Document:

WHERIFY
      WIRELESS, INC.

     

    SECURITIES
      PURCHASE AND OPTION AGREEMENT

     

    As
      of
      February _, 2007

     

    

     

    

     

    

     

    

     

    

     

    

     

    

    
      

      

    

     

    
      
        
           

        

        
        

      

      
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    THIS
      SECURITIES PURCHASE AND OPTION AGREEMENT,
      dated
      as of this ______ day of February, 2007 (this “Agreement”),
      is
      between Wherify Wireless, Inc., a Delaware corporation (the “Company”),
      and
      GPS Associates, LLC, a Delaware limited liability company (the “Purchaser”).

     

    WITNESSETH:

     

    WHEREAS,
      the
      Company desires to issue to the Purchaser, and the Purchaser desire to purchase
      from the Company, the Securities (as such term is defined below) as set forth
      below (the “Offering”);

     

    WHEREAS,
      in
      addition to purchasing the Securities, the Company desires to provide to the
      Purchaser and the Purchaser desires to acquire the Option; and

     

    WHEREAS,
      certain
      capitalized terms used in this Agreement are defined in Section
      9.1
      hereof.

     

    NOW,
      THEREFORE,
      in
      consideration of the promises and mutual covenants and agreements hereinafter
      contained, and for good and valuable consideration the receipt and adequacy
      of
      which are hereby acknowledged, the parties hereto hereby agree as
      follows:

     

    
      	1.  	
              Sale
                and Purchase of Securities; the
                Option.

            

    

     

    1.1   Sale
      and Purchase of Securities.
      Subject
      to the terms and conditions of this Agreement, on the Closing Date (as defined
      in Section
      3.1
      hereof),
      the Company shall issue, sell and deliver to the Purchasers, and the Purchasers
      shall purchase from the Company for the Purchase Price (as defined in
Section
      2.1
      hereof)
      (i) a 10% Senior Convertible Promissory Note in the aggregate principal amount
      of $1,200,000 (the “Note”)
      and
      (ii) a five year warrant (the “Warrant”)
      to
      purchase Three Million (3,000,000) shares at an exercise price of $0.10 per
      share (subject to adjustment as described therein), of the Company’s common
      stock, par value $0.01 per share. (the “Common
      Stock”).
      The
      Note and Warrant shall hereinafter sometimes be collectively referred to as
      the
“Securities.”
The
      principal amount of Note purchased and Warrant received by the Purchaser shall
      be set forth on Schedule
      1.1
      hereto.

     

    1.2   Option
      to Purchase Series A Convertible Preferred Stock.
      By
      execution of this Agreement, the Company hereby grants to the Purchaser the
      right to purchase (the “Option”)
      an
      aggregate of up to $7.5 million stated value of the Company’s Series A
      Convertible Preferred Stock (the “A
      Shares”),
      which
      A Shares shall have the terms set forth on Schedule
      1.2
      hereto.
      The Option may be exercised at a 20% discount price to the face amount of A
      Shares purchased by either:

     

    
      	◦  	
              Exercise
                in Full:
                GPS may exercise the Option in full by electing to: (1) exchange
                some, all
                or none of the Note for the Preferred Stock and (2) delivering to
                Wherify
                before expiry of the Option that amount of gross cash proceeds which,
                when
                added to the face amount of the Note which is exchanged, equals
                $6,000,000; or

            

    

     

    
      	◦  	
              Partial
                Option Exercise:
                GPS may partially exercise the Option by delivering to Wherify before
                expiry of the Option (1) a minimum amount of $4,500,000 in gross
                cash
                proceeds plus (2) some, all or none of the Note in an exchange ratio
                of
                $1.25 principal amount of Preferred for every $1.00 of Notes
                exchanged.

            

    

     

    
      
        
        

      

      
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    The
      Option may be exercised at any time or from time to time commencing on the
      Closing Date until and including the later to occur of ninety (90) days
      following the Closing Date Or June 2, 2007.

     

    
      	2.  	
              Purchase
                Price.

            

    

     

    2.1  Purchase
      Price.
      The
      aggregate gross purchase price of the Securities to be purchased pursuant to
      Section
      1.1
      shall be
      $1,200,000 (the “Purchase
      Price”).

     

    2.2  Payment
      of the Purchase Price.
      At the
      Closing (as defined in Section
      3.1
      hereof),
      the Purchaser shall pay the Purchase Price from the Escrow Account, as defined
      in Section
      4.2
      hereof
      (less all fees and expenses owed to Laidlaw & Company (UK) Ltd.
      (“Laidlaw”),
      the
      placement agent of the Offering and its counsel), by wire transfer of
      immediately available funds to such account of the Company as shall have been
      designated in advance to the Purchaser by the Company.

     

    
      	3.  	
              Closing.

            

    

     

    3.1  Closing
      Date.
      The
      closing of the sale and purchase of the Securities (the “Closing”)
      shall
      take place on or before February 28, 2007, at such other time, date or place
      as
      the parties hereto may mutually agree; provided,
      that
      all conditions to the Closing set forth in this Agreement have been satisfied
      or
      waived by such date. The date on which the Closing is held is referred to in
      this Agreement as the “Closing
      Date.”
At
      the
      Closing (i) the Company shall deliver, or cause to be delivered, the Note and
      Warrant, each executed by the Company and (ii) the documents referred to in
      Section
      8
      hereof.

     

    
      	4.  	
              Representations
                and Warranties of the
                Company

            

    

     

    .
      The
      Company hereby represents, covenants and warrants as of the date hereof and
      as
      of the Closing Date to the Purchasers, acknowledging that the Purchasers are
      relying upon the accuracy and completeness of the representations and warranties
      set forth herein to, among other things, ensure that registration under Section
      5 of the Securities Act is not required in connection with the sale of the
      Securities hereby, as follows:

     

    4.1  Organization
      and Good Standing; Capitalization.

     

    (a)  The
      Company and each Subsidiary is duly organized, validly existing and in good
      standing under the laws of the state of Delaware and has the corporate power
      and
      authority to own, lease and operate its properties and assets and to carry
      on
      its business as now conducted and as it is proposed to be conducted. The Company
      is duly qualified or authorized to do business as a foreign corporation and
      is
      in good standing under the laws of each jurisdiction in which the conduct of
      its
      business or the ownership of its properties or assets requires such
      qualification or authorization.

     

    (b)  All
      the
      outstanding shares of capital stock of the Company have been duly authorized,
      and are validly issued, fully paid and non-assessable. Except for the Option
      and
      as disclosed in the SEC Reports (as defined in Section
      4.9
      hereof)
      or on Schedule
      4.1(b)
      (i)
      there is no option, warrant, call, right, commitment or other agreement of
      any
      character to which the Company is a party, (ii) there are no securities of
      the
      Company outstanding which upon conversion or exchange, and (iii) there are
      no
      share appreciation rights, or other similar rights based on securities of the
      Company which, in the case of clause (i), (ii) or (iii), would require the
      issuance, sale or transfer of any additional shares of capital stock or other
      equity securities of the Company or other securities convertible into,
      exchangeable for or evidencing the right to subscribe for or purchase share
      capital or other equity securities of the Company. Other than as disclosed
      in
      the SEC Reports and contemplated by this Agreement or Transaction Documents
      (as
      defined in Section
      4.2),
      the
      Company is not a party to, nor is it aware of, any voting trust or other voting,
      stockholders or similar agreement with respect to any of the securities of
      the
      Company or of any agreement relating to the issuance, sale, redemption, transfer
      or other disposition of the shares of capital stock on other securities of
      the
      Company.

     

    
      
        
        

      

      
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    4.2  Authorization
      of Agreement; Enforceability.
      The
      Company has all requisite corporate power and authority to execute and deliver
      this Agreement and each other agreement, document, instrument and certificate,
      including, but not limited to, the Note, the Warrant, the Laidlaw Warrant,
      the
      Escrow Agreement by and among Signature Bank, the Purchaser and the Company,
      dated February 8, 2007 (the “Escrow
      Agreement”),
      and
      the Registration Rights Agreement, to be executed by the Company in connection
      with the consummation of the transactions contemplated by this Agreement
      (collectively, the “Transaction
      Documents”),
      and
      to perform fully its obligations hereunder and thereunder (including, but not
      limited to, granting the Option). The execution, delivery and performance by
      the
      Company of this Agreement (including, but not limited to, granting the Option)
      and the Transaction Documents have been duly authorized by all necessary
      corporate action on the part of the Company and its stockholders. This Agreement
      and each of the Transaction Documents have been duly and validly executed and
      delivered by the Company and, assuming the due authorization, execution and
      delivery thereof by the Purchaser, this Agreement and each of the Transaction
      Documents constitutes the legal, valid and binding obligations of the Company,
      enforceable against the Company in accordance with its respective terms, subject
      to applicable bankruptcy, insolvency, reorganization, moratorium and similar
      laws affecting creditors’ rights and remedies generally and subject, as to
      enforceability, to general principles of equity (regardless of whether
      enforcement is sought in a proceeding at law or in equity).

     

    4.3  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated thereby
      (including, but not limited to, granting the Option), do not and will not (i)
      conflict with or violate any provision of the Company’s and/or any Subsidiary’s
      Articles of Incorporation or by-laws and any and all amendments thereto
      (collectively, the “Internal
      Documents”),
      (ii)
      conflict with, or constitute a default (or an event that with notice or lapse
      of
      time or both would become a default) under, or give to others any rights of
      termination, amendment, acceleration or cancellation (with or without notice,
      lapse of time or both) of, any agreement, credit facility, debt or other
      instrument (evidencing a Company or Subsidiary debt or otherwise), or other
      understanding to which the Company or any Subsidiary is a party or by which
      any
      property or asset of the Company or any Subsidiary is bound or affected, or
      (iii) result in a violation of any law, rule, regulation, order, judgment,
      injunction, decree or other restriction of any court or governmental authority
      to which the Company or a Subsidiary is subject (including federal and state
      securities laws and regulations), or by which any property or asset of the
      Company or a Subsidiary is bound or affected.

     

    4.4  Subsidiaries,
      Joint Ventures, Partnerships, Etc.

     

    (a)  As
      of the
      Closing Date, (i) Wherify California, Inc., a California corporation (ii) IQ
      Biometrix Operations, Inc., a Delaware corporation and (iii) Wherify Wireless,
      Inc., a Canadian corporation (collectively the “Subsidiaries”)
      are
      the only subsidiaries of the Company. Each Subsidiary is wholly owned by the
      Company, is duly organized, validly existing and in good standing under the
      laws
      of the jurisdiction of its incorporation with corporate power and corporate
      authority under such laws to own, lease and operate its properties and conduct
      its business as currently conducted; and is duly qualified to transact business
      as a foreign corporation and is in good standing (if applicable) in each other
      jurisdiction in which it owns or leases property of a nature, or transacts
      business of a type, that would make such qualification necessary other than
      such
      qualifications which the failure to have would not reasonably be expected to
      have a Material Adverse Effect.

     

    
      
        
        

      

      
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    (b)  Neither
      the Company nor its Subsidiaries is a party to any joint venture, partnership
      or
      similar arrangement or agreement.

     

    4.5  Consents
      of Third Parties.
      None of
      the execution and delivery by the Company of this Agreement and the Transaction
      Documents, the consummation of the transactions contemplated hereby or thereby,
      or compliance by the Company with any of the provisions hereof or thereof will
      (a) conflict with, or result in the breach of, any provision of the Certificate
      of Incorporation or Bylaws of the Company (or any Subsidiary), (b) conflict
      with, violate, result in the breach or termination of, or constitute a default
      or give rise to any right of termination or acceleration or right to increase
      the obligations or otherwise modify the terms thereof under any Permit or Order
      to which the Company (or any Subsidiary) is a party or any Contract to which
      the
      Company or its Subsidiaries is bound or by which the Company or any of its
      properties or assets is bound, other than such conflicts, violations, breaches,
      defaults, termination or accelerations that would not reasonably be expected
      to
      have a Material Adverse Effect, (c) constitute a violation of any Law applicable
      to the Company (or any Subsidiary) or (d) result in the creation of any Lien
      upon the properties or assets of the Company (or any Subsidiary). No consent,
      waiver, approval, Order, Permit or authorization of, or declaration or filing
      with, or notification to, any Person or Governmental Body is required on the
      part of the Company and/or its Subsidiaries in connection with the execution
      and
      delivery of this Agreement (including, but not limited to, the granting of
      the
      Option) and/or the Transaction Documents, or the compliance by the Company
      with
      any of the provisions hereof or thereof.

     

    4.6  Authorization
      of Securities.

     

    (a)  On
      the
      Closing Date, the issuance, sale, and delivery of the Option and the Securities
      to be purchased pursuant to Section
      1.1
      will
      have been duly authorized by all requisite action of the Company, and, when
      issued, sold, delivered and paid for in accordance with this Agreement, the
      Securities will be validly issued and outstanding, with no personal liability
      attaching to the ownership thereof.

     

    (b)  On
      the
      Closing Date, the issuance and delivery of the shares of Common Stock to be
      delivered upon conversion of the Notes (the “Conversion
      Shares”)
      and
      upon exercise of the Warrants (the “Warrant
      Shares”)
      in
      accordance with the terms thereof (collectively, the Conversion Shares and
      the
      Warrants Shares, the “Underlying
      Shares”)
      will
      have been duly authorized by all requisite action of the Company and, when
      issued and delivered in accordance with the terms of the Securities, the
      Underlying Shares will be validly issued and outstanding, fully paid and
      non-assessable, with no personal liability attaching to the ownership thereof,
      and not subject to preemptive or any other similar rights of the stockholders
      of
      the Company or others.

     

    4.7  Capitalization.
      Other
      than the Option and as disclosed in the SEC Reports, (i) there are no
      outstanding securities of the Company or any of its Subsidiaries which contain
      any preemptive, redemption or similar provisions, nor is any holder of
      securities of the Company or any Subsidiary entitled to preemptive or similar
      rights arising out of any agreement or understanding with the Company or any
      Subsidiary by virtue of any of the Transaction Documents, and there are no
      contracts, commitments, understandings or arrangements by which the Company
      or
      any of its Subsidiaries is or may become bound to redeem a security of the
      Company or any of its Subsidiaries; (ii) the Company does not have any stock
      appreciation rights or “phantom stock” plans or agreements or any similar plan
      or agreement; and (iii) there are no outstanding options, warrants, script
      rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities, except as a result of the purchase and sale of
      the
      Transaction Securities, or rights or obligations convertible into or
      exchangeable for, or giving any Person any right to subscribe for or acquire,
      any shares of Common Stock, or contracts, commitments, understandings, or
      arrangements by which the Company or any Subsidiary is or may become bound
      to
      issue additional shares of Common Stock, or securities or rights convertible
      or
      exchangeable into shares of Common Stock.

     

    
      
        
        

      

      
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    4.8  SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or Section 15(d)
      of the Exchange Act, for the one (1) year preceding the date hereof (or such
      shorter period as the Company was required by law to file such material) (the
      foregoing materials, including the exhibits thereto, being collectively referred
      to herein as the “SEC
      Reports”).
      As of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder, as applicable, and none
      of
      the SEC Reports, when filed, contained any untrue statement of a material fact
      or omitted to state a material fact required to be stated therein or necessary
      in order to make the statements therein, in light of the circumstances under
      which they were made, not misleading. All material agreements to which the
      Company is a party or to which the property or assets of the Company are subject
      have been filed as exhibits to the SEC Reports to the extent required. The
      financial statements of the Company included in the SEC Reports comply in all
      material respects with applicable accounting requirements and the rules and
      regulations of the Commission with respect thereto as in effect at the time
      of
      filing. Such financial statements have been prepared in accordance with
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements or the notes
      thereto and except that unaudited financial statements may not contain all
      footnotes required by GAAP, and fairly present in all material respects the
      financial position of the Company and its consolidated subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments. Additionally, since the adoption of
      the
      Sarbanes-Oxley Act of 2002 (the “New
      Act”)
      and to
      the extent that the Company is subject to the New Act, the Company has complied
      in all material respects with the laws, rules and regulation under the New
      Act.

     

    4.9  Material
      Changes.
      Since
      September 30, 2006 and other than as disclosed in the SEC Reports (i) there
      has
      been no event, occurrence or development that has had or that could reasonably
      be expected to result in a Material Adverse Effect, (ii) the Company has not
      incurred any material liabilities (contingent or otherwise) other than (A)
      trade
      payables and accrued expenses incurred in the ordinary course of business
      consistent with past practice and (B) liabilities not required to be reflected
      in the Company’s financial statements pursuant to GAAP or required to be
      disclosed in filings made with the Commission, (iii) the Company has not altered
      its method of accounting or the identity of its auditors, (iv) the Company
      has
      not declared or made payment or distribution of any dividend or distribution
      of
      cash or other property to its holders of Common Stock or purchased, redeemed
      or
      made any agreements to purchase or redeem any shares of its capital stock and
      (v) the Company has not issued any equity securities to any officer, director
      or
      Affiliate, except pursuant to existing Company stock option plans.

     

    4.10  Intentionally
      not used.

     

    4.11  No
      Undisclosed Liabilities.
      Other
      than as disclosed in the SEC Reports, neither the Company nor its Subsidiaries
      has any liabilities (whether accrued, absolute, contingent or otherwise, and
      whether due or to become due or asserted or unasserted), except (a) liabilities
      provided for in the Financial Statements (other than liabilities which, in
      accordance with GAAP, need not be disclosed), (b) liabilities disclosed on
      Schedule
      4.11
      hereto
      and (c) liabilities incurred in the ordinary course of business which do not
      materially exceed historic levels.

     

    
      
        
        

      

      
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    4.12  Absence
      of Certain Developments.
      Since
      September 30, 2006, other than as disclosed in the SEC Reports, in the ordinary
      course of business or in the context of the Transactions contemplated in this
      Agreement and the Transaction Documents:

     

    (a)  there
      has
      not been any Material Adverse Change nor has any event occurred which could
      result in any Material Adverse Change other than those matters as disclosed
      in
      the SEC Reports;

     

    (b)  there
      has
      not been any declaration, setting a record date, setting aside or authorizing
      the payment of, any dividend or other distribution in respect of any shares
      of
      capital stock of the Company or its Subsidiaries or any repurchase, redemption
      or other acquisition by the Company or its Subsidiaries, of any of the
      outstanding shares of capital stock or other securities of, or other ownership
      interest in, the Company or its Subsidiaries;

     

    (c)  there
      has
      not been any transfer, issue, sale or other disposition by the Company of any
      shares of capital stock or other securities of the Company or its Subsidiaries
      or any grant of options, warrants, calls or other rights to purchase or
      otherwise acquire shares of such capital stock or such other securities other
      than those matters as disclosed in the SEC Reports;

     

    (d)  neither
      the Company nor its Subsidiaries has (i) awarded or paid any bonuses to
      employees or representatives of the Company, (ii) entered into any employment,
      deferred compensation, severance or similar agreements (nor amended any such
      agreement), other than in the ordinary course of business other than those
      matters as disclosed in the SEC Reports;

     

    (e)  neither
      the Company nor its Subsidiaries has made any loans, advances (other than
      advances to officers and employees of the Company or its Subsidiaries which
      advances are made in the ordinary course of business), or capital contributions
      to, or investments in, any Person or paid any fees or expenses to any Affiliate
      of the Company other than its Subsidiaries;

     

    (f)  neither
      the Company nor its Subsidiaries has transferred or granted any rights under
      any
      Contracts or licenses, used by the Company in its business other than those
      matters as disclosed in the SEC Reports;

     

    (g)  there
      has
      not been any damage, destruction or loss, whether or not covered by insurance,
      with respect to the property or assets of the Company or its Subsidiaries having
      a replacement cost of more than $10,000 for any single loss or $20,000 for
      all
      such losses;

     

    (h)  neither
      the Company nor its Subsidiaries has mortgaged, pledged or subjected to any
      Lien
      any of its assets, or acquired any assets for a purchase price in excess of
      $50,000 in the aggregate or sold, assigned, transferred, conveyed, leased or
      otherwise disposed of any assets of the Company or its Subsidiaries for a sale
      price in excess of $50,000 in the aggregate except for assets acquired or sold,
      assigned, transferred, conveyed, leased or otherwise disposed of in the ordinary
      course of business other than those matters as disclosed in the SEC
      Reports;

     

    (i)  neither
      the Company nor its Subsidiaries has canceled or compromised any debt or claim,
      or amended, canceled, terminated, relinquished, waived or released any Contract
      or right, except in the ordinary course of business consistent with past
      practice and which, individually or in the aggregate, would not be material
      to
      the Company or its Subsidiaries other than those matters as disclosed in the
      SEC
      Reports;

     

    
      
        
        

      

      
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    (j)  neither
      the Company nor its Subsidiaries has made any binding commitment to make any
      capital expenditures or capital additions or betterments in excess of $20,000
      individually or $50,000 in the aggregate;

     

    (k)  neither
      the Company nor its Subsidiaries has incurred any debts, obligations or
      liabilities, whether due or to become due, except current liabilities incurred
      in the ordinary course of business, none of which current liabilities
      (individually or in the aggregate) could result in a Material Adverse Change
      other than those matters as disclosed in the SEC Reports;

     

    (l)  neither
      the Company nor its Subsidiaries has entered into any transaction other than
      in
      the ordinary course of business except for (in the case of the Company) this
      Agreement other than those matters as disclosed in the SEC Reports;

     

    (m)  neither
      the Company nor its Subsidiaries has encountered any labor difficulties or
      labor
      union organizing activities;

     

    (n)  neither
      the Company nor its Subsidiaries has made any change in the accounting
      principles, methods or practices followed by it or depreciation or amortization
      policies or rates theretofore adopted;

     

    (o)  neither
      the Company nor its Subsidiaries has disclosed to any Person any material trade
      secrets except for disclosures made to Persons subject to valid and enforceable
      confidentiality agreements;

     

    (p)  neither
      the Company nor its Subsidiaries has suffered or experienced any change in
      the
      relationship or course of dealings between the Company and/or its Subsidiaries
      and any of their suppliers or customers which supply goods or services to the
      Company or its Subsidiaries or purchase goods or services from the Company
      and
      or its Subsidiaries other than those matters as disclosed in the SEC Reports;
      and

     

    (q)  neither
      the Company nor its Subsidiaries has made any payment to, or received any
      payment from, or made or received any investment in, or entered into any
      transaction or series of related transactions (including without limitation,
      the
      purchase, sale, exchange or lease of assets, property or services, or the making
      of a loan or guarantee) with any Affiliate in each case, in excess of $50,000
      or
      its equivalent (other than any transactions between or among the Company and
      its
      Subsidiaries) (each, an “Affiliate
      Transaction”)
      other
      than those matters as disclosed in the SEC Reports.

     

    
      
        
        

      

      
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    4.13  Tax
      Status.
      The
      Company and its Subsidiaries have 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. To the best of the Company’s knowledge, 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.

     

    4.14  Real
      Property.
      The
      Company currently has leased certain locations for office space and all material
      leases, all of which leases are disclosed (including the terms of such leases)
      in the SEC Reports.

     

    4.15  Tangible
      Personal Property; Assets.
      All
      material items of personal property and assets owned or leased by the Company
      and its Subsidiaries are in good operating condition, normal wear and tear
      excepted.

     

    
      
        
        

      

      
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    4.16  Intangible
      Property.
      The
      Company and its Subsidiaries own, or possess adequate rights or licenses to
      use
      all trademarks, trade names, service marks, service mark registrations, service
      names, patents, patent rights, copyrights, inventions, licenses, approvals,
      governmental authorizations, trade secrets and rights necessary to conduct
      their
      respective businesses as now conducted, the lack of which could reasonably
      be
      expected to have a Material Adverse Effect. The Company and its Subsidiaries
      do
      not have any knowledge of any infringement by the Company or its Subsidiaries
      of
      trademarks, trade name rights, patents, patent rights, copyrights, inventions,
      licenses, service names, service marks, service mark registrations, trade
      secrets or other similar rights of others, or of any such development of similar
      or identical trade secrets or technical information by others and no claim,
      action or proceeding has been made or brought against, or to the Company’s
      knowledge, has been threatened against, the Company or its Subsidiaries
      regarding trademarks, trade name rights, patents, patent rights, inventions,
      copyrights, licenses, service names, service marks, service mark registrations,
      trade secrets or other infringement, except where such infringement, claim,
      action or proceeding would not reasonably be expected to have either
      individually or in the aggregate a Material Adverse Effect. None of the
      Company’s employees, officers, or consultants are obligated under any contract
      (including licenses, covenants, or commitments of any nature) or other
      agreement, or subject to any judgment, decree, or order of any court or
      administrative agency, that would interfere with the use of such employee’s,
      officer’s, or consultant’s commercially reasonable efforts to promote the
      interests of the Company or that would conflict with the Company’s business as
      conducted. Neither the execution nor delivery of the Transaction Documents,
      nor
      the carrying on of the Company’s business by the employees of the Company, nor
      the conduct of the Company’s business, will, to the Company’s knowledge,
      conflict with or result in a breach of the terms, conditions, or provisions
      of,
      or constitute a default under, any contract, covenant, or instrument under
      which
      any of such employees, officers or consultants are now obligated.

     

    4.17  Material
      Contracts.

     

    Other
      than as disclosed in the SEC Reports or set forth on Schedule
      4.17,
      (a)
      neither
      the Company nor its Subsidiaries nor any of their respective properties or
      assets is a party to or bound by any (i) Contract not made in the ordinary
      course of business, or involving a commitment or payment by the Company or
      any
      Subsidiary in excess of $50,000 or, in the Company’s belief, otherwise material
      to the business of the Company or its Subsidiaries, (ii) Contract among members
      or granting a right of first refusal or for a partnership or a joint venture
      or
      for the acquisition, sale or lease of any assets or share capital of the Company
      or any other Person or involving a sharing of profits, (iii) mortgage, pledge,
      conditional sales contract, security agreement, factoring agreement or other
      similar Contract with respect to any real or tangible personal property of
      the
      Company or its Subsidiaries, (iv) loan agreement, credit agreement, promissory
      note, guarantee, subordination agreement, letter of credit or any other similar
      type of Contract, (v) Contract with any Governmental Body outside the ordinary
      course of business, (vi) Contract with respect to the discharge, storage or
      removal of hazardous materials or (vii) binding commitment or agreement to
      enter
      into any of the foregoing.

     

    (b)  (i)
      Each
      of the Contracts disclosed in the SEC Reports and listed on Schedule
      4.17
      is valid
      and enforceable against the Company or its Subsidiaries in accordance with
      its
      terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
      and similar laws affecting creditors’ rights and remedies generally and subject,
      as to enforceability, to general principles of equity (regardless of whether
      enforcement is sought in a proceeding at law or in equity), and, except as
      disclosed in the SEC Reports or on Schedule
      4.17,
      there
      is no default under any Contract disclosed in the SEC Reports and listed on
      Schedule
      4.17
      by the
      Company or any of its Subsidiaries or, to the knowledge of the Company, by
      any
      other party thereto, which is likely to have a Material Adverse Effect, and
      no
      event has occurred that with the lapse of time or the giving of notice or both
      would constitute a default by the Company thereunder which is likely to have
      a
      Material Adverse Effect.

     

    (ii)  No
      previous or current party to any Contract has given written notice to the
      Company or any Subsidiary of, or made a claim, verbal or written, with respect
      to any breach or default thereunder and the Company has no knowledge of any
      notice of or claim with respect to any such breach or default other than such
      notices or claims with respect to any such breaches or defaults that would
      not,
      either individually or in the aggregate, be reasonably expected to have a
      Material Adverse Effect other than those matters as disclosed in the SEC
      Reports.

     

    (c)  With
      respect to the Contracts disclosed in the SEC Reports and listed on Schedule
      4.17
      that
      were assigned to the Company or any Subsidiary by a third party, all necessary
      consents to such assignment have been obtained other than such contents which
      the failure to obtain would not be reasonably expected to have a Material
      Adverse Effect.

     

    4.18  Employee
      Benefits.
      Except
      as disclosed in the SEC Reports or set forth on Schedule
      4.18,
      neither
      the Company nor any of its Subsidiaries has in effect any employment agreements,
      consulting agreements, deferred compensation, pension or retirement agreements
      or arrangements, bonus, incentive or profit-sharing plans or arrangements,
      or
      labor or collective bargaining agreements, written or oral. The Company and
      its
      Subsidiaries are in compliance in all material respects with all applicable
      Laws
      relating to labor, employment, fair employment practices, terms and conditions
      of employment, and wages and hours.

     

    4.19  Employees.

     

    (a)  No
      key
      executive Employee, group of Employees nor independent contractors of the
      Company or its Subsidiaries has announced or in any other manner communicated
      to
      the Company any plans to terminate his or her employment or relationship as
      an
      Employee or independent contractor with the Company or its
      Subsidiaries.

     

    (b)  To
      the
      best of the Company’s knowledge, no key executive Employee or any other Employee
      of the Company or its Subsidiaries is a party to or is otherwise bound by any
      agreement or arrangement (including, without limitation, confidentiality
      agreements, non- competition agreements, licenses, covenants, or commitments
      of
      any nature), or subject to any judgment, decree, or Order of any court or
      Governmental Body, (i) that would conflict with such employee’s obligation
      diligently to promote and further the interest of the Company or its
      Subsidiaries or (ii) that would conflict with the Company’s (or its
      Subsidiaries) business as now conducted or as proposed to be
      conducted.

     

    (c)  Schedule
      4.19(c)
      sets
      forth a list of each of the key executive Employees of the Company who have
      entered into an employment and/or confidentiality agreement with the Company.
      It
      is understood that all employees of the Company are covered by employment
      agreements or employment contracts, as appropriate, which contain signed
      confidentiality agreements with the Company.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      4.20  Litigation.
        Other
        than is disclosed in the SEC Reports or is set forth on Schedule
        4.20,
        there
        is no action, suit, inquiry, notice of violation, proceeding or investigation
        pending or, to the knowledge of the Company, currently threatened against
        or
        affecting the Company, any Subsidiary or any of their respective properties
        before or by any court, arbitrator, governmental or administrative agency
        and/or
        regulatory authority (federal, state, county, local or foreign), (collectively,
        an “Action”)
        which
        does and/or could (i) adversely affects or challenges the legality, validity
        or
        enforceability of any of the Transaction Documents and/or the Transaction
        Securities or to consummate the transactions contemplated hereby or thereby
        or
        (ii) could, if there were an unfavorable decision, have or reasonably be
        expected to result in, either individually or in the aggregate, a Material
        Adverse Effect. The Commission has not issued any stop order or other order
        suspending the effectiveness of any registration statement filed by the Company
        or any Subsidiary under the Exchange Act or the Securities Act. The foregoing
        includes, without limitation, actions, pending or threatened (or any basis
        therefor known to the Company), involving the prior employment of any of
        the
        Company’s employees, their use in connection with the Company’s business of any
        information or techniques allegedly proprietary to any of their former
        employers, or their obligations under any agreements with prior employers.
        The
        Company is not a party or subject to the provisions of any order, writ,
        injunction, judgment, or decree of any court or government agency or
        instrumentality.

    

     

    4.21  Compliance
      with Laws; Permits.
      Other
      than as disclosed in the SEC Reports, neither the Company nor any Subsidiary
      (i)
      is in default under or in violation of (and no event has occurred that has
      not
      been waived that, with notice or lapse of time or both, would result in a
      default by the Company or any Subsidiary under), nor has the Company or any
      Subsidiary received notice of a claim that it is in default under or that it
      is
      in violation of, any indenture, mortgage, decree, lease, license, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has been in violation of any
      statute, rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws applicable to its
      business, except in the case of clauses (i), (ii) and (iii) as would not result
      in a Material Adverse Effect. Neither the Company nor any of the Subsidiaries
      has received any written notice of any violation of or noncompliance with,
      any
      federal, state, local or foreign laws, ordinances, regulations and orders
      (including, without limitation, those relating to environmental protection,
      occupational safety and health, federal securities laws, equal employment
      opportunity, consumer protection, credit reporting, “truth-in-lending”, and
      warranties and trade practices) applicable to its business or to the business
      of
      any Subsidiary, the violation of, or noncompliance with, which would have a
      materially adverse effect on either the Company’s business or operations, or
      that of any Subsidiary, and the Company knows of no facts or set of
      circumstances which would give rise to such a notice. The execution, delivery,
      and performance of the Transaction Documents and the consummation of the
      transactions contemplated thereby will not result in any such violation or
      be in
      conflict with or constitute, with or without the passage of time and giving
      of
      notice, either a default under any such provision, instrument, judgment, order,
      writ, decree or contract, or an event which results in the creation of any
      lien,
      charge, or encumbrance upon any assets of the Company or the suspension,
      revocation, impairment, forfeiture, or nonrenewal of any material permit,
      license, authorization, or approval applicable to the Company, its business
      or
      operations, or any of its assets or properties, except as would not reasonably
      be expected to have a Material Adverse Effect.

     

    4.22  Environmental
      and Safety Laws.
      Neither
      the Company nor its Subsidiaries are in violation of any applicable Laws
      relating to the environment or occupational health and safety where the failure
      to so comply could have a Material Adverse Effect and no material expenditures
      are or will be required in order to comply with any such existing
      Laws.

     

    4.23  Investment
      Company Act.
      The
      Company is not, nor is it directly or indirectly controlled by or acting on
      behalf of, any Person that is an investment company within the meaning of the
      Investment Company Act of 1940, as amended.

     

    4.24  Financial
      Advisors.
      Except
      for Laidlaw, no agent, broker, investment banker, finder, financial advisor
      or
      other Person is or will be entitled to any broker’s or finder’s fee or any other
      commission or similar fee from the Company, directly or indirectly, in
      connection with the transactions contemplated by this Agreement or any
      Transaction Document and no Person is entitled to any fee or commission or
      like
      payment from the Company in respect thereof based in any way on agreements,
      arrangements or understandings made by or on behalf of the Company.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    4.25  Condition
      of Properties.
      All
      facilities, machinery, equipment, fixtures, vehicles and other properties owned,
      leased or used by the Company and its Subsidiaries are in good operating
      condition and repair, are reasonably fit and usable for the purposes for which
      they are being used, are adequate and sufficient for the Company and its
      Subsidiaries respective businesses and conform in all material respects with
      all
      applicable Laws.

     

    4.26  Pending
      Changes.
      The
      Company has no knowledge of any development which might reasonably be expected
      to result in a Material Adverse Affect on the operations or financial condition
      of the Company or its Subsidiaries.

     

    4.27  Securities
      Laws.
      The
      Company has complied in all material respects with all applicable U.S. federal
      and state securities laws in connection with (i) all offers, issuances and
      sales
      of its securities prior to the date hereof and (ii) the offer, issuance and
      sale
      of the Securities. All sales and issuances of currently outstanding securities
      by the Company have been to accredited investors within the meaning of Rule
      501
      of Regulation D under the Securities Act. Prior to the Closing, neither the
      Company nor anyone acting on its behalf has sold, offered to sell or solicited
      offers to buy the Securities or similar securities to, or solicit offers with
      respect thereto from, or entered into any preliminary conversations or
      negotiations relating thereto with, any Person, so as to bring the issuance
      and
      sale of the Securities under the registration provisions of the Securities
      Act,
      and applicable state securities laws. Neither the Company nor any Person acting
      on its behalf has offered the Securities to any Person by means of general
      or
      public solicitation or general or public advertising, such as by newspaper
      or
      magazine advertisements, by broadcast media, or at any seminar or meeting whose
      attendees were solicited by such means.

     

    4.28  Registration
      Rights.
      Except
      for any rights granted under the Transaction Documents, no Person has demand
      or
      other rights to cause the Company to file any registration statement under
      the
      Securities Act relating to any securities of the Company or any right to
      participate in any such registration statement other than those matters as
      disclosed in the SEC Reports.

     

    4.29  Disclosure;
      Survival.
      There
      is no fact which has not been disclosed in the SEC Reports or otherwise
      disclosed to the Purchasers of which the Company has knowledge and which has
      had
      or could reasonably be anticipated to result in a Material Adverse Change.
      All
      representations and warranties set forth in this Agreement or in any of the
      Transaction Documents or in any writing or certificate delivered in connection
      with this Agreement shall survive the execution and delivery of this Agreement
      and the consummation of the transactions contemplated hereby for a period of
      one
      (1) year (the “Survival
      Period”)
      and
      shall not be affected by any examination made for or on behalf of the Purchaser,
      the knowledge of the Purchaser, or the acceptance by the Purchaser of any
      certificate or opinion.

     

    4.30  No
      General Solicitation.
      Neither
      the Company, its Subsidiaries, any of their affiliates nor any person acting
      on
      their behalf, has engaged in any form of general solicitation or general
      advertising (within the meaning of Regulation D under the Securities Act) in
      connection with the offer or sale of the Notes and the Warrants.

     

    4.31  Insurance.
      The
      Company has in full force and effect fire and casualty insurance policies,
      with
      extended coverage, sufficient in amount (subject to reasonable deductibles)
      to
      allow it to replace any of its properties that might be damaged or destroyed,
      and the Company has insurance against other hazards, risks, and liabilities
      to
      persons and property to the extent and in the manner customary for companies
      in
      similar businesses similarly situated. To the extent that any premium payments
      are not currently paid-up, the Company will endeavor to remedy such past due
      instances promptly following the Closing Date.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    4.32  Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all licenses, certificates, authorizations
      and permits issued by the appropriate federal, state, local or foreign
      regulatory authorities necessary to conduct their respective businesses, except
      where the failure to possess such permits would not have or reasonably be
      expected to result in a Material Adverse Effect (“Material
      Permits”),
      and
      believes it can obtain, without undue burden or expense, any similar authority
      for the conduct of its business as planned to be conducted, and neither the
      Company nor any Subsidiary has received any notice of proceedings relating
      to
      the revocation or modification of any Material Permit.

     

    4.33  Title
      to Property and Assets.
      The
      Company (and each Subsidiary) owns its property and assets free and clear of
      all
      mortgages, liens, loans, pledges, security interests, claims, equitable
      interests, charges, and encumbrances, except (1) such encumbrances and liens
      which arise in the ordinary course of business and do not materially impair
      the
      Company’s (and each Subsidiary’s) ownership or use of such property or assets
      and (2) the security pledge to Cornell Capital Partners under the convertible
      debenture agreements of March 2006, and any other matters as disclosed in the
      SEC Reports. With respect to the property and assets it leases, the Company
      (and
      each Subsidiary) is in compliance with such leases and, to its knowledge, holds
      a valid leasehold interest free of any material liens, claims, or
      encumbrances.

     

    4.34  Foreign
      Assets Control Legislation.
      Neither
      the sale of the Notes nor the Warrants by the Company hereunder nor its use
      of
      the proceeds thereof will violate the Trading with the Enemy Act, as amended,
      or
      any of the foreign assets control regulations of the United States Treasury
      Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
      legislation or executive order relating thereto. Without limiting the foregoing,
      neither the Company nor any of its Subsidiaries (a) is a person whose property
      or interests in property are blocked pursuant to Section 1 of Executive Order
      13224 of September 23, 2001 Blocking Property and Prohibiting Transactions
      With
      Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
      49079
      (2001)) or (b) engages in any dealings or transactions, or be otherwise
      associated, with any such person. The Company and its Subsidiaries, to their
      full knowledge, are in compliance with the USA Patriot Act of 2001 (signed
      into
      law October 26, 2001).

     

    
      	5.  	
              Representations
                and Warranties of the Purchaser.
                The Purchaser hereby represents and warrants as of the date hereof
                and as
                of the Closing Date to the Company, acknowledging that the Company
                is
                relying upon the accuracy and completeness of the representations
                and
                warranties set forth herein to, among other things, ensure that
                registration under Section 5 of the Securities Act is not required
                in
                connection with the sale of the Securities and the granting of the
                Option
                hereby, as follows

            

    

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    5.2  Investment
      Intent.
      The
      Purchaser represents and warrants to the Company that it is (a) an “accredited
      investor” as defined in Rule 501 of Regulation D of the Securities Act; and (b)
      acquiring the Securities and the Option to be purchased by it pursuant to this
      Agreement for investment and not with a view to the distribution
      thereof.

     

    5.3  Investment
      Purposes.
      (a) The
      Purchaser is acquiring the Securities and the Option for investment purposes
      only, for its own account, and not as nominee or agent for any other Person,
      and
      not with a view to, or for resale in connection with, any distribution thereof
      within the meaning of the Securities Act, (b) it understands and acknowledges
      that the Securities have not been registered under the Securities Act or any
      other securities laws, (c) it is not an “affiliate” (as defined in Rule 144
      under the Securities Act) of the Company, (d) it has such knowledge and
      experience in financial and business matters as to be capable of evaluating
      the
      merits and risks of its investment, (e) each is an “accredited investor” within
      the meaning of Rule 501 of Regulation D under the Securities Act, (f) the
      Company has made available to it the opportunity to ask questions and to receive
      answers, and to obtain information necessary to evaluate the merits and risks
      of
      this investment, and (g) the Purchaser understands, acknowledges and agrees
      that
      the Securities have not been registered under (and that the Company has no
      present intention to register the Securities under) the Securities Act or
      applicable state securities laws, and may not be sold or otherwise transferred
      by the Purchaser to a United States person unless the Securities have been
      registered under the Securities Act and applicable U.S. state securities laws
      or
      are sold or transferred in a transaction exempt therefrom.

     

    5.4  Class
      A Members
      of
      Purchaser. Each Class A Member of the Purchaser (the “Member”) is an “accredited
      investor” as defined in Rule 501 of Regulation D of the Securities Act and each
      member has represented and warranted to the Purchaser those certain
      Representations and Warranties set forth in Section 5 of that certain
      Subscription Agreement entered into between the Purchaser and the Class A
      Members in connection with the Offering.

     

    
      	6.  	
              Further
                Agreements of the Parties.

            

    

     

    6.1  Reserved
      Shares.
      For so
      long as the Securities are outstanding, the Company shall reserve that number
      of
      shares of Common Stock issuable upon conversion of the Notes and exercise of
      the
      Warrants, which shares shall not be subject to any preemptive or other similar
      rights.

     

    6.2  Access
      to Information.
      The
      Purchaser and its representatives shall be entitled, upon reasonable notice,
      to
      make such investigation of the properties, business and operations of the
      Company and such examination of the books, records and financial condition
      of
      the Company as it reasonably requests to make extracts and copies of such books
      and records, upon reasonable notice during regular business hours. Any such
      investigation and examination shall be conducted during regular business hours
      and under reasonable circumstances without material interference with the
      Company’s normal business operations, and the Company and its representatives
      shall cooperate fully therein. No investigation by a Purchaser or its
      Representatives prior to or after the date of this Agreement shall diminish
      or
      obviate any of the representations, warranties, covenants or agreements of
      the
      Company contained in this Agreement or the Transaction Documents. In order
      for
      Purchaser to have full opportunity to make such physical, business, accounting
      and legal review, examination of the affairs of the Company and investigation
      as
      may be reasonably requested, the Company shall cause its Representatives to
      cooperate fully with the Representatives of the Purchaser in connection with
      such review and examination.

     

    6.3   Confidentiality.
      Except
      as may be required by applicable Law or as otherwise agreed among the parties
      hereto, neither the Company, the Purchaser nor any of its Affiliates shall
      at
      any time divulge, disclose, disseminate, announce or release any information
      to
      any Person concerning this Agreement, the Transaction Documents, the
      transactions contemplated hereby or thereby, any trade secrets or other
      confidential information of the Company or the Purchaser, without first
      obtaining the prior written consent of the other parties hereto.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    6.4  Other
      Actions.
      The
      Company and the Purchaser agree to execute and deliver such other documents
      and
      take such other actions as the other parties may reasonably request for the
      purpose of carrying out the intent of this Agreement and the Transaction
      Documents.

     

    6.5  Indemnification.
      The
      Company shall indemnify and hold harmless each Purchaser, the officers,
      directors, agents and employees of each of them, each Person who controls any
      such Purchaser (within the meaning of Section 15 of the Securities Act or
      Section 20 of the Exchange Act) and the officers, directors, agents and
      employees of each such controlling Person, to the fullest extent permitted
      by
      applicable law, from and against any and all losses, claims, damages,
      liabilities, costs (including, without limitation, reasonable attorneys’ fees)
      and expenses (including the cost [including without limitation, reasonable
      attorneys’ fees] and expenses relating to an Indemnified Party’s (as defined
      below) actions to enforce the provisions of this Section
      6.5)
      (collectively, “Losses”),
      as
      incurred, to the extent arising out of or relating to (i) any material
      misrepresentation or breach of any representation or warranty made by the
      Company in the Transaction Documents, or, (ii) any material breach of any
      covenant, agreement or obligation of the Company contained in the Transaction
      Documents, or (iii) any cause of action, suit or claim brought or made against
      such Indemnified Party and arising out of or resulting from the execution,
      delivery, performance or enforcement of the Transaction Documents executed
      pursuant hereto by any of the Indemnified Parties. The Company will not be
      liable to any Person entitled to indemnity hereunder (an “Indemnified
      Party”)
      under
      this Agreement to the extent that any loses, claims, damages, liabilities,
      costs
      and expenses are attributable to any Indemnified Party’s breach of any of the
      representations, warranties, covenants and agreements made in this Agreement
      or
      in the other Transaction Documents. If the indemnification provided for in
      this
Section
      6.5
      is held
      by a court of competent jurisdiction to be unavailable to an Indemnified Party
      with respect to any Losses, then the Indemnifying Party (as defined below),
      in
      lieu of indemnifying such Indemnified Party hereunder, shall contribute to
      the
      amount paid or payable by such Indemnified Party as a result of Losses in such
      proportion as is appropriate to reflect the relative fault of the Indemnifying
      Party on the one hand and of the Indemnified Party on the other in connection
      with the actions or omissions that resulted in such Losses as well as any other
      relevant equitable considerations. The Company shall notify the Purchaser
      promptly of the institution, threat or assertion of any proceeding of which
      the
      Company is aware in connection with the transactions contemplated by this
      Agreement.

     

    (b) Conduct
      of Indemnification Proceedings.
      If any
      proceeding shall be brought or asserted against an Indemnified Party, such
      Indemnified Party shall promptly notify the other party (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall have the right to assume the defense
      thereof, including the employment of counsel reasonably satisfactory to the
      Indemnified Party and the payment of all fees and expenses incurred in
      connection with defense thereof; provided,
      however,
      that
      the failure of any Indemnified Party to give such notice shall not relieve
      the
      Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
      except (and only) to the extent that such failure shall have materially and
      adversely prejudiced the Indemnifying Party.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

     

    The
      indemnification obligations under this Section
      6.5
      are in
      addition to any indemnification or similar obligations under any other
      Transaction Document.

     

    (d) The
      provisions of this Section
      6.5
      shall
      survive the termination of this Agreement for a period of three (3)
      years.

     

    (e) All
      payments to be made to Purchaser pursuant to this Section
      6.5,
      shall
      be paid no later than five (5) business days after request for payment is sent
      to the Company.

     

    6.6  Financial
      Advisor.
      In
      connection with the sale of the Securities, Laidlaw & Company (UK) Ltd.
      (“Laidlaw”)
      shall
      receive from the Company the fees and commissions provided for in that certain
      Engagement Agreement dated February 6, 2007, including in connection therewith
      a
      5-year warrant (the “Laidlaw
      Warrant”)
      to
      purchase 3,000,000 shares of Common Stock at an exercise price of $0.10 per
      share, which may be exercised on a cashless basis, and shall have such other
      terms and provisions, including registration rights as the parties have
      agreed

     

    
      	7.  	
              Other
                Obligations of the
                Parties.

            

    

     

    7.1  Public
      Announcements.
      The
      Company hereby agrees not to, and not to permit its Subsidiaries to, issue
      any
      press release, or otherwise make any public statements (collectively,
“Press
      Releases”)
      with
      respect to the transactions contemplated hereby without the prior written
      consent of the Purchaser, except as may be required by law. Furthermore, where
      the Company desires to issue any such Press Release, the parties agree to
      cooperate in good faith in order to prepare such Press Release in such form
      and
      substance as is agreeable to both parties.

     

    7.2  Furnishing
      Information.
      Each of
      the parties hereto will, as soon as practicable after reasonable request
      therefor, furnish all the information concerning it required for inclusion
      in
      any statement or application made by any of them to any governmental or
      regulatory body in connection with the transactions contemplated by this
      Agreement.

     

    7.3  Transfer
      Restrictions.

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

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

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE AND ARE BEING OFFERED AND SOLD IN
      RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
      AS AMENDED (THE “SECURITIES
      ACT”),
      AND,
      ACCORDINGLY, MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED
      OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
      ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
      TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
      APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
      TO
      THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
      ACCEPTABLE TO THE COMPANY.

     

    (c)  Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section
      7.3(b)
      (i)
      following any sale of the Underlying Shares pursuant to Rule 144, or (ii) if
      such Underlying Shares are eligible for sale under Rule 144(k). The Company
      agrees that at such time as such legend is no longer required under and pursuant
      to this Section
      7.3(c),
      it
      will, no later than three (3) Trading Days following the delivery by a Purchaser
      to the Company (the “Delivery
      Date”)
      or the
      Company’s transfer agent of a Note for conversion, a Warrant for exercise, a
      restricted stock certificate or a lost securities affidavit if any of such
      securities are lost, as the case may be, deliver to such Purchaser a certificate
      representing Underlying Shares that is free from all restrictive and other
      legends (the “Deadline”).
      The
      Company may not make any notation on its records or give instructions to any
      transfer agent of the Company that enlarge the restrictions on transfer set
      forth in this Section.

     

    7.4  Underlying
      Share Delivery Damages.
      In the
      event that a non-legended certificate for Underlying Shares is not received
      by a
      Purchaser by the Deadline, as partial compensation to the Purchaser for such
      loss as a result of such delivery delay, the Company shall pay (as liquidated
      damages and not a penalty) to the Purchaser for late issuance of the Underlying
      Shares an amount of $100 per business day after the Deadline for each $100,000
      of principal amount of the Note being converted, and/or or $100,000 of market
      value (based upon the closing stock price of the Company on the Delivery Date)
      of Underlying Shares of the Warrant being exercised for as the case may be,
      which are not timely delivered. The liquidated damages in this Section 7.4
      are
      in addition to any shall not limit any other penalty provisions in the
      Transaction Documents and shall not limit a Purchasers right to collect other
      damages and/or remedies.

     

    7.5  Integration.
      The
      Company shall not sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of any of the Securities
      in
      a manner that would require the registration under the Securities Act of the
      sale of the Securities to the Purchasers.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    7.6  Use
      of
      Proceeds.
      The
      Company covenants and agrees that all of the net proceeds that it receives
      from
      the sale of the Notes and Warrants pursuant to this Agreement, shall be used
      as
      provided in Schedule
      7.6
      hereof.

     

    7.7  Form
      D
      and Blue Sky.
      The
      Company shall file a Form D with respect to the Securities as required under
      Regulation D under the Securities Act and, upon written request, provide a
      copy
      thereof to each Purchaser promptly after such filing. The Company shall, on
      or
      before the Closing, take such action as the Company shall reasonably determine
      is necessary in order to obtain an exemption for or to qualify any Securities
      for sale to the Purchasers pursuant to this Agreement under applicable
      securities or “Blue Sky” laws of the states of the United States, and shall
      provide evidence of any such action so taken to the Purchaser on or prior to
      the
      Closing. The Company shall make all filings and reports relating to the offer
      and sale of the Securities required under applicable securities or “Blue Sky”
laws of the states of the United States following the Closing.

     

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

     

    7.9  Securities
      Laws Disclosure.
      The
      Company shall, by the end of the business on the fourth (4th)
      Business Day following the Closing, issue a press release or file a Current
      Report on Form 8-K, disclosing the transactions contemplated hereby and make
      such other filings and notices in the manner and time required by the
      Commission.

     

    
      	8.  	
              Conditions
                to Closing.

            

    

     

    8.1  Conditions
      of Obligations of the Purchaser.
      The
      obligation of the Purchaser to purchase and pay for the Securities is subject
      to
      the fulfillment prior to or on the Closing Date of the following conditions,
      any
      of which may be waived in whole or in part by the Purchasers:

     

    (a)  Representations,
      Warranties and Covenants.
      The
      representations and warranties of the Company under this Agreement shall be
      deemed to have been made again on the Closing Date (other than those
      representations and warranties made expressly as of a date prior to the Closing
      Date) and shall then be true and correct. The Company shall represent to the
      Purchaser that all of the information contained herein does not contain any
      untrue statement of a material fact, or contain any omission of a material
      fact
      relating to such information that is necessary in order to make the information,
      in light of the circumstances under which the information is provided, not
      misleading.

     

    (b)  Compliance
      with Agreement.
      The
      Company shall have performed and complied with all covenants, agreements and
      conditions required by this Agreement to be performed or complied with by the
      Company on or before the Closing Date.

     

    (c)  Approvals.
      The
      Company shall have obtained any and all consents, waivers, approvals or
      authorizations, with or by any Governmental Body or any other Person required
      for the valid execution of this Agreement and the transactions contemplated
      hereby.

     

    (d)  No
      Injunction.
      No
      Governmental Body or any other Person shall have issued an Order which shall
      then be in effect restraining or prohibiting the completion of the transactions
      contemplated hereby, nor shall any such Order be threatened or
      pending.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (e)  No
      Material Adverse Change.
      Since
      September 30, 2006, there shall not have been a Material Adverse Change except
      as disclosed in the SEC Reports.

     

    (f)  Certificate
      of Officer.
      The
      Company shall have delivered to the Purchaser a certificate dated the Closing
      Date, executed by its Chief Executive Officer and Chief Financial Officer,
      certifying the satisfaction of the conditions specified in paragraphs (a),
      (b),
      (c), (d) and (e) of this Section
      8.1.

     

    (g)  Opinion
      of the Company’s Counsel.
      The
      Purchasers shall have received from Company counsel, in a form satisfactory
      to
      Purchasers and their counsel, an opinion dated the Closing Date (the
“Legal
      Opinion”).

     

    (h)  Certificate
      of Incorporation and By-Laws.
      The
      Certificate of Incorporation, as amended, and the By-Laws, shall be in full
      force and effect as of the Closing under the laws of the State of Delaware
      and
      shall not have been further amended or modified. A certified copy of the
      Certificate of Incorporation, as so amended, shall have been delivered to
      counsel for the Purchasers.

     

    (i)  Closing
      Documents Provided By Company.
      The
      Purchaser shall have received the following:

     

    (i)  a
      Note in
      favor of the Purchaser, duly executed by the Company, in the form and on the
      terms contained in Schedule
      1.1
      herein;

     

    (ii)  a
      Warrant
      in the name of the Purchaser, duly executed by the Company, in the form and
      on
      the terms contained in Schedule
      1.1
      herein;

     

    (iii)  the
      Registration Rights Agreement duly executed by the Company;

     

    (iv)  this
      Agreement duly executed by the Company;

     

    (v)  Secretary’s
      Certificate in a form reasonably acceptable to Purchaser, with good standing
      certificates of the Company and each Subsidiary as of a recent
      date;

     

    (vi)  Legal
      Opinion;

     

    (vii)  Executed
      10b-5 Letters from each executive Officer and Director of the
      Company;

     

    (viii)  Such
      other documents as Purchasers and/or its legal counsel may request and/or deem
      necessary (including, but not limited to, a Good Standing Certificate of recent
      date from the Secretary of State of the State of incorporation).

     

    8.2  Conditions
      of Company’s Obligations.
      The
      Company’s obligation to issue and sell the Securities to the Purchasers on the
      Closing Date is subject to the fulfillment prior to or on the Closing Date
      of
      the following conditions, any of which may be waived in whole or in part by
      the
      Company:

     

    (a)  Representations
      and Warranties.
      The
      representations and warranties of the Purchaser under this Agreement shall
      be
      deemed to have been made again on the Closing Date and shall then be true and
      correct in all material respects.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (b)  Compliance
      with Agreement.
      The
      Purchasers shall have performed and complied with all agreements and conditions
      required by this Agreement to be performed or complied with by such Purchaser
      on
      or before the Closing.

     

    (c)  Approvals.
      The
      Purchaser shall have obtained any and all consents, waivers, approvals, Permits
      or authorizations, with or by any Governmental Body or any other Person required
      for the valid execution of this Agreement and the transactions contemplated
      hereby including, but not limited to the approval by.

     

    (d)  Payment
      of Purchase Price.
      The
      Purchaser shall have delivered to the Company the Purchase Price specified
      in
Section
      2.1
      hereof
      (less commissions and all fees and expenses of Purchaser counsel).

     

    (e)  No
      Injunction.
      No
      Governmental Body or any other Person shall have issued an Order which shall
      then be in effect restraining or prohibiting the completion of the transactions
      contemplated hereby including, but not limited to, the, Acquisition nor shall
      any such Order be threatened or pending.

     

    (f)  Closing
      Documents Provided By Purchaser.
      The
      Company shall have received the following:

     

    (i)  this
      Agreement duly executed by the Purchaser; and

     

    (ii)  the
      Registration Rights Agreement duly executed by the Purchaser; and

     

    (iii)  the
      Subscription Agreement executed by the Members.

     

    8.3  Post
      Closing Obligations.
      Following the Closing Date:

     

    (i)  the
      Company shall file all necessary documents in accordance with their obligations
      under the Security Agreement;

     

    (ii)  Purchaser
      Counsel shall file all post closing Blue Sky filings in the necessary
      jurisdictions.

     

    
      	9.  	
              Miscellaneous.

            

    

     

    9.1  Certain
      Definitions.

     

    “Action”
shall
      have the meaning ascribed to such term in Section
      4.20.

     

    “Affiliate”
of
      any
      Person means any Person that directly or indirectly controls, or is under
      control with, or is controlled by, such Person. As used in this definition,
      “control”
      (including with its correlative meanings, “controlled
      by”
and
      “under
      control with”)
      shall
      mean the possession, directly or indirectly, of the power to direct or cause
      the
      direction of the management or policies of a Person (whether through ownership
      of securities or partnership or other ownership interests, by contract or
      otherwise).

     

    “A
      Shares”
shall
      have the meaning ascribed to such term in Section
      1.2
      of this
      Agreement.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

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

     

    “Closing”
means
      the closing of the purchase and sale of the Notes and the Warrants pursuant
      to
Section
      3.1
      on
      February __, 2007, or such other date as mutually agreed to by the
      parties.

     

    “Closing
      Date”
means
      the date of the Closing.

     

    “Code”
means
      the Internal Revenue Code of 1986, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the shares of common stock, par value $0.01 per share, of the
      Company.

     

    “Company
      Counsel”
means
      Reed Smith LLP.

     

    “Contract”
means
      any contract, agreement, indenture, note, bond, loan, instrument, lease,
      conditional sales contract, mortgage, license, franchise, insurance policy,
      commitment or other arrangement or agreement, whether written or
      oral.

     

    “Conversion
      Shares”
means
      all shares of Common Stock issuable upon conversion of the Notes.

     

    “Employee”
means
      any current employee, office consultant, agent, officer or director of the
      Company.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “Exhibits”
shall
      mean the following exhibits attached hereto and made a part of this
      Agreement:

     

    Exhibit
      A—
      Registration Rights Agreement 

    Exhibit
      B—
Form
      of
      Warrant 

    Exhibit
      C—
Form
      of
      Note

     

    “Governmental
      Body”
means
      any government or governmental or regulatory body thereof, or political
      subdivision thereof, whether federal, state, local or foreign, or any agency,
      instrumentality or authority thereof, or any court or arbitrator (public or
      private).

     

    “Laidlaw”
shall
      have the meaning ascribed to such term in Section
      6.6
      of this
      Agreement.

     

    “Laidlaw
      Warrant”
shall
      have the meaning ascribed to such term in Section
      6.6
      of this
      Agreement.

     

    “Law”
means
      any federal, state, local or foreign law (including law), statute, code,
      ordinance, rule, regulation or other requirement or guideline.

     

    “Legal
      Proceeding”
means
      any judicial, administrative or arbitral actions, suits, proceedings (public
      or
      private), claims or governmental proceedings.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    “Lien”
means
      any mortgage, pledge, security interest, encumbrance, lien or charge of any
      kind, including, without limitation, any conditional sale or other title
      retention agreement, any lease in the nature thereof and the filing of or
      agreement to give any financing statement under the Uniform Commercial Code
      (or
      similar laws) of any jurisdiction and including any lien or charge arising
      by
      statute or other law.

     

    “Material
      Adverse Change”
means
      any material adverse change in the business, assets, liabilities, prospects,
      properties, results of operations or condition (financial or otherwise) of
      the
      Company and its Subsidiaries, taken as a whole.

     

    “Material
      Adverse Effect”
means
      any event, circumstance, condition, fact, effect, or other matter which has
      had
      or could reasonably be expected to have a material adverse effect (i) on the
      business, assets, liabilities, prospects, properties, results of operations
      or
      condition (financial or otherwise) of the Company and its Subsidiaries taken
      as
      a whole or (ii) on the ability of the Company or its Subsidiaries to perform
      on
      a timely basis any material obligation under this Agreement or to consummate
      the
      transactions contemplated hereby.

     

    “Notes”
shall
      have the meaning ascribed to such term in Section
      1.1.

     

    “Option”
shall
      have the meaning ascribed to such term in Section
      1.2
      of this
      Agreement.

     

    “Order”
means
      any order, injunction, judgment, decree, ruling, writ, assessment or arbitration
      award.

     

    “Permits”
means
      any approvals, authorizations, consents, licenses, permits or certificates
      by or
      of any Governmental Body.

     

    “Person”
means
      any individual, corporation, partnership, firm, joint venture, association,
      joint-stock company, trust, unincorporated organization, Governmental Body
      or
      other entity.

     

    “Registration Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering, among other items, the resale by the Purchaser
      of
      the Underlying Shares.

     

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

     

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

     

    “SEC
      Reports”
shall
      have the meaning ascribed to such term in Section
      4.9.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, or any similar federal statute, and
      the
      rules and regulations of the Securities and Exchange Commission thereunder,
      all
      as the same shall be in effect at the time.

     

    “Subsidiary”
shall
      have the meaning ascribed to such term in Section
      4.4.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    “Taxes”
means
      any federal, state, local or foreign income, gross receipts, license, payroll,
      employment, excise, severance, stamp, occupation, premium, windfall profits,
      environmental (including taxes under Section 59A of the Code), customs duties,
      share capital, franchise, profits, withholding, social security (or similar),
      unemployment, disability, real property, personal property, sales, use,
      transfer, registration, value-added, alternative or add-on minimum, estimated,
      or other tax of any kind whatsoever, including any interest, penalty, or
      addition thereto, whether disputed or not.

     

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

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the OTC Bulletin Board, the American Stock
      Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq
      SmallCap Market.

     

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

     

    “Warrants”
shall
      have the meaning ascribed to such term in Section
      1.1.

     

    9.2  Further
      Assurances.
      The
      Company and the Purchasers agree to execute and deliver such other documents
      or
      agreements as may be necessary or desirable for the implementation of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    9.3  Entire
      Agreement; Amendments and Waivers.
      This
      Agreement (including the schedules and exhibits hereto) represents the entire
      understanding and agreement among the parties hereto with respect to the subject
      matter hereof and can be amended, supplemented or changed, and any provision
      hereof can be waived, only by written instrument making specific reference
      to
      this Agreement signed by the parties hereto. No action taken pursuant to this
      Agreement, including without limitation, any investigation by or on behalf
      of
      any party, shall be deemed to constitute a waiver by the party taking such
      action of compliance with any representation, warranty, covenant or agreement
      contained herein. The waiver by any party hereto of a breach of any provision
      of
      this Agreement shall not operate or be construed as a further or continuing
      waiver of such breach or as a waiver of any other or subsequent breach. No
      failure on the part of any party to exercise, and no delay in exercising, any
      right, power or remedy hereunder shall operate as a waiver thereof, nor shall
      any single or partial exercise of such right, power or remedy by such party
      preclude any other or further exercise thereof or the exercise of any other
      right, power or remedy. All remedies hereunder are cumulative and are not
      exclusive of any other remedies provided by law.

     

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

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    9.5  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of each Purchaser. Any Purchaser, however, may assign any or all of
      its
      Securities and/or rights under any of the Transaction Documents to any Person,
      provided (i) such transferee agrees in writing to be bound, with respect to
      the
      transferred Securities and otherwise, by the provisions hereof that apply to
      the
“Purchasers” and (ii) the transfer or assignment does not violate federal
      securities laws.

     

    9.6  No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    9.7  Governing
      Law.
      This
      Agreement shall be governed by and construed exclusively in accordance with
      the
      internal laws of the State of New York without regard to the conflicts of laws
      principles thereof. The parties hereto hereby irrevocably agree that any suit
      or
      proceeding arising directly and/or indirectly pursuant to or under this
      Agreement, shall be brought solely in a federal or state court located in the
      City, County and State of New York. By its execution hereof, the parties hereby
      covenant and irrevocably submit to the in personam
      jurisdiction of the federal and state courts located in the City, County and
      State of New York and agree that any process in any such action may be served
      upon any of them personally, or by certified mail or registered mail upon them
      or their agent, return receipt requested, with the same full force and effect
      as
      if personally served upon them in New York City. The parties hereto waive any
      claim that any such jurisdiction is not a convenient forum for any such suit
      or
      proceeding and any defense or lack of in personam
      jurisdiction with respect thereto. In the event of any such action or
      proceeding, the party prevailing therein shall be entitled to payment from
      the
      other party hereto of all of its reasonable legal fees and
      expenses.

     

    9.8  Headings;
      Interpretive Matters.
      The
      section headings of this Agreement are for reference purposes only and are
      to be
      given no effect in the construction or interpretation of this Agreement. No
      provision of this Agreement will be interpreted in favor of, or against, any
      of
      the parties hereto by reason of the extent to which any such party or its
      counsel participated in the drafting thereof or by reason of the extent to
      which
      any such provision is inconsistent with any prior draft hereof or
      thereof.

     

    9.9  Confidentiality.
      Each
      party hereto covenants and agrees to treat any non-public information provided
      to it by the Company concerning the business and finances of the Company
      (“Corporate
      Information”)
      as
      confidential and agrees further that it will not use, exploit, reproduce,
      disclose or provide Corporate Information to any third-party (other than any
      agents of the parties who are bound by substantially similar obligations of
      confidentiality) on its own behalf or otherwise, except with the consent of
      the
      Company or as required by law, legal process or any federal or state regulatory
      body having jurisdiction over such party. The provisions of this Section
      9.9
      shall
      not apply to any information which:

     

    (a)  was
      within the public domain prior to the time of disclosure of Corporate
      Information to the receiving party or which comes into the public domain other
      than as a result of a breach by the party of this Section
      9.9;

     

    (b)  was
      rightfully acquired by the receiving party from a third party without, to the
      knowledge of the receiving party, any restriction or any obligation of
      confidentiality; or

     

    (c)  was
      independently developed by the receiving party without any use or reference
      to
      the Corporate Information.

     

    The
      provisions of this Section
      9.9
      shall
      survive the termination of this Agreement, either in whole or as to any party,
      for a period of two (2) years.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    9.10  Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on (a) the next Business Day, if sent by U.S. nationally recognized overnight
      courier service, or (b) upon actual receipt by the party to whom such notice
      is
      required to be given. The address for such notices and communications to the
      Company shall be as set forth below and for each Purchaser shall be as set
      forth
      on the signature pages attached hereto.

     

    If
      to the
      Company:

     

    Wherify
      Wireless, Inc.

    2000
      Bridge Parkway (Suite 201) 

    Redwood
      Shores, California 94065 

    Attention:
      Timothy J. Neher, CEO 

    Telephone:
      605-551-5210

     

    If
      to the
      Purchaser:

     

    GPS
      Associates, LLC

    90
      Park
      Avenue, 31st Floor 

    New
      York,
      NY 10016 

    Attention:
      Ted Fowler 

    Telephone:
      212-697-5200

     

    All
      notices are effective upon receipt or upon refusal if properly
      delivered.

     

    9.11  Severability.
      If any
      provision of this Agreement is invalid or unenforceable, the balance of this
      Agreement shall remain in effect.

     

    9.12  Binding
      Effect; Assignment.
      This
      Agreement shall be binding upon and insure to the benefit of the parties and
      their respective successors and permitted assigns. No assignment of this
      Agreement or of any rights or obligations hereunder may be made by the Company
      or the Purchasers (by operation of law or otherwise) without the prior written
      consent of the other parties hereto and any attempted assignment without the
      required consents shall be void.

     

    9.13  Counterparts.
      This
      Agreement may be executed simultaneously in two or more counterparts, each
      of
      which shall be deemed an original but all of which together shall constitute
      one
      and the same instrument.

     

    [The
      remainder of this page has been intentionally left blank]

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

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

     

    WHERIFY
      WIRELESS, INC.

     

    

     

    By:
      ____________________________________ 

    Name:
      Timothy
      J. Neher 

    Title:
      Chief
      Executive Officer

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    PURCHASER’S
      SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

     

     

                                                                            
      

    By:                                                                                         
       
      

    Name:
      

    Title:

     

                                                                             

    Address

     

    

     

                                                                             

    Facsimile
      Number

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    Schedule
      1.1

     

    Purchaser

     

    
      	
              NAME
                AND ADDRESS

              OF
                EACH PURCHASER

            	
              PRINCIPAL
                NOTE AMOUNT
                PURCHASED

            	
              WARRANTS 

              TO
                BE RECEIVED

            
	
              GPS
                Associates LLC

            	
              $1,200,000

            	
              3,000,000

            

    

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    Schedule
      1.2

     

    Terms
      of the
      Series A Convertible Preferred Stock

     

    
      	
              Issuer:

            	
              Wherify
                Wireless, Inc. (the “Company”)

            
	 	 
	
              Designation:

            	
              Series
                A Convertible Preferred Stock (the “Preferred
                Stock”).

            
	 	 
	
              Stated
                Value per Share:

            	
              $1000

            
	 	 
	
              Dividend
                Rate:

            	
              10%
                per annum, payable quarterly in arrears, at the option of the Company
                either in cash, the issuance of additional Preferred Stock or a
                combination of cash and additional Preferred Stock.

            
	 	 
	
              Maturity:

            	
              None.

            
	 	 
	
              Conversion:

            	
              Optional
                Conversion.
                Subject to the several adjustment and other provisions set forth
                herein,
                the Preferred Stock is convertible at any time in whole or in part
                at the
                option of GPS into the Common Stock of the Company (the “Conversion
                Shares”)
                at a conversion price (the “Optional
                Conversion Price”)
                equal to $0.125 per share.

              Mandatory
                Conversion.
                Holders of the Preferred Stock must convert the Preferred Stock in
                the
                case of the following events:

               

              i.  An
                underwritten secondary public offering resulting in proceeds to Wherify
                of
                no less than $20 million (a “Qualifying
                Secondary”)
                and the Conversion Shares are registered for resale and free to trade
                not
                later than 180 days following the Qualifying Secondary closing
                date.

               

              ii.  the
                common stock of the Company has for 20 consecutive trading days (i)
                closed
                at a price equal to not less than 250% of the applicable Optional
                Conversion Price, (ii) averaged (a) not less than 300,000 shares
                per day
                in volume or (b) a market value of not less than $500,000 in trading
                per
                day and (iii) there is an effective resale registration statement
                in
                respect of the underlying conversion shares relating thereto.

               

              iii.  Upon
                a Change of Control (defined below). Adjustment of the
                Optional

            

    

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

      
        	
                Conversion
                  Price:

              	
                The
                  Optional Conversion Price is subject to adjustment in the following
                  circumstances:

                 

                1.  Ratably
                  for all stock splits, stock dividends, reclassifications, or similar
                  events.

                 

                2.  If,
                  prior to an event triggering Mandatory Conversion, the Company
                  shall issue
                  Common Stock (or securities exchangeable, exercisable or convertible
                  into
                  Common Stock), other than in connection with acquisitions or employee
                  stock options approved by the Board of Directors of the Company
                  at a price
                  below the applicable Optional Conversion Price (a “Dilutive
                  Issuance”),
                  the Optional Conversion Price shall be adjusted on a weighted average
                  dilution calculation basis.

              
	 	 
	
                Liquidation
                  Preference:

              	
                In
                  the event that the Company shall file for bankruptcy, cease or
                  unwind its
                  business or otherwise be liquidated for the benefit of its creditors
                  or
                  otherwise, holders of the Preferred Stock shall, before holders
                  of the
                  Common Stock (or any other securities of the Company junior in
                  right of
                  payment to the Preferred Stock) receive any consideration from
                  such
                  liquidation, be entitled to receive an amount equal to 125% of
                  the sum of
                  (i) the principal amount of all the Preferred Stock then outstanding
                  and
                  (ii) all accrued and unpaid dividends thereon (the “Liquidation
                  Preference Amount”).

              
	 	 
	
                Change
                  of Control:

              	
                In
                  the event that, prior to a Qualifying Secondary, there shall be
                  a change
                  in control transaction (which shall for the purposes hereof include
                  a sale
                  of substantially all the assets of the Company), holders of the
                  Preferred
                  Stock shall be entitled to receive:

                 

                1.  before
                  holders of the Common Stock receive any consideration from the
                  consideration resulting therefrom, the Liquidation Preference Amount;
                  plus

                 

                2.  that
                  amount owed on the Conversion Shares as a result of the Preferred
                  Stock
                  being converted into Common
                  Stock.

              

      

    

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    

      
        	
                Covenants
                  and Rights:

              	
                The
                  Preferred Stock shall have the following covenants and
                  rights:

                 

                1.  Voting
                  Rights:
                  On an as converted basis, one vote per Conversion Share.

                 

                2.  Covenants:
                  For so long as at least 25% of the Preferred Stock shall remain
                  outstanding, unless GPS delivers its express written consent, the
                  Company
                  will not:

                 

                a.  Pay
                  dividends to the holders of its common stock without paying, in
                  addition
                  to the Preferred Stock Dividend, the amount which the Preferred
                  Stock
                  holders would have received had the subject Preferred Stock been
                  converted
                  at the Optional Conversion Price.

                 

                b.  Issue
                  any additional preferred stock which ranks senior to the Preferred
                  Stock.

              

      

    

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    Schedule
      4.1(b)

     

    Outstanding
      Options/Warrants/Etc.

     

    Employee
      Stock Option Plans

     

    2004
      Stock Plan

     

    Wherify’s
      Board administers the 2004 Stock Plan (“2004
      Plan”),
      which
      was adopted by the Stockholders effective July 21, 2005, as amended. The company
      has registered 10 million shares under the 2004 Plan, the maximum aggregate
      number of shares allowed for issuance under the plan. The 2004 Plan provides
      for
      the grant of incentive stock options, non-statutory stock options, restricted
      stock, and other stock based awards as determined by the administrator to be
      appropriate to employees, directors (including employee directors) and
      consultants. The administrator is authorized to determine the terms of each
      option granted under the plan, including the number of shares, exercise price,
      term and exercisability. The exercise price of incentive stock options may
      not
      be less than 100% of the fair market value of the Common Stock as of the date
      of
      grant (110% of the fair market value in the case of an optionee who owns more
      than 10% of the total combined voting power of all classes of the Company’s
      capital stock). Options may not be exercised more than ten years after the
      date
      of grant (five years in the case of 10% Stockholders). Upon termination of
      employment for any reason other than death or disability, each option may be
      exercised for a period of 90 days, to the extent it is exercisable on the date
      of termination unless otherwise provided in the award agreement. In the case
      of
      a termination due to death or disability, an option will remain exercisable
      for
      a period of one year, to the extent it is exercisable on the date of
      termination. Up to an aggregate of approximately 8 million shares of Common
      Stock are currently authorized for issuance under the 2004 Plan. As of September
      18, 2006, there were 2,060,095 options granted and outstanding under the 2004
      Plan of which 345,976 are vested.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    2001
      Stock Plan

     

    Wherify’s
      Board administers the 2001 Stock Plan (“2001 Plan”), which was adopted by the
      Stockholders effective July 26, 2001. The 2001 Plan provides for the grant
      of
      incentive stock options, non-statutory stock options and restricted stock to
      employees, directors (including employee directors) and consultants. The
      administrator is authorized to determine the terms of each option granted under
      the plan, including the number of shares, exercise price, term and
      exercisability. The Board has authorized up to an aggregate of 2,000,000 shares
      of Common Stock for issuance under the 2001 Plan. As of September 18, 2006,
      there were 325,000 options granted and outstanding under the 2001 Plan of which
      318,403 are vested. No additional options may be granted under this
      plan.

     

    1999
      Stock Option Plan

     

    Wherify’s
      Board administers the 1999 Stock Option Plan, as amended and restated (“1999
      Plan”), which was originally approved on June 1, 1999 by Wherify California,
      Inc. (a California corporation) and subsequently amended and restated and
      assumed by Wherify pursuant to an Agreement and Plan of Merger dated April
      14,
      2004. The 1999 Plan provides for the grant of incentive stock options and
      non-statutory stock options to employees, directors (including employee
      directors) and consultants. The administrator is authorized to determine the
      terms of each option granted under the plan, including the number of shares,
      exercise price, term and exercisability. On July 21, 2005, the date that Wherify
      completed the merger of Wherify Acquisition, Inc. (a wholly-owned subsidiary
      of
      Wherify) and Wherify California, Inc. (a California corporation), the number
      of
      shares underlying options granted under Wherify California, Inc.’s (a California
      corporation) amended and restated 1999 Plan were assumed by Wherify and
      multiplied by the 4.8021 merger exchange ratio and existing vesting schedules
      were maintained. As a result on July 25, 2005, upon application of the merger
      exchange ratio, there was a total of 3,977,731 options outstanding under the
      1999 Plan. As of September 18, 2006, there were 3,279,845 options granted and
      outstanding under the 1999 Plan of which 2,543,402 are vested. No additional
      options may be granted under this plan.

     

    Common
      Stock Purchase Warrants

     

    As
      of
      January 12, 2007, Wherify had warrants outstanding exercisable for approximately
      22.6 million shares of Wherify common stock. A summary of the warrants is as
      follows:

     

    *
      A
      warrant to purchase 14,843 shares at $.80 per share. This warrant carries a
      cashless exercise provision and expires on December 30, 2008;

     

    *
      Warrants to purchase 27,379 shares at $2.00 per share. These warrants carry
      a
      cashless exercise provision and expire on various dates between July 2008 and
      August, 2009;

     

    warrants
      to purchase 163,750 shares at $2.00 per share expiring January 11, 2010. These
      warrants carry a cashless exercise provision. In addition, in the event that
      the
      per share closing bid price of Wherify common stock equals or exceeds 200%
      of
      the warrant exercise price for a period of 20 consecutive trading days,
      following the effectiveness of this registration statement, Wherify may elect
      to
      redeem the warrants at a redemption price of $0.01 per share on 30 days written
      notice (the “Notice Period”); provided, however, that (i) Wherify simultaneously
      calls all warrants issued in on January 11, 2005 on the same terms, and (ii)
      all
      of the Wherify common stock issuable under the warrants are either registered
      pursuant to an effective registration statement, which has not been suspended
      and for which no stop order is in effect, and pursuant to which the warrant
      holder is able to sell the warrant shares at all times during the Notice Period;
      and

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    *
      Warrants to purchase 757,053 shares at $2.60 per share (post-adjustment)
      expiring January 11, 2010. These warrants carry a cashless exercise provision.
      In addition, in the event that the per share closing bid price of Wherify common
      stock equals or exceeds 200% of the warrant exercise price for a period of
      20
      consecutive trading days, following the effectiveness of this registration
      statement, Wherify may elect to redeem the warrants at a redemption price of
      $0.01 per share on 30 days written notice (the “Notice Period”); provided,
      however, that (i) Wherify simultaneously calls all warrants issued in on January
      11, 2005 on the same terms, and (ii) all of the Wherify common stock issuable
      under the warrants are either registered pursuant to an effective registration
      statement, which has not been suspended and for which no stop order is in
      effect, and pursuant to which the warrant holder is able to sell the warrant
      shares at all times during the Notice Period. The exercise price and the number
      of shares of common stock issuable upon exercise of the foregoing warrants
      are
      subject to adjustment in certain circumstances, including stock splits, stock
      dividends, or subdivisions, combinations or recapitalizations of Wherify’s
      common stock. In addition, the warrant price and the number of shares covered
      by
      the warrants exercisable at $2.70 per share (as originally issued) are subject
      to adjustment on a weighted-average basis in the event that Wherify issues
      or is
      deemed to issue shares of its common stock at a price per share which is less
      than the then-current warrant exercise price. Such exercise price was adjusted
      as a result of pricing our direct offering on August 8, 2006, to $0.25 per
      share, (see Note 19—Subsequent Event);

     

    *
      Warrants to purchase 16,294 shares at $3.00 per share. These warrants carry
      a
      cashless exercise provision and expire January 31, 2010;

     

    *
      A
      warrant to purchase 12,800 shares at $5.00 per share. This warrant carries
      a
      cashless exercise provision and expires on September 13, 2008;

     

    *
      Warrants to purchase 11,250,000 shares at an exercise price of $0.25 per share
      expiring March 10, 2011. The exercise price is subject to adjustment as the
      result of any subdivision, stock split and combination of shares or
      recapitalization or if Wherify sells any common stock or rights to acquire
      common stock at a purchase price less than the exercise price of the warrants.
      Such exercise price and number of warrants was adjusted as a result of pricing
      our direct offering on August 8, 2006. These warrants carry a cashless exercise
      option; and

     

    *
      Warrants to purchase 10,000,000 shares at an exercise price of $0.25 per share
      expiring March 14, 2011. The exercise price is subject to adjustment as the
      result of any subdivision, stock split and combination of shares or
      recapitalization or if Wherify sells any common stock or rights to acquire
      common stock at a purchase price less than the exercise price of the warrants.
      Such exercise price and number of warrants was adjusted as a result of pricing
      our direct offering on August 8, 2006, (see Note 19—Subsequent Event). These
      warrants carry a cashless exercise option.

     

    Upon
      exercise, the warrant holders shall participate on the same basis as the holders
      of common stock in connection with the transaction. The warrants do not confer
      upon the holder any voting or any other rights of a stockholder of
      Wherify.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    Schedule
      4.7

     

    Capitalization
      of the Company

     

    Capital
      Stock

     

    Wherify’s
      authorized capital stock consists of 200,000,000 shares of common stock, $.01
      par value per share and 10,000,000 shares of undesignated preferred stock,
      $.01
      par value per share.

     

    Common
      Stock

     

    The
      authorized common stock of Wherify consists of 200,000,000 shares, par value
      $0.01 per share. Approximately 72.4 million shares of common stock are issued
      and outstanding as of January 12, 2007.

     

    All
      of
      the shares of common stock are validly issued, fully paid and non-assessable.
      Holders of record of common stock will be entitled to receive dividends when
      and
      if declared by the board of directors out of funds of Wherify legally available
      therefore. In the event of any liquidation, dissolution or winding up of the
      affairs of Wherify, whether voluntary or otherwise, after payment of provision
      for payment of the debts and other liabilities of Wherify, including the
      liquidation preference of all classes of preferred stock of Wherify, each holder
      of common stock will be entitled to receive his pro rata portion of the
      remaining net assets of Wherify, if any. Each share of common stock has one
      vote, and there are no preemptive, subscription, conversion or redemption
      rights. Shares of common stock do not have a cumulative voting right, which
      means that the holders of a majority of the shares voting for the election
      of
      directors can elect all of the directors.

     

    Preferred
      Stock

     

    Wherify’s
      certificate of incorporation authorizes the issuance of up to 10,000,000 shares
      of Wherify’s $0.01 par value preferred stock. As of January 12, 2007 no shares
      of preferred stock were outstanding. The preferred stock constitutes what is
      commonly referred to as “blank check” preferred stock. “Blank check” preferred
      stock allows the board of directors, from time to time, to divide the preferred
      stock into series, to designate each series, to issue shares of any series,
      and
      to fix and determine separately for each series any one or more of the following
      relative rights and preferences: i) the rate of dividends; (ii) the price at
      and
      the terms and conditions on which shares may be redeemed; (iii) the amount
      payable upon shares in the event of involuntary liquidation; (iv) the amount
      payable upon shares in the event of voluntary liquidation; (v) sinking fund
      provisions for the redemption or purchase of shares; (vi) the terms and
      conditions pursuant to which shares may be converted if the shares of any series
      are issued with the privilege of conversion; and (vii) voting rights. Holders
      of
      preferred stock are entitled to receive dividends when and as declared by the
      board of directors out of any funds legally available therefore, may be
      cumulative and may have a preference over common stock as to the payment of
      such
      dividends. The provisions of a particular series, as designated by the board
      of
      directors, may include restrictions on the ability of Wherify to purchase shares
      of common stock or to redeem a particular series of preferred stock. Depending
      upon the voting rights granted to any series of preferred stock, issuance
      thereof could result in a reduction in the power of the holders of common stock.
      In the event of any dissolution, liquidation or winding up of Wherify, whether
      voluntary or involuntary, the holders of each series of the then outstanding
      preferred stock may be entitled to receive, prior to the distribution of any
      assets or funds to the holders of the common stock, a liquidation preference
      established by the board of directors, together with all accumulated and unpaid
      dividends. Depending upon the consideration paid for preferred stock, the
      liquidation preference of preferred stock and other matters, the issuance of
      preferred stock could result in a reduction in the assets available for
      distribution to the holders of the common stock in the event of liquidation
      of
      Wherify. Holders of preferred stock will not have preemptive rights to acquire
      any additional securities issued by Wherify. Once a series has been designated
      and shares of the series are outstanding, the rights of holders of that series
      may not be modified adversely except by a vote of at least a majority of the
      outstanding shares constituting such series. One of the effects of the existence
      of authorized but unissued shares of common stock or preferred stock may be
      to
      enable the board of directors of Wherify to render it more difficult or to
      discourage an attempt to obtain control of Wherify by means of a merger, tender
      offer at a control premium price, proxy contest or otherwise and thereby protect
      the continuity of or entrench Wherify’s management, which concomitantly may have
      a potentially adverse effect on the market price of the common stock. If in
      the
      due exercise of its fiduciary obligations, for example, the board of directors
      were to determine that a takeover proposal were not in the best interests of
      Wherify, such shares could be issued by the board of directors without
      stockholder approval in one or more private placements or other transactions
      that might prevent or render more difficult or make more costly the completion
      of any attempted takeover transaction by diluting voting or other rights of
      the
      proposed acquirer or insurgent stockholder group, by creating a substantial
      voting block in institutional or other hands that might support the position
      of
      the incumbent board of directors, by effecting an acquisition that might
      complicate or preclude the takeover, or otherwise.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    
      	
              Wherify
                Wireless, Inc

              Capitalization
                Table

            	
              As
                of January 12, 2007

            
	 	
              Authorized
                Number of Shares

            	
              Outstanding
                Number of Shares

            	
              Percent
                of 

              Total
                Common Shares

            
	 	 	 	
              Outstanding

            	
              Authorized

            
	
              PREFERRED
                SHARES AUTHORIZED

            	
              10,000,000

            	 	 	 
	
              PREFERRED
                SHARES ISSUED AND OUTSTANDING

            	 	
              -
                

            	 	 
	
              COMMON
                SHARES AUTHORIZED

            	
              200,000,000

            	 	 	 
	
              COMMON
                SHARES ISSUED AND OUTSTANDING

            	 	
              72,365,599

            	
              56%

            	
              36%

            
	
              DILUTIVE
                COMMON SHARES:

            	 	 	 	 
	
              For
                exercise of warrants

            	 	
              22,619,436

            	
              17%

            	
              11%

            
	
              For
                Cornell convertible debentures, including shares currently held in
                escrow

            	 	
              19,460,000

            	
              15%

            	
              10%

            
	
              For
                exercise of stock options (issued and outstanding)

            	 	
              5,664,940

            	
              4%

            	
              3%

            
	
              Subtotal
                for Shares Contractually Committed to Issue

            	 	
              47,744,376

            	
              37%

            	
              24%

            
	
              For
                issuance under Standby Equity Distribution Agreement (Registration
                Statement withdrawn)

            	 	
              2,200,000

            	
              2%

            	
              1%

            
	
              For
                issuance of stock options (registered and authorized but not
                issued)

            	 	
              8,000,000

            	
              6%

            	
              4%

            
	
              Subtotal
                for Shares NOT Contractually Committed to Issue

            	 	
              10,200,000

            	
              8%

            	
              5%

            
	
              TOTAL
                SHARES RESERVED FOR ISSUANCE

            	 	
              57,944,376

            	
              44%

            	
              29%

            
	
              TOTAL
                SHARES ISSUED AND RESERVED FOR ISSUANCE

            	 	
              130,309,975

            	
              100%

            	
              65%

            

    

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    Schedule
      4.11

     

    Liabilities

     

    Wherify
      Wireless, Inc

     

    Consolidated
      Balance Sheet Extract

     

    Unaudited

     

    
      	 	 	
              Sept.
                30, 2006

            	 	
              Dec.
                31, 2006

            	 
	 	 	
              ($
                millions)

            	 
	
              CURRENT
                LIABILITIES, Accounts Payable: 

            	 	 	 	 	 	
              (1

            	
              )

            
	
              Wherify
                Wireless Inc (Delaware)

            	 	 	 	 	 	 	 
	
              Allen
                Matkins

            	 	
              $

            	
              1.6

            	 	
              $

            	
              1.7

            	 
	
              Jabil

            	 	 	
              1.1

            	 	 	
              0.9

            	 
	
              Luczo
                Note Payable

            	 	 	
              2.0

            	 	 	
              2.0

            	 
	
              All
                Other

            	 	 	
              2.2

            	 	 	
              3.1

            	 
	 	 	 	
              6.9

            	 	 	
              7.7

            	 
	
              Wherify
                California Inc (California)

            	 	 	 	 	 	 	 
	
              Westport
                Joint Venture (Arillaga)

            	 	 	
              3.1

            	 	 	
              3.1

            	 
	
              Venture
                Corporation

            	 	 	
              1.6

            	 	 	
              1.6

            	 
	
              Westport
                Office Park (Harvest properties)

            	 	 	
              0.8

            	 	 	
              1.0

            	 
	
              All
                Other

            	 	 	
              1.0

            	 	 	
              1.0

            	 
	 	 	 	
              6.5

            	 	 	
              6.7

            	 
	
              Total
                Accounts Payable Liabilities

            	 	
              $

            	
              13.4

            	 	
              $

            	
              14.4

            	 

    

     

    (1)
      Dec
      31, 2006 liability amounts may differ slightly in the final Q2 Form 10-QSB
      which
      is still in process towards completion.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    Schedule
      4.14

     

    Property

     

    The
      Company does not own any property, plants or facilities.

     

    Equipment,
      including equipment used at its remote location services centers around the
      world, is stated at cost less accumulated depreciation. Depreciation is computed
      using the straight-line method over the estimated useful lives of the respective
      assets, 3 years for office and computer equipment, 3 to 5 years for test
      equipment, 7 years for furniture and fixtures, and 10 years for leasehold
      improvements. When assets are disposed of, the cost and related accumulated
      depreciation are removed from the accounts and the resulting gains and losses
      are included in other income or loss. Maintenance and repairs are charged to
      expense as incurred.

     

    As
      of
      December 31, 2006 the Company recorded gross equipment of approximately
      $1,964,000 against which accumulated depreciation has been charged of
      approximately $1,436,000, resulting in net equipment of approximately
      $528,000.

     

    
      
        
           

          
          

        

        
          38

          
            

          

        

        
          
          

        

      

    

     

    Schedule
      4.17

    Material
      Contracts

     

    
      	
              Wherify
                Wireless, Inc. 

              Leases
                and Agreements:

            	
              Purpose:

            	
              Date
                signed:

            
	
              American
                Business Equipment

            	
              Toshiba
                lease and maintenance agreement

            	
              28-Mar-2006

            
	
              American
                Network Computadores LTDA

            	
              Master
                service agreement

            	
              1-Jun-2006

            
	
              D&H
                Distributing

            	
              Vendor
                purchase agreement (NOT SIGNED) 

            	
              14-Jun-2006

            
	
              Delphi
                Automotive Systems Do Brasil LTDA

            	
              Distribution
                agreement

            	
              23-Jan-2006

            
	
              Elabs

            	
              Payment
                agreement

            	
              22-Dec-2006

            
	
              Elabs

            	
              Service
                agreement

            	
              12-Oct-2005

            
	
              Entel
                PCS Telecomunicaciones S.A.

            	
              International
                supply and distribution agreement

            	
              1-Apr-2006

            
	
              Enter

            	
              Letter
                agreement

            	
              4-Oct-2005

            
	
              Interlinc

            	
              Service
                agreement

            	
              15-Nov-2005
                

            
	
              Jabil
                Circuit, Inc.

            	
              Manufacturing
                services agreement

            	
              3-Mar-2006

            
	
              Kore
                Wireless Canada Inc

            	
              Telecommunications
                services agreement

            	
              11-Oct-2005

            
	
              Laidlaw
                & Company (UK) LTD

            	
              Engagement
                agreement

            	
              2-Nov-2006

            
	
              Lance
                Steinhart

            	
              Engagement
                letter - Resold wireless & foreign corporation filings

            	
              5-Jul-2006
                

            
	
              MapCity

            	
              Web
                service agreement

            	
              2-May-2006

            
	
              Nucomm
                International

            	
              Managed
                services agreement

            	
              31-Oct-2005

            
	
              Oriant
                Australia Pty Ltd

            	
              Letter
                agreement

            	
              28-Sep-2005

            
	
              PetroCom
                LLC

            	
              Service
                agreement

            	
              26-Jan-2006

            
	
              SED
                International, Inc.

            	
              Distributor
                agreement

            	
              14-Jul-2006
                

            
	
              Siemens
                AG

            	
              Master
                purchase/reseller agreement

            	
              13-Mar-2006

            
	
              Tax
                Partners

            	
              Tax
                compliance service agreement

            	
              5-Jul-2006

            
	
              Walmart
                Stores Inc

            	
              Supplier
                agreement

            	
              29-Nov-2004

            
	
              Westport
                Joint Venture

            	
              Lease
                agreement

            	
              3-Sep-1999

            
	
              Westport
                Office Park LLC

            	
              Notification
                change of ownership Westport Business Park

            	
              18-Aug-2005

            
	
              Wilson
                Sonsini

            	
              Engagement
                letter

            	
              3-Feb-2005

            

    

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    Schedule
      4.18

     

    Employment
      Related Agreements/Benefits

     

    Employment
      contracts for the Company’s following named executives have been filed as
      Exhibits with the Company’s Forms 10-KSB and Forms 8-K, as
      appropriate:

     

    Timothy
      Neher, CEO and Director

    Gerald
      Parrick, President

    Douglas
      Hajjar, Consultant and Co-Chairman of the Board

    Mark
      E. Gitter, CFO and Treasurer 

    William
      Scigliano, President Government Services Division, Co-Chairman ,
      Secretary

     

    All
      other
      employees are hired under standard Company at will employment offers, and
      include a standard package of benefits and other compensation as defined in
      those employment offers, as appropriate to the position.

     

    Schedule
      4.19(c)

     

    Key
      Employee Agreements

     

    Employment
      contracts for the Company’s following named executives have been filed as
      Exhibits with the Company’s Forms 10-KSB and Forms 8-K, as appropriate, and are
      summarized below:

     

    Employment
      Agreement with Timothy Neher, CEO and Director

     

    In
      November 2002, Wherify California, Inc., a California corporation (“Wherify
      California”) entered into an employment agreement with Timothy Neher pursuant to
      which Mr. Neher agreed to serve as the President and Chief Executive Officer
      of
      Wherify California until November 2007 at an annual base salary of $200,000
      (as
      adjusted pursuant to the agreement). In addition, in November 2002, Wherify
      California granted Mr. Neher an option to purchase 1,200,525 shares of its
      common stock at an exercise price of $0.34 per share. In addition to the
      compensation described above, Wherify California also agreed to award Mr. Neher
      additional cash bonuses, in the event Wherify California achieved certain
      milestones as described in the employment agreement. Mr. Neher is also entitled
      to participate in any and all employee benefit plan hereafter established for
      Wherify California employees and is entitled to an automobile allowance of
      $2,000 per month. Wherify has agreed to assume this agreement from Wherify
      California.

     

    Under
      the
      terms of the employment agreement, Mr. Neher is entitled to the following
      severance benefits:

     

    If
      Mr.
      Neher’s employment is terminated other than for “Cause” (as defined in the
      agreement), or if he resigns as a result of a “Constructive Termination” then
      Mr. Neher is entitled, in exchange for a release of all claims, a lump sum
      severance payment equal to 12 months base salary, as then determined, plus
      50%
      of his prior year’s bonus, if any. Additionally, Mr. Neher will receive
      accelerated vesting with respect to 240,105 shares purchasable upon exercise
      of
      the option granted to him by Wherify California.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    Employment
      Agreement with Gerald Parrick, President

     

    In
      December 2004, Wherify California entered into an employment agreement with
      Mr.
      Parrick. Under this agreement, Mr. Parrick agreed to serve as President and
      acting VP of Sales and Marketing of Wherify California, at an annual salary
      of
      $185,000. In addition, in December 2004, Wherify California granted Mr. Parrick
      an option to purchase 480,210 shares, at an exercise price of $0.31 per share.
      One sixteenth of the shares vest after 3 months of employment, and the remainder
      vest at 1/48th per month over the following four-year period. Under the
      employment agreement, Mr. Parrick is entitled to a lump sum severance payment
      equal to four months base salary in the event he is terminated other than for
      cause, or if he terminates his employment as a result of a constructive
      termination (as defined in the agreement). Wherify has agreed to assume this
      agreement from Wherify California.

     

    Consulting
      Agreement with Douglas Hajjar, Consultant and Co-Chairman of the
      Board

     

    Effective
      January 1, 2004, Wherify California entered into a Consulting Agreement (the
      “Initial Consulting Agreement”) with Douglas Hajjar, which was subsequently
      assumed by Wherify in connection with the merger of Wherify with Wherify
      California on July 21, 2005. Under the terms of the Initial Consulting
      Agreement, Mr. Hajjar acted as a financial advisor to the Company and the
      Company paid Mr. Hajjar a consulting fee of $10,000 per month.

     

    In
      accordance with the terms of the Initial Consulting Agreement, in 2004 Wherify
      California issued to Mr. Hajjar an option to purchase 100,000 shares of Wherify
      California common stock (equivalent to approximately 481,000 shares of Wherify
      common stock) at the then fair market value. The options vest ratably on a
      monthly basis over a 36 month period commencing on the date of the agreement,
      but cease to vest upon termination of the agreement. All options granted
      pursuant to the Initial Consulting Agreement vest immediately upon a Change
      in
      Control.

     

    The
      Initial Consulting Agreement also provided that upon a Change of Control during
      the term of the agreement, or within six months thereafter, in which the
      acquiring person or entity is introduced to the company by Mr. Hajjar, the
      company would pay Mr. Hajjar an acquisition fee equal to 2% of the aggregate
      consideration paid to the company’s stockholders in such
      transaction.

     

    On
      January 13, 2006, Wherify and Mr. Hajjar entered into a new Consulting Agreement
      which supersedes and replaces the Initial Consulting Agreement entered into
      effective January 1, 2004. Under the new Consulting Agreement, Mr. Hajjar
      continues to be paid a fee of $10,000 per month for his assistance as a
      financial adviser to the Company and is entitled to reimbursement for
      out-of-pocket costs and indemnification for damages arising out of his services.
      However, he is no longer entitled to a fee in connection with a Change in
      Control transaction. The agreement is terminable by either party on 30 days’
notice.

     

    Also
      on
      January 13, 2006, Wherify entered into a letter agreement with Mr. Hajjar
      setting forth certain terms of his services as a Director and Co-Chairman.
      Under
      this agreement, Mr. Hajjar agreed to direct and coordinate the Board’s oversight
      of the business and operations of the Company and the activities and performance
      of senior management, and to assist senior management in developing strategic
      plans for the Company and with fund raising and financing activities. Pursuant
      to the agreement, on January 13, 2006 the Company granted to Mr. Hajjar an
      option to purchase 125,000 shares of common stock at an exercise price equal
      to
      the closing sales price on that date. The option vests in equal monthly
      increments over four years so long as Mr. Hajjar remains on the Board. The
      agreement further provides that for each additional year Mr. Hajjar serves
      on
      the Board he will receive an additional option for 12,500 shares of common
      stock
      with an exercise price equal to the closing sales price on the grant date and
      which vests ratably monthly over 12 months. Mr. Hajjar is also entitled under
      this agreement to a cash payment of $5,000 per month during which he serves
      on
      the Board.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    Employment
      Agreement with Mark E. Gitter, CFO and Treasurer

     

    In
      February 2006, Wherify entered into an employment agreement with Mr. Gitter.
      Under this agreement, Mr. Gitter agreed to serve as Chief Financial Officer
      of
      Wherify at an annual salary of $175,000 per year, subject to periodic review
      and
      adjustment. In addition, senior management will recommend that the Board of
      Directors grant Mr. Gitter an option to purchase up to 260,000 shares of the
      Company’s Common Stock. The option will be exercisable for a period of 10 years
      and will vest in accordance with the following schedule: (a) 25% of the total
      number of shares purchasable upon exercise of the option will vest after 12
      months of continuous employment and (b) an additional 1/48 of the option shares
      will vest at the close of each month during the remaining term of the option.
      In
      the event that Mr. Gitter is terminated by the Company without Cause or resigns
      as a result of a Constructive Termination, he is entitled to a severance payment
      equal to three months of his base salary, but only if such termination occurs
      subsequent to Mr. Gitter having received a satisfactory performance review,
      and
      health care coverage during the severance period.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

    Schedule
      4.20

     

    Litigation

     

    Legal
      Proceedings

     

    Venture
      Corporation Limited, a Singapore Corporation v. Wherify Wireless, Inc, a
      California Corporation

     

    On
      October 15, 2004, Venture Corporation Limited, a Singapore corporation
      (“Venture”), filed suit against Wherify California, in the United States
      District Court, Central District of California. The complaint sought
      approximately $5 million in damages for breach of contract, fraud and common
      counts alleging that Wherify California failed to pay certain amounts owed
      for
      the manufacture of the children’s model personal locater (“CM1”). Wherify
      California answered Venture’s complaint on November 16, 2004 and filed a
      cross-complaint alleging that Venture failed to timely deliver conforming goods.
      A mediation between the parties ended without a resolution. A court trial
      concluded on November 4, 2005, and on December 27, 2005 the District Court’s
      judgment awarding Venture approximately $1.7 million in damages (including
      costs) was entered. On January 26, 2006, a Notice of Appeal was filed with
      the
      United States Court of Appeals for the Ninth Circuit which Wherify intends
      to
      vigorously pursue. Venture has commenced collection procedures, including
      attempts to levy upon assets and accounts of not only Wherify California, but
      also its parent, Wherify. On September 25, 2006 a hearing occurred regarding
      Venture Corporation’s motion to amend its judgment to add Wherify to its
      judgment against Wherify California. Wherify believes that there are no legal
      grounds or basis for any claim or attempt to levy against Wherify or any of
      its
      assets, and intends to vigorously defend against any such claims or attempts
      to
      levy. On November 2, 2006 the court denied Venture’s motion to amend the
      judgment against Wherify California to extend the levy to include Wherify.
      It is
      management’s assessment that a potential liability against Wherify California of
      an amount up to one million seven hundred thousand dollars exists. Therefore,
      the Company has accrued an amount of one million seven hundred thousand
      dollars.

     

    Lariviere,
      et al. v. I.Q. Biometrix, Inc., a Delaware Corporation, et al.

     

    On
      August
      5, 2005, plaintiffs Sylvie Lariviere, Robert Rios, Toni Lange, Fernand Beland,
      Frederic Serre and Roland Vroye, filed their first amended complaint against
      I.Q. Biometrix, Inc., a Delaware corporation, in Fresno County Superior Court,
      State of California. Plaintiffs’ complaint alleges causes of action for breach
      of contract and fraud for a failure to issue stock options pursuant to an
      alleged oral and/or written agreement. The complaint seeks to recover damages,
      including punitive damages, and/or an award of stock options. On October 25,
      2005, Wherify demurred on behalf of itself, Greg Micek and William Scigliano
      and
      on January 4, 2005, the demurrer was sustained on several grounds. This matter
      has been set for trial on January 18, 2007. The Company’s management feels that
      a reasonable estimate for potential liability for the company is somewhere
      within a range of $0 to $500,000. Management of the Company has also determined
      that no amount within that range is a better estimate of a potential liability
      than any other amount. Therefore, no amount has been set aside for this
      contingent liability.

     

    Westport
      Office Parr LLC v. Where Wireless, Inc, a California
      Corporation

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    On
      January 5, 2007, Westport Office Park, LLC (“Westport”), filed an Entry of
      Stipulation and Agreement against Wherify Wireless, Inc, a California
      Corporation (“Wherify California”), in the Superior Court of California—San
      Mateo County. The complaint sought a judgment for possession of certain leased
      premises occupied by Wherify California as its principal offices in favor of
      Westport, approximately one million one hundred thousand dollars in then
      outstanding amounts due and owing under the terms of the lease, and certain
      other amounts deemed owed. Wherify California answered Westport’s complaint on
      January 17, 2007 by vacating from the leased premises. The Company has accrued
      an amount of approximately one million one hundred thousand dollars pending
      resolution of this matter.

     

    Management
      is not aware of any other threatened or actual legal proceedings currently
      in
      process against the Company or its subsidiaries that would have a material
      effect on the financial position of the Company.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    Schedule
      7.6

     

    Use
      of Proceeds

     

    
      	
              Use
                of Proceeds:

            	 	
              The
                following table summarizes the net proceeds contemplated to be raised
                in
                connection with the Offering:

            	 
	 	 	
              Offering
                Amount

            	 
	
              Gross
                Offering Proceeds

            	 	$	
              1,200,000

            	 	
               

            	
               

            	 
	
              Less:
                Offering Fee

            	 	 	
              (120,000

            	
              )

            
	
              Agent
                Offering Expenses

            	 	 	
              (60,000

            	
              )

            
	
              Company
                Expenses

            	 	 	
              (20,000

            	
              )

            
	
              GPS
                Net Proceeds to Wherify 

            	 	$	
              1,000,000

            	 	
               

            	
               

            	 
	
              GPS
                intends to use the $1.2 million in Gross Offering Proceeds to purchase
                from Wherify the securities described in Appendix
                A,
                from which Wherify will pay the above summarized Offering Fees and
                Expenses and apply the remaining estimated $1.0 million in net proceeds
                maintain its operations at a modest level until the Step II Offering
                can
                be completed.

            	 	 

    

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    FORM
      OF REGISTRATION RIGHTS AGREEMENT

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    FORM
      OF WARRANT

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

     

    FORM
      OF NOTE

     

     

     

    48THIS
      WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
      OR
      UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND HAVE BEEN ACQUIRED FOR
      INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
      DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE MADE WITHOUT AN
      EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
      SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
      ACT, OR APPLICABLE STATE SECURITIES LAWS.

     

    WHERIFY
      WIRELESS, INC.

     

    WARRANT
      TO PURCHASE

     

    3,000,000
      SHARES

     

    OF
      COMMON STOCK

     

    (Void
      after February 22, 2012)

     

    No:
      BW-1

     

    This
      certifies that for value, GPS
      ASSOCIATES, LLC,
      or its
      registered assigns (the “Holder”),
      is
      entitled, subject to the terms set forth below, at any time from and after
      February 22, 2007 (the “Original
      Issuance Date”)
      and
      before 5:00 p.m., Eastern Time, on February 22, 2012 (the “Expiration
      Date”),
      to
      purchase from WHERIFY
      WIRELESS, INC.,
      a
      Delaware corporation (the “Company”),
      three
      million (3,000,000) shares of common stock, par value $0.01 per share, of the
      Company (the “Common
      Stock”),
      upon
      surrender hereof, at the principal office of the Company referred to below,
      with
      a duly executed subscription form in the form attached hereto as Exhibit A
      and
      simultaneous payment therefor in lawful, immediately available money of the
      United States or otherwise as hereinafter provided, at an initial exercise
      price
      per share of $0.10 (the “Purchase
      Price”).
      The
      Purchase Price is subject to further adjustment as provided in Section 5
      below.
      The term “Common
      Stock”
shall
      include, unless the context otherwise requires, the stock and other securities
      and property at the time receivable upon the exercise of this Warrant. The
      term
“Warrant,”
as
      used herein, shall mean this Warrant and any other Warrants delivered in
      substitution or exchange therefor as provided herein. 

     

    This
      Warrant was issued in connection with the Company’s private placement offering
      (the “Offering”)
      of its
      10% $1,200,000 aggregate principal amount senior convertible promissory note
      (the “Note”),
      pursuant to the terms and conditions of the Securities Purchase and Option
      Agreement, dated February 22, 2007, by and between the Company and the
      Holder (the “SPA”).
      

     

    1.  Exercise.
      This
      Warrant may be exercised at any time or from time to time from and after the
      Original Issuance Date and before the Expiration Date, on any business day,
      for
      the full number of shares of Common Stock called for hereby, by surrendering
      it
      at the principal office of the Company, at 901 Mariners Island Blvd., Suite
      300,
      San Mateo, CA 94404, with the subscription form duly executed, together with
      payment in an amount equal to (a) the number of shares of Common Stock
      called for on the face of this Warrant, multiplied (b) by the Purchase
      Price. Payment of the Purchase Price may be made at Holder’s choosing either:
      (1) by payment in immediately available funds; or (2) in lieu of any
      cash payment, in exchange for the number of shares of Common Stock equal to
      the
      product of (x) the number of 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    shares
      to
      which the Warrants are being exercised multiplied by (y) a fraction, the
      numerator of which is the Purchase Price and the denominator of which is the
      Fair Market Value (as defined below). This Warrant may be exercised for less
      than the full number of shares of Common Stock at the time called for hereby,
      except that the number of shares receivable upon the exercise of this Warrant
      as
      a whole, and the sum payable upon the exercise of this Warrant as a whole,
      shall
      be proportionately reduced. Upon a partial exercise of this Warrant in
      accordance with the terms hereof, this Warrant shall be surrendered, and a
      new
      Warrant of the same tenor and for the purchase of the number of such shares
      not
      purchased upon such exercise shall be issued by the Company to Holder without
      any charge therefor. A Warrant shall be deemed to have been exercised
      immediately prior to the close of business on the date of its surrender for
      exercise as provided above, and the person entitled to receive the shares of
      Common Stock issuable upon such exercise shall be treated for all purposes
      as
      the holder of such shares of record as of the close of business on such date.
      Within two (2) business days after such date, the Company shall issue and
      deliver to the person or persons entitled to receive the same a certificate
      or
      certificates for the number of full shares of Common Stock issuable upon such
      exercise, together with cash, in lieu of any fraction of a share, equal to
      such
      fraction of the then Fair Market Value on the date of exercise of one full
      share
      of Common Stock. 

     

    2.  “Fair
      Market Value”
shall
      mean, as of any date: (i) if shares of the Common Stock are listed on a
      national securities exchange, the average of the closing prices as reported
      for
      composite transactions during the ten (10) consecutive trading days preceding
      the trading day immediately prior to such date or, if no sale occurred on a
      trading day, then the mean between the closing bid and asked prices on such
      exchange on such trading day; (ii) if shares of the Common Stock are not so
      listed but are traded on the NASDAQ National Market (“NNM”),
      the
      average of the closing prices as reported on the NNM during the ten (10)
      consecutive trading days preceding the trading day immediately prior to such
      date or, if no sale occurred on a trading day, then the mean between the highest
      bid and lowest asked prices as of the close of business on such trading day,
      as
      reported on the NNM; or if applicable, the Nasdaq Capital Market (“NCM”),
      (iii) if not then included for quotation on the NNM or the NCM, the average
      of the highest reported bid and lowest reported asked prices as reported by
      the
      OTC Bulletin Board of the National Quotation Bureau, as the case may be; or
      (iv) if the shares of the Common Stock are not then publicly traded, the
      fair market price of the Common Stock as determined in good faith by the
      independent members of the Board of Directors of the Company and the Holders
      of
      all Warrants. 

     

    3.  Shares
      Fully Paid; Payment of Taxes.
      All
      shares of Common Stock issued upon the exercise of this Warrant shall be validly
      issued, fully paid and non-assessable, and the Company shall pay all taxes
      and
      other governmental charges (other than income taxes to the holder) that may
      be
      imposed in respect of the issue or delivery thereof.

     

    4.  Transfer
      and Exchange

     

    (a)  .
      (a) Neither this Warrant nor the Common Stock to be issued upon exercise
      hereof (the “Warrant
      Shares”)
      have
      been registered under the Act or any state securities laws (“Blue
      Sky Laws”).
      This
      Warrant has been acquired for investment purposes and not with a view to
      distribution or resale and may not be pledged, hypothecated, sold, made subject
      to a security interest, or otherwise transferred without: (i) an effective
      registration statement for such Warrant under the Act and such applicable Blue
      Sky Laws; or (ii) an opinion of counsel reasonably satisfactory to the
      Company that registration is not required under the Act or under any applicable
      Blue Sky Laws. 

     

    (b)  Upon
      compliance with applicable federal and state securities laws as set forth in
      Section 4(a),
      above,
      this Warrant and all rights hereunder are transferable, in whole or in part,
      on
      the books of the Company maintained for such purpose at its Principal Office
      by
      the Holder in person or by duly authorized attorney, upon surrender of this
      Warrant together with a completed and executed assignment form in the form
      attached hereto as Exhibit
      B,
      and
      payment of any necessary transfer tax or other governmental charge imposed
      upon
      such transfer. Upon any partial transfer, the Company will issue and deliver
      to
      the assignee a new Warrant with respect to the shares of Common Stock for which
      it is exercisable that have been transferred, and will deliver to the Holder
      a
      new Warrant or Warrants with respect to the shares of Common Stock not so
      transferred. A Warrant may be transferred only by the procedure set forth
      herein. No transfer shall be effective until such transfer is recorded on the
      books of the Company, provided that such transfer is recorded promptly by the
      Company, and until such transfer on such books, the Company shall treat the
      registered Holder hereof as the owner of the Warrant for all purposes.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c)  This
      Warrant is exchangeable at the Principal Office for two or more new Warrants,
      each in the form of this Warrant, to purchase the same aggregate number of
      shares of Common Stock, each new Warrant to represent the right to purchase
      such
      number of shares as the Holder shall designate at the time of such exchange,
      but
      which shall not exceed the total number of shares for which this Warrant may
      be
      from time to time exercisable. 

     

    (d)  Transfer
      of the Warrant Shares issued upon the exercise of this Warrant shall be
      restricted in the same manner and to the same extent as the Warrant, and the
      certificates representing such Warrant Shares shall bear substantially the
      following legend, until such Warrant Shares have been registered under the
      Act
      or may be removed as otherwise permitted under the Act: 

     

    “THE
      SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE
      STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION
      STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
      BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) IN THE OPINION OF COUNSEL
      SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE
      STATE
      SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.”

     

    (e)  The
      Holder and the Company agree to execute such other documents and instruments
      as
      counsel to the Company deems necessary to effect the compliance of the issuance
      of this Warrant and any Warrant Shares issued upon exercise hereof with
      applicable federal and state securities laws, including compliance with
      applicable exemptions from the registration requirements of such laws.

     

    5.  Adjustment
      Of Purchase Price And Number Of Warrant Shares Issuable.
      

     

    (a)  For
      purposes of this Section 5,
      “Convertible
      Security”
means
      any stock or securities, directly or indirectly, convertible into or
      exchangeable for Common Equity (as hereinafter defined) , including without
      limitation any exchangeable debt securities; “Option”
shall
      mean any rights or options to subscribe for or purchase Common Equity or
      Convertible Securities. 

     

    (b)  If
      and
      whenever the Company issues or sells or, in accordance with Section 5(c),
      is
      deemed to have issued or sold, any share of Common Equity without consideration
      or for a net consideration per share less than $0.10 (as adjusted for stock
      splits, dividends, recapitalizations, reclassifications and other similar
      events), then immediately upon such issuance or sale, the Purchase Price shall
      be adjusted to a price equal to the following: the applicable Exercise Price
      in
      effect immediately prior to the Dilutive Issuance (the “Old Exercise Price”)
      multiplied by the quotient obtained by dividing: (i) an amount equal to the
      sum of (x) the Fully Diluted Equity, plus (y) the number of shares of
      Common Equity which the consideration received by the Company upon the Dilutive
      Issuance would purchase at such Old Exercise Price, by (ii) the Fully
      Diluted Equity after the Dilutive Issuance.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      the foregoing, there shall be no adjustment to the Purchase Price with respect
      to:

     

    
      	(i)  	
              Common
                Stock issued or issuable upon conversion of the Note and/or this
                Warrant;

            

    

     

    
      	(ii)  	
              Common
                Stock issued or issuable upon conversion and/or exercise of any securities
                outstanding on the Original Issuance
                Date;

            

    

     

    
      	(iii)  	
              Common
                Stock or securities convertible into Common Stock issuable upon the
                conversion or exercise of securities issuable to Laidlaw & Company
                (UK) Ltd. in connection with the sale of Notes and the Warrants to
                investors;

            

    

     

    
      	(iv)  	
              Common
                Stock issuable pursuant to stock option plans which have been approved
                by
                the Corporation’s directors and shareholders, but only to the extent that
                the aggregate number of shares of Common Stock and securities providing
                for the right to acquire Common Stock, issued under all of such plans
                to
                all officers, directors and employees, does not, in any twelve (12)
                month
                period, exceed, in the aggregate, ten percent (10%) of the total
                number of
                shares of Common Stock issued and outstanding at the beginning of
                such
                twelve (12) month period; and

            

    

     

    
      	(v)  	
              Common
                Stock or options, warrants or other rights to acquire or securities
                convertible into or exchangeable for shares of Common Stock, which
                are
                issued to any non-affiliated third party in connection with (A) the
                acquisition of all of the issued and outstanding equity interests
                of an
                unaffiliated corporation or other entity; (B) the merger of any such
                entity described in clause (A) immediately preceding into the Corporation,
                where the Corporation is the surviving entity; or (C) the acquisition
                by
                the Corporation of all or substantially all of the assets of any
                such
                entity described in clause (A) hereof; provided,
                however,
                that in any such case the transaction has been approved by the
                Corporation’s independent and disinterested
                directors.

            

    

     

    For
      purposes of this Section 5,
      “Common
      Equity”
means
      all shares now or hereafter authorized of any class of common stock of the
      Company (including the Common Stock) and any other stock of the Company, however
      designated, authorized on or after the date hereof, which has the right (subject
      always to prior rights of any class or series of preferred stock) to participate
      in any distribution of the assets or earnings of the Company without limit
      as to
      per share amount, and “Fully
      Diluted Equity”
means,
      with respect to the Company at any given time, (A) the number of shares of
      Common Equity actually outstanding at such time, plus (B) the maximum number
      of
      shares of Common Equity that are issuable upon the exercise, exchange or
      conversion of any unexpired right or unexpired option (including the Warrants)
      to subscribe for, to purchase or to receive Common Equity or other securities
      convertible into or exchangeable for Common Equity, including without limitation
      any exchangeable debt securities, regardless of whether any of the foregoing
      are
      actually exercisable at such time; provided, however, the number of shares
      of
      Common Equity outstanding at any given time shall not include shares, directly
      or indirectly, owned or held by or for the account of the Company.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (c)  For
      purposes of determining the adjusted Purchase Price under Section 5(b)
      above,
      the following shall be applicable:

     

    (1)  CONSIDERATION.
      If any Common Equity, Options or Convertible Securities are issued or sold
      or
      deemed to have been issued or sold for cash, the consideration received therefor
      shall be deemed to be (i) in the case of any public offering of such
      securities for cash, the gross proceeds of such offering (without deduction
      for
      any underwriters discount) and (ii) in the case of any other issuance, sale
      or deemed issuance or sale for cash, the gross amount received by the Company
      therefor. In case any Common Equity, Options or Convertible Securities are
      issued or sold for a consideration other than cash, the amount of the
      consideration other than cash received by the Company shall be the fair market
      value of such consideration. In case any Common Equity, Options or Convertible
      Securities are issued to the owners of the non-surviving entity in connection
      with any merger in which the Company is the surviving corporation, the amount
      of
      consideration therefor shall be deemed to be the fair market value of such
      portion of the net assets and business of the non-surviving entity as is
      attributable to such Common Equity, Options or Convertible Securities, as the
      case may be. The fair market value of any consideration other than cash shall
      be
      determined by the Company in good faith.

     

    (2)  OPTIONS
      AND CONVERTIBLE SECURITIES. In the case of the granting or sale of any Option
      or
      Convertible Security (whether or not at the time convertible, exercisable or
      exchangeable):

     

    (A)  the
      aggregate maximum number of shares of Common Equity deliverable, directly or
      indirectly, upon exercise of any Option shall be deemed to have been issued
      at
      the time such Option was granted and for a consideration equal to the
      consideration (determined in the manner provided in subsection (1) above),
      if any, received by the Company upon the issuance of such Option plus the
      minimum purchase price provided in such Option for the Common Equity covered
      thereby;

     

    (B)  the
      aggregate maximum number of shares of Common Equity deliverable upon conversion
      of or in exchange for any such Convertible Security, or upon the exercise of
      any
      Option to purchase or acquire any Convertible Security and the subsequent
      conversion or exchange thereof, shall be deemed to have been issued at the
      time
      such Convertible Security was issued or such Option was issued and for a
      consideration equal to the consideration, if any, received by the Company for
      any such Convertible Security and any related Option (excluding any cash
      received on account of accrued interest or accrued dividends), plus the
      additional consideration (determined in the manner provided in subsection
      (1) above), if any, to be received by the Company upon the conversion or
      exchange of such Convertible Security, or upon the exercise of any related
      Option to purchase or acquire any Convertible Security and the subsequent
      conversion or exchange thereof;

     

    (C)  on
      any
      change in the number of shares of Common Equity deliverable, directly or
      indirectly, upon conversion, exercise or exchange of any such Option or
      Convertible Security or any change in the consideration to be received by the
      Company upon such exercise, conversion or exchange, including, but not limited
      to, a change resulting from the anti-dilution provisions thereof, the Purchase
      Price as then in effect shall forthwith be readjusted to such Purchase Price
      as
      would have been obtained had an adjustment been made upon the issuance of such
      Option or Convertible Security upon the basis of such change; and

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (D)  if
      the
      Purchase Price shall have been adjusted upon the issuance of any such Option
      or
      Convertible Security, no further adjustment of the Purchase Price shall be
      made
      for the actual issuance of Common Equity upon any exercise, conversion, or
      exchange thereof; provided, however, that none of the events set forth in
Section 5(c)(2)(A)
      through 5(c)(2)(D),
      inclusive, shall result in any increase in the Purchase Price.

     

    (3)  INTEGRATED
      TRANSACTION. In case any Option is issued in connection with the issue or sale
      of other securities of the Company, together comprising one integrated
      transaction in which no specific consideration is allocated to such Options
      by
      the parties thereto, the Options shall be deemed to have been issued without
      consideration.

     

    (4)  TREASURY
      SHARES. The number of shares of Common Equity outstanding at any given time
      does
      not include shares owned or held by or for the account of the Company, and
      the
      disposition of any shares so owned or held shall be considered an issuance
      or
      sale of Common Equity.

     

    (5)  RECORD
      DATE. If the Company takes a record of the holders of Common Equity for the
      purpose of entitling them (A) to receive a dividend or other distribution
      payable in Common Equity, Options or in Convertible Securities or (B) to
      subscribe for or purchase Common Equity, Options or Convertible Securities,
      then
      such record date shall be deemed to be the date of the issuance or sale of
      the
      shares of Common Equity deemed to have been issued or sold upon the declaration
      of such dividend or the making of such other distribution or the date of the
      granting of such right of subscription or purchase, as the case may
      be.

     

    (d)  If
      the
      Company at any time subdivides (by any stock split, stock dividend,
      recapitalization or otherwise) one or more classes of its outstanding shares
      of
      Common Equity into a greater number of shares, the Purchase Price in effect
      immediately prior to such subdivision shall be proportionately reduced and
      the
      number of shares of Common Stock obtainable upon exercise of the Warrant shall
      be proportionately increased. If the Company at any time combines (by reverse
      stock split or otherwise) one or more classes of its outstanding shares of
      Common Stock into a smaller number of shares, the Purchase Price in effect
      immediately prior to such combination shall be proportionately increased and
      the
      number of shares of Common Stock obtainable upon exercise of this Warrant shall
      be proportionately decreased. 

     

    (e)  Any
      recapitalization, reorganization, reclassification, consolidation, merger,
      sale
      of all or substantially all of the Company’s assets or other transaction, in
      each case which is effected in such a way that the holders of Common Equity
      are
      entitled to receive (either directly or upon subsequent liquidation) stock,
      securities or assets with respect to or in exchange for Common Equity is
      referred to herein as a “Corporate
      Change.”
Prior
      to the consummation of any Corporate Change, the Company shall make appropriate
      provision (in form and substance satisfactory to the Warrant Holder) to insure
      that the Warrant Holder shall thereafter have the right to acquire and receive,
      in lieu of or in addition to (as the case may be) the Warrant Shares acquirable
      and receivable upon the exercise of such holder’s Warrants, such shares of
      stock, securities or assets as may be issued or payable with respect to or
      in
      exchange for the number of Warrant Shares acquirable and receivable upon
      exercise of such holder’s Warrant had such Corporate Change not taken place. In
      any such case, the Company shall make appropriate provision (in form and
      substance reasonably satisfactory to the Warrant Holder) with respect to such
      holder’s rights and interests to insure that the provisions of this Agreement
      shall thereafter be applicable to the Warrants (including, in the case of any
      such consolidation, merger or sale in which the successor entity or purchasing
      entity is other than the Company, any adjustment of the Purchase Price based
      on
Section 5
      hereof).
      The Company shall not effect any such consolidation, merger or sale, unless
      prior to the consummation thereof, the successor entity (if other than the
      Company) resulting from consolidation or merger or the entity purchasing such
      assets assumes by written instrument (in form and substance reasonably
      satisfactory to the Warrant Holder), the obligation to deliver to the Warrant
      Holder such shares of stock, securities or assets as, in accordance with the
      foregoing provisions, such holder may be entitled to acquire.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (f)  If
      any
      event occurs of the type contemplated by the provisions of this Section 5
      but not
      expressly provided for by such provisions (including, without limitation, the
      granting of stock appreciation rights, phantom stock rights or other rights
      with
      equity features), then the Company’s Board shall make an appropriate adjustment
      in the Purchase Price and the number of shares of Common Stock obtainable upon
      exercise of this Warrant so as to protect the rights of the Warrant Holder;
      provided that no such adjustment shall increase the Exercise Price or decrease
      the number of shares of Common Stock obtainable as otherwise determined pursuant
      to this Section 5.

     

    (g)  If
      the
      Company declares or pays a dividend upon the Common Equity payable otherwise
      than in cash out of earnings or earned surplus (determined in accordance with
      generally accepted accounting principles, consistently applied) except for
      a
      stock dividend payable in shares of Common Stock (a “Liquidating
      Dividend”),
      then
      the Company shall pay to the Warrant Holder at the time of payment thereof
      the
      Liquidating Dividend which would have been paid to such Warrant Holder on the
      Common Stock had the Warrants been fully exercised immediately prior to the
      date
      on which a record is taken for such Liquidating Dividend, or, if no record
      is
      taken, the date as of which the record holders of Common Equity entitled to
      such
      dividends are to be determined.

     

    (h)  Notices
      of Record Date.
      In
      case:

     

    A.  the
      Company shall take a record of the holders of its Common Stock (or other stock
      or securities at the time receivable upon the exercise of the Warrants) for
      the
      purpose of entitling them to receive any dividend or other distribution, or
      any
      right to subscribe for or purchase any shares of stock of any class or any
      other
      securities, or to receive any other right, or

     

    B.  of
      any
      capital reorganization of the Company, any reclassification of the capital
      stock
      of the Company, any consolidation or merger of the Company with or into another
      corporation, or any conveyance of all or substantially all of the assets of
      the
      Company to another corporation, or

     

    C.  of
      any
      voluntary dissolution, liquidation or winding-up of the Company then, and in
      each such case, the Company will mail or cause to be mailed to each holder
      of a
      Warrant at the time outstanding a notice specifying, as the case may be,
      (a) the date on which a record is to be or has been taken for the purpose
      of such dividend, distribution or right, and stating the amount and character
      of
      such dividend, distribution or right, or (b) the date on which such
      reorganization, reclassification, consolidation, merger, conveyance,
      dissolution, liquidation or winding-up is expected to take place (the
“Payment
      Date”),
      and
      the time, if any is to be fixed, as of which the holders of record of Common
      Stock (or such stock or securities at the time receivable upon the exercise
      of
      the Warrants) shall be entitled to exchange their shares of Common Stock (or
      such other stock or securities) for securities or other property deliverable
      upon such reorganization, reclassification, consolidation, merger, conveyance,
      dissolution, liquidation or winding-up, such notice shall be mailed at least
      ten
      (10) days prior to the Payment Date therein specified.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    6.  Loss
      or Mutilation.
      Upon
      receipt by the Company of evidence satisfactory to it (in the exercise of
      reasonable discretion) of the ownership of and the loss, theft, destruction
      or
      mutilation of any Warrant and (in the case of loss, theft or destruction) of
      indemnity and bond satisfactory to it (in the exercise of reasonable
      discretion), and (in the case of mutilation) upon surrender and cancellation
      thereof, the Company will execute and deliver in lieu thereof a new Warrant
      of
      like tenor.

     

    7.  Reservation
      of Common Stock.
      The
      Company shall at all times reserve and keep available for issue upon the
      exercise of Warrants such number of its authorized but unissued shares of Common
      Stock as will be sufficient to permit the exercise in full of this Warrant.
      All
      of the shares of Commons Stock issuable upon the proper exercise of the rights
      represented by this Warrant will, upon issuance and receipt of the Purchase
      Price therefor, be fully paid and nonassessable, and free from all contractual
      preemptive rights, rights of first refusal or first offer, taxes, liens and
      charges of whatever nature, with respect to the issuance thereof. If at any
      time
      the number of authorized but unissued shares of Common Stock shall not be
      sufficient for such purposes, the Company will take such corporate action as
      may, in the opinion of its counsel, be necessary to increase its authorized
      but
      unissued shares of Common Stock to such number of shares as shall be sufficient
      for such purpose and the obligation to issue such shares shall be suspended
      until such action has been taken.

     

    8.  Registration
      Rights.
      The
      Holder of this Warrant is entitled to have the Warrant Shares registered for
      resale under the Securities Act of 1933, as amended (the “Act”),
      pursuant to and in accordance with the Registration Rights Agreement among
      the
      Company, the Holder and the other investors who were issued Warrants in
      connection with the Offering.

     

    9.  No
      Rights as Stockholder Conferred by Warrants.
      The
      Warrant shall not entitle the Holder hereof to any of the rights, either at
      law
      or in equity, of a stockholder of the Company. The Holder shall, upon the
      exercise thereof, not be entitled to any dividend that may have accrued or
      which
      may previously have been paid with respect to shares of stock issuable upon
      the
      exercise of the Warrant, except as may otherwise be provided in Section 5
      hereof.

     

    10.  Endorsement
      of Warrants.
      The
      Warrant when presented or surrendered for exchange, transfer or registration
      shall be accompanied (if so required by the Company) by an assignment in the
      form attached hereto as Exhibit B
      or such
      other written instrument of transfer, in form satisfactory to the Company,
      duly
      executed by the registered Holder or by his duly authorized
      attorney.

     

    11.  Agreement
      of Warrant Holders.
      The
      Holder, and to the extent that portions of this Warrant are assigned and there
      is more than one Holder of warrants exercisable for the Warrant Shares, every
      holder of a Warrant, by accepting the same, consents and agrees with the Company
      and with all other Warrant holders that: (a) the Warrants are transferable
      only as permitted by Section 4
      above;
      (b) the Warrants are transferable only on the registry books of the Company
      as herein provided; and (c) the Company may deem and treat the person in
      whose name the Warrant certificate is registered as the absolute owner thereof
      and of the Warrants evidenced thereby for all purposes whatsoever, and the
      Company shall not be affected by any notice to the contrary. 

     

    12.  Payment
      of Taxes.
      The
      Company will pay all stamp, transfer and other similar taxes payable in
      connection with the original issuance of this Warrant and the shares of Common
      Stock issuable upon exercise thereof, provided, however, that the Company shall
      not be required to (i) pay any such tax which may be payable in respect of
      any transfer involving the transfer and delivery of this Warrant or the issuance
      or delivery of certificates for shares of Common Stock issuable upon exercise
      thereof in a name other than that of the registered Holder of this Warrant
      or
      (ii) issue or deliver any certificate for shares of Common Stock upon the
      exercise of this Warrant until any such tax required to be paid under clause
      (i) shall have been paid, all such tax being payable by the holder of this
      Warrant at the time of surrender.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    13.  Fractional
      Interest.
      The
      Company shall not be required to issue fractional shares of Common Stock on
      the
      exercise of this Warrant. If more than one Warrant shall be presented for
      exercise at the same time by the Holder, the number of full shares of Common
      Stock which shall be issuable upon such exercise shall be computed on the basis
      of the aggregate number of shares of Common Stock acquirable on exercise of
      the
      Warrants so presented. If any fraction of a share of Common Stock would, except
      for the provisions of this Section 13,
      be
      issuable on the exercise of any Warrant (or specified portion thereof), the
      Company shall pay an amount in cash calculated by it to be equal to the Purchase
      Price per share multiplied by such fraction computed to the nearest whole cent.
      The Holder by his acceptance of this Warrant expressly waives any and all rights
      to receive any fraction of a share of Common Stock or a stock certificate
      representing a fraction of a share of Common Stock.

     

    14.  Entire
      Agreement.
      This
      Warrant constitutes the full and entire understanding and agreement among the
      parties with regard to the subject matter hereof and no party shall be liable
      or
      bound to any other party in any manner by any representations, warranties,
      covenants or agreements except as specifically set forth herein.

     

    15.  Successors
      and Assigns.
      All
      covenants and provisions of this Warrant by or for the benefit of the Company
      or
      the Holder of this Warrant shall bind and inure to the benefit of their
      respective successors, permitted assigns, heirs and personal
      representatives.

     

    16.  Termination.
      This
      Warrant shall terminate at 5:00 p.m., Eastern Time, on the Expiration Date
      or
      upon such earlier date on which all of this Warrant has been exercised (the
      “Termination
      Date”).

     

    17.  Notices.
      All
      notices and other communications from the Company to the Holder of this Warrant
      shall be deemed delivered if mailed by first class, registered or certified
      mail, postage prepaid, to the address furnished to the Company in writing by
      the
      Holder. All notices from the Holder of this Warrant to the Company shall be
      made
      in writing by the Holder to the Company at its Principal Office and shall be
      deemed delivered upon receipt.

     

    18.  Change;
      Modifications; Waiver.
      No
      terms of this Warrant may be amended, waived or modified except by the express
      written consent of the Company and the Holder.

     

    19.  Headings.
      The
      headings in this Warrant are for purposes of convenience in reference only,
      and
      shall not be deemed to constitute a part hereof.

     

    20.  Governing
      Law, Etc.
      This
      Warrant shall be governed by and construed in accordance with the internal
      laws
      of the State of New York without regard to the conflicts of laws principles
      thereof. The parties hereto hereby irrevocably agree that any suit or proceeding
      arising directly and/or indirectly pursuant to or under this Warrant, shall
      be
      brought solely in a federal or state court located in the City, County and
      State
      of New York. By its execution hereof, the parties hereby covenant and
      irrevocably submit to the in personam
      jurisdiction of the federal and state courts located in the City, County and
      State of New York and agree that any process in any such action may be served
      upon any of them personally, or by certified mail or registered mail upon them
      or their agent, return receipt requested, with the same full force and effect
      as
      if personally served upon them in New York City. The parties hereto waive any
      claim that any such jurisdiction is not a convenient forum for any such suit
      or
      proceeding and any defense or lack of in personam
      jurisdiction with respect thereto. In the event of any such action or
      proceeding, the party prevailing therein shall be entitled to payment from
      the
      other party hereto of all of its reasonable and documented legal fees and
      expenses.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    WARRANT
      SIGNATURE PAGE

     

     

    Dated:
      August __, 2007

     

    
      	 	 	 
	 	WHERIFY
              WIRELESS, INC.
	 
 	 
 	 
 
	Date: 	By:  	 
	 	
              

              Name:
                 Vincent
                Sheeran

              Title:
                 Chief
                Executive Officer

            

    

     

     

    Warrant
      #BW-1

    Issued
      to
      GPS Associates, LLC

    For
      3,000,000 Shares

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    SUBSCRIPTION
      FORM

     

    (To
      be
      executed only upon exercise of Warrant)

     

    The
      undersigned registered owner of this Warrant irrevocably exercises this Warrant
      and purchases _______ shares of the Common Stock of Wherify Wireless, Inc.,
      purchasable with this Warrant, and herewith makes payment therefor, all at
      the
      price and on the terms and conditions specified in this Warrant.

     

    
      	 	 	 
	Dated:  	 	 
	 	  	 
	 	 
	 	
              
(Signature
              of Registered Owner)
	 	 
	 	 
	 	
              
(Street
              Address)  
	 	 
	 	 
	 	
              
(City
              / State / Zip
              Code)  

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    FORM
      OF ASSIGNMENT

     

    FOR
      VALUE RECEIVED
      the
      undersigned registered owner of this Warrant hereby sells, assigns and transfers
      unto the Assignee named below all of the rights of the undersigned under the
      within Warrant, with respect to the number of shares of Common Stock set forth
      below:

     

    
      	
              Name
                of Assignee

            	 	
              Address

            	 	
              Number
                of Shares

            
	 	 	 	 	 

    

     

    and
      does
      hereby irrevocably constitute and appoint __________________________ Attorney
      to
      make such transfer on the books of Wherify Wireless Inc., maintained for the
      purpose, with full power of substitution in the premises.

    
       

      
        	 	 	 
	Dated:  ____________________	 	 
	    	  	 
	 	 
	 	
                
(Signature)
	 	 
	 	 
	 	
                
(Witness)  

      

    

     

    The
      undersigned Assignee of the Warrant hereby makes to Wherify Wireless, Inc.,
      as
      of the date hereof, with respect to the Assignee, all of the representations
      and
      warranties made by the Holder, and the undersigned Assignee agrees to be bound
      by all the terms and conditions of the Warrant and Wherify Wireless, Inc.
      Registration Rights Agreement, dated the date of this Warrant, by and between
      Wherify Wireless, Inc. and the Holder. 

    
       

      
        	 	 	 
	Dated:  ____________________	 	 
	 	  	 
	 	 
	 	
                
(Signature)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}]]