Document:

REDEMPTION
      AGREEMENT AND RELEASE

     

    This
      Redemption Agreement and Release (the “Agreement”) is dated as of July ___, 2007
      and is made by and between _______________ (the “Purchaser”) and Manaris
      Corporation, a Nevada corporation (the “Company”).

     

    WHEREAS,
      the
      Company issued to the Purchaser an aggregate of $[_________] principal amount
      of
      Series B Subordinated Secured Convertible Promissory Notes (collectively the
      “Notes”), and an aggregate of $[_________] principal amount of Original Issue
      Discount Series B Subordinated Secured Convertible Promissory Notes pursuant
      to
      the Note and Warrant Purchase Agreement (the “Purchase Agreement”) dated August
      11, 2006 (collectively the “OID Notes”); 

     

    WHEREAS,
      the
      Company issued to the Purchaser an aggregate of [_________] four year warrants
      to purchase shares of the Company’s common stock, $0.001 par value per share
      (the “Common Stock”), exercisable at $0.45 per share (collectively the “Series Z
      Warrants”), and an aggregate of [_________] four year warrants to purchase
      shares of the Company’s Common Stock exercisable at $0.65 per share
      (collectively the “Series Y Warrants;” the Series Y Warrants and the Series Z
      Warrants, shall collectively be referred to as the “Warrants”); the Warrants,
      the Notes and the OID Notes shall collectively be referred to as the
“Securities”); 

     

    WHEREAS,
      the
      Company desires to purchase from the Purchaser (i) all of the Notes, (ii) all
      of
      the OID Notes, and (iii) Warrants which represent 50% of the Series Z Warrants
      and 50% of the Series Y Warrants pursuant to the terms set forth herein;
      and

     

    WHEREAS,
      the
      Company desires to (a) reduce the exercise price of (i) Series Z Warrants held
      by the Purchaser from $0.45 to $0.11, and (ii) Series Y Warrants held by the
      Purchaser from $0.65 to $0.11, and (b) provide for Section 4 of the Warrants
      as
      applicable to the remaining Warrants held by the Purchaser to be considered
      null, void and no longer applicable, such that, except as provided in this
      Agreement, there shall not be any additional adjustment of the exercise price
      of
      the Warrants. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual conditions and covenants contained in this
      Agreement, and for other good and valuable consideration, the sufficiency and
      receipt of which is hereby acknowledged, it is hereby stipulated, consented
      to
      and agreed by and among the Purchaser and the Company as follows:

     

    1. The
      Company and the Purchaser agree that (i) the outstanding principal balance
      of
      the Notes and all interest accrued and unpaid thereon is $[_________] (the
      “Outstanding Notes”), (ii) the outstanding principal balance of the OID Notes
      and all interest accrued and unpaid thereon is $[_________] (the “Outstanding
      OID Notes”), (iii) the Purchaser is the holder of [_________] Series Z Warrants,
      and (iv) the Purchaser is the holder of [_________] Series Y
      Warrants.

     

    2. (a) Upon
      execution of this Agreement, the Purchaser shall surrender and return to the
      Company via overnight delivery the original Notes, the OID Notes, and Warrants
      to the following address: Manaris Corporation, 400 boul. Montpellier Montreal,
      Quebec, Canada H4N 2G7, attention Tony Giuliano;

     

    (b) Upon
      execution of this Agreement, the exercise price of the remaining balance of
      the
      Series Z Warrants held by the Purchaser shall be reduced from $0.45 to $0.11,
      and the exercise price of the remaining balance of the Series Y Warrants held
      by
      the Purchaser shall be reduced $0.65 to $0.11 (collectively the “New Exercise
      Price”); 

     

    (c) Within
      three (3) days of execution of this Agreement, the Company shall delivery to
      the
      Purchaser via overnight delivery the remaining balance of the Warrants
      reflecting the New Exercise Price; and

     

    (d) Upon
      execution of this Agreement, Section 4 of the Warrants as applicable to the
      remaining Warrants held by the Purchaser shall be considered null, void and
      no
      longer applicable, such that, except as provided in this Agreement, there shall
      not be any additional adjustment of the exercise price of the
      Warrants.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3. Within
      three (3) business days from execution of this Agreement and upon receipt of
      the
      original Securities, the Company shall pay, or shall instruct its authorized
      agents to pay, to the Purchaser the sum of $_____________, equal to One Hundred
      and Six (106%) Percent of the aggregate principal amounts of the Outstanding
      Notes and the Outstanding OID Notes, by wire transfer to the Purchaser’s bank
      and account as set forth on Schedule A hereto. 

     

    4. In
      consideration of the foregoing, the Purchaser releases and discharges the
      Company, the Company’s officers, directors, principals, control persons, past
      and present employees, insurers, successors, and assigns (the Company “Parties”)
      from all actions, cause of action, suits, debts, dues, sums of money, accounts,
      reckonings, bonds, bills, specialties, covenants, contracts, controversies,
      agreements, promises, variances, trespasses, damages, judgments, extents,
      executions, claims, and demands whatsoever, in law, admiralty or equity, which
      against the Company Parties ever had, now have or hereafter can, shall or may,
      have for, upon, or by reason of any matter, cause or thing whatsoever, whether
      or not known or unknown, from the beginning of the world to the day of the
      date
      of this Release arising under the Securities.

     

    5.
       In
      consideration of the foregoing, the Company releases and discharges the
      Purchaser, the Purchaser’s officers, directors, principals, managers, control
      persons, past and present employees, insurers, successors, and assigns (the
      “Purchaser Parties”) from all actions, cause of action, suits, debts, dues, sums
      of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts,
      controversies, agreements, promises, variances, trespasses, damages, judgments,
      extents, executions, claims, and demands whatsoever, in law, admiralty or
      equity, which against the Purchaser Parties ever had, now have or hereafter
      can,
      shall or may, have for, upon, or by reason of any matter, cause or thing
      whatsoever, whether or not known or unknown, from the beginning of the world
      to
      the day of the date of this Release arising under the Securities.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6. The
      Company and the Purchaser each understand and agree that this Agreement
      (including all of its terms) is forever deemed confidential between them. Except
      as required under the statutes, rules or regulations of any federal or state
      government, government agency or court of competent jurisdiction, each of the
      Company and the Purchaser, and their respective counsel, shall not disclose
      or
      divulge any of the matters underlying this Agreement, or any of the terms or
      substance of this Agreement to others. 

     

      All
      inquiries, if any, regarding the other party’s performance shall be responded to
      promptly. Each party shall furnish the other party with a written copy of each
      and every written response; or, if such response was oral the date, time and
      person to whom a response was given. 

     

    7. All
      parties acknowledge and represent that: (a) they have read the Agreement; (b)
      they clearly understand the Agreement and each of its terms; (c) they fully
      and
      unconditionally consent to the terms of this Agreement; (d) they have had the
      benefit and advice of counsel of their own selection; (e) they have executed
      this Agreement, freely, with knowledge, and without influence or duress; (f)
      they have not relied upon any other representations, either written or oral,
      express or implied, made to them by any person; and (g) the consideration
      received by them has been actual and adequate.

     

    8. This
      Agreement contains the entire agreement and understanding concerning the subject
      matter hereof between the parties and supersedes and replaces all prior
      negotiations, proposed agreement and agreements, written or oral. Each of the
      parties hereto acknowledges that neither any of the parties hereto, nor agents
      or counsel of any other party whomsoever, has made any promise, representation
      or warranty whatsoever, express or implied, not contained herein concerning
      the
      subject hereto, to induce it to execute this Agreement and acknowledges and
      warrants that it is not executing this Agreement in reliance on any promise,
      representation or warranty not contained herein.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    9. This
      Agreement may not be modified or amended in any manner except by an instrument
      in writing specifically stating that it is a supplement, modification or
      amendment to the Agreement and signed by each of the parties
      hereto.

     

    10. Should
      any provision of this Agreement be declared or be determined by any court or
      tribunal to be illegal or invalid, the validity of the remaining parts, terms
      or
      provisions shall not be affected thereby and said illegal or invalid part,
      term
      or provision shall be severed and deemed not to be part of this
      Agreement.

     

    11. This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York, without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state of New York. Both parties
      and
      the individuals executing this Agreement and other agreements on behalf of
      the
      Company agree to submit to the jurisdiction of such courts and waive trial
      by
      jury. The prevailing party shall be entitled to recover from the other party
      its
      reasonable attorney’s fees and costs. 

     

    12. This
      Agreement may be executed in counterparts, each of which, when all parties
      have
      executed at least one such counterpart, shall be deemed an original, with the
      same force and effect as if all signatures were appended to one instrument,
      but
      all of which together shall constitute one and the same Agreement.

     

    [Remainder
      of Page Left Intentionally Blank]

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      the
      parties have duly executed this Agreement as of the date first indicated
      above.

     

    
      	Name of
              Purchaser:	 	 	 
	[___________________________]	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By: 	 	 	 	 
	Name: 	
              

            	 	 	
            
	Title:	 	 	 	 

    

    
       

      
        	MANARIS
                CORPORATION	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By: 	 	 	 	 
	Name: 	
                
John
                G. Fraser	 	 	
              
	Title:	Chief
                Executive
                Officer	 	 	 

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Schedule
      A

     

    
      	Bank:	 	 
	 	 	 
	Branch Address:	 	 
	 	 	 
	 	 	 
	Account Name:	 	 
	 	 	 
	Account Number:	 	 
	 	 	 
	Routing Number:	 	 
	 	 	 
	Remark:	 	Manaris Corporation/Redemption of
              SecuritiesExecution
      Copy

    

    

    NOTE
      PURCHASE AGREEMENT

    

    NOTE
      PURCHASE AGREEMENT (this “Agreement”),
      dated
      as of July 24, 2007, by and between MANARIS CORPORATION, a Nevada corporation
      (the “Company”),
      and
      each of the entities whose names appear on the signature pages hereof. Such
      entities are each referred to herein as an “Investor”
and,
      collectively, as the “Investors”.

    

    A. The
      Company wishes to sell to each Investor, and each Investor wishes to purchase,
      upon
      the
      terms and subject to the conditions set forth in this Agreement, an 8.5% Senior
      Secured Demand Note in the form attached hereto as Exhibit
      A
      (a
“Note”
and,
      collectively with the other Notes issued hereunder, the “Notes”).

    

    B. The
      Company’s obligations under the Notes, including without limitation its
      obligation to make payments of principal thereof and interest thereon,
are
      guaranteed by each of the Company’s direct and indirect subsidiaries, and
are
      secured by the assets of the Company and such subsidiaries pursuant to the
      terms
      of a Security Agreement in the form attached hereto as Exhibit
      B
      (the
“Security
      Agreement”).

    

    In
      consideration of the mutual promises made herein, and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      Company and each Investor hereby agree as follows:

    

    
      	1.	
              PURCHASE
                AND SALE OF NOTES. 

            

    

    

    1.1 Closing.
      

    

    Upon
      the
      terms and subject to the satisfaction or waiver of the conditions set forth
      herein, the Company agrees to sell and each Investor agrees to purchase a Note
      with a principal amount equal to the amount set forth below such Investor’s name
      on the signature pages hereof. The date on which the closing of such purchase
      and sale occurs (the “Closing”)
      is
      hereinafter referred to as the “Closing
      Date”.
      The
      Closing will be deemed to occur at the offices of Mazzeo Song LLP, 708 Third
      Avenue, 19th
      Floor,
      New York, New York 10017 when (A) this Agreement and the other Transaction
      Documents (as defined below) have been executed and delivered by the Company
      and
      each Investor, (B) each of the conditions to the Closing described in this
      Agreement has been satisfied or waived as specified therein and (C) payment
      of
      each Investor’s Purchase Price (as defined below) payable with respect to the
      Note being purchased by such Investor at the Closing has been made by wire
      transfer of immediately available funds. At the Closing, the Company shall
      deliver to each Investor a duly executed instrument representing the Note
      purchased by such Investor at the Closing. 

    

    1.2
       Certain
      Definitions.
      When
      used herein, the following terms shall have the respective meanings
      indicated: 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Affiliate”
means,
      as to any Person (the “subject
      Person”),
      any
      other Person (a) that directly or indirectly through one or more
      intermediaries controls or is controlled by, or is under direct or indirect
      common control with, the subject Person, (b) that directly or indirectly
      beneficially owns or holds ten percent (10%) or more of any class of voting
      equity of the subject Person, or (c) ten percent (10%) or more of the
      voting equity of which is directly or indirectly beneficially owned or held
      by
      the subject Person. For the purposes of this definition, “control”
when
      used with respect to any Person means the power to direct the management and
      policies of such Person, directly or indirectly, whether through the ownership
      of voting securities, through representation on such Person’s board of directors
      or other management committee or group, by contract or otherwise. 

    

    “Board
      of Directors”
means
      the Company’s board of directors.

    

    “Business
      Day”
means
      any
      day
      other than a Saturday, a Sunday or a day on which the Principal Market is closed
      or on which banks in the City of New York are required or authorized by law
      to
      be closed.

    

    “Closing”
and
      “Closing
      Date”
have
      the respective meanings specified in Section
      1.1
      of this
      Agreement.

    

    “Commission”
means
      the Securities and Exchange Commission, and any successor regulatory
      agency.

    

    “Common
      Stock”
means
      the common stock of the Company, par value $0.0001 per share.

    

    “Company
      Subsidiaries”
means
      the Subsidiaries of the Company set forth on Schedule
      3.5(ii) and
      such
      other Subsidiaries of the Company that become party to the Security
      Agreement.

    

    “Debt”
means,
      as to any Person at any time: (a) all indebtedness, liabilities and obligations
      of such Person for borrowed money; (b) all indebtedness, liabilities and
      obligations of such Person to pay the deferred purchase price of Property or
      services (except trade accounts payable of such Person arising in the ordinary
      course of business that are not past due by more than 90 days); (c) all capital
      lease obligations of such Person; (d) all Debt of others guaranteed by such
      Person; (e) all indebtedness, liabilities and obligations secured by a Lien
      existing on Property owned by such Person, whether or not the indebtedness,
      liabilities or obligations secured thereby have been assumed by such Person
      or
      are non-recourse to such Person; (f) all reimbursement obligations of such
      Person (whether contingent or otherwise) in respect of letters of credit,
      bankers’ acceptances, surety or other bonds and similar instruments; and (g) all
      liabilities and obligations of such Person to redeem or retire shares of capital
      stock of such Person. 

    

    “Disclosure
      Documents”
means
      all SEC Documents filed with the Commission at least three (3) Business Days
      prior to the Execution Date.

    

    
      
         

      

      
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    “Environmental
      Law”
means
      any federal, state, provincial, local or foreign law, statute, code or
      ordinance, principle of common law, rule or regulation, as well as any Permit,
      order, decree, judgment or injunction issued, promulgated, approved or entered
      thereunder, relating to pollution or the protection, cleanup or restoration
      of
      the environment or natural resources, or to the public health or safety, or
      otherwise governing the generation, use, handling, collection, treatment,
      storage, transportation, recovery, recycling, discharge or disposal of hazardous
      materials.

    

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended, and the
      regulations and published interpretations thereunder.

    

    “Event
      of Default”
has
      the
      meaning specified in the Notes.

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended (or any successor act), and
      the
      rules and regulations promulgated thereunder (or respective successors
      thereto).

    

    “Excluded
      Securities”
means
      (i) any securities issued upon the conversion or exercise of any options,
      warrants, convertible securities or any other agreements outstanding as of
      the
      Issue Date and disclosed on Schedule
      3.5(i)
      hereto;
      (ii) shares of Common Stock issuable or issued to employees,
      officers, directors of,
      and
      consultants to, the Company and/or the Company Subsidiaries, from
      time
      to time upon the exercise of options granted or to be granted in the discretion
      of the Board of Directors pursuant to one or more employee stock option plans
      or
      restricted stock plans in effect as of the Issue Date or adopted after the
      Issue
      Date by the Board of Directors; (iii) shares of Common Stock issued in
      connection with any stock split, stock dividend or recapitalization of the
      Company; and (iv) securities issued pursuant to acquisition, licensing
      agreements, or other strategic transactions, provided any such issuance shall
      only be to a Person which is, itself or through its subsidiaries, an operating
      company (including, without limitation, a company engaged primarily in research
      and development) in a business which the Board of Directors believes is
      beneficial to the Company, but shall not include a transaction in which the
      Company is issuing securities primarily for the purpose of raising capital
      or to
      an entity whose primary business is investing in securities. 

     

    “Execution
      Date”
means
      the date of this Agreement. 

    

    “GAAP”
means
      U.S. generally accepted accounting principles, applied on a consistent basis.
      Accounting principles are applied on a “consistent basis” when the accounting
      principles applied in a current period are comparable in all material respects
      to those accounting principles applied in a preceding period.

    

    “Governmental
      Authority”
means
      any nation or government, any state, provincial or political subdivision thereof
      and any entity exercising executive, legislative, judicial, regulatory or
      administrative functions of or pertaining to government, including, without
      limitation, any stock exchange, securities market or self-regulatory
      organization.

     

    
      
         

      

      
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    “Governmental
      Requirement”
means
      any law, statute, code, ordinance, order, rule, regulation, judgment, decree,
      injunction, franchise, license or other directive or requirement of any federal,
      state, county, municipal, parish, provincial or other Governmental Authority
      or
      any department, commission, board, court, agency or any other instrumentality
      of
      any of them.

    

    “Intellectual
      Property”
means
      the collective reference to all existing rights, priorities and privileges
      relating to intellectual property, whether arising under United States,
      multinational or foreign laws or otherwise, including, without limitation,
      (i)
      all copyrights arising under the laws of the United States, any other country
      or
      any political subdivision thereof, whether registered or unregistered and
      whether published or unpublished, all registrations and recordings thereof,
      and
      all applications in connection therewith, including, without limitation, all
      registrations, recordings and applications in the United States Copyright
      Office, (ii) all letters patent of the United States, any other country or
      any
      political subdivision thereof, all reissues and extensions thereof, and all
      applications for letters patent of the United States or any other country and
      all divisions, continuations and continuations-in-part thereof, (iii) all
      trademarks, trade names, corporate names, company names, business names,
      fictitious business names, trade dress, service marks, logos, domain names
      and
      other source or business identifiers, and all goodwill associated therewith,
      now
      existing or hereafter adopted or acquired, all
      registrations and recordings thereof, and all applications in connection
      therewith, whether in the United States Patent and Trademark Office or in any
      similar office or agency of the United States, any State thereof or any other
      country or any political subdivision thereof, or otherwise, and all common
      law
      rights related thereto, (iv) all trade secrets arising under the laws of the
      United States, any other country or any political subdivision thereof, (v)
      all
      rights to obtain any reissues, renewals or extensions of the foregoing, (vi)
      all
      licenses for any of the foregoing, and (vii) all causes of action for
      infringement of the foregoing.

    

    “Investor
      Party”
has
      the
      meaning specified in 4.6
      of this
      Agreement.

    

    “Key
      Employee”
has
      the
      meaning specified in Section
      3.12
      of this
      Agreement.

    

    “Lien”
means,
      with respect to any Property, any lien, mortgage, pledge, hypothecation,
      assignment, security interest, charge, easement or other
      encumbrance.

    

    “Material
      Adverse Effect”
means
      an effect that is material and adverse to
      (i) the
      consolidated business, properties, assets, operations, results of operations,
      financial condition, credit worthiness or prospects of the Company and the
      Company Subsidiaries taken as a whole, (ii) the ability of the Company or any
      Company Subsidiary to perform its material obligations under this Agreement
      or
      the other Transaction Documents or (iii) the rights and benefits to which an
      Investor is entitled under this Agreement or any of the other Transaction
      Documents.

     

    “Material
      Contracts”
means,
      as to the Company and the Company Subsidiaries, any agreement
      required pursuant to Item 601 of Regulation S-B or Item 601 of Regulation S-K,
      as applicable, promulgated under the Securities Act to be filed as an exhibit
      to
      any report,
      schedule, registration statement or definitive proxy statement filed or required
      to be filed by the Company with the Commission under
      the
      Exchange Act or any rule or regulation promulgated thereunder,
      and any
      and all material amendments, modifications, supplements, renewals or
      restatements thereof.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    “Pension
      Plan”
means
      an employee pension benefit plan (as defined in ERISA) maintained by the Company
      for employees of the Company or any of its Affiliates.

    

    “Permitted
      Debt”
means
      the following:

    

    (a) the
      Notes;

    

    (b) Debt
      outstanding on the Execution Date to the extent disclosed on Schedule
      3.5(iv)
      hereto;
      and

    

    (c) Debt
      consisting of capitalized lease obligations and purchase money indebtedness
      incurred in connection with acquisition of capital assets and obligations under
      sale-leaseback or similar arrangements provided in each case that such
      obligations are not secured by Liens on any assets of the Company or the Company
      Subsidiaries other than the assets so leased.

    

    “Permitted
      Liens”
means
      each of the following:

    

    (a) Liens
      in
      existence on the Execution Date and disclosed on Schedule
      3.5(v)
      hereto;

    

    (b) encumbrances
      consisting of easements, rights-of-way, zoning restrictions or other
      restrictions on the use of real Property or imperfections to title that do
      not
      (individually or in the aggregate) materially impair the ability of the Company
      or any Company Subsidiary to use such Property in its businesses, and none
      of
      which is violated in any material respect by existing or proposed structures
      or
      land use;

    

    (c) Liens
      for
      taxes, assessments or other governmental charges (including without limitation
      in connection with workers’ compensation and unemployment insurance) that are
      not delinquent or which are being contested in good faith by appropriate
      proceedings, which proceedings have the effect of preventing the forfeiture
      or
      sale of the Property subject to such Liens, and for which adequate reserves
      (as
      determined in accordance with GAAP) have been established; and

    

    (d) Liens
      of
      mechanics, materialmen, warehousemen, carriers, landlords or other similar
      statutory Liens securing obligations that are not yet due and are incurred
      in
      the ordinary course of business or which are being contested in good faith
      by
      appropriate proceedings, which proceedings have the effect of preventing the
      forfeiture or sale of the Property subject to such Liens, for which adequate
      reserves (as determined in accordance with GAAP) have been
      established.

     

    
      
         

      

      
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    “Person”
means
      any individual, corporation, trust, association, company, partnership, joint
      venture, limited liability company, joint stock company, Governmental Authority
      or other entity. 

    

    “Principal
      Market”
means
      the Over-The-Counter Bulletin Board or the principal exchange, market or
      quotation system on which the Common Stock is then listed, traded or
      quoted.

    

    “Property”
means
      property and/or assets of all kinds, whether real, personal or mixed, tangible
      or intangible (including, without limitation, all rights relating
      thereto).

    

    “Purchase
      Price”
means,
      with respect to the Notes purchased at the Closing, the original principal
      amount of the Note purchased at the Closing.

    

    “Restricted
      Payment”
means,
      with the exception of Series B Notes, (a) any dividend or other distribution
      (whether in cash, Property or obligations), direct or indirect, on account
      of
      (or the setting apart of money for a sinking or other analogous fund for the
      benefit of) any shares of any class of capital stock of the Company or the
      Company Subsidiaries now or hereafter outstanding, except a dividend payable
      solely in shares of that class of stock to all of the holders of that class;
      (b)
      any redemption, exchange, retirement, sinking fund or similar payment, purchase
      or other acquisition for value, direct or indirect, of any shares of any class
      of capital stock of the Company or any of its Affiliates now or hereafter
      outstanding; (c) any prepayment of principal of, premium, if any, or interest
      on, or any redemption, conversion, exchange, purchase, retirement, sinking
      fund
      or defeasance of, any Debt (whether upon acceleration of such Debt, amendment
      of
      the terms governing such Debt or otherwise) other than the Notes (it being
      understood that regularly scheduled payments of principal and interest shall
      not
      be deemed a Restricted Payment); and (d) any loan, advance or other payment
      to
      any employee, officer, director or stockholder of the Company or any of its
      Affiliates exclusive of reasonable base salary and bonuses and transactions
      that
      are made on arm’s-length terms and approved by the independent members of the
      Board of Directors.

    

    “SEC
      Documents”
means
      all reports, schedules, registration statements and definitive proxy statements
      filed (or required to be filed) by the Company with the Commission.

    

    “Securities
      Act”
has
      the
      meaning specified in the recitals of this Agreement.

    

    “Series
      B Notes”
      means
      the Series B Subordinated Secured Convertible Promissory Notes dated August
      11,
      2007 and the transaction documents entered by and among the Company and the
      holders of the Series B Notes in connection therewith, as reported by the
      Company in its Current Report on Form 8-K filed with the SEC on August 17,
      2006.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    “Subsequent
      Placement”
means
      any issuance, sale or exchange by the Company or any Company Subsidiary at
      any
      time after the Closing Date, or any agreement or obligation of the Company
      or
      any Company Subsidiary to issue, sell or exchange, at any time after the Closing
      Date, (i) any shares of common stock of the Company or any Company Subsidiary,
      (ii) any other equity security of the Company or any Company Subsidiary,
      including without limitation preferred stock, (iii) any other security of the
      Company or any Company Subsidiary which by its terms is convertible into or
      exchangeable or exercisable for any equity security of the Company or any
      Company Subsidiary, (iv) any option, warrant or other right to subscribe for,
      purchase or otherwise acquire any such security described in the foregoing
      clauses
      (i)
      through
(iii),
      or (v)
      any debt instruments or securities, including promissory notes and convertible
      debt instruments; provided,
      however,
      that
      the term “Subsequent
      Placement”
shall
      not be deemed to include any issuance, sale or exchange of Excluded
      Securities.

    

    “Subsidiary”
means,
      with respect to any Person, any corporation or other entity of which at least
      a
      majority of the outstanding shares of stock or other ownership interests having
      by the terms thereof ordinary voting power to elect a majority of the board
      of
      directors (or Persons performing similar functions) of such corporation or
      entity (regardless of whether or not at the time, in the case of a corporation,
      stock of any other class or classes of such corporation shall have or might
      have
      voting power by reason of the happening of any contingency) is at the time
      directly or indirectly owned or controlled by such Person or one or more of
      its
      Subsidiaries or by such Person and one or more of its Subsidiaries.

    

    “Termination
      Date”
means
      the first date on which there are no Notes outstanding.

     

    “Transaction
      Documents”
means
      (i) this Agreement, (ii) the Notes, (iii) the Security Agreement, and (iv)
      all
      other agreements, documents and other instruments executed and delivered by
      or
      on behalf of the Company or any of its officers at the Closing.

    

    1.3 Other
      Definitional Provisions.
      All
      definitions contained in this Agreement are equally applicable to the singular
      and plural forms of the terms defined. The words “hereof”, “herein” and
“hereunder” and words of similar import contained in this Agreement refer to
      this Agreement as a whole and not to any particular provision of this
      Agreement.

    

    
      	2.	
              REPRESENTATIONS
                AND WARRANTIES OF EACH INVESTOR.

            

    

    

    Each
      Investor (with respect to itself only) hereby represents and warrants to the
      Company and agrees with the Company that, as of the Execution Date:

    

    2.1 Authorization;
      Enforceability.
      Such
      Investor is duly and validly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or organization as
      set
      forth below such Investor’s name on the signature page hereof with the requisite
      corporate power and authority to purchase the Note to be purchased by it
      hereunder and to execute, deliver and to
      consummate the transactions contemplated by,
      this
      Agreement and the other Transaction Documents to which it is a party
      and
      otherwise to carry out its obligations thereunder.
      This
      Agreement constitutes, and upon execution and delivery thereof, each other
      Transaction Document to which such Investor is a party will constitute, such
      Investor’s valid and legally binding obligation, enforceable in accordance with
      its terms, subject to (i) applicable bankruptcy, insolvency, fraudulent
      transfer, reorganization, moratorium or other similar laws of general
      application relating to or affecting the enforcement of creditors’ rights
      generally and (ii) general principles of equity.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    2.2
      No
      Conflicts.
      The
      execution and performance of this Agreement and the other Transaction Documents
      to which it is a party do not conflict in any material respect with any
      agreement to which such Investor is a party or is bound, any court order or
      judgment applicable to such Investor, or the constituent documents of such
      Investor.

     

    2.3 Fees.
      Such
      Investor has not agreed to pay any compensation or other fee, cost or related
      expenditure to any underwriter, broker, agent or other representative in
      connection with the transactions contemplated hereby.

     

    3.    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      Except
      as set forth in the Schedules provided as part of, and incorporated into, this
      Agreement, the Company hereby represents and warrants to each Investor and
      agrees with each Investor that, as of the Execution Date:

    

    3.1 Organization,
      Good Standing and Qualification.
      Each of
      the Company and the Company Subsidiaries is
      duly
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization and has all requisite power
      and authority to carry on its business as now conducted. Each of the Company
      and
      the Company Subsidiaries is duly qualified to transact business and is in good
      standing in each jurisdiction in which it conducts business except where the
      failure so to qualify has not had or would not reasonably be expected to have
      a
      Material Adverse Effect.

    

    3.2 Authorization;
      Consents.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents.
      Each
      Company Subsidiary has the requisite power and authority to enter into and
      perform its obligations under the Security Agreement. All
      corporate action on the part of the Company by its officers, directors and
      stockholders necessary for the authorization, execution and delivery of, and
      the
      performance by the Company of its obligations under, the Transaction Documents
      has been taken, and no further consent or authorization of the Company, its
      Board of Directors, stockholders, any Governmental Authority or any other Person
      is required (pursuant to any rule of the Principal Market or
      otherwise). All
      corporate action on the part of each Company Subsidiary by its officers,
      directors, stockholders, members or governors necessary for the authorization,
      execution and delivery of, and the performance by such Company Subsidiary of
      its
      obligations under the Security Agreement has been taken. The
      Board
      of Directors has determined that the sale and issuance of the Notes, and the
      consummation of the other transactions contemplated hereby and by the other
      Transaction Documents, are in the best interests of the Company.

    

    3.3 Enforcement.
      This
      Agreement has been duly executed and delivered by the Company, and at the
      Closing, each of the Company and the Company Subsidiaries will have duly
      executed and delivered each of the other Transaction Documents to which such
      entity is a party. This Agreement constitutes, and at the Closing, each of
      the
      other Transaction Documents to which the Company or any of the Company
      Subsidiaries is a party will constitute, the valid and legally binding
      obligations of the Company and the Company Subsidiaries, enforceable against
      the
      Company and the Company Subsidiaries in accordance with their respective terms,
      subject to (i) applicable bankruptcy, insolvency, fraudulent transfer,
      moratorium, reorganization or other similar laws of general application relating
      to or affecting the enforcement of creditors’ rights generally and (ii) general
      principles of equity. 

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    3.4 Disclosure
      Documents; Agreements; Financial Statements; Other Information.
      The
      Company is subject to the reporting requirements of the Exchange Act and the
      Company has filed with the Commission all SEC Documents that the Company was
      required to file with the Commission on or after June 30, 2005. The Company
      is
      not aware of any event occurring or expected to occur on or prior to the Closing
      Date (other than the transactions effected hereby or the redemption by the
      Company of certain Series B Notes) that would require the filing of, or with
      respect to which the Company intends to file, a Form 8-K after the Closing.
      Each
      SEC Document filed on or after June 30, 2005, as of the date of the filing
      thereof with the Commission (or if amended or superseded by a filing prior
      to
      the Execution Date, then on the date of such amending or superseding filing),
      complied in all material respects with the requirements of the Securities Act
      or
      Exchange Act, as applicable, and the rules and regulations promulgated
      thereunder and, as of the date of such filing (or if amended or superseded
      by a
      filing prior to the Execution Date, then on the date of such filing), such
      SEC
      Document (including all exhibits and schedules thereto and documents
      incorporated by reference therein) did not, contain an untrue statement of
      material fact or omit to state a material fact required to be stated therein
      or
      necessary to make the statements therein, in light of the circumstances under
      which they were made, not misleading. To the best of the Company’s knowledge,
      all documents required to be filed as exhibits to the SEC Documents filed on
      or
      after June 30, 2005 have been filed as required. Except as set forth in the
      Disclosure Documents, the Company has no liabilities, contingent or otherwise,
      other than liabilities incurred in the ordinary course of business which, under
      GAAP, are not required to be reflected in the financial statements included
      in
      the Disclosure Documents and which, individually or in the aggregate, are not
      material to the consolidated business or financial condition of the Company
      and
      the Company Subsidiaries taken as a whole. As of their respective dates, the
      financial statements of the Company included in the SEC Documents filed on
      or
      after June 30, 2005 complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the
      Commission with respect thereto. Such financial statements have been prepared
      in
      accordance with GAAP consistently applied at the times and 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 exclude footnotes or may be condensed or summary statements)
      and fairly present in all material respects the financial position of the
      Company as of the dates thereof and the results of its operations and cash
      flows
      for the periods then ended (subject, in the case of unaudited statements, to
      normal year-end adjustments). The Company will prepare the financial statements
      to be included in any reports, schedules, registration statements and definitive
      proxy statements that the Company is required to file or files with the
      Commission after the date hereof in accordance with GAAP (except in the case
      of
      unaudited interim statements, to the extent they may exclude footnotes or may
      be
      condensed or summary statements).

     

    3.5 Capitalization;
      Debt
      Schedule.
      The
      capitalization of the Company, including its authorized capital stock, the
      number of shares issued and outstanding, the number of shares issuable and
      reserved for issuance pursuant to the Company’s stock option plans and
      agreements, the number of shares issuable and reserved for issuance pursuant
      to
      securities exercisable for, or convertible into or exchangeable for any shares
      of Common Stock is set forth on Schedule
      3.5(i)
      hereto.
      All outstanding shares of capital stock of the Company have been, or upon
      issuance will be, validly issued, fully paid and non-assessable. All of the
      direct and indirect Subsidiaries of the Company are set forth on Schedule
      3.5(ii)
      hereto.
      The Company or a Company Subsidiary owns all of the capital stock of each
      Company Subsidiary, which capital stock is validly issued, fully paid and
      non-assessable, and no shares of the capital stock of the Company or any Company
      Subsidiary are subject to preemptive rights or any other similar rights of
      the
      stockholders of the Company or any such Company Subsidiary or any Liens created
      by or through the Company or any such Company Subsidiary. Except as disclosed
      on
Schedule
      3.5(i),
      there
      are no outstanding options, warrants, scrip, rights to subscribe to, calls
      or
      commitments of any character whatsoever relating to, or securities or rights
      convertible into or exercisable or exchangeable for, any shares of capital
      stock
      of the Company or any Company Subsidiary, or arrangements by which the Company
      or any Company Subsidiary is or may become bound to issue additional shares
      of
      capital stock of the Company or any Company Subsidiary (whether
      pursuant to anti-dilution, “reset” or other similar provisions).
      Schedule
      3.5(iv)
      identifies all Debt of the Company and/or the Company Subsidiaries currently
      outstanding as of the date hereof, and Schedule
      3.5(v) identifies
      all Liens encumbering any of the assets of the Company and/or the Company
      Subsidiaries as of the date hereof.

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    3.6 Due
      Authorization; Valid Issuance.
      The
      Notes are duly authorized and, when issued, sold and delivered in accordance
      with the terms of this Agreement, will be duly and validly issued, free and
      clear of any Liens imposed by or through the Company. 

     

    3.7 No
      Conflict; No Violation.
      Neither
      the Company nor any Company Subsidiary is in violation of any provisions of
      its
      charter, bylaws or any other governing document. Neither the Company nor any
      Company Subsidiary is in violation of or in default (and no event has occurred
      which, with notice or lapse of time or both, would constitute a default) under
      any provision of any instrument or contract to which it is a party or by which
      it or any of its Property is bound, or in violation of any provision of any
      Governmental Requirement applicable to the Company or any Company Subsidiary.
      The
      execution, delivery and performance of this Agreement and the other Transaction
      Documents and the consummation of the transactions contemplated hereby and
      thereby will not result in any violation of any provisions of the Company’s or
      any Company Subsidiary’s charter, bylaws or any other governing document or in a
      default under any provision of any instrument or contract to which the Company
      or Company Subsidiary is a party or by which it or any of its Property is bound,
      or in violation of any provision of any Governmental Requirement applicable
      to
      the Company or Company Subsidiary or be in conflict with or constitute, with
      or
      without the passage of time and giving of notice, either a default under any
      such provision, instrument or contract or an event which results in the creation
      of any Lien upon any assets of the Company or of any Company Subsidiary or
      the
      triggering of any preemptive rights or rights of first refusal or first
      offer.

    

    3.8 Financial
      Condition; Taxes; Litigation.

    

    3.8.1
      The
      financial condition of each of the Company and each Company Subsidiary is,
      in
      all material respects, as described in the Disclosure Documents, except for
      changes in the ordinary course of business and normal year-end adjustments
      that
      are not, in the aggregate, materially adverse to the consolidated business
      or
      financial condition of the Company and the Company Subsidiaries taken as a
      whole. There has been no (i) material adverse change to the business,
      operations, properties, financial condition, prospects or results of operations
      of the Company and the Company Subsidiaries taken as a whole since the date
      of
      the Company’s most recent financial statements contained in the Disclosure
      Documents, (ii) material adverse change to the Company’s cash balances or cash
      flows during the 90 days preceding the date hereof, or (iii) change by the
      Company in its accounting principles, policies and methods except as required
      by
      changes in GAAP.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    3.8.2
      Except
      as set forth on Schedule
      3.8.2,
      each of
      the Company and the Company Subsidiaries has prepared in good faith and duly
      and
      timely filed all tax returns required to be filed by it and such returns are
      complete and accurate in all material respects and the Company and the Company
      Subsidiaries each has paid all taxes required to have been paid by it, except
      for taxes which it reasonably disputes in good faith or the failure of which
      to
      pay has not had or would not reasonably be expected to have a Material Adverse
      Effect. Except as set forth on Schedule
      3.8.2,
      neither
      the Company nor any Company Subsidiary has any liability with respect to taxes
      that accrued on or before the date of the most recent balance sheet of the
      Company included in the Disclosure Documents in excess of the amounts accrued
      with respect thereto that are reflected on such balance sheet. 

    

    3.8.3
      Except
      as set forth on Schedule
      3.8.2,
      neither
      the Company nor any Company Subsidiary is the subject of any pending or, to
      the
      Company’s knowledge, threatened inquiry, investigation or administrative or
      legal proceeding of a material nature by the Internal Revenue Service, the
      taxing authorities of any state or local jurisdiction, the Commission, any
      state
      securities commission or other Governmental Authority. 

    

    3.8.4
      Except
      as set forth in the Disclosure Documents (and if not set forth therein, except
      as set forth on Schedule
      3.8.4),
      there
      is no material claim, litigation or administrative proceeding pending, or,
      to
      the Company’s knowledge, threatened or contemplated, against the Company or any
      Company Subsidiary, or against any officer, director or employee of the Company
      or any such Company Subsidiary in connection with such person’s employment
      therewith. Neither the Company nor any Company Subsidiary is a party to or
      subject to the provisions of, any order, writ, injunction, judgment or decree
      of
      any court or Governmental Authority which has had or would reasonably be
      expected to have a Material Adverse Effect.

    

    3.9 Intellectual
      Property.
      Except
      as set forth in the Disclosure Documents:

    

    (a) The
      Company and the Company Subsidiaries own, free and clear of claims or rights
      or
      any other Person, with full right to use, sell, license, sublicense, dispose
      of,
      and bring actions for infringement of, or, to the knowledge of the Company,
      has
      acquired licenses or other rights to use, all Intellectual Property necessary
      for the conduct of its business as presently conducted (other than with respect
      to software which is generally commercially available and not used or
      incorporated into the Company’s products and open source software which may be
      subject to one or more “general public” licenses). All works that are used or
      incorporated into the Company’s or any of the Company Subsidiaries’ services,
      products or services or products actively under development and which is
      proprietary to the Company or such Company Subsidiary was developed by or for
      the Company or the Company Subsidiaries by the current or former employees,
      consultants or independent contractors of the Company or the Company
      Subsidiaries or purchased or licensed by the Company or one or more Company
      Subsidiaries. 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (b) The
      business of the Company and the Company Subsidiaries as presently conducted
      and
      the production, marketing, licensing, use and servicing of any products or
      services of the Company and the Company Subsidiaries do not, to the knowledge
      of
      the Company, infringe or conflict with any patent, trademark, copyright, or
      trade secret rights of any third parties or any other Intellectual Property
      of
      any third parties in any material respect. Neither the Company nor any Company
      Subsidiary has received written notice from any third party asserting that
      any
      Intellectual Property owned or licensed by the Company or the Company
      Subsidiaries, or which the Company or any Company Subsidiary otherwise has
      the
      right to use, is invalid or unenforceable by the Company or such Company
      Subsidiary and, to the Company’s knowledge, there is no valid basis for any such
      claim (whether or not pending or threatened). 

    

    (c) No
      claim
      is pending or, to the Company’s knowledge, threatened against the Company or any
      Company Subsidiary nor has the Company or any Company Subsidiary received any
      written notice or other written claim from any Person asserting that any of
      the
      Company’s or a Company Subsidiary’s present or contemplated activities infringe
      or may infringe in any material respect any Intellectual Property of such
      Person, and the Company is not aware of any infringement by any other Person
      of
      any material rights of the Company or any Company Subsidiary under any
      Intellectual Property Rights.

    

    (d) All
      licenses or other agreements under which the Company or any Company Subsidiary
      is granted Intellectual Property (excluding licenses to use software utilized
      in
      the Company’s or such Company Subsidiary’s internal operations and which is
      generally commercially available) are in full force and effect and, to the
      Company’s knowledge, there is no material default by any party thereto. The
      Company has no reason to believe that the licensors under such licenses and
      other agreements do not have and did not have all requisite power and authority
      to grant the rights to the Intellectual Property purported to be granted
      thereby.

    

    (e) All
      licenses or other agreements under which the Company or any Company Subsidiary
      has granted rights to Intellectual Property to others (including all end-user
      agreements) are in full force and effect, there has been no material default
      by
      the Company or any Company Subsidiary thereunder and, to the Company’s
      knowledge, there is no material default of any provision thereof relating to
      Intellectual Property by any other party thereto. 

    

    (f) The
      Company and the Company Subsidiaries have taken all steps required in accordance
      with commercially reasonable business practice to establish and preserve their
      ownership in their owned Intellectual Property and to keep confidential all
      material technical information developed by or belonging to the Company or
      the
      Company Subsidiaries which has not been patented or copyrighted. To the
      Company’s knowledge, neither the Company nor any Company Subsidiary is making
      any unlawful use of any Intellectual Property of any other Person, including,
      without limitation, any former employer of any past or present employees of
      the
      Company or any Company Subsidiary. To the Company’s knowledge, neither the
      Company, any Company Subsidiary nor any of their respective employees has any
      agreements or arrangements with former employers of such employees relating
      to
      any Intellectual Property of such employers, which materially interfere or
      conflict with the performance of such employee’s duties for the Company or any
      Company Subsidiary or result in any former employers of such employees having
      any rights in, or claims on, the Company’s or any Company Subsidiary’s
      Intellectual Property. Each employee of the Company and of each Company
      Subsidiary is subject to the policies regarding confidentiality and proprietary
      information described in the Company’s current employee handbook, which policies
      are reasonably sufficient to protect the Intellectual Property interests of
      the
      Company or a Company Subsidiary in inventions created by its employees. The
      Company and each Company Subsidiary has obtained executed assignment agreements
      from any current or former employees with respect to the development by such
      employees of intellectual property that have become the subject of registered
      patents or of outstanding applications for registration. The Company and each
      Company Subsidiary has taken reasonable security measures to guard against
      unauthorized disclosure or use of any of its Intellectual Property that is
      confidential or proprietary; and the Company has no reason to believe that
      any
      Person (including, without limitation, any former employee or consultant of
      the
      Company or of any Company Subsidiary) has unauthorized possession of any of
      its
      Intellectual Property, or any part thereof, or that any Person has obtained
      unauthorized access to any of its Intellectual Property. The Company and each
      Company Subsidiary has complied in all material respects with its respective
      obligations pursuant to all agreements relating to Intellectual Property rights
      that are the subject of licenses granted by third parties, except for any
      non-compliance that has not had or would not reasonably be expected to have
      a
      Material Adverse Effect.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    3.10 Fees.
      The
      Company is not obligated to pay any brokers, finders or financial advisory
      fees
      or commissions to any underwriter, broker, agent or other representative in
      connection with the transactions contemplated hereby. The Company will indemnify
      and hold harmless such Investor from and against any claim by any person or
      entity alleging that such Investor is obligated to pay any such compensation,
      fee, cost or related expenditure in connection with the transactions
      contemplated hereby.

    

    3.11 Foreign
      Corrupt Practices.
      Neither
      the Company, any Company Subsidiary nor, to the knowledge of the Company, any
      director, officer, agent, employee or other person acting on behalf of the
      Company or any Company Subsidiary, has (i) used any corporate funds for any
      unlawful contribution, gift, entertainment or other unlawful expenses relating
      to political activity, (ii) made any direct or indirect unlawful payment to
      any
      foreign or domestic government official or employee, or (iii) violated any
      provision of the Foreign Corrupt Practices Act of 1977, as amended, or made
      any
      bribe, rebate, payoff, influence payment, kickback or other unlawful payment
      to
      any foreign or domestic government official or employee.

    

    3.12 Key
      Employees.
      Each of
      the Company’s and each Company Subsidiary’s executive officers (as defined in
      Rule 501(f) of the Securities Act) (each, a “Key
      Employee”)
      is
      currently serving in the capacity described in the Disclosure Documents. The
      Company has no knowledge of any fact or circumstance (including without
      limitation (i) the terms of any agreement to which such person is a party or
      any
      litigation in which such person is or may become involved and (ii) any illness
      or medical condition that could reasonably be expected to result in the
      disability or incapacity of such person) that would limit or prevent any such
      person from serving in such capacity on a full-time basis in the foreseeable
      future, or of any intention on the part of any such person to limit or terminate
      his or her employment with the Company or any Company Subsidiary. To the
      knowledge of the Company, no Key Employee has borrowed money pursuant to a
      currently outstanding loan that is secured by Common Stock or any right or
      option to receive Common Stock. 

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    3.13 Employee
      Matters.
      There
      is no strike, labor dispute or union organization activities pending or, to
      the
      knowledge of the Company, threatened between the Company or any Company
      Subsidiary and any of their employees. Other than as set forth in the Disclosure
      Documents, no employees of the Company or any Company Subsidiary belong to
      any
      union or collective bargaining unit. The Company and each Company Subsidiary
      has
      complied in all material respects with all applicable federal and state equal
      opportunity and other laws related to employment.

    

    3.14 Environment.
      Except
      as
      disclosed in the Disclosure Documents, the Company and the Company Subsidiaries
      have no liabilities under any Environmental Law, nor, to the Company's
      knowledge, do any factors exist that are reasonably likely to give rise to
      any
      such liability, affecting any of the properties owned or leased by the Company
      or any Company Subsidiary that, individually or in the aggregate, has
      had
      or would reasonably be expected to have a
      Material Adverse Effect. Neither the Company nor any Company Subsidiary has
      violated any Environmental Law applicable to it now or previously in effect,
      other than such violations or infringements that, individually or in the
      aggregate, have not had and would not reasonably be expected to have a Material
      Adverse Effect.

     

    3.15 ERISA.
      The
      Company does not maintain or contribute to, or have any obligation under, any
      Pension Plan. The Company is in compliance in all material respects with the
      presently applicable provisions of ERISA and the United States Internal Revenue
      Code of 1986, as amended, with respect to each Pension Plan except in any such
      case for any such matters that, individually or in the aggregate, have not
      had,
      and would not reasonably be expected to have, a Material Adverse
      Effect.

    

    3.16 Disclosure.
      Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents and the information to be disclosed
      by
      the Company pursuant to Section
      4.1(c),
      the
      Company confirms that neither it nor any other Person acting on its behalf
      has
      provided any of the Investors or their agents or counsel with any information
      that it believes constitutes or might constitute material, nonpublic
      information. The Company understands and confirms that the Investors will rely
      on the foregoing representation and the obligations of the Company under
Section
      4.1
      in
      effecting transactions in securities of the Company. All disclosure furnished
      by
      or on behalf of the Company to the Investors regarding the Company and the
      Company Subsidiaries, and their respective businesses and the transactions
      contemplated hereby, including the Schedules to this Agreement, is true and
      correct and does not contain any untrue statement of a material fact or omit
      to
      state any material fact necessary in order to make the statements made therein,
      in light of the circumstances under which they were made, not misleading. The
      press releases disseminated by the Company during the twelve months preceding
      the date of this Agreement
      did not,
      at the time they were issued, contain
      any untrue statement of a material fact or omit to state a material fact
      required to be stated therein or necessary in order to make the statements,
      in
      light of the circumstances under which they were made and when made, not
      misleading. The Company acknowledges and agrees that no Investor makes or has
      made any representations or warranties with respect to the transactions
      contemplated hereby other than those specifically set forth in Section
      2.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    3.17 Insurance.
      The
      Company maintains insurance for itself and the Company Subsidiaries in such
      amounts and covering such losses and risks as are reasonably sufficient and
      customary in the businesses in which the Company and the Company Subsidiaries
      are engaged. As
      of the
      date hereof and as of the Closing Date, no
      notice
      of cancellation has been received for any of such policies and the Company
      is in
      compliance in all material respects with all of the terms and conditions
      thereof. The Company has no reason to believe that it will not be able to renew
      its existing insurance coverage as and when such coverage expires or to obtain
      similar coverage from similar insurers as may be necessary to continue to
      conduct its business as currently conducted without a significant increase
      in
      cost. Without limiting the generality of the foregoing, the Company maintains
      Director’s and Officer’s insurance in an amount not less than customary industry
      practice.

    

    3.18 Property.
      The
      Company and the
      Company Subsidiaries
      have good and marketable title to all real and personal Property owned by them,
      in each case free and clear of all Liens, except for Permitted Liens. Any
      Property held under lease by the Company or the Company Subsidiaries is held
      by
      them under valid, subsisting and enforceable leases with such exceptions as
      are
      not material and do not interfere with the use made or proposed to be made
      of
      such Property by the Company or any Company Subsidiary. 

    

    3.19 Regulatory
      Permits.
      The
      Company and the Company Subsidiaries possess all certificates, authorizations
      and permits issued by the appropriate federal, state or foreign regulatory
      authorities necessary to conduct their respective businesses,
      except
      where the failure to have any such certificate,
      authorization
      or permit would not have a Material Adverse Effect,
      and
      neither the Company nor any such Company Subsidiary has received any notice
      of
      proceedings relating to the revocation or modification of any such certificate,
      authorization or permit.

     

    3.20 Exchange
      Act Registration; OTC Bulletin Board.
      The
      Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
      Act and is quoted on the OTC Bulletin Board. The Company currently meets the
      continuing eligibility requirements for quotation on the OTC Bulleting Board
      and
      has not received any notice from such service that it may not currently satisfy
      such requirements or that such continued quotation is in any way threatened.
      The
      Company has taken no action designed to, or which, to the knowledge of the
      Company, may have the effect of, terminating the registration of the Common
      Stock under the Exchange Act or qualification to have the Common Stock quoted
      on
      the OTC Bulletin Board.

    

    3.21 Transfer
      Taxes.
      No
      transfer or other taxes (other than income taxes) are required to be paid in
      connection with the issuance and sale of any of the Notes.

    

    3.22 Sarbanes-Oxley
      Act; Internal Controls and Procedures.
      The
      Company is in material compliance with any and all applicable requirements
      of
      the Sarbanes-Oxley Act of 2002, as amended, and any and all applicable rules
      and
      regulations promulgated by the SEC thereunder that are effective as of the
      date
      hereof. The Company maintains internal accounting controls, policies and
      procedures, and such books and records as are reasonably designed to provide
      reasonable assurance that (i)
      all
      transactions to which the Company or any Company Subsidiary is a party or by
      which its properties are bound are effected by a duly authorized employee or
      agent of the Company, supervised by and acting within the scope of the authority
      granted by the Company’s senior management; (ii)
      the
      recorded accounting of the Company’s consolidated assets is compared with
      existing assets at regular intervals; and
      (iii) all
      transactions to which the Company or any Company Subsidiary is a party, or
      by
      which its properties are bound, are recorded (and such records maintained)
      in
      accordance with all Governmental Requirements and as may be necessary or
      appropriate to ensure that the financial statements of the Company are prepared
      in accordance with GAAP.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    3.23 Transactions
      with Interested Persons; Restricted Payments.
      No
      officer, director, stockholder or employee of the Company or any Company
      Subsidiary is or has made any arrangements with the Company or any Company
      Subsidiary to become a party to any transaction with the Company or any Company
      Subsidiary (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director, stockholder or such employee or, to the knowledge of the Company,
      any
      entity in which any officer, director, stockholder or any such employee has
      a
      substantial interest or is an officer, director, trustee or partner. Neither
      the
      Company nor any Company Subsidiary has made any Restricted Payments during
      the
      90 days preceding the date hereof.

    

    3.24 Customers
      and Suppliers.
      The
      relationships of the Company and the Company Subsidiaries with their respective
      customers and suppliers are maintained on commercially reasonable terms. To
      the
      Company’s knowledge, no customer or supplier of the Company or any Company
      Subsidiary has any plan or intention to terminate its agreement with the Company
      or such Company Subsidiary, which termination would reasonably be expected
      to
      have a Material Adverse Effect.

    

    3.25 Accountants.
      The
      Company’s accountants, who
      the
      Company expects will render their opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-KSB for the
      year ended June 30, 2007, are independent accountants as required by the
      Securities Act.

    

    3.26 Solvency.
      (i) The
      fair saleable value of the Company’s assets exceeds the amount that will be
      required to be paid on or in respect of the Company’s existing Debt; and (ii)
      the expected cash flows of the Company for future periods, together with the
      proceeds the Company would receive upon liquidation of its assets and the
      proceeds from expected debt or equity offerings, after taking into account
      all
      anticipated uses of such amounts, would be sufficient to pay all Debt when
      such
      Debt is required to be paid. The Company has no knowledge of any facts or
      circumstances which led it to believe that it will be required to file for
      reorganization or liquidation under bankruptcy or reorganization laws of any
      jurisdiction, and has no present intention to so file.

    

    4.    COVENANTS
      OF THE COMPANY AND EACH INVESTOR.

    

    4.1 Filings
      and Disclosure Reports.
      The
      Company agrees with each Investor that the Company will:

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    (a) on
      or
      prior to 8:30 a.m. (eastern time) on the second Business Day
      following the Execution Date,
      issue a
      press release disclosing the material terms of this Agreement and the other
      Transaction Documents and the transactions contemplated hereby and thereby,
      and

    

    (b) on
      or
      prior to 5:00 p.m. (eastern time) on the fourth Business Day
      following the Execution Date,
      file
      with the Commission a Current Report on Form 8-K disclosing the material terms
      of and including as exhibits this Agreement and the other Transaction Documents
      and the transactions contemplated hereby and thereby; provided,
      however,
      that
      each Investor shall have a reasonable opportunity to review and comment on
      any
      such press release or Form 8-K prior to the issuance or filing thereof; and
      provided,
      further,
      that if
      the Company fails to issue a press release disclosing the material terms of
      this
      Agreement and the other Transaction Documents within the time frames described
      herein, any Investor may issue a press release disclosing such information
      subject to notice to, and consent by, the Company, which consent shall not
      be
      unreasonably withheld. Thereafter, the Company shall timely file any filings
      and
      notices required by the Commission or applicable law with respect to the
      transactions contemplated hereby.

    

    4.2 Existence
      and Compliance.
      The
      Company agrees that it will, and will cause each Company Subsidiary to, while
      any Investor holds any Notes:

     

    (a) maintain
      its corporate existence in good standing;

    

    (b) comply
      with all Governmental Requirements applicable to the operation of its business,
      except for instances of noncompliance that are immaterial;

    

    (c) comply
      with all agreements, documents and instruments binding on it or affecting its
      Properties or business, including, without limitation, all Material Contracts,
      except for instances of noncompliance that are immaterial;

    

    (d) provide
      each Investor with copies of all materials sent to its stockholders at the
      same
      time as such materials are delivered to such stockholders (provided
      that
      such
      delivery shall be deemed effected in accordance herewith if the Company provides
      the Investors with a link to the EDGAR filing containing such materials);

     

    (e) timely
      file with the Commission all reports required to be filed pursuant to the
      Exchange Act and refrain from terminating its status as an issuer required
      by
      the Exchange Act to file reports thereunder even if the Exchange Act or the
      rules or regulations thereunder would permit such termination; 

     

    (f) ensure
      that the Common Stock is at all times quoted on the Principal Market or
      otherwise listed or quoted on the Nasdaq Capital Market, the American Stock
      Exchange, the New York Stock Exchange, or the Nasdaq National Market;
      and

     

    (g) maintain
      adequate insurance coverage (including D&O insurance) for the Company and
      each Company Subsidiary
      in such
      amounts and covering such losses and risks as are reasonably sufficient and
      customary in the businesses in which the Company and the Company Subsidiaries
      are engaged.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    4.3 Transactions
      with Affiliates.
      The
      Company agrees that, during the period beginning on the Execution Date and
      ending on the Termination Date, any transaction or arrangement between the
      Company or any Company Subsidiary, on the one hand, and any Affiliate
      of the Company or any Company Subsidiary (including, in the case of the Company,
      any Company Subsidiary, and in the case of a Company Subsidiary, the Company
      or
      any other Company Subsidiary), or any officer, director, manager, shareholder,
      member or employee of the foregoing,
      on the
      other hand, shall be effected on an arms’ length basis and shall be approved by
      the independent members of board of directors of the Company or the board of
      directors or equivalent thereof of the Company Subsidiary, as the case may
      be.

    

    4.4 Use
      of
      Investor Name.
      Except
      as may be required by applicable law and/or this Agreement, the Company shall
      not use, directly or indirectly, any Investor’s name or the name of any of its
      Affiliates in any advertisement, announcement, press release or other similar
      communication unless it has received the prior written consent of such Investor
      for the specific use contemplated or as otherwise required by applicable law
      or
      regulation.

    

    4.5 Disclosure
      of Non-Public Information.
      In
      addition to the Company’s obligations under Section
      4.1,
      the
      Company agrees that it will not at any time following the Execution Date
      disclose material non-public information to any Investor without first obtaining
      such Investor’s written consent to such disclosure.

    

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

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    4.7 Limitation
      on Debt and Liens.
      During
      the period beginning on the Execution Date and ending on the Termination Date,
      the Company shall refrain, and shall ensure that each Company Subsidiary
      refrains, from (A) incurring any Debt other than Permitted Debt, and (B)
      granting, establishing or maintaining any Lien on any of its Property other
      than
      Permitted Liens.

    

    4.8 Restricted
      Payments.
      During
      the period beginning on the Execution Date and ending on the Termination Date,
      the Company will not, and will not permit any Company Subsidiary to, make any
      Restricted Payments other than Restricted Payments made by a Company Subsidiary
      to the Company. 

    

    4.9 Disposition
      of Property.
      During
      the period beginning on the Execution Date and ending on the Termination Date,
      the Company will not, and will not permit any Company Subsidiary to, (i)
dispose
      in a single transaction or in a series of related transactions all or any part
      of its Property unless (x) such disposition is in the ordinary course of
      business and for fair market value, and (y) such Property is not material to
      the
      Company’s or any Company Subsidiary’s business, operations or financial
      condition or performance or (ii) sell, assign or otherwise transfer any equity
      interest in any Company Subsidiary to a Person other than the Company or another
      Company Subsidiary. 

    

    4.10 No
      Subsequent Placements.
      During
      the period beginning on the Execution Date and ending on the Termination Date,
      the Company shall not, and the Company shall not permit any Company Subsidiary
      to, effectuate a Subsequent Placement of any kind whatsoever, unless consented
      to by the holders of a majority of the aggregate principal of the Notes then
      outstanding.

    

    4.11 Acquisitions
      and Investments.
      During
      the period beginning on the Execution Date and ending on the Termination Date,
      the
      Company will not, nor will it permit any Company Subsidiary to, purchase or
      otherwise acquire the capital stock or other equity interests in or assets
      (constituting a business unit) of, any Person or agree to do so, unless (i)
      the
      business or entity to be acquired has had net positive cash flow from operations
      (determined in accordance with GAAP after deducting the amount of capital
      expenditures) during the twelve-month period immediately preceding such
      acquisition and (ii) the Company in good faith believes that the acquired
      business or entity will continue to generate such positive cash flow during
      the
      twelve-month period immediately following such acquisition.

    

    4.12 Newly
      Created Subsidiaries.
      During
      the period beginning on the Execution Date and ending on the Termination Date,
      if
      the
      Company creates or acquires any new Subsidiary, then, contemporaneously with
      such creation or acquisition, the Company shall cause such new Subsidiary to
      become party to the Security Agreement.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    4.13 Notice
      of Event of Default.
      Upon
      the occurrence of an Event of Default, the Company shall (i) notify the
      Investors of the nature of such Event of Default as soon as practicable (but
      in
      no event later than one Business Day after the Company becomes aware of such
      Event of Default), and (ii) not later than two Business Days after delivering
      such notice to the Investors, issue a press release disclosing such Event of
      Default and take such other actions as may be necessary to ensure that none
      of
      the Investors are in the possession of material, nonpublic information as a
      result of receiving such notice from the Company.

    

    4.14 Existing
      Secured Lenders; Effectiveness of the Security Documents.
      The
      Company shall (i) use its reasonable best efforts to obtain, as promptly as
      practicable, the consents, terminations and/or releases necessary for the
      Company and each Company Subsidiary to grant the Investors a first priority
      perfected security interest in the assets of the Company and each Company
      Subsidiary, and (ii) if requested by the Investors, take such actions reasonably
      requested by the Investors that are intended to facilitate the preparation
      and
      negotiation of intercreditor agreements to be entered into between the Investors
      and the existing secured lenders of the Company and/or the Company Subsidiaries.
      The Company and the Investors hereby agree that the Security Documents (as
      defined below) shall be deemed executed, delivered and in effect, without any
      further action by any party, effective as of the date (the “Release
      Date”)
      on
      which all current holders of the Series B Notes have either (i) had their Series
      B Notes redeemed by the Company or purchased by the Investors, or (ii) consented
      to the granting of the liens contemplated by the Security Documents. As used
      herein, the term “Security
      Documents”
means
      the following documents which are to be held in escrow until the Release Date:
      (i) the Security Agreement, (ii) the Deeds of Hypothec of the Company and each
      Company Subsidiary (to the extent each Company Subsidiary is authorized to
      enter
      into such), and (iii) the legal opinions of the Company’s U.S. and Canadian
      counsel relating to the Security Documents (including opinions relating to
      the
      perfection of the security interest contemplated therein) (which opinions shall
      be (x) in form and substance reasonably satisfactory to the Investors and (y)
      delivered by the Company to the Investors no later than three Business Days
      after the date hereof and held in escrow along with the other Security Documents
      until the Release Date).

    

    5.    CONDITIONS
      TO CLOSING.

    

    5.1 Conditions
      to Investors’ Obligations at the Closing.
      Each
      Investor’s obligations to effect the Closing, including without limitation its
      obligation to purchase its Note at the Closing, are conditioned upon the
      fulfillment (or waiver by such Investor in its sole and absolute discretion)
      of
      each of the following events as of the Closing Date, and the Company shall
      use
      commercially reasonable efforts to cause each of such conditions to be
      satisfied:

     

    
      
        	
              	5.1.1	
                the
                  representations and warranties of the Company set forth in this
                  Agreement
                  and in the other Transaction Documents shall be true and correct
                  in all
                  material respects as of such date as if made on such date (except
                  that to
                  the extent that any such representation or warranty relates to
                  a
                  particular date, such representation or warranty shall be true
                  and correct
                  in all material respects as of that particular date);
                  

              

      

    

     

    
      
         

      

      
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              5.1.2

            	 	
              the
                Company shall have complied with or performed in all material respects
                all
                of the agreements, obligations and conditions set forth in this Agreement
                and in the other Transaction Documents that are required to be complied
                with or performed by the Company on or before the Closing;
                

            

    

    

    
      	
            	5.1.3	
              the
                Company shall have caused its outside legal counsel to deliver to
                such
                Investor a legal opinion substantially in the form of Exhibit
                C;

            

    

    

    
      	 	 	
              5.1.4

            	 	
              the
                Company shall have executed and delivered to such Investor the Note
                being
                purchased by such Investor at the
                Closing;

            

    

    

    
      	 	 	
              5.1.5

            	 	
              [Reserved]

            

    

    

    
      	 	 	
              5.1.6

            	 	
              the
                Company shall have delivered to such Investor a certificate, signed
                by the
                Secretary or an Assistant Secretary of the Company, attaching (i)
                the
                articles of incorporation and by-laws of the Company and (ii) resolutions
                passed by its Board of Directors to authorize the transactions
                contemplated hereby and by the other Transaction Documents, and (iii)
                resolutions passed by the respective boards of directors of the Company
                Subsidiaries to authorize the transactions contemplated by the Security
                Agreement, and certifying that such documents are true and complete
                copies
                of the originals and have not been amended or superseded, it being
                understood that such Investor may rely on such certificate as a
                representation and warranty of the Company made
                herein;

            

    

    

    
      	 	 	
              5.1.7

            	 	
              there
                shall have occurred no material adverse change in the Company’s
                consolidated business or financial condition since the date of the
                Company’s most recent financial statements contained in the Disclosure
                Documents; 

            

    

    

    
      	 	 	
              5.1.8
                

            	 	
              [Reserved]

            

    

    

    
      	 	 	
              5.1.9

            	 	
              there
                shall be no injunction, restraining order or decree of any nature
                of any
                court or Governmental Authority of competent jurisdiction that is
                in
                effect that restrains or prohibits the consummation of the transactions
                contemplated hereby and by the other Transaction Documents;
                and

            

    

    

    
      	 	 	
              5.1.10

            	 	
              the
                Company shall have paid the expenses described in 6.9
                of
                this Agreement.

            

    

     

    
      
         

      

      
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    5.2 Conditions
      to Company’s Obligations at the Closing.
      The
      Company’s obligations to effect the Closing with an Investor are conditioned
      upon the fulfillment (or waiver by the Company in its sole and absolute
      discretion) of each of the following events as of the Closing Date:

    

    
      	 	 	
              5.2.1

            	 	
              the
                representations and warranties of such Investor set forth in this
                Agreement and in the other Transaction Documents to which it is a
                party
                shall be true and correct in all material respects as of such date
                as if
                made on such date (except that to the extent that any such representation
                or warranty relates to a particular date, such representation or
                warranty
                shall be true and correct in all material respects as of that
                date);

            

    

    

    
      	 	 	
              5.2.2

            	 	
              such
                Investor shall have complied with or performed all of the agreements,
                obligations and conditions set forth in this Agreement that are required
                to be complied with or performed by such
                Investor
                on or before the Closing; 

            

    

    

    
      	 	 	
              5.2.3

            	 	
              there
                shall be no injunction, restraining order or decree of any nature
                of any
                court or Governmental Authority of competent jurisdiction that is
                in
                effect that restrains or prohibits the consummation of the transactions
                contemplated hereby and by the other Transaction Documents;
                

            

    

    

    
      	
            	5.2.4	
              such
                Investor shall have executed each Transaction Document to which it
                is a
                party and shall have delivered the same to the Company;
                and

            

    

     

    
      	
            	5.2.5	
              such
                Investor shall have tendered the Purchase Price for the Note being
                purchased by it at the Closing
                by wire transfer of immediately available funds
                pursuant to the wiring instructions set forth on Exhibit
                D.

            

    

     

    6.    MISCELLANEOUS.

    

    6.1 Survival;
      Severability.
      The
      representations, warranties, covenants and indemnities made by the parties
      herein and in the other Transaction Documents shall survive the Closing
      notwithstanding any due diligence investigation made by or on behalf of the
      party seeking to rely thereon. In the event that any provision of this Agreement
      becomes or is declared by a court of competent jurisdiction to be illegal,
      unenforceable or void, this Agreement shall continue in full force and effect
      without said provision; provided
      that in
      such case the parties shall negotiate in good faith to replace such provision
      with a new provision which is not illegal, unenforceable or void, as long as
      such new provision does not materially change the economic benefits of this
      Agreement to the parties.

    

    6.2 No
      Reliance.
      Each
      party acknowledges that (i) it has such knowledge in business and financial
      matters as to be fully capable of evaluating this Agreement, the other
      Transaction Documents and the transactions contemplated hereby and thereby,
      (ii)
      it is not relying on any advice or representation of any other party in
      connection with entering into this Agreement, the other Transaction Documents
      or
      such transactions (other than the representations made in this Agreement or
      the
      other Transaction Documents), (iii) it has not received from any other party
      any
      assurance or guarantee as to the merits (whether legal, regulatory, tax,
      financial or otherwise) of entering into this Agreement or the other Transaction
      Documents or the performance of its obligations hereunder and thereunder, and
      (iv) it has consulted with its own legal, regulatory, tax, business, investment,
      financial and accounting advisors to the extent that it has deemed necessary,
      and has entered into this Agreement and the other Transaction Documents based
      on
      its own independent judgment and, if applicable, on the advice of such advisors,
      and not on any view (whether written or oral) expressed by any other
      party.

    

    
      
         

      

      
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    6.3
       Injunctive
      Relief.
      The
      Company and each Investor acknowledges and agrees that a breach by it of its
      obligations hereunder will cause irreparable harm to the other and that the
      remedy or remedies at law for any such breach will be inadequate and agrees,
      in
      the event of any such breach, in addition to all other available remedies,
      the
      non-breaching party shall be entitled to an injunction restraining any breach
      and requiring immediate and specific performance of such obligations without
      the
      necessity of showing economic loss or the posting of any bond.

    

    6.4 Governing
      Law; Jurisdiction; Waiver of Jury Trial.
      (a)
      This Agreement shall be governed by and construed under the laws of the State
      of
      New York applicable to contracts made and to be performed entirely within the
      State of New York. Each party hereby irrevocably submits to the exclusive
      jurisdiction of the state and federal courts sitting in the City and County
      of
      New York for the adjudication of any dispute hereunder or any other Transaction
      Document or in connection herewith or therewith or with any transaction
      contemplated hereby or thereby, and hereby irrevocably waives, and agrees not
      to
      assert in any suit, action or proceeding, any claim that it is not personally
      subject to the jurisdiction of any such court, that such suit, action or
      proceeding is brought in an inconvenient forum or that the venue of such suit,
      action or proceeding is improper. Each party hereby irrevocably waives personal
      service of process and consents to process being served in any such suit, action
      or proceeding by mailing a copy thereof to such party at the address in effect
      for notices to it under this Agreement and agrees that such service shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law.

    

    (b)
      EACH
      PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR CONTROVERSY
      THAT MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY
      TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY
      IRREVOCABLY
      AND
      UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
      RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
      TO
      THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT OR
      THE
      OTHER TRANSACTION DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
      EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (I) NO
      REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
      OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
      SEEK
      TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS
      CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS
      WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO
      THIS
      AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
      THIS
SECTION
      6.4(b).

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    6.5 Successors
      and Assigns.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective successors and permitted assigns of the parties.
      Nothing in this Agreement, express or implied, is intended to confer upon any
      party other than the parties hereto or their respective successors and permitted
      assigns any rights, remedies, obligations or liabilities under or by reason
      of
      this Agreement, except as expressly provided in this Agreement. An Investor
      may
      assign its rights and obligations hereunder in connection with any sale or
      transfer of the Notes in accordance with the terms hereof and of the other
      Transaction Documents, as long as, as a condition precedent to such transfer,
      the transferee executes an acknowledgment agreeing to be bound by the applicable
      provisions of this Agreement, in which case the term “Investor” shall be deemed
      to refer to such transferee as though such transferee were an original signatory
      hereto. The Company may not assign its rights or obligations under this
      Agreement.

    

    6.6 Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, and all of which together shall constitute one and the
      same
      instrument. This Agreement may be executed and delivered by facsimile
      transmission.

    

    6.7 Headings.
      The
      headings used in this Agreement are used for convenience only and are not to
      be
      considered in construing or interpreting this Agreement. 

    

    6.8 Notices.
      Any
      notice, demand or request required or permitted to be given by the Company
      or
      the Investor pursuant to the terms of this Agreement shall be in writing and
      shall be deemed delivered (i) when delivered personally or by verifiable
      facsimile transmission, unless such delivery is made on a day that is not a
      Business Day, in which case such delivery will be deemed to be made on the
      next
      succeeding Business Day, (ii) on the next Business Day after timely delivery
      to
      an overnight courier and (iii) on the Business Day actually received if
      deposited in the U.S. mail (certified or registered mail, return receipt
      requested, postage prepaid), addressed as follows:

    

    If
      to
      the Company:

    

    Manaris
      Corporation

    400
      boul.
      Montpellier

    Montreal,
      Quebec

    Canada
      H4N 2G7

    Attn:
      John Fraser, Chief Executive Officer

    Tel:
      514-904-6030

    Fax:
      514-744-2080

    

    with
      a copy (which
      shall not constitute notice) to:

    

    Sichenzia
      Ross Friedman Ference LLP

    61
      Broadway, 32nd
      Floor

    New
      York,
      New York 10006

    Attn: Darrin
      Ocasio, Esq.

    Tel: 212-930-9700

    Fax: 212-930-9725

    

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    and
      if to
      any Investor, to such address for such Investor as shall appear on the signature
      page hereof executed by such Investor, or as shall be designated by such
      Investor in writing to the Company in accordance with this Section
      6.8. 

    

    6.9 Expenses.
      The
      Company and each Investor shall pay all costs and expenses that it incurs in
      connection with the negotiation, execution, delivery and performance of this
      Agreement or the other Transaction Documents, provided,
      however,
      that
      that the Company shall, at the Closing, pay to Imperium Advisers, LLC
      (“Imperium”)
      an
      amount of $25,000 in immediately available funds as reimbursement for its
      out-of-pocket expenses (including without limitation legal fees and expenses)
      incurred or to be incurred by it in connection with its due diligence
      investigation of the Company and the negotiation, preparation, execution,
      delivery and performance of this Agreement and the other Transaction
      Documents.
      At the
      Closing, the amount due for such fees and expenses may be netted out of the
      Purchase Price payable by any Investor managed by Imperium.

    

    6.10 Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents constitute the entire agreement
      between the parties with regard to the subject matter hereof and thereof,
      superseding all prior agreements or understandings, whether written or oral,
      between or among the parties. No amendment, modification or other change to
      this
      Agreement or waiver of any agreement or other obligation of the parties under
      this Agreement may be made or given unless such amendment, modification or
      waiver is set forth in writing and is signed by the Company and by the holders
      of a majority of the aggregate principal of the Notes then
      outstanding.
      Any
      waiver or consent shall be effective only in the specific instance and for
      the
      specific purpose for which given.

    

    

    [Signature
      Pages to Follow]

    

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
      first-above written.

    

      	MANARIS CORPORATION	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	/s/
              John G.
              Fraser	 	 	 
	 	
              
John
              G. Fraser	 	 	
            
	 	Chief
              Executive
              Officer	 	 	 

    

    
      

        	IMPERIUM MASTER FUND,
                LTD.	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	/s/
                Maurice
                Hryshko	 	 	 
	 	
                
Maurice
                Hryshko, Esq.	 	 	
              
	 	General
                Counsel	 	 	 

      

    

    

    Principal
      Amount of Note Purchased at Closing: $2,274,053

    

    ADDRESS:

    

    c/o
      Imperium Advisers, LLC 

    153
      East
      53rd
      Street-
      29th
      Floor

    New
      York,
      NY 10022 

    Attn: Maurice
      Hryshko, Esq.

    Tel:
      (212) 433-1360 

    Fax:
      (212) 433-1361

    

    
      
         

      

        26

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