Document:

EX-10.1

 

Exhibit 10.1

Agreement for Services

Effective July 1, 2006

NMHG Oregon, LLC will pay Mr. Reginald R. Eklund the following fees for services provided as an
independent contractor to NMHG Oregon, LLC or its affiliate NACCO Materials Handling Group, Inc.:

	 	 	 	 	 
	Daily travel pay
	 	$1,500 per day
	 
	 	 	 	 
	Daily consulting services
	 	$3,000 per day

In addition, Mr. Eklund will be reimbursed for all related travel and entertainment expenses. Mr.
Eklund agrees to provide receipts for these expenses to NMHG Oregon, LLC. This Agreement may be
terminated by either party upon written notice.

The scope of this agreement is restricted to Mr. Eklund’s participation as an independent director
of Sumitomo NACCO Materials Handling Co., Ltd.

	 	 	 	 	 
	/s/ Michael P. Brogan
 

Michael P. Brogan

President and Chief Executive Officer

NMHG Oregon, LLC

	 	     
	 	     
	 
	 	 	 	 
	/s/ Reginald R. Eklund
 

Reginald R. EklundSecurities Purchase Agr

    Exhibit
      10.1

     

     

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of August 31, 2006, by and among Telkonet, Inc., a Utah corporation
      (the “Company”),
      and
      the purchasers identified on the signature pages hereto (each, a “Purchaser”
      and
      collectively, the “Purchasers”).

     

    RECITALS

     

    A. The
      Company and each Purchaser are executing and delivering this agreement in
      reliance upon the exemption from securities registration afforded by Section
      4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”),
      and
      Rule 506 of Regulation D (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission under the
      Securities Act.

    

    B. Each
      Purchaser, severally and not jointly, wishes to purchase, and the Company wishes
      to sell, upon the terms and conditions stated in this Agreement, (i) an
      aggregate of 2,400,000 shares of the Company’s Common Stock, par value $0.001
      per share (the “Common
      Stock”),
      at a
      purchase price of $2.50 per share(the “Per
      Share Purchase Price”)
      (collectively referred to herein as the “Shares”),
      and
      (ii) warrants, in substantially the form attached hereto as Exhibit A (the
      “Warrants”)
      to
      acquire up to that number of additional shares of Common Stock set forth below
      such Purchaser’s name on the signature page hereto (as exercised, collectively,
      the “Warrant
      Shares”)

    

    C. The
      Shares, the Warrants and the Warrant Shares issued pursuant to this Agreement
      are collectively referred to herein as the “Securities”.

    

    D. Contemporaneous
      with the sale of the Shares and the Warrants, the parties hereto will enter
      into
      a Registration Rights Agreement, in the form attached hereto as Exhibit
      B
      (the
“Registration
      Rights Agreement”),
      pursuant to which, among other things, the Company will agree to provide certain
      registration rights under the Securities Act and applicable state securities
      laws.

    

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

     

    ARTICLE
      I.

    DEFINITIONS

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Affiliate”
      means,
      with respect to any Person, any other Person that, directly or indirectly
      through one or more intermediaries, Controls, is controlled by or is under
      common control with such Person. With respect to a Purchaser, any investment
      fund or managed account that is managed on a discretionary basis by the same
      investment manager as such Purchaser will be deemed to be an Affiliate of such
      Purchaser.

     

    “Business
      Day”
      means a
      day, other than a Saturday or Sunday, on which banks in New York City are open
      for the general transaction of business.

     

    “Buy-In”
has
      the
      meaning set forth in Section 4.1(c).

     

    “Buy-In
      Price”
has
      the
      meaning set forth in Section 4.1(c).

     

    “Closing”
      means
      the closing of the purchase and sale of the Shares and the Warrants pursuant
      to
      this Agreement.

     

    “Closing
      Date”
      means
      the Business Day on which all of the conditions set forth in Sections 2.1 and
      2.2 hereof are satisfied, or such other date as the parties may
      agree.

     

    "Commission"
      means
      the United States Securities and Exchange Commission.

     

    “Common
      Stock”
      has the
      meaning set forth in the Recitals, and also includes any securities into which
      the Common Stock may hereafter be reclassified. 

     

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

     

    “Company
      Counsel”
means
      Baker & Hostetler LLP.

    

       “Company
      Deliverables”
has
      the
      meaning set forth in Section 2.2(a).

    

       “Company’s
      Knowledge”
means
      with respect to any statement made to the knowledge of a party, that the
      statement is based upon the actual knowledge of the officers of such party
      having responsibility for the matter or matters that are the subject of the
      statement.

    

    “Control”
      (including the terms “controlling”, “controlled by” or “under common control
      with”) means the possession, direct or indirect, of the power to direct or cause
      the direction of the management and policies of a Person, whether through the
      ownership of voting securities, by contract or otherwise.

     

    “Convertible
      Notes”
means
      those certain Senior Convertible Notes, dated on or about October 28, 2005
      issued by the Company to each of the investors party to the Settlement
      Agreements.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    “Disclosure
      Materials”
      has the
      meaning set forth in Section 3.1(h).

     

    “Effective
      Date”
      means
      the date on which the initial Registration Statement required by Section 2(a)
      of
      the Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Effectiveness
      Deadline”
means
      the date on which the initial Registration Statement is required to be declared
      effective by the Commission under the terms of the Registration Rights
      Agreement.

     

    “Environmental
      Laws”
has
      the
      meaning set forth in Section 3.1(l).

     

    “Evaluation
      Date”
has
      the
      meaning set forth in Section 3.1(v).

     

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

     

    “GAAP”
      means
      U.S. generally accepted accounting principles, as applied by the
      Company.

     

    “Indemnified
      Person”
has
      the
      meaning set forth in Section 4.7(b).

     

    “Intellectual
      Property Rights”
      has the
      meaning set forth in Section 3.1(r).

     

    “Lead
      Investors”
means
      those Purchasers which are managed by __________.

     

    “Lien”
      means
      any lien, charge, encumbrance, security interest, right of first refusal,
      preemptive right or other restrictions of any kind.

     

    “Losses”
has
      the
      meaning set forth in Section 4.7(a).

     

    “Material
      Adverse Effect”
      means
      any of (i) a material and adverse effect on the legality, validity or
      enforceability of any Transaction Document, (ii) a material and adverse effect
      on the results of operations, assets, prospects, business or condition
      (financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
      or (iii) a material adverse impairment to the Company's ability to perform
      on a
      timely basis its obligations under any Transaction Document.

     

    “Material
      Contract”
means
      any contract of the Company that was filed as an exhibit to the SEC Filings
      pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.

    

    “New
      York Courts”
      means
      the state and federal courts sitting in the City of New York, Borough of
      Manhattan.

     

    “Person”
      means an
      individual, corporation, partnership, limited liability company, trust, business
      trust, association, joint stock company, joint venture, sole proprietorship,
      unincorporated organization, governmental authority or any other form of entity
      not specifically listed herein.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

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

     

    “Purchaser
      Deliverables”
has
      the
      meaning set forth in Section 2.2(b).

     

    “Purchaser
      Party”
      has the
      meaning set forth in Section 4.7.

     

    “Registration
      Statement”
      means a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Purchasers of the Registrable
      Securities (as defined in the Registration Rights Agreement).

     

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

     

    “SEC
      Reports”
      has the
      meaning set forth in Section 3.1(h).

     

    “Secretary’s
      Certificate”
has
      the
      meaning set forth in Section 2.2(a)(vi).

     

    “Settlement
      Agreements”
means
      those certain Settlement Agreements, dated as of August 14, 2006, between the
      Company and each of the investors party thereto. 

     

    “Short
      Sales”
      include,
      without limitation, all “short sales” as defined in Rule 3b-3 of the Exchange
      Act and Rule 200 promulgated under Regulation SHO under the Exchange Act,
      whether or not against the box, and all types of direct and indirect stock
      pledges, forward sale contracts, options, puts, calls, short sales, swaps,
“put
      equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and
      similar arrangements (including on a total return basis), and sales and other
      transactions through non-US broker dealers or foreign regulated brokers having
      the effect of hedging the securities or investment made under this
      Agreement.

     

    “Subscription
      Amount”
      means
      with respect to each Purchaser, the Subscription Amount indicated on such
      Purchaser’s signature page to this Agreement.

     

    “Subsidiary”
      means
      any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
      promulgated by the Commission under the Exchange Act.

     

    “Trading
      Affiliate”
has
      the
      meaning set forth in Section 3.2(g).

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

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

     

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

     

    “Transfer
      Agent”
      means
      StockTrans.

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1 Closing.
      Subject
      to the terms and conditions set forth in this Agreement, at the Closing, the
      Company shall issue and sell to each Purchaser, and each Purchaser shall,
      severally and not jointly, purchase from the Company, the Shares and Warrants
      representing such Purchaser’s Subscription Amount. The Closing shall take place
      at the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas,
      18th
      Floor,
      New York, New York 10020, on the Closing Date or at such other location or
      time
      as the parties may agree.

     

    2.2 Closing
      Deliveries.
        (a) At
      the
      Closing, the Company shall issue, deliver or cause to be delivered to each
      Purchaser the following (the “Company
      Deliverables”):

     

    (i) this
      Agreement, duly executed by the Company;

     

    (ii) one
      or
      more stock certificates, free and clear of all restrictive and other legends
      (except as expressly provided in Section 4.1(b) hereof), evidencing a number
      of
      Shares equal to the quotient obtained by dividing (a) such Purchaser’s
      Subscription Amount by (b) the Per Share Purchase Price;

     

    (iii) a
      Warrant, executed by the Company and registered in the name of such Purchaser,
      pursuant to which such Purchaser shall have the right to acquire such number
      of
      Warrant Shares equal to65% of the number of Shares issuable to such Purchaser
      pursuant to this Agreement;

     

    (iv) a
      legal
      opinion of Company Counsel, in the form set forth in Exhibit C hereto, executed
      by such counsel and addressed to the Purchasers; 

     

    (v) the
      Registration Rights Agreement, duly executed by the Company; 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (vi) a
      certificate of the Secretary of the Company (the “Secretary’s
      Certificate”),
      dated
      as of the Closing Date, certifying the resolutions adopted by the Board of
      Directors of the Company approving the transactions contemplated by this
      Agreement and the other Transaction Documents and the issuance of the
      Securities, certifying the current versions of the Articles of Incorporation
      and
      by-laws of the Company and certifying as to the signatures and authority of
      persons signing the Transaction Documents and related documents on behalf of
      the
      Company; and

     

    (b) At
      the
      Closing, each Purchaser shall deliver or cause to be delivered to the Company
      the following (the “Purchaser
      Deliverables”):

     

    (i) this
      Agreement, duly executed by such Purchaser;

     

    (ii) its
      Subscription Amount, in United States dollars and in immediately available
      funds; 

     

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

     

    (iv) a
      fully
      completed and duly executed Selling Stockholder Questionnaire in the form
      attached as Annex B to the Registration Rights Agreement; and

     

    (v) a
      fully
      completed and duly executed Accredited Investor Questionnaire and Stock
      Certificate Questionnaire in the forms attached hereto as Exhibits D-1 and
      D-2,
      respectively.

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1 Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Purchasers that, except as set
      forth in the Schedules delivered herewith:

     

    (a) Subsidiaries.
      The
      Company has no direct or indirect Subsidiaries other than those listed in the
      Company’s Form 10-K Report for the year ended December 31, 2005. Except as
      disclosed therein, the Company owns, directly or indirectly, all of the capital
      stock or comparable equity interests of each Subsidiary free and clear of any
      and all Liens and all the issued and outstanding shares of capital stock or
      comparable equity interest of each Subsidiary are validly issued and are fully
      paid, non-assessable and free of preemptive and similar rights. 

     

    (b) Organization
      and Qualification.
      The
      Company and each Subsidiary is an entity duly incorporated or otherwise
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with the
      requisite power and authority to own or lease and use its properties and assets
      and to carry on its business as currently conducted. Neither the Company nor
      any
      Subsidiary is in violation of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents. Each of the Company and the Subsidiaries is duly qualified
      to
      conduct business and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary or appropriate, except
      where the failure to be so qualified or in good standing, as the case may be,
      could not, individually or in the aggregate, have or reasonably be expected
      to
      result in a Material Adverse Effect. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (c) Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      to
      which it is a party and otherwise to carry out its obligations hereunder and
      thereunder. The execution and delivery of each of the Transaction Documents
      to
      which it is a party by the Company and the consummation by it of the
      transactions contemplated hereby and thereby (including, but not limited to,
      the
      sale and delivery of the Shares and the Warrants and the subsequent issuance
      of
      the Warrant Shares upon exercise of the Warrants have been duly authorized
      by
      all necessary corporate action on the part of the Company and no further
      corporate action is required by the Company, its Board of Directors or its
      stockholders. Each Transaction Document to which it is a party has been (or
      upon
      delivery will have been) duly executed by the Company and, when delivered in
      accordance with the terms hereof, will constitute the valid and binding
      obligation of the Company enforceable against the Company in accordance with
      its
      terms, except as such enforceability may be limited by applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation or similar laws relating
      to,
      or affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application. There are no stockholders
      agreements, voting agreements, or other similar arrangements with respect to
      the
      Company’s capital stock to which the Company is a party or, to the Company’s
      Knowledge, between or among any of the Company’s stockholders.

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents and the
      consummation by the Company of the transactions contemplated hereby or thereby
      (including without limitation, the issuance of the Shares, pursuant to Sections
      2.2 and, if any, Section 4.12, and the issuance of the Warrants pursuant to
      this
      Agreement and the registration of the Registrable Securities under the
      Registration Rights Agreement) do not and will not (i) conflict with or violate
      any provision of the Company’s or any Subsidiary’s certificate or articles of
      incorporation, bylaws or other organizational or charter documents, (ii) except
      as set forth on Schedule
      3.1(d),
      conflict with, or constitute a default (or an event that with notice or lapse
      of
      time or both would become a default) under, or give to others any rights of
      termination, amendment, acceleration or cancellation (with or without notice,
      lapse of time or both) of, any agreement, credit facility, debt, equity or
      other
      instrument (evidencing a Company or Subsidiary debt, equity issuance obligation
      or otherwise) or other understanding to which the Company or any Subsidiary
      is a
      party or by which any property or asset of the Company or any Subsidiary is
      bound, or affected, except to the extent that such conflict, default,
      termination, amendment, acceleration or cancellation right could not reasonably
      be expected to have a Material Adverse Effect, or (iii) result in a violation
      of
      any law, rule, regulation, order, judgment, injunction, decree or other
      restriction of any court or governmental authority to which the Company or
      a
      Subsidiary is subject (including federal and state securities laws and
      regulations and the rules and regulations, assuming the correctness of the
      representations and warranties made by the Purchasers herein, of any
      self-regulatory organization to which the Company or its securities are subject,
      including all applicable Trading Markets), or by which any property or asset
      of
      the Company or a Subsidiary is bound or affected, except to the extent that
      such
      violation described in this clause (iii) could not, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse
      Effect.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (e) Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority or other Person
      in
      connection with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) the filing with the Commission of one
      or
      more Registration Statements in accordance with the requirements of the
      Registration Rights Agreement, (ii) filings required by applicable state
      securities laws, (iii) the filing of a Notice of Sale of Securities on Form
      D
      with the Commission under Regulation D of the Securities Act, (iv) the filing
      of
      any requisite notices and/or application(s) to each applicable Trading Market
      for the issuance and sale of the Common Stock and the Warrants and the listing
      of the Common Stock for trading or quotation, as the case may be, thereon in
      the
      time and manner required thereby, (v) the filings required in accordance with
      Section 4.5 and (vi) those that have been made or obtained prior to the date
      of
      this Agreement.

     

    (f) Issuance
      of the Securities.
      The
      Shares and the Warrant Shares have been duly authorized and, when issued and
      paid for in accordance with the terms of the Transaction Documents, will be
      duly
      and validly issued, fully paid and nonassessable, free and clear of all Liens
      other than restrictions on transfer provided for in the Transaction Documents
      or
      imposed by applicable securities laws and shall not be subject to preemptive
      or
      similar rights of stockholders. Assuming the accuracy of the representations
      and
      warranties of the Purchasers, the Shares and the Warrant Shares will be issued
      in compliance with all applicable federal and state securities laws.

     

    (g) No
      Anti-dilution Trigger.
      Except
      as set forth in Schedule
      3.1(g),
      the
      issuance and sale of the Securities whether pursuant to Section 2.2 or Section
      4.12, and the issuance of the Warrant Shares upon exercise of the Warrants
      in
      accordance with their terms, will not, immediately or with the passage of time
      or the giving of notice or both, obligate the Company to issue shares of Common
      Stock or other securities to any Person (other than the Purchasers) and will
      not
      result in a right of any holder of Company securities to adjust the exercise,
      conversion, exchange or reset price under such securities.

     

    (h) Capitalization.
      The
      number of shares and type of all authorized, issued and outstanding capital
      stock, options and other securities of the Company (whether or not presently
      convertible into or exercisable or exchangeable for shares of capital stock
      of
      the Company) is specified in the SEC Reports. No securities of the Company
      are
      entitled to preemptive or similar rights, and no Person has any right of first
      refusal, preemptive right, right of participation, or any similar right to
      participate in the transactions contemplated by the Transaction Documents.
      Except as set forth on Schedule
      3.1(h),
      there
      are no outstanding options, warrants or scrip rights to subscribe to, calls
      or
      commitments of any character whatsoever relating to, or securities, rights
      or
      obligations convertible into or exchangeable for, or giving any Person any
      right
      to subscribe for or acquire, any shares of the Company’s capital stock, or
      contracts, commitments, understandings or arrangements by which the Company
      or
      any Subsidiary is or may become bound to issue additional shares of capital
      stock of the Company, or options, securities or rights convertible or
      exchangeable into shares of capital stock. Except as set forth on Schedule
      3.1(h)
      and
      customary adjustments resulting from stock dividends, stock splits, combination
      of shares, reorganizations, recapitalizations, reclassifications or other
      similar events, there are no anti-dilution or price adjustment provisions
      contained in any security issued by the Company (or in any agreement providing
      rights to security holders). All of the outstanding shares of capital stock
      of
      the Company are duly authorized, validly issued, fully paid and non-assessable,
      have been issued in compliance with all applicable federal and state security
      laws, and none of such outstanding shares was issued in violation of any
      preemptive rights or similar rights to subscribe for or purchase any capital
      stock of the Company.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (i) SEC
      Reports.
      The
      Company has filed all reports required to be filed by it under the Exchange
      Act,
      including pursuant to Section 13(a) or 15(d) thereof, for the two years
      preceding the date hereof (or such shorter period as the Company was required
      by
      law to file such reports) (the foregoing materials being collectively referred
      to herein as the “SEC
      Reports”
      and
      together with this Agreement and the Schedules to this Agreement (if any),
      the“Disclosure
      Materials”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, or to the extent corrected by a subsequent restatement,
      the SEC Reports complied in all material respects with the requirements of
      the
      Securities Act and the Exchange Act and the rules and regulations of the
      Commission promulgated thereunder, and none of the SEC Reports, when filed,
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading.

     

    (j) Financial
      Statements. The
      financial statements of the Company included in the SEC Reports comply in all
      material respects with applicable accounting requirements and the rules and
      regulations of the Commission with respect thereto as in effect at the time
      of
      filing (or to the extent corrected by a subsequent restatement). Such financial
      statements have been prepared in accordance with GAAP applied on a consistent
      basis during the periods involved, except as may be otherwise specified in
      such
      financial statements or the notes thereto and except that unaudited financial
      statements may not contain all footnotes required by GAAP, and fairly present
      in
      all material respects the financial position of the Company and its consolidated
      subsidiaries as of and for the dates thereof and the results of operations
      and
      cash flows for the periods then ended, subject, in the case of unaudited
      statements, to normal, year-end audit adjustments. 

     

    (k) Tax
      Matters.
      Each of
      the Company and its Subsidiaries (i) has accurately and timely prepared and
      filed all foreign, federal and state income and all other tax returns, reports
      and declarations required by any jurisdiction to which it is subject, (ii)
      has
      paid all material taxes and other governmental assessments and charges that
      are
      material in amount, shown or determined to be due on such returns, reports
      and
      declarations, except those being contested in good faith, with respect to which
      adequate reserves have been set aside on the books of the Company and (iii)
      has
      set aside on its books provision reasonably adequate for the payment of all
      taxes for periods subsequent to the periods to which such returns, reports
      or
      declarations apply. There are no unpaid taxes in any material amount claimed
      to
      be due by the taxing authority of any jurisdiction, and the officers of the
      Company know of no basis for such claim. 

     

    
      
        
        

      

      
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    (l) Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in the SEC Reports, (i) there has
      been
      no event, occurrence or development that has had or that could reasonably be
      expected to result in a Material Adverse Effect, (ii) the Company has not
      incurred any liabilities (contingent or otherwise) other than (A) trade
      payables, accrued expenses and other liabilities incurred in the ordinary course
      of business consistent with past practice and (B) liabilities not required
      to be
      reflected in the Company's financial statements pursuant to GAAP or required
      to
      be disclosed in filings made with the Commission, (iii) the Company has not
      altered its method of accounting or the manner in which it keeps its accounting
      books and records, or changed its auditors, (iv) the Company has not declared
      or
      made any dividend or distribution of cash or other property to its stockholders
      or purchased, redeemed or made any agreements to purchase or redeem any shares
      of its capital stock (other than in connection with repurchases of unvested
      stock issued to employees of the Company) and (v) the Company has not issued
      any
      equity securities to any officer, director or Affiliate, except Common Stock
      issued in the ordinary course as dividends on outstanding preferred stock and
      pursuant to existing Company stock option or stock purchase plans or executive
      and director corporate arrangements disclosed in the SEC Reports and (vi) there
      has not been any material change or amendment to, or any waiver of any material
      right under, any contract under which the Company, any subsidiary thereof,
      or
      any of their assets is bound or subject. The Company does not have pending
      before the Commission any request for confidential treatment of
      information.

     

    (m) Environmental
      Matters.
      To the
      Company’s Knowledge, neither the Company nor any Subsidiary (i) is in violation
      of any statute, rule, regulation, decision or order of any governmental agency
      or body or any court, domestic or foreign, relating to the use, disposal or
      release of hazardous or toxic substances or relating to the protection or
      restoration of the environment or human exposure to hazardous or toxic
      substances (collectively, “Environmental
      Laws”),
      (ii)
      owns or operates any real property contaminated with any substance that is
      in
      violation of any Environmental Laws, (iii) is liable for any off-site disposal
      or contamination pursuant to any Environmental Laws, and (iv) is subject to
      any
      claim relating to any Environmental Laws; which violation, contamination,
      liability or claim has had or could reasonably be expected to have a Material
      Adverse Effect, individually or in the aggregate; and there is no pending or,
      to
      the Company’s Knowledge, threatened investigation that might lead to such a
      claim.

     

    (n) Litigation.
      There
      is no Proceeding which (i) adversely affects or challenges the legality,
      validity or enforceability of any of the Transaction Documents or the issuance
      of the Securities or (ii) except as specifically disclosed in the SEC Reports,
      could, if there were an unfavorable decision, individually or in the aggregate,
      have or reasonably be expected to result in a Material Adverse Effect. Neither
      the Company nor any Subsidiary, nor any director or officer thereof (in his
      or
      her capacity thereof), is or has been during the ten-year period prior to the
      closing Date the subject of any Proceeding involving a claim of violation of
      or
      liability under federal or state securities laws or a claim of breach of
      fiduciary duty. There has not been and to the Company’s Knowledge, there is not
      pending or contemplated, any investigation by the Commission involving the
      Company or any current or former director or officer of the Company (in his
      or
      her capacity as such). The Commission has not issued any stop order or other
      order suspending the effectiveness of any registration statement filed by the
      Company or any subsidiary under the Exchange Act or the Securities
      Act.

     

    
      
        
        

      

      
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    (o) Employment
      Matters.
      The
      Company and its Subsidiaries are in compliance with all federal, state, local
      and foreign laws and regulations respecting labor, employment and employment
      practices and benefits, terms and conditions of employment and wages and hours,
      except where the failure to be in compliance would not, either individually
      or
      in the aggregate, reasonably be expected to result in a Material Adverse Effect.
      Neither the Company nor any of its Subsidiaries is a party to any collective
      bargaining agreement. The Company and its Subsidiaries believe that their
      relations with their employees are satisfactory. No executive officer of the
      Company or any of its Subsidiaries (as defined in Rule 501(f) of the Securities
      Act) has notified the Company or any such Subsidiary that such officer intends
      to leave the Company or any such Subsidiary or otherwise terminate such
      officer’s employment with the Company or any such Subsidiary. 

     

    (p) Compliance.
      Neither
      the Company nor any Subsidiary, except in each case as could not, individually
      or in the aggregate, have or reasonably be expected to result in a Material
      Adverse Effect (i) is in default under or in violation of (and no event has
      occurred that has not been waived that, with notice or lapse of time or both,
      would result in a default by the Company or any Subsidiary under), nor has
      the
      Company or any Subsidiary received notice of a claim that it is in default
      under
      or that it is in violation of, any indenture, loan or credit agreement or any
      other agreement or instrument to which it is a party or by which it or any
      of
      its properties is bound (whether or not such default or violation has been
      waived), (ii) is in violation of any order of any court, arbitrator or
      governmental body having jurisdiction over the Company or its properties or
      assets, or (iii) is or has been in violation of, or in receipt of notice that
      it
      is in violation of, any statute, rule or regulation of any governmental
      authority applicable to the Company. 

     

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

     

    (r) Title
      to Assets.
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to their respective businesses
      and
      good and marketable title in all personal property owned by them that is
      material to their respective businesses, in each case free and clear of all
      Liens, except for Liens that do not, individually or in the aggregate, have
      or
      result in a Material Adverse Effect. Any real property and facilities held
      under
      lease by the Company and the Subsidiaries are held by them under valid,
      subsisting and enforceable leases of which the Company and the Subsidiaries
      are
      in material compliance.

     

    
      
        
        

      

      
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    (s) Patents
      and Trademarks.
      The
      Company and its subsidiaries own, possess, license or have other rights to
      use
      all foreign and domestic patents, patent applications, trade and service marks,
      trade and service mark registrations, trade names, copyrights, licenses,
      inventions, trade secrets, technology, Internet domain names, know-how and
      other
      intellectual property (collectively, the “Intellectual
      Property”)
      necessary for the conduct of their respective businesses as now conducted or
      as
      proposed to be conducted. Except as set forth in the SEC Reports and except
      where such violations or infringements would not reasonably be expected to
      result in a Material Adverse Effect, (a) to the Company’s Knowledge, there
      are no rights of third parties to any such Intellectual Property; (b) to the
      Company’s Knowledge, there is no infringement by third parties of any such
      Intellectual Property; (c) there is no pending or, to the Company’s Knowledge,
      threatened action, suit, proceeding or claim by others challenging the Company’s
      and its Subsidiaries’ rights in or to any such Intellectual Property, and the
      Company is unaware of any facts which would form a reasonable basis for any
      such
      claim; (d) there is no pending or, to the Company’s Knowledge, threatened
      action, suit, proceeding or claim by others challenging the validity or scope
      of
      any such Intellectual Property; and (e) there is no pending or, to the Company’s
      Knowledge, threatened action, suit, proceeding or claim by others that the
      Company and its Subsidiaries infringe or otherwise violate any patent,
      trademark, copyright, trade secret or other proprietary rights of others, and
      the Company is unaware of any other fact which would form a reasonable basis
      for
      any such claim.

     

    (t) Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged. Neither the Company nor any Subsidiary has any Knowledge that it will
      be unable to renew its existing insurance coverage for the Company and the
      Subsidiaries as and when such coverage expires or to obtain similar coverage
      from similar insurers as may be necessary to continue its business without
      a
      significant increase in cost.

     

    (u) Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports made on or prior to the date hereof, none of
      the
      officers or directors of the Company and, to the Company’s Knowledge, none of
      the employees of the Company is presently a party to any transaction with the
      Company or any Subsidiary or to a presently contemplated transaction (other
      than
      for services as employees, officers and directors) that would be required to
      be
      disclosed pursuant to Item 404 of Regulation S-K promulgated under the
      Securities Act. The Company is in compliance with applicable requirements of
      the
      Sarbanes Oxley Act of 2002 and applicable rules and regulations promulgated
      by
      the Commission thereunder, except where such noncompliance would not result
      in,
      individually or in the aggregate, a Material Adverse Effect.

     

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

     

    
      
        
        

      

      
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    (w) Internal
      Controls. The
      Company has established disclosure controls and procedures (as defined in 1934
      Act Rules 13a-15 and 15d-15) for the Company and designed such disclosure
      controls and procedures to ensure that material information relating to the
      Company is made known to the certifying officers by others within those
      entities, particularly during the period in which the Company’s most recently
      filed periodic report under the Exchange Act was being prepared. The Company's
      certifying officers have evaluated the effectiveness of the Company's disclosure
      controls and procedures as of the end of the most recent periodic reporting
      period under the Exchange Act (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed periodic report under the Exchange
      Act the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, except with respect to the
      remediation of the material weakness in internal control over financial
      reporting and the ineffectiveness of disclosure controls and procedures as
      described in the SEC Filings, there have been no significant changes in the
      Company's internal control over financial reporting (as such term is defined
      in
      Item 308(c) of Regulation S-K) or, to the Company's Knowledge, in other factors
      that could significantly affect the Company's internal control over financial
      reporting. The Company maintains and will continue to maintain a standard system
      of accounting established and administered in accordance with GAAP and the
      applicable requirements of the Exchange Act.

     

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

     

    (y) Private
      Placement.
      Assuming the accuracy of the Purchasers’ representations and warranties set
      forth in Section 3.2(b)-(e), no registration under the Securities Act is
      required for the offer and sale of the Shares and Warrant Shares by the Company
      to the Purchasers under the Transaction Documents. The Company is eligible
      to
      register the Shares and the Warrant Shares for resale by the Purchasers using
      Form S-3 promulgated under the Securities Act. Except as specified in
Schedule
      3.1(y),
      the
      Company has not granted or agreed to grant to any Person any rights (including
      “piggy-back” registration rights) to have any securities of the Company
      registered with the Commission or any other governmental authority that have
      not
      been satisfied or waived. 

     

    (z) No
      Directed Selling Efforts or General Solicitation.
      Neither
      the Company, nor any of its Affiliates, nor any Person acting on its or their
      behalf has conducted any “general solicitation” or “general advertising” (as
      those terms are used in Regulation D) in connection with the offer or sale
      of
      any of the Securities.

     

    
      
        
        

      

      
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    (aa) No
      Integrated Offering.
      Neither
      the Company nor any of its Affiliates, nor any Person acting on its or their
      behalf has, directly or indirectly, at any time within the past six months
      made
      any offers or sales of any Company security or solicited any offers to buy
      any
      security, under circumstances that would (i) eliminate the availability of
      the
      exemption from registration under Regulation D under the Securities Act in
      connection with the offer and sale by the Company of the Securities as
      contemplated hereby or (ii) cause the offering of the Securities pursuant to
      the
      Transaction Documents to be integrated with prior offerings by the Company
      for
      purposes of any applicable law, regulation or stockholder approval provisions,
      including, without limitation, under the rules and regulations of any Trading
      Market.

     

    (bb) Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
      Act, and the Company has taken no action designed to terminate the registration
      of the Common Stock under the Exchange Act nor has the Company received any
      notification that the Commission is contemplating terminating such registration.
      Except as specified in the SEC Reports, the Company has not, in the two years
      preceding the date hereof, received notice (written or oral) from any Trading
      Market to the effect that the Company is not in compliance with the listing
      or
      maintenance requirements thereof. The Company is in compliance in all material
      respects with the listing and maintenance requirements for continued listing
      of
      the Common Stock on the Trading Market on which the Common Stock is currently
      listed or quoted. The issuance and sale of the Securities under the Transaction
      Documents does not contravene the rules and regulations of the Trading Market
      on
      which the Common Stock is currently listed or quoted, and no approval of the
      shareholders of the Company thereunder is required for the Company to issue
      and
      deliver to the Purchasers the maximum number of Securities contemplated by
      Transaction Documents.

     

    (cc) Investment
      Company.
      Neither
      the Company nor any of its Subsidiaries is required to be registered as, and
      is
      not an Affiliate of, and immediately following the Closing will not be required
      to register as, an “investment company” within the meaning of the Investment
      Company Act of 1940, as amended.

     

    (dd) Questionable
      Payments. Neither
      the Company nor any of its Subsidiaries, nor, to the Company’s Knowledge,
      directors, officers, employees, agents or other Persons acting on behalf of
      the
      Company or any of its Subsidiaries has, in the course of its actions for, or
      on
      behalf of, the Company: (a) used any corporate funds for unlawful contributions,
      gifts, entertainment or other unlawful expenses relating to foreign or domestic
      political activity; (b) made any direct or indirect unlawful payments to any
      foreign or domestic governmental officials or employees from corporate funds;
      (c) violated in any material respect any provision of the Foreign Corrupt
      Practices Act of 1977, as amended or (d) made any other unlawful bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    
      
        
        

      

      
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    (ee) Application
      of Takeover Protections.
      There
      is no control share acquisition, business combination, poison pill (including
      any distribution under a rights agreement) or other similar anti-takeover
      provision under the Company's charter documents or the laws of its state of
      incorporation that is or could reasonably be expected to become applicable
      to
      any of the Purchasers as a result of the Purchasers and the Company fulfilling
      their obligations or exercising their rights under the Transaction Documents,
      including without limitation the Company's issuance of the Securities and the
      Purchasers' ownership of the Securities.

     

    (ff) Disclosure.
      The
      Company confirms that neither it nor any Person acting on its behalf has
      provided any Purchaser or its respective agents or counsel with any information
      that constitutes or might constitute material, non-public information except
      insofar as the existence, provisions and terms of the Transaction Documents
      and
      the proposed transactions hereunder may constitute such information. The Company
      understands and confirms that the Purchasers will rely on the foregoing
      representations in effecting transactions in securities of the Company. All
      disclosure provided to the Purchasers regarding the Company, its business and
      the transactions contemplated hereby, furnished by or on behalf of the Company
      in the Transaction Documents (including the Company’s representations and
      warranties set forth in this Agreement) are true and correct in all material
      respects and do not contain any untrue statement of a material fact or omit
      to
      state any material fact necessary in order to make the statements made therein,
      in light of the circumstances under which they were made, not misleading.

     

    (gg) Manipulation
      of Price.
      The
      Company has not, and to its Knowledge no Person acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any Company security to facilitate
      the sale or resale of any such securities, (ii) sold, bid for, purchased, or,
      paid any compensation for soliciting purchases of, any of the Company
      securities, or (iii) paid or agreed to pay to any Person any compensation for
      soliciting another to purchaser any Company securities.

     

    (hh) No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company, and the Company is current with
      respect to any fees owed to its accountants and lawyers.

     

    Each
      Purchaser acknowledges and agrees that the Company has not made or does not
      make
      any representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.1.

    

    
      
        
        

      

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

     

    (a) Organization;
      Authority.
      Such
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with the requisite
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the applicable Transaction Documents and otherwise
      to carry out its obligations hereunder and thereunder. The execution, delivery
      and performance by such Purchaser of the transactions contemplated by this
      Agreement has been duly authorized by all necessary corporate and shareholder
      or, if such Purchaser is not a corporation, such partnership and partner,
      limited liability company and member or other applicable like action, on the
      part of such Purchaser and no further action is required by such Purchaser
      or
      its board or directors, shareholders, partners or members, as applicable. Each
      of this Agreement and the Registration Rights Agreement has been duly executed
      by such Purchaser, and when delivered by such Purchaser in accordance with
      terms
      hereof, will constitute the valid and legally binding obligation of such
      Purchaser, enforceable against it in accordance with its terms, except as such
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application.

     

    (b) Investment
      Intent.
      Such
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and is acquiring the Securities and, upon exercise of the Warrants will
      acquire the Warrant Shares issuable upon exercise thereof, as principal for
      its
      own account for investment purposes only and not with a view to or for
      distributing or reselling such Securities or any part thereof, without
      prejudice, however, to such Purchaser's right, subject to the provisions of
      this
      Agreement and the Registration Rights Agreement, at all times to sell or
      otherwise dispose of all or any part of such Securities or Warrant Shares
      pursuant to an effective registration statement under the Securities Act or
      under an exemption from such registration and in compliance with applicable
      federal and state securities laws. Subject to the immediately preceding
      sentence, nothing contained herein shall be deemed a representation or warranty
      by such Purchaser to hold the Securities for any period of time. Such Purchaser
      is acquiring the Securities hereunder in the ordinary course of its business.
      Such Purchaser does not have any agreement, plan or understanding, directly
      or
      indirectly, with any Person to distribute any of the Securities.

     

    (c) Purchaser
      Status.
      At the
      time such Purchaser was offered the Securities, it was, and at the date hereof
      it is, and on each date on which it exercises the Warrants it will be, an
“accredited investor” as defined in Rule 501(a) under the Securities Act. Such
      Purchaser is not a registered broker-dealer under Section 15 of the Exchange
      Act.

     

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

     

    
      
        
        

      

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

     

    (f) Residency.
      Such
      Purchaser has, if an entity, its principal place of business or, if an
      individual, its primary residence in the jurisdiction set forth immediately
      below such Purchaser’s name on the signature pages hereto.

     

    (g) Certain
      Trading Activities.
      Since
      the earlier to occur of (1) the time that such Purchaser was first contacted
      by
      the Company, or any other Person regarding an investment in the Company and
      (2)
      the 10th
      day
      prior to the date of this Agreement, neither the Purchaser nor any Affiliate
      of
      such Purchaser which (x) had knowledge of the transactions contemplated hereby,
      (y) has or shares discretion relating to such Purchaser’s investments or trading
      or information concerning such Purchaser’s investments, including in respect of
      the Securities, or (z) is subject to such Purchaser’s review or input concerning
      such Affiliate’s investments or trading (collectively, “Trading
      Affiliates”)
      has
      directly or indirectly, nor has any Person acting on behalf of or pursuant
      to
      any understanding with such Purchaser or Trading Affiliate, effected or agreed
      to effect any transactions in the securities of the Company (including, without
      limitation, any Short Sales involving the Company’s securities), except for the
      transactions contemplated by this Agreement. Prior to the Effective Date,
such
      Purchaser shall
      not, and shall cause its Trading Affiliates not to, engage, directly or
      indirectly, in any Short Sales in the securities of the Company, except in
      compliance with all applicable law. Each Purchaser agrees that it will not
      use
      any of the Shares or Warrant Shares acquired pursuant to this Agreement to
      cover
      any short position in the Common Stock if doing so would be in violation of
      applicable securities laws. Each Purchaser acknowledges that it is aware that
      the Commission has published its position that covering a short position
      established prior to effectiveness of a resale registration statement with
      shares included in such registration statement would be a violation of Section
      5
      of the Securities Act.

     

    (h) Brokers
      and Finders.
      No
      Person will have, as a result of the transactions contemplated by this
      Agreement, any valid right, interest or claim against or upon the Company,
      or
      any Purchaser for any commission, fee or other compensation pursuant to any
      agreement, arrangement or understanding entered into by or on behalf of the
      Purchaser.

     

    
      
        
        

      

      
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    (i) Limited
      Ownership.
      The
      purchase by such Purchaser of the Securities issuable to it at the Closing
      will
      not result in such Purchaser (individually or together with other Person with
      whom such Purchaser has identified, or will have identified, itself as part
      of a
“group” in a public filing made with the Commission involving the Company’s
      securities) acquiring, or obtaining the right to acquire, in excess of 19.99%
      of
      the outstanding shares of Common Stock or the voting power of the Company on
      a
      post transaction basis that assumes that the Closing shall have occurred. Such
      Purchaser does not presently intend to, alone or together with others, make
      a
      public filing with the Commission to disclose that it has (or that it together
      with such other Persons have) acquired, or obtained the right to acquire, as
      a
      result of the Closing (when added to any other securities of the Company that
      it
      or they then own or have the right to acquire), in excess of 19.99% of the
      outstanding shares of Common Stock or the voting power of the Company on a
      post
      transaction basis that assumes that the Closing shall have
      occurred.

     

    (j) Independent
      Investment Decision.
      Such
      Purchaser has independently evaluated the merits of its decision to purchase
      Securities pursuant to the Transaction Documents, and such Purchaser confirms
      that it has not relied on the advice of any other Purchaser’s business and/or
      legal counsel in making such decision. Such Purchaser understands that nothing
      in this Agreement or any other materials presented by or on behalf of the
      Company to the Purchaser in connection with the purchase of the Securities
      constitutes legal, tax or investment advice. Such Purchaser has consulted such
      legal, tax and investment advisors as it, in its sole discretion, has deemed
      necessary or appropriate in connection with its purchase of the Securities.
      

     

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

     

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

     

    (m) No
      Conflicts.
      The
      execution, delivery and performance by such Purchaser of this Agreement and
      the
      Registration Rights Agreement and the consummation by such Purchaser of the
      transactions contemplated hereby and thereby will not (i) result in a violation
      of the organizational documents of such Purchaser or (ii) conflict with, or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which such Purchaser is a party, or (iii) result in a violation
      of
      any law, rule, regulation, order, judgment or decree applicable to such
      Purchaser, except in the case of clauses (ii) and (iii) above, for such
      conflicts, defaults, rights or violations which would not, individually or
      in
      the aggregate, reasonably be expected to have a material adverse effect on
      the
      ability of such Purchaser to perform its obligations hereunder.

     

    
      
        
        

      

      
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    The
      Company acknowledges and agrees that no Purchaser has made or makes any
      representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.2.

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1 (a) Compliance
      with Laws.
      Notwithstanding any other provision of this Article IV, each Purchaser covenants
      that the Securities may only be disposed of pursuant to an effective
      registration statement under, and in compliance with the requirements of, the
      Securities Act, or pursuant to an available exemption from, or in a transaction
      not subject to, the registration requirements of the Securities Act, and in
      compliance with any applicable state and federal securities laws. In connection
      with any transfer of the Securities other than pursuant to an effective
      registration statement, pursuant to Rule 144(k) or in connection with a pledge
      as contemplated in Section 4.1(b), except as otherwise provided herein, the
      transferor will provide to the Company an opinion of counsel selected by the
      transferor, which counsel and the form and substance of which opinion shall
      be
      reasonably satisfactory to the Company and its legal counsel, to the effect
      that
      such transfer does not require registration of such transferred Securities
      under
      the Securities Act. 

     

    (b) Legends.
      Certificates evidencing the Securities will contain the following legend, until
      such time as they are not required under Section 4.1(c):

     

    NEITHER
      THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
      HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
      SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS OR BLUE SKY LAWS.

     

    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge,
      and/or grant a security interest in some or all of the legended Securities,
      in
      connection with applicable securities laws, pursuant to a bona fide margin
      agreement in compliance with a bona fide margin loan. Such a pledge would not
      be
      subject to approval or consent of the Company and no legal opinion of legal
      counsel to the pledgee, secured party or pledgor shall be required in connection
      with the pledge, but such legal opinion shall be required in connection with
      a
      subsequent transfer or foreclosure following default by the Purchaser transferee
      of the pledge. No notice shall be required of such pledge but Purchaser’s
      transferee shall promptly notify the Company of the pledge. Each Purchaser
      acknowledges that the Company shall not be responsible for any pledges relating
      to, or the grant of any security interest in, any of the Securities or for
      any
      agreement, understanding or arrangement between any Purchaser and its pledgee
      or
      secured party. Provided that the Company is in compliance with the terms of
      this
      Section 4.1(b), the Company’s indemnification obligations pursuant to this
      Agreement shall not extend to any Proceeding or Losses arising out of or related
      to this Section 4.1(b). 

     

    
      
        
        

      

      
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    (c) Removal
      of Legends.
      Certificates evidencing Securities shall not be required to contain such legend
      or any other legend (i) while a registration statement (including the
      Registration Statement) covering the resale of such Securities is effective
      under the Securities Act, (ii) following any sale of such Securities pursuant
      to
      Rule 144 (assuming the transferor is not an affiliate of the Company), (iii)
      if
      such Securities are eligible for sale under Rule 144(k) (to the extent that
      the
      applicable Purchaser provides a certification or legal opinion to the Company
      to
      that effect), or (iv) if such legend is not required under applicable
      requirements of the Securities Act (including controlling judicial
      interpretations and pronouncements issued by the Commission). The Company shall
      cause its counsel to issue a standing legal opinion to the Transfer Agent
      promptly after the Effective Date, if required by the Company’s transfer agent
      to effect the removal of the legends hereunder. Any fees (with respect to the
      transfer agent, counsel to the Company or otherwise) associated with the
      issuance of such opinion or the removal of such legend shall be borne by the
      Company. If any portion of the Warrant is exercised at a time when there is
      an
      effective registration statement to cover the resale of the Warrant Shares,
      or
      if such Warrant Shares may be sold under Rule 144(k), then such Warrant Shares
      shall be issued free of all legends. Following the Effective Date or at such
      earlier time as a legend is no longer required for certain Securities, the
      Company will no later than three Trading Days following the delivery by a
      Purchaser to the Company or the Transfer Agent (with notice to the Company)
      of
      (i) a legended certificate representing such Shares or Warrant Shares (endorsed
      or with stock powers attached, signatures guaranteed, and otherwise in form
      necessary to affect the reissuance and/or transfer) or (ii) an Exercise Notice
      in the manner stated in the Warrants to affect the exercise of such Warrant
      in
      accordance with its terms and an opinion of counsel to the extent required
      by
      Section 4.1(a), deliver or cause to be delivered to such Purchaser a certificate
      representing such Securities that is free from all restrictive and other
      legends. The Company may not make any notation on its records or give
      instructions to the Transfer Agent that enlarge the restrictions on transfer
      set
      forth in this Section. If within three (3) Trading Days after the Company’s
      receipt of a legended certificate representing such Securities (the
“Delivery
      Date”),
      the
      Company shall fail to issue and deliver to such Purchaser a certificate
      representing such Securities that is free from all restrictive and other
      legends, and if on or after such Delivery Date the Purchaser purchases (in
      an
      open market transaction or otherwise) shares of Common Stock to deliver in
      satisfaction of a sale by the Purchaser of shares of Common Stock that the
      Purchaser anticipated receiving from the Company without any restrictive legend
      (a “Buy-In”),
      then
      the Company shall, within three (3) Trading Days after the Purchaser’s request
      and in the Purchaser’s sole discretion, either (i) pay cash to the Purchaser in
      an amount equal to the Purchaser’s total purchase price (including brokerage
      commissions, if any) for the shares of Common Stock so purchased (the
“Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate shall terminate
      and such shares shall be cancelled, or (ii) promptly honor its obligation to
      deliver to the Purchaser a certificate or certificates representing such number
      of shares of Common Stock that would have been issued if the Company timely
      complied with its obligations hereunder and pay cash to the Purchaser in an
      amount equal to the excess (if any) of the Buy-In Price over the product of
      (a)
      such number of shares of Common Stock that the Company was required to deliver
      to the Purchaser on the Delivery Date, times (b) the closing bid price of the
      Common Stock on the Delivery Date.

    

    
      
        
        

      

      
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    (d) In
      addition to the rights and remedies provided for in Section 4.1(c) regarding
      failing to issue or deliver certificates, the Purchaser shall be entitled to
      such other remedies at law and in equity as may be available including without
      limitation specific performance and injunctive relief, and, in any event, the
      Company shall pay to such Purchaser, in cash, as partial liquidated damages
      and
      not as a penalty, an amount equal to 1.0% of the aggregate Buy-In Price
      (increasing to 2.0% of the aggregate Buy-In Price five Trading Days after such
      damages have begun to accrue) of the securities that were required to be
      delivered, for each Trading Day after the Delivery Date until all such
      certificates have been received by such Purchaser. The amounts payable under
      Sections 4.1(c) and (d) shall be payable by the Company to such Purchaser upon
      Purchaser’s demand therefore, and shall accrue interest at the rate of 10% per
      annum after such demand until paid.

    

    4.2 Reservation
      of Common Stock.
      The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations in full under the Transaction Documents.
      In
      the event that at any time the then authorized shares of Common Stock are
      insufficient for the Company to satisfy its obligations in full under the
      Transaction Documents, the Company shall promptly take such actions as may
      be
      required to increase the number of authorized shares.

     

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

     

    4.4 No
      Integration.
      The
      Company shall not, and shall use its best efforts to ensure that no Affiliate
      of
      the Company shall, sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that will be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers, or that will be integrated with the offer
      or sale of the Securities for purposes of the rules and regulations of any
      Trading Market.

     

    
      
        
        

      

      
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    4.5 Subsequent
      Registrations.
      Other
      than pursuant to the Registration Statement or as required to satisfy its
      obligations under the Settlement Agreement and the Warrants held by the parties
      to the Settlement Agreements, prior to the Effective Date, the Company shall
      not
      file any registration statement (other than on Form S-8) with the Commission
      with respect to any securities of the Company.

     

    4.6 Securities
      Laws Disclosure; Publicity.
      By 9:00
      a.m. (New York City time) on the Trading Day immediately following the execution
      of this Agreement and, if the Agreement is executed on a day other than the
      Closing Date, then also by 9:00 a.m. (New York City time) on the Trading Day
      following the Closing Date, the Company shall issue press releases disclosing
      the transactions contemplated hereby and the Closing. On the trading day
      following the execution of this Agreement, the Company will file a Current
      Report on Form 8-K with the Commission describing the material terms of the
      Transaction Documents (and including as exhibits to such Current Report on
      Form
      8-K the Transaction Documents), and on the Trading Day following the Closing
      Date, the Company will file an additional Current Report on Form 8-K to disclose
      the Closing. Thereafter, the Company shall timely file any filings and notices
      required by the Commission and the Trading Market on which the Common Stock
      is
      listed. Notwithstanding the foregoing, the Company shall not publicly disclose
      the name of any Purchaser, or include the name of any Purchaser in any press
      release or filing with the Commission (other than the Registration Statement)
      or
      any regulatory agency or Trading Market, without the prior written consent
      of
      such Purchaser, except to the extent such disclosure is required by law or
      Trading Market regulations, in which case the Company shall promptly provide
      the
      Purchasers with prior notice of such disclosure. 

     

    4.7 Indemnification.

     

    (a) Indemnification
      of Purchasers.
      In
      addition to the indemnity provided in the Registration Rights Agreement, the
      Company will indemnify and hold the Purchasers and their directors, officers,
      shareholders, partners, employees and agents (each, a “Purchaser
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys' fees and costs of
      investigation (collectively, “Losses”)
      that
      any such Purchaser Party may suffer or incur as a result of or relating to
      any
      misrepresentation, breach or inaccuracy of any representation, warranty,
      covenant or agreement made by the Company in any Transaction Document. In
      addition to the indemnity contained herein, the Company will reimburse each
      Purchaser Party for its reasonable legal and other expenses (including the
      cost
      of any investigation, preparation and travel in connection therewith) incurred
      in connection therewith, as such expenses are incurred. If and to the extent
      that such indemnification is unenforceable for any reason, the Company shall
      make the maximum contribution to the payment and satisfaction of such losses
      permissible under applicable law.

     

    
      
        
        

      

      
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    (b) Conduct
      of Indemnification Proceedings.
      Promptly
      after receipt by any Person (the “Indemnified
      Person”)
      of
      notice of any demand, claim or circumstances which would or might give rise
      to a
      claim or the commencement of any action, proceeding or investigation in respect
      of which indemnity may be sought pursuant to Section
      4.7(a),
      such
      Indemnified Person shall promptly notify the Company in writing and the Company
      shall assume the defense thereof, including the employment of counsel reasonably
      satisfactory to such Indemnified Person, and shall assume the payment of all
      fees and expenses; provided,
      however, that
      the
      failure of any Indemnified Person so to notify the Company shall not relieve
      the
      Company of its obligations hereunder except to the extent that the Company
      is
      actually and materially prejudiced by such failure to notify. In any such
      proceeding, any Indemnified Person shall have the right to retain its own
      counsel, but the fees and expenses of such counsel shall be at the expense
      of
      such Indemnified Person unless: (i) the Company and the Indemnified Person
      shall
      have mutually agreed to the retention of such counsel; or (ii) in the reasonable
      judgment of counsel to such Indemnified Person representation of both parties
      by
      the same counsel would be inappropriate due to actual or potential differing
      interests between them. The Company shall not be liable for any settlement
      of
      any proceeding effected without its written consent, which consent shall not
      be
      unreasonably withheld, delayed or conditioned, but if settled without such
      consent, or if there is a final judgment for the plaintiff, the Company shall
      indemnify and hold harmless such Indemnified Person from and against any Losses
      by reason of such settlement or judgment. Without the prior written consent
      of
      the Indemnified Person, the Company shall not effect any settlement of any
      pending or threatened proceeding in respect of which any Indemnified Person
      is
      or could have been a party and indemnity could have been sought hereunder by
      such Indemnified Party, unless such settlement includes an unconditional release
      of such Indemnified Person from all liability arising out of such
      proceeding.

     

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

     

    4.9 Listing
      of Securities.
      Promptly following the date hereof, the Company shall take all necessary action
      to cause the Shares and the Warrant Shares to be approved for trading on the
      American Stock Exchange. Further, if the Company applies to have its Common
      Stock or other securities listed on any other Trading Market, it shall include
      in such application the Shares and the Warrant Shares and will take such other
      action as is necessary to cause the Shares and the Warrant Shares to be listed
      on such other Trading Market as promptly as practicable. The Company will use
      commercially reasonable efforts to continue the listing and trading of its
      Common Stock on a Trading Market and, in accordance, therewith, will use
      commercially reasonable efforts to comply in all respects with the Company’s
      reporting, filing and other obligations applicable to issuers whose securities
      are listed on such Trading Market.

     

    
      
        
        

      

      
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    4.10 Use
      of
      Proceeds.
      The
      Company intends to use the net proceeds from the sale of the Securities
      hereunder for working capital and general corporate purposes; provided, however,
      such proceeds shall not be used (x) to redeem any Common Stock or Common Stock
      Equivalents, (y) to settle any outstanding Proceeding, or (z) to pay any
      indebtedness for borrowed money or amounts owing to any directors, officers,
      employees, consultants or other Affiliates.

     

    4.11 Trading
      Restrictions.
      In
      addition to the restrictions set forth in this Agreement, the Lead Investors
      hereby agree to, and shall cause their Trading Affiliates to, not effect any
      transactions in any securities of the Company listed on any Trading Market
      before September 13, 2006. 

     

    4.12 Anti-dilution
      Adjustment.
      If (x)
      the “Company Conversion Price” determined pursuant to Section 1(b) of the
      Settlement Agreements is less than, or (y) any Common Stock or other securities
      of the Company are issued pursuant to the Convertible Notes based on a per
      share
      price of the Common Stock that is less than, the Per Share Purchase Price in
      effect on the Closing Date (the “Lower
      Per Share Purchase Price”),
      then
      (each, a “Trigger
      Issuance”),
      on
      September 14, 2006 (and on each such later date as the Company Conversion Price
      is determined or such securities are issued), the Company shall issue a number
      of additional shares of Common Stock to each Purchaser equal to the difference
      of (A) the number of Shares that would have been issued to such Investor, based
      on such Purchaser’s Subscription Amount, if the Per Share Purchase Price on the
      Closing Date was equal to the Lower Per Share Purchase Price, minus
      (B) the
      number of Shares initially issued to such Purchaser upon payment of its
      Subscription Amount. Promptly following the occurrence of any event giving
      rise
      to the issuance of additional Shares to the Purchasers in accordance with this
      Section 4.12 (but in no event more than two (2) Business Days thereafter),
      the
      Company shall issue irrevocable instructions authorizing the Transfer Agent
      to
      issue such additional Shares to each Purchaser in the amounts set forth in
      the
      immediately preceding sentence. Until the Company issues the securities
      described in Section 1(b)(i) and 1(b)(ii) of the Settlement Agreements, the
      Company shall not amend, modify or alter the Settlement Agreements in any way,
      or waive or suffer to exist any waiver of any provisions thereof, in each case,
      without the Purchasers’ prior written consent.

     

    ARTICLE
      V.

    CONDITIONS
      PRECEDENT TO CLOSING

    

    5.1 Conditions
      Precedent to the Obligations of the Purchasers to Purchase
      Securities.
      The
      obligation of each Purchaser to acquire Securities at the Closing is subject
      to
      the fulfillment to such Purchase’s satisfaction, on or prior to the Closing
      Date, of each of the following conditions, any of which may be waived by such
      Purchaser (as to itself only):

     

    (a) Representations
      and Warranties.
      The
      representations and warranties of the Company contained herein shall be true
      and
      correct in all material respects as of the date when made and as of the Closing
      Date, as though made on and as of such date. 

     

    (b) Performance.
      The
      Company and each other Purchaser shall have performed, satisfied and complied
      in
      all material respects with all covenants, agreements and conditions required
      by
      the Transaction Documents to be performed, satisfied or complied with by it
      at
      or prior to the Closing.

     

    
      
        
        

      

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

     

    (d) Consents. The
      Company shall have obtained in a timely fashion any and all consents, permits,
      approvals, registrations and waivers necessary or appropriate for consummation
      of the purchase and sale of the Securities, and all of which shall be and remain
      so long as necessary in full force and effect.

     

    (e) Adverse
      Changes.
      Since
      the date of execution of this Agreement, no event or series of events shall
      have
      occurred that reasonably could have or result in a Material Adverse Effect;
      

     

    (f) No
      Suspensions of Trading in Common Stock; Listing.
      Trading
      in the Common Stock shall not have been suspended by the Commission or any
      Trading Market (except for any suspensions of trading of not more than one
      Trading Day solely to permit dissemination of material information regarding
      the
      Company) at any time since the date of execution of this Agreement, and the
      Common Stock shall have been at all times since such date listed for trading
      on
      a Trading Market; 

     

    (g) Settlement
      Agreements.
      The
      Settlement Agreements (x) shall not have been, amended, modified or altered
      in
      any way, and no provision thereof shall have been waived by any party thereto,
      and (y) the Company shall have performed all of its obligations thereunder
      and
      as contemplated thereby, unless, in any such case, the Purchasers’ shall have
      consented thereto in writing;

     

    (h) Company
      Deliverables.
      The
      Company shall have delivered the Company Deliverables in accordance with Section
      2.2(a); and

     

    (i) Compliance
      Certificate.
      The
      Company shall have delivered to each Purchaser a certificate, dated as of the
      Closing Date and signed by its Chief Executive Officer or its Chief Financial
      Officer, dated as of the Closing Date, certifying to the fulfillment of the
      conditions specified in Sections 5.1(a), (b), (c), (d) and (f).

     

    5.2 Conditions
      Precedent to the Obligations of the Company to sell Securities.
      The
      Company's obligation to sell and issue the Securities at the Closing is subject
      to the fulfillment to the satisfaction of the Company on or prior to the Closing
      Date of the following conditions, any of which may be waived by the
      Company:

     

    (a) Representations
      and Warranties.
      The
      representations and warranties made by the Purchasers in Section
      3.2
      hereof
      shall be true and correct in all material respects as of the date when made,
      and
      as of the Closing Date as though made on and as of such date.

     

    (b) Performance.
      The
      Purchasers shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by the Purchasers at
      or
      prior to the Closing;

     

    
      
        
        

      

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

     

    (d) Purchasers
      Deliverables.
      Each
      Purchaser shall have delivered its Purchaser Deliverables in accordance with
      Section 2.2(b).

     

    ARTICLE
      VI.

    MISCELLANEOUS

     

    6.1 Fees
      and Expenses.
      At
      Closing, the Company shall reimburse the reasonable fees and expenses of the
      Lead Investors in an amount of $25,000 in connection with the transactions
      contemplated by this Agreement, which fees shall include, without limitation,
      the fees and expenses associated with the negotiation, preparation and execution
      and delivery of this Agreement and the other Transaction Documents and any
      amendments, modifications or waivers thereto. The Company and the Purchasers
      shall each pay the fees and expenses of their respective advisers, counsel,
      accountants and other experts, if any and all other expenses incurred by such
      party in connection with the negotiation, preparation, execution, delivery
      and
      performance of this Agreement. The Company shall pay all Transfer Agent fees,
      stamp taxes and other taxes and duties levied in connection with the sale and
      issuance of the Securities. Each party acknowledges that Lowenstein Sandler
      PC
      has rendered legal advice to the Lead Investors, and not to such party in
      connection with the transactions contemplated hereby, and that such party has
      relied for such matters on the advice of its own respective
      counsel.

     

    6.2 Entire
      Agreement.
      The
      Transaction Documents, together with the Exhibits and Schedules thereto, contain
      the entire understanding of the parties with respect to the subject matter
      hereof and supersede all prior agreements, understandings, discussions and
      representations, oral or written, with respect to such matters, which the
      parties acknowledge have been merged into such documents, exhibits and
      schedules. At or after the Closing, and without further consideration, the
      Company and the Purchasers will execute and deliver to the other such further
      documents as may be reasonably requested in order to give practical effect
      to
      the intention of the parties under the Transaction Documents.

     

    6.3 Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile or e-mail (provided the sender receives a
      machine-generated confirmation of successful transmission) at the facsimile
      number specified in this Section prior to 5:00 p.m. (New York City time) on
      a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      specified in this Section on a day that is not a Trading Day or later than
      5:00
      p.m. (New York City time) on any Trading Day, (c) the Trading Day following
      the
      date of mailing, if sent by U.S. nationally recognized overnight courier
      service, or (d) upon actual receipt by the party to whom such notice is required
      to be given. The address for such notices and communications shall be as
      follows:

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    
      	
            	
              If
                to the Company:

            	
              Telkonet,
                Inc.

            

    

    20374
      Seneca Meadows Parkway

    Germantown,
      Maryland 20876

    Telephone
      No.: (240) 912-1800

    Facsimile
      No.: (240) 912-1939

    Attention:
      Chief Financial Officer

    

    
      	
            	With
              a copy to:	
              Baker
                & Hostetler LLP

            

    

    1050
      Connecticut Avenue, NW

    Suite
      1100

    Washington,
      D.C. 20036

    Telephone
      No.: (202) 861-1500

    Facsimile
      No.: (202) 861-1783

    Attention:
      William J. Conti, Esq.

    

    
      	
            	If
              to a Purchaser:	
              To
                the address set forth under such Purchaser’s name on the signature page
                hereof;

            

    

    

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

    

    6.4 Amendments;
      Waivers; No Additional Consideration.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by the Company and each of
      the
      Purchasers or, in the case of a waiver, by the party against whom enforcement
      of
      any such waiver is sought. No waiver of any default with respect to any
      provision, condition or requirement of this Agreement shall be deemed to be
      a
      continuing waiver in the future or a waiver of any subsequent default or a
      waiver of any other provision, condition or requirement hereof, nor shall any
      delay or omission of either party to exercise any right hereunder in any manner
      impair the exercise of any such right. No consideration shall be offered or
      paid
      to any Purchaser to amend or consent to a waiver or modification of any
      provision of any Transaction Document unless the same consideration is also
      offered to all Purchasers who then hold Shares.

     

    6.5 Construction.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party. This Agreement shall be
      construed as if drafted jointly by the parties, and no presumption or burden
      of
      proof shall arise favoring or disfavoring any party by virtue of the authorship
      of any provisions of this Agreement or any of the Transaction
      Documents.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    6.6 Successors
      and Assigns.
      The
      provisions of this Agreement shall inure to the benefit of and be binding upon
      the parties and their successors and permitted assigns. This Agreement, or
      any
      rights or obligations hereunder, may not be assigned by the Company without
      the
      prior written consent of the Purchasers. Any Purchaser may assign its rights
      hereunder in whole or in part to any Person to whom such Purchaser assigns
      or
      transfers any Securities in compliance with this agreement and applicable law,
      provided such transferee shall agree in writing to be bound, with respect to
      the
      transferred Securities, by the terms and conditions of this Agreement that
      apply
      to the “Purchasers”.

     

    6.7  No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except each Purchaser Party
      is an intended third party beneficiary of Section 4.7 and may enforce the
      provisions of such Section directly against the parties with obligations
      thereunder .

     

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

     

    6.9 Survival.
      Subject
      to applicable statute of limitations, the representations, warranties,
      agreements and covenants contained herein shall survive the Closing and the
      delivery of the Securities.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    6.13 Replacement
      of Securities.
      If any
      certificate or instrument evidencing any Securities is mutilated, lost, stolen
      or destroyed, the Company shall issue or cause to be issued in exchange and
      substitution for and upon cancellation thereof, or in lieu of and substitution
      therefor, a new certificate or instrument, but only upon receipt of evidence
      reasonably satisfactory to the Company of such loss, theft or destruction and
      the execution by the holder thereof of a customary lost certificate affidavit
      of
      that fact and an agreement to indemnify and hold harmless the Company for any
      reasonable losses in connection therewith. The applicants for a new certificate
      or instrument under such circumstances shall also pay any reasonable third-party
      costs associated with the issuance of such replacement Securities. If a
      replacement certificate or instrument evidencing any Securities is requested
      due
      to a mutilation thereof, the Company may require delivery of such mutilated
      certificate or instrument as a condition precedent to any issuance of a
      replacement.

     

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

     

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

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    6.16 Independent
      Nature of Purchasers' Obligations and Rights.
      The
      obligations of each Purchaser under any Transaction Document are several and
      not
      joint with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser under any Transaction Document. The decision of each Purchaser to
      purchase Securities pursuant to the Transaction Documents has been made by
      such
      Purchaser independently of any other Purchaser and independently of any
      information, materials, statements or opinions as to the business, affairs,
      operations, assets, properties, liabilities, results of operations, condition
      (financial or otherwise) or prospects of the Company or any Subsidiary which
      may
      have been made or given by any other Purchaser or by any agent or employee
      of
      any other Purchaser, and no Purchaser and any of its agents or employees shall
      have any liability to any other Purchaser (or any other Person) relating to
      or
      arising from any such information, materials, statement or opinions. Nothing
      contained herein or in any Transaction Document, and no action taken by any
      Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
      a
      partnership, an association, a joint venture or any other kind of entity, or
      create a presumption that the Purchasers are in any way acting in concert or
      as
      a group with respect to such obligations or the transactions contemplated by
      the
      Transaction Documents. Each Purchaser acknowledges that no other Purchaser
      has
      acted as agent for such Purchaser in connection with making its investment
      hereunder and that no Purchaser will be acting as agent of such Purchaser in
      connection with monitoring its investment in the Securities or enforcing its
      rights under the Transaction Documents. Each Purchaser shall be entitled to
      independently protect and enforce its rights, including without limitation
      the
      rights arising out of this Agreement or out of the other Transaction Documents,
      and it shall not be necessary for any other Purchaser to be joined as an
      additional party in any proceeding for such purpose. The Company acknowledges
      that each of the Purchasers has been provided with the same Transaction
      Documents for the purpose of closing a transaction with multiple Purchasers
      and
      not because it was required or requested to do so by any Purchaser. The
      Company’s obligations to each Purchaser under this Agreement are identical to
      its obligations to each other Purchaser other than such differences resulting
      solely from the number of Securities purchased by such Purchaser, but regardless
      of whether such obligations are memorialized herein or in another agreement
      between the Company and a Purchaser.

    

     

    [Signatures
      on next page]

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

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

     

    TELKONET,
      INC.

     

    By:_______________________________________ 

    Name: 

    Title: 

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOR PURCHASERS FOLLOW]

     

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    NAME
      OF PURCHASER

    

    By:_______________________________________

    Name:

    Title:

     

    Subscription
      Amount $______________

    Tax
      ID
      No. ____________________

     

    ADDRESS
      FOR NOTICE

    

    c/o:_______________________________________

    Street:_____________________________________

    City/State/Zip:_______________________________

    Attention:__________________________________

    Telephone
      No.:______________________________

    Facsimile
      No.:_______________________________

    

    Deliver
      Instructions 

    (if
      different than above)

    

    c/o
      _______________________________

    Street:
      ____________________________

    City/State/Zip:
      ______________________

    Attention:
      _________________________

    Tel
      No.:
      ___________________________ 

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

     

    Exhibit
      A

     

    FORM
      OF WARRANT

     

    

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    Exhibit
      B

     

    FORM
      OF REGISTRATION RIGHTS AGREEMENT

     

    

     

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    Exhibit
      C

     

    INSTRUCTION
      SHEET FOR PURCHASER

     

    (to
      be
      read in conjunction with the entire

    Securities
      Purchase Agreement)

     

    
      	A.	
              Complete
                the following items in the Securities Purchase
                Agreement:

            

    

     

    1. Complete
      and execute the Purchaser Signature Page. The Agreement must be executed by
      an
      individual authorized to bind the Purchaser.

     

    2. Exhibit
      D-1 - Stock Certificate Questionnaire:

     

    Provide
      the information requested by the Stock Certificate Questionnaire; 

     

    3. Exhibit
      D-2 - Purchaser Certificate:

     

    Provide
      the information requested by the Certificate for Corporate, Partnership, Trust,
      Foundation and Joint Purchasers, as applicable.

     

    4. Return,
      via facsimile, the signed Share Purchase Agreement including the properly
      completed Exhibits D-1 and D-2, to:

     

    Baker
      & Hostetler LLP

    1050
      Connecticut Avenue, NW

    Suite
      1100

    Washington,
      D.C. 20036

    Telephone
      No.: (202) 861-1500

    Facsimile
      No.: (202) 861-1783

    Attention:
      William J. Conti, Esq.

     

    5. After
      completing instruction number five (5) above, deliver the original signed Share
      Purchase Agreement including the properly completed Exhibits D-1 and D-2
      to:

     

    
      	
              B.

            	
              Instructions
                regarding the transfer of funds for the purchase of Shares will be
                telecopied to the Purchaser by the Company at a later
                date.

            

    

     

    
      	
              C.

            	
              Upon
                the resale of any Shares by the Purchaser after the Registration
                Statement
                covering any Shares is effective, as described in the Purchase Agreement,
                the Purchaser
                must deliver a current prospectus, and annual and quarterly reports
                of the
                Company to the buyer.

            

    

     

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    Exhibit
      C

     

    OPINION
      OF COMPANY COUNSEL

     

    1. The
      Company is a corporation duly incorporated and validly existing under, and
      by
      virtue of, the laws of the State of Utah and is in good standing under such
      laws. The Company has requisite corporate power to own and operate its
      properties and assets, and to carry on its business as presently conducted.
      The
      Company is qualified to do business as a foreign corporation in the state of
      Maryland. 

     

    2. The
      Company has all requisite legal and corporate power to execute and deliver
      the
      Agreement, to sell and issue the Common Stock and the Warrants under the
      Agreement, to issue the Warrant Shares issuable upon exercise of the Warrants
      and to carry out and perform its obligations under the terms of the Agreement.
      

     

    3. The
      shares of Common Stock have been duly authorized and when issued, delivered
      and
      paid for in accordance with the terms of the Agreement, will be validly issued,
      fully paid and nonassessable. The Warrants have been duly authorized and when
      issued, delivered and paid for in accordance with the terms of the Agreement,
      will be validly issued. The Warrant Shares have been duly and validly reserved,
      and, when issued in accordance with the terms of the Agreement, the Warrant
      and
      the Company’s Certificate of Incorporation, will be validly issued, fully paid
      and nonassessable.

     

    4. All
      corporate action on the part of the Company necessary for the authorization,
      execution and delivery of the Agreement by the Company, the authorization,
      sale,
      issuance and delivery of the Common Stock, the Warrants and the Warrant Shares
      and the performance by the Company of its obligations under the Agreement has
      been taken. The Agreement has been duly and validly executed and delivered
      by
      the Company and constitutes a valid and binding obligation of the Company,
      enforceable against the Company in accordance with its terms. 

     

    5. The
      execution and delivery by the Company of the Agreement, the performance by
      the
      Company of its obligations under the Agreement, and the issuance of the Common
      Stock and the Warrants do not violate any provision of the Certificate of
      Incorporation or Bylaws, or any provision of the [Utah Corporations Law], any
      applicable federal or Maryland state law, or rule or regulation known to us
      to
      be customarily applicable to transactions of this nature. The execution and
      delivery by the Company of the Agreement, the performance by the Company of
      its
      obligations under the Agreement, and the issuance of the Common Stock, the
      Warrants and the Warrant Shares do not violate, or constitute a default under,
      any contract or agreement filed as an exhibit to the Company’s Form 10-K for the
      fiscal year ended December 31, 2005 or the Company’s Form 10-Q for the fiscal
      quarters ended March 31, 2006 and June 30, 2006 with the Securities and Exchange
      Commission pursuant to Item 601(b)(10) of Regulation S-K to which the Company
      is
      a party or by which the Company is bound. 

     

    6. Except
      as
      identified in the Agreement, to our knowledge, there are no actions, suits,
      proceedings or investigations pending against the Company or its properties
      before any court or governmental agency nor, to our knowledge, has the Company
      received any written threat thereof.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    7. No
      consent, approval or authorization of or designation, declaration or filing
      with
      any governmental authority on the part of the Company is required in connection
      with the valid execution and delivery of the Agreement, the offer, sale or
      issuance of the Common Stock or the Warrants or the consummation by the Company
      of any other transaction contemplated by the Agreement except the filing of
      a
      Form D pursuant to Regulation D under the Securities Act of 1933, as
      amended.

    

    8. Subject
      to the accuracy of the Investors’ representations in Section 3.2 of the
      Agreement, the offer, sale and issuance of the Common Stock and the Warrants
      in
      conformity with the terms of the Agreement constitute transactions exempt from
      the registration requirements of Section 5 of the Securities Act of 1933, as
      amended. 

     

    

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    
       

      Exhibit
        D-1

       

      Telkonet,
        Inc.

       

      STOCK
        CERTIFICATE QUESTIONNAIRE

       

      Please
        provide us with the following information:

       

      
        	
                1.

              	
                The
                  exact name that the Shares are to be registered in (this is the
                  name that
                  will appear on the stock certificate(s)). You may use a nominee
                  name if
                  appropriate:

              	 	 
	
                2.

              	
                The
                  relationship between the Purchaser of the Shares and the Registered
                  Holder
                  listed in response to item 1 above:

              	 	 
	
                3.

              	
                The
                  mailing address, telephone and telecopy number of the Registered
                  Holder
                  listed in response to item 1 above:

              	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
                4.

              	
                The
                  Tax Identification Number of the Registered Holder listed in response
                  to
                  item 1 above:

              	 	 

      

    

     

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    

      Exhibit
        D-2

      

      Telkonet,
        Inc.

      

      CERTIFICATE
        FOR CORPORATE, PARTNERSHIP,

      TRUST,
        FOUNDATION AND JOINT PURCHASERS

      

      If
        the
        investor is a corporation, partnership, trust, pension plan, foundation,
        joint
        purchaser (other than a married couple) or other entity, an authorized officer,
        partner, or trustee must complete, date and sign this Certificate.

      

      CERTIFICATE

      

      The
        undersigned certifies that the representations and responses below are true
        and
        accurate:

      

      (a)
        The
        investor has been duly formed and is validly existing and has full power
        and
        authority to invest in the Company. The person signing on behalf of the
        undersigned has the authority to execute and deliver the Share Purchase
        Agreement on behalf of the Purchaser and to take other actions with respect
        thereto.

      

      (b)
        Indicate the form of entity of the undersigned:

      

      ____
        Limited Partnership

      

      ____
        General Partnership

      

      ____
        Corporation

      

      ____
        Revocable Trust (identify each grantor and indicate under what circumstances
        the
        trust is revocable
        by the grantor):

      

      (Continue
        on a separate piece of paper, if necessary.)

      

      ____
        Other type of Trust (indicate type of trust and, for trusts other than pension
        trusts, name the grantors and beneficiaries):

      

      (Continue
        on a separate piece of paper, if necessary.)

      

      ____
        Other form of organization (indicate form of organization)

       

      
 

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

      (c)
        Indicate the approximate date the undersigned entity was formed:

      

      (d)
        In
        order for the Company to offer and sell the Shares in conformance
        with state and federal securities laws, the following information must
        be
        obtained regarding your investor status. Please initial each category
applicable
        to you as an investor in the Company.

      

      ___
        1. A
        bank as defined in Section 3(a)(2) of the Securities Act, or any savings
        and
        loan association or other institution as defined in Section 3(a)(5)(A) of
        the
        Securities Act whether acting in its individual or fiduciary
        capacity;

      

      ___
        2. A
        broker or dealer registered pursuant to Section 15 of the Securities Exchange
        Act of 1934;

      

      ___
        3. An
        insurance company as defined in Section 2(13) of the Securities
        Act;

      

      ___
        4. An
        investment company registered under the Investment Company Act of 1940 or
        a
        business development company as defined in Section 2(a)(48) of that
        Act;

      

      ___
        5. A
        Small Business Investment Company licensed by the U.S. Small Business
        Administration under Section 301(c) or (d) of the Small Business Investment
        Act
        of 1958;

      

      ___
        6. A
        plan established and maintained by a state, its political subdivisions, or
        any
        agency or instrumentality of a state or its political subdivisions, for the
        benefit of its employees, if such plan has total assets in excess of
        $5,000,000;

      

      ___
        7. An
        employee benefit plan within the meaning of the Employee Retirement Income
        Security Act of 1974, if the investment decision is made by a plan
        fiduciary,

      as
        defined in Section 3(21) of such Act, which is either a bank, savings and
        loan
        association, insurance company, or registered investment advisor, or if the
        employee benefit plan has total assets in excess of $5,000,000 or, if a
        self-directed plan, with investment decisions made solely by persons that
        are
        accredited investors;

      

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

      

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

      

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

      ___
        10. A
        trust, with total assets in excess of $5,000,000, not formed for the specific
        purpose of acquiring the Shares, whose purchase is directed by a sophisticated
        person as described in Rule 506(b)(2)(ii) of the Exchange Act;

      

      ___
        11.
        An entity in which all
        of the
        equity owners qualify under any of the above subparagraphs. If the undersigned
        belongs to this investor category only, list the equity owners of the
        undersigned, and the investor category which each such equity owner satisfies:

       

      (Continue
        on a separate piece of paper, if necessary.)

      

      Please
        set forth in the space provided below the (i) states, if any, in the U.S.
        in
        which you maintained your principal office during the past two years and
        the
        dates during which you maintained your office in each state, (ii) state(s),
        if
        any, in which you are incorporated or otherwise organized and (iii) state(s),
        if
        any, in which you pay income taxes.

      

      

      Dated:
        ____________, 2006

      

      ___________________________

      Name
        of
        investor

      

      ___________________________

      Signature
        and title of authorized officer, partner or trustee

    

     

     

     

    41

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