Document:

exhibit2.htm

    
Exhibit
10.2

    AMENDMENT
AGREEMENT

     

    AMENDMENT
AGREEMENT, dated as of March 4, 2010 (this “Agreement”), among
REGENCY GAS SERVICES LP, a Delaware limited partnership (the “Borrower”), REGENCY
ENERGY PARTNERS LP, a Delaware limited partnership (“Regency MLP”), the
Subsidiary Guarantors party hereto (together with Regency MLP, the “Guarantors”), WACHOVIA BANK, NATIONAL
ASSOCIATION, as Administrative Agent and Collateral Agent, the lending
institutions with a Commitment under the Fifth Amended and Restated Credit
Agreement (as defined below) (the “Lenders”), WELLS
FARGO SECURITIES LLC, BANC OF AMERICA SECURITIES LLC (“BAS”) and RBS
SECURITIES INC. (“RBS”), as Joint Lead
Arrangers and Joint Bookmanagers for the revolving facility under the Fifth
Amended and Restated Credit Agreement, BANK OF AMERICA, N.A. and THE ROYAL BANK
OF SCOTLAND PLC, as Co-Syndication Agents for the revolving facility under the
Fifth Amended and Restated Credit Agreement, JPMORGAN CHASE BANK, N.A, UBS LOAN
FINANCE LLC and CITIBANK, N.A., as senior managing agents, and MORGAN STANLEY
SENIOR FUNDING INC. and BARCLAYS BANK PLC., as co-documentation
agents.

     

    W
I T N E S S E T H:

     

    WHEREAS,
Borrower, the lending institutions from time to time party thereto as Lenders
(the “Original
Lenders”), UBS AG, Stamford Branch, as administrative agent and
collateral agent for the Original Lenders, UBS Securities LLC, as arranger and
bookmanager, UBS Loan Finance LLC, as swingline lender and certain other agents
entered into that certain Credit Agreement, dated as of December 1, 2004 (the
“Original Credit
Agreement”), pursuant to which the Original Lenders made certain loans
and other extensions of credit to Borrower;

     

    WHEREAS,
Borrower, the Lenders party thereto from time to time, UBS AG, Stamford Branch,
as administrative agent and collateral agent, UBS Securities LLC, as arranger
and bookmanager, UBS Loan Finance LLC, as swingline lender and certain other
agents entered into the first amendment and restatement of the Original
Agreement on July 26, 2005, the second amendment and restatement thereof on
November 30, 2005 and the third amendment and restatement thereof on February 3,
2006;

     

    WHEREAS,
Borrower, the Lenders party thereto from time to time, Wachovia Bank, National
Association, as administrative agent, collateral agent and swingline lender, UBS
Securities LLC and Wachovia Capital Markets, as joint lead arrangers and joint
bookmanagers for the tranche B-1 term loans, Wachovia Capital Markets, Citigroup
Global Markets Inc. and UBS Securities LLC, as joint lead arrangers and joint
bookmanagers for the revolving loans, UBS Loan Finance LLC, as syndication
agent, Citigroup Global Markets Inc., as co-syndication agent for the revolving
loans and certain other agents entered into the fourth amendment and restatement
of the Original Agreement on August 15, 2006 (as amended by Amendment No. 1,
Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, Amendment
No. 6, Amendment No. 7 and Amendment No. 8 (each as defined in Annex I hereto),
the “Fourth Amended
and Restated Credit Agreement”);

     

    WHEREAS,
the Secured Obligations (as defined in the Fourth Amended and Restated Credit
Agreement, hereinafter the “Original
Obligations”) of Borrower and the other Loan Parties under the Fourth
Amended and Restated Credit Agreement and the other Loan Documents (as defined
in the Fourth Amended and Restated Credit Agreement) are secured by certain
collateral (hereinafter the “Continuing
Collateral”) and are guaranteed or otherwise benefited by the Loan
Documents;

     

    WHEREAS,
the parties hereto wish to, among other things, renew and amend and restate the
Fourth Amended and Restated Credit Agreement in its entirety to effect the
amendments described

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    herein to
create a new Tranche of Revolving Commitments (as defined in Annex I hereto) in
the aggregate principal amount of $895,000,000;

     

    WHEREAS,
the Borrower has requested and certain Revolving Lenders (the “Extending Lenders”)
have agreed to extend the maturity of all or a portion of their Revolving
Commitments and Revolving Loans to the Tranche 2 Revolving Maturity Date, which
commitments and loans shall be deemed to be Tranche 2 Revolving Commitments and
Tranche 2 Revolving Loans, respectively, upon the Fifth ARCA Effective
Date;

     

    WHEREAS,
the Borrower has requested and certain Extending Lenders have agreed to provide
additional Tranche 2 Revolving Commitments (the “Additional
Commitments”) under the Fifth Amended and Restated Credit
Agreement;

     

    WHEREAS,
as of the Fifth ARCA Effective Date there were no Term Loans (as defined in the
Fourth Amended and Restated Credit Agreement) outstanding; and

     

    WHEREAS,
the parties hereto intend that the loans under the Fourth Amended and Restated
Credit Agreement outstanding as of the date hereof (including after giving
effect to the exchange of Loans contemplated by this Agreement) shall be Loans
under and as defined in the Fifth Amended and Restated Credit Agreement attached
hereto as Annex
I on the terms set forth therein.

     

    NOW, THEREFORE, in
consideration of the premises and for other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged), the parties hereto
hereby agree as follows:

     

    SECTION
1. Definitions.  Unless
otherwise defined or the context otherwise requires, terms for which meanings
are provided in the Fifth Amended and Restated Credit Agreement shall have such
meanings when used in this Agreement.

     

    SECTION
2. Exchange of Loans and
Commitments.

     

    (a) Subject
to and upon the terms and conditions herein and in the Fifth Amended and
Restated Credit Agreement, each Lender with a Revolving Commitment and Revolving
Loans (each as defined in the Fourth Amended and Restated Credit Agreement) who
executes and delivers this Agreement as an “Extending Lender” severally agrees
to exchange all or a portion of its Revolving Commitment and/or Revolving Loans,
as applicable, under the Fourth Amended and Restated Credit Agreement in the
amount specified as their “Existing Lender Extension Commitment” (for all
Lenders, the “Existing
Lender Extension Commitments”) on such Lender’s signature page hereto for
a like principal amount of Tranche 2 Revolving Commitment and/or Tranche 2
Revolving Loans, as applicable, under the Fifth Amended and Restated Credit
Agreement on the Fifth ARCA Effective Date (as set forth on such Lender’s
signature page hereto).

     

    (b) Subject
to and upon the terms and conditions herein and in the Fifth Amended and
Restated Credit Agreement, each Extending Lender who executes and delivers this
Agreement severally agrees to provide an additional Tranche 2 Revolving
Commitment and Tranche 2 Revolving Loans in the amount specified as their
“Additional Commitment” (the “Additional
Commitments” and, together with the Existing Lender Extension
Commitments, the “Total Extension
Commitments”) on such Lender’s signature page hereto, provided that no
Additional Commitments may be made by any Extending Lender unless such Extending
Lender’s Existing Lender Extension Commitment equals the full amount of such
Extending Lender’s Revolving Commitment under the Fourth Amended and Restated
Credit Agreement immediately prior to the Fifth ARCA Effective
Date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c) Subject
to and upon the terms and conditions herein and in the Fifth Amended and
Restated Credit Agreement, each Extending Lender severally commits to its
Tranche 2 Revolving Commitment on the Fifth ARCA Effective Date and severally
agrees to make Tranche 2 Revolving Loans under the Fifth Amended and Restated
Credit Agreement on or after the Fifth ARCA Effective Date (as set forth on such
Lender’s signature page hereto);

     

    (d) Borrower
shall pay all accrued and unpaid Commitment Fees payable pursuant to Section 2.05 of the
Fourth Amended and Restated Credit Agreement and interest on the Revolving Loans
(if any) to the lenders with Revolving Commitments under the Fourth Amended and
Restated Credit Agreement to, but not including, the Fifth ARCA Effective Date,
such payment to be made on such date and any breakage loss or expense under
Section 2.13 of
the Fourth Amended and Restated Credit Agreement.  Borrower shall pay
all fees accrued under Section 2.05(c) of
the Fourth Amended and Restated Credit Agreement prior to the Fifth ARCA
Effective Date which shall be payable to the Administrative Agent for
distribution among the Lenders as provided in Section 2.05(c) of
the Fourth Amended and Restated Credit Agreement.  The Fifth ARCA
Effective Date shall be deemed the first day of a new Interest Period under the
Fifth Amended and Restated Credit Agreement with respect to the Revolving Loans
made on the Fifth ARCA Effective Date.

     

    (e) For
avoidance of doubt, holders of Revolving Loans under the Fifth Amended and
Restated Credit Agreement shall be entitled to the same guarantees and security
interests pursuant to the Loan Documents from and after the Fifth ARCA Effective
Date as the holders of Revolving Loans under the Fourth Amended and Restated
Credit Agreement had been entitled immediately prior to the Fifth ARCA Effective
Date.  The Continuing Collateral and the Loan Documents shall continue
to secure, guarantee, support and otherwise benefit the Original Obligations as
well as the other Secured Obligations of Borrower and the other Loan Parties
under the Fifth Amended and Restated Credit Agreement and the other Loan
Documents.

     

    SECTION
3. Amendment and Restatement of
Fourth Amended
and Restated
Credit Agreement.

     

    On the
Fifth ARCA Effective Date, the Fourth Amended and Restated Credit Agreement
shall be, and is hereby, amended and restated in its entirety as set forth in
Annex I hereto
(as set forth in such Annex I, the “Fifth Amended and Restated
Credit Agreement”), and as so amended and restated is hereby ratified,
approved and confirmed in each and every respect by all parties
hereto.  The rights and obligations of the parties to the Fourth
Amended and Restated Credit Agreement with respect to the period prior to the
Fifth ARCA Effective Date shall not be affected by such amendment and
restatement.

     

    SECTION
4. Authorization to Release
Portions of Mortgaged Property.

     

    In
connection with the Mortgage Amendments required under Section 5(f), the
Collateral Agent is authorized hereby to release that portion of Mortgaged
Property containing Buildings (as defined in the applicable Flood Insurance
Regulation) or Manufactured (Mobile) Homes (as defined in the applicable Flood
Insurance Regulation).  The Borrower hereby represents and warrants that
the value of such Buildings or Manufactured (Mobile) Homes is not
material.

     

    SECTION
5. Conditions Precedent to the
Effectiveness of this Amendment.

     

    This
Agreement shall become effective as of the date first written above upon (the
“Fifth ARCA Effective
Date”), and the obligations of the Lenders under the Fifth Amended and
Restated Credit Agreement shall be subject to, the prior or concurrent
satisfaction of each of the conditions precedent set forth in this Section 5
hereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (a) Executed
Counterparts.  The Administrative Agent shall have received
this Agreement, duly executed by (A) the Required Lenders and (B) each of the
other parties hereto.

     

    (b) Extension
Commitments.  A minimum of $750,000,000 aggregate principal
amount of Total Extension Commitments shall have been provided by Extending
Lenders executing counterparts of this Agreement pursuant to the provisions of
this Agreement.

     

    (c) Officers’
Certificate.  Administrative Agent shall have received a
certificate, dated the Fifth ARCA Effective Date and signed by a Responsible
Officer of the Borrower, confirming compliance with the conditions precedent set
forth in this Section
5 (to the extent satisfaction thereof is not subject to the discretion of
a Secured Party) and Sections 4.02(b) and
(c) of the
Fifth Amended and Restated Credit Agreement.

     

    (d) Financial Statements; Pro
Forma Balance Sheet; Projections.  The Arrangers shall have
received and shall be reasonably satisfied with the form and substance of the
audited financial statements for the fiscal year ended December 31, 2009 and the
forecasts of the financial performance of Regency MLP and its Subsidiaries, pro
forma for the Transactions on an annual basis through the Final Maturity Date
(as defined in Annex I hereto).

     

    (e) Opinions of
Counsel.  The Administrative Agent shall have received (i) a
legal opinion, in form and substance reasonably satisfactory to the
Administrative Agent, from Locke Lord Bissell & Liddell LLP, counsel to
Borrower and (ii) such other opinions of counsel to Borrower as may be
reasonably requested by the Administrative Agent or its counsel.

     

    (f) Real Property
Collateral.  The Collateral Agent shall have
received:

     

    (i) with
respect to each Mortgaged Property encumbered by a Mortgage under the Fourth
Amended and Restated Credit Agreement:

     

    (1) an
amendment thereof (each a “Mortgage Amendment”)
duly executed and acknowledged by the applicable Loan Party, and in form for
recording in the recording office where each such Mortgage was recorded,
together with such certificates, affidavits, questionnaires or returns as shall
be required in connection with the recording or filing thereof under applicable
law, in each case in form and substance reasonably satisfactory to the
Collateral Agent; and

     

    (2) with
respect to each Mortgage Amendment, opinions of local counsel to the Loan
Parties, which opinions (x) shall be addressed to each Agent and each of
the Lenders and be dated the Fifth ARCA Effective Date, (y) shall cover the
enforceability of the respective Mortgage as amended by the Mortgage Amendment
and such other matters incident to the transactions contemplated herein as the
Administrative Agent may reasonably request and (z) shall be in form and
substance reasonably satisfactory to the Agents.

     

    (ii) with
respect to each Mortgaged Property not encumbered by a Mortgage under the Fourth
Amended and Restated Credit Agreement:

     

    (1) a
Mortgage encumbering each Mortgaged Property in favor of the Collateral Agent,
for the benefit of the Secured Parties, duly executed and acknowledged by each
Loan Party that is the owner of or holder of any interest in such Mortgaged
Property, and otherwise in form for recording in the recording office of each
applicable political 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    subdivision
where each such Mortgaged Property is situated, together with such certificates,
affidavits, questionnaires or returns as shall be required in connection with
the recording or filing thereof to create a lien under applicable Requirements
of Law, and such financing statements and any other instruments necessary to
grant a mortgage lien under the laws of any applicable jurisdiction, all of
which shall be in form and substance reasonably satisfactory to Collateral
Agent; and

     

    (2) with
respect to each Mortgaged Property, such consents, approvals, amendments,
supplements, estoppels, tenant subordination agreements or other instruments as
necessary to consummate the Transactions or as shall reasonably be deemed
necessary by the Collateral Agent in order for the owner or holder of the fee or
leasehold interest constituting such Mortgaged Property to grant the Lien
contemplated by the Mortgage with respect to such Mortgaged
Property;

     

    (iii) evidence
reasonably acceptable to the Collateral Agent of payment by Borrower of all
search and examination charges, escrow charges and related charges, mortgage
recording taxes, fees, charges, costs and expenses required for the recording of
the Mortgages and Mortgage Amendments referred to above; and

     

    (iv) with
respect to each Mortgaged Property, each Company shall have made all
notifications, registrations and filings, to the extent required by, and in
accordance with, all Governmental Real Property Disclosure Requirements
applicable to such Mortgaged Property.

     

    (g) Flood
Certificate.  The Administrative Agent shall have received a
certificate, dated the Fifth ARCA Effective Date and signed by a Responsible
Officer of the Borrower, confirming that, as of the Fifth ARCA Effective Date
and after giving effect to the execution and delivery of the Mortgage Amendments
contemplated by Section 5(f), (i) no
Buildings or Manufactured (Mobile) Homes on the Mortgaged Property are
encumbered by a Mortgage and (ii) that none of the Mortgaged Property is (a)
located in a special flood hazard area and (b) required to be covered by
mandatory flood insurance in accordance with the requirements of the Flood
Insurance Regulations.

     

    (h) Representations and
Warranties.  On the Fifth ARCA Effective Date, the
representations and warranties made by Borrower, as they relate to the Loan
Parties at such time, or the Loan Parties in Section 7 and
15 hereof shall
be true and correct in all material respects.

     

    (i) No
Default.  No Default has occurred and is continuing or would
result from the Transactions, including compliance with the covenants set forth
in Section 6.10
of the Fifth Amended and Restated Credit Agreement (for avoidance of doubt,
Regency MLP’s Senior Secured Leverage Ratio on December 31, 2009 shall not
exceed 4.0 to 1.0).

     

    (j) Fees.  The
Administrative Agent shall have received (i) fees for the account of each Lender
in the amounts set forth in the presentation, “Regency Energy Partners Bank
Group Meeting February 1-3, 2010”, distributed to the Lenders on February 2,
2010, with respect to the amount indicated in writing by such Lender on their
signature page hereto as its Additional Commitment required to be paid on the
Fifth ARCA Effective Date (such amount the “Pre-Allocated Commitment
Amount”) to each Lender offering a Pre-Allocated Commitment Amount, (ii)
fees for the account of each Lender equal to 100 basis points with respect to
each Existing Lender Extension Commitment (which fee shall be calculated based
on the difference between such Lender’s Total Extension Commitment less its
Pre-Allocated Commitment Amount (which amount shall be deemed to be zero in the
case of a negative 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    difference))
payable to each Lender extending their commitment in connection with the
Proposed Amendment, (iii) all fees under Section 2 hereof and
(iv) all fees and expenses (including the reasonable fees, disbursements and
other charges of Cahill Gordon & Reindel llp, counsel for the Administrative
Agent) for which invoices have been presented on or prior to the Fifth ARCA
Effective Date.  Lenders who purchase by assignment any Assigned
Interests (as defined in the Master Assignment and Acceptance (as defined
below)) shall be entitled to the fees set forth herein with respect to such
Assigned Interests.

     

    SECTION
6. Post-Closing
Obligations.

     

    (a) Personal Property
Requirements.  Within 30 days of the date hereof, the
Collateral Agent shall have received the certified results of a recent
bankruptcy, tax and judgment lien search in each relevant jurisdiction with
respect to Regency MLP, Borrower and the other Loan Parties, and such search
shall reveal no liens on any of the assets of any of them, except for liens
permitted by the Fifth Amended and Restated Credit Agreement or liens to be
discharged on or prior to the Fifth ARCA Effective Date pursuant to
documentation satisfactory to the Administrative Agent.

     

    SECTION
7. Representations and
Warranties.

     

    On and as
of the Fifth ARCA Effective Date, after giving effect to this Agreement,
Borrower and each Guarantor hereby represent and warrant to the Administrative
Agent and each Lender as follows:

     

    (a) this
Agreement has been duly authorized, executed and delivered by Borrower and each
Guarantor and constitutes the legal, valid and binding obligations of Borrower
and each Guarantor enforceable against Borrower and each Guarantor in accordance
with its terms and the terms of the Fifth Amended and Restated Credit Agreement
and constitutes the legal, valid and binding obligation of Borrower and each
Guarantor enforceable against Borrower and each Guarantor in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors’ rights generally;

     

    (b) after
giving effect to this Agreement, neither the modification of the Fourth Amended
and Restated Credit Agreement effected pursuant to this Agreement nor the
execution, delivery, performance or effectiveness of this Agreement and the
Fifth Amended and Restated Credit Agreement:

     

    (i) impairs
the validity, effectiveness or priority of the Liens granted pursuant to any
Loan Document, and such Liens continue unimpaired with the same priority to
secure repayment of all Secured Obligations, whether heretofore or hereafter
incurred; or

     

    (ii) requires
that any new filings be made or other action taken to perfect or to maintain the
perfection of such Liens other than the actions required by Section 6 of this
Agreement.

     

    SECTION
8. No Other Amendments;
References to the Credit Agreement.

     

    Other
than as specifically provided herein or in the Fifth Amended and Restated Credit
Agreement, this Agreement shall not operate as a waiver or amendment of any
right, power or privilege of the Lenders under (and as defined in) the Fourth
Amended and Restated Credit Agreement or any other Loan Document (as such term
is defined in the Fourth Amended and Restated Credit Agreement) or of any other
term or condition of the Fourth Amended and Restated Credit Agreement or any
other Loan 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Document
(as such term is defined in the Fourth Amended and Restated Credit Agreement)
nor shall the entering into of this Agreement preclude the Lenders from refusing
to enter into any further waivers or amendments with respect to the Fifth
Amended and Restated Credit Agreement.  All references to the Fourth
Amended and Restated Credit Agreement in any document, instrument, agreement, or
writing that is a Loan Document shall from and after the Fifth ARCA Effective
Date be deemed to refer to the Fifth Amended and Restated Credit Agreement, and,
as used in the Fifth Amended and Restated Credit Agreement, the terms
“Agreement,” “herein,” “hereafter,” “hereunder,” “hereto” and words of similar
import shall mean, from and after the Fifth ARCA Effective Date, the Fifth
Amended and Restated Credit Agreement.

     

    SECTION
9. Headings.

     

    The
various headings of this Agreement used herein are for convenience of reference
only, are not part of this Agreement and shall not affect the construction of,
or be taken into consideration in interpreting, this Agreement.

     

    SECTION
10. Execution in
Counterparts.

     

    This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), including by facsimile or Adobe .pdf file, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract.

     

    SECTION
11. Expenses.

     

    Borrower
agrees to pay promptly (and in any event on the Fifth ARCA Effective Date) after
presentation of an invoice therefor all reasonable out-of-pocket expenses of the
Agents (including the reasonable fees and out-of-pocket expenses of one counsel
to the Agents (and of local counsel, if any, who may be retained by such
counsel)) in connection with the preparation, negotiation, execution and
delivery of this Agreement, the Fifth Amended and Restated Credit Agreement,
each other Loan Document and the documents and transactions contemplated hereby,
including the reasonable fees and disbursements of Cahill Gordon & Reindel
llp, counsel for
the Administrative Agent.

     

    SECTION
12. Cross-References.

     

    References
in this Agreement to any Section are, unless otherwise specified or otherwise
required by the context, to such Section of this Agreement.

     

    SECTION
13. Cooperation; Other
Documents.

     

    At all
times following the execution of this Agreement, the parties hereto shall
execute and deliver to the Lenders and the Agents, or shall cause to be executed
and delivered to the Lenders and the Agents, and shall do or cause to be done
all such other acts and things as the Lenders and the Agents may reasonably deem
to be necessary or desirable to assure the Lenders and the Agents of the benefit
of this Agreement (including the Fifth Amended and Restated Credit Agreement),
the other Loan Documents and each other document relating to this
Agreement.

     

    SECTION
14. Governing
Law.

     

    THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CONFLICTS
OF LAW PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF LAWS OF ANOTHER
JURISDICTION.

     

    SECTION
15. Loan Party
Acknowledgments.

     

    (a) Each (i)
Guarantor hereby expressly acknowledges the terms of the Fifth Amended and
Restated Credit Agreement, (ii) Loan Party hereby ratifies and affirms its
obligations under the Loan Documents (including guarantees and security
documents) executed by the undersigned, (iii) Loan Party hereby acknowledges
renews and extends its continued liability under all such Loan Documents to
which it is party and agrees such Loan Documents remain in full force and effect
and (iv) Loan Party agrees that the Security Documents secure all obligations of
Borrower and the Guarantors under the Fifth Amended and Restated Credit
Agreement.

     

    (b) Each
Guarantor hereby reaffirms, as of the Fifth ARCA Effective Date, (i) the
covenants and agreements applicable to it contained in each Loan Document to
which it is a party, including, in each case, such covenants and agreements
applicable to it under the Loan Documents as in effect immediately after giving
effect to this Agreement and the transactions contemplated hereby and thereby,
and (ii) its guarantee of payment of the Secured Obligations pursuant to the
Guarantee and its grant of Liens on the Collateral to secure the Secured
Obligations under the Security Documents.

     

    (c) Each Loan
Party hereby certifies that, as of the date hereof (both before and after giving
effect to the occurrence of the Fifth ARCA Effective Date and the effectiveness
of the Fifth Amended and Restated Credit Agreement), the representations and
warranties made by it contained in the Loan Documents to which it is a party are
true and correct in all material respects with the same effect as if made on the
date hereof, except to the extent any such representation or warranty refers or
pertains solely to a date prior to the date hereof (in which case such
representation and warranty was true and correct in all material respects as of
such earlier date).

     

    (d) Each Loan
Party further confirms that each Loan Document to which it is a party is and
shall continue to be in full force and effect and the same are hereby ratified
and confirmed in all respects.

     

    (e) Each Loan
Party hereby acknowledges and agrees that the acceptance by the Administrative
Agent, each Lender and each other Agent of this document shall not be construed
in any manner to establish any course of dealing on any Agent’s or Lender’s
part, including the providing of any notice or the requesting of any
acknowledgment not otherwise expressly provided for in any Loan Document with
respect to any future amendment, waiver, supplement or other modification to any
Loan Document or any arrangement contemplated by any Loan Document.

     

    SECTION
16. Loan
Document.

     

    For the
avoidance of doubt, this Amendment Agreement is a Loan Document as defined in
the Fifth Amended and Restated Credit Agreement.

     

    SECTION
17. Master Assignment and
Acceptance.

     

    The
Master Assignment and Acceptance, dated as of the date hereof (the “Master Assignment and
Acceptance”), shall be in the form attached as Annex II hereto and the
provisions thereof relating to fees to be paid by the Borrower shall be deemed
incorporated herein.

     

    [SIGNATURE
PAGES FOLLOW]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, each of
the parties hereto has caused a counterpart of this Agreement to be duly
executed and delivered as of the date first above written.

    
    

     

    
      	 	 REGENCY GAS
      SERVICES LP
	 	 By: Regency
      OLP GP LLC, its General Partner

    

     

                                                    

     

     

    
      	
               
      

            	
              By:

            	 /s/ Stephen
      L. Arata	 

    

    
      	
               
      

            	
              Stephen
      L. Arata

            

    

    
      	
               
      

            	
              Vice
      President

            

    

     

                            

     

    
    

     

    
      	 	 REGENCY ENERGY
      PARTNERS LP
	 	 By:           Regency
      GP LP, its General Partner
	 	 By:           Regency
      GP LLC, its General Partner

    

     

                                                     

    
      	
            	
              By:

            	 /s/ Stephen
      L. Arata	 

    

    
    

    
      	
               
      

            	
              Stephen
      L. Arata

            

    

    
      	
               
      

            	
              Executive
      Vice President and Chief Financial
Officer

            

    

     

     

     

    
    

     

    
      	 	 REGENCY FIELD
      SERVICES LLC
	 	 REGENCY
      LIQUIDS PIPELINE LLC
	 	 REGENCY GAS
      MARKETING LLC
	 	 REGENCY GAS
      UTILITY LLC
	 	 CDM RESOURCE
      MANAGEMENT LLC
	 	 WGP-KHC,
      LLC

    
      	
               
      

            	
              By:

            	
              FrontStreet Hugoton LLC, its sole
member

            

    
      	 	 FRONTSTREET
      HUGOTON LLC
	 	 REGENCY
      HAYNESVILLE INTRASTATE GAS LLC

    

     

     

     

    

    
      	
               
      

            	
              By:

            	
              Regency Gas Services LP, its sole
member

            

    

    
      	 	
              By:

            	
              Regency OLP GP LLC,

            

    

    
      	 	
              its general partner

            

    

     

    

      	
            	
              By:

            	 /s/ Stephen
      L. Arata	 

    

    
    

    
      	
                

            	 	
              Stephen L. Arata

            

    

    
      	
                

            	 	
              Vice President

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              GULF STATES TRANSMISSION CORPORATION

            

    

    
    

    
      	
                

            	
              PUEBLO MIDSTREAM GAS CORPORATION 

              PUEBLO HOLDINGS,
INC.   

            

    

     

     

     

    
      	
            	
              By:

            	 /s/ Stephen
      L. Arata	 

    

    
    

    
      	
               
      

            	 	
              Stephen
      L. Arata

            

    

    
      	
               
      

            	 	
              Vice
      President

            

    

    

    

    

     

    
      	 	  PALAFOX
      JOINT VENTURE

    

     

                            

    
      	
                

            	
              By:

            	
              Regency Field Services LLC, its
venturer

            

    

    
      	
                

            	
              By:

            	
              Regency Gas Services LP, its sole
member

            

    

    
      	
                

            	
              By:

            	
              Regency OLP GP LLC, its general
partner

            

    

    

                  

    
      	
            	
              By:

            	 /s/ Stephen
      L. Arata	 

      
      

      
        	
                 
      

              	 	
                Stephen
      L. Arata

              

      

      
        	
                 
      

              	 	
                Vice
      President

              

    

                          

    

       

      
        	 	 By:      Regency
      Gas Services LP, its venturer	 
	 	 	 By:   	 Regency OLP GP
      LLC,	 
	 	 	 	  its
      general partner	 

      

       

    

     

            

    
      	
            	
              By:

            	 /s/ Stephen
      L. Arata	 

      
      

      
        	
                 
      

              	 	
                Stephen
      L. Arata

              

      

      
        	
                 
      

              	 	
                Vice
      President

              

                   

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        
          	
                   
      

                	
                  WACHOVIA
      BANK, NATIONAL ASSOCIATION, as 

                      Issuing
      Bank, Swingline Lender, Administrative 

                      Agent
      and Collateral Agent

                   

                   

                  
                    By: _________________________________      

                    Name:

                    Title:

                  

                   

                

        

         

                                

         

         

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    By
executing this signature page:

    

    (i) as an
existing Revolving Lender that is an Extending Lender, the undersigned
institution agrees (A) to the terms of the Amendment Agreement and the Fifth
Amended and Restated Credit Agreement, (B) on the terms and subject to the
conditions set forth in the Amendment Agreement and the Fifth Amended and
Restated Credit Agreement, to extend and reclassify its Revolving Commitments
and/or Loans, as applicable, into Tranche 2 Revolving Commitments and/or Loans,
as applicable, in the amount reflected as Existing Lender Extension Commitment
and (C) to provide Additional Commitments for Tranche 2 Revolving Loans in the
amount reflected as Additional Commitments, if any, provided that no
Additional Commitments may be made by an Extending Lender unless such Extending
Lender’s Extension Commitment equals the full amount of such Extending Lender’s
Revolving Commitment under the Fourth Amended and Restated Credit Agreement,
and

    

    (ii) as
an existing Revolving Lender that is not an Extending Lender (any such Lender, a
“Non-Extending
Lender”), the undersigned institution agrees to the terms of the
Amendment Agreement and the Fifth Amended and Restated Credit Agreement, but
not to extend and
reclassify its Revolving Loans and/or Commitments, as applicable, into Tranche 2
Revolving Loans and/or Commitments, as applicable, or add additional Tranche 2
Revolving Loans.

    

    
      

      Name of
Lender:____________________________________________________________________

      

    

    

    
      	  
	 
      	 
      	
              Existing
      Amount

            	
              Extended
      Amount

            
	
              Existing
      Lender Extension Commitment

            	
               

              _______________

            	
               

              _______________

            
	 
      	 
      	 
      	 
      
	 
      	 
      	
              Additional
      Commitment Amount

            
	
              Additional
      Commitment

            	
               

              _______________

            	 
      
	 
      	 
      	 
      	 
      

    

    Executing
  as an Extending
  Lender:

         by

              ___________________________________

                  Name:

                  Title:

     

    For any
  Institution requiring a second signature line:

         by

              ___________________________________

                  Name:

                  Title:

     

    
    

    	 
      	 
      	
            Existing
      Amount

          	
            Extended
      Amount

          
	
            Existing
      Lender Extension Commitment

          	
             

            _______________

          	
             

            _______________

          
	 
      	 
      	 
      	 
      
	 
      	 
      	
            Additional
      Commitment Amount

          
	
            Additional
      Commitment

          	
             

            _______________

          	 
      
	 
      	 
      	 
      	 
      

 
 
 

    Executing
as a Non-Extending
Lender:

         by

              ___________________________________

                  Name:

                  Title:

     

    For any
Institution requiring a second signature line:

         by

              ___________________________________

                  Name:

                  Title:gia_ex101.htm

     

    Exhibit
10.1

     

    PURCHASE
AGREEMENT

     

    for

     

    SENIOR
SECURED NOTES AND WARRANTS

     

    Dated
as of February 26, 2010

     

    among

     

    GULFSTREAM
INTERNATIONAL GROUP, INC.

     

    and

     

    THE
PURCHASERS LISTED ON EXHIBIT A

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    TABLE OF
CONTENTS

    

     

    
      
        	 	PAGE
	ARTICLE
      I  Purchase and Sale of Securities	 
	 	 	 
	Section
      1.1.	Purchase
      and Sale of Securities 	4
	Section
      1.2.	Warrant
      Shares 	5
	Section
      1.3.	Purchase
      Price and Closings 	5
	Section
      1.4.	Payment
      of Purchase Price 	5
	Section
      1.5.	Location
      and Time of Closings 	5
	Section
      1.6.	Registration
      Rights Agreement 	6
	 	 	 
	ARTICLE
      II  Representations and Warranties	 
	 	 	 
	Section
      2.1.	Representations
      and Warranties of the Company 	6
	Section
      2.2.	Representations
      and Warranties of the Purchasers 	17
	 	 	 
	ARTICLE
      III  Covenants of the Company	 
	 	 
	Section
      3.1.	Securities
      Law Compliance 	20
	Section
      3.2.	Registration
      and Listing 	20
	Section
      3.3.	Inspection
      Rights 	20
	Section
      3.4.	Compliance with
      Laws	21
	Section
      3.5.	Keeping
      of Records and Books of Account 	21
	Section
      3.6.	Reporting
      Requirements 	21
	Section
      3.7.	Other
      Agreements 	21
	Section
      3.8.	Use
      of Proceeds 	21
	Section
      3.9.	Reservation
      of Shares 	21
	Section
      3.10.	Reporting
      Status 	22
	Section
      3.11.	Disclosure
      of Transaction 	22
	Section
      3.12.	Disclosure
      of Material Information 	22
	Section
      3.13.	Additional
      Affirmative Covenants 	22
	 	 	 
	ARTICLE
      IV  Covenants of the Company and the Purchasers	 
	 	 	 
	Section
      4.1.	Further
      Assurances 	23
	 	 	 
	ARTICLE
      V  Conditions	 
	 	 	 
	Section
      5.1.	Conditions
      Precedent to the Obligation of the Company to Sell the
      Securities 	24
	Section
      5.2.	Conditions
      Precedent to the Obligation of the Purchasers to Purchase the
      Securities 	24

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	ARTICLE
      VI  Certificate Legends	 
	 	 	 
	Section
      6.1.	Legends 	26
	 	 	 
	ARTICLE
      VII  Indemnification	 
	 	 	 
	Section
      7.1.	Company
      Indemnity 	27
	Section
      7.2.	Purchaser
      Indemnity 	27
	Section
      7.3.	 Indemnification
      Procedure	27
	 	 	 
	ARTICLE
      VIII  Miscellaneous	 
	 	 	 
	Section
      8.1.	Fees
      and Expenses 	28
	Section
      8.2.	Entire
      Agreement; Amendment 	29
	Section
      8.3.	Notices 	29
	Section
      8.4.	Waivers 	30
	Section
      8.5.	Headings 	30
	Section
      8.6.	Successors
      and Assigns 	30
	Section
      8.7.	No
      Third Party Beneficiaries 	30
	Section
      8.8.	Governing
      Law 	30
	Section
      8.9.	Survival 	30
	Section
      8.10.	Counterparts 	30
	Section
      8.11.	Publicity 	31
	Section
      8.12.	Severability 	31
	Section
      8.13.	Further
      Assurances 	31

      

    

    
    

     

    
      	Exhibits	 
	 	 
	List of Purchasers
      -   	Exhibit
  A
	Form of Note
      -  	Exhibit
  B
	Form of Warrant
      -     	Exhibit
  C
	Form of Escrow
      Agreement- 	Exhibit
  D
	Form of Security
      Agreement-  	Exhibit
  E
	Form of
      Intercreditor Agreement-  	Exhibit
  F
	Form of Registration
      Rights Agreement-	Exhibit
  G
	Offeree
      Questionairre-   	Exhibit
  H

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    PURCHASE
AGREEMENT

    For

    SENIOR
SECURED NOTES AND WARRANTS

     

    THIS PURCHASE AGREEMENT FOR SENIOR SECURED NOTES AND WARRANTS
(the “Agreement”) is dated
as of February 26, 20010 by and among Gulfstream International Group,
Inc., a Delaware corporation (the “Company”), and of the
Purchasers of the Senior Secured Notes and Warrants of the Company whose names
are set forth on Exhibit A hereto
(individually, a “Purchaser” and
collectively, the “Purchasers”).

    

    The parties hereto agree as
follows:

     

    ARTICLE
I

     

    Purchase
and Sale of Securities

     

     Section
1.1. Purchase and Sale of
Securities.  Upon the following terms and conditions, the
Company shall issue and sell to the Purchasers and each of the Purchasers (a
“Purchaser”)
shall purchase from the Company, severally, and not jointly, in the amounts set
forth opposite such Purchaser’s name on Exhibit A
hereto:

     

    (a) a 12%
Senior Secured Notes of the Company due December 31, 2010 (the “Note”) and in the
form of Exhibit
B attached hereto, and

     

    (b) a
warrant, expiring February 28, 2015 (the “Warrants”), entitling
the Purchaser to acquire that number of shares of the Company’s Common Stock,
par value $0.01 per share (the “Common Stock”) as
shall be determined by dividing (i) fifty percent (50%) of the principal amount
of the Note purchased by such Purchaser, by (ii) the Exercise Price of the
Warrants; provided,
however, that if the Note purchased by the Purchaser shall not have
been prepaid in full by June 30, 2010, then and in such event the number of
shares of Common Stock issuable upon exercise of the Warrant (the “Warrant Shares”)
shall be determined by dividing (i) one hundred percent (100%) of the principal
amount of the Note purchased by such Purchaser, by (ii) the Exercise Price of
the Warrants.  As used herein, the “Exercise Price” of
the Warrants shall be equal to one hundred percent (100%) of the closing price
of the Company’s Common Stock as at the Closing Date (hereinafter
defined).  A copy of the form of Warrant is attached hereto as Exhibit
C.

     

    The Note
and Warrants sold to each Purchaser hereunder are paid of an aggregate of up to
$1,000,000 of Notes and Warrants to be issued to all Purchasers pursuant to this
Agreement.  Such Notes and Warrants are sometimes collectively
referred to herein as the “Securities.” The
Company and the Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “Commission”) under
the Securities Act of 1933, as amended (the “Securities Act”) or
Section 4(2) of the Securities Act.

     

    
      
        
        

      

      
        4

        
          

        

      

       

      Section
1.2. Warrant
Shares.  The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a number of shares of Common Stock as shall
from time to time be sufficient to permit the exercise of all of the Warrants
from time to time outstanding.  Any shares of Common Stock issuable
upon exercise of the Warrants (and such shares when issued) are herein referred
to as the “Warrant
Shares”.

       

      Section
1.3. Purchase Price and
Closings.

    

     

    (a)           Subject
to the terms and conditions hereof, the Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the Notes and the
Warrants for an aggregate purchase price of up to One Million Dollars
($1,000,000) (the “Purchase
Price”).

     

    (b)           The
sale of the Notes and the Warrants shall be sold and funded in one closing (the
“Closing”)
which shall take place on a date which shall be not later than Friday, February
26, 2010 (the “Closing
Date”), unless such Closing Date shall be mutually extended by agreement
between the Company and Taglich Brothers, Inc., as agent for the Purchasers
(“TBI”).

     

    (c)           Pending
the Closing, all proceeds paid by Purchasers will be held in escrow in an escrow
account maintained by CSC Trust Company of Delaware at PNC Bank pursuant to the
terms of the escrow agreement in the form of Exhibit D annexed
hereto (the “Escrow
Agreement”).  Set forth below are the wire instructions for the
escrow account under the Escrow Agreement.

     

    PNC
Bank

    300
Delaware Avenue

    Wilmington,
DE 19899

    ABA#
___________

     

    Account
Name:    CSC Trust Company of Delaware

     

    Account
Number:  ___________

     

    FFC: 
Gulfstream International Group, Inc. Escrow; ___________

     

    Section
1.4. Payment of Purchase
Price.  On the Closing Date,  (a) each Purchaser
shall pay the Purchase Price to the Company for the Securities to be issued and
sold to the Purchaser at the Closing, by wire transfer of immediately available
funds to in accordance with the wire instructions set forth in Section 1.3(c)
above, and (b) the Company shall deliver to each Purchaser (i) Notes in an
amount equal to the Purchase Price paid by the Purchaser at the Closing, and
(ii) Warrants in an amount determined under the provisions of Section 1.1(b) of
this Agreement.

     

    Section
1.5. Location and Time of
Closings.  The Closing under this Agreement shall take place at
the offices of Hodgson Russ LLP, 1540 Broadway, 24th
floor, New York, New York 10036 at 10:00 a.m., New York time.  Subject
to the terms and conditions of this Agreement, at the Closing the Company shall
deliver or cause to be delivered to each Purchaser (x) certificates for the
number of Notes and Warrants set forth opposite the name of such Purchaser on
Exhibit A
hereto, and (y) any other documents required to be delivered pursuant to Article
IV hereof.  At the Closing, each Purchaser shall deliver its Purchase
Price by wire transfer to an escrow account designated by the escrow
agent.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Section
1.6. Security
Agreement.  The Notes shall be secured by a priority lien and
security interest on the accounts receivable of the Company and the proceeds
from the sale or collection of such accounts receivable (the “A/R Lien”) which A/R
Lien shall be senior to all other liens and security interests on the accounts
receivable of the Company and its Subsidiaries and the proceeds
thereof.  At the Closing, the Company and TBI, as collateral agent for
each of the Purchasers (the “Collateral Agent”),
shall enter into a security agreement in the form of Exhibit E annexed
hereto (the “Security
Agreement”).

     

    Section
1.7. Intercreditor
Agreement. Inasmuch as the A/R Lien securing payment of the Notes is
intended to be senior to all other liens and security interests encumbering the
accounts receivable of the Company, at the Closing, the Company, the Collateral
Agent and Shelter Island Opportunity Fund, LLC shall enter into an intercreditor
and subordination agreement in the form of Exhibit F annexed
hereto (the “Intercreditor
Agreement”).

     

    Section
1.8. Registration Rights
Agreement.  At the Closing, the Company and each Purchaser
shall enter into a registration rights agreement in the form of Exhibit G annexed
hereto (the “Registration Rights
Agreement”).

     

    ARTICLE
II

     

    Representations
and Warranties

     

    Section
2.1. Representations and
Warranties of the Company.  The Company hereby represents and
warrants to the Purchasers, as of the date hereof and the Closing Date (except
as set forth on the Schedule of Exceptions attached hereto with each numbered
Schedule corresponding to the section number herein), as follows:

     

    (a) Organization, Good Standing
and Power.  The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to own, lease and operate its properties
and assets and to conduct its business as it is now being
conducted.  As used in this Agreement, the term “Subsidiary” means any
legal entity in which the Company owns, directly or indirectly, outstanding
capital stock, or holds an equity or similar interest, representing all of the
outstanding equity or similar interest of the entity.  The Company
does not have any Subsidiaries except as set forth in the Company’s Form 10-K
for the year ended December 31, 2008, including the accompanying financial
statements (the “Form
10-K”), the Company’s Form 10-K/A filed with the Commission on April 30,
2009 (the “Form
10-K/A”), the Company’s Form 10-Q for the fiscal quarters ended March 31,
2009, June 30,  2009 and September 30, 2009 (the “Form 10-Qs”), the
Proxy Statement on Schedule 14A for the Company’s stockholder meeting held
October 20, 2009, and any and all Form 8-K Interim Reports filed by the Company
since the date of the Form 10-K, (collectively the “Recent 34 Act
Filings”), or on Schedule 2.1(g)
hereto.  The Company and each such Subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined in Section 2.1(c) hereof) on the Company’s financial
condition.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

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

    

     

    (c) Capitalization.  The
authorized capital stock of the Company and the shares thereof currently issued
and outstanding as of the date hereof are set forth in the Recent 34 Act Filings
or as updated on Schedule 2.1(c)
hereto.  All of the outstanding shares of the Common Stock and the
Preferred Stock have been duly and validly authorized.  Except as set
forth in the Recent 34 Act Filings or on Schedule 2.1(c)
hereto: (i) no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company; (ii) there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company; (iii) the Company is
not a party to any agreement granting registration or anti-dilution rights to
any person with respect to any of its equity or debt securities; and (iv) the
Company is not a party to, and it has no knowledge of, any agreement restricting
the voting or transfer of any shares of the capital stock of the
Company.  The offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the Company issued prior to the
Closing complied with all applicable Federal and state securities laws, and no
stockholder has a right of rescission or claim for damages with respect thereto
which would have a Material Adverse Effect (as defined below).  The
Company has furnished or made available to the Purchasers true and correct
copies of the Company’s Certificate of Incorporation as in effect on the date
hereof (the “Articles”), and the
Company’s Bylaws as in effect on the date hereof (the “Bylaws”).  For
the purposes of this Agreement, “Material Adverse
Effect” means (i) any event or condition which would have a material
adverse effect on the business, operations, properties, prospects, or financial
condition of the Company and the Subsidiaries, when taken as a consolidated
whole, and/or (ii) any condition, circumstance, or situation that would prohibit
or otherwise materially interfere with the ability of the Company to perform any
of its obligations under this Agreement in any material respect.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

      (d) Issuance of
Securities.  The Securities to be issued at the Closing will
have been duly authorized by all necessary corporate action, and the Notes and
Warrants, when paid for or issued in accordance with the terms of this
Agreement, shall be validly issued and outstanding.

    

     

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

     

    (f) Commission Documents,
Financial Statements.  The Common Stock of the Company is
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the “Commission
Documents”).  The Company has delivered or made available to
each of the Purchasers true and complete copies of the Commission
Documents.  The Company has not provided to the Purchasers any
material non-public information or other information which, according to
applicable law, rule or regulation, was required to have been disclosed publicly
by the Company but which has not been so disclosed, other than with respect to
the transactions contemplated by this Agreement.  At the times of
their respective filings, the Form 10-K, the Form 10-K/A, and the Form 10-Qs
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such
documents, and, as of their respective dates, none of the Recent 34 Act Filings
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.  

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

      The
financial statements of the Company included in the Commission Documents comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the Commission or other applicable rules
and regulations with respect thereto.  Such financial statements have
been prepared in accordance with United States generally accepted accounting
principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and the Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).

       

      (g) Subsidiaries.  The
Commission Documents or Schedule 2.1(g)
hereto sets forth each Subsidiary of the Company, showing the jurisdiction of
its incorporation or organization and showing the percentage of each person’s
ownership.  For the purposes of this Agreement, “subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries.  All of the outstanding shares
of capital stock of each subsidiary have been duly authorized and validly
issued, and are fully paid and non-assessable.  There is not
outstanding any preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary for the purchase
or acquisition of any shares of capital stock of any subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock.  Neither the Company
nor any subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of the capital stock of any
subsidiary or any convertible securities, rights, warrants or options of the
type described in the preceding sentence.  Neither the Company nor any
subsidiary is party to, nor has any knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of any
subsidiary.

       

      (h) No Material Adverse
Change.  Since December 31, 2008, except as disclosed in the
Recent 34 Act Filings the Company has not experienced or suffered any Material
Adverse Effect.

       

      (i) No Undisclosed
Liabilities.  Except as disclosed in the Recent 34 Act Filings,
neither the Company nor any of the Subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of the Company’s or the Subsidiaries’ respective
businesses since December 31, 2008 and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect on the Company or the
Subsidiaries.

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

      (j) No Undisclosed Events or
Circumstances.  No event or circumstance has occurred or exists
with respect to the Company or the Subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed.

       

      (k) Indebtedness.  The
Recent 34 Act Filings or Schedule 2.1(k)
hereto sets forth as of a recent date all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any
subsidiary has commitments.  For the purposes of this Agreement,
“Indebtedness”
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$250,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required to
be capitalized in accordance with GAAP.  Except as set forth in the
Recent 34 Act Filings or on Schedule 2.1(k)
hereto, neither the Company nor any subsidiary is in default with respect to any
Indebtedness.

       

      (l) Title to
Assets.  Each of the Company and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the Form
10-K, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those disclosed in the Form 10-K or
such that, individually or in the aggregate, do not cause a Material Adverse
Effect.  All leases that are material to the business of the Company
and the Subsidiaries are valid and subsisting and in full force and
effect.

       

      (m) Actions
Pending.  There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary which questions the validity of this Agreement or any of the
other Transaction Documents or the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto.  Except
as set forth in the Recent 34 Act Filings or on Schedule 2.1(m)
hereto: (i) there is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or any other proceeding pending or, to
the knowledge of the Company, threatened, against or involving the Company, any
Subsidiary or any of their respective properties or assets, and (ii) there are
no outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
subsidiary or any officers or directors of the Company or subsidiary in their
capacities as such.

       

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

    

     

    
      
        
        

      

      
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      (o) Taxes.  Except
as set forth in the Recent 34 Act Filings or on Schedule 2.1(o)
hereto, the Company and each of the subsidiaries has accurately prepared and
filed all federal, state and other tax returns required by law to be filed by
it, has paid or made provisions for the payment of all taxes shown to be due and
all additional assessments, and adequate provisions have been and are reflected
in the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable.  None of the federal income
tax returns of the Company or any subsidiary have been audited by the Internal
Revenue Service.  The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.

       

      (p) Certain
Fees.  Except as set forth on Schedule 2.1(p)
hereto, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any subsidiary or any Purchaser with respect to the
transactions contemplated by this Agreement.

       

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

       

      (r) Operation of
Business.  The Company and each of the Subsidiaries owns or
possesses all patents, trademarks, domain names (whether or not registered) and
any patentable improvements or copyrightable derivative works thereof, websites
and intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Recent 34 Act
Filings, and all rights with respect to the foregoing, which are necessary for
the conduct of its business as now conducted without any conflict with the
rights of others that does or would have a Material Adverse Effect.

       

      (s) Environmental
Compliance.  The Company and each of the Subsidiaries have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under
any  Environmental Laws.  The Recent 34 Act Filings describe
all material permits, licenses and other authorizations issued under any
Environmental Laws to the Company or the Subsidiaries.  “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in
nature.  

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

      The
Company has all necessary governmental approvals required under all
Environmental Laws and used in its business or in the business of any of the
Subsidiaries.  The Company and each of the Subsidiaries are also in
compliance with all other material limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under all
Environmental Laws.  Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect, there are no
past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or the Subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous
substance.

       

      (t) Books and Record Internal
Accounting Controls.  The books and records of the Company and
the Subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any
Subsidiary.  The Company and each of the Subsidiaries maintains a
system of internal accounting controls sufficient, in the judgment of the
Company, to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions is taken with respect to any differences.

       

      (u) Material
Agreements.  Except as described in or filed as an exhibit to
the Recent 34 Act Filings or on Schedule 2.1(u)
hereto (which Schedule may cross-reference other Commission Documents), neither
the Company nor any Subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to a
registration statement on Form S-1 or applicable form (collectively, “Material Agreements”)
if the Company or any Subsidiary were registering securities under the
Securities Act.  The Company and each of the Subsidiaries has in all
material respects performed all the obligations required to be performed by them
to date under the foregoing agreements, have received no notice of default and
are not in default under any Material Agreement now in effect, the result of
which could cause a Material Adverse Effect.  Except as set forth in
the Recent 34 Act Filings or on Schedule 2.1(u)
annexed hereto, no written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement of the Company or of any Subsidiary limits or
shall limit the payment of dividends on the Series A Preferred Stock, other
preferred stock, if any, or its Common Stock.

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

      (v) Transactions with
Affiliates.  Except as set forth in the Commission Documents,
and other than as disclosed on Schedule 2.1(v), none
of the officers, directors or employees of the Company is presently a party to
any transaction of the Company or any of its Subsidiaries (other than for
ordinary course services as employees, officers, or directors) including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing fro rental of real or personal property to or from,
or otherwise requiring payments to or from any such officer, director or
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which such officer, director, or employee has a
substantial interest or is an officer, director, trustee, or
partner.

       

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

       

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

       

      (y) Employees.  Neither
the Company nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees.  Except as disclosed in the
Recent 34 Act Filings, neither the Company nor any Subsidiary has any employment
contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
Subsidiary.  Except as disclosed in the Recent 34 Act Filings, no
officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, could have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the
Company or any Subsidiary.

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

      (z) Absence of Certain
Developments.  Except as set forth in the Recent 34 Act Filings
or on Schedule
2.1(c) hereto, since September 30, 2009, neither the Company nor any
Subsidiary has:

    

     

     

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

     

    (ii) borrowed
any material amount or incurred or become subject to any material liabilities
(absolute or contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature and
volume of the Company’s or such Subsidiary’s business;

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    (dd) No Integrated
Offering.  Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offering of the Securities to this
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.  The
Company does not have any registration statement pending before the Commission
or currently under the Commission’s review and, except as disclosed in the
Recent 34 Act Filings, since December 1, 2007, the
Company has not offered or sold any of its equity securities or debt securities
convertible into shares of Common Stock.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

      (ee) Sarbanes-Oxley
Act.  The Company is in compliance with the applicable
provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),
and the rules and regulations promulgated thereunder, that are effective, and
intends to comply with other applicable provisions of the Sarbanes-Oxley Act,
and the rules and regulations promulgated thereunder, upon the effectiveness of
such provisions.

    

     

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

     

    (gg) DTC
Status.  The Company’s current transfer agent is a participant
in and the Common Stock is eligible for transfer pursuant to the Depository
Trust Company Automated Securities Transfer Program.  The name,
address, telephone number, fax number, contact person and email address of the
Company’s transfer agent is set forth on Schedule 2.1(gg)
hereto.

     

    (hh) Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage of at least $5.0 million.  To the best of Company’s
knowledge, such insurance contracts and policies are accurate and complete. The
Company reasonably believes that it will be able to renew its own and the
Subsidiaries’ existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to continue
its and their business without a material increase in cost.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

      Section
2.2. Representations and
Warranties of the Purchasers.  Each of the Purchasers hereby
makes the following representations and warranties to the Company with respect
solely to itself and not with respect to any other Purchaser:

    

     

    (a) Organization and Standing of
the Purchasers.  If the Purchaser is a corporation,
partnership, unincorporated association or other entity, it has the legal
capacity to enter into and be bound by the Agreement, it has been duly
incorporated or organized, and that it is validly subsisting in the jurisdiction
of its incorporation or organization.  If the Purchaser is a natural
person, he or she is of the full age of majority and is legally competent to
execute and perform under the terms of the Transaction Documents.

     

    (b) Authorization and
Power.  Each Purchaser has the requisite power and authority to
enter into and perform the Transaction Documents and to purchase the Securities
being sold to it under this Agreement.  The execution, delivery and
performance of the Transaction Documents by the Purchaser and the consummation
by it of the transactions contemplated the Transaction Documents have been duly
authorized by all necessary corporate or partnership other organizational
action, and no further consent or authorization of such Purchaser or its Board
of Directors, stockholders, partners, interest holders or representatives, as
the case may be, is required.  This Agreement has been duly
authorized, executed and delivered by such Purchaser and constitutes, or shall
constitute when executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its
terms.

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

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

    

     

    (e) Status of
Purchasers.  Such Purchaser is an “accredited investor” as
defined in Rule 501 of Regulation D promulgated under the Securities Act, and
has indicated on the attached Exhibit E the basis
on which the Purchaser claims to be an accredited investor.  Such
Purchaser is not acting as a “broker-dealer,” as that term is defined under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), in
connection with the transactions contemplated by the Transaction Documents, and
is not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.

     

    (f) Opportunities for Additional
Information.  Each Purchaser acknowledges that such Purchaser
has had the opportunity to ask questions of and receive answers from, or obtain
additional information from, the executive officers of the Company concerning
the financial and other affairs of the Company, and to the extent deemed
necessary in light of such Purchaser’s individual knowledge of the Company’s
affairs, such Purchaser and its representatives have asked such questions and
received answers to the full satisfaction of such Purchaser, and such Purchaser
desires to invest in the Company. The Purchaser understands that its investment
in the Securities involves a high degree of risk including those risks
identified in the Recent 34 Act Filings. The Purchaser has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed decision with respect to acquisition of the Securities.

     

    (g) No Governmental
Review.  Each Purchaser understands that no United States
federal or state agency, or any other government or governmental agency, has
passed upon or made any recommendation or endorsement of the Securities or of
the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

     

    
      
        
        

      

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

    

     

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

     

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

     

    (k) Independent
Investment.  Except as may be disclosed in any filings with the
Commission by the Purchasers under Section 13 and/or Section 16 of the Exchange
Act, no Purchaser has agreed to act with any other Purchaser for the purpose of
acquiring, holding, voting or disposing of the Securities for purposes of
Section 13(d) under the Exchange Act, and each Purchaser is acting independently
with respect to its investment in the Shares.

     

    (l) Trading Activities.  Each Purchaser’s trading activities with
respect to the Securities shall be in compliance with all applicable federal and
state securities laws.  No
Purchaser nor any of its affiliates has an open short position in Common Stock,
each Purchaser agrees that it shall not, and that it will cause its affiliates
not to, engage in any short sales with respect to Common Stock for a period of
one (1) year following the applicable Closing Date.

     

    (m) Counsel.  The
Purchaser is represented by its own legal counsel, and it acknowledges that the
Company’s counsel is acting as counsel to the Company and not as counsel to the
Purchaser.

     

    (n) Offeree
Questionairre. The Purchaser has completed, executed and delivered to the
Company an offeree questionnaire in the form of Exhibit H annexed hereto and
made a part hereof (the “Offeree
Questionairre”).

     

    
      
        
        

      

      
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    ARTICLE
III

     

    Covenants of the Company

     

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

     

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

     

    Section
3.2. Registration and
Listing.  The Company shall cause its Common Stock to continue
to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in
all respects with its reporting and filing obligations under the Exchange Act
and to not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted in the Transaction
Documents.  The Company will take all action necessary to continue the
listing or trading of its Common Stock on the NYSE: Amex Stock Exchange or other
exchange or market on which the Common Stock is trading.  Subject to
the terms of the Transaction Documents, the Company further covenants that it
will take such further action as the Purchasers may reasonably request, all to
the extent required from time to time to enable the Purchasers to sell the
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities
Act.  Upon the request of the Purchasers, the Company shall deliver to
the Purchasers a written certification of a duly authorized officer as to
whether it has complied with such requirements.

     

    Section
3.3. Inspection
Rights.  The Company shall permit, during normal business hours
and upon reasonable request and reasonable notice, each Purchaser or any
employees, agents or representatives thereof, so long as such Purchaser shall
own Warrant Shares which, in the aggregate, represent more than 5% of the total
combined voting power of all of the Company’s voting securities then
outstanding, for purposes reasonably related to such Purchaser’s interests as a
stockholder to examine and make reasonable copies of and extracts from the
records and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, consultants, directors, and key employees, provided, however, that if
required by Regulation FD or other applicable regulations of the Commission, the
right of inspection and information provided in this section shall be
exercisable by the Purchaser only if the Purchaser enters into an appropriate
confidentiality agreement with the Company.

     

    
      
        
        

      

      
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      Section
3.4. Compliance with
Laws.  The Company shall comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance
with which could have a Material Adverse Effect.

       

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

       

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

    

     

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

     

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

     

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

     

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

     

    Section
3.8. Use of
Proceeds.  The net proceeds from the sale of the Securities
shall be used by the Company for working capital purposes only, and not to
redeem any Common Stock or securities convertible, exercisable or exchangeable
into Common Stock or to settle any outstanding litigation.

     

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

     

    
      
        
        

      

      
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      Section
3.10. Reporting
Status. So
long as a Purchaser beneficially owns any of the Warrants, the Company shall
timely file all reports required to be filed with the Commission pursuant to the
Exchange Act.

       

      Section
3.11. Disclosure of
Transaction. The Company file with the Commission a Current Report
on Form 8-K (the “Form
8-K”) describing the material terms of the transactions contemplated
hereby (and attaching as exhibits thereto this Agreement) on the Initial Closing
Date.  "Trading Day" means
any day during which the NYSE: Amex Stock Exchange (or other principal exchange
on which the Common Stock is traded) shall be open for trading.

       

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

       

      Section
3.13. Monthly A/R
Reports. Not later than ten (10) days following the last day of each
month, commencing with the month of February 2010, the Company shall furnish to
the Collateral Agent reports as at the aggregate amount of the accounts
receivable of the Company and each of its Subsidiaries (as hereinafter defined)
as at end of the immediately preceding calendar month (the “A/R
Report”).   The failure of the Company to timely furnish
such monthly A/R Report shall constitute a material breach of this Agreement
and, upon receipt of written notice from Collateral Agent, shall represent an
Event of Default under the Note.

       

      Section
3.14. Additional Affirmative
Covenants.  The Company hereby covenants and agrees, so long as
any Securities remain outstanding and to the extent necessary to avoid a
Material Adverse Effect, as follows:

    

     

    (a) Maintenance of Corporate
Existence.  The Company shall and shall cause the Subsidiaries
to, maintain in full force and effect its corporate existence, material rights
and franchises and all material terms of licenses and other rights to use
material licenses, trademarks, trade names, service marks, copyrights, patents
or processes owned or possessed by it and necessary to the conduct of its
business.

     

    (b) Maintenance of
Properties.  The Company shall and shall cause the Subsidiaries
to, keep each of its properties necessary to the conduct of its business in good
repair, working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company shall and shall the
Subsidiaries to at all times comply with each material provision of all leases
to which it is a party or under which it occupies property.

     

    
      
        
        

      

      
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      (c) Payment of
Taxes.  The Company shall and shall cause the Subsidiaries to,
promptly pay and discharge, or cause to be paid and discharged when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, assets, property or business of the Company
and the Subsidiaries; provided, however, that any such tax, assessment, charge
or levy need not be paid if the validity thereof shall be contested timely and
in good faith by appropriate proceedings, if the Company or the Subsidiaries
shall have set aside on its books adequate reserves with respect thereto, and
the failure to pay shall not be prejudicial in any material respect to the
holders of the Securities, and provided, further, that the Company or the
Subsidiaries will pay or cause to be paid any such tax, assessment, charge or
levy forthwith upon the commencement of proceedings to foreclose any lien which
may have attached as security therefor.

    

     

    (d) Maintenance of
Insurance.  The Company shall and shall cause the Subsidiaries
to, keep its assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by theft, fire, explosion
and other risks customarily insured against by companies in the line of business
of the Company or the Subsidiaries, in amounts sufficient to prevent the Company
and the Subsidiaries from becoming a co-insurer of the property insured; and the
Company shall and shall cause the Subsidiaries to maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated or as may be required by law,
including, without limitation, general liability, fire and business interruption
insurance, and product liability insurance as may be required pursuant to any
license agreement to which the Company or the Subsidiaries is a party or by
which it is bound.  In addition, the Company and the Subsidiaries
shall maintain directors and officers liability insurance coverage of at least
$5.0 million by insurers of recognized financial responsibility.

     

    ARTICLE
IV

     

    Covenants
of the Company and the Purchasers

     

    Section
4.1. Further
Assurances.  From time to time the Company shall execute and
deliver to the Purchasers and the Purchasers shall execute and deliver to the
Company such other instruments, certificates, agreements and documents and take
such other action and do all other things as may be reasonably requested by the
other party in order to implement or effectuate the terms and provisions of the
Transaction Documents and any of the Securities.

     

    
      
        
        

      

      
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      Section
4.2. Restrictions
on Common Stock Ownership. Notwithstanding anything to the contrary set
forth in this Agreement, at no time may any  Purchaser own of record
or beneficially, upon exercise of the Warrant, in whole or in part, that number
of shares of Common Stock that would cause such Purchaser or his or its
Affiliate to own beneficially at such time, when aggregated with all other
shares of Common Stock beneficially owned by the Purchaser and his or its
affiliates at such time (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules thereunder), in
excess of 9.99% of the then issued and outstanding shares of Common Stock
outstanding at such time; provided, however, that upon
the Purchaser or his or its Affiliates providing the Corporation with sixty-one
(61) days notice (the "Waiver Notice") that
the Purchaser or his or its Affiliate would like to waive the provisions of this
Section 3.16 regard to any or all shares of Common Stock, this Section 3.16
shall be of no force or effect with regard to those shares referenced in the
Waiver Notice.

    

     

    ARTICLE
V

     

    Conditions

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

    

     

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

     

    (a) Accuracy of the Company’s
Representations and Warranties.  Each of the representations
and warranties of the Company in this Agreement and the other Transaction
Documents shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of such Closing Date as though made at that time, except for
representations and warranties that are expressly made as of a particular date,
which shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of such
date.

     

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

     

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

     

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

     

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

     

    (f) Certificates.  The
Company shall have executed and delivered to the Purchasers the certificates for
the Securities being acquired by such Purchaser at such Closing (in such
denominations as such Purchaser shall request).

     

    
      
        
        

      

      
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      (g) Resolutions.  The
Board of Directors of the Company shall have adopted resolutions consistent with
Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the
"Resolutions").

    

     

    (h) Reservation of
Shares.  As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the purpose
of permitting the exercise of the Warrants, a number of shares of Common Stock
equal to one hundred twenty percent (120%) of the aggregate number of Warrant
Shares issuable upon exercise of the Warrants outstanding on such Closing
Date.

     

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

     

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

     

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

     

     

    ARTICLE
VI

     

    Certificate
Legends

     

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

     

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN] [THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) NOR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WITH
RESPECT TO THE SECURITIES IS EFFECTIVE AND ANY APPLICABLE STATE SECURITIES LAW
REQUIREMENTS HAVE BEEN MET, OR (B) GULF STREAM INTERNATIONAL RECEIVES AN OPINION
OF COUNSEL, REASONABLY ACCEPTABLE TO IT, THAT THE REQUIREMENTS FOR EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND FROM THE
REGISTRATION OR QUALIFICATION REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES
LAWS HAVE BEEN MET.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the securities upon which it is
stamped, if (i) the securities are registered for resale under the Securities
Act and registered or qualified under any applicable state securities laws, or
(ii) in connection with a sale, assignment or other transfer, the holder
provides the Company with an opinion of counsel, reasonably satisfactory to the
Company, to the effect that the sale, assignment, or transfer of the securities
is exempt from registration under the Securities Act and is exempt from the
registration or qualification requirements of any applicable state securities
law.

     

    ARTICLE
VII

     

    Indemnification

     

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

     

    Section
7.2. Purchaser
Indemnity.  Each Purchaser agrees to indemnify and hold
harmless the Company.

     

    Section
7.3. Indemnification
Procedure.  Any party entitled to indemnification under this
Article VII (an “indemnified party”) will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VII except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice.  In case
any action, proceeding or claim is brought against an indemnified party in
respect of which indemnification is sought hereunder, the indemnifying party
shall be entitled to participate in and, unless in the reasonable judgment of
the indemnified party a conflict of interest between it and the indemnifying
party may exist with respect of such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified
party.  In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim.  

     

    
      
        
        

      

      
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      In any
event, unless and until the indemnifying party elects in writing to assume and
does so assume the defense of any such claim, proceeding or action, the
indemnified party’s costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder.  The indemnified party shall cooperate
fully with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the indemnified party
which relates to such action or claim.  The indemnifying party shall
keep the indemnified party fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto.  If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense.  The indemnifying party
shall not be liable for any settlement of any action, claim or proceeding
effected without its prior written consent.  Notwithstanding anything
in this Article VII to the contrary, the indemnifying party shall not, without
the indemnified party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such
claim.  The indemnification required by this Article VII shall be made
by periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, but only if the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification.  The indemnity
agreements contained herein shall be in addition to (a) any cause of action or
similar rights of the indemnified party against the indemnifying party or
others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.

    

     

     

    ARTICLE
VIII

     

    Miscellaneous

     

    Section
8.1. Fees and
Expenses.  Except as otherwise set forth in this Agreement and
the other Transaction Documents, each party shall pay the fees and expenses of
its advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    Each of
the Company and the Purchasers (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper.  Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by delivery of a copy thereof, by an independent delivery service
that confirms delivery at the recipient’s address, to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing in this Section 7.2 shall affect or limit any right
to serve process in any other manner permitted by law.

     

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

     

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

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    
      	
              If
      to the Company:

            	
              Gulfstream
      International Group, Inc.

              3201
      Griffin Road

              Ft.
      Lauderdale, Florida

              Attention:
      David Hackett, President

              Tel.
      No.: (954) 985-1500

              Fax
      No.:  (954) 985 5245

            
	 
      	 
      
	
              with
      copies to:

            	
              Hodgson
      Russ LLP

              1540
      Broadway, 24th
      Floor

              New
      York, New York 10036-4039

              Attention:  Stephen
      A. Weiss, Esq.

              Tel.
      No.:  (646) 218-7606

              Fax
      No.:  (212) 751-0928

            
	 
      	 
      
	
              If
      to any Purchaser:

            	
              At
      the address of such Purchaser set forth on Exhibit A 

              to
      this Agreement, with copies to Purchaser’s counsel as 

              set
      forth on Exhibit A or as specified in
      writing by such 

              Purchaser
      with copies
  to:______________________________________

            

    

    

     

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

     

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

     

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

     

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

     

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

     

    Section
8.8. Placement Agent
Compensation. Taglich Brothers, Inc. or its Affiliates shall be
entitled to receive (a) a fee equal to five percent (5%) of the total amount of
Notes sold in the Offering, and (b) warrants (the “Placement Agent Warrants”)
entitling the Placement Agent or its Affiliates to purchase a number of Warrant
Shares equal to ten percent (10%) of the number of Warrant Shares issuable to
Purchasers of the Notes.

     

    Section
8.9. Governing
Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction.  This
Agreement shall not be interpreted or construed with any presumption against the
party causing this Agreement to be drafted.

     

    Section
8.10. Survival.  The
representations and warranties of the Company and the Purchasers shall survive
the execution and delivery hereof and each Closing until the second anniversary
of the final Closing Date, except the agreements and covenants set forth in
Articles I, III, VI, VII, and VIII of this Agreement shall survive the execution
and delivery hereof and the Closings hereunder.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

       

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

       

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

       

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

       

      Section
8.14. Subsidiaries. As used
in this Agreement, the term “Subsidiaries” shall mean each of Gulfstream
International Airlines, Inc., a Florida corporation, Gulfstream Connection,
Inc., a Florida corporation, Gulfstream Training Academy, a Florida corporation
and GIA Holdings Corp., Inc., a Delaware corporation, and all wholly-owned
subsidiaries of the Company.  The Subsidiaries have jointly and
severally guaranteed the obligations of the Company under the Note and the
Security Agreement, and by their execution below, this Agreement.

       

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

    

     

    [REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    Signature
Page to Purchase Agreement for Senior Subordinated Notes and
Warrants

     

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

     

    
      	
              The
    Company:

            	
              GULFSTREAM
      INTERNATIONAL GROUP, INC.

               

            
	 
      	 
      
	 
      	
              By:                                                                   

            
	 
      	
                    Name:
      David F. Hackett

                    Title:   President

               

               

            
	
              The
      Subsidiaries:

            	
              GULFSTREAM
      INTERNATIONAL AIRLINES, INC.

            
	 
      	 
      
	 
      	
              By:                                                                   

            
	 
      	
                    Name:
      David F. Hackett

                    Title:   President

               

            
	 
      	 
      

              GULFSTREAM
      CONNECTION, INC.

            
	 
      	 
      
	 
      	
              By:                                                                   

            
	 
      	
                    Name:
      David F. Hackett

                    Title:   President

               

            
	 
      	 
      
	 
      	
              GULFSTREAM
      TRAINING ACADEMY, INC.

            
	 
      	 
      
	 
      	
              By:                                                                   

            
	 
      	
                    Name:
      David F. Hackett

                    Title:   President

               

            
	 
      	
              GIA
      HOLDINGS CORP., INC.

            
	 
      	 
      
	 
      	
              By:                                                                   

            
	 
      	
                    Name:
      David F. Hackett

                    Title:   President

               

            

    

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    

    
      	
              PURCHASER
      (signing jointly)

            	
              PURCHASER

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
              By:_________________________________

                    Name:

                    Title:

            	
              By:_____________________________________________________   

                    Name:

                    Title:

            
	 
      	 
      
	 
      	
              Address
      of Purchaser

            
	 
      	 
      
	 
      	
              _________________________________________________________

               

              _________________________________________________________

               

              Email:
      _________________________________

               

              Telephone:
      _____________________________

               

               

            
	 
      	
              Principal
      amount of Notes
    Purchased:   $_______________

            
	 
      	 
      
	 
      	
              Purchase
      Price:

              $______________________

            
	 
      	 
      
	 
      	
              Number
      of Warrants based on formula contained in Section 1.1(b).

               

                _____________
      Warrants

            
	 
      	 
      
	 
      	 
      

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    DEFINITION
OF “ACCREDITED INVESTOR”

     

    The term
“accredited investor” means:

     

    A
bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act, whether acting in its individual or fiduciary capacity; a broker
or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of the Securities Act; an
investment company registered under the Investment Company Act of 1940 (the
“Investment Company Act”) or a business development company as defined in
Section 2(a)(48) of the Investment Company Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions or any agency or
instrumentality of a state or its political subdivisions for the benefit of its
employees, if such plan has total assets in excess of US $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the
employee benefit plan has total assets in excess of US $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors.

     

    A
private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.

     

    An
organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of US $5,000,000.

    
            

            
A director or executive officer of the Company.

    

    
    

     

    A
natural person whose individual net worth, or joint net worth with that person’s
spouse, at the time of his or her purchase exceeds US $1,000,000.

     

    A
natural person who had an individual income in excess of US $200,000 in each of
the two most recent years or joint income with that person’s spouse in excess of
US $300,000 in each of those years and has a reasonable expectation of reaching
the same income level in the current year.

     

    A
trust, with total assets in excess of US $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) (i.e., a person who has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective
investment).

     

    An
entity in which all of the equity owners are accredited
investors.  (The Purchaser
must identify each equity owner and provide statements signed by each
demonstrating how each is qualified as an accredited investor.)

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    ACCREDITED
INVESTOR REPRESENTATIONS

     

    Each
Purchaser indicating that it is an Accredited Investor, severally and not
jointly, further represents and warrants to the Company as follows:

     

    Such
person or entity qualifies as an Accredited Investor on the basis set forth on
its signature page to this Agreement.

     

    Such
person or entity has sufficient knowledge and experience in finance, securities,
investments and other business matters to be able to protect such Purchaser’s
interests in connection with the transactions contemplated by this
Agreement.

     

    Such
person or entity has consulted, to the extent that it has deemed necessary, with
its tax, legal, accounting and financial advisors concerning its investment in
the Securities.

     

    Such
person or entity understands the various risks of an investment in the
Securities and can afford to bear such risks for an indefinite period of time,
including, without limitation, the risk of losing its entire investment in the
Securities.

     

    Such
person or entity has had access to the Company’s publicly filed reports with the
SEC and has been furnished during the course of the transactions contemplated by
this Agreement with all other public information regarding the Company that such
person or entity has requested and all such public information is sufficient for
such person or entity to evaluate the risks of investing in the
Securities.

     

    Such
person or entity has been afforded the opportunity to ask questions of and
receive answers concerning the Company and the terms and conditions of the
issuance of the Securities.

     

    Such
person or entity is not relying on any representations and warranties concerning
the Company, whether oral or written, made by the Company or any
officer, employee or agent of the Company, other than those contained in this
Agreement.

     

    Such
person or entity is acquiring the Securities for such person’s or entity’s, as
the case may be, own account, for investment and not for distribution or resale
to others.

     

    Such
person or entity will not sell or otherwise transfer the Securities, unless
either (a) the transfer of such securities is registered under the Securities
Act or (b) an exemption from registration of such securities is
available.

     

    Such
person or entity consents to the placement of a legend on any certificate or
other document evidencing the Securities substantially in the form set forth in
Section 5.1.

     

    Such
person or entity understands and acknowledges that the Securities have not been
recommended by any federal or state securities commission or regulatory
authority, that the foregoing authorities have not confirmed the accuracy or
determined the adequacy of any information concerning the Company that has been
supplied to such person or entity and that any representation to the contrary is
a criminal offense.

     

    
      
        
        

      

      
        35

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