
      such Security is registered for sale under an effective registration statement
      filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or
      Regulation S without any restriction as to the number of securities as of a
      particular date that can then be immediately sold, or (b) such holder provides
      the Company with an opinion of counsel, in form, substance and scope customary
      for opinions of counsel in comparable transactions, to the effect that a public
      sale or transfer of such Security may be made without registration under the
      1933 Act, which opinion shall be accepted by the Company so that the sale or
      transfer is effected or (c) such holder provides the Company with reasonable
      assurances that such Security can be sold pursuant to Rule 144 or Regulation
      S.  The Buyer agrees to sell all Securities, including those
      represented by a certificate(s) from which the legend has been removed, in
      compliance with applicable prospectus delivery requirements, if
      any.

     

    h.  Authorization;
      Enforcement. This Agreement and the Registration Rights Agreement have been
      duly and validly authorized.  This Agreement has been duly executed
      and delivered on behalf of the Buyer, and this Agreement constitutes, and upon
      execution and delivery by the Buyer of the Registration Rights Agreement, such
      agreement will constitute, valid and binding agreements of the Buyer enforceable
      in accordance with their terms.

     

    i.  Residency.  The
      Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
      name on the signature pages hereto.

     

    3.  REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.  The Company represents and
      warrants to each Buyer that:

     

    a.  Organization
      and Qualification.  The Company and each of its Subsidiaries (as
      defined below), if any, is a corporation duly organized, validly existing and
      in
      good standing under the laws of the jurisdiction in which it is incorporated,
      with full power and authority (corporate and other) to own, lease, use and
      operate its properties and to carry on its business as and where now owned,
      leased, used, operated and conducted.  Schedule 3(a) sets forth a list
      of all of the Subsidiaries of the Company and the jurisdiction in which each
      is
      incorporated.  The Company and each of its Subsidiaries is duly
      qualified as a foreign corporation to do business and is in good standing in
      every jurisdiction in which its ownership or use of property or the nature
      of
      the business conducted by it makes such qualification necessary except where
      the
      failure to be so qualified or in good standing would not have a Material Adverse
      Effect.  “Material Adverse Effect” means any material adverse effect
      on the business, operations, assets, financial condition or prospects of the
      Company or its Subsidiaries, if any, taken as a whole, or on the transactions
      contemplated hereby or by the agreements or instruments to be entered into
      in
      connection herewith.  “Subsidiaries” means any corporation or other
      organization, whether incorporated or unincorporated, in which the Company
      owns,
      directly or indirectly, any equity or other ownership interest.

     

    b.  Authorization;
      Enforcement.  (i) The Company has all requisite corporate power
      and authority to enter into and perform this Agreement, the Registration Rights
      Agreement, the Debentures and the Warrants and to consummate the transactions
      contemplated hereby and thereby and to issue the Securities, in accordance
      with
      the terms hereof and thereof, (ii) the execution and delivery of this Agreement,
      the Registration Rights Agreement, the Debentures and the Warrants by the
      Company and the consummation by it of the transactions contemplated hereby
      and
      thereby (including without limitation, the issuance of the Debentures and the
      Warrants and the issuance and reservation for issuance of the Conversion Shares
      and Warrant Shares issuable upon conversion or exercise thereof) have been
      duly
      authorized by the Company’s Board of Directors and no further consent or
      authorization of the Company, its Board of Directors, or its shareholders is
      required, (iii) this Agreement has been duly executed and delivered by the
      Company by its authorized representative, and such authorized representative
      is
      the true and official representative with authority to sign this Agreement
      and
      the other documents executed in connection herewith and bind the Company
      accordingly, and (iv) this Agreement constitutes, and upon execution and
      delivery by the Company of the Registration Rights Agreement, the Debentures
      and
      the Warrants, each of such instruments will constitute, a legal, valid and
      binding obligation of the Company enforceable against the Company in accordance
      with its terms.

     

    c.  Capitalization.  As
      of the date hereof, the authorized capital stock of the Company consists of
      (i)
      750,000,000 shares of Common Stock, of which 30,646,421 shares are issued and
      outstanding, no shares are reserved for issuance pursuant to the Company’s stock
      option plans, 4,190,000 shares are reserved for issuance pursuant to securities
      (other than the Debentures and the Warrants) exercisable for, or convertible
      into or exchangeable for shares of Common Stock and, subject to obtaining
      Stockholder Approval (as defined in Section 4(k)), 65,823,530 shares are
      reserved for issuance upon conversion of the Debentures and the Additional
      Debentures (as defined in Section 4(m)) and exercise of the Warrants and the
      Additional Warrants (as defined in Section 4(m)); and (ii) 875,000 shares
      of preferred stock, of which 25,357 shares are issued and
      outstanding.  All of such outstanding shares of capital stock are, or
      upon issuance will be, duly authorized, validly issued, fully paid and
      nonassessable.  No shares of capital stock of the Company are subject
      to preemptive rights or any other similar rights of the shareholders of the
      Company or any liens or encumbrances imposed through the actions or failure
      to
      act of the Company.  Except as disclosed in Schedule 3(c), as of the
      effective date of this Agreement, (i) there are no outstanding options,
      warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
      agreements, understandings, claims or other commitments or rights of any
      character whatsoever relating to, or securities or rights convertible into
      or
      exchangeable for any shares of capital stock of the Company or any of its
      Subsidiaries, or arrangements by which the Company or any of its Subsidiaries
      is
      or may become bound to issue additional shares of capital stock of the Company
      or any of its Subsidiaries, (ii) there are no agreements or arrangements under
      which the Company or any of its Subsidiaries is obligated to register the sale
      of any of its or their securities under the 1933 Act (except the Registration
      Rights Agreement) and (iii) there are no anti-dilution or price adjustment
      provisions contained in any security issued by the Company (or in any agreement
      providing rights to security holders) that will be triggered by the issuance
      of
      the Debentures, the Warrants, the Conversion Shares or Warrant
      Shares.  The Company has furnished to the Buyer true and correct
      copies of the Company’s Articles of Incorporation as in effect on the date
      hereof (“Articles of Incorporation”), the Company’s By-laws, as in effect on the
      date hereof (the “By-laws”), and the terms of all securities convertible into or
      exercisable for Common Stock of the Company and the material rights of the
      holders thereof in respect thereto.  The Company shall provide the
      Buyer with a written update of this representation signed by the Company’s Chief
      Executive or Chief Financial Officer on behalf of the Company as of the Closing
      Date.

     

    d.  Issuance
      of Shares.  Subject to obtaining Stockholder Approval (as defined
      in Section 4(k)), the Conversion Shares and Warrant Shares are duly authorized
      and reserved for issuance and, upon conversion of the Debentures and exercise
      of
      the Warrants in accordance with their respective terms, will be validly issued,
      fully paid and non-assessable, and free from all taxes, liens, claims and
      encumbrances with respect to the issue thereof and shall not be subject to
      preemptive rights or other similar rights of shareholders of the Company and
      will not impose personal liability upon the holder thereof.

     

    e.  Acknowledgment
      of Dilution.  The Company understands and acknowledges the
      potentially dilutive effect to the Common Stock upon the issuance of the
      Conversion Shares and Warrant Shares upon conversion of the Debenture or
      exercise of the Warrants.  The Company further acknowledges that its
      obligation to issue Conversion Shares and Warrant Shares upon conversion of
      the
      Debentures or exercise of the Warrants in accordance with this Agreement, the
      Debentures and the Warrants is absolute and unconditional regardless of the
      dilutive effect that such issuance may have on the ownership interests of other
      shareholders of the Company.

     

    f.  No
      Conflicts.  Subject to obtaining Stockholder Approval (as defined
      in Section 4(k)), the execution, delivery and performance of this Agreement,
      the
      Registration Rights Agreement, the Debentures and the Warrants by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance and reservation for
      issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
      with
      or result in a violation of any provision of the Articles of Incorporation
      or
      By-laws or (ii) violate or conflict with, or result in a breach of any provision
      of, or constitute a default (or an event which with notice or lapse of time
      or
      both could become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture, patent,
      patent license or instrument to which the Company or any of its Subsidiaries
      is
      a party, or (iii) to the Company’s knowledge, result in a violation of any law,
      rule, regulation, order, judgment or decree (including federal and state
      securities laws and regulations and regulations of any self-regulatory
      organizations to which the Company or its securities are subject) applicable
      to
      the Company or any of its Subsidiaries or by which any property or asset of
      the
      Company or any of its Subsidiaries is bound or affected (except for such
      conflicts, defaults, terminations, amendments, accelerations, cancellations
      and
      violations as would not, individually or in the aggregate, have a Material
      Adverse Effect).  Neither the Company nor any of its Subsidiaries is
      in violation of its Articles of Incorporation, By-laws or other organizational
      documents and neither the Company nor any of its Subsidiaries is in default
      (and
      no event has occurred which with notice or lapse of time or both could put
      the
      Company or any of its Subsidiaries in default) under, and neither the Company
      nor any of its Subsidiaries has taken any action or failed to take any action
      that would give to others any rights of termination, amendment, acceleration
      or
      cancellation of, any agreement, indenture or instrument to which the Company
      or
      any of its Subsidiaries is a party or by which any property or assets of the
      Company or any of its Subsidiaries is bound or affected, except for possible
      defaults as would not, individually or in the aggregate, have a Material Adverse
      Effect. The businesses of the Company and its Subsidiaries, if any, are not
      being conducted, and shall not be conducted so long as a Buyer owns any of
      the
      Securities, in violation of any law, ordinance or regulation of any governmental
      entity.  Except as specifically contemplated by this Agreement and as
      required under the 1933 Act and any applicable state securities laws, the
      Company is not required to obtain any consent, authorization or order of, or
      make any filing or registration with, any court, governmental agency, regulatory
      agency, self regulatory organization or stock market or any third party in
      order
      for it to execute, deliver or perform any of its obligations under this
      Agreement, the Registration Rights Agreement, the Debentures or the Warrants
      in
      accordance with the terms hereof or thereof or to issue and sell the Debentures
      and Warrants in accordance with the terms hereof and to issue the Conversion
      Shares upon conversion of the Debentures and the Warrant Shares upon exercise
      of
      the Warrants.  Except as disclosed in Schedule 3(f), all consents,
      authorizations, orders, filings and registrations which the Company is required
      to obtain pursuant to the preceding sentence have been obtained or effected
      on
      or prior to the date hereof.  The Company is not in violation of the
      listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and
      does not reasonably anticipate that the Common Stock will be delisted by the
      OTCBB in the foreseeable future.  The Company and its Subsidiaries are
      unaware of any facts or circumstances which might give rise to any of the
      foregoing.

     

    g.  SEC
      Documents; Financial Statements.  Except as disclosed in Schedule
      3(g), the Company has timely filed all reports, schedules, forms, statements
      and
      other documents required to be filed by it with the SEC pursuant to the
      reporting requirements of the Securities Exchange Act of 1934, as amended (the
      “1934 Act”) (all of the foregoing filed prior to the date hereof and all
      exhibits included therein and financial statements and schedules thereto and
      documents (other than exhibits to such documents) incorporated by reference
      therein, being hereinafter referred to herein as the “SEC
      Documents”).  As of their respective dates, the SEC Documents complied
      in all material respects with the requirements of the 1934 Act and the rules
      and
      regulations of the SEC promulgated thereunder applicable to the SEC Documents,
      and none of the SEC Documents, at the time they were filed with the SEC,
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading.  None of the statements made in any such SEC Documents is,
      or has been, required to be amended or updated under applicable law (except
      for
      such statements as have been amended or updated in subsequent filings prior
      the
      date hereof).  As of their respective dates, the financial statements
      of the Company included in the SEC Documents complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto.  Such financial
      statements have been prepared in accordance with United States generally
      accepted accounting principles, consistently applied, during the periods
      involved (except (i) as may be otherwise indicated in such financial statements
      or the notes thereto, or (ii) in the case of unaudited interim statements,
      to
      the extent they may not include footnotes or may be condensed or summary
      statements) and fairly present in all material respects the consolidated
      financial position of the Company and its consolidated Subsidiaries as of the
      dates thereof and the consolidated results of their operations and cash flows
      for the periods then ended (subject, in the case of unaudited statements, to
      normal year-end audit adjustments).  Except as set forth in the
      financial statements of the Company included in the SEC Documents, the Company
      has no liabilities, contingent or otherwise, other than (i) liabilities incurred
      in the ordinary course of business subsequent to September 30, 2005 and (ii)
      obligations under contracts and commitments incurred in the ordinary course
      of
      business and not required under generally accepted accounting principles to
      be
      reflected in such financial statements, which, individually or in the aggregate,
      are not material to the financial condition or operating results of the
      Company.

     

    h.  Absence
      of Certain Changes.  Except as set forth on Schedule 3(h), since
      September 30, 2005, there has been no material adverse change and no material
      adverse development in the assets, liabilities, business, properties,
      operations, financial condition, results of operations or prospects of the
      Company or any of its Subsidiaries.

     

    i.  Absence
      of Litigation.  There is no action, suit, claim, proceeding,
      inquiry or investigation before or by any court, public board, government
      agency, self-regulatory organization or body pending or, to the knowledge of
      the
      Company or any of its Subsidiaries, threatened against or affecting the Company
      or any of its Subsidiaries, or their officers or directors in their capacity
      as
      such, that could have a Material Adverse Effect.  Schedule 3(i)
      contains a complete list and summary description of any pending or, to the
      knowledge of the Company, threatened proceeding against or affecting the Company
      or any of its Subsidiaries, without regard to whether it would have a Material
      Adverse Effect.  The Company and its Subsidiaries are unaware of any
      facts or circumstances which might give rise to any of the
      foregoing.

     

    j.  Patents,
      Copyrights, etc.  The Company and each of its Subsidiaries owns or
      possesses the requisite licenses or rights to use all patents, patent
      applications, patent rights, inventions, know-how, trade secrets, trademarks,
      trademark applications, service marks, service names, trade names and copyrights
      (“Intellectual Property”) necessary to enable it to conduct its business as now
      operated (and, except as set forth in Schedule 3(j) hereof, to the best of
      the
      Company’s knowledge, as presently contemplated to be operated in the future);
      there is no claim or action by any person pertaining to, or proceeding pending,
      or to the Company’s knowledge threatened, which challenges the right of the
      Company or of a Subsidiary with respect to any Intellectual Property necessary
      to enable it to conduct its business as now operated (and, except as set forth
      in Schedule 3(j) hereof, to the best of the Company’s knowledge, as presently
      contemplated to be operated in the future); to the best of the Company’s
      knowledge, the Company’s or its Subsidiaries’ current and intended products,
      services and processes do not infringe on any Intellectual Property or other
      rights held by any person; and the Company is unaware of any facts or
      circumstances which might give rise to any of the foregoing.  The
      Company and each of its Subsidiaries have taken reasonable security measures
      to
      protect the secrecy, confidentiality and value of their Intellectual
      Property.

     

    k.  No
      Materially Adverse Contracts, Etc.  Neither the Company nor any of
      its Subsidiaries is subject to any charter, corporate or other legal
      restriction, or any judgment, decree, order, rule or regulation which in the
      judgment of the Company’s officers has or is expected in the future to have a
      Material Adverse Effect.  Neither the Company nor any of its
      Subsidiaries is a party to any contract or agreement which in the judgment
      of
      the Company’s officers has or is expected to have a Material Adverse
      Effect.

     

    l.  Tax
      Status.  Except as set forth on Schedule 3(l), the Company and
      each of its Subsidiaries has made or filed all federal, state and foreign income
      and all other tax returns, reports and declarations required by any jurisdiction
      to which it is subject (unless and only to the extent that the Company and
      each
      of its Subsidiaries has set aside on its books provisions reasonably adequate
      for the payment of all unpaid and unreported taxes) and has paid all taxes
      and
      other governmental assessments and charges that are material in amount, shown
      or
      determined to be due on such returns, reports and declarations, except those
      being contested in good faith and has set aside on its books provisions
      reasonably adequate for the payment of all taxes for periods subsequent to
      the
      periods to which such returns, reports or declarations apply.  There
      are no unpaid taxes in any material amount claimed to be due by the taxing
      authority of any jurisdiction, and the officers of the Company know of no basis
      for any such claim.  The Company has not executed a waiver with
      respect to the statute of limitations relating to the assessment or collection
      of any foreign, federal, state or local tax.  Except as set forth on
      Schedule 3(l), none of the Company’s tax returns is presently being audited by
      any taxing authority.

     

    m.  Certain
      Transactions.  Except as set forth on Schedule 3(m) and except for
      arm’s length transactions pursuant to which the Company or any of its
      Subsidiaries makes payments in the ordinary course of business upon terms no
      less favorable than the Company or any of its Subsidiaries could obtain from
      third parties, none of the officers, directors, or employees of the Company
      is
      presently a party to any transaction with the Company or any of its Subsidiaries
      (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 corporation, partnership,
      trust or other entity in which any officer, director, or any such employee
      has a
      substantial interest or is an officer, director, trustee or
      partner.

     

    n.  Disclosure.  All
      information relating to or concerning the Company or any of its Subsidiaries
      set
      forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
      hereof and otherwise in connection with the transactions contemplated hereby
      is
      true and correct in all material respects and the Company has not omitted to
      state any material fact necessary in order to make the statements made herein
      or
      therein, in light of the circumstances under which they were made, not
      misleading.  No event or circumstance has occurred or exists with
      respect to the Company or any of its Subsidiaries or its or their business,
      properties, prospects, operations or financial conditions, which, under
      applicable law, rule or regulation, requires public disclosure or announcement
      by the Company but which has not been so publicly announced or disclosed
      (assuming for this purpose that the Company’s reports filed under the 1934 Act
      are being incorporated into an effective registration statement filed by the
      Company under the 1933 Act).

     

    o.  Acknowledgment
      Regarding Buyers’ Purchase of Securities.  The Company
      acknowledges and agrees that the Buyers are acting solely in the capacity of
      arm’s length purchasers with respect to this Agreement and the transactions
      contemplated hereby.  The Company further acknowledges that no Buyer
      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 statement made by any Buyer or any of their respective
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is not advice or a recommendation and is merely incidental
      to the Buyers’ purchase of the Securities.  The Company further
      represents to each Buyer that the Company’s decision to enter into this
      Agreement has been based solely on the independent evaluation of the Company
      and
      its representatives.

     

    p.  No
      Integrated Offering.  Neither the Company, nor any of its
      affiliates, nor any person acting on its or their behalf, has directly or
      indirectly made any offers or sales in any security or solicited any offers
      to
      buy any security under circumstances that would require registration under
      the
      1933 Act of the issuance of the Securities to the Buyers.  The
      issuance of the Securities to the Buyers will not be integrated with any other
      issuance of the Company’s securities (past, current or future) for purposes of
      any shareholder approval provisions applicable to the Company or its
      securities.

     

    q.  No
      Brokers.  The Company has taken no action which would give rise to
      any claim by any person for brokerage commissions, transaction fees or similar
      payments relating to this Agreement or the transactions contemplated
      hereby.

     

    r.  Permits;
      Compliance.  The Company and each of its Subsidiaries is in
      possession of all franchises, grants, authorizations, licenses, permits,
      easements, variances, exemptions, consents, certificates, approvals and orders
      necessary to own, lease and operate its properties and to carry on its business
      as it is now being conducted (collectively, the “Company Permits”), and there is
      no action pending or, to the knowledge of the Company, threatened regarding
      suspension or cancellation of any of the Company Permits.  Neither the
      Company nor any of its Subsidiaries is in conflict with, or in default or
      violation of, any of the Company Permits, except for any such conflicts,
      defaults or violations which, individually or in the aggregate, would not
      reasonably be expected to have a Material Adverse Effect.  Since
      September 30, 2005, neither the Company nor any of its Subsidiaries has received
      any notification with respect to possible conflicts, defaults or violations
      of
      applicable laws, except for notices relating to possible conflicts, defaults
      or
      violations, which conflicts, defaults or violations would not have a Material
      Adverse Effect.

     

    s.  Environmental
      Matters.

     

    (i)  Except
      as set forth in Schedule 3(s), there are, to the Company’s knowledge, with
      respect to the Company or any of its Subsidiaries or any predecessor of the
      Company, no past or present violations of Environmental Laws (as defined below),
      releases of any material into the environment, actions, activities,
      circumstances, conditions, events, incidents, or contractual obligations which
      may give rise to any common law environmental liability or any liability under
      the Comprehensive Environmental Response, Compensation and Liability Act of
      1980
      or similar federal, state, local or foreign laws and neither the Company nor
      any
      of its Subsidiaries has received any notice with respect to any of the
      foregoing, nor is any action pending or, to the Company’s knowledge, threatened
      in connection with any of the foregoing.  The term “Environmental
      Laws” means all federal, state, local or foreign laws relating to pollution or
      protection of human health or the environment (including, without limitation,
      ambient air, surface water, groundwater, land surface or subsurface strata),
      including, without limitation, laws relating to emissions, discharges, releases
      or threatened releases of chemicals, pollutants contaminants, or toxic or
      hazardous substances or wastes (collectively, “Hazardous Materials”) into the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (ii)  Other
      than those that are or were stored, used or disposed of in compliance with
      applicable law, no Hazardous Materials are contained on or about any real
      property currently owned, leased or used by the Company or any of its
      Subsidiaries, and no Hazardous Materials were released on or about any real
      property previously owned, leased or used by the Company or any of its
      Subsidiaries during the period the property was owned, leased or used by the
      Company or any of its Subsidiaries, except in the normal course of the Company’s
      or any of its Subsidiaries’ business.

     

    (iii)  Except
      as set forth in Schedule 3(s), there are no underground storage tanks on or
      under any real property owned, leased or used by the Company or any of its
      Subsidiaries that are not in compliance with applicable law.

     

    t.  Title
      to Property.  The Company and its Subsidiaries have good and
      marketable title in fee simple to all real property and good and marketable
      title to all personal property owned by them which is material to the business
      of the Company and its Subsidiaries, in each case free and clear of all liens,
      encumbrances and defects except such as are described in Schedule 3(t) or such
      as would not have a Material Adverse Effect.  Any real property and
      facilities held under lease by the Company and its Subsidiaries are held by
      them
      under valid, subsisting and enforceable leases with such exceptions as would
      not
      have a Material Adverse Effect.

     

    u.  Insurance.  Except
      as set forth in Schedule 3(u), the Company and each of its Subsidiaries are
      insured by insurers of recognized financial responsibility against such losses
      and risks and in such amounts as management of the Company believes to be
      prudent and customary in the businesses in which the Company and its
      Subsidiaries are engaged.  Neither the Company nor any such 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
      at a
      cost that would not have a Material Adverse Effect.  The Company has
      provided to Buyer true and correct copies of all policies relating to directors’
and officers’ liability coverage, errors and omissions coverage, and commercial
      general liability coverage.

     

    v.  Internal
      Accounting Controls.  The Company and each of its Subsidiaries
      maintain a system of internal accounting controls sufficient, in the judgment
      of
      the Company’s board of directors, to provide reasonable assurance that (i)
      transactions are executed in accordance with management’s general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management’s general or specific
      authorization and (iv) the recorded accountability for assets is compared with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences.

     

    w.  Foreign
      Corrupt Practices.  Neither the Company, nor any of its
      Subsidiaries, nor any director, officer, agent, employee or other person acting
      on behalf of the Company or any Subsidiary has, in the course of his actions
      for, or on behalf of, the Company, used any corporate funds for any unlawful
      contribution, gift, entertainment or other unlawful expenses relating to
      political activity; made any direct or indirect unlawful payment to any foreign
      or domestic government official or employee from corporate funds; violated
      or is
      in violation of any provision of the U.S. Foreign Corrupt Practices Act of
      1977,
      as amended, or made any bribe, rebate, payoff, influence payment, kickback
      or
      other unlawful payment to any foreign or domestic government official or
      employee.

     

    x.  Solvency.  Except
      as provided on Schedule 3(x), the Company (after giving effect to the
      transactions contemplated by this Agreement) is solvent (i.e., its assets
      have a fair market value in excess of the amount required to pay its probable
      liabilities on its existing debts as they become absolute and matured) and
      currently the Company has no information that would lead it to reasonably
      conclude that the Company would not, after giving effect to the transaction
      contemplated by this Agreement, have the ability to, nor does it intend to
      take
      any action that would impair its ability to, pay its debts from time to time
      incurred in connection therewith as such debts mature.  Except as
      provided on Schedule 3(x), the Company did not receive a qualified opinion
      from
      its auditors with respect to its most recent fiscal year end and, after giving
      effect to the transactions contemplated by this Agreement, does not anticipate
      or know of any basis upon which its auditors might issue a qualified opinion
      in
      respect of its current fiscal year.

     

    y.  No
      Investment Company.  The Company is not, and upon the issuance and
      sale of the Securities as contemplated by this Agreement will not be an
“investment company” required to be registered under the Investment Company Act
      of 1940 (an “Investment Company”).  The Company is not controlled by
      an Investment Company.

     

    z.  Breach
      of Representations and Warranties by the Company.  If the Company
      breaches any of the representations or warranties set forth in this Section
      3,
      and in addition to any other remedies available to the Buyers pursuant to this
      Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages
      Amount in cash or in shares of Common Stock at the option of the Company, until
      such breach is cured.  If the Company elects to pay the Standard
      Liquidated Damages Amounts in shares of Common Stock, such shares shall be
      issued at the Conversion Price at the time of payment.

     

    4.  COVENANTS.

     

    a.  Best
      Efforts.  The parties shall use their best efforts to satisfy
      timely each of the conditions described in Section 6 and 7 of this
      Agreement.

     

    b.  Form
      D; Blue Sky Laws.  The Company agrees to file a Form D with
      respect to the Securities as required under Regulation D and to provide a copy
      thereof to each Buyer promptly after such filing.  The Company shall,
      on or before the Closing Date, take such action as the Company shall reasonably
      determine is necessary to qualify the Securities for sale to the Buyers at
      the
      applicable closing pursuant to this Agreement under applicable securities or
      “blue sky” laws of the states of the United States (or to obtain an exemption
      from such qualification), and shall provide evidence of any such action so
      taken
      to each Buyer on or prior to the Closing Date.

     

    c.  Reporting
      Status; Eligibility to Use Form S-3, SB-2 or Form

     

    S-1. The
      Company’s Common Stock is registered under Section 12(g) of the 1934 Act. The
      Company represents and warrants that it meets the requirements for the use
      of
      Form S-3 (or if the Company is not eligible for the use of Form S-3 as of the
      Filing Date (as defined in the Registration Rights Agreement), the Company
      may
      use the form of registration for which it is eligible at that time) for
      registration of the sale by the Buyer of the Registrable Securities (as defined
      in the Registration Rights Agreement).  So long as the Buyer
      beneficially owns any of the Securities, the Company shall timely file all
      reports required to be filed with the SEC pursuant to the 1934 Act, and the
      Company shall not terminate its status as an issuer required to file reports
      under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
      would permit such termination.  The Company further agrees to file all
      reports required to be filed by the Company with the SEC in a timely manner
      so
      as to become eligible, and thereafter to maintain its eligibility, for the
      use
      of Form S-3.  The Company shall issue a press release describing the
      material terms of the transaction contemplated hereby as soon as practicable
      following the Closing Date but in no event more than two (2) business days
      of
      the Closing Date, which press release shall be subject to prior review by the
      Buyers.  The Company agrees that such press release shall not disclose
      the name of the Buyers unless expressly consented to in writing by the Buyers
      or
      unless required by applicable law or regulation, and then only to the extent
      of
      such requirement.

     

    d.  Use
      of Proceeds.  The Company shall use the proceeds from the sale of
      the Debentures and the Warrants in the manner set forth in Schedule 4(d)
      attached hereto and made a part hereof and shall not, directly or indirectly,
      use such proceeds for any loan to or investment in any other corporation,
      partnership, enterprise or other person (except in connection with its currently
      existing direct or indirect Subsidiaries)

     

    e.  Future
      Offerings.  Subject to the exceptions described below, the Company
      will not, without the prior written consent of a majority-in-interest of the
      Buyers, not to be unreasonably withheld, (A) negotiate or contract with any
      party to obtain additional equity financing (including debt financing with
      an
      equity component) that involves the issuance of convertible securities that
      are
      convertible into an indeterminate number of shares of Common Stock or (B) grant
      any registration rights in connection with any issuance of Common Stock or
      warrants during the period (the “Lock-up Period”) beginning on the Closing Date
      and ending on the later of (i) two hundred seventy (270) days from the Closing
      Date or (ii) one hundred eighty (180) days from the date the Registration
      Statement (as defined in the Registration Rights Agreement) is declared
      effective (plus any days in which sales cannot be made
      thereunder).  Notwithstanding the foregoing, the Company shall be
      permitted to obtain additional equity financing (including debt financing with
      an equity component) that does not involve the issuance of convertible
      securities that are convertible into an indeterminate number of shares of Common
      Stock and which involves the grant of registration rights, so long as such
      registration rights do not become effective or may not be invoked by the holder
      thereof for a period of at least 320 days from the Closing Date.  In
      addition, subject to the exceptions described below, the Company will not
      conduct any equity financing (including debt with an equity component) (“Future
      Offerings”) during the period beginning on the Closing Date and ending two (2)
      years after the end of the Lock-up Period unless it shall have first delivered
      to each Buyer, at least twenty (20) business days prior to the closing of such
      Future Offering, written notice describing the proposed Future Offering,
      including the terms and conditions thereof and proposed definitive documentation
      to be entered into in connection therewith, and providing each Buyer an option
      during the fifteen (15) day period following delivery of such notice to purchase
      its pro rata share (based on the ratio that the aggregate principal amount
      of
      Debentures purchased by it hereunder bears to the aggregate principal amount
      of
      Debentures purchased hereunder) of the securities being offered in the Future
      Offering on the same terms as contemplated by such Future Offering (the
      limitations referred to in this sentence and the preceding sentence are
      collectively referred to as the “Capital Raising Limitations”).  In the
      event the terms and conditions of a proposed Future Offering are amended in
      any
      respect after delivery of the notice to the Buyers concerning the proposed
      Future Offering, the Company shall deliver a new notice to each Buyer describing
      the amended terms and conditions of the proposed Future Offering and each Buyer
      thereafter shall have an option during the fifteen (15) day period following
      delivery of such new notice to purchase its pro rata share of the securities
      being offered on the same terms as contemplated by such proposed Future
      Offering, as amended.  The foregoing sentence shall apply to
      successive amendments to the terms and conditions of any proposed Future
      Offering.  The Capital Raising Limitations shall not apply to any
      transaction involving (i) issuances of securities in a firm commitment
      underwritten public offering (excluding a continuous offering pursuant to Rule
      415 under the 1933 Act) or (ii) issuances of securities as consideration for
      a
      merger, consolidation or purchase of assets, or in connection with any strategic
      partnership or joint venture (the primary purpose of which is not to raise
      equity capital), or in connection with the disposition or acquisition of a
      business, product or license by the Company.  The Capital Raising
      Limitations also shall not apply to the issuance of securities upon exercise
      or
      conversion of the Company’s options, warrants or other convertible securities
      outstanding as of the date hereof or to the grant of additional options or
      warrants, or the issuance of additional securities, under any Company stock
      option or restricted stock plan approved by the shareholders of the
      Company.

     

    f.  Expenses.  At
      the Closing, the Company shall reimburse Buyers for expenses incurred by them
      in
      connection with the negotiation, preparation, execution, delivery and
      performance of this Agreement and the other agreements to be executed in
      connection herewith (“Documents”), including, without limitation, attorneys’ and
      consultants’ fees and expenses, transfer agent fees, fees for stock quotation
      services, fees relating to any amendments or modifications of the Documents
      or
      any consents or waivers of provisions in the Documents, fees for the preparation
      of opinions of counsel, escrow fees, and costs of restructuring the transactions
      contemplated by the Documents.  When possible, the Company must pay
      these fees directly, otherwise the Company must make immediate payment for
      reimbursement to the Buyers for all fees and expenses immediately upon written
      notice by the Buyer or the submission of an invoice by the Buyer  If
      the Company fails to reimburse the Buyer in full within three (3) business
      days
      of the written notice or submission of invoice by the Buyer, the Company shall
      pay interest on the total amount of fees to be reimbursed at a rate of 15%
      per
      annum.

     

    g.  Financial
      Information.  The Company agrees to send the following reports to
      each Buyer until such Buyer transfers, assigns, or sells all of the Securities:
      (i) within ten (10) days after the filing with the SEC, a copy of its Annual
      Report on Form

     

    10-KSB
      its Quarterly Reports on Form 10-QSB and any Current Reports on Form 8-K; (ii)
      within one (1) day after release, copies of all press releases issued by the
      Company or any of its Subsidiaries; and (iii) contemporaneously with the making
      available or giving to the shareholders of the Company, copies of any notices
      or
      other information the Company makes available or gives to such
      shareholders.

     

    h.  Authorization
      and Reservation of Shares.  Subject to obtaining Stockholder
      Approval (as defined in Section 4(k)), the Company shall at all times have
      authorized, and reserved for the purpose of issuance, a sufficient number of
      shares of Common Stock to provide for the full conversion or exercise of the
      outstanding Debentures and Warrants and issuance of the Conversion Shares and
      Warrant Shares in connection therewith (based on the Conversion Price of the
      Debentures or Exercise Price of the Warrants in effect from time to time) and
      as
      otherwise required by the Debentures.  The Company shall not reduce
      the number of shares of Common Stock reserved for issuance upon conversion
      of
      Debentures and exercise of the Warrants without the consent of each
      Buyer.  The Company shall at all times maintain the number of shares
      of Common Stock so reserved for issuance at an amount (“Reserved Amount”) equal
      to no less than two (2) times the number that is then actually issuable upon
      full conversion of the Debentures and Additional Debentures and upon exercise
      of
      the Warrants and the Additional Warrants (based on the Conversion Price of
      the
      Debentures or the Exercise Price of the Warrants in effect from time to
      time).  If at any time the number of shares of Common Stock authorized
      and reserved for issuance (“Authorized and Reserved Shares”) is below the
      Reserved Amount, the Company will promptly take all corporate action necessary
      to authorize and reserve a sufficient number of shares, including, without
      limitation, calling a special meeting of shareholders to authorize additional
      shares to meet the Company’s obligations under this Section 4(h), in the case of
      an insufficient number of authorized shares, obtain shareholder approval of
      an
      increase in such authorized number of shares, and voting the management shares
      of the Company in favor of an increase in the authorized shares of the Company
      to ensure that the number of authorized shares is sufficient to meet the
      Reserved Amount.  If the Company fails to obtain such shareholder
      approval within thirty (30) days following the date on which the number of
      Reserved Amount exceeds the Authorized and Reserved Shares, the Company shall
      pay to the Borrower the Standard Liquidated Damages Amount, in cash or in shares
      of Common Stock at the option of the Buyer.  If the Buyer elects to be
      paid the Standard Liquidated Damages Amount in shares of Common Stock, such
      shares shall be issued at the Conversion Price at the time of
      payment.  In order to ensure that the Company has authorized a
      sufficient amount of shares to meet the Reserved Amount at all times, the
      Company must deliver to the Buyer at the end of every month a list detailing
      (1)
      the current amount of shares authorized by the Company and reserved for the
      Buyer; and (2) amount of shares issuable upon conversion of the Debentures
      and
      upon exercise of the Warrants and as payment of interest accrued on the
      Debentures for one year.  If the Company fails to provide such list
      within five (5) business days of the end of each month, the Company shall pay
      the Standard Liquidated Damages Amount, in cash or in shares of Common Stock
      at
      the option of the Buyer, until the list is delivered.  If the Buyer
      elects to be paid the Standard Liquidated Damages Amount in shares of Common
      Stock, such shares shall be issued at the Conversion Price at the time of
      payment.

     

    i.  Listing.  The
      Company shall promptly secure the listing of the Conversion Shares and Warrant
      Shares upon each national securities exchange or automated quotation system,
      if
      any, upon which shares of Common Stock are then listed (subject to official
      notice of issuance) and, so long as any Buyer owns any of the Securities, shall
      maintain, so long as any other shares of Common Stock shall be so listed, such
      listing of all Conversion Shares and Warrant Shares from time to time issuable
      upon conversion of the Debentures or exercise of the Warrants.  The
      Company will obtain and, so long as any Buyer owns any of the Securities,
      maintain the listing and trading of its Common Stock on the OTCBB or any
      equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the
      Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange
      (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all
      respects with the Company’s reporting, filing and other obligations under the
      bylaws or rules of the National Association of Securities Dealers (“NASD”) and
      such exchanges, as applicable.  The Company shall promptly provide to
      each Buyer copies of any notices it receives from the OTCBB and any other
      exchanges or quotation systems on which the Common Stock is then listed
      regarding the continued eligibility of the Common Stock for listing on such
      exchanges and quotation systems.

     

    j.  Corporate
      Existence.  So long as a Buyer beneficially owns any Debentures or
      Warrants, the Company shall maintain its corporate existence and shall not
      sell
      all or substantially all of the Company’s assets, except in the event of a
      merger or consolidation or sale of all or substantially all of the Company’s
      assets, where the surviving or successor entity in such transaction (i) assumes
      the Company’s obligations hereunder and under the agreements and instruments
      entered into in connection herewith and (ii) is a publicly traded corporation
      whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
      NYSE or AMEX.

     

    k.  Stockholder
      Approval.  The Company shall file a proxy or information statement
      with the SEC no later than January 31, 2006  and use its best efforts
      to obtain, on or before April 30, 2006, such approvals of the Company’s
      stockholders as may be required to issue all of the shares of Common Stock
      issuable upon conversion or exercise of, or otherwise with respect to, the
      Debentures and the Warrants in accordance with Nevada law and any applicable
      rules or regulations of the OTCBB and/or Nasdaq, either through a reverse stock
      split of the Common Stock or an increase in authorized capital (the “Stockholder
      Approval”).  The Company shall furnish to each Buyer and its legal
      counsel promptly (but in no event less than two (2) business days) before the
      same is filed with the SEC, one copy of the proxy or information statement
      and
      any amendment thereto, and shall deliver to each Buyer promptly each letter
      written by or on behalf of the Company to the SEC or the staff of the SEC,
      and
      each item of correspondence from the SEC or the staff of the SEC, in each case
      relating to such proxy or information statement (other than any portion thereof
      which contains information for which the Company has sought confidential
      treatment).  The Company will promptly (but in no event more than
      three (3) business days) respond to any and all comments received from the
      SEC
      (which comments shall promptly be made available to each Buyer).  The
      Company shall comply with the filing and disclosure requirements of Section
      14
      under the 1934 Act in connection with the Stockholder Approval.

     

    l.  No
      Integration.  The Company shall not make any offers or sales of
      any security (other than the Securities) under circumstances that would require
      registration of the Securities being offered or sold hereunder under the 1933
      Act or cause the offering of the Securities to be integrated with any other
      offering of securities by the Company for the purpose of any stockholder
      approval provision applicable to the Company or its securities.

     

    m.  Restriction
      on Short Sales. The Buyers agree that, so long as any of the Notes remain
      outstanding, but in no event less than two (2) years from the date hereof,
      the
      Buyers will not enter into or effect any “short sales” (as such term is defined
      in Rule 3b-3 of the 1934 Act) of the Common Stock or hedging transaction which
      establishes a net short position with respect to the Common Stock.

     

    n.  Breach
      of Covenants.  If the Company breaches any of the covenants set
      forth in this Section 4, and in addition to any other remedies available to
      the
      Buyers pursuant to this Agreement, the Company shall pay to the Buyers the
      Standard Liquidated Damages Amount, in cash or in shares of Common Stock at
      the
      option of the Company, until such breach is cured.  If the Company
      elects to pay the Standard Liquidated Damages Amount in shares, such shares
      shall be issued at the Conversion Price at the time of payment.

     

    5.  TRANSFER
      AGENT INSTRUCTIONS.  The Company shall issue irrevocable
      instructions to its transfer agent to issue certificates, registered in the
      name
      of each Buyer or its nominee, for the Conversion Shares and Warrant Shares
      in
      such amounts as specified from time to time by each Buyer to the Company upon
      conversion of the Debentures or exercise of the Warrants in accordance with
      the
      terms thereof (the “Irrevocable Transfer Agent Instructions”).  Prior
      to registration of the Conversion Shares and Warrant Shares under the 1933
      Act
      or the date on which the Conversion Shares and Warrant Shares may be sold
      pursuant to Rule 144 without any restriction as to the number of Securities
      as
      of a particular date that can then be immediately sold, all such certificates
      shall bear the restrictive legend specified in Section 2(g) of this
      Agreement.  The Company warrants that no instruction other than the
      Irrevocable Transfer Agent Instructions referred to in this Section 5, and
      stop
      transfer instructions to give effect to Section 2(f) hereof (in the case of
      the
      Conversion Shares and Warrant Shares, prior to registration of the Conversion
      Shares and Warrant Shares under the 1933 Act or the date on which the Conversion
      Shares and Warrant Shares may be sold pursuant to Rule 144 without any
      restriction as to the number of Securities as of a particular date that can
      then
      be immediately sold), will be given by the Company to its transfer agent and
      that the Securities shall otherwise be freely transferable on the books and
      records of the Company as and to the extent provided in this Agreement and
      the
      Registration Rights Agreement.  Nothing in this Section shall affect
      in any way the Buyer’s obligations and agreement set forth in Section 2(g)
      hereof to comply with all applicable prospectus delivery requirements, if any,
      upon re-sale of the Securities.  If a Buyer provides the Company with
      (i) an opinion of counsel in form, substance and scope customary for opinions
      in
      comparable transactions, to the effect that a public sale or transfer of such
      Securities may be made without registration under the 1933 Act and such sale
      or
      transfer is effected or (ii) the Buyer provides reasonable assurances that
      the
      Securities can be sold pursuant to Rule 144, the Company shall permit the
      transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly
      instruct its transfer agent to issue one or more certificates, free from
      restrictive legend, in such name and in such denominations as specified by
      such
      Buyer.  The Company acknowledges that a breach by it of its
      obligations hereunder will cause irreparable harm to the Buyers, by vitiating
      the intent and purpose of the transactions contemplated
      hereby.  Accordingly, the Company acknowledges that the remedy at law
      for a breach of its obligations under this Section 5 may be inadequate and
      agrees, in the event of a breach or threatened breach by the Company of the
      provisions of this Section, that the Buyers shall be entitled, in addition
      to
      all other available remedies, to an injunction restraining any breach and
      requiring immediate transfer, without the necessity of showing economic loss
      and
      without any bond or other security being required.

     

    6.  CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL.  The obligation of the
      Company hereunder to issue and sell the Debentures and Warrants to a Buyer
      at
      the Closing is subject to the satisfaction, at or before the Closing Date of
      each of the following conditions thereto, provided that these conditions are
      for
      the Company’s sole benefit and may be waived by the Company at any time in its
      sole discretion:

     

    a.  The
      applicable Buyer shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Company.

     

    b.  The
      applicable Buyer shall have delivered the Purchase Price in accordance with
      Section 1(b) above.

     

    c.  The
      representations and warranties of the applicable Buyer shall be true and correct
      in all material respects as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date), and the applicable Buyer shall have performed, satisfied
      and complied in all material respects with the covenants, agreements and
      conditions required by this Agreement to be performed, satisfied or complied
      with by the applicable Buyer at or prior to the Closing Date.

     

    d.  No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    7.  CONDITIONS
      TO EACH BUYER’S OBLIGATION TO PURCHASE.  The obligation of each
      Buyer hereunder to purchase the Debentures and Warrants at the Closing is
      subject to the satisfaction, at or before the Closing Date of each of the
      following conditions, provided that these conditions are for such Buyer’s sole
      benefit and may be waived by such Buyer at any time in its sole
      discretion:

     

    a.  The
      Company shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Buyer.

     

    b.  The
      Company shall have delivered to such Buyer duly executed Debentures (in such
      denominations as the Buyer shall request) and Warrants in accordance with
      Section 1(b) above.

     

    c.  The
      Irrevocable Transfer Agent Instructions, in form and substance satisfactory
      to a
      majority-in-interest of the Buyers, shall have been delivered to and
      acknowledged in writing by the Company’s Transfer Agent.

     

    d.  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Date as though
      made at such time (except for representations and warranties that speak as
      of a
      specific date) and the Company shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Company at
      or
      prior to the Closing Date.  The Buyer shall have received a
      certificate or certificates, executed by the chief executive officer of the
      Company, dated as of the Closing Date, to the foregoing effect and as to such
      other matters as may be reasonably requested by such Buyer including, but not
      limited to certificates with respect to the Company’s Articles of Incorporation,
      By-laws and Board of Directors’ resolutions relating to the transactions
      contemplated hereby.

     

    e.  No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    f.  No
      event shall have occurred which could reasonably be expected to have a Material
      Adverse Effect on the Company.

     

    g.  The
      Conversion Shares and Warrant Shares shall have been authorized for quotation
      on
      the OTCBB and trading in the Common Stock on the OTCBB shall not have been
      suspended by the SEC or the OTCBB.

     

    h.  The
      Buyer shall have received an opinion of the Company’s counsel, dated as of the
      Closing Date, in form, scope and substance reasonably satisfactory to the Buyer
      and in substantially the same form as Exhibit “D” attached hereto.

     

    i.  The
      Buyer shall have received an officer’s certificate described in Section 3(c)
      above, dated as of the Closing Date.

     

    8.  GOVERNING
      LAW; MISCELLANEOUS.

     

    a.  Governing
      Law.  THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
      IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
      MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE
      PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO
      THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW
      YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
      AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
      HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
      FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES
      FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL
      SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY
      IN
      ANY SUCH SUIT OR PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER
      PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
      LAW.  BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY
      SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
      JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL
      MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
      THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
      ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
      DISPUTE.

     

    b.  Counterparts;
      Signatures by Facsimile.  This Agreement may be executed in one or
      more counterparts, each of which shall be deemed an original but all of which
      shall constitute one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other
      party.  This Agreement, once executed by a party, may be delivered to
      the other party hereto by facsimile transmission of a copy of this Agreement
      bearing the signature of the party so delivering this Agreement.

     

    c.  Headings.  The
      headings of this Agreement are for convenience of reference only and shall
      not
      form part of, or affect the interpretation of, this Agreement.

     

    d.  Severability.  In
      the event that any provision of this Agreement is invalid or unenforceable
      under
      any applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law.  Any provision
      hereof which may prove invalid or unenforceable under any law shall not affect
      the validity or enforceability of any other provision hereof.

     

    e.  Entire
      Agreement; Amendments.  This Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor the Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters.  No
      provision of this Agreement may be waived or amended other than by an instrument
      in writing signed by the party to be charged with enforcement.

     

    f.  Notices.  Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile and shall be effective five days after being placed
      in
      the mail, if mailed by regular United States mail, or upon receipt, if delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile, in each case addressed to a party.  The addresses for
      such communications shall be:

     

    
      	
              If
                to the Company:

            	
              Juniper
                Group, Inc.

            

    

     

    
      	
               

            	
              20283
                State Road, Suite
                400                                                 Boca
                Raton, Florida 33498

            

    

     

    
      	
               

            	
              Attention:  Chief
                Executive Officer

            

    

     

    
      	
               

            	
              Telephone:  (561)
                482-9327

            

    

     

    
      	
               

            	
              Facsimile:
                (561) 482-9328

            

    

     

    With
      copies
      to:                        Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas

    New
      York, NY  10018

    Attention:   Gregory
      Sichenzia, Esq.

    Telephone:  (212)
      930-9700

    Facsimile:   (212)
      930-9725

     

    If
      to a Buyer:  To the address set forth immediately below such Buyer’s
      name on the signature pages hereto.

     

    With
      copy
      to:               Ballard
      Spahr Andrews & Ingersoll, LLP

    1735
      Market Street

     

    51st
      Floor

     

    Philadelphia,
      Pennsylvania  19103

     

    Attention:  Gerald
      J. Guarcini, Esq.

     

    Telephone:  215-864-8625

     

    Facsimile:  215-864-8999

     

    Email:  guarcini@ballardspahr.com

     

    Each
      party shall provide notice to the other party of any change in
      address.

     

    g.  Successors
      and Assigns.  This Agreement shall be binding upon and inure to
      the benefit of the parties and their successors and assigns.  Neither
      the Company nor any Buyer shall assign this Agreement or any rights or
      obligations hereunder without the prior written consent of the other;
provided, however, that subject to Section 2(f), any Buyer
      may assign its rights hereunder to any person that purchases Securities in
      a
      private transaction from a Buyer or to any of its “affiliates,” as that term is
      defined under the 1934 Act, without the consent of the Company; and provided
      further, that the Buyers shall not assign this Agreement or any rights or
      obligations hereunder until the Registration Debentures and Registration
      Warrants are purchased by the Buyers.

     

    h.  Third
      Party Beneficiaries.  This Agreement is intended for the benefit
      of the parties hereto and their respective permitted successors and assigns,
      and
      is not for the benefit of, nor may any provision hereof be enforced by, any
      other person.

     

    i.  Survival.  The
      representations and warranties of the Company and the agreements and covenants
      set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
      notwithstanding any due diligence investigation conducted by or on behalf of
      the
      Buyers.  The Company agrees to indemnify and hold harmless each of the
      Buyers and all their officers, directors, employees and agents for loss or
      damage arising as a result of or related to any breach or alleged breach by
      the
      Company of any of its representations, warranties and covenants set forth in
      Sections 3 and 4 hereof or any of its covenants and obligations under this
      Agreement or the Registration Rights Agreement, including advancement of
      expenses as they are incurred.

     

    j.  Publicity.  The
      Company and each of the Buyers shall have the right to review a reasonable
      period of time before issuance of any press releases, SEC, OTCBB or NASD
      filings, or any other public statements with respect to the transactions
      contemplated hereby; provided, however, that the Company shall be
      entitled, without the prior approval of each of the Buyers, to make any press
      release or SEC, OTCBB (or other applicable trading market) or NASD filings
      with
      respect to such transactions as is required by applicable law and regulations
      (although each of the Buyers shall be consulted by the Company in connection
      with any such press release prior to its release and shall be provided with
      a
      copy thereof and be given an opportunity to comment thereon).

     

    k.  Further
      Assurances.  Each party shall do and perform, or cause to be done
      and performed, all such further acts and things, and shall execute and deliver
      all such other agreements, certificates, instruments and documents, as the
      other
      party may reasonably request in order to carry out the intent and accomplish
      the
      purposes of this Agreement and the consummation of the transactions contemplated
      hereby.

     

    l.  No
      Strict Construction.  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.

     

    m.  Remedies.  The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Buyers by vitiating the intent and purpose of the
      transaction contemplated hereby.  Accordingly, the Company
      acknowledges that the remedy at law for a breach of its obligations under this
      Agreement will be inadequate and agrees, in the event of a breach or threatened
      breach by the Company of the provisions of this Agreement, that the Buyers
      shall
      be entitled, in addition to all other available remedies at law or in equity,
      and in addition to the penalties assessable herein, to an injunction or
      injunctions restraining, preventing or curing any breach of this Agreement
      and
      to enforce specifically the terms and provisions hereof, without the necessity
      of showing economic loss and without any bond or other security being
      required.

     

    

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

     

    IN
      WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
      Agreement to be duly executed as of the date first above written.

     

    

    

    JUNIPER
      GROUP, INC.

    

    /s/Vlado P. Hreljanovic

    ________________________________

    Vlado
      P. Hreljanovic

    Chief
      Executive Officer

    

    

    AJW
      PARTNERS, LLC

    By:  SMS
      Group, LLC

    

    /s/ Corey S. Ribotsky

    ______________________________________

    Corey
      S. Ribotsky

    Manager

    

    

    RESIDENCE:  Delaware

    

    ADDRESS:     1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New York 11576

    Facsimile:  (516)
      739-7115

    Telephone:  (516)
      739-7110

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    Aggregate
      Principal Amount of
      Debentures:                                                                       
$________

    Number
      of
      Warrants:                                                                                                             ________

    Aggregate
      Purchase
      Price:                                                                                                   $________

    

    AJW
      MASTER FUND, LTD.

    By:  First
      Street Manager II, LLC

    

    /s/Corey S. Ribotsky

    ______________________________________

    Corey
      S. Ribotsky

    Manager

    

    

    RESIDENCE:   Cayman
      Islands

    

    ADDRESS:      AJW
      Offshore, Ltd.

    P.O.
      Box 32021 SMB

    Grand
      Cayman, Cayman Island, B.W.I.

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    Aggregate
      Principal Amount of Debentures: $_______

    Number
      of Warrants: _______

    Aggregate
      Purchase Price: $_______

    

    NEW
      MILLENNIUM CAPITAL PARTNERS II, LLC

     

    By:  First
      Street Manager II, LLP

     

    /s/Corey
      S. Ribotsky

    ____________________________________

     

    Corey
      S. Ribotsky

     

    Manager

     

    

    

    RESIDENCE:                                               New
      York

    

    ADDRESS:     1044
      Northern Boulevard

    Suite
      302

    Roslyn,
      New York 11576

    Facsimile:      (516)
      739-7115

    Telephone:     (516)
      739-7110

    

    

    AGGREGATE
      SUBSCRIPTION AMOUNT:

    

    Aggregate
      Principal Amount of Notes: $________

    Number
      of
      Warrants:                          
  ________

    Aggregate
      Purchase
      Price:                  
$________ex-10_2.htm

    
      Exhibit
        10.2

       

      

       

      

       

      THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THE SECURITIES MAY
        NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
        FORM,
        SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
        THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT
        TO RULE
        144 OR REGULATION S UNDER SAID ACT.

       

      

       

      CALLABLE
        SECURED CONVERTIBLE NOTE

       

      Great
        Neck, NY

      September
        13, 2007                                                                                       $540,600

       

      FOR
        VALUE RECEIVED, JUNIPER GROUP, INC., a Nevada corporation (hereinafter called
        the “Borrower”), hereby promises to pay to the order of AJW Master Fund, Ltd. or
        registered assigns (the “Holder”) the sum of $540,600, on September 13, 2010
        (the “Maturity Date”), and to pay interest on the unpaid principal balance
        hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from
        September 13, 2007 (the “Issue Date”) until the same becomes due and payable,
        whether at maturity or upon acceleration or by prepayment or
        otherwise.  Any amount of principal or interest on this Note which is
        not paid when due shall bear interest at the rate of fifteen percent (15%)
        per
        annum from the due date thereof until the same is paid (“Default
        Interest”).  Interest shall commence accruing on the Issue Date, shall
        be computed on the basis of a 365-day year and the actual number of days
        elapsed
        and shall be payable quarterly provided that no interest shall be due and
        payable for any month in which the Trading Price (as such term is defined
        below)
        is greater than $.0375 for each Trading Day (as such term is defined below)
        of
        the month. All payments due hereunder (to the extent not converted into common
        stock, $.001 par value per share (the “Common Stock”) in accordance with the
        terms hereof) shall be made in lawful money of the United States of
        America.  All payments shall be made at such address as the Holder
        shall hereafter give to the Borrower by written notice made in accordance
        with
        the provisions of this Note.  Whenever any amount expressed to be due
        by the terms of this Note is due on any day which is not a business day,
        the
        same shall instead be due on the next succeeding day which is a business
        day
        and, in the case of any interest payment date which is not the date on which
        this Note is paid in full, the extension of the due date thereof shall not
        be
        taken into account for purposes of determining the amount of interest due
        on
        such date.  As used in this Note, the term “business day” shall mean
        any day other than a Saturday, Sunday or a day on which commercial banks
        in the
        city of New York, New York are authorized or required by law or executive
        order
        to remain closed.  Each capitalized term used herein, and not
        otherwise defined, shall have the meaning ascribed thereto in that certain
        Securities Purchase Agreement, dated September 13, 2007, pursuant to which
        this
        Note was originally issued (the “Purchase Agreement”).

       

      This
        Note is free from all taxes, liens, claims and encumbrances with respect
        to the
        issue thereof and shall not be subject to preemptive rights or other similar
        rights of shareholders of the Borrower and will not impose personal liability
        upon the holder thereof.  The obligations of the Borrower under this
        Note shall be secured by that certain Security Agreement and Intellectual
        Property Security Agreement, each dated September 13, 2007 by and between
        the
        Borrower and the Holder.

       

      The
        following terms shall apply to this Note:

       

       

      ARTICLE
        I.                                           CONVERSION
        RIGHTS

       

      1.1  Conversion
        Right.  The Holder shall have the right from time to time, and at
        any time on or prior to the earlier of (i) the Maturity Date and (ii) the
        date
        of payment of the Default Amount (as defined in Article III) pursuant to
        Section
        1.6(a) or Article III, the Optional Prepayment Amount (as defined in Section
        5.1
        or any payments pursuant to Section 1.7, each in respect of the remaining
        outstanding principal amount of this Note to convert all or any part of the
        outstanding and unpaid principal amount of this Note into fully paid and
        non-assessable shares of Common Stock, as such Common Stock exists on the
        Issue
        Date, or any shares of capital stock or other securities of the Borrower
        into
        which such Common Stock shall hereafter be changed or reclassified at the
        conversion price  (the “Conversion Price”) determined as provided
        herein (a “Conversion”); provided, however, that in no event shall
        the Holder be entitled to convert any portion of this Note in excess of that
        portion of this Note upon conversion of which the sum of (1) the number of
        shares of Common Stock beneficially owned by the Holder and its affiliates
        (other than shares of Common Stock which may be deemed beneficially owned
        through the ownership of the unconverted portion of the Notes or the unexercised
        or unconverted portion of any other security of the Borrower (including,
        without
        limitation, the warrants issued by the Borrower pursuant to the Purchase
        Agreement) subject to a limitation on conversion or exercise analogous to
        the
        limitations contained herein) and (2) the number of shares of Common Stock
        issuable upon the conversion of the portion of this Note with respect to
        which
        the determination of this proviso is being made, would result in beneficial
        ownership by the Holder and its affiliates of more than 4.99% of the outstanding
        shares of Common Stock and providedfurther that the Holder shall
        not be entitled to convert any portion of this Note during any month immediately
        succeeding a Determination Date on which the Borrower exercises its prepayment
        option pursuant to Section 5.2 of this Note.  For purposes of the
        proviso to the immediately preceding sentence, beneficial ownership shall
        be
        determined in accordance with Section 13(d) of the Securities Exchange Act
        of
        1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
        in clause (1) of such proviso.  The number of shares of Common Stock
        to be issued upon each conversion of this Note shall be determined by dividing
        the Conversion Amount (as defined below) by the applicable Conversion Price
        then
        in effect on the date specified in the notice of conversion, in the form
        attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the
        Borrower by the Holder in accordance with Section 1.4 below; provided that
        the
        Notice of Conversion is submitted by facsimile (or by other means resulting
        in,
        or reasonably expected to result in, notice) to the Borrower before 6:00
        p.m.,
        New York, New York time on such conversion date (the “Conversion
        Date”).  The term “Conversion Amount” means, with respect to any
        conversion of this Note, the sum of (1) the principal amount of this Note
        to be
        converted in such conversion plus (2) at the Borrower’s option, accrued
        and unpaid interest, if any, on such principal amount at the interest rates
        provided in this Note to the Conversion Date, provided, however, that the
        Company shall have the right to pay any or all interest in cash plus (3)
        at the Borrower’s option, Default Interest, if any, on the amounts referred to
        in the immediately preceding clauses (1) and/or (2) plus (4) at the
        Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
        1.4(g) hereof or pursuant to Section 2(c) of that certain Registration Rights
        Agreement, dated as of September 13, 2007, executed in connection with the
        initial issuance of this Note and the other Notes issued on the Issue Date
        (the
“Registration Rights Agreement”).  The term “Determination Date” means
        the last business day of each month after the Issue Date.

       

      1.2  Conversion
        Price.

       

      (a)  Calculation
        of Conversion Price.  The Conversion Price shall be the lesser of
        (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed
        Conversion Price (subject, in each case, to equitable adjustments for stock
        splits, stock dividends or rights offerings by the Borrower relating to the
        Borrower’s securities or the securities of any subsidiary of the Borrower,
        combinations, recapitalization, reclassifications, extraordinary distributions
        and similar events).  The “Variable Conversion Price” shall mean the
        Applicable Percentage (as defined herein) multiplied by the Market Price
        (as
        defined herein).  “Market Price” means the average of the lowest three
        (3) Trading Prices (as defined below) for the Common Stock during the twenty
        (20) Trading Day period ending one Trading Day prior to the date the Conversion
        Notice is sent by the Holder to the Borrower via facsimile (the “Conversion
        Date”).  “Trading Price” means, for any security as of any date, the
        intraday trading price on the Over-the-Counter Bulletin Board (the “OTCBB”) as
        reported by a reliable reporting service (“Reporting Service”) mutually
        acceptable to Borrower and Holder and hereafter designated by Holders of
        a
        majority in interest of the Notes and the Borrower or, if the OTCBB is not
        the
        principal trading market for such security, the intraday trading price of
        such
        security on the principal securities exchange or trading market where such
        security is listed or traded or, if no intraday trading price of such security
        is available in any of the foregoing manners, the average of the intraday
        trading prices of any market makers for such security that are listed in
        the
“pink sheets” by the National Quotation Bureau, Inc.  If the Trading
        Price cannot be calculated for such security on such date in the manner provided
        above, the Trading Price shall be the fair market value as mutually determined
        by the Borrower and the holders of a majority in interest of the Notes being
        converted for which the calculation of the Trading Price is required in order
        to
        determine the Conversion Price of such Notes.  “Trading Day” shall
        mean any day on which the Common Stock is traded for any period on the OTCBB,
        or
        on the principal securities exchange or other securities market on which
        the
        Common Stock is then being traded.  “Applicable Percentage” shall mean
        50.0%. The “Fixed Conversion Price” shall mean $.05.

       

      (b)  Conversion
        Price During Major Announcements.  Notwithstanding anything
        contained in Section 1.2(a) to the contrary, in the event the Borrower (i)
        makes
        a public announcement that it intends to consolidate or merge with any other
        corporation (other than a merger in which the Borrower is the surviving or
        continuing corporation and its capital stock is unchanged) or sell or transfer
        all or substantially all of the assets of the Borrower or (ii) any person,
        group
        or entity (including the Borrower) publicly announces a tender offer to purchase
        50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the
        date of the announcement referred to in clause (i) or (ii) is hereinafter
        referred to as the  “Announcement Date”), then the Conversion Price
        shall, effective upon the Announcement Date and continuing through the Adjusted
        Conversion Price Termination Date (as defined below), be equal to the lower
        of
        (x) the Conversion Price which would have been applicable for a Conversion
        occurring on the Announcement Date and (y) the Conversion Price that would
        otherwise be in effect. From and after the Adjusted Conversion Price Termination
        Date, the Conversion Price shall be determined as set forth in this Section
        1.2(a).  For purposes hereof,  “Adjusted Conversion Price
        Termination Date” shall mean, with respect to any proposed transaction or tender
        offer (or takeover scheme) for which a public announcement as contemplated
        by
        this Section 1.2(b) has been made, the date upon which the Borrower (in the
        case
        of clause (i) above) or the person, group or entity (in the case of clause
        (ii)
        above) consummates or publicly announces the termination or abandonment of
        the
        proposed transaction or tender offer (or takeover scheme) which caused this
        Section 1.2(b) to become operative.

       

      1.3  Authorized
        Shares.  Subject to Stockholder Approval (as such term is defined
        in Section 4(k) of the Securities Purchase Agreement), the Borrower covenants
        that during the period the conversion right exists, the Borrower will reserve
        from its authorized and unissued Common Stock a sufficient number of shares,
        free from preemptive rights, to provide for the issuance of Common Stock
        upon
        the full conversion of this Note and the other Notes issued pursuant to the
        Purchase Agreement.  The Borrower is required at all times to have
        authorized and reserved two times the number of shares that is actually issuable
        upon full conversion of the Notes (based on the Conversion Price of the Notes
        or
        the Exercise Price of the Warrants in effect from time to time) (the “Reserved
        Amount”).  The Reserved Amount shall be increased from time to time in
        accordance with the Borrower’s obligations pursuant to Section 4(h) of the
        Purchase Agreement.  The Borrower represents that upon issuance, such
        shares will be duly and validly issued, fully paid and
        non-assessable.  In addition, if the Borrower shall issue any
        securities or make any change to its capital structure which would change
        the
        number of shares of Common Stock into which the Notes shall be convertible
        at
        the then current Conversion Price, the Borrower shall at the same time make
        proper provision so that thereafter there shall be a sufficient number of
        shares
        of Common Stock authorized and reserved, free from preemptive rights, for
        conversion of the outstanding Notes.  The Borrower (i) acknowledges
        that it has irrevocably instructed its transfer agent to issue certificates
        for
        the Common Stock issuable upon conversion of this Note, and (ii) agrees
        that its issuance of this Note shall constitute full authority to its officers
        and agents who are charged with the duty of executing stock certificates
        to
        execute and issue the necessary certificates for shares of Common Stock in
        accordance with the terms and conditions of this Note.

       

      If,
        at any time a Holder of this Note submits a Notice of Conversion, and the
        Borrower does not have sufficient authorized but unissued shares of Common
        Stock
        available to effect such conversion in accordance with the provisions of
        this
        Article I (a “Conversion Default”), subject to Section 4.8, the Borrower shall
        issue to the Holder all of the shares of Common Stock which are then available
        to effect such conversion.  The portion of this Note which the Holder
        included in its Conversion Notice and which exceeds the amount which is then
        convertible into available shares of Common Stock (the “Excess Amount”) shall,
        notwithstanding anything to the contrary contained herein, not be convertible
        into Common Stock in accordance with the terms hereof until (and at the Holder’s
        option at any time after) the date additional shares of Common Stock are
        authorized by the Borrower to permit such conversion, at which time the
        Conversion Price in respect thereof shall be the lesser of (i) the Conversion
        Price on the Conversion Default Date (as defined below) and (ii) the Conversion
        Price on the Conversion Date thereafter elected by the Holder in respect
        thereof.  In addition, the Borrower shall pay to the Holder payments
        (“Conversion Default Payments”) for a Conversion Default in the amount of (x)
        the sum of (1) the then outstanding principal amount of this Note
plus (2) accrued and unpaid interest on the unpaid principal
        amount of
        this Note through the Authorization Date (as defined below) plus (3)
        Default Interest, if any, on the amounts referred to in clauses (1) and/or
        (2),
multiplied by (y) .24, multiplied by (z) (N/365), where N = the
        number of days from the day the holder submits a Notice of Conversion giving
        rise to a Conversion Default (the “Conversion Default Date”) to the date (the
“Authorization Date”) that the Borrower authorizes a sufficient number of shares
        of Common Stock to effect conversion of the full outstanding principal balance
        of this Note.  The Borrower shall use its best efforts to authorize a
        sufficient number of shares of Common Stock as soon as practicable following
        the
        earlier of (i) such time that the Holder notifies the Borrower or that the
        Borrower otherwise becomes aware that there are or likely will be insufficient
        authorized and unissued shares to allow full conversion thereof and (ii)
        a
        Conversion Default.  The Borrower shall send notice to the Holder of
        the authorization of additional shares of Common Stock, the Authorization
        Date
        and the amount of Holder’s accrued Conversion Default Payments.  The
        accrued Conversion Default Payments for each calendar month shall be paid
        in
        cash or shall be convertible into Common Stock (at such time as there are
        sufficient authorized shares of Common Stock) at the applicable Conversion
        Price, at the Borrower’s option, as follows:

       

      (a)  In
        the event Holder elects to take such payment in cash, cash payment shall
        be made
        to Holder by the fifth (5th) day of the month
        following
        the month in which it has accrued; and

       

      (b)  In
        the event Holder elects to take such payment in Common Stock, the Holder
        may
        convert such payment amount into Common Stock at the Conversion Price (as
        in
        effect at the time of conversion) at any time after the fifth day of the
        month
        following the month in which it has accrued in accordance with the terms
        of this
        Article I (so long as there is then a sufficient number of authorized shares
        of
        Common Stock).

       

      The
        Holder’s election shall be made in writing to the Borrower at any time prior to
        6:00 p.m., New York, New York time, on the third day of the month following
        the
        month in which Conversion Default payments have accrued.  If no
        election is made, the Holder shall be deemed to have elected to receive
        cash.  Nothing herein shall limit the Holder’s right to pursue actual
        damages (to the extent in excess of the Conversion Default Payments) for
        the
        Borrower’s failure to maintain a sufficient number of authorized shares of
        Common Stock, and each holder shall have the right to pursue all remedies
        available at law or in equity (including degree of specific performance and/or
        injunctive relief).

       

      1.4  Method
        of Conversion.

       

      (a)  Mechanics
        of Conversion.  Subject to Section 1.1, this Note may be converted
        by the Holder in whole or in part at any time from time to time after the
        Issue
        Date, by (A) submitting to the Borrower a Notice of Conversion (by
        facsimile or other reasonable means of communication dispatched on the
        Conversion Date prior to 6:00 p.m., New York, New York time) and
        (B) subject to Section 1.4(b), surrendering this Note at the principal
        office of the Borrower.

       

      (b)  Surrender
        of Note Upon Conversion.  Notwithstanding anything to the contrary
        set forth herein, upon conversion of this Note in accordance with the terms
        hereof, the Holder shall not be required to physically surrender this Note
        to
        the Borrower unless the entire unpaid principal amount of this Note is so
        converted.  The Holder and the Borrower shall maintain records showing
        the principal amount so converted and the dates of such conversions or shall
        use
        such other method, reasonably satisfactory to the Holder and the Borrower,
        so as
        not to require physical surrender of this Note upon each such
        conversion.  In the event of any dispute or discrepancy, such records
        of the Borrower shall be controlling and determinative in the absence of
        manifest error.  Notwithstanding the foregoing, if any portion of this
        Note is converted as aforesaid, the Holder may not transfer this Note unless
        the
        Holder first physically surrenders this Note to the Borrower, whereupon the
        Borrower will forthwith issue and deliver upon the order of the Holder a
        new
        Note of like tenor, registered as the Holder (upon payment by the Holder
        of any
        applicable transfer taxes) may request, representing in the aggregate the
        remaining unpaid principal amount of this Note.  The Holder and any
        assignee, by acceptance of this Note, acknowledge and agree that, by reason
        of
        the provisions of this paragraph, following conversion of a portion of this
        Note, the unpaid and unconverted principal amount of this Note represented
        by
        this Note may be less than the amount stated on the face hereof.

       

      (c)  Payment
        of Taxes.  The Borrower shall not be required to pay any tax which
        may be payable in respect of any transfer involved in the issue and delivery
        of
        shares of Common Stock or other securities or property on conversion of this
        Note in a name other than that of the Holder (or in street name), and the
        Borrower shall not be required to issue or deliver any such shares or other
        securities or property unless and until the person or persons (other than
        the
        Holder or the custodian in whose street name such shares are to be held for
        the
        Holder’s account) requesting the issuance thereof shall have paid to the
        Borrower the amount of any such tax or shall have established to the
        satisfaction of the Borrower that such tax has been paid.

       

      (d)  Delivery
        of Common Stock Upon Conversion.  Upon receipt by the Borrower
        from the Holder of a facsimile transmission (or other reasonable means of
        communication) of a Notice of Conversion meeting the requirements for conversion
        as provided in this Section 1.4, the Borrower shall issue and deliver or
        cause
        to be issued and delivered to or upon the order of the Holder certificates
        for
        the Common Stock issuable upon such conversion within three (3) business
        days
        after such receipt (and, solely in the case of conversion of the entire unpaid
        principal amount hereof, surrender of this Note) (such third business day
        being
        hereinafter referred to as the “Deadline”) in accordance with the terms hereof
        and the Purchase Agreement (including, without limitation, in accordance
        with
        the requirements of Section 2(g) of the Purchase Agreement that certificates
        for
        shares of Common Stock issued on or after the effective date of the Registration
        Statement upon conversion of this Note shall not bear any restrictive
        legend).

       

      (e)  Obligation
        of Borrower to Deliver Common Stock.  Upon receipt by the Borrower
        of a Notice of Conversion, the Holder shall be deemed to be the holder of
        record
        of the Common Stock issuable upon such conversion, the outstanding principal
        amount and the amount of accrued and unpaid interest on this Note shall be
        reduced to reflect such conversion, and, unless the Borrower defaults on
        its
        obligations under this Article I, all rights with respect to the portion
        of this
        Note being so converted shall forthwith terminate except the right to receive
        the Common Stock or other securities, cash or other assets, as herein provided,
        on such conversion.  If the Holder shall have given a Notice of
        Conversion as provided herein, the Borrower’s obligation to issue and deliver
        the certificates for Common Stock shall be absolute and unconditional,
        irrespective of the absence of any action by the Holder to enforce the same,
        any
        waiver or consent with respect to any provision thereof, the recovery of
        any
        judgment against any person or any action to enforce the same, any failure
        or
        delay in the enforcement of any other obligation of the Borrower to the holder
        of record, or any setoff, counterclaim, recoupment, limitation or termination,
        or any breach or alleged breach by the Holder of any obligation to the Borrower,
        and irrespective of any other circumstance which might otherwise limit such
        obligation of the Borrower to the Holder in connection with such
        conversion.  The Conversion Date specified in the Notice of Conversion
        shall be the Conversion Date so long as the Notice of Conversion is received
        by
        the Borrower before 6:00 p.m., New York, New York time, on such
        date.

       

      (f)  Delivery
        of Common Stock by Electronic Transfer.  In lieu of delivering
        physical certificates representing the Common Stock issuable upon conversion,
        provided the Borrower’s transfer agent is participating in the Depository Trust
        Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon
        request of the Holder and its compliance with the provisions contained in
        Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts
        to
        cause its transfer agent to electronically transmit the Common Stock issuable
        upon conversion to the Holder by crediting the account of Holder’s Prime Broker
        with DTC through its Deposit Withdrawal Agent Commission (“DWAC”)
        system.

       

      (g)  Failure
        to Deliver Common Stock Prior to Deadline.  Without in any way
        limiting the Holder’s right to pursue other remedies, including actual damages
        and/or equitable relief, the parties agree that if delivery of the Common
        Stock
        issuable upon conversion of this Note is more than two (2) business days
        after
        the Deadline (other than a failure due to the circumstances described in
        Section
        1.3 above, which failure shall be governed by such Section) the Borrower
        shall
        pay to the Holder $2,000 per day in cash, for each day beyond the Deadline
        that
        the Borrower fails to deliver such Common Stock.  Such cash amount
        shall be paid to Holder by the fifth day of the month following the month
        in
        which it has accrued or, at the option of the Holder (by written notice to
        the
        Borrower by the first day of the month following the month in which it has
        accrued), shall be added to the principal amount of this Note, in which event
        interest shall accrue thereon in accordance with the terms of this Note and
        such
        additional principal amount shall be convertible into Common Stock in accordance
        with the terms of this Note.

       

      1.5  Concerning
        the Shares.  The shares of Common Stock issuable upon conversion
        of this Note may not be sold or transferred unless  (i) such shares
        are sold pursuant to an effective registration statement under the Act or
        (ii)
        the Borrower or its transfer agent shall have been furnished with an opinion
        of  counsel (which opinion shall be in form, substance and scope
        customary for opinions of counsel in comparable transactions) to the effect
        that
        the shares to be sold or transferred may be sold or transferred pursuant
        to an
        exemption from such registration or (iii) such shares are sold or
        transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
        144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule
        144) of the Borrower who agrees to sell or otherwise transfer the shares
        only in
        accordance with this Section 1.5 and who is an Accredited Investor (as defined
        in the Purchase Agreement).  Except as otherwise provided in the
        Purchase Agreement (and subject to the removal provisions set forth below),
        until such time as the shares of Common Stock issuable upon conversion of
        this
        Note have been registered under the Act as contemplated by the Registration
        Rights Agreement or otherwise may be sold pursuant to Rule 144 without any
        restriction as to the number of securities as of a particular date that can
        then
        be immediately sold, each certificate for shares of Common Stock issuable
        upon
        conversion of this Note that has not been so included in an effective
        registration statement or that has not been sold pursuant to an effective
        registration statement or an exemption that permits removal of the legend,
        shall
        bear a legend substantially in the following form, as appropriate:

       

      “THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
        TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
        FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
        AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
        REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE
        144 OR
        REGULATION S UNDER SAID ACT.”

       

      The
        legend set forth above shall be removed and the Borrower shall issue to the
        Holder a new certificate therefor free of any transfer legend if (i) the
        Borrower or its transfer agent shall have received an opinion of counsel,
        in
        form, substance and scope customary for opinions of counsel in comparable
        transactions, to the effect that a public sale or transfer of such Common
        Stock
        may be made without registration under the Act and the shares are so sold
        or
        transferred, (ii) such Holder provides the Borrower or its transfer agent
        with
        reasonable assurances that the Common Stock issuable upon conversion of this
        Note (to the extent such securities are deemed to have been acquired on the
        same
        date) can be sold pursuant to Rule 144 or (iii) in the case of the Common
        Stock
        issuable upon conversion of this Note, such security is registered for sale
        by
        the Holder under an effective registration statement filed under the Act
        or
        otherwise may be sold pursuant to Rule 144 without any restriction as to
        the
        number of securities as of a particular date that can then be immediately
        sold.  Nothing in this Note shall (i) limit the Borrower’s obligation
        under the Registration Rights Agreement or (ii) affect in any way the Holder’s
        obligations to comply with applicable prospectus delivery requirements upon
        the
        resale of the securities referred to herein.

       

      1.6  Effect
        of Certain Events.

       

      (a)  Effect
        of Merger, Consolidation, Etc.  At the option of the Holder, the
        sale, conveyance or disposition of all or substantially all of the assets
        of the
        Borrower, the effectuation by the Borrower of a transaction or series of
        related
        transactions in which more than 50% of the voting power of the Borrower is
        disposed of, or the consolidation, merger or other business combination of
        the
        Borrower with or into any other Person (as defined below) or Persons when
        the
        Borrower is not the survivor shall either:  (i) be deemed to be an
        Event of Default (as defined in Article III) pursuant to which the Borrower
        shall be required to pay to the Holder upon the consummation of and as a
        condition to such transaction an amount equal to the Default Amount (as defined
        in Article III) or (ii) be treated pursuant to Section 1.6(b)
        hereof.  “Person” shall mean any individual, corporation, limited
        liability company, partnership, association, trust or other entity or
        organization.

       

      (b)  Adjustment
        Due to Merger, Consolidation, Etc.  If, at any time when this Note
        is issued and outstanding and prior to conversion of all of the Notes, there
        shall be any merger, consolidation, exchange of shares, recapitalization,
        reorganization, or other similar event, as a result of which shares of Common
        Stock of the Borrower shall be changed into the same or a different number
        of
        shares of another class or classes of stock or securities of the Borrower
        or
        another entity, or in case of any sale or conveyance of all or substantially
        all
        of the assets of the Borrower other than in connection with a plan of complete
        liquidation of the Borrower, then the Holder of this Note shall thereafter
        have
        the right to receive upon conversion of this Note, upon the basis and upon
        the
        terms and conditions specified herein and in lieu of the shares of Common
        Stock
        immediately theretofore issuable upon conversion, such stock, securities
        or
        assets which the Holder would have been entitled to receive in such transaction
        had this Note been converted in full immediately prior to such transaction
        (without regard to any limitations on conversion set forth herein), and in
        any
        such case appropriate provisions shall be made with respect to the rights
        and
        interests of the Holder of this Note to the end that the provisions hereof
        (including, without limitation, provisions for adjustment of the Conversion
        Price and of the number of shares issuable upon conversion of the Note) shall
        thereafter be applicable, as nearly as may be practicable in relation to
        any
        securities or assets thereafter deliverable upon the conversion
        hereof.  The Borrower shall not effect any transaction described in
        this Section 1.6(b) unless (a) it first gives, to the extent practicable,
        thirty
        (30) days prior written notice (but in any event at least fifteen (15) days
        prior written notice) of the record date of the special meeting of shareholders
        to approve, or if there is no such record date, the consummation of, such
        merger, consolidation, exchange of shares, recapitalization, reorganization
        or
        other similar event or sale of assets (during which time the Holder shall
        be
        entitled to convert this Note) and (b) the resulting successor or acquiring
        entity (if not the Borrower) assumes by written instrument the obligations
        of
        this Section 1.6(b).  The above provisions shall similarly apply to
        successive consolidations, mergers, sales, transfers or share
        exchanges.

       

      (c)  Adjustment
        Due to Distribution.  If the Borrower shall declare or make any
        distribution of its assets (or rights to acquire its assets) to holders of
        Common Stock as a dividend, stock repurchase, by way of return of capital
        or
        otherwise (including any dividend or distribution to the Borrower’s shareholders
        in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
        (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be
        entitled, upon any conversion of this Note after the date of record for
        determining shareholders entitled to such Distribution, to receive the amount
        of
        such assets which would have been payable to the Holder with respect to the
        shares of Common Stock issuable upon such conversion had such Holder been
        the
        holder of such shares of Common Stock on the record date for the determination
        of shareholders entitled to such Distribution.

       

      (d)  Adjustment
        Due to Dilutive Issuance.  If, at any time when any Notes are
        issued and outstanding, the Borrower issues or sells, or in accordance with
        this
        Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common
        Stock for no consideration or for a consideration per share (before deduction
        of
        reasonable expenses or commissions or underwriting discounts or allowances
        in
        connection therewith) less than the Fixed Conversion Price in effect on the
        date
        of such issuance (or deemed issuance) of such shares of Common Stock (a
“Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Fixed
        Conversion Price will be reduced to the amount of the consideration per share
        received by the Borrower in such Dilutive Issuance; provided that only
        one adjustment will be made for each Dilutive Issuance. Notwithstanding anything
        contained in this Section 1.6 to the contrary, the Holder hereby acknowledges
        that the issuance of any shares of Common Stock in connection with any of
        the
        transactions set forth on Schedule A, attached hereto, shall not be
        deemed a Dilutive Issuance and accordingly there will be no reduction
        to  the Fixed Conversion Price.

       

      The
        Borrower shall be deemed to have issued or sold shares of Common Stock if
        the
        Borrower in any manner issues or grants any warrants, rights or options (not
        including employee stock option plans), whether or not immediately exercisable,
        to subscribe for or to purchase Common Stock or other securities convertible
        into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
        rights and options to purchase Common Stock or Convertible Securities are
        hereinafter referred to as “Options”) and the price per share for which Common
        Stock is issuable upon the exercise of such Options is less than the Fixed
        Conversion Price then in effect, then the Fixed Conversion Price shall be
        equal
        to such price per share.  For purposes of the preceding sentence, the
“price per share for which Common Stock is issuable upon the exercise of such
        Options” is determined by dividing (i) the total amount, if any, received or
        receivable by the Borrower as consideration for the issuance or granting
        of all
        such Options, plus the minimum aggregate amount of additional consideration,
        if
        any, payable to the Borrower upon the exercise of all such Options, plus,
        in the
        case of Convertible Securities issuable upon the exercise of such Options,
        the
        minimum aggregate amount of additional consideration payable upon the conversion
        or exchange thereof at the time such Convertible Securities first become
        convertible or exchangeable, by (ii) the maximum total number of shares of
        Common Stock issuable upon the exercise of all such Options (assuming full
        conversion of Convertible Securities, if applicable).  No further
        adjustment to the Conversion Price will be made upon the actual issuance
        of such
        Common Stock upon the exercise of such Options or upon the conversion or
        exchange of Convertible Securities issuable upon exercise of such
        Options.

       

      Additionally,
        the Borrower shall be deemed to have issued or sold shares of Common Stock
        if
        the Borrower in any manner issues or sells any Convertible Securities, whether
        or not immediately convertible (other than where the same are issuable upon
        the
        exercise of Options), and the price per share for which Common Stock is issuable
        upon such conversion or exchange is less than the Fixed Conversion Price
        then in
        effect, then the Fixed Conversion Price shall be equal to such price per
        share.  For the purposes of the preceding sentence, the “price per
        share for which Common Stock is issuable upon such conversion or exchange” is
        determined by dividing (i) the total amount, if any, received or receivable
        by
        the Borrower as consideration for the issuance or sale of all such Convertible
        Securities, plus the minimum aggregate amount of additional consideration,
        if
        any, payable to the Borrower upon the conversion or exchange thereof at the
        time
        such Convertible Securities first become convertible or exchangeable, by
        (ii)
        the maximum total number of shares of Common Stock issuable upon the conversion
        or exchange of all such Convertible Securities.  No further adjustment
        to the Fixed Conversion Price will be made upon the actual issuance of such
        Common Stock upon conversion or exchange of such Convertible
        Securities.

       

      (e)  Purchase
        Rights.  If, at any time when any Notes are issued and
        outstanding, the Borrower issues any convertible securities or rights to
        purchase stock, warrants, securities or other property (the “Purchase Rights”)
        pro rata to the record holders of any class of Common Stock, then the Holder
        of
        this Note will be entitled to acquire, upon the terms applicable to such
        Purchase Rights, the aggregate Purchase Rights which such Holder could have
        acquired if such Holder had held the number of shares of Common Stock acquirable
        upon complete conversion of this Note (without regard to any limitations
        on
        conversion contained herein) immediately before the date on which a record
        is
        taken for the grant, issuance or sale of such Purchase Rights or, if no such
        record is taken, the date as of which the record holders of Common Stock
        are to
        be determined for the grant, issue or sale of such Purchase Rights.

       

      (f)  Notice
        of Adjustments.  Upon the occurrence of each adjustment or
        readjustment of the Conversion Price as a result of the events described
        in this
        Section 1.6, the Borrower, at its expense, shall promptly compute such
        adjustment or readjustment and prepare and furnish to the Holder of a
        certificate setting forth such adjustment or readjustment and showing in
        detail
        the facts upon which such adjustment or readjustment is based.  The
        Borrower shall, upon the written request at any time of the Holder, furnish
        to
        such Holder a like certificate setting forth (i) such adjustment or
        readjustment, (ii) the Conversion Price at the time in effect and (iii) the
        number of shares of Common Stock and the amount, if any, of other securities
        or
        property which at the time would be received upon conversion of the
        Note.

       

      1.7  Trading
        Market Limitations.  Unless permitted by the applicable rules and
        regulations of the principal securities market on which the Common Stock
        is then
        listed or traded, in no event shall the Borrower issue upon conversion of
        or
        otherwise pursuant to this Note and the other Notes issued pursuant to the
        Purchase Agreement more than the maximum number of shares of Common Stock
        that
        the Borrower can issue pursuant to any rule of the principal United States
        securities market on which the Common Stock is then traded (the “Maximum Share
        Amount”), which shall be 19.99% of the total shares outstanding on the Closing
        Date (as defined in the Purchase Agreement), subject to equitable adjustment
        from time to time for stock splits, stock dividends, combinations, capital
        reorganizations and similar events relating to the Common Stock occurring
        after
        the date hereof.  Once the Maximum Share Amount has been issued (the
        date of which is hereinafter referred to as the “Maximum Conversion Date”), if
        the Borrower fails to eliminate any prohibitions under applicable law or
        the
        rules or regulations of any stock exchange, interdealer quotation system
        or
        other self-regulatory organization with jurisdiction over the Borrower or
        any of
        its securities on the Borrower’s ability to issue shares of Common Stock in
        excess of the Maximum Share Amount (a “Trading Market Prepayment Event”), in
        lieu of any further right to convert this Note, and in full satisfaction
        of the
        Borrower’s obligations under this Note, the Borrower shall pay to the Holder,
        within fifteen (15) business days of the Maximum Conversion Date (the “Trading
        Market Prepayment Date”), an amount equal to 130% times the sum of
        (a) the then outstanding principal amount of this Note immediately following
        the
        Maximum Conversion Date, plus (b) accrued and unpaid interest on the
        unpaid principal amount of this Note to the Trading Market Prepayment Date,
        plus (c) Default Interest, if any, on the amounts referred to in clause
        (a) and/or (b) above, plus (d) any optional amounts that may be added
        thereto at the Maximum Conversion Date by the Holder in accordance with the
        terms hereof (the then outstanding principal amount of this Note immediately
        following the Maximum Conversion Date, plus the amounts referred to in
        clauses (b), (c) and (d) above shall collectively be referred to as the
“Remaining Convertible Amount”).  With respect to each Holder of
        Notes, the Maximum Share Amount shall refer to such Holder’s
prorata share thereof determined in accordance with Section 4.8
        below.  In the event that the sum of (x) the aggregate number of
        shares of Common Stock issued upon conversion of this Note and the other
        Notes
        issued pursuant to the Purchase Agreement plus (y) the aggregate number
        of shares of Common Stock that remain issuable upon conversion of this Note
        and
        the other Notes issued pursuant to the Purchase Agreement, represents at
        least
        one hundred percent (100%) of the Maximum Share Amount (the “Triggering Event”),
        the Borrower will use its best efforts to seek and obtain Shareholder Approval
        (or obtain such other relief as will allow conversions hereunder in excess
        of
        the Maximum Share Amount) as soon as practicable following the Triggering
        Event
        and before the Maximum Conversion Date.  As used herein, “Shareholder
        Approval” means approval by the shareholders of the Borrower to authorize the
        issuance of the full number of shares of Common Stock which would be issuable
        upon full conversion of the then outstanding Notes but for the Maximum Share
        Amount.

       

      1.8  Status
        as Shareholder.  Upon submission of a Notice of Conversion by a
        Holder, (i) the shares covered thereby (other than the shares, if any, which
        cannot be issued because their issuance would exceed such Holder’s allocated
        portion of the Reserved Amount or Maximum Share Amount) shall be deemed
        converted into shares of Common Stock and (ii) the Holder’s rights as a Holder
        of such converted portion of this Note shall cease and terminate, excepting
        only
        the right to receive certificates for such shares of Common Stock and to
        any
        remedies provided herein or otherwise available at law or in equity to such
        Holder because of a failure by the Borrower to comply with the
        terms  of this Note.  Notwithstanding the foregoing, if a
        Holder has not received certificates for all shares of Common Stock prior
        to the
        tenth (10th) business day after the expiration of the Deadline with respect
        to a
        conversion of any portion of this Note for any reason, then (unless the Holder
        otherwise elects to retain its status as a holder of Common Stock by so
        notifying the Borrower) the Holder shall regain the rights of a Holder of
        this
        Note with respect to such unconverted portions of this Note and the Borrower
        shall, as soon as practicable, return such unconverted Note to the Holder
        or, if
        the Note has not been surrendered, adjust its records to reflect that such
        portion of this Note has not been converted.  In all cases, the Holder
        shall retain all of its rights and remedies (including, without limitation,
        (i)
        the right to receive Conversion Default Payments pursuant to Section 1.3
        to the
        extent required thereby for such Conversion Default and any subsequent
        Conversion Default and (ii) the right to have the Conversion Price with respect
        to subsequent conversions determined in accordance with Section 1.3) for
        the
        Borrower’s failure to convert this Note.

       

       

      ARTICLE
        II.                                           CERTAIN
        COVENANTS

       

      2.1  Distributions
        on Capital Stock.  So long as the Borrower shall have any
        obligation under this Note, the Borrower shall not without the Holder’s written
        consent (a) pay, declare or set apart for such payment, any dividend or other
        distribution (whether in cash, property or other securities) on shares of
        capital stock other than dividends on shares of Common Stock solely in the
        form
        of additional shares of Common Stock or (b) directly or indirectly or through
        any subsidiary make any other payment or distribution in respect of its capital
        stock except for distributions pursuant to any shareholders’ rights plan which
        is approved by a majority of the Borrower’s disinterested
        directors.

       

      2.2  Restriction
        on Stock Repurchases.  So long as the Borrower shall have any
        obligation under this Note, the Borrower shall not without the Holder’s written
        consent redeem, repurchase or otherwise acquire (whether for cash or in exchange
        for property or other securities or otherwise) in any one transaction or
        series
        of related transactions any shares of capital stock of the Borrower or any
        warrants, rights or options to purchase or acquire any such shares.

       

      2.3  Borrowings.  So
        long as the Borrower shall have any obligation under this Note, the Borrower
        shall not, without the Holder’s written consent, create, incur, assume or suffer
        to exist any liability for borrowed money, except (a) borrowings in existence
        or
        committed on the date hereof and of which the Borrower has informed Holder
        in
        writing prior to the date hereof, (b) indebtedness to trade creditors or
        financial institutions incurred in the ordinary course of business or (c)
        borrowings, the proceeds of which shall be used to repay this Note.

       

      2.4  Sale
        of Assets.  So long as the Borrower shall have any obligation
        under this Note, the Borrower shall not, without the Holder’s written consent,
        sell, lease or otherwise dispose of any significant portion of its assets
        outside the ordinary course of business.  Any consent to the
        disposition of any assets may be conditioned on a specified use of the proceeds
        of disposition.

       

      2.5  Advances
        and Loans.  So long as the Borrower shall have any obligation
        under this Note, the Borrower shall not, without the Holder’s written consent,
        lend money, give credit or make advances to any person, firm, joint venture
        or
        corporation, including, without limitation, officers, directors, employees,
        subsidiaries and affiliates of the Borrower, except loans, credits or advances
        (a) in existence or committed on the date hereof and which the Borrower has
        informed Holder in writing prior to the date hereof, (b) made in the ordinary
        course of business or (c) not in excess of $50,000.

       

      2.6  Contingent
        Liabilities.  So long as the Borrower shall have any obligation
        under this Note, the Borrower shall not, without the Holder’s written consent,
        which shall not be unreasonably withheld, assume, guarantee, endorse,
        contingently agree to purchase or otherwise become liable upon the obligation
        of
        any person, firm, partnership, joint venture or corporation, except by the
        endorsement of negotiable instruments for deposit or collection and except
        assumptions, guarantees, endorsements and contingencies (a) in existence
        or
        committed on the date hereof and which the Borrower has informed Holder in
        writing prior to the date hereof, and (b) similar transactions in the ordinary
        course of business.

       

       

      ARTICLE
        III.                                           EVENTS
        OF DEFAULT

       

      If
        any of the following events of default (each, an “Event of Default”) shall
        occur:

       

      3.1  Failure
        to Pay Principal or Interest.  The Borrower fails to pay the
        principal hereof or interest thereon when due on this Note, whether at maturity,
        upon a Trading Market Prepayment Event pursuant to Section 1.7, upon
        acceleration or otherwise;

       

      3.2  Conversion
        and the Shares.  The Borrower fails to issue shares of Common
        Stock to the Holder (or announces or threatens that it will not honor its
        obligation to do so) upon exercise by the Holder of the conversion rights
        of the
        Holder in accordance with the terms of this Note (for a period of at least
        sixty
        (60) days, if such failure is solely as a result of the circumstances governed
        by Section 1.3 and the Borrower is using its best efforts to authorize a
        sufficient number of shares of Common Stock as soon as practicable), fails
        to
        transfer or cause its transfer agent to transfer (electronically or in
        certificated form) any certificate for shares of Common Stock issued to the
        Holder upon conversion of or otherwise pursuant to this Note as and when
        required by this Note or the Registration Rights Agreement, or fails to remove
        any restrictive legend (or to withdraw any stop transfer instructions in
        respect
        thereof) on any certificate for any shares of Common Stock issued to the
        Holder
        upon conversion of or otherwise pursuant to this Note as and when required
        by
        this Note or the Registration Rights Agreement (or makes any announcement,
        statement or threat that it does not intend to honor the obligations described
        in this paragraph) and any such failure shall continue uncured (or any
        announcement, statement or threat not to honor its obligations shall not
        be
        rescinded in writing) for three (3) business days after the Borrower shall
        have
        been notified thereof in writing by the Holder;

       

      3.3  Failure
        to Timely File Registration or Effect Registration.  The Borrower
        fails to file the Registration Statement within forty-five (45) days following
        the Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
        with the Securities and Exchange Commission of the Registration Statement
        within
        one hundred and twenty (120) days following the Closing Date (as defined
        in the
        Purchase Agreement) or such Registration Statement lapses in effect (or sales
        cannot otherwise be made thereunder effective, whether by reason of the
        Borrower’s failure to amend or supplement the prospectus included therein in
        accordance with the Registration Rights Agreement or otherwise) for more
        than
        ten (10) consecutive days or twenty (20) days in any twelve month period
        after
        the Registration Statement becomes effective;

       

      3.4  Breach
        of Covenants.  The Borrower breaches any material covenant or
        other material term or condition contained in Sections 1.3, 1.6 or 1.7 of
        this
        Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase Agreement
        and such breach continues for a period of ten (10) days after written notice
        thereof to the Borrower from the Holder;

       

      3.5  Breach
        of Representations and Warranties.  Any representation or warranty
        of the Borrower made herein or in any agreement, statement or certificate
        given
        in writing pursuant hereto or in connection herewith (including, without
        limitation, the Purchase Agreement and the Registration Rights Agreement),
        shall
        be false or misleading in any material respect when made and the breach of
        which
        has (or with the passage of time will have) a material adverse effect on
        the
        rights of the Holder with respect to this Note, the Purchase Agreement or
        the
        Registration Rights Agreement;

       

      3.6  Receiver
        or Trustee.  The Borrower or any subsidiary of the Borrower shall
        make an assignment for the benefit of creditors, or apply for or consent
        to the
        appointment of a receiver or trustee for it or for a substantial part of
        its
        property or business, or such a receiver or trustee shall otherwise be
        appointed;

       

      3.7  Judgments.  Any
        money judgment, writ or similar process shall be entered or filed against
        the
        Borrower or any subsidiary of the Borrower or any of its property or other
        assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
        for a period of twenty (20) days unless otherwise consented to by the Holder,
        which consent will not be unreasonably withheld;

       

      3.8  Bankruptcy.  Bankruptcy,
        insolvency, reorganization or liquidation proceedings or other proceedings
        for
        relief under any bankruptcy law or any law for the relief of debtors shall
        be
        instituted by or against the Borrower or any subsidiary of the Borrower,
        unless
        such proceeding shall be stayed within thirty (30) days;

       

      3.9  Delisting
        of Common Stock.  The Borrower shall fail to maintain the listing
        of the Common Stock on at least one of the OTCBB or an equivalent replacement
        exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New
        York
        Stock Exchange, or the American Stock Exchange; or

       

      3.10  Default
        Under Other Notes.  An Event of Default has occurred and is
        continuing under any of the other Notes issued pursuant to the Purchase
        Agreement,

       

      then,
        upon the occurrence and during the continuation of any Event of Default
        specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
        of the Holders of a majority of the aggregate principal amount of the
        outstanding Notes issued pursuant to the Purchase Agreement exercisable through
        the delivery of written notice to the Borrower by such Holders (the “Default
        Notice”), and upon the occurrence of an Event of Default specified in Section
        3.6 or 3.8 (unless, under Section 3.8, such proceeding shall be stayed within
        30
        days), the Notes shall become immediately due and payable and the Borrower
        shall
        pay to the Holder, in full satisfaction of its obligations hereunder, an
        amount
        equal to the greater of (i) 130% times the sum of (w) the then
        outstanding principal amount of this Note plus (x) accrued and unpaid
        interest on the unpaid principal amount of this Note to the date of payment
        (the
“Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the
        amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed
        to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section
        2(c) of the Registration Rights Agreement (the then outstanding principal
        amount
        of this Note to the date of payment plus the amounts referred to in
        clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or
        (ii) the “parity value” of the Default Sum to be prepaid, where parity value
        means (a) the highest number of shares of Common Stock issuable upon conversion
        of or otherwise pursuant to such Default Sum in accordance with Article I,
        treating the Trading Day immediately preceding the Mandatory Prepayment Date
        as
        the “Conversion Date” for purposes of determining the lowest applicable
        Conversion Price, unless the Default Event arises as a result of a breach
        in
        respect of a specific Conversion Date in which case such Conversion Date
        shall
        be the Conversion Date), multiplied by (b) the highest Closing Price for
        the Common Stock during the period beginning on the date of first occurrence
        of
        the Event of Default and ending one day prior to the Mandatory Prepayment
        Date
        (the “Default Amount”) and all other amounts payable hereunder shall immediately
        become due and payable, all without demand, presentment or notice, all of
        which
        hereby are expressly waived, together with all costs, including, without
        limitation, legal fees and expenses, of collection, and the Holder shall
        be
        entitled to exercise all other rights and remedies available at law or in
        equity.  If the Borrower fails to pay the Default Amount within five
        (5) business days of written notice that such amount is due and payable,
        then
        the Holder shall have the right at any time, so long as the Borrower remains
        in
        default (and so long and to the extent that there are sufficient authorized
        shares), to require the Borrower, upon written notice, to immediately issue,
        in
        lieu of the Default Amount, the number of shares of Common Stock of the Borrower
        equal to the Default Amount divided by the Conversion Price then in
        effect.

       

       

      ARTICLE
        IV.                                           MISCELLANEOUS

       

      4.1  Failure
        or Indulgence Not Waiver.  No failure or delay on the part of the
        Holder in the exercise of any power, right or privilege hereunder shall operate
        as a waiver thereof, nor shall any single or partial exercise of any such
        power,
        right or privilege preclude other or further exercise thereof or of any other
        right, power or privileges.  All rights and remedies existing
        hereunder are cumulative to, and not exclusive of, any rights or remedies
        otherwise available.

       

      4.2  Notices.  Any
        notice herein required or permitted to be given shall be in writing and may
        be
        personally served or delivered by courier or sent by United States mail and
        shall be deemed to have been given upon receipt if personally served (which
        shall include telephone line facsimile transmission) or sent by courier or
        three
        (3) days after being deposited in the United States mail, certified, with
        postage pre-paid and properly addressed, if sent by mail.  For the
        purposes hereof, the address of the Holder shall be as shown on the records
        of
        the Borrower; and the address of the Borrower shall be 60 Cutter Mill Road,
        Great Neck, NY 11021, facsimile number: (516) 829-4691.  Both the
        Holder and the Borrower may change the address for service by service of
        written
        notice to the other as herein provided.

       

      4.3  Amendments.  This
        Note and any provision hereof may only be amended by an instrument in writing
        signed by the Borrower and the Holder.  The term “Note” and all
        reference thereto, as used throughout this instrument, shall mean this
        instrument (and the other Notes issued pursuant to the Purchase Agreement)
        as
        originally executed, or if later amended or supplemented, then as so amended
        or
        supplemented.

       

      4.4  Assignability.  This
        Note shall be binding upon the Borrower and its successors and assigns, and
        shall inure to be the benefit of the Holder and its successors and
        assigns.  Each transferee of this Note must be an “accredited
        investor” (as defined in Rule 501(a) of the 1933
        Act).  Notwithstanding anything in this Note to the contrary, this
        Note may be pledged as collateral in connection with a bonafide
        margin account or other lending arrangement.

       

      4.5  Cost
        of Collection.  If default is made in the payment of this Note,
        the Borrower shall pay the Holder hereof costs of collection, including
        reasonable attorneys’ fees.

       

      4.6  Governing
        Law.  THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
        ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
        MADE
        AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
        OF CONFLICT OF LAWS.  THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE
        JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW
        YORK
        WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED
        INTO
        IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
        BOTH
        PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
        MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
        THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE
        DEEMED
        IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH
        SUIT OR
        PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE
        PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT
        A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
        CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
        OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN
        ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND
        EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
        CONNECTION WITH SUCH DISPUTE.

       

      4.7  Certain
        Amounts.  Whenever pursuant to this Note the Borrower is required
        to pay an amount in excess of the outstanding principal amount (or the portion
        thereof required to be paid at that time) plus accrued and unpaid interest
        plus
        Default Interest on such interest, the Borrower and the Holder agree that
        the
        actual damages to the Holder from the receipt of cash payment on this Note
        may
        be difficult to determine and the amount to be so paid by the Borrower
        represents stipulated damages and not a penalty and is intended to compensate
        the Holder in part for loss of the opportunity to convert this Note and to
        earn
        a return from the sale of shares of Common Stock acquired upon conversion
        of
        this Note at a price in excess of the price paid for such shares pursuant
        to
        this Note.  The Borrower and the Holder hereby agree that such amount
        of stipulated damages is not plainly disproportionate to the possible loss
        to
        the Holder from the receipt of a cash payment without the opportunity to
        convert
        this Note into shares of Common Stock.

       

      4.8  Allocations
        of Maximum Share Amount and Reserved Amount.  The Maximum Share
        Amount and Reserved Amount shall be allocated pro rata among the Holders
        of
        Notes based on the principal amount of such Notes issued to each
        Holder.  Each increase to the Maximum Share Amount and Reserved Amount
        shall be allocated pro rata among the Holders of Notes based on the principal
        amount of such Notes held by each Holder at the time of the increase in the
        Maximum Share Amount or Reserved Amount.  In the event a Holder shall
        sell or otherwise transfer any of such Holder’s Notes, each transferee shall be
        allocated a pro rata portion of such transferor’s Maximum Share Amount and
        Reserved Amount.  Any portion of the Maximum Share Amount or Reserved
        Amount which remains allocated to any person or entity which does not hold
        any
        Notes shall be allocated to the remaining Holders of Notes, pro rata based
        on
        the principal amount of such Notes then held by such Holders.

       

      4.9  Damages
        Shares.  The shares of Common Stock that may be issuable to the
        Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section
        2(c)
        of the Registration Rights Agreement (“Damages Shares”) shall be treated as
        Common Stock issuable upon conversion of this Note for all purposes hereof
        and
        shall be subject to all of the limitations and afforded all of the rights
        of the
        other shares of Common Stock issuable hereunder, including without limitation,
        the right to be included in the Registration Statement filed pursuant to
        the
        Registration Rights Agreement.  For purposes of calculating interest
        payable on the outstanding principal amount hereof, except as otherwise provided
        herein, amounts convertible into Damages Shares (“Damages Amounts”) shall not
        bear interest but must be converted prior to the conversion of any outstanding
        principal amount hereof, until the outstanding Damages Amounts is
        zero.

       

      4.10  Denominations.  At
        the request of the Holder, upon surrender of this Note, the Borrower shall
        promptly issue new Notes in the aggregate outstanding principal amount hereof,
        in the form hereof, in such denominations of at least $50,000 as the Holder
        shall request.

       

      4.11  Purchase
        Agreement.  By its acceptance of this Note, each Holder agrees to
        be bound by the applicable terms of the Purchase Agreement.

       

      4.12  Notice
        of Corporate Events.  Except as otherwise provided below, the
        Holder of this Note shall have no rights as a Holder of Common Stock unless
        and
        only to the extent that it converts this Note into Common Stock.  The
        Borrower shall provide the Holder with prior notification of any meeting
        of the
        Borrower’s shareholders (and copies of proxy materials and other information
        sent to shareholders).  In the event of any taking by the Borrower of
        a record of its shareholders for the purpose of determining shareholders
        who are
        entitled to receive payment of any dividend or other distribution, any right
        to
        subscribe for, purchase or otherwise acquire (including by way of merger,
        consolidation, reclassification or recapitalization) any share of any class
        or
        any other securities or property, or to receive any other right, or for the
        purpose of determining shareholders who are entitled to vote in connection
        with
        any proposed sale, lease or conveyance of all or substantially all of the
        assets
        of the Borrower or any proposed liquidation, dissolution or winding up of
        the
        Borrower, the Borrower shall mail a notice to the Holder, at least twenty
        (20)
        days prior to the record date specified therein (or thirty (30) days prior
        to
        the consummation of the transaction or event, whichever is earlier), of the
        date
        on which any such record is to be taken for the purpose of such dividend,
        distribution, right or other event, and a brief statement regarding the amount
        and character of such dividend, distribution, right or other event to the
        extent
        known at such time.  The Borrower shall make a public announcement of
        any event requiring notification to the Holder hereunder substantially
        simultaneously with the notification to the Holder in accordance with the
        terms
        of this Section 4.12.

       

      4.13  Remedies.  The
        Borrower acknowledges that a breach by it of its obligations hereunder will
        cause irreparable harm to the Holder, by vitiating the intent and purpose
        of the
        transaction contemplated hereby.  Accordingly, the Borrower
        acknowledges that the remedy at law for a breach of its obligations under
        this
        Note will be inadequate and agrees, in the event of a breach or threatened
        breach by the Borrower of the provisions of this Note, that the Holder shall
        be
        entitled, in addition to all other available remedies at law or in equity,
        and
        in addition to the penalties assessable herein, to an injunction or injunctions
        restraining, preventing or curing any breach of this Note and to enforce
        specifically the terms and provisions thereof, without the necessity of showing
        economic loss and without any bond or other security being
        required.

       

       

      ARTICLE
        V.                                           CALL
        OPTION

       

      5.1  Call
        Option.  Notwithstanding anything to the contrary contained in
        this Article V, so long as (i) no Event of Default or Trading Market
        Prepayment Event shall have occurred and be continuing, (ii) the Borrower
        has a sufficient number of authorized shares of Common Stock reserved for
        issuance upon full conversion of the Notes, then at any time after the Issue
        Date, and (iii) the Common Stock is trading at or below $.15 per share, the
        Borrower shall have the right, exercisable on not less than ten (10) Trading
        Days prior written notice to the Holders of the Notes (which notice may not
        be
        sent to the Holders of the Notes until the Borrower is permitted to prepay
        the
        Notes pursuant to this Section 5.1), to prepay all of the outstanding Notes
        in
        accordance with this Section 5.1.  Any notice of prepayment hereunder
        (an “Optional Prepayment”) shall be delivered to the Holders of the Notes at
        their registered addresses appearing on the books and records of the Borrower
        and shall state (1) that the Borrower is exercising its right to prepay all
        of
        the Notes issued on the Issue Date and (2) the date of prepayment (the “Optional
        Prepayment Notice”).  On the date fixed for prepayment (the “Optional
        Prepayment Date”), the Borrower shall make payment of the Optional Prepayment
        Amount (as defined below) to or upon the order of the Holders as specified
        by
        the Holders in writing to the Borrower at least one (1) business day prior
        to
        the Optional Prepayment Date.  If the Borrower exercises its right to
        prepay the Notes, the Borrower shall make payment to the holders of an amount
        in
        cash (the “Optional Prepayment Amount”) equal to either (i) 125% (for
        prepayments occurring within thirty (30) days of the Issue Date), (ii) 135%
        for prepayments occurring between thirty-one (31) and sixty  (60) days
        of the Issue Date, or (iii) 150% (for prepayments occurring after the sixtieth
        (60th) day following the
        Issue Date), multiplied by the sum of (w) the then outstanding principal
        amount
        of this Note plus (x) accrued and unpaid interest on the unpaid
        principal amount of this Note to the Optional Prepayment Date plus (y)
        Default Interest, if any, on the amounts referred to in clauses (w) and (x)
        plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and
        1.4(g) hereof or pursuant to Section 2(c) of the Registration Rights Agreement
        (the then outstanding principal amount of this Note to the date of payment
        plus the amounts referred to in clauses (x), (y) and (z) shall
        collectively be known as the “Optional Prepayment Sum”). Notwithstanding notice
        of an Optional Prepayment, the Holders shall at all times prior to the Optional
        Prepayment Date maintain the right to convert all or any portion of the Notes
        in
        accordance with Article I and any portion of Notes so converted after receipt
        of
        an Optional Prepayment Notice and prior to the Optional Prepayment Date set
        forth in such notice and payment of the aggregate Optional Prepayment Amount
        shall be deducted from the principal amount of Notes which are otherwise
        subject
        to prepayment pursuant to such notice.  If the Borrower delivers an
        Optional Prepayment Notice and fails to pay the Optional Prepayment Amount
        due
        to the Holders of the Notes within two (2) business days following the Optional
        Prepayment Date, the Borrower shall forever forfeit its right to redeem the
        Notes pursuant to this Section 5.1.

       

      5.2  Partial
        Call Option.  Notwithstanding anything to the contrary contained
        in this Article V, in the event that the Average Daily Price of the Common
        Stock, as reported by the Reporting Service, for each day of the month ending
        on
        any Determination Date is below $.15 per share, the Borrower may, at its
        option,
        prepay a portion of the outstanding principal amount of the Notes equal to
        104%
        of the principal amount hereof divided by thirty-six (36) plus one month’s
        interest.

       

      

       

      

       

      

       

      

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

       

      IN
        WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
        its
        duly authorized officer this 13th day of September,
        2007.

       

      

      JUNIPER
        GROUP, INC.

      

      

      

      By:       /s/Vlado
        P. Hreljanovic

      Chief
        Executive Officer

       

       

      EXHIBIT
        A

       

      NOTICE
        OF CONVERSION

       

      (To
        be Executed by the Registered Holder

       

      in
        order to Convert the Notes)

       

      The
        undersigned hereby irrevocably elects to convert $__________ principal amount
        of
        the Note (defined below) into shares of common stock, par value $.001 per
        share
        (“Common Stock”), of Juniper Group, Inc., a Nevada corporation (the “Borrower”)
        according to the conditions of the convertible Notes of the Borrower dated
        as of
        September 13, 2007 (the “Notes”), as of the date written below.  If
        securities are to be issued in the name of a person other than the undersigned,
        the undersigned will pay all transfer taxes payable with respect thereto
        and is
        delivering herewith such certificates.  No fee will be charged to the
        Holder for any conversion, except for transfer taxes, if any.  A copy
        of each Note is attached hereto (or evidence of loss, theft or destruction
        thereof).

       

      The
        Borrower shall electronically transmit the Common Stock issuable pursuant
        to
        this Notice of Conversion to the account of the undersigned or its nominee
        with
        DTC through its Deposit Withdrawal Agent Commission system (“DWAC
        Transfer”).

       

      Name
        of DTC Prime
        Broker:                                                                                                                     

      Account
        Number:                                                                                                                     

       

      In
        lieu of receiving shares of Common Stock issuable pursuant to this Notice
        of
        Conversion by way of a DWAC Transfer, the undersigned hereby requests that
        the
        Borrower issue a certificate or certificates for the number of shares of
        Common
        Stock set forth below (which numbers are based on the Holder’s calculation
        attached hereto) in the name(s) specified immediately below or, if additional
        space is necessary, on an attachment hereto:

       

      Name:                                                                                                                     

      Address:                                                                                                                     

       

      The
        undersigned represents and warrants that all offers and sales by the undersigned
        of the securities issuable to the undersigned upon conversion of the Notes
        shall
        be made pursuant to registration of the securities under the Securities Act
        of
        1933, as amended (the “Act”), or pursuant to an exemption from registration
        under the Act.

       

      Date
        of Conversion:___________________________

      Applicable
        Conversion Price:____________________

      Number
        of Shares of Common Stock to be Issued Pursuant to

      Conversion
        of the Notes:______________

      Signature:___________________________________

      Name:______________________________________

      Address:____________________________________

       

      The
        Borrower shall issue and deliver shares of Common Stock to an overnight courier
        not later than three business days following receipt of the original Note(s)
        to
        be converted, and shall make payments pursuant to the Notes for the number
        of
        business days such issuance and delivery is late.

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