Document:

Unassociated Document

    EXECUTION
VERSION

     

    NOTE
CONVERSION AGREEMENT

     

    This Note
Conversion Agreement (this “Agreement”) is dated as of
December 22, 2010, between InsPro Technologies
Corporation (formerly known as Health Benefits Direct Corporation), a
Delaware corporation (the “Company”), and The Co-Investment Fund II,
L.P. (the “Investor”).

     

    WHEREAS,
the Company, its subsidiaries and the Investor entered into a Loan Agreement
(the “Loan Agreement”)
and Secured Promissory Note (the “Note”), dated as of December
22, 2009, as amended by the First Amendment to Loan Documents, dated as of June
15, 2010, pursuant to which the Investor loaned the Company an aggregate of
$2,250,000 (the “Loan”);

     

    WHEREAS,
pursuant to the Loan Agreement, at any time subsequent to the Company’s issuance
of common or preferred stock for cash consideration prior to the Maturity Date
(as defined in the Loan Agreement), the Investor may demand the Company to repay
the Loan plus accrued Interest (as defined in the Loan Agreement) in the form of
the Company’s equity securities issued in the equity issuance with a conversion
price and terms identical to the price and terms of the Company’s equity
issuance;

     

    WHEREAS,
the Company completed a private placement pursuant to a Securities Purchase
Agreement, dated as of September 30, 2010, among the Company and the investors
identified on the signature pages thereto, pursuant to which the Company sold
units consisting of the Company’s Series B Convertible Preferred Stock and
five-year warrants to purchase shares of the Company’s common stock (the “Equity
Issuance”);

     

    WHEREAS,
accrued Interest on the Loan as of December 22, 2010 is $142,136.40 and the Loan
plus accrued Interest balance as of December 22, 2010 is
$2,392,136.40;

     

    WHEREAS,
the Investor has requested by letter dated December 15, 2010 that the Company
repay the Loan plus accrued Interest through the issuance of 797,378 units in
the same form issued in the Equity Issuance;

     

    WHEREAS,
each unit (all such units being the “Units”) will be issued at a
Note conversion price of $3.00 per Unit (the “Per Unit Conversion Price”)
and will consist of (i) one share of Series B Convertible Preferred Stock,
$0.001 par value per share (the “Preferred Stock”) and (ii) a
Warrant (all such warrants being the “Warrants”) to purchase ten
(10) shares of common stock, $0.001 par value per share (the “Common Stock”) in the form
attached hereto at Exhibit A.  The
Preferred Stock shall have the other rights set forth in the Certificate of
Designation attached hereto as Exhibit B (the “Certificate of
Designation”);

     

    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, the
Company desires to issue to the Investor as full repayment of the Loan, and the
Investor, desires to accept from the Company as full repayment of the Loan,
certain securities of the Company, as more fully described in this
Agreement.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    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 Investor 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:

     

    “Action” means any action,
suit, inquiry, notice of violation, proceeding (including any partial proceeding
such as a deposition) or investigation pending or threatened in writing against
or affecting the Company, any Subsidiary or any of their respective properties,
or the Common Stock, or any officers, directors or key employees of the Company
or any of its Subsidiaries, before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

     

    “Affiliate” means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144.

     

    “Agreement” has the meaning set
forth in the Preamble to this Agreement.

     

    “Bloomberg” means Bloomberg
Financial Markets.

     

    “Board of Directors” or “Board” means the Board of
Directors of the Company.

     

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

     

    “Certificate of Designation”
has the meaning set forth in the Preamble to this Agreement.

     

    “Closing” means the closing of
the issuance of the Units and conversion of the Note pursuant to Section
2.1.

     

    “Closing Date” means the
Business Day immediately following the date on which all of the conditions set
forth in Sections 5.1 and 5.2 hereof are satisfied or waived, or such other date
as the parties may agree, provided that such conditions continue to be so
satisfied or waived on such Business Day.

     

    “Commission” means the
Securities and Exchange Commission.

     

    “Common Stock” has the meaning
set forth in the Preamble to this Agreement.

    
      
         

      

      
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    “Common Stock Equivalents”
means any securities of the Company or any Subsidiary which entitle the holder
thereof to acquire Common Stock at any time, 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” has the meaning set
forth in the Preamble to this Agreement.

     

    “Company Counsel” means Morgan,
Lewis & Bockius LLP.

     

    “Company Deliverables” has the
meaning set forth in Section 2.3(a).

     

    “Company Shares” means the
shares of Preferred Stock issued to the Investor by the Company pursuant to this
Agreement, including any securities into which such shares of Preferred Stock
may hereafter be reclassified or changed.

     

    “Company’s IP” has the meaning set
forth in Section 3.1(r).

     

    “Confidential Information”
means trade secrets, confidential information and know-how (including but not
limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance
specifications, support documentation, drawings, specifications, designs,
business and marketing plans, and customer and supplier lists and related
information).

     

    “Conversion Amount” means the
amount of the Note to be converted indicated as the Conversion Amount on the
Investor’s signature page to this Agreement.

     

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

     

    “Delaware Courts” means the
state and federal courts sitting in the City of Wilmington, State of
Delaware.

     

    “Designated Investor” has the
meaning set forth in Section 4.15.

     

    “Disclosure Letter” means any
of the disclosures hereto containing information relating to the Company
pursuant to Article III and other provisions hereof that has been provided to
the Investor on the date hereof.

     

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

     

    “Effective Date” means the date
that the Registration Statement filed pursuant to Section 2(a), 2(b) or 2(c) of
the Registration Rights Agreement (as applicable) is first declared effective by
the Commission.

     

    “Equity Issuance” has the
meaning set forth in the Preamble to this Agreement.

    
      
         

      

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

     

    “Fundamental Transaction” means
(1) any merger or consolidation of the Company with or into another Person
(whether or not the Company is the surviving corporation), (2) any sale,
assignment, transfer, or other disposition of all or substantially all of the
Company’s assets in one or a series of related transactions, (3) the completion
of any purchase, tender offer or exchange offer (whether by the Company or
another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property that is
accepted by more than 50% of the outstanding shares of Common Stock, or (3) any
stock purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme or
arrangement ) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (4) any reorganization,
recapitalization, or reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property.

     

    “GAAP” means U.S. generally
accepted accounting principles.

     

    “Infringe” has the meaning set
forth in Section 3.1(r).

     

    “Intellectual Property” shall
mean any or all of the following and all rights in, arising out of, or
associated therewith:  (a) all United States, international and
foreign registered patents and applications therefor and all underlying patent
rights, reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof; (b) all inventions (whether patentable or
not), ideas, processes, invention disclosures, improvements, trade secrets,
proprietary information, know-how, technology, improvements, discoveries,
technical data, customer lists, proprietary processes and formulae, all source
and object code, algorithms, architectures, structures, display screens,
layouts, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records; (c) all copyrights, copyrights registrations and
applications therefor, copyrightable material including derivative works,
revisions, transformations and adaptations, material that is subject to
non-copyright disclosure protections, and all other works of authorship and
designs (whether or not copyrightable), and all other rights corresponding
thereto throughout the world; (d) all trade names, logos, trade dress, common
law trademarks and service marks, trademark and service mark registrations and
applications therefor throughout the world; (e) domain names; (f) web sites and
related content; (g) intellectual property rights acquired by license or
agreement; (h) damages or benefits derived from any action arising out of or
related to the foregoing, including laws controlling computer and Internet
rights; (i) all manuals, documentation and materials relating to the above; and
(j) any equivalent rights to any of the foregoing anywhere in the
world.

     

    “Investor” has the meaning set
forth in the Preamble to this Agreement.

     

    “Investor Deliverables” has the
meaning set forth in Section 2.3(b).

     

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

    
      
         

      

      
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    “License Agreements” has the meaning set
forth in Section 3.1(r).

     

    “Lien” means any lien, charge,
encumbrance, security interest, preemptive or similar rights, right of first
refusal or other restrictions of any kind, other than restrictions on the
transfer of securities arising under federal or state securities laws and
regulations.

     

    “Loan” has the meaning set
forth in the Preamble to this Agreement.

     

    “Loan Agreement” has the
meaning set forth in the Preamble to this Agreement.

     

    “Material Adverse Effect” means
any of (i) a material adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material adverse effect on operations
(including the results thereof), assets, liabilities, 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.

     

    “Note” has the meaning set
forth in the Preamble to this Agreement.

     

    “Person” means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.

     

    “Per Unit Conversion Price” has
the meaning set forth in the Preamble to this Agreement.

     

    “Preferred Stock” has the
meaning set forth in the Preamble to this Agreement.

     

    “Principal Market” means the
National Association of Securities Dealers, Inc. OTC Bulletin
Board.

     

    “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.

     

    “Registrable Securities” has
the meaning set forth in the Registration Rights Agreement.

     

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

     

    “Registration Rights Agreement”
means the Registration Rights Agreement, dated as of the date of this Agreement,
between the Company and the Investor, in the form of Exhibit C
hereto.

    
      
         

      

      
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    “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).

     

    “Securities” means,
collectively, the Company Shares, the Conversion Shares, the Warrants and the
Units.

     

    “Securities Act” means the
Securities Act of 1933, as amended.

     

    “Security Agreements” has the
meaning set forth in Section 2.2.

     

    “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 of Regulation SHO and
include all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps 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.

     

    “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, including without
limitation those entities listed in Exhibit 21 to the Form 10-K.

     

    “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York City
time).

     

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

     

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

     

    “Units” has the meaning set
forth in the Preamble to this Agreement.

    
      
         

      

      
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    “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded) during the period
beginning at 9:30:01 am., New York City Time, and ending at 4:00:00 p.m., New
York City Time, as reported by Bloomberg through its “Volume at Price” function
or, if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York City
Time, and ending at 4:00:00 p.m., New York City Time, as reported by Bloomberg,
or, if no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If VWAP cannot be calculated for such security on such
date on any of the foregoing bases, the VWAP of such security on such date shall
be the fair market value as mutually determined by the Company and the Investor.
If the Company and the Investor are unable to agree upon the fair market value
of such security, then they shall agree in good faith on a reputable investment
bank to make such determination of fair market value, whose determination shall
be final and binding and whose fees and expenses shall be borne by the Company.
All such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.

     

    “Warrants” has the meaning set
forth in the Preamble to this Agreement.

     

    “Warrant Shares” mean the
shares of Common Stock issuable upon the exercise of the Warrants being sold
under this Agreement.

     

    ARTICLE
II.

    ISSUANCE
OF SECURITIES AND CONVERSION OF NOTE

     

    2.1           Closing.  Subject
to the terms and conditions set forth in this Agreement, at the Closing, the
Company shall issue to the Investor an aggregate of 797,378 Units together with
a cash payment of $2.40 to the Investor, representing full payment of all
principal and accrued and unpaid interest under the Note, and, subject to and in
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Investor irrevocably assigns, transfers and conveys to
the Company the Note, for cancellation, conversion and exchange into the Units
and the Investor hereby irrevocably waives any rights to receive any other
consideration in connection with the principal amount and outstanding accrued
interest on the Note.  The Closing shall take place at the offices of
Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, PA 19103 on
the Closing Date, or at such other location or time as the parties may
agree.

     

    2.2           Termination of Security
Interests.  The Investor hereby agrees that, upon receipt of
the Units, (i) any and all security interests and other liens of every type at
any time granted to or held by the Investor as security for the Note, including,
but not limited to, the security interests and liens under that certain Security
Agreement, Intellectual Property Security Agreement and Pledge Agreement, each
of which were executed by the Company and its subsidiaries in favor of the
Investor as of December 22, 2009 (collectively, the “Security Agreements”), are hereby terminated,
discharged and forever released, and, (ii) in connection therewith, all
obligations and liabilities of the Company under or in respect of the Note, the
Loan Agreement, the Security Agreements and any other agreement or instrument
delivered by the Company in connection with the Note and the Security Agreements
will terminate and be deemed satisfied and paid-in-full.

    
      
         

      

      
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    2.3         Closing
Deliveries.

     

    (a)           At
the Closing, the Company shall deliver or cause to be delivered to the Investor
the following (the “Company
Deliverables”):

     

    (i)           a
stock certificate representing a number of Company Shares equal to the portion
of the Investor’s Conversion Amount converted at the Closing divided by the Per
Unit Conversion Price, registered in the name of the Investor;

     

    (ii)          a
certificate evidencing the formation and good standing of the Company issued by
the Secretary of State of Delaware as of a date within fifteen (15) days of the
Closing Date;

     

    (iii)         a
certified copy of the Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within fifteen (15) days of the Closing
Date;

     

    (iv)        evidence
of the filing of a Certificate of Amendment to the Certificate of Designation
increasing the number of authorized shares of the Preferred Stock;

     

    (v)         a
certificate, executed by the Assistant Secretary of the Company and dated as of
the Closing Date, as to (i) the resolutions consistent with Section 3.1(c) as
adopted by the Company’s board of directors in a form reasonably acceptable to
the Investor, (ii) the Certificate of Incorporation and (iii) the Bylaws, each
as in effect at the Closing;

     

    (vi)        a
Warrant, registered in the name of the Investor pursuant to which the Investor
shall have the right to acquire the number of shares of Common Stock equal to
the number of Company Shares issuable to the Investor pursuant to Section
2.3(a)(i) multiplied by ten (10);

     

    (vii)       the
legal opinion of Company Counsel, in substantially the form previously provided
to the Investor, addressed to the Investor;

     

    (viii)      the
Registration Rights Agreement and any other Transaction Documents which the
Company is required to execute hereunder, duly executed by the
Company;

     

    (ix)         a
check payable to the Investor in the amount of $2.40; and

     

    (x)          such
other documents relating to the transactions contemplated by this Agreement as
the Investor or its counsel may reasonably request.

    
      
         

      

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

     

    (i)           such
Uniform Commercial Code termination statements as shall be required in order to
terminate any financing statements in favor of the Investor (or its successors
or assigns) as described in Section 2.2 and will execute such other documents
and instruments; and take such other actions as the Company shall reasonably
request to evidence this satisfaction of the Company’s obligations to the
Investor and release of security interests described in Section
2.2;

     

    (ii)          the
original stock certificates of the Company’s subsidiaries pledged to the
Investor pursuant to the Security Agreements;

     

    (iii)         the
original Note (or an affidavit of loss in which the Investor notifies the
Company that the Note has been lost, stolen or destroyed and executes an
agreement reasonably satisfactory to the Company to indemnify the Company for
any loss incurred by it in connection with the Note) which shall be endorsed as
paid-in-full and cancelled; however, whether or not the original Note is
provided for cancellation, conversion and exchange, following the Closing, the
Company shall have no liability or obligation to the Investor with respect to
the Note (other than to issue the Units pursuant to this Agreement), all of
which shall be of no further force and effect; and

     

    (iv)        the
Registration Rights Agreement, duly executed by the Investor.

     

    ARTICLE
III.

    REPRESENTATIONS
AND

    WARRANTIES

     

    3.1         Representations and
Warranties of the Company.  The Company hereby makes the
following representations and warranties to the Investor:

     

    (a)           Subsidiaries.  The
Company has no direct or indirect Subsidiaries other than as specified in the
SEC Reports.  The Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any and all Liens except
those Liens disclosed in the SEC Reports, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.  The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.

     

    (b)           Organization and
Qualification.  The Company and each Subsidiary are 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 and use its
properties and assets and to carry on its business as currently conducted and as
presently proposed to be conducted, except in each case as would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.  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.  The Company and each Subsidiary are duly qualified to
conduct its respective businesses and are 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,
except where the failure to be so qualified or in good standing, as the case may
be, would not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.

    
      
         

      

      
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    (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 and otherwise to carry out its obligations
thereunder.  The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby, including, without limitation, the issuance of the
Securities and the reservation for issuance and issuance of the Warrant Shares
issuable upon exercise of the Warrants, have been duly authorized by all
necessary corporate action on the part of the Company and no consent or further
corporate action is required by the Company, its Board of Directors or its
stockholders in connection therewith.  Each Transaction Document 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 rights to indemnity and contribution may be limited by
state or federal securities laws or the public policy underlying such laws, and
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.

     

    (d)           No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby 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,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations and the rules and regulations of the Principal
Market), or by which any property or asset of the Company or a Subsidiary is
bound or affected; except in the case of each of clauses (ii) and (iii), such as
would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.

    
      
         

      

      
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    (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 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 filings required in accordance with Sections 4.4 (and any related
amendments to, or related prospectus supplements to, the Company’s outstanding
registration statements filed on either Form S-1 or Form SB-2) and 4.6, and (iv)
those that have been made or obtained prior to the date of this
Agreement.  The Company and its Subsidiaries are unaware of any facts
or circumstances which might prevent the Company from obtaining or effecting any
of the registration, application or filings pursuant to this Section
3.1(e).

     

    (f)           Issuance of the
Securities.  The Company Shares, the Warrants, the Conversion
Shares and the Warrant Shares have been duly authorized and, when issued and
paid for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens. The Company
has reserved from its duly authorized capital stock the Securities issuable
pursuant to this Agreement, including the Company Shares, the Conversion Shares
and the Warrant Shares.  When issued pursuant to the terms of the
Company Shares and the Warrants, the Conversion Shares and the Warrant Shares
will be validly issued, fully paid and non-assessable and free from all Liens,
with the holders being entitled to all rights accorded to a holder of Preferred
Stock or Common Stock, as the case may be. Upon exercise in accordance with the
Warrants, the Warrant Shares will be validly issued, fully paid and
nonassessable and free from all Liens.  Subject to the accuracy of the
representations and warranties of the Investor in this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the
Securities Act.

     

    (g)           Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of
20,000,000 shares of preferred stock, $0.001 par value per share, of which
3,437,500 shares are designated as Series A Convertible Preferred Stock and of
which as of the date hereof, 1,276,750 shares are issued and outstanding, and of
which 5,000,000 shares are designated as Series B Convertible Preferred Stock
and of which as of the date hereof, 2,000,001 shares are issued and outstanding,
and 300,000,000 shares of Common Stock, of which as of the date hereof,
41,354,655 shares are issued and outstanding, 25,535,000 shares are reserved for
issuance pursuant to the conversion of Series A Convertible Preferred Stock into
Common Stock, 23,921,340 shares are reserved for issuance pursuant to the
conversion of Series B Convertible Preferred Stock into Common Stock, 28,996,980
shares are reserved for issuance pursuant to the Company’s stock option and
purchase plans, 85,188,564 shares are reserved for issuance pursuant to warrants
exercisable for shares of Common Stock and 3,000,000 shares are reserved for
issuance pursuant to warrants exercisable for shares of 150,000 shares of Series
A Convertible Preferred Stock (subject to increase to cover the anti-dilution
provisions associated therewith). All of such outstanding shares are duly
authorized and have been, or upon issuance will be, validly issued and are fully
paid and nonassessable. Except as specified in Section 3.1(g) of the
Disclosure Letter, 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 specified
in Section 3.1(g) of
the Disclosure Letter, there are no outstanding options, warrants, 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 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, or securities or rights convertible or
exchangeable into shares of capital stock. Except as specified in Section 3.1(g) of the
Disclosure Letter, the issue and sale of the Securities will not,
immediately or with the passage of time, obligate the Company to issue shares of
capital stock or other securities to any Person (other than the Investor) 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 (including,
without limitation, under any anti-dilution or similar
provisions).

    
      
         

      

      
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    (h)           SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (the foregoing
materials and all exhibits included therein and financial statements, notes and
schedules thereto and documents incorporated by reference therein being
collectively referred to herein as the “SEC Reports” and, together
with the Disclosure Letter, the “Disclosure Materials”) on a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  The Company has made available to the Investor or its
representatives true, correct and complete copies of each of the SEC Reports not
available on the EDGAR system (if any).  As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, 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.  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 amendment, as
applicable).  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 fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments or which will not be material, either individually or
in the aggregate.

     

    (i)           Tax Status. The
Company and each of its Subsidiaries (i) has timely made or 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 timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (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,
except in each case as would not reasonably be expected to have a Material
Adverse Effect. There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.

    
      
         

      

      
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    (j)           Material Changes;
Undisclosed Events, Liabilities or Developments. Since the date of the
latest audited financial statements included in the Company’s Annual Report on
Form 10-K for the Year ended December 31, 2009 (“2009 10-K”) and unaudited
financial statements included in the Company’s most recent Quarterly Report on
Form 10-Q (“2010 10-Q”),
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof or in Section 3.1(j) of the
Disclosure Letter, (i) there has been no event, occurrence or development
that has had or that would 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
identity of 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, (v) the Company has not sold any assets outside of the ordinary course of
business, (vi) the Company has not made any material capital expenditures and
(vi) the Company has not issued any equity securities to any officer, director
or Affiliate, except pursuant to existing Company stock option plans. The
Company does not have pending before the Commission any request for confidential
treatment of information.  Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do
so.  No event, liability, fact, circumstance, occurrence or
development has occurred or exists, or is reasonably expected to occur or exist,
with respect to the Company or its Subsidiaries or their respective business,
properties, operations, assets or condition (financial or otherwise) which has
had or could reasonably be expected to result in a Material Adverse Effect that
has not been publicly disclosed at least one Trading Day prior to the date that
this representation is made.

     

    (k)           Litigation.  There
is no Action which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents against the Company or the
Securities or (ii) except as specifically disclosed in the 2009 10-K and 2010
10-Q, would, 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 as such), is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the 2009 10-K and 2010 10-Q. There has not been, and to the
knowledge of the Company, there is not pending 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.  Except as specified in Section 3.1(k) of the
Disclosure Letter, (i) neither the Company nor any Subsidiary is or,
within the last three years, has been the subject of an investigation by any
federal, state or local governmental agency and (ii) there are no claims,
actions, suits or proceedings pending or threatened against or involving the
Company or its Subsidiaries, or any assets of the Company or its Subsidiaries,
that are reasonably likely to result in a claim for damages in excess of
$150,000.

    
      
         

      

      
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    (l)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.  Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union.
The Company and its Subsidiaries believe that their relations with their
employees are good.  No executive officer (as defined in Rule 501(f)
of the Securities Act) of the Company or any of its Subsidiaries 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. No executive officer of the Company or
any of its Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing
matters.  The Company and its Subsidiaries are and have been in
compliance with all U.S. federal, state and local laws and regulations relating
to employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     

    (m)           Employee
Benefits.  Section 3.1(m) of the
Disclosure Letter sets forth a complete
list of all employee benefit plans,
pension plans, stock option, bonus or incentive plans, severance pay plans or
agreements, deferred compensation agreements, or any similar plan, agreement or
arrangement that are sponsored or maintained by the Company or any member of a
Controlled Group or with respect to which the Company or any member of the
Controlled Group has made or is required to make payments, transfers or
contributions (an “Employee
Benefit Plan”).  No other corporation, trade, or business
exists which would be treated together with the Company as a single “employer”
under the provisions of Section 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended (the “Code”).  Each
Employee Benefit Plan has been and is currently administered in compliance with
its constituent documents and all reporting, disclosure and other requirements
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Code and any
other law applicable to such Employee Benefit Plan. There are no unfunded
obligations of the Company under any retirement, pension, profit-sharing,
deferred compensation plan or similar program, and any employee contributions
withheld from payroll have been timely and fully contributed to the appropriate
Employee Benefit Plan as required under ERISA, the Code and applicable
law.  The Company is not required to make any payments or
contributions to any Employee Benefit Plan pursuant to any collective bargaining
agreement or any applicable labor relations law.  The Company has
never maintained or contributed to any Employee Benefit Plan providing or
promising any health or other nonpension benefits to terminated employees (other
than continuation coverage, at the maximum applicable premium permitted to be
charged by the Company, required under Section 4980B of the Code, or
Section 601 of the ERISA).  For purposes of this Section 3.1(m),
the term “Controlled
Group” used herein means, collectively, any trade or business (whether or
not incorporated) (i) under common control within the meaning of
Section 4001(b)(1) of ERISA with the Company or (ii) that, together
with the Company, is treated as a single employer under Section 414(t) of
the Code.

    
      
         

      

      
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    (n)           Compliance.  Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, 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 (except to the extent such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, ordinance, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws relating to taxes, pollution, environmental protection, occupational health
and safety, product quality and safety or employment and labor matters, except
in each case as would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.

     

    (o)           Environmental
Compliance.   The Company and its Subsidiaries (i) has at
all times had and now has all environmental approvals,  consents,
licenses, permits and orders required to conduct the businesses in which it has
been or is now engaged and (ii) has at all times been and is now in compliance
in all material  respects with all applicable environmental laws.
There are no claims, actions, suits or proceedings pending or threatened against
or involving the Company or its Subsidiaries, or any assets of the Company or
its Subsidiaries, under any of the environmental laws (whether by reason of any
failure to comply with any of the environmental laws or
otherwise).  No decree, judgment or order of any kind under any of the
environmental laws has been entered against the Company or its Subsidiaries.
There are no facts, conditions or situations, whether now or heretofore
existing, that could form the basis for any claim against, or result in any
liability of, the Company or its Subsidiaries under any of the environmental
laws.

     

    (p)           Regulatory Permits.
The Company and the Subsidiaries possess all certificates, authorizations,
licenses 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 any such
certificates, authorizations, licenses or permits would not, individually or in
the aggregate, have or 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 certificate,
authorization, license or permit.

     

    (q)           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 or used by them that is material to their respective
businesses, in each case free and clear of all Liens, except for Liens disclosed
in the 2009 10-K or 2010 10-Q or as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company or any of its Subsidiaries. Any real
property and facilities held under lease by the Company or any of its
Subsidiaries are held by them under valid, subsisting and, to the Company’s
knowledge, enforceable leases of which the Company and the Subsidiaries are in
compliance, except as would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.

    
      
         

      

      
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    (r)          Patents and
Trademarks.

     

    (i)           Section 3.1(r) of the
Disclosure Letter accurately sets forth all material Intellectual
Property that is owned and/or used in the business of the Company and its
Subsidiaries, viewed as a whole, as presently conducted (“Company’s IP”). No
Intellectual Property other than the Company’s IP is material to the business of
the Company or any of its Subsidiaries as presently conducted or as presently
proposed to be conducted. The Company or one of its Subsidiaries is the sole and
exclusive owner of all right, title and interest in and to Company’s IP (with no
breaks in the chain of title thereof) free and clear of, to its knowledge, any
claim, security interest, lien, pledge, option, charge or encumbrance of any
kind whatsoever except as disclosed in the 2009 10-K or 2010
10-Q.  Company’s IP has not been used or enforced or failed to be used
or enforced in a manner that would result in the abandonment, cancellation or
unenforceability of any of Company’s material rights in and to Company’s
IP.

     

    (ii)          The
Company has not transferred any rights or interest in, or granted any exclusive
license with respect to, any of the Company’s IP to any third
party.

     

    (iii)         All
of the Company’s IP is currently in compliance in all material respects with all
legal requirements (including timely filings, proofs and payments of fees) and
is, to the Company’s knowledge, valid and enforceable.  None of the
Company’s IP which is necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any pending or
threatened cancellation, dispute or litigation of which the Company is
aware.  No patent of the Company or its Subsidiaries has been or is
now involved in any interference, reissue, re-examination or opposition
proceeding.

     

    (iv)        All
of the licenses and sublicenses and consent, royalty or other agreements
concerning Company’s IP which are necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is a
party or by which any of their assets are bound (other than  generally
commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $25,000 per license)
(collectively, “License
Agreements”) are valid and binding obligations of the Company or its
Subsidiaries that are parties thereto and, to the Company’s knowledge, the other
parties thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally, and there exists no
event or condition which, to the Company’s knowledge, will result in a material
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default by the Company or any of its Subsidiaries under any such
License Agreement.

    
      
         

      

      
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    (v)         The
Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the operation of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted.  The Company and its Subsidiaries
have a valid and enforceable right to use all third party Intellectual Property
and Confidential Information used or held for use as the Company’s
IP.

     

    (vi)        To
the best knowledge of the Company, the conduct of the Company’s and its
Subsidiaries’ businesses as currently conducted does not infringe or otherwise
impair or conflict with (collectively, “Infringe”) any Intellectual
Property rights of any third party or any confidentiality obligation owed to a
third party, and, to the Company’s knowledge, the Company’s IP which are
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted are
not being Infringed by any third party.  There is no litigation or
order pending or outstanding or, to the Company’s knowledge, threatened or
imminent, that seeks to limit or challenge or that concerns the ownership, use,
validity or enforceability of any of the Company’s IP or, to the Company’s
knowledge, the Company’s and its Subsidiaries’ use of any Intellectual Property
or Confidential Information owned by a third party, and, to the Company’s
knowledge, there is no valid basis for the same.

     

    (vii)       The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of or
restriction on the Company’s or any of its Subsidiaries’ ownership or right to
use any of the Company’s IP which is necessary for the conduct of Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted.

     

    (s)          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.  The Company has no reason to believe that it will not be
able to renew its and the Subsidiaries’ existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business on terms consistent in all material
respects with market for similar size companies as the Company and its
Subsidiaries for the lines of business of the Company and its Subsidiaries at a
cost that would not have a Material Adverse Effect.  Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for.

     

    (t)          Transactions With Affiliates
and Employees. None of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is presently
a party to any transaction with the Company or any Subsidiary (other than for
ordinary course services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, which in each case is required to be disclosed in
the SEC Reports and has not been so disclosed.

    
      
         

      

      
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    (u)           Sarbanes-Oxley; Internal Accounting
Controls.  The Company is in compliance with all provisions of
the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it as of the
Closing Date.  The Company and each of 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 generally
accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any differences.  The Company has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls and
procedures so that they are effective in ensuring that information required to
be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Commission, including, without
limitation, controls and procedures designed to ensure that material information
relating to the Company, including its Subsidiaries, is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company’s Form 10-K or 10-Q, as the case may be, is being
prepared. The Company’s certifying officers have evaluated the effectiveness of
the Company’s controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report 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, there
have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has significantly affected,
or is reasonably likely to significantly affect, the Company’s internal control
over financial reporting. Since the Evaluation Date, neither the Company nor any
of its Subsidiaries has received any written notice or correspondence from any
accountant relating to any potential material weakness in any part of the system
of internal accounting controls of the Company or any of its Subsidiaries. Additionally, the
Company is not in violation of any of the rules, regulations or requirements of
the Principal Market and has no knowledge of any facts or circumstances that
could reasonably lead to delisting or suspension of the Common Stock in the
foreseeable future.

    
      
         

      

      
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    (v)           Solvency.  Based
on the financial condition of the Company as of the date hereof and as of the
Closing Date (assuming that the Closing shall have occurred), (i) the Company’s
present fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its
liabilities when such amounts are required to be paid.  The foregoing
representation and warranty is also true and correct as to the Company and the
Subsidiaries on a consolidated basis.  Neither the Company nor any
Subsidiary intends to incur debts beyond its or their ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be payable
on or in respect of its or their debt).  The Company has no knowledge
of any facts or circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date.

     

    (w)           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 Investor shall
have no obligation with respect to any fees or with respect to any claims (other
than such fees or commissions owed by the Investor pursuant to written
agreements executed by the Investor which fees or commissions shall be the sole
responsibility of the Investor) made by or on behalf of other Persons for fees
of a type contemplated in this Section 3.1(w) that may be due in connection with
the transactions contemplated by this Agreement.

     

    (x)           Certain Registration
Matters. Assuming the accuracy of the Investor’s 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 Units by the Company to the
Investor under the Transaction Documents.   Except as specified
in the Registration Rights Agreement and in Section 3.1(x) of the
Disclosure Letter, no Person has any rights (including “piggy-back”
registration rights) to cause the Company to effect the registration under the
Securities Act or any state securities laws of any securities of the Company
that have not been satisfied.

     

    (y)           Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating 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.  The Company has not, in the two years
preceding the date hereof, received notice from any Trading Market to the effect
that the Company is not in compliance with the listing or maintenance
requirements thereof. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance 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
stockholders of the Company thereunder is required for the Company to issue and
deliver to the Investor the Securities contemplated by Transaction
Documents.

    
      
         

      

      
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    (z)           Investment
Company.  The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company,”
an Affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company” within the meaning of the Investment Company Act of
1940, as amended.

     

    (aa)         Application of Takeover
Protections.  The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or would become applicable to the Investor as a
direct result of the transactions contemplated by this Agreement, including
without limitation, the Company’s issuance of the Securities to the
Investor.  The Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Common
Stock or a change in control of the Company.

     

    (bb)         No Additional
Agreements.  The Company does not directly or indirectly have
any agreement or understanding with the Investor with respect to the
transactions contemplated by the Transaction Documents other than as specified
in the Transaction Documents and the Disclosure Materials.

     

    (cc)         Disclosure.  The
Company confirms that neither it nor, to its knowledge, any Person acting on its
behalf has provided the Investor or its agents or counsel with any information
that the Company believes constitutes material, non-public information, except
insofar as the existence and terms of the proposed transactions hereunder and
the information contained herein or in the other Transaction Documents may
constitute such information. The Company understands and confirms that the
Investor will rely on the foregoing representations and warranties in effecting
transactions in securities of the Company. The Company acknowledges and agrees
that the Investor does not make nor has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Sections 3.2 and 4.14.

     

    (dd)         Off Balance Sheet
Arrangements. Except as set forth in Section 3.1(dd) of the
Disclosure Letter, there is no transaction, arrangement or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so
disclosed.

     

    (ee)         U.S. Real Property Holding
Corporation. The Company is not, and has never been, a U.S. real property
holding corporation within the meaning of Section 897 of the Code and the
Company shall so certify upon the request of the Investor.

     

    (ff)          Foreign Corrupt
Practices.  Neither the Company nor any of its Subsidiaries nor
any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee, except in each case as
would not have a Material Adverse Effect.

    
      
         

      

      
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    (gg)         No General
Solicitation.  Neither the Company nor any Person acting on
behalf of the Company has offered or sold any of the Units by any form of
general solicitation or general advertising.  The Company has offered
the Units for sale only to the Investor and certain other “accredited investors”
within the meaning of Rule 501 under the Securities Act.

     

    (hh)         Accountants.  The
Company’s accounting firm is set forth in the SEC Reports.  To the
knowledge and belief of the Company, such accounting firm: (i) is a registered
public accounting firm as required by the Exchange Act and (ii) shall express
its opinion with respect to the financial statements to be included in the
Company’s Annual Report for the year ending December 31, 2010.

     

    (ii)           Regulation M
Compliance.  The Company has not, and to its knowledge no one 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
security of the Company to facilitate the sale or resale of any of the
Securities or (ii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company.

     

    3.2         Representations and
Warranties of the Investor.  The
Investor hereby represents and warrants to the Company as follows:

     

    (a)           Organization;
Authority.  The Investor 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 thereunder. The
execution, delivery and performance by the Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if the Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of the
Investor.  Each of this Agreement and the Registration Rights
Agreement has been duly executed by the Investor, and when delivered by the
Investor in accordance with the terms hereof, will constitute the valid and
legally binding obligation of the Investor, enforceable against it in accordance
with its terms, except as rights to indemnity and contribution may be limited by
state or federal securities laws or the public policy underlying such laws, and
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.  The Investor understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities laws and is acquiring the Securities 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 the Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities 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 the Investor to hold the Securities for any period of time.  The
Investor is acquiring the Securities hereunder in the ordinary course of its
business. The Investor does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the
Securities.

    
      
         

      

      
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    (c)           Investor
Status.  At the time the Investor was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises
any Warrants, it will be either: (i) an “accredited investor” as defined in Rule
501(a) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act.  The Investor has
completed and executed the Investor Questionnaire (attached to this Agreement as
Exhibit D and
incorporated herein as representations and warranties of the Investor under this
Section 3.2) and that the information contained in such document is complete and
accurate.  The Investor is not a registered broker-dealer under
Section 15 of the Exchange Act.  The Investor, 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. The Investor 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.

     

    (d)           General Solicitation.
The Investor is not acquiring the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.

     

    (e)           Access to
Information. The Investor acknowledges that it has 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 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 the Investor or its representatives or counsel
shall modify, amend or affect the Investor’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)           Certain Trading Activities
and Confidentiality. Other than consummating the transactions
contemplated hereunder, the Investor has not engaged, nor has the Investor
directed any Person to act on its behalf to engage, in any transactions in the
securities of the Company (including, without limitations, any Short Sales
involving the Company’s securities or “locking-up” borrowing with respect to any
of the Company’s securities) since the earlier to occur of (1) the time that the
Investor was first contacted by the Company or any other Person regarding an
investment in the Company and (2) the 30th day
prior to the date of this Agreement.  Other than to other Persons
party to this Agreement (and their respective representatives and advisors), the
Investor has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).

    
      
         

      

      
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    (g)           Independent Investment
Decision. The Investor has independently evaluated the merits of its
decision to acquire Securities pursuant to this Agreement, and the Investor
confirms that it has not relied on the advice of any other investor’s business
and/or legal counsel in making such decision.

     

    (h)           Reliance.  The
Investor understands and acknowledges that: (i) the Securities are being offered
and issued to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and the Company
will rely upon the accuracy and truthfulness of, the foregoing representations
and the Investor hereby consents to such reliance.

     

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

     

    The
Company acknowledges and agrees that the Investor has not 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 and Section
4.13.

     

    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1         Reasonable Best
Efforts.  Each party shall use its reasonable best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 5.1 and 5.2 of this Agreement.

     

    4.2         Legends.

     

    (a)           Sales of Securities.
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of any Securities
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of the Investor or in connection with a pledge as contemplated in
Section 4.2(d), the Company may, pursuant to the provisions of Section 4.2(e)
below, require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.

     

    (b)           Register. The Company
shall maintain at its principal executive offices (or such other office or
agency of the Company as it may designate by notice to each holder of
Securities), a register for the Securities in which the Company shall record the
name and address of the Person in whose name the Securities have been issued
(including the name and address of each transferee) and the number of Warrant
Shares issuable upon exercise of the Warrants held by such Person. The Company
shall keep the register open and available at all times during business hours
for inspection of the Investor or its legal representatives.

    
      
         

      

      
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    (c)           Transfer Agent
Instructions. The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at The Depository Trust Company
(“DTC”) (if DTC is then
offered by the Company and its transfer agent and such Securities qualify for
deposit with DTC in accordance with its rules), registered in the name of the
Investor or its respective nominee(s), for the Securities in such amounts as
specified from time to time by the Investor to the Company upon conversion of
the Company Shares or exercise of the Warrants. The Company represents and
warrants that no instruction other than the irrevocable instructions to its
transfer agent referred to in this Section 4.2(c) will be given by the Company
to its transfer agent with respect to the Securities and that the Securities
shall otherwise be freely transferable on the books and records of the Company,
as applicable, and to the extent provided in this Agreement and the other
Transaction Documents, except as it may reasonably determine are necessary to
comply or to ensure compliance with those applicable laws that are enacted or
modified after the Closing. If the Investor effects a sale, assignment or
transfer of the Securities in accordance with the terms of the Transaction
Documents, the Company shall permit the transfer and shall promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC (if DTC is then offered by the Company and
its transfer agent and such Securities qualify for deposit with DTC in
accordance with its rules) in such name and in such denominations as specified
by the Investor to effect such sale, transfer or assignment. In the event that
such sale, assignment or transfer involves Securities sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144 (provided that in the case of a sale, transfer or assignment under
Rule 144 the foregoing is not an “affiliate” of the Company or any of its
Subsidiaries (as defined in Rule 144)), the transfer agent shall issue such
Securities to the Investor, assignee or transferee, as the case may be, without
any restrictive legend in accordance with Section 4.2(e) below. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investor. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 4.2(c) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of any provisions of this Section 4.2(c), that the Investor shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required. The Company shall cause its counsel to issue the legal
opinion referred to in the irrevocable transfer agent instructions required to
be delivered pursuant to the terms of the Registration Rights Agreement to the
Company’s transfer agent on each Effective Date. 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 any legends on any of the Securities
shall be borne by the Company.

    
      
         

      

      
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      (d)           Certificates
evidencing the Securities will contain the following legend, until such time as
they are not required under Section 4.1(e):

    

     

    THESE
SECURITIES HAVE NOT 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 (I) (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY OR (II) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT. NOTWITHSTANDING
THE FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

     

    The Company acknowledges and agrees
that the Investor may from time to time pledge, and/or grant a security interest
in some or all of the Securities in accordance with all applicable federal and
state securities laws pursuant to a bona fide margin agreement in connection
with a bona fide margin account and, if required under the terms of such
agreement or account, the Investor may transfer pledged or secured Securities to
the pledgees or secured parties.  Such a pledge or transfer 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 may be required in connection with a
subsequent transfer by the pledgee or secured party following default by the
Investor or otherwise.  No notice shall be required of such pledge. At
the Investor’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities.

    
      
         

      

      
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    (e)           Certificates
evidencing the Securities shall not contain any legend (including the legend set
forth in Section 4.1(d)) at such time as the Investor has provided reasonable
evidence to the Company (including any customary broker’s or selling
stockholder’s letters but expressly excluding an opinion of counsel other than
with respect to clauses (iv) or (v) below), that: (i) there has been a sale of
such Securities pursuant to an effective registration statement (including the
Registration Statement(s)), (ii) there has been a sale of such Securities
pursuant to Rule 144 (assuming the transferor is not an Affiliate of the
Company), (iii) such Securities are then eligible for sale under Rule 144(b)(i),
(iv) in connection with a sale, assignment or other transfer (other than under
Rule 144) provided that, upon request of the Company, the Investor provides the
Company with an opinion of counsel to the Investor, in a reasonably acceptable
form, to the effect that such sale, assignment or transfer of the Securities may
be made without registration under the applicable requirements of the Securities
Act or (v) if such legend is not required under applicable requirements of the
Securities Act (including, without limitation, controlling judicial
interpretations and pronouncements issued by the Commission). Following such
time as restrictive legends are not required to be placed on certificates
representing Securities pursuant to the preceding sentence, the Company will, no
later than three (3) Trading Days following the delivery by the Investor to the
Company or the Company’s transfer agent of a certificate representing Securities
containing a restrictive legend and the foregoing evidence (and opinion if
applicable), deliver or cause to be delivered to the Investor a certificate
representing such Securities that is free from all restrictive and other legends
or credit the balance account of the Investor’s or the Investor’s nominee with
DTC (if DTC is then offered by the Company and its transfer agent and such
Securities qualify for deposit with DTC in accordance with its rules) with a
number of shares of Preferred Stock or Common Stock equal to the number of
shares represented by the certificate so delivered by the Investor (the date by
which such certificate is required to be delivered to the Investor or such
shares were required to be credited to the Investor’s account with DTC (as the
case may be) pursuant to the foregoing is referred to herein as the “Required Delivery Date”). The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section, except as it may reasonably determine are necessary or
appropriate to comply or to ensure compliance with those applicable laws that
are enacted or modified after the Closing.

     

    4.3           Form D and Blue
Sky.  The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Investor who requests one promptly after such filing.  The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to,
qualify the Securities for sale to the Investor at the Closing pursuant to this
Agreement under applicable securities or “Blue Sky” laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Investor on or prior to the
Closing Date.  The Company shall make all filings and reports relating
to the offer and sale of the Securities required under applicable securities or
“Blue Sky” laws of the states of the United States following the Closing
Date.

     

    4.4           Furnishing of
Information.  Until the earliest of the time that (i)
the Investor does not own Securities, (ii) the Warrants have expired
or (iii) the consummation of a Fundamental Transaction (as defined in the
Warrants) where the Company is no longer publicly traded following such
Fundamental Transaction (the “Reporting Period”) has
occurred, the Company covenants to maintain the registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act and 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 even if the Exchange Act or the rules and regulations
thereunder would no longer require or otherwise permit such termination. Without
limiting any of the Company’s obligations under the Registration Rights
Agreement, during the Reporting Period, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to the Investor and
make publicly available in accordance with Rule 144(c) such information as is
required for the Investor to sell the Securities under Rule 144. Without
limiting any of the Company’s obligations under the Registration Rights
Agreement, the Company further covenants that it will take such further action
as any holder of Securities may reasonably request, to the extent required from
time to time to enable such Person to sell the Securities without registration
under the Securities Act, including without limitation, within the requirements
of the exemption provided by Rule 144.

    
      
         

      

      
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    4.5           Integration. The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
issuance of the Securities to the Investor, or that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of any
Trading Market in a manner that would require stockholder approval of the
issuance of the securities to the Investor.

     

    4.6           Securities Laws Disclosure;
Publicity. On the Trading Day following the execution of this Agreement,
the Company will file a Current Report on Form 8-K disclosing the material terms
of the Transaction Documents (and attach as exhibits thereto 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 (unless
the Closing Date occurs on the same date as the execution of this Agreement, in
which case only one Form 8-K will be required).

     

    4.7           Indemnification of
the
Investor. In addition to the indemnity provided in the Registration
Rights Agreement, the Company will indemnify and hold the Investor and its
directors, officers, stockholders, partners, employees, members and direct
or indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (each, an “Investor Party”) harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs,
expenses, actions, causes of action, suits, penalties and fees, including all
judgments, amounts paid in settlements, court costs and reasonable out-of-pocket
attorneys’ fees and costs of investigation (collectively, “Losses”) that any such
Investor Party may suffer or incur as a result of, arising out of or relating to
(a) any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant, obligation or agreement made by the Company in any Transaction
Document or (b) any cause of action, suit or claim brought or made against any
Investor Party by a third party (including for these purposes a derivative
action brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or
(iii) the status of such Investor Party or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the
Transaction Documents; provided, that an Investor Party shall not be entitled to
indemnification to the extent any of the foregoing is caused by such Investor
Party’s gross negligence, material violation of law or regulation or willful
misconduct. In addition to the indemnity contained herein, the Company will
reimburse each Investor Party for its reasonable out-of-pocket legal and
other expenses (including the reasonable out-of-pocket cost of any
investigation, preparation and travel in connection therewith) as incurred in
connection therewith, as promptly as practicable after such expenses are
incurred and invoiced.

    
      
         

      

      
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    4.8           Non-Public
Information. Except with respect to material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company
covenants and agrees that neither it nor any of its Subsidiaries, or other
Person acting on its or their behalf will provide the Investor or its agents or
counsel with any material, non-public information regarding the Company or its
Subsidiaries without the prior express consent of the Investor; provided, that
no such consent shall be required prior to disclosing any such material,
non-public information to (a) a director designated by the Investor (but only
when made to such director in his or her capacity as a director) or (b) the
Investor when such disclosure is required by the express terms of this Agreement
or the Registration Rights Agreement. The Company understands that the Investor
shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.

     

    4.9           Listing of
Securities. The Company shall promptly secure the listing of all of the
Registrable Securities upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents on such exchange or automated quotation system or another Trading
Market. The Company shall use reasonable best efforts to maintain the Common
Stock’s authorization for quotation on the Principal Market. The Company agrees,
(i) if the Company applies to have the Common Stock traded on any other Trading
Market, it will include in such application the Company Shares, the Conversion
Shares and the Warrant Shares, and will take such other action as is necessary
or desirable to cause the Company Shares, the Conversion Shares and the Warrant
Shares to be listed on such other Trading Market as promptly as possible, and
(ii) it will use reasonable best efforts to take all action that it believes is
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and to comply in all material respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
applicable Trading Market. Neither the Company nor any of its Subsidiaries shall
take any action which it believes could be reasonably expected to result in the
delisting or suspension of the Common Stock (and if required to be listed by
this Section 4.9, the Preferred Stock) on any Trading Market. The Company shall
pay all fees and expenses in connection with satisfying its obligations under
this Section 4.9.

     

    4.10        Additional Issuances of
Securities.

     

    (a)           The
Company agrees that for the period commencing on the date hereof and ending
ninety (90) days after the Closing, neither the Company nor any of its
Subsidiaries shall directly or indirectly issue, offer, sell, grant any option
to purchase, or otherwise dispose of (or announce any issuance, offer, sale,
grant or any option to purchase or other disposition of) any of their respective
equity or equity equivalent securities, including, without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time and under any circumstances convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, capital stock and other
securities of the Company (including, without limitation, Common Stock
Equivalents) (collectively with such capital stock or other securities of the
Company, “Equivalents”)
(any such issuance, offer, sale, grant, disposition or announcement being
referred to as a “Subsequent
Placement”).

    
      
         

      

      
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    (b)           Notwithstanding
the foregoing, this Section 4.10 shall not apply in respect of the issuance of
(A) Company stock or options to purchase Company stock issued to directors,
officers, employees or consultants of the Company in connection with their
service as directors or officers of the Company, their employment by the Company
or their retention as consultants by the Company pursuant to an equity
compensation program or other contract or arrangement approved by the Board of
Directors of the Company (or the compensation committee of the Board of
Directors of the Company), provided that all such issuances after the date
hereof pursuant to this clause (A) do not, in the aggregate, exceed more than
10% of the Common Stock issued and outstanding immediately prior to the date
hereof, (B) Common Stock or standard warrants (including so-called penny
warrants) to purchase Common Stock in connection with strategic alliances,
acquisitions, mergers, strategic partnerships, joint ventures, vendor and
supplier arrangements and as equity kickers in lease and financing transactions,
the primary purpose of which is not to raise capital, and which are approved in
good faith by the Company’s Board of Directors, provided that all such issuances
after the date hereof pursuant to this clause (B) do not, in the aggregate,
exceed more than 10% of the Common Stock issued and outstanding immediately
prior to the date hereof, (C) shares issued upon the conversion or exercise of
Equivalents issued prior to the date hereof, provided that such Equivalents have
not been amended since the date of this Agreement to increase the number of
shares issuable thereunder or to lower the exercise or conversion price thereof
or otherwise materially change the terms or conditions thereof in any manner
that adversely affects the Investor, (D) shares issued or issuable by reason of
a dividend, stock split or other distribution on Common Stock, (E) the
Conversion Shares, or (F) the Warrant Shares (each of the foregoing in clauses
(A) through (F), collectively the “Excluded
Securities”).

     

    4.11         Conduct of Business.
The business of the Company and its Subsidiaries shall not be conducted in
violation of any law, ordinance or regulation of any governmental entity, except
where such violations would not result, either individually or in the aggregate,
in a Material Adverse Effect.

     

    4.12         Variable Rate
Transaction. From the date hereof until 12 months after the Closing, the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Placement involving a “Variable Rate Transaction.” The
term “Variable Rate
Transaction” shall mean a transaction in which the Company (i) issues or
sells any Equivalents either (A) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such Equivalents, or (B) with a conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of such
Equivalents or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common
Stock, other than pursuant to a customary “weighted average” or “full ratchet”
anti-dilution provision or (ii) enters into any agreement (including, but not
limited to, an equity line of credit) whereby the Company may sell securities at
a future determined price (other than customary “pre-emptive” or “participation”
rights). The Investor shall be entitled to obtain injunctive relief against the
Company to preclude any such issuance, which remedy shall be in addition to any
right to collect damages.

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    4.13         Trading Restrictions.
The Investor represents and warrants to, and covenants with, the Company that it
will not (and its Affiliates acting on its behalf or pursuant to any
understanding with it will not) engage in or effect, directly or indirectly, any
transactions in any securities of the Company (including, without limitation,
any Short Sales, “locking-up” borrow or hedging activities involving the
Company’s securities) during the period commencing on the date hereof and ending
on the date that is fifteen (15) months following the Closing Date. In
furtherance (and without limitation) of the foregoing, during such restricted
period, neither the Investor nor any of such Affiliates, (a) will directly or
indirectly, sell, agree to sell, grant any call option or purchase any put
option with respect to, pledge, borrow or otherwise dispose of any securities of
the Company, or (b) will establish or increase any “put equivalent position” or
liquidate or decrease any “call equivalent position” with respect to any such
securities (in each case within the meaning of Section 16 of the Exchange Act
and the rules and regulations promulgated thereunder), or otherwise enter into
any swap, derivative or other transaction or arrangement that transfers to
another, in whole or in part, any economic consequence of ownership of any such
securities, whether or not such transaction is to be settled by delivery of any
such securities, other securities, cash or other consideration. Notwithstanding
the foregoing, it is understood and agreed that nothing contained in this
Section 4.13 shall prohibit the Investor (or such Affiliates) from (1)
purchasing or agreeing to purchase unrestricted securities of the Company or
securities which are covered by an effective registration statement and the
prospectus included therein is available for use on the date of such purchase
(including through block trades or privately negotiated transactions), (2)
purchasing or agreeing to purchase securities of the Company pursuant to Section
4.14 or otherwise from the Company, (3) exercising any or all Warrants to
acquire Warrant Shares or otherwise acting under or enforcing, or receiving any
right or benefit or adjustment under, the Warrants, (4) selling or agreeing to
sell “long” securities of the Company (because the Investor or such Affiliate is
“deemed to own such securities” pursuant to paragraph (b) of Rule 200 under
Regulation SHO), including, without limitation, (I) any Company Shares,
Conversion Shares, Warrants or Warrant Shares acquired hereunder or pursuant to
the transactions contemplated hereby or any of the Transaction Documents, (II)
any shares of Common Stock or warrants to purchase shares of Common Stock held
on the date hereof, (III) any shares of Common Stock acquired after the date
hereof pursuant to the exercise of warrants to purchase Common Stock held on the
date hereof, or (IV) securities acquired after the date hereof in accordance
with this paragraph, (5) pledging or hypothecating any securities of the Company
in connection with leverage arrangements engaged in by the Investor (or such
Affiliates) without the purpose of transferring economic risk relating to such
securities or (6) from transferring any of the Securities to any Affiliate who
agrees in writing to be bound by this Section 4.13, in each case, provided such
sale is in compliance with all applicable securities laws and following the
public announcement of the transaction contemplated hereby pursuant to Section
4.6.

     

    4.14         Participation Right.
From the date hereof until September 30, 2012, the Company shall not effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4.14. The Company acknowledges and agrees that the right set forth in
this Section 4.14 is a right granted by the Company to the Investor, for so long
as it or any of its affiliates in the aggregate holds at least one percent of
the Common Stock Deemed Outstanding (as defined in the Warrants) (the “Designated
Investor”).

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    (a)           The
Company shall deliver to the Designated Investor a written notice
(the ”Offer
Notice”) of any proposed or intended issuance or sale or exchange
(the ”Offer”) of
the securities being offered (the “Offered Securities”) in a
Subsequent Placement, which Offer Notice shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, (y) identify the Persons (if
known) to which or with which the Offered Securities are to be offered, issued,
sold or exchanged and (z) offer to issue and sell to or exchange with the
Designated Investor in accordance with the terms of the Offer the Designated
Investor’s pro rata portion of the Offered Securities, calculated by dividing
(i) the number of shares of Common Stock Deemed Outstanding (as defined in the
Warrants) owned by the Designated Investor as of immediately prior to the Offer,
by (ii) the Common Stock Deemed Outstanding (as defined in the Warrants) (such
pro rata portion, the “Basic
Amount”).

     

    (b)           To
accept an Offer, in whole or in part, the Designated Investor must deliver an
irrevocable written notice to the Company prior to the end of the third (3rd)
Business Day after such Designated Investor’s receipt of the Offer Notice (the
“Offer Period”), setting
forth the portion of the Designated Investor’s Basic Amount that such Designated
Investor elects to purchase (the “Notice of
Acceptance”).

     

    (c)           The
Company shall have twenty (20) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the
Designated Investor (the “Refused Securities”) pursuant
to a definitive agreement(s) (the “Subsequent Placement
Agreement”), but only to the offerees described in the Offer Notice (if
so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not materially more
favorable (when viewed on an aggregate basis) to the acquiring Person or Persons
or materially less favorable (when viewed on an aggregate basis) to the Company
than those set forth in the Offer Notice.

     

    (d)           Upon
the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, the Designated Investor shall acquire from the Company,
subject to the terms and conditions specified in the Offer Notice, and the
Company shall issue to the Designated Investor, the number or amount of Offered
Securities specified in the Notices of Acceptance, subject to the terms and
conditions specified in the Offer Notice. The purchase by the Designated
Investor of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Designated Investor of a separate
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to the Designated Investor and its counsel and the Company
and its counsel.

     

    (e)           The
Company and the Designated Investor agree that if the Designated Investor elects
to participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto
(collectively, the “Subsequent
Placement Documents”) shall include any term or provisions whereby such
Designated Investor shall be required to agree to any restrictions on trading as
to any securities of the Company owned by such Designated Investor prior to such
Subsequent Placement more restrictive in any material respect than the
restrictions contained in the Transaction Documents.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    (f)           Notwithstanding
anything to the contrary in this Section 4.14 and unless otherwise agreed to by
such Designated Investor, the Company shall either confirm in writing to such
Designated Investor that the transaction with respect to the Subsequent
Placement has been abandoned or shall publicly disclose its intention to issue
the Offered Securities, in either case in such a manner such that such
Designated Investor will not be in possession of any material, non-public
information, by the thirtieth (30th)
Business Day following delivery of the Offer Notice (or any later follow-up
Offer Notice or offer terms provided pursuant to the terms of this Section
4.14(b) (the “Public Notice
Date”). If by the Public Notice Date, no public disclosure regarding a
transaction with respect to the Offered Securities has been made, and no notice
regarding the abandonment of such transaction has been received by such
Designated Investor, such transaction shall be deemed to have been
abandoned.

     

    (g)           The
restrictions contained in this Section 4.14 shall not apply in connection with
the issuance of any Excluded Securities (as defined herein or as defined in the
Warrants).

     

    4.15         Prohibited Actions.
The Company shall not without the prior consent of the Investor knowingly enter
into any transaction or take any other action which would create any liability
under Section 16(b) of the Exchange Act, or the rules promulgated thereunder by
the Commission, on the part the Investor as a consequence of having acquired the
Securities under this Agreement.

     

    ARTICLE
V.

     

    CONDITIONS
PRECEDENT TO CLOSINGS

    

    5.1           Conditions Precedent to the
Obligations of the Investor to Convert Note.  The obligation of
the Investor to acquire the Securities and convert the Note at the Closing are
subject to the satisfaction, or waiver by the Investor, at or before the
Closing, of each of the following conditions:

     

    (a)           Representations and
Warranties. Each and every representation and warranty of the Company
contained herein shall be true and correct in all respects as of the date when
made and in all material respects as of the Closing Date as though originally
made on and as of such date (except for representations and warranties qualified
by materiality or Material Adverse Effect, which shall be true and correct in
all respects). The Investor shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Investor;

     

    (b)           Performance.  The
Company shall have performed, satisfied and complied in all 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.  The Investor shall have received a certificate, executed by
the Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Investor;

     

    (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;

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

     

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

     

    (e)           No Suspensions of Trading in
Common Stock; Listing. Trading in the Common Stock shall not have been
suspended (or threatened to be 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. The Common Stock shall be designated for quotation or listed on the
Principal Market and any required approval of the Principal Market to list the
Company Shares and the Warrant Shares shall have been obtained by the
Company;

     

    (f)           Company
Deliverables.  The Company shall have delivered the Company
Deliverables in accordance with Section 2.3(a);

     

    (g)           Consents and
Approvals. The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Securities, including without limitation, any of those required by the Principal
Market;

     

    (h)           Certificate of Amendment to
Certificate of Designation.  The Certificate of Amendment to
the Certificate of Designation increasing the number of authorized shares of the
Preferred Stock shall have been filed with the Secretary of State of the State
of Delaware and shall have become effective;

     

    5.2          Conditions Precedent to the
Obligations of the Company to Issue Securities.  The obligation
of the Company to issue the Units at the Closing is subject to the satisfaction,
or waiver by the Company, at or before the Closing, of each of the following
conditions:

     

    (a)           Representations and
Warranties.  The representations and warranties of the Investor
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
Investor 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 Investor at or
prior to the Closing;

     

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

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

     

    (d)           Investor
Deliverables. The Investor shall have delivered its Investor Deliverables
in accordance with Section 2.3(b).

     

    ARTICLE
VI.

    MISCELLANEOUS

     

    6.1           Fees and Expenses.
The Company shall pay the reasonable fees, disbursements and expenses of both
the Company and the Investor, including their advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of the
Transaction Documents.

     

    6.2           Entire Agreement. The
Transaction Documents, together with the exhibits,  schedules and the
Disclosure Letter 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 subject matter, which the parties acknowledge have been merged into such
documents, exhibits and schedules. The Company confirms that, except for the
investment in the Securities as set forth in this Agreement, the Investor has
not made any commitment or promise or has any other obligation to provide any
financing to the Company or otherwise.

     

    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 (provided the sender receives a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section 6.3 prior to 6:30 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 6.3 on a day that is not a Trading Day or later than
6:30 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 (with next day delivery specified), 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:

     

    
      	
              If
      to the Company:

            	
              InsPro
      Technologies Corporation

            
	 
      	
              150
      N. Radnor-Chester Road, Radnor, PA 19087

            
	 
      	
              Facsimile:
      (484) 654-2212

            
	 
      	
              Attn:
      Chief Financial Officer

            
	 
      	 
      
	
              With
      copies to:

            	
              InsPro
      Technologies Corporation

            
	 
      	
              150
      N. Radnor-Chester Road, Radnor, PA 19087

            
	 
      	
              Facsimile:
      (484) 654-2209

            
	 
      	
              Attn:
      Vice President and Controller

            

    

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    

    
      	 
      	
              Morgan,
      Lewis & Bockius LLP

            
	 
      	
              1701
      Market Street, Philadelphia, PA 19103

            
	 
      	
              Facsimile:
      (215) 963-5001

            
	 
      	
              Attn:
      James W. McKenzie, Jr., Esq.

            
	 
      	 
      
	
              If
      to the Investor:

            	
              To
      the address set forth under the Investor’s name

            
	 
      	
              on
      the signature pages 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 any Transaction Document may be
waived or amended except in a written instrument signed by the Company and the
Investor (or, with respect to Section 4.14 hereof, in lieu thereof the consent
of the Designated Investor), provided that any party shall have the right to
provide a waiver with regards to itself.  No waiver of any default
with respect to any provision, condition or requirement of any Transaction
Document 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 the Investor 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 investors who then hold the
Securities; provided that with respect to Section 4.14 hereof, such
consideration may be offered or paid solely to the Designated Investor and not
any other investors. No such amendment or waiver (unless given pursuant to the
foregoing provisos) shall be effective to the extent that it applies to less
than all of the holders of the Securities then outstanding.

     

    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.

     

    6.6           Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns.  The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Investor. The Investor may assign any or all
of its rights under this Agreement and the other Transaction Documents to any
Person to whom the Investor assigns or transfers any Securities, (other
than any rights under Section 4.14 hereof, which are not assignable or
transferable except by the Designated Investor to any affiliate of the
Designated Investor) provided such assignee or transferee agrees in writing to
be bound, with respect to the assigned or transferred Securities, by the
provisions hereof that apply to the “Investor,” in which event such assignee or
transferee shall be deemed to be the Investor hereunder with respect to such
assigned rights.

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

     

    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 as otherwise set forth in Section 4.7 (as to each Investor
Party).

     

    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
Delaware, 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 Delaware Courts. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the Delaware 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 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 Delaware 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 out-of-pocket attorneys’ fees and other reasonable
out-of-pocket costs and expenses incurred with the investigation, preparation
and prosecution of such Proceeding.

     

    6.9           Survival.  The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Securities.  The Investor
shall be responsible only for its own representations, warranties, agreements
and covenants hereunder.

     

    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.

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

     

    6.12         Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever
the Investor 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 the Investor 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 customary and reasonable indemnity, if requested. 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 parties hereto 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 the defense that a remedy at law would be adequate.  The
Company therefore agrees that the Investor shall be entitled to specific
performance and temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or
any other type of security.

     

    6.15         Payment Set
Aside. To the extent that the Company makes a payment or payments to
the Investor pursuant to any Transaction Document or the Investor
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.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    6.16     
   Delivery of
Securities.  Notwithstanding anything contained in this
Agreement or any other Transaction Document to the contrary, unless otherwise
directed in writing by the Investor,
the Company shall, and shall cause its agents and representatives to, deliver
all of the Investor’s Securities issued pursuant to this Agreement (and all
securities which are issuable to the Investor pursuant to the terms of this
Agreement or any other Transaction Document) to the address for delivery of
Securities set forth on the Investor’s signature page to this Agreement, and
copies of the certificates representing such securities shall be sent to the
Investor to the address of the Investor as set forth on the Investor’s signature
page to this Agreement.

     

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

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES FOLLOW]

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Note Conversion Agreement as of
the date first written above.

     

    
      
        
          
            
              
                
                  	
                          InsPro
      Technologies Corporation

                        
	 
      	 
      
	
                          By:

                        	
                          /s/
      Anthony R. Verdi  

                        
	Name: 
      Anthony
      R. Verdi
	Title:   
      Acting
      Chief Executive Officer, Chief
	
                                       
      Operating Officer and Chief Financial

                        
	
                                      
      Officer

                        

                

              

            

          

        

      

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES FOR THE INVESTOR FOLLOW]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Note Conversion Agreement as of
the date first written above.

     

    
      
        
          	
                  The
      Co-Investment Fund II, L.P.

                
	 
      
	
                  By:  Co-Invest
      Management II, L.P., its General Partner

                
	
                  By:  Co-Invest
      II Capital Partners, Inc., its General Partner

                
	 
      
	
                  By:

                	/s/
      Brian Adamsky  
	
                  Name:  Brian
      Adamsky

                
	
                  Title:   
      CFO & Treasurer

                
	
                  Conversion
      Amount and Units Acquired at the Closing:

                
	
                  $2,392,134
      Conversion Amount – 797,378 Units Acquired

                
	 
      
	
                  Tax
      ID No.: 20-3863585

                
	 
      
	
                  ADDRESS
      FOR NOTICE

                
	 
      
	
                  c/o
      Cross Atlantic Capital Partners

                
	
                  Five
      Radnor Corporate Center, Suite 555

                
	
                  Radnor,
      PA 19087

                
	
                  Attention:
      Brian Adamsky

                
	
                  Facsimile
      No.:  610-971-2062

                
	
                  *E-mail:  badamsky@xacp.comUnassociated Document

    EXECUTION
VERSION

    

    REGISTRATION
RIGHTS AGREEMENT

     

    This
Registration Rights Agreement (this “Agreement”) is made and
entered into as of December 22, 2010, by and between InsPro Technologies
Corporation, a Delaware corporation (the “Company”), and The
Co-Investment Fund II, L.P. (the “Investor”).

     

    This
Agreement is made pursuant to the Note Conversion Agreement, dated as of the
date hereof, between the Company and the Investor (the “Note Conversion
Agreement”).

     

    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 Investor hereby agree as follows, with the
intent to be legally bound hereby:

     

    1.           Definitions.  Capitalized
terms used and not otherwise defined herein that are defined in the Note
Conversion Agreement shall have the meanings given such terms in the Note
Conversion Agreement.  As used in this Agreement, the following terms
shall have the respective meanings set forth in this Section 1:

     

    “Common Stock” means the
common stock, par value $0.001 per share, of the Company.

     

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

     

    “Demand Notice” has the
meaning set forth in Section 2(a) of this Agreement.

     

    “Effective Date” means the
date that the Registration Statement filed pursuant to Section 2(a), 2(b) or
2(c) of this Agreement is first declared effective by the
Commission.

     

    “Effectiveness Date” means:
(a) with respect to the initial Registration Statement required to be filed
under Section 2(a) to cover the resale by the Holders of the Registrable
Securities the 60th calendar day after the Filing Date (or the 120th calendar
day after the Filing Date in the event that such Registration Statement is
subject to review by the Commission) and (b) with respect to any additional
Registration Statements that may be required pursuant to Section 2(b) or 2(c)
hereof, the 90th calendar day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section (or the 150th calendar day after such
date in the event that such Registration Statement is subject to review by the
Commission).

     

    “Effectiveness Period” shall
have the meaning set forth in Section 2(a).

     

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

     

    “Excluded Registration” means
(i) a registration relating solely to the sale of securities to employees of the
Company or a subsidiary of the Company pursuant to a stock option, stock
purchase, or similar plan or (ii) a registration relating to a Rule 145
transaction.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    “Filing Date” means, with
respect to the initial Registration Statement required to be filed to cover the
resale by the Holders of the Registrable Securities, 30 days following the
receipt of a Demand Notice.

     

    “Holder” or “Holders” means the Investor,
or any transferee or assignee of any Registrable Securities, to whom the
Investor assigns its rights under this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with the Note Conversion
Agreement and any transferee or assignee thereof to whom a transferee or
assignee of any Registrable Securities assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with the Note Conversion Agreement.

     

    “Indemnified Party” shall have
the meaning set forth in Section 5(c).

     

    “Indemnifying Party” shall
have the meaning set forth in Section 5(c).

     

    “Losses” shall have the
meaning set forth in Section 5(a).

     

    "Preferred Stock" means shares
of Series B Convertible Preferred Stock, $0.001 par value per share, of the
Company.

     

    “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.

     

    “Prospectus” means the
prospectus included in a Registration Statement (including, without limitation,
a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement, and all
other amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.

     

    “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to Rule 415 and the declaration of effectiveness of such Registration
Statement(s) by the Commission.

     

    “Registrable Securities” means
(i) the Shares, (ii) the Conversion Shares (iii) the Warrant Shares and (iv) any
securities issued or issuable with respect to the securities referenced in (i),
(ii), or (iii) above, including, without limitation, as a result of any stock
dividend, stock split or other distribution, recapitalization, merger,
consolidation, reorganization, exchange or similar event or otherwise (without
regard to any limitations on exercises of the Warrants).

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    “Registration Statement” means
the initial registration statement required to be filed under the Securities Act
in accordance with Section 2(a) and any additional registration statement(s)
required to be filed under Sections 2(b) or 2(c), including (in each case) the
Prospectus, amendments and supplements to such registration statements or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statements.

     

    “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.

     

    “Rule 415” means Rule 415
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.

     

    “Rule 424” means Rule 424
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.

     

    “Securities Act” means the
Securities Act of 1933, as amended.

     

    “Shares” means the shares of
Preferred Stock issued or issuable to the Investor by the Company pursuant to
the Note Conversion Agreement.

     

    “Warrants” means the warrants
issued or issuable to the Investor pursuant to the Note Conversion
Agreement.

     

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

     

    2.           Demand
Registration.

     

    (a)             If
at any time after the date of this Agreement the Company receives a request from
a Holder of Registrable Securities that the Company file a Registration
Statement on Form S-1 covering the resale of the Registrable Securities held by
such Holder (a "Demand
Notice"), then the Company shall (i) within five (5) days after the date
it receives the Demand Notice, give notice thereof to all other Holders and (ii)
as soon as reasonably practicable, but in no event later than the Filing Date,
file with the Commission a Registration Statement on Form S-1 covering the
resale of all Registrable Securities of the Holder that provided the Demand
Notice and any additional Registrable Securities requested by the other Holders
to be included therein, as specified by each such other Holder within twenty
(20) days after such Holder has received notice from the Company pursuant to
clause (i); provided
that such Registration Statement need not include Registrable Securities
already covered by an existing and effective Registration Statement The
Registration Statement shall be for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement) the “Plan of Distribution”
attached hereto as Annex
A.  The Company shall use its reasonable best efforts to cause
the Registration Statement to be declared effective under the Securities Act as
soon as practicable but, in any event, no later than the Effectiveness Date, and
shall use its reasonable best efforts to keep the Registration Statement
effective under the Securities Act until the date when all Registrable
Securities covered by the Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144(b)(i) promulgated under the
Securities Act (the “Effectiveness
Period”).

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    (b)             If
for any reason the Commission does not permit all of the Registrable Securities
requested by a Holder to be included in the Registration Statement filed
pursuant to Section 2(a), or for any other reason any such Registrable
Securities are not permitted by the Commission to be included on a Registration
Statement filed under this Agreement, then the Company shall prepare and file as
soon as possible after the date on which such filing may be made, an additional
Registration Statement covering the resale of all of the Registrable Securities
requested by Holder not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis at the
market pursuant to Rule 415 or otherwise as may be acceptable to a Holder whose
Registrable Securities were not registered for resale. Each such Registration
Statement shall contain (except if otherwise required pursuant to written
comments received from the Commission upon a review of such Registration
Statement) the “Plan of Distribution” attached hereto as Annex A. The Company
shall use its reasonable best efforts to cause each such Registration Statement
to be declared effective under the Securities Act as soon as possible but, in
any event, no later than its Effectiveness Date, and shall use its reasonable
best efforts to keep such Registration Statement effective under the Securities
Act during the entire Effectiveness Period.

     

    (c)             If:
(i) a Registration Statement covering all of the Registrable Securities required
to be covered thereby is not filed by the Company with the Commission on or
prior to the Filing Date (or the applicable filing date if the Registration
Statement is not the initial Registration Statement required to be filed under
Section 2(a)), (ii) a Registration Statement covering all of the Registrable
Securities is not declared effective by the Commission on or prior to its
required Effectiveness Date (it being understood that if the Company shall not
have filed a “final” prospectus for the Registration Statement with the SEC
under Rule 424(b) in accordance with Section 2(f) below (whether or not such a
prospectus is technically required by such rule), the Company shall not be
deemed to have satisfied this clause (ii)), (iii) the Company fails to file a
request for the acceleration of the Effectiveness Date of the applicable
Registration Statement as required by Section 3(c), (iv) there is a suspension
or delisting of the Company’s Common Stock (or the Company fails to timely list
all the Registrable Securities) on its principal trading market or exchange, (v)
after its Effective Date, other than during an Allowable Grace Period (as
defined below), such Registration Statement ceases to be effective and available
for use by the Holders as to any Registrable Securities to which it is required
to cover at any time prior to the expiration of its Effectiveness Period for up
to no more than 3 consecutive Trading Days (or 20 Trading Days in any 12 month
period in the aggregate) (any such failure or breach being referred to as an
“Event,” and for purposes of clauses
(i)-(iv), on the date on which such Event occurs, or for purposes of clause (v),
the date on which the Allowable Grace Period or other specified period is
exceeded, being referred to as “Event Date”), then, in
addition to any other rights available to the Holders under this Agreement or
under applicable law: (x) on each such Event Date the Company shall pay to each
Holder an amount in cash, as partial damages and not as a penalty, equal to 1.5%
of the aggregate Investment Amount paid by such Holder pursuant to the Note
Conversion Agreement; and (y) on each 30-day anniversary of each such Event Date
(if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to each Holder an amount in
cash, as partial damages and not as a penalty, equal to 1.5% of the aggregate
Investment Amount paid by such Holder pursuant to the Note Conversion Agreement.
The partial damages pursuant to the terms hereof shall apply on a pro rata basis
for any portion of a month prior to the cure of an Event. Notwithstanding the
foregoing, in no event shall the partial damages under this Section 2(d) exceed
an amount equal to 20% of the aggregate Investment Amounts.

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    (d)             Notwithstanding
anything to the contrary contained in this Agreement, in the event the staff of
the Commission (the “Staff”) or the Commission
requires any Holder seeking to sell securities under a Registration
Statement filed pursuant to this Agreement to be specifically identified as
an “underwriter” in order to permit such Registration Statement to
become effective, and such Holder does not consent to being so named as an
underwriter in such Registration Statement, then in each such case, the
Company shall reduce the total number of Registrable Securities to be
registered on behalf of such Holder, until such time as the Staff
or the Commission does not require such identification or until such Holder
accepts such identification and the manner thereof. Any reduction pursuant
to this paragraph will first reduce all Registrable Securities other than
those issued pursuant to the Note Conversion Agreement and in the event of any
reduction pursuant to this paragraph, no Holder shall have any claim against the
Company as a result of such reduction and any Event or other delay or breach of
this Agreement occurring primarily due to such action by the Staff or the
Commission and any such relating reduction shall not require the Company to pay
any partial damages pursuant to Section 2(d) hereof or otherwise provide the
basis for any claim by any Holder against the Company pursuant to the
Transaction Documents (it being understood that the foregoing does not
constitute a waiver of Section 3.2(f) of the Note Conversion Agreement by any
Holder or the obligations of the Company under this paragraph and elsewhere in
relation thereto). In the event of any reduction in Registrable
Securities pursuant to this paragraph, an affected Holder shall have the
right to require, upon delivery of a written request to the Company signed by
the Holder, the Company to file a registration statement within 30 days of such
request (subject to any restrictions imposed by Rule 415 or required by
the Staff or the Commission) for re-sale by such Holder in a manner
acceptable to such Holder, and the Company shall following such
request cause to be and keep effective such registration statement in the
same manner as otherwise contemplated in this Agreement
for registration statements hereunder, in each case until such time as: (i)
all Registrable Securities held by such Holder have been registered
pursuant to an effective Registration Statement in a manner acceptable to such
Holder or (ii) the Registrable Securities may be resold by such
Holder without restriction (including volume limitations) pursuant to Rule
144(b)(i) of the Securities Act (taking account of any Staff position with
respect to “affiliate” status) or (iii) the Holder agrees to be named as an
underwriter in any such Registration Statement in a manner acceptable to Holder
as to all Registrable Securities held by such Holder and that have not
theretofore been included in a Registration Statement under this Agreement (it
being understood that the special demand right under this sentence may be
exercised by a Holder multiple times and with respect to limited amounts of
Registrable Securities in order to permit the re-sale thereof by such Holder as
contemplated above).

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    (e)             In
the event that Form S-1 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall use reasonable best efforts
to (i) register the resale of the Registrable Securities on another appropriate
form reasonably acceptable to the Holders and (ii) undertake to register the
Registrable Securities on Form S-1 as soon as such form is available, provided
that the Company shall use reasonable best efforts to maintain the effectiveness
of the Registration Statement then in effect until such time as a Registration
Statement on Form S-1 covering the Registrable Securities has been declared
effective by the Commission. In the event the Company becomes eligible to
register the Registrable Securities on Form S-3, the Company shall use
reasonable best efforts to promptly register the Registrable Securities on Form
S-3, provided that the Company shall use reasonable best efforts to maintain the
effectiveness of the Registration Statement(s) then in effect until such time as
a Registration Statement on Form S-3 covering the Registrable Securities has
been declared effective by the Commission.

     

    (f)             By
5:30 p.m. on the Trading Day immediately following the Effective Date of each
Registration Statement, the Company shall file with the Commission in accordance
with Rule 424 under the Securities Act the final prospectus to be used in
connection with sales pursuant to such Registration Statement.

     

    3.           Company
Registration.

     

    (a)      
     If the Company proposes to register (including for
this purpose, a registration effected by the Company for stockholders other than
the Holders), any of its securities under the Securities Act in connection with
the offering of such securities for cash (other than an Excluded Registration),
the Company shall, at such time, promptly give each Holder notice of the
proposed registration. Upon the request of each Holder given within twenty (20)
days after such notice is given by the Company, the Company shall, subject to
the provisions of Section 3(b), cause to be registered all of the Registrable
Securities that each such holder has requested be included in such registration.
The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 3 before the effective date of such
registration, whether or not any Holder has elected to include Registrable
Securities in such registration.  The expenses of such withdrawn
registration shall be borne by the Company.

    

    (b)           
If a registration under Section 3(a) involves an underwritten offering by the
Company, the Company shall not be required to include any Holder's Registrable
Securities in such underwriting unless the Holders accept the terms of the
underwriting as agreed upon between the Company and its underwriters, and then
only in such quantity as the underwriters determine will not jeopardize the
success of the offering by the Company. If the total number of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the number of securities to be sold (other than by the
Company) that the underwriters determine is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters and the Company determine will not jeopardize the success of the
offering. If the underwriters determine that less than all of the Registrable
Securities requested to be registered can be included in such offering, then the
Registrable Securities that are included in such offering shall be allocated
among the selling Holders in proportion (as nearly as practicable) to the number
of Registrable Securities owned by each selling Holder or in such other
proportions as shall mutually be agreed to by all such selling
Holders.

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    

    4.           Registration
Procedures

     

    In
connection with the Company’s registration obligations hereunder, the Company
shall:

     

    (a)             Not
less than ten (10) Trading Days prior to the filing of a Registration Statement
and not less than five (5) Trading Days prior to the filing of any related
Prospectus or any amendment or supplement thereto (except for any amendment or
supplement thereto related to the filing of an Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or
successor reports), the Company shall furnish to the Holders copies of such
document, as proposed to be filed in substantially final form. The Company shall
(A) permit each Holder to review and comment upon (i) each Registration
Statement at least five (5) Trading Days prior to its filing with the
Commission, provided that such comments are received by the Company no later
than three (3) Trading Days after providing such Registration Statement for
review, and (ii) all amendments and supplements to all Registration Statements
(except for any amendment or supplement thereto related to the filing of an
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and any similar or successor reports) within a reasonable number of
days prior to their filing with the Commission, provided that such comments are
received by the Company no later than three (3) Trading Days after providing
such amendment or supplement for review, and (B) shall consider all such
reasonable comments in good faith.

     

    (b)           
(i)  Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement continuously effective as to the applicable Registrable Securities for
its Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible to any comments received from the
Commission with respect to each Registration Statement or any amendment thereto
and, as promptly as reasonably possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to such
Registration Statement that pertain to the Holders as a Selling Stockholder or
to the Plan of Distribution, but would not result in the disclosure to the
Holders of material, non-public information concerning the Company or any of its
subsidiaries; and (iv) comply in all material respects with the provisions of
the Securities Act and the Exchange Act with respect to the Registration
Statements and the disposition of all Registrable Securities covered by each
Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 4(b)) by reason of the Company filing a
report on Form 10-Q or Form 10-K or any analogous report under the Exchange Act,
the Company shall have incorporated such report by reference into such
Registration Statement, if applicable, or shall file such amendments or
supplements with the Commission on the same day on which the Exchange Act report
is filed, if practicable.  The Company shall ensure that each
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein (in the case of prospectuses, in the
light of the circumstances in which they were made) not
misleading.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

     

    (c)             Notify
the Holders' Counsel (which may occur electronically and any other notifications
or documents required to be provided to a Holder or any other party hereunder
may be provided electronically pursuant to the notice provisions contained
herein) as promptly as reasonably possible and (if requested by any such Person)
confirm such notice in writing no later than one three (3) Trading Days
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed or
is filed; (B) when the Commission notifies the Company whether there will be a
“review” of a Registration Statement or post-effective amendment and whenever
the Commission comments in writing on such Registration Statement or
post-effective amendment (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders, but not
information which the Company believes in good faith would constitute material,
non-public information); and (C) with respect to each Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or for
additional information that pertains to the Holders as a Selling Stockholder or
to the Plan of Distribution; (iii) of the issuance by the Commission of any stop
order or other suspension of the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Company shall submit to the Commission, within two (2) Trading Days after the
date that the Company learns that no review of a particular Registration
Statement will be made by the Staff or the Commission or that such Staff has no
further comments on a particular Registration Statement (as the case may be);
provided that the financial information included in such Registration Statement
meets all applicable SEC requirements.

     

    (d)             Use
its reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any stop order or other suspension of the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest practicable moment and each Holder who holds Registrable Securities
being sold of the issuance of such order and the resolution thereof or its
receipt of actual notice of the initiation or threat of any proceeding for such
purpose.

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    (e)             Furnish
to each Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested by
such Person (including those previously furnished) promptly after the filing of
such documents with the Commission.

     

    (f)             Promptly
deliver to each Holder, without charge, as many copies of each Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request from time to time and
such other documents as such Holder may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by such
Holder.  The Company hereby consents to the use of such Prospectus and
each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.

     

    (g)             Prior
to any resale of Registrable Securities, use its reasonable best efforts to (i)
register or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of those specific jurisdictions within the United
States which the Holders may reasonably request from time to time in writing to
the Company, (ii) keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and (iii) do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statements; provided, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or subject the Company to any material tax in any such jurisdiction where it is
not then so subject. The Company shall promptly notify each Holder of the
receipt by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or Blue Sky laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.

     

    (h)             Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statements, which certificates shall be free, to
the extent permitted by the Note Conversion Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.

     

    (i)             Upon
the occurrence of any event contemplated by Section 4(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any Prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.

     

    (j)             Each
Holder agrees to furnish to the Company a completed Selling Questionnaire in the
form attached to this Agreement as Annex B (a “Selling Holder
Questionnaire”). The Company shall not be required to include the
Registrable Securities of a Holder in a Registration Statement and shall not be
required to pay any partial or other damages under Section 2(d) hereof to such
Holder who fails to furnish to the Company a fully completed Selling Holder
Questionnaire at least five (5) Trading Days prior to the Filing
Date).

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    (k)             If
requested by a Holder, the Company shall as soon as practicable after receipt of
notice from such Holder and subject to Section 3(p) hereof, use reasonable best
efforts to (i) incorporate in a prospectus supplement or post-effective
amendment such information as a Holder reasonably requests to be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable Securities to be
sold in such offering; (ii) make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if reasonably
requested by a Holder holding any Registrable Securities.

     

    (l)             The
Company shall use its reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.

     

    (m)            The
Company shall otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission in connection with any
registration hereunder.  Within one (1) Trading Day after a
Registration Statement which covers Registrable Securities is declared effective
by the Commission, the Company shall deliver, and shall cause legal counsel for
the Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Holders whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the Commission in a customary form.

     

    (p) 
          Notwithstanding
anything to the contrary herein (but subject to the last sentence of this
Section 4(p), at any time after the Effective Date of the initial Registration
Statement required to be filed hereunder pursuant to Section 2(a), the Company
may delay the disclosure of material, non-public information concerning the
Company the disclosure of which at the time is not, in the good faith
determination of the Board of Directors of the Company, in the best interest of
the Company and is not, in the opinion of Board of Directors of the Company,
after consultation with the Company’s counsel, otherwise required (a “Grace Period”); provided, that
the Company shall promptly (i) notify the Holders in writing of the existence of
material, non-public information giving rise to a Grace Period (provided that in
each notice the Company will not disclose the content of such material,
non-public information to the Holders) and the date on which the Grace Period
will begin, and (ii) notify the Holders in writing of the date on which the
Grace Period ends; and, provided that no Grace Period shall exceed thirty (30)
consecutive days and during any three hundred sixty five (365) day period such
Grace Periods shall not exceed an aggregate of sixty (60) days and the first day
of any Grace Period must be at least two (2) Trading Days after the last day of
any prior Grace Period (each, an “Allowable Grace Period”);
provided further, that no Allowable Grace Period may exist during the first
thirty (30) Trading Days after the Effective Date of the initial Registration
Statement required to be filed hereunder pursuant to Section 2(a). For purposes
of determining the length of a Grace Period above, the Grace Period shall begin
on and include the date the Holders receive the notice referred to in clause (i)
and shall end on and include the later of the date the Holders receive the
notice referred to in clause (ii) and the date referred to in such notice.
Notwithstanding anything to the contrary contained in this Section 4(p), the
Company shall cause its transfer agent to deliver shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Note Conversion
Agreement in connection with any sale of Registrable Securities with respect to
which such Holder has entered into a contract for sale, and delivered a copy of
the prospectus included as part of the applicable Registration Statement (to the
extent required under applicable securities laws), prior to such Holder’s
receipt of the notice of a Grace Period and for which such Holder has not yet
settled.

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    

    (q)    
       At the reasonable request of any
Holder, the Company shall use its reasonable best efforts to furnish to such
Holder, on the date of the effectiveness of the Registration Statement or any
additional registration statement required by the terms of this Agreement and
thereafter from time to time on such dates as a Holder may reasonably request
(i) a letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the Holders, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement or such
additional registration statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
Holders.

    

    (r)       
     The Company shall make available for inspection by
(i) any Holder, (ii) legal counsel to any Holder and (iii) one firm of
accountants or other agents retained by the Holders (collectively, the “Inspectors”), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company's officers,
directors and employees, and shall use its reasonable best efforts to cause its
counsel and the Company's independent certified public accountants to, supply
all information which may be necessary and any Inspector may reasonably request;
provided, however, that prior to inspection, each Inspector shall agree to hold
in strict confidence and shall not make any disclosure (except to the Investor)
or use of any Record or other information which the Company determines in good
faith to be confidential, pursuant to the terms of a Confidentiality Agreement
in form and substance reasonably satisfactory to the Company. Nothing herein
shall be deemed to limit the Holders' ability to sell Registrable Securities in
a manner which is otherwise consistent with applicable laws and
regulations.

    

    (s)         
   If requested by a Holder, the Company shall, within five days
of receipt of notice from such Holder, (i) incorporate in a prospectus
supplement or post-effective amendment such information as the Investor
reasonably requests to be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being offered or sold, the
purchase price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; (ii) make all required
filings of such prospectus supplement or post-effective amendment after being
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) supplement or make amendments to any
Registration Statement if reasonably requested by the Investor holding any
Registrable Securities.

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    

    (t)      
      The Company shall make generally available
to its security holders as soon as practical, but not later than 90 days after
the close of the period covered thereby, an earnings statement (in form
complying with, and in the manner provided by, the provisions of Rule 158 under
the 1933 Act) covering a twelve-month period beginning not later than the first
day of the Company's fiscal quarter next following the Effective Date of the
Registration Statement or any additional registration statement required by the
terms of this Agreement.

    

    5.           Registration
Expenses.  All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to a Registration
Statement.  The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement.  In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any audit and the fees
and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    6.           Indemnification.

     

    (a)             Indemnification by the
Company.  The Company shall, notwithstanding any termination of
this Agreement, indemnify and hold harmless each Holder, the officers,
directors, agents, investment advisors, partners, members, employees, agents and
representatives of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and officers, directors, agents, investment advisors, partners,
members, employees, agents and representatives of each such controlling Person
(each an “Indemnified
Person”), to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, judgments, fines,
penalties, charges, amounts paid in settlement, costs and expenses, joint or
several, (including, without limitation, reasonable out-of-pocket costs of
preparation and reasonable attorneys’ fees and expenses) (collectively, “Losses”), as incurred, arising
out of or relating to (i) any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto, in any preliminary
prospectus or in any filing made in connection with the qualification of the
offering under the securities or other Blue Sky laws of any jurisdiction in
which Registrable Securities are offered, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for
this purpose) or (2) in the case of an occurrence of an event of the type
specified in Section 4(c)(ii)-(v), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of an Advice or an amended or supplemented Prospectus, but only if and to the
extent that following the receipt of the Advice or the amended or supplemented
Prospectus the misstatement or omission giving rise to such Loss would have been
corrected and no grounds for such Loss would have existed; or (ii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement. The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.  Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of any of the Registrable Securities by any of
the Holders.

     

    (b)             Indemnification by
Holders. Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon: (x) such Holder’s failure to comply with the prospectus
delivery requirements of the Securities Act to the extent applicable or (y) any
untrue statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent that, (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement (it being understood that the Holder has approved
Annex A hereto for this purpose), such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (2) in the case of an occurrence of an
event of the type specified in Section 4(c)(ii)-(v), the use by such Holder of
an outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or  defective and prior to
the receipt by such Holder of an Advice or an amended or supplemented
Prospectus, but only if and to the extent that following the receipt of the
Advice or the amended or supplemented Prospectus the misstatement or omission
giving rise to such Loss would have been corrected and no grounds for such Loss
would have existed.  In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation. The indemnity agreement contained in this
Section 6(b) and the agreement with respect to contribution contained in Section
6(d) shall not apply to amounts paid in settlement of any Losses if such
settlement is effected without the prior written consent of the applicable
Holder, which consent shall not be unreasonably withheld or
delayed.

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    (c)           
Conduct of
Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

     

    An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party); provided
that the Indemnifying Party shall not be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties. The Indemnified Party shall reasonably cooperate with the Indemnifying
Party in connection with any negotiation or defense of any such action or Losses
by the Indemnifying Party and shall furnish to the Indemnifying Party all
information reasonably available to the Indemnified Party which relates to such
action or Losses. The Indemnifying Party shall keep the Indemnified Party
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Indemnifying Party shall not
be liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld.  No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld, effect any settlement
of any pending Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability on claims that are the subject matter of such
Proceeding.

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    All
reasonable out-of-pocket fees and expenses of the Indemnified Party (including
reasonable out-of-pocket fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Trading Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

     

    No Person
involved in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) in
connection with such sale shall be entitled to indemnification from any Person
involved in such sale of Registrable Securities who is not guilty of fraudulent
misrepresentation.

     

    The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party against the Indemnifying Party
or others, and (ii) any liabilities the Indemnifying Party may be subject to
pursuant to the law.

     

    (d) 
          Contribution.  If
a claim for indemnification under Section 6(a) or 6(b) is unavailable to an
Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission.  The amount paid or payable by a party
as a result of any Losses shall be deemed to include, subject to the limitations
set forth in Section 6(c), any reasonable out-of-pocket attorneys’ fees or
expenses or other reasonable out-of-pocket fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its
terms.

     

    The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph.  Notwithstanding the provisions of this Section 6(d), (i)
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the net proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Holder has otherwise been required to pay,
or would otherwise be required to pay under Section 6(b), by reason of such
untrue or alleged untrue statement or omission or alleged omission; (ii) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6
hereof and (iii) no Person involved in the sale of Registrable Securities which
Person is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation.

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.

     

    7.           Reports Under the Exchange
Act. With a view to making available to the Holders the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the Commission that may at any time permit the Holders to sell securities of
the Company to the public without registration, the Company agrees to use
reasonable best efforts to:

     

    (a)             make
and keep public information available, as those terms are understood and defined
in Rule 144;

     

    (b)             file
with the Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company’s obligations under the Note Conversion
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and

     

    (c)             furnish
to each Holder so long as such Holder owns Registrable Securities, promptly upon
request, (i) a written statement by the Company, if true, that it has complied
with the reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company if such reports are
not publicly available via EDGAR, and (iii) such other information as may be
reasonably requested to permit the Holders to sell such securities pursuant to
Rule 144 without registration.

     

    8.           Miscellaneous.

     

    (a)             Remedies. In the
event of a breach by the Company or by a Holder, of any of their obligations
under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement (without the obligation to post a
bond or any other type of security).  The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    (b)             No Piggyback on
Registrations. Except as set forth on Schedule 8(b) attached hereto,
neither the Company nor any of its security holders (other than the Holders in
such capacity pursuant hereto) may include securities of the Company in a
Registration Statement required to be filed hereunder other than the Registrable
Securities, provided that no securities set forth on Schedule 8(b) may be
included in a Registration Statement if including any such securities would
adversely affect any of the Holders. The Company shall not after the date hereof
until the initial Effective Date enter into any agreement providing any such
right to any of its security holders.

     

    (c)             Compliance.  Each
Holder covenants and agrees that it will comply with any prospectus delivery
requirements of the Securities Act as applicable to it and otherwise comply with
all applicable securities laws in connection with sales of Registrable
Securities pursuant to the Registration Statement.

     

    (d)             Discontinued
Disposition.  Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in clauses (ii) through (v) of
Section 4(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the “Advice”) by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement. The Company may provide appropriate stop orders to enforce the
provisions of this paragraph. Notwithstanding anything to the contrary in this
Section 7(d), the Company shall cause its transfer agent to deliver shares of
Common Stock to a transferee of a Holder in accordance with the terms of the
Note Conversion Agreement in connection with any sale of Registrable Securities
with respect to which such Holder has entered into a contract for sale, and
delivered a copy of the prospectus included as part of the applicable
Registration Statement (to the extent required under applicable securities laws)
prior to such Holder’s receipt of a notice from the Company of the happening of
any event of the kind described in Section 4(c)(ii)-(v).

     

    (e)             Amendments and
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed by the Company and the Holders of
no less than a majority of the outstanding Registrable Securities; provided that
any party shall have the right to provide a waiver with regard to
itself.  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.

     

    (f)             Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing or via e-mail and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile or e-mail at the facsimile
telephone number or e-mail address, as applicable, specified in this Section
prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the Trading Day
after the date of transmission, if such notice or communication is delivered via
facsimile or e-mail at the facsimile telephone number or e-mail address, as
applicable, specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Trading Day following the date of mailing, if sent by nationally
recognized overnight courier service (with next day delivery specified), or (iv)
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:

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              If
      to the Company:

            	
                InsPro
      Technologies Corporation

            

    

    
      	
               
      

            	
              150
      N. Radnor-Chester Road, Radnor, PA
19087

            

    

    
      	
               
      

            	
              Facsimile:
      (484) 654-2209

            

    

    
      	
               
      

            	
              Attn:
      Vice President and Controller

            

    

    

    
      	
               
      

            	
              With
      a copy to:

            	
                Morgan,
      Lewis & Bockius LLP

            

    

    
      	
               
      

            	
              1701
      Market Street, Philadelphia, PA
19103

            

    

    
      	
               
      

            	
              Facsimile:
      (215) 963-5001

            

    

    
      	
               
      

            	
              Attn:
      James W. McKenzie, Jr., Esq.

            

    

     

    
      	
               
      

            	
              If
      to the Investor:

            	
                To the
      address, e-mail address or facsimile number set forth under the Investor’s
      

                name
      on
      the signature pages
hereof;

            

    

    
      
      

    

    

    
      If to any
other Person who is then the registered Holder:

    

     

    
      	
               
      

            	
              To
      the address, e-mail address or facsimile number of such Holder as it
      appears in the stock transfer books of the
  Company

            

    

     

    or such
other address, e-mail address or facsimile number as may be designated
hereafter, in the same manner, by such Person.

     

    (g)             Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and
shall inure to the benefit of each Holder. The Company may not assign its rights
or obligations hereunder without the prior written consent of each Holder. Each
Holder may assign their respective rights hereunder in the manner and to the
Persons as permitted under the Note Conversion Agreement.

     

    (h)             Execution and
Counterparts.  This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same
Agreement.  In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.  Each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof.  The
terms “including,” “includes,” “include” and words of
like import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found.

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    (i)             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
Delaware, 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 (whether brought
against a party hereto or its respective Affiliates, employees or agents) shall
be commenced exclusively in the state and federal courts sitting in the City of
Wilmington, State of Delaware, (the “Delaware Courts”). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware
Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, 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 Delaware 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 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 this Agreement, then the prevailing
party in such Proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

     

    (j)             Cumulative Remedies.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.

     

    (k)             Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction.  It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.

     

    (l)             Headings.  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

     

    (m)            Entire
Agreement.  This Agreement, the other Transaction Documents (as
defined in the Note Conversion Agreement), the schedules and exhibits attached
hereto and thereto and the instruments referenced herein and therein constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof.  There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and
therein.  This Agreement, the other Transaction Documents, the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and
thereof.

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

     

    (n)             Independent Nature of
Holders’ Obligations and Rights.  The obligations of each
Holder under this Agreement and the other Transaction Documents are several and
not joint with the obligations of any other Holder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder under this Agreement or any other Transaction Document. Nothing contained
herein or in any other Transaction Document, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of group or
entity, or create a presumption that the Holders are in any way acting in
concert or as a group or entity with respect to such obligations or the
transactions contemplated by the Transaction Documents or any matters, and the
Company acknowledges that the Holders are not acting in concert or as a group
with respect to such obligations or the transactions contemplated by this
Agreement or any of the other the Transaction Documents. Each Holder shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose. The use of a
single agreement with respect to the obligations of the Company contained herein
was solely in the control of the Company, not the action or decision of any
Holder, and was done solely for the convenience of the Company and not because
it was required or requested to do so by any Holder.

     

    (o)        
   No
Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.

    

    (p)      
     No Third Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person, other
than the Persons referred to in Section 5 hereof.

    

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

    

    [signature page
follows]

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.

     

    
      
        
          
            	
                    INSPRO
      TECHNOLOGIES CORPORATION

                  
	 
      	 
      
	
                    By:

                  	/s/
      Anthony
      R. Verdi
	
                    Name: 

                  	
                    Anthony
      R. Verdi

                  
	
                    Title:

                  	
                    Acting
      Chief Executive Officer, Chief Operating

                  
	 
      	
                    Officer
      and Chief Financial
Officer

                  

          

        

      

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES OF INVESTOR TO FOLLOW]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	THE
      CO-INVESTMENT FUND II, L.P.	 
	 	 
	
                                    By:  Co-Invest
      Management II, L.P., its General Partner

                                  	 
	
                                    By:  Co-Invest
      II Capital Partners, Inc., its General Partner

                                  	 
	 
      	 
      	 
	
                                    By:

                                  	/s/
      Brian
      Adamsky	 
	
                                    Name: 

                                  	
                                    Brian
      Adamsky

                                  	 
	
                                    Title:

                                  	
                                    CFO
      & Treasurer

                                  	 
	 
      	 
      	 
	
                                    Address
      for Notice:

                                  	 
	 	 
	
                                    c/o
      Cross Atlantic Capital Partners

                                  	 
	
                                    Five
      Radnor Corporate Center, Suite 555

                                  	 
	
                                    Radnor,
      PA 19087

                                  	 
	
                                    Attention:
      Brian Adamsky

                                  	 
	
                                    Facsimile
      No.:  610-971-2062

                                  	 
	
                                    *E-mail:  badamsky@xacp.com

                                  	 

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    By
providing an e-mail address, the party listed above hereby consents to
electronic delivery of the documents and notices required to be delivered
pursuant to this Agreement.

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