Document:

Exhibit
10.10

 

Agreement Number:                

 

AGREEMENT

 

between

 

Fiserv Solutions, Inc.

255 Fiserv Drive

Brookfield,
WI  53045-5815

 

and

 

Coastal Carolina
National Bank, In organization

2305 North Oak
Street

Myrtle Beach, SC

 

 

 

 

Master 2008

 

 

AMENDMENT
NO. 1 TO AGREEMENT

 

AMENDMENT NO. 1 dated as of July 21, 2008 (“Amendment”)
between Fiserv Solutions, Inc., a Wisconsin corporation (“Fiserv”), and
Coastal Carolina National Bank, a proposed National Bank, with offices located
at 2305 North Oak Street, Myrtle Beach, SC (“Client”), to the Agreement dated July 21,
2008 between Fiserv and Client (as amended through the date hereof, the “Agreement”).

 

WHEREAS, Fiserv and Client entered into the Agreement
for Fiserv’s provision of outsource services to Client; and

 

WHEREAS, Fiserv and Client wish to amend the Agreement.

 

NOW, THEREFORE, Fiserv and Client hereby agree as
follows:

 

1.                                       Defined
Terms.  Unless otherwise defined
herein, capitalized terms used herein shall have the same meanings assigned
them in the Agreement.

 

2.                                       Special
Termination.  The following new Section 9(g) is
hereby added to the Agreement:

 

(g)  Special
Termination.  If Client does not receive all required regulatory
approvals to commence banking operations, or does not meet its initial capital
requirements, this Agreement shall be terminated upon written notice from
Client to Fiserv.  Client shall not be
required to pay termination fees to Fiserv; provided, however, that Client
shall compensate Fiserv for all fees, costs and other expenses (including
without limitation travel, out-of-pocket, telecommunication and third party
costs incurred by Fiserv) associated with Fiserv’s efforts to prepare for and
implement Client on the Fiserv Services.

 

3.                                       Amendment.  This Amendment is intended to be a
modification of the Agreement.  Except as
expressly modified herein, the Agreement shall remain in full force and
effect.  In the event of a conflict
between the terms of this Amendment and the Agreement, this Amendment shall
control.

 

IN WITNESS WHEREOF, the
parties have caused this Amendment to be executed by their duly authorized
representatives as of the date indicated below.

 

	
  For Client:

  	
   

  	
  For Fiserv:

  
	
   

  	
   

  	
   

  
	
  Coastal
  Carolina National Bank, In Organization

  	
   

  	
  FISERV SOLUTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
  Ms. Holly
  Schreiber

  	
   

  	
  Name:

  	
  Jerry C. Tull

  
	
  Title:

  	
  CFO

  	
   

  	
  Title:

  	
  EVP – ITI
  Outsourcing, Southeast Region

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
									

 

	
  Coastal Carolina
  National Bank, In Organization

  	
   

  

 

2

 

MASTER AGREEMENT

 

MASTER AGREEMENT (“Agreement”) dated as of July 21,
2008 (“Effective Date”)
between Fiserv Solutions, Inc., a Wisconsin corporation with offices
located at 5335 Triangle Parkway, Norcross, GA 
30092 (“Fiserv”),
and Coastal Carolina National Bank, In organization, a Proposed National Bank
with offices located at 2305 North Oak Street, Myrtle Beach, SC (“Client”).

 

Fiserv and Client hereby
agree as follows:

 

1.  Fiserv Services.  Fiserv, itself and through its affiliates,
agrees to provide Client, and Client agrees to obtain from Fiserv the services
(“Services”) and products (“Products”) (collectively, “Fiserv Services”) described in the
attached Exhibits.  Exhibits attached as
of the Effective Date are listed below. 
The Exhibits set forth specific terms and conditions applicable to the
Services and/or Products.  The parties
may add services and products to this Agreement by signing an appropriate Exhibit to
this Agreement.

 

Exhibit A
– Account Processing Services

Exhibit B – Item
Processing Services

Exhibit C – Signature
Debit Services

Exhibit D – Core
Provider Questionnaire

Exhibit E – Final
Proposal

Exhibit H – Disaster
Recovery Services

Exhibit O –
E-Commerce Services

Exhibit Z –  Item Processing Clearing Services

 

2.  Fees for Fiserv Services.  (a) General.  Client agrees to pay Fiserv all of the
following (collectively, “Fees”):

 

(i) Estimated fees
(unless otherwise set forth in the Exhibits) for Fiserv Services for the
following month as specified in the Exhibits. Fiserv shall timely reconcile
estimated fees paid by Client for Fiserv Services against the fees and charges
actually due Fiserv based on Client’s actual use of Fiserv Services for such
month.  Fiserv shall either issue a
credit to Client or provide Client with an invoice for any additional fees or
other charges owed.  Fiserv may change
the estimated amount of fees billed as appropriate to reflect changes in actual
use of Fiserv Services.

 

(ii) Out-of-pocket
and other additional charges for the month pursuant to Section 2(b).

 

(iii) Taxes as
defined in Section 2(c).

 

Fees
may be increased from time to time as set forth in the Exhibits.  Fiserv may increase its fees in excess of
amounts listed in the Exhibits in the event that Fiserv implements major system
enhancements to comply with changes in law, government regulation, or industry
practices.

 

(b) Additional
Charges.  Fees for out-of-pocket
expenses, such as telephone, microfiche, courier, and other charges reasonably
incurred by Fiserv for goods or services obtained by Fiserv on Client’s behalf
shall be billed to Client at cost plus the applicable Fiserv administrative
fee, if any, set forth in the Exhibits. 
Such out-of-pocket expenses may be changed from time to time upon
notification of a fee change from a vendor/provider, and, as applicable, shall
be incurred in accordance with Fiserv’s then-current corporate travel and
expense policy.

 

(c) Taxes.  Fiserv shall add to each invoice any sales,
use, excise, value added, and other taxes and duties however designated that
are levied by any taxing authority relating to the Fiserv Services (“Taxes”).  In no event shall Taxes include taxes based
upon Fiserv’s net income.

 

(d) Payment Terms.  Fees are due and payable monthly upon receipt
of invoice.  Client shall pay Fiserv
through the Automated Clearing House unless otherwise set forth in the
Exhibits.  In the event any invoiced
amounts remain unpaid 30 days after payment is due, Client shall pay a monthly
late charge of the lesser of 1.5% or the highest amount allowed by law.  Client shall neither make nor assert any
right of deduction or set-off from Fees invoiced for Fiserv Services, except as
specifically provided herein.  If Client
disputes any invoice item, Client shall provide written notice to Fiserv within
15 days of the invoice date specifying in detail the nature of the
disagreement.

 

3.  Confidentiality and Ownership.  (a) Definitions.

 

(i) “Client Information” means the following
types of information provided to or accessed by Fiserv in connection with this
Agreement:  (A) confidential plans,
information, and other proprietary material of Client that is marked with a
restrictive legend, or if not so marked or is disclosed orally, is identified
as confidential at the time of disclosure (and written confirmation thereof is
promptly provided to Fiserv); (B) customer lists and any information and
data concerning the business and financial records of Client’s customers
prepared by or for Fiserv, or used in any way by Fiserv in connection with the
provision of Fiserv Services (whether or not any such information is marked
with a restrictive legend); and (C) any information and data received from
Client that Fiserv reasonably ought to know is 

 

3

 

confidential (whether or
not any such information is marked with a restrictive legend).

 

(ii) “Fiserv Information” means the following
types of information provided to or accessed by Client in connection with this
Agreement: (A) confidential plans, information, research, development,
trade secrets, business affairs (including that of any Fiserv client, supplier,
or affiliate), and other proprietary material of Fiserv that is marked with a
restrictive legend, or if not so marked or is disclosed orally, is identified
as confidential at the time of disclosure (and written confirmation thereof is
promptly provided to Client); (B) Fiserv’s information security plans,
business continuity plans, proprietary computer programs (including custom
software modifications, software documentation, databases, and training aids,
and all data, code, techniques, algorithms, methods, logic, architecture, and
designs embodied or incorporated therein), all copyrights, patent rights,
trademark rights and other proprietary rights which form part of the Fiserv
Services, and the terms and conditions of this Agreement (whether or not any
such information is marked with a restrictive legend); and (C) any
information and data received from Fiserv that Client reasonably ought to know
is confidential (whether or not any such information is marked with a restrictive
legend).

 

(iii) “Information” means Client Information
and Fiserv Information.  No obligation of
confidentiality applies to any Information that the receiving party (“Recipient”) (A) already possesses
without obligation of confidentiality; (B) develops independently; or (C) rightfully
receives without obligation of confidentiality from a third party.  No obligation of confidentiality applies to
any Information that is, or becomes, publicly available without breach of this
Agreement.

 

(b) Obligations.  Recipient agrees to hold as confidential all
Information it receives from the disclosing party (“Discloser”).  All Information shall remain the property of
Discloser or its suppliers and licensors. 
Recipient will use the same care and discretion to avoid disclosure of
Information as it uses with its own similar information that it does not wish
disclosed, but in no event less than a reasonable standard of care.  Recipient may only use Information in
accordance with the purpose of this Agreement. 
Fiserv specifically agrees that it will not use or disclose any
non-public personal information about Client’s customers in any manner
prohibited by Title V of the Gramm-Leach-Bliley Act or the regulations issued
thereunder (“GLB”).  Recipient may disclose Information to: (i) its
employees and employees of permitted subcontractors and affiliates who have a
need to know; and (ii) any other party with Discloser’s prior written
consent.  Before disclosure to any of the
above parties, Recipient will have a written agreement with such party
sufficient to require that party to treat Information in accordance with this
Agreement.  Recipient may disclose
Information to the extent required by law. 
However, Recipient agrees to give Discloser prompt notice, if legally
permissible, so that Discloser may seek a protective order.  At Recipient’s option, Information will be
returned to Discloser or destroyed (except as may be contained in back-up files
created in the ordinary course of business that are recycled in the ordinary course
of business over a 30- to 90-day period or such longer period as required by
applicable law) at the termination or expiration of this Agreement and, upon
Discloser’s request, Recipient will certify to Discloser in writing that it has
complied with the requirements of this sentence.  The provisions of this sub-section survive
any termination or expiration of this Agreement.

 

(c) Residuals.  Nothing contained in this Agreement shall
restrict Recipient from the use in its business of any ideas, concepts,
know-how, or techniques contained in Information that are related to Recipient’s
business activities and retained in the unaided memory of Recipient’s
employees.

 

(d) Fiserv System
and Client Systems.  Fiserv systems
used in the delivery of Services (the “Fiserv
System”) and Client’s networks and computer systems (“Client Systems”) contain information
and computer software that are proprietary and confidential information of the
respective parties, their suppliers, and licensors.  Each party agrees not to attempt to
circumvent the devices employed by the other party to prevent unauthorized
access thereto, including, but not limited to, alterations, decompiling,
disassembling, modifications, and reverse engineering thereof.

 

(e)  Ownership.  With the exception of Client Information, all
information, reports, studies, object or source code, flow charts, diagrams,
and other tangible or intangible material of any nature whatsoever produced by
Fiserv or jointly with Client or by any of their employees or agents, through
or as a result of or related to any of the Services performed or Products
provided hereunder, shall be the sole and exclusive property of Fiserv or its
corporate parent.  Client shall execute
documents reasonably required by Fiserv to perfect such rights.  Client shall be entitled to use all such work
product in accordance with the terms and conditions of this Agreement.

 

(f)  Restrictions.  Without limiting any other obligation set
forth in this Section 3, Client shall not use, transfer, distribute,
interface, integrate, or dispose of any information or content contained in
Fiserv Services in any manner that could compete with the business of
Fiserv.  Client shall not: (i) use
the Fiserv Services to provide services to third parties; or (ii) reproduce,
republish or offer any part of the Fiserv Services (or compilations based on
any part of the Fiserv Services) for sale or distribution in any form, over or
through

 

4

 

any medium, without the
prior written consent of Fiserv.  In like
manner, Fiserv shall not use, transfer, distribute, interface, integrate, or
dispose of any information or content contained in Client’s information in any
manner that could compete with the business of Client.  Fiserv shall not: (i) use the Client
information to provide services to third parties; or (ii) reproduce,
republish or offer any part of the Fiserv Services (or compilations based on
any part of the Client’s information) for sale or distribution in any form,
over or through any medium, without the prior written consent of Client.

 

4.  Information Security.  (a) General.  Fiserv has implemented and shall maintain
appropriate measures designed to meet the objectives of the applicable
guidelines establishing information security standards as adopted by any
federal regulatory agencies having jurisdiction over Client’s affairs (“Guidelines”). These measures include
appropriate disposal of consumer information as required, and taking
appropriate actions to address incidents of unauthorized access to Client’s
sensitive customer information, including notification to Client as soon as
possible of any such incident.  Without
limiting the foregoing, Fiserv’s information security program is designed to: (i) ensure
the security and confidentiality of customer information; (ii) protect
against any anticipated threats or hazards to the security or integrity of such
information; and (iii) protect against unauthorized access to or use of
such information that could result in substantial harm or inconvenience to any
customer.  Upon Client’s written request,
Fiserv shall provide Client with copies of any associated audit reports,
summaries of test results or equivalent measures taken by Fiserv to ensure that
its information security program meets the objectives of the Guidelines.

 

(b) Client
Requirements.  As mutually agreed and
at Client’s expense, Fiserv shall make commercially reasonable modifications to
its information security program to conform to Client’s information security
requirements, as they exist from time to time.

 

(c) Fiserv Plan.  Within 30 days of Client’s written request,
Fiserv shall provide to Client a summary copy of Fiserv’s written information
security plan, and thereafter upon Client’s request will provide updates on the
status of its information security plan.

 

(d)  Security
Testing.  Fiserv may use a third
party to provide monitoring, penetration and intrusion testing with respect to
certain Services.  Upon Client’s written
request, Fiserv agrees to provide Client with a copy of its most recent
security certification, if any, for the applicable Fiserv service center
providing such Services.

 

(e)  Client
Notification.  Client agrees that it
shall notify Fiserv as soon as possible upon becoming aware of any incident of
unauthorized access to any Information or the Fiserv System.

 

(f)  Data
Encryption.  Client agrees to comply
with Fiserv’s then-current data encryption policies and controls regarding
transmission to and from Fiserv of tapes, images, Client Files as defined in Section 6(a),
or other data in connection with the Fiserv Services (collectively, “Data”). 
If Client requests or requires Fiserv to send, transmit, or otherwise
deliver Data to Client or any third party in any manner not in compliance with
such policies and controls, then, notwithstanding any other provision of this
Agreement:  (i) Client understands
and accepts all risk of transmitting Data in an unencrypted or otherwise
noncompliant format; (ii) Client releases and discharges Fiserv and its
employees, officers, directors, agents, and affiliates from any and all
liability, damage, or other loss under this Agreement or otherwise
(collectively, “Loss”)
suffered by or through Client arising out of the transmission, destruction, or
loss of such Data, including without limitation any information security or
privacy breach related to such Data; and (iii) Client shall indemnify and
hold harmless Fiserv and its employees, officers, directors, agents, and
affiliates from any Loss suffered by any of them arising out of the
transmission, destruction, or loss of such Data, including without limitation
any information security or privacy breach related to such Data.

 

5.  Hiring and Employment. (a) Background
Checks.  Fiserv shall not knowingly
permit any Fiserv employee to have access to the premises, records or data of
Client when such employee: (i) uses drugs illegally; or (ii) has been
convicted of a crime in connection with a dishonest act or a breach of trust,
as set forth in Section 19 of the Federal Deposit Insurance Act, 12 U.S.C.
1829(a).  Consistent with Fiserv’s
employment practices, newly hired Fiserv employees: (x) as from 1996, are
required to pass a pre-employment criminal background check; and (y) as
from 1993, are required to pass a pre-employment drug screening.  Upon Client’s reasonable request and at its
expense, Fiserv agrees to perform additional reasonable background checks on
those of Fiserv’s employees who will have access to Client facilities or Client
Systems located at Client facilities. 
The results of all such background checks shall be retained solely by
Fiserv.

 

(b)  Equal
Employment.  Each party agrees that
it shall not discriminate against any employee or applicant for employment
because of race, creed, color, age, sex, national origin, marital status,
liability for service in the armed forces, disability due to veteran status,
status as veteran of the Vietnam era, or the handicapped, and it shall comply
with all applicable requirements of the Equal Opportunity Clause set forth in
Executive Order 11246, as amended, and its implementing instructions, as well
as the Rehabilitation Act of 

 

5

 

1973 and the Vietnam Era
Veterans’ Readjustment Assistance Act of 1974.

 

6.  Regulatory Agencies, Regulations and Legal
Requirements.  (a) Client
Files.  Records maintained and
produced for Client (“Client Files”)
may be subject to examination by such Federal, State, or other governmental
regulatory agencies as may have jurisdiction over Client’s business to the same
extent as such records would be subject if maintained by Client on its own
premises, and in any such event, if allowed by requesting authority, Fiserv
agrees to immediately notify Client of any such request.  Client agrees that Fiserv is authorized to
give all reports, summaries, or information contained in or derived from the
data or information in Fiserv’s possession relating to Client when formally
requested to do so by an authorized regulatory or government agency.  Client agrees to pay Fiserv its then-current
rates for all research work resulting from regulatory requests, government
agency requests, and legal process requests such as subpoena or search warrant,
whether issued during or after the term of this Agreement.

 

(b) Compliance
with Regulatory Requirements.  Client
agrees to comply with regulatory and legal requirements applicable to Client’s
receipt of Fiserv Services, which may include without limitation:

 

(i) submitting a copy of
this Agreement to the appropriate regulatory agencies prior to the date
Services commence;

(ii) providing
adequate notice to the appropriate regulatory agencies of the termination of
this Agreement or any material changes in Services;

(iii) retaining
records of its accounts as required by regulatory authorities;

(iv) obtaining and
maintaining, at its own expense, any Fidelity Bond required by any regulatory
or governmental agency; and

(v) Fiserv and
Client will maintain, at their own expense, such casualty and business
interruption insurance coverage for loss of records from fire, disaster, or
other causes, and taking such precautions regarding the same, as may be
required by regulatory authorities.

 

7.  Warranties and Indemnification. (a) By
Fiserv.

 

(i) Fiserv
represents and warrants that: (A) no contractual obligations exist that
would prevent Fiserv from entering into this Agreement; (B) Fiserv has the
requisite authority to execute, deliver, and perform Fiserv’s obligations under
this Agreement; (C) Services will conform to the specifications set forth
in the Exhibits; (D) Fiserv will perform Client’s work accurately provided
that Client supplies accurate data and information, and follows the procedures
described in all Fiserv documentation and notices; (E) Fiserv personnel
will exercise due care in provision of Services; (F) functionality
provided by the Fiserv System will enable Client to comply in all material
respects with Federal regulations generally applicable to Fiserv’s clients in
the industry in which the functionality is intended to be used; and (G) Fiserv
will comply with Federal regulations applicable to Fiserv’s performance of its
obligations under this Agreement.

(ii) Fiserv shall
defend and indemnify Client and hold it harmless against any and all amounts
payable by Client under any judgment, verdict, court order or settlement
entered or agreed in any third party claim or action that alleges that the
Fiserv System infringes a United States patent, copyright, or other proprietary
right of such third party (“Infringement
Claim”).  Client agrees to
notify Fiserv promptly of any Infringement Claim and grants Fiserv the sole
right to control the defense and disposition of all Infringement Claims.  Client shall provide Fiserv with reasonable
cooperation and assistance in the defense of any Infringement Claim. The
obligations set forth in this paragraph are Fiserv’s entire liability and
Client’s sole and exclusive remedy for any Infringement Claim.

 

THE WARRANTIES STATED
ABOVE AND IN THE EXHIBITS, IF ANY, ARE LIMITED WARRANTIES AND ARE THE ONLY
WARRANTIES MADE BY FISERV.  CLIENT
ACKNOWLEDGES THAT IT HAS INDEPENDENTLY EVALUATED THE FISERV SERVICES AND THEIR
APPLICATION TO CLIENT’S NEEDS.  FISERV
DOES NOT MAKE, AND CLIENT HEREBY EXPRESSLY WAIVES, ALL OTHER WARRANTIES,
INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT, AND FROM A COURSE OF DEALING OR USAGE OR TRADE.

 

(b) By Client.

 

(i)             Client
represents and warrants that: (A) no contractual obligations exist that
would prevent Client from entering into this Agreement; (B) it has
complied with all applicable regulatory requirements; and (C) it has
requisite authority to execute, deliver, and perform this Agreement.

 

(ii)  Client
shall indemnify and hold harmless Fiserv, its officers, directors, employees,
and affiliates against: (A) any claims or actions arising out of the use
by Client of the Fiserv System in a manner other than that provided in this
Agreement; and (B) any and all claims by third parties through Client
arising out of the performance and non-performance of Fiserv Services by
Fiserv, provided that the indemnity listed in clause (B) hereof
shall not preclude Client’s recovery of damages from Fiserv pursuant to the
terms and subject to the limitations of this Agreement.

 

6

 

8.  Limitation of Liability.  IN NO EVENT SHALL FISERV BE LIABLE FOR LOSS
OF GOODWILL, OR FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR TORT
DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT, REGARDLESS OF WHETHER
SUCH CLAIM ARISES IN TORT OR IN CONTRACT. 
EXCEPT FOR CLAIMS RELATED TO PROPRIETARY RIGHTS OR PAYMENT OBLIGATIONS,
NEITHER PARTY MAY ASSERT ANY CLAIM AGAINST THE OTHER RELATED TO THIS
AGREEMENT MORE THAN 2 YEARS AFTER SUCH CLAIM ACCRUED.  FISERV’S AGGREGATE LIABILITY TO CLIENT OR ANY
THIRD PARTY FOR ANY AND ALL CLAIMS OR OBLIGATIONS RELATING TO THIS AGREEMENT
SHALL BE LIMITED TO THE TOTAL FEES PAID BY CLIENT TO FISERV FOR THE FISERV
SERVICE RESULTING IN SUCH LIABILITY IN THE 2 MONTH PERIOD PRECEDING THE DATE
THE CLAIM ACCRUED.

 

9.  Term and Termination.  (a) Term. The initial term of
this Agreement shall end 66 months following the date Fiserv Services are first
used by Client in live production. Unless written notice of non-renewal is
provided by either party at least 120 days prior to expiration of the initial
term or any renewal term, this Agreement shall automatically renew for
additional term(s) of 3 years.  This
Agreement shall be effective on the earlier of the Effective Date and the day
services are first provided to Client by Fiserv.

 

(b) Material
Breach; Failure to Pay.

 

(i) 
Either party may terminate this Agreement in the event of a material breach by
the other party not cured within 90 days following written notice stating, with
particularity and in reasonable detail, the nature of the claimed breach.

 

(ii) 
In the event any invoice remains unpaid by Client 30 days after due, Fiserv may
terminate this Agreement and/or Client’s access to and use of Fiserv Services.

 

(c) Remedies.  Remedies contained in this Section 9 are
cumulative and are in addition to the other rights and remedies available to
Fiserv under this Agreement, by law or otherwise.

 

(d) Defaults.  If Client:

 

(i) fails to cure
its material breach, or fails to pay amounts due, each as set forth in Section 9(b);

(ii) deconverts any
data or information from the Fiserv System either without Fiserv’s prior
written consent or in violation of this Agreement; or

(iii) commits an act
of bankruptcy or becomes the subject of any proceeding under the Bankruptcy
Code or becomes insolvent or if any substantial part of Client’s property
becomes subject to any levy, seizure, assignment, application, or sale for or
by any creditor or governmental agency;

 

then, in any such event,
Fiserv may, upon written notice, terminate this Agreement and be entitled to
recover from Client as liquidated damages an amount equal to the present value
of all payments remaining to be made hereunder for the remaining unused term of
this Agreement.  For purposes of the
preceding sentence, present value shall be computed using the “prime” rate (as
published in The  Wall Street
Journal) in effect at the date of termination and “all payments
remaining to be made” shall be calculated by multiplying the average monthly
invoices for the 6 months immediately preceding the date of termination by the
remaining months of the term.  Client
agrees to reimburse Fiserv for any expenses Fiserv may incur, including
reasonable attorneys’ fees, in taking any of the foregoing actions.

 

(e) Convenience;
Early Termination.  If Client
terminates this Agreement or reduces or terminates Fiserv Services for any
reason other than pursuant to Section 9(b)(i), Client shall pay a
termination fee based on the remaining unused term of this Agreement.  Such fee shall be determined by multiplying
the average of the monthly invoices for each Fiserv Service received by Client
during the 6-month period preceding the effective date of termination (or if no
monthly invoice has been received, the sum of the estimated monthly billing for
each Fiserv Service to be received hereunder) by 80% times the remaining months
of the term, plus any unamortized conversion fees or third party costs existing
on Fiserv’s books on the date of termination.

 

(f) Liquidated
Damages.  Client understands and agrees
that Fiserv losses incurred as a result of early termination of the Agreement
would be difficult or impossible to calculate as of the effective date of
termination since they will vary based on, among other things, the number of
clients using the Fiserv System on the date the Agreement terminates.  Accordingly, the amounts set forth in
Sections 9(d) and (e) represent Client’s agreement to pay and Fiserv’s
agreement to accept as liquidated damages (and not as a penalty) such amount
for any such termination.

 

10.  Dispute Resolution.  (a) Informal. Before initiating
arbitration or other legal action against the other relating to a dispute
herein, the parties agree to work in good faith to resolve disputes and claims
arising out of this Agreement.  To this
end, either party may request that each party designate an officer or other
management employee with authority to bind such party to meet to resolve the
dispute or claim.  If the dispute is not
resolved within 30 days of the commencement of informal efforts under this
paragraph, either party may pursue formal dispute resolution.  This paragraph will not apply if: (i) expiration
of the applicable time for bringing an action is imminent; or (ii) injunctive
or other equitable relief is necessary to protect a party’s proprietary rights.

 

7

 

(b)  Arbitration.  Except with respect to disputes arising from
a misappropriation or misuse of either party’s proprietary rights, any dispute
or controversy arising out of this Agreement or its interpretation that is not
resolved under Section 10(a), may be submitted to and resolved by
arbitration under the then prevailing rules of Judicial Arbitration and
Mediation Services, Inc. (JAMS). A party seeking arbitration shall submit
written notice of its request for arbitration to the other party, setting forth
the specifics of the claim being made. If the parties agree to arbitrate such
dispute, a formal demand for arbitration shall be submitted to JAMS by such
requesting party.  The arbitration shall
be heard before an arbitrator mutually agreeable to the parties; provided, that
if the parties cannot agree on the choice of arbitrator within 10 days after
the parties agree to arbitrate, then the arbitration shall be heard by 3 arbitrators,
1 chosen by each party, and the third chosen by those 2 arbitrators.  The arbitrators will be selected from a panel
of persons having experience with and knowledge of information technology and
at least 1 of the arbitrators selected will be an attorney.  Discovery shall not be permitted.  A hearing on the merits of all claims for
which arbitration is sought by either party shall be commenced not later than 90
days from the date demand for arbitration is submitted to JAMS.  The arbitrator(s) must render a decision
within 10 days after the conclusion of such hearing.  Any award in such arbitration shall be final
and binding upon the parties and the judgment thereon may be entered in any
court of competent jurisdiction.

 

(c) Applicable
Law.  The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. §§1–16 and the Federal Rules of
Evidence.  The arbitrators shall apply
the substantive law of the State of New York, without reference to provisions
relating to conflict of laws.  The arbitrators
shall not have the power to alter, modify, amend, add to, or subtract from any
term or provision of this Agreement, nor to grant any extension, renewal, or
continuance of this Agreement.  The
arbitrators shall have the authority to grant any legal remedy available had
the parties submitted the dispute to a judicial proceeding.

 

(d) Location.  If arbitration is used to resolve any
disputes between the parties, the proceedings to resolve any such dispute shall
be held in the headquarters city of the party receiving the request for
arbitration from the other party, specifically Atlanta, GA for Fiserv and
Charlotte, NC for Client.

 

11.  Audit. 
(a) General. Fiserv employs an internal auditor responsible
for ensuring the integrity of its processing environments and internal
controls.  In addition, Fiserv provides
for periodic independent audits of its operations, which shall include an annual SAS-70 Type II
audit to the extent required by law or regulation.  Fiserv shall provide Client with a copy of such
independent audit report of the Fiserv service center providing Services within
a reasonable time after its completion and shall charge each client a fee based
on the pro rata cost of such audit.  If
material deficiencies affecting the Services are noted in such audit report,
Fiserv will develop and implement an action plan to address and resolve any
such deficiencies within a commercially reasonable time at Fiserv’s expense.

 

(b) Regulatory.  As specifically permitted by law and
regulation, Fiserv acknowledges and agrees that regulators shall be permitted
to audit Fiserv’s performance under this Agreement at any time during Fiserv’s
normal business hours.

 

(c) Billing Records.  Upon Client’s reasonable request in writing,
Fiserv shall provide Client with documentation supporting the amounts invoiced
by Fiserv hereunder for the 12-month period preceding such Client request. If
such documentation reveals the amounts paid to Fiserv exceed the amounts
to which Fiserv is entitled and such amounts are independently verified, Fiserv
shall promptly remit the amount of such overpayment.

 

12.  General.  (a) Binding Agreement; Assignment.  This Agreement is binding upon the parties
and their respective successors and permitted assigns.  Neither this Agreement nor any interest may
be sold, assigned, transferred, pledged, or otherwise disposed of by Client,
whether pursuant to change of control, by operation of law or otherwise,
without Fiserv’s prior written consent, which shall not be unreasonably
withheld.  Client agrees that Fiserv may
subcontract any services to be performed hereunder; provided that any such
subcontractors shall be required to comply with all applicable terms and
conditions of this Agreement, and Fiserv shall remain primarily liable for the
performance of any such subcontractors.

 

(b) Entire
Agreement; Amendments.  This
Agreement, including its Exhibits and Appendices (if any), which are expressly
incorporated herein by reference, constitutes the complete and exclusive
statement of the agreement between the parties as to the subject matter hereof
and supersedes all previous agreements with respect thereto.  Each party hereby acknowledges that it has
not entered into this Agreement in reliance upon any representation made by the
other party not embodied herein. 
Modifications of this Agreement must be in writing and signed by duly
authorized representatives of the parties. 
In the event the provisions of any Exhibit conflict with the
provisions of this Agreement, this Agreement shall control unless the applicable
Exhibit expressly provides that its provisions control.

 

(c) Severability.  If any provision of this Agreement is held to
be unenforceable or invalid, the other provisions shall continue in full force
and effect.

 

8

 

(d) Governing
Law; Jury Trial Waiver.  This
Agreement will be governed by the substantive laws of the State of New York,
without reference to provisions relating to conflict of laws.  The United Nations Convention on Contracts
for the International Sale of Goods shall not apply to this Agreement.  Both
parties agree to waive any right to have a jury participate in the resolution
of any dispute or claim between the parties or any of their respective
affiliates arising under this Agreement.

 

(e) Force Majeure.  Neither party shall be responsible for delays
or failures in performance resulting from acts of God, acts of civil or
military authority, fire, flood, strikes, war, epidemics, pandemics, shortage
of power, or other acts or causes reasonably beyond the control of that party.
The party experiencing the force majeure event agrees to give the other party
notice promptly following the occurrence of a force majeure event, and to use
diligent efforts to re-commence performance as promptly as commercially
practicable.

 

(f) Notices.  Any written notice required or permitted to
be given hereunder shall be given by: (i) Registered or Certified Mail,
Return Receipt Requested, postage prepaid; (ii) confirmed facsimile; or (iii) nationally
recognized overnight courier service to the other party at the addresses listed
on the cover page or to such other address or person as a party may
designate in writing.  All such notices
shall be effective upon receipt.

 

(g) No Waiver.  The failure of either party to insist on
strict performance of any of the provisions hereunder shall not be construed as
the waiver of any subsequent default of a similar nature.

 

(h) Prevailing
Party.  The prevailing party in any
arbitration, suit, or action brought against the other party to enforce the
terms of this Agreement or any rights or obligations hereunder, shall be
entitled to receive its reasonable costs, expenses, and attorneys’ fees of
bringing such arbitration, suit, or action.

 

(i) Survival.  All rights and obligations of the parties
under this Agreement that, by their nature, do not terminate with the
expiration or termination of this Agreement shall survive the expiration or
termination of this Agreement.

 

(j) Exclusivity.  Client agrees that Fiserv shall be the sole
and exclusive provider of the services that are the subject matter of this
Agreement.  For purposes of the
foregoing, the term “Client” shall include Client affiliates.  Client agrees not to enter into an agreement
with any other entity to provide these services (or similar services), and not
to perform these services (or similar services) for itself, during the term of
this Agreement without Fiserv’s prior written consent, which shall not be
unreasonably withheld.  If Client
acquires another entity, the exclusivity provided to Fiserv hereunder shall
take effect with respect to such acquired entity as soon as practicable after
expiration or earlier termination of such acquired entity’s previously existing
arrangement for these services.  If
Client is acquired by another entity, the exclusivity provided to Fiserv
hereunder shall apply with respect to the level or volume of services provided
immediately prior to the signing of the definitive acquisition agreement
relating to such acquisition and shall continue with respect to the level or
volume of such services until any termination or expiration of this Agreement.

 

(k) Recruitment
of Employees. Client and Fiserv shall not, without the other’s prior
written consent, directly or indirectly, solicit for employment or hire any
Restricted Employee (as defined herein) while such person is employed by Client
or Fiserv and for the 12-month period starting on the earlier of: (i) termination
of such Restricted Employee’s employment, or (ii) termination or
expiration of this Agreement.  “Restricted Employee” means any former
or current employee of either Fiserv or Client or their affiliates that the
other becames aware of or came into contact with during Fiserv’s provision of
services under this Agreement.

 

(l) Publicity.  Client and Fiserv shall have the right to
make general references about each other and the type of services being
provided hereunder to third parties, such as auditors, regulators, financial
analysts, and prospective customers and clients, provided that in so doing
Client or Fiserv does not breach Section 3 of this Agreement.  The parties may mutually agree on a press
release relating to the execution of this Agreement.  In conjunction with this, the party
initiating such release shall give the other party a reasonable opportunity to
review and comment on the content thereof prior to its release.

 

(m) Independent
Contractors.  Client and Fiserv
expressly agree they are acting as independent contractors and under no
circumstances shall any of the employees of one party be deemed the employees
of the other for any purpose.  This
Agreement shall not be construed as authority for either party to act for the
other party in any agency or other capacity, or to make commitments of any kind
for the account of or on behalf of the other except as expressly authorized
herein.

 

(n)  No Third
Party Beneficiaries.  No third party
shall be deemed to be an intended or unintended third party beneficiary of this
Agreement.

 

9

 

IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed by their duly authorized
representatives as of the Effective Date.

 

	
  For Client:

  	
   

  	
  For Fiserv:

  
	
   

  	
   

  	
   

  
	
  Coastal Carolina
  National Bank, In organization

  	
   

  	
  Fiserv
  Solutions, Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Ms. Holly
  Schreiber

  	
   

  	
  Name:

  	
  Jerry C. Tull

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  CFO

  	
   

  	
  Title:

  	
  EVP – ITI Outsourcing,
  Southeast Region

  
									

 

10Securities Purchase Agreement

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of August 20, 2008 between Blink Logic Inc., a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, 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 each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1

Definitions.  In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7. 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

“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 405 under the Securities Act.  

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

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

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

“Closing Date” means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions 

precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities have been satisfied or waived.

“Closing Statement” means the Closing Statement in the form Annex A attached hereto.

 “Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

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

 “Conversion Price” shall have the meaning ascribed to such term in the Debentures.

“Debentures” means the Original Issue Discount Senior Secured Convertible Debentures due, subject to the terms therein, two years from their date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

“Discussion Time” shall have the meaning ascribed to such term in Section 3.2(f). 

“Effective Date” means the earlier of (a) the effective date of a Registration Statement and (b) the date that all of Shares or Warrant Shares are eligible for sale under Rule 144, without (i) the requirement for the Company to be in compliance with the current public information required under Rule 144 and (ii) volume or manner-of-sale restrictions.

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r). 

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

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose (provided, however, any such issuances to consultants shall not exceed an aggregate of 200,000 shares, subject to adjustment for 

2

forward and reverse stock splits, stock dividends and similar transactions of the Common Stock that occur after the Closing Date, in any 12-month period), (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities and (d) up to an amount of Debentures and Warrants equal to the difference between $1,400,000 and the aggregate Subscription Amounts set forth herein, on the same terms and conditions and prices as hereunder, with investors executing definitive agreements for the purchase of such securities and such transactions having closed on or before September 30, 2008.

 “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

“Intercreditor Agreement” means the Intercreditor Agreement, dated as of the date hereof, duly executed by the Company, each of the Purchasers, each of the September Purchasers and the June Purchaser in the form of Exhibit C attached hereto.

“June Purchase Agreement” means the Securities Purchase Agreement, dated June 12, 2008, by and among the Company and the purchaser signatory thereto for the issuance of debentures and warrants.

 “June Purchaser” means the purchaser of the debentures and warrants issued pursuant to the June Purchase Agreement.

“July Purchase Agreement: means the Securities Purchase Agreement, dated July 28, 2008, by and among the Company and the purchaser signatory thereto for the issuance of debentures and warrants. 

“July Purchaser”  means the purchaser of the debentures and warrants issued pursuant to the July Purchase Agreement. 

 “Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c). 

3

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction. 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

“Participation Maximum” shall have the meaning ascribed to such term in Section 4.12. 

“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.

“Pre-Notice” shall have the meaning ascribed to such term in Section 4.12. 

“Principal Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s Subscription Amount multiplied by 1.111.

“Pro Rata Portion” shall have the meaning ascribed to such term in Section 4.12(e). 

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

“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).

“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b). 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.

 “Registration Statement” means a registration statement filed pursuant to Section 4.18, registering the resale, by the Purchasers, of all of the Underlying Shares.

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

4

“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all Debentures, ignoring any conversion or exercise limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 75% of the then Conversion Price on the Trading Day immediately prior to the date of determination.

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

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

“Securities” means the Debentures, the Warrants, the Warrant Shares and the Underlying Shares.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 “Security Agreement” means the Security Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit D attached hereto.

“Security Documents” shall mean the Security Agreement, the Subsidiary Guarantees, the Intercreditor Agreement, and any other documents and filing required thereunder in order to grant the Purchasers a first priority security interest in the assets of the Company and the Subsidiaries as provided in the Security Agreement and the Intercreditor Agreement, including all UCC-1 filing receipts. 

“September Purchase Agreement” means the Securities Purchase Agreement, dated September 28, 2007, by and among the Company and the purchasers signatory thereto for the issuance of debentures and warrants.

 “September Purchasers” means the purchasers of the debentures and warrants issued pursuant to the September Purchase Agreement.

 “Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 

“SRFF” mans Sichenzia Ross Friedman Ference LLP 61 Broadway, New York, New York 1006

 “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures and Warrants purchased hereunder as specified below such 

5

Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

“Subsequent Financing” shall have the meaning ascribed to such term in Section 4.12(a).

“Subsequent Financing Notice” shall have the meaning ascribed to such term in Section 4.12(b). 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 “Subsidiary Guarantee” means the Subsidiary Guarantee, dated the date hereof, by each Subsidiary in favor of the Purchasers, in the form of Exhibit E attached hereto.

“Trading Day” means a day on which the principal Trading Market is open for trading.

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

 “Transaction Documents” means this Agreement, the Debentures, the Warrants, the Security Agreement, the Subsidiary Guarantee, the Intercreditor Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

“Transfer Agent” means Computershare Trust Company, the current transfer agent of the Company with a mailing address of 350 Indiana Street, Suite 800 and a facsimile number of (303) 262-0604, and any successor transfer agent of the Company.

“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Debentures and upon exercise of the Warrants.

“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b).

 “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; 

6

(c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to five years, in the form of Exhibit B attached hereto.

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

ARTICLE II.

PURCHASE AND SALE

2.1

Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $522,200 in Principal Amount of the Debentures (for an aggregate cash Subscription Amount of up to $470,027). Each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to its Subscription Amount and the Company shall deliver to each Purchaser its respective Debenture and a Warrant, as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of SRFF or such other location as the parties shall mutually agree.  The parties acknowledge and agree that the Debentures are being purchased hereunder at an original issue discount.

2.2

Deliveries.

(a)

On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

(i)

this Agreement duly executed by the Company;

(ii)

a Debenture with a principal amount equal to such Purchaser’s Principal Amount, registered in the name of such Purchaser;

(iii)

a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 75% of such Purchaser’s 

7

Principal Amount divided by the Conversion Price, with an exercise price equal to $1.96, subject to adjustment therein; 

(iv)

the Security Agreement, duly executed by the Company and each Subsidiary, along with all of the Security Documents, including the Subsidiary Guarantee, duly executed by the parties thereto; 

(v)

the Intercreditor Agreement, duly executed by the Company, each of the September Purchasers,  the June Purchaser and July Purchaser; 

(vi)

an officer’s certificate from the Chief Executive Officer of the Company, dated as of the Closing Date, certifying and setting forth (i) the names, signatures and positions of the Persons authorized to execute this Agreement and any other Transaction Documents to which the Company is a party and (ii) a copy of the resolutions of the Company authorizing the execution, delivery and performance of this Agreement; and 

(vii)

a legal opinion of SRFF, substantially in the form of Exhibit F, attached hereto.

(b)

On  or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following: 

(i)

this Agreement duly executed by such Purchaser;

(ii)

such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company; 

(iii)

the Intercreditor Agreement duly executed by such Purchaser; and

(iv)

the Security Agreement duly executed by such Purchaser.

2.3

Closing Conditions. 

(a)

The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

(i)

the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein;

(ii)

all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

(iii)

the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

8

(b)

The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

(i)

the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;

(ii)

all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; 

(iii)

the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; 

(iv)

there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

(v)

from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission  or the Company’s principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1

Representations and Warranties of the Company.  Except as set forth in the                                          Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

(a)

 Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a)(i).  Other than as set forth on Schedule 3.1(a)(ii), the Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of 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 to subscribe for or purchase securities.  If the 

9

Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

(b)

Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(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 hereunder and thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(d)

No Conflicts.  Except as set forth on Schedule 3.1(d), the execution, delivery and performance by the Company of the Transaction Documents, the issuance and sale of the Securities and the consummation by it to which it is a party of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or 

10

violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, 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) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(e)

Filings, Consents and Approvals.  Except as set forth on Schedule 3.1(e), 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 filings required pursuant to Section 4.6 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

(f)

Issuance of the Securities.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof.  

(g)

Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common 

11

Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act.  Except as set forth on Schedule 3.1(g), no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as set forth on Schedule 3.1(g), and/or as a result of the purchase and sale of the Securities, 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 exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

(h)

SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the 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.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited 

12

financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

(i)

Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (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 and (v) 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.  Except for the issuance of the Securities contemplated by this Agreement or as set forth on Schedule 3.1(i), no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one Trading Day prior to the date that this representation is made.

(j)

Litigation.  There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, 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.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  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.  

13

(k)

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 which could reasonably be expected to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, 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 in compliance with all U.S. federal, state, local and foreign 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.

(l)

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 (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

(m)

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

(n)

Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens 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 

14

and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

(o)

Patents and Trademarks.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(p)

Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(q)

Transactions with Affiliates and Employees.  Except as set forth in the SEC Reports, 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 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, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

15

(r)

Sarbanes-Oxley; Internal Accounting Controls.  The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 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 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure 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 materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(s)

Certain Fees.  Other than as set forth on Schedule 3.1 (s), 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 the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.  

(t)

Private Placement.  Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

(u)

Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as amended.

16

(v)

Registration Rights.  Except as set forth on Schedule 3.1(v), no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.

(w)

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 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

(x)

Application of Takeover Protections.  The Company and the 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 could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

(y)

Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, nonpublic information.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.   The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

17

(z)

No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated if such integration would cause the transactions contemplated by this Agreement to require approval of the Company’s shareholders. 

(aa)

Solvency.  Based on the consolidated financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing 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 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 Company does not intend to incur debts beyond its 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 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.  Schedule 3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

(bb)

Tax Status. 

 Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the 

18

Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

(cc)

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

(dd)

Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(ee)

Accountants.  The Company’s accounting firm is set forth on Schedule 3.1(ee) of the Disclosure Schedules.  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 on Form 10-K for the year ending December 31. 2008. 

(ff)

Seniority.  Except as set forth on Schedule 3.1(ff), as of the Closing Date, no Indebtedness or other claim against the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby). Notwithstanding the provisions of this Section 3.1(ff), pursuant to the terms of the Intercreditor Agreement, the security interest issued thereunder shall be pari passu with the existing lien in favor of September Purchasers, the June Purchaser and July Purchaser

(gg)

No Disagreements with Accountants and Lawyers.  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

(hh)

Acknowledgment Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that no 

19

Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

(ii)

Acknowledgment Regarding Purchasers’ Trading Activity

..  Notwithstanding anything in this Agreement or elsewhere herein to the contrary (except for Sections 3.2(f) and 4.16 hereof), it is understood and acknowledged by the Company that (i) none of the Purchasers has been asked to agree by the Company, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction.  

The Company further understands and acknowledges that (a) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined and (b) such hedging activities (if any) could reduce the value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

(jj)

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, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection with the placement of the Securities.

(kk)

Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair 

20

market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated.  The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

3.2

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

(a)

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

(b)

Own Account.  Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to a Registration Statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law.  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

(c)

Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants or converts any Debentures it will be either: (i) an “accredited investor” as defined in 

21

Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

(d)

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

(e)

General Solicitation.  Such Purchaser is not purchasing 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.

(f)

Short Sales and Confidentiality Prior To The Date Hereof.  Other than consummating the transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing from the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder until the date hereof (“Discussion Time”).  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect short sales or similar transactions in the future.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1

Transfer Restrictions.

(a)

The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant 

22

to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, 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.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement.

(b)

The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [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 AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT  WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith.  Further, no notice shall be required of such pledge.  At the appropriate Purchaser’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, including, if the Securities are subject to registration pursuant to Section 4.18, the preparation and 

23

filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

(c)

Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including a Registration Statement) covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder.  If all or any portion of a Debenture is converted or Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying Shares shall be issued free of all legends.  The Company agrees that following such time as such legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section.  Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.

(d)

In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day 5 Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend.  Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all 

24

remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

(e)

Each Purchaser, severally and not jointly with the other Purchasers, agrees that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

4.2

Acknowledgment of Dilution.  The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges that its obligations under the Transaction Documents, including without limitation its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

4.3

Furnishing of Information; Public Information.  

(a)

If the Common Stock is not registered under Section 12(b) or 12(g) of the Exchange Act on the date hereof, the Company agrees to cause the Common Stock to be registered under Section 12(g) of the Exchange Act on or before the 60th calendar day following the date hereof. Until the time that no Purchaser owns Securities, 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.    As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144.  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 such Securities without registration under the Securities Act within the requirements of the exemption provided by Rule 144.

(b)

At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s other 

25

available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required  for the Purchasers to transfer the Underlying Shares pursuant to Rule 144.  The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.”  Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

4.4

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 to the Purchasers in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market if such integration would cause the transactions contemplated by this Agreement to require approval of the Company’s shareholders.

4.5

Conversion and Exercise Procedures.  Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Debentures set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Debentures.  No additional legal opinion or other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their Debentures.  The Company shall honor exercises of the Warrants and conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

4.6

Securities Laws Disclosure; Publicity.  The Company shall, by 8:30 a.m. (New York City time) on the Trading Day following the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby and, by 8:30 a.m. (New York City time) on the fourth Trading Day following the date hereof, issue a Current Report on Form 8-K further disclosing the material terms of the transactions contemplated hereby and including the Transaction Documents as exhibits thereto.  The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with 

26

respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (i) as required by federal securities law in connection with (A) any registration statement contemplated by Section 4.18 of this Agreement and (B) the filing of final Transaction Documents (including signature pages thereto) with the Commission and (ii) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (ii).

4.7

Shareholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

4.8

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

4.9

Use of Proceeds.  Except as set forth on Schedule 4.9 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds for (a) the satisfaction of any portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), (b) the redemption of any Common Stock or Common Stock Equivalents or (c) the settlement of any outstanding litigation.

4.10

Indemnification of Purchasers.   Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, 

27

claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

4.11

Reservation and Listing of Securities.

(a)

The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

(b)

If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.

(c)

The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional 

28

shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market. 

4.12

Participation in Future Financing. 

(a)

From the date hereof until the date that is the 12 month anniversary of the date hereof, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, Indebtedness (or a combination of units hereof) (a “Subsequent Financing”), each Purchaser shall have the right to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing.  

(b)

At least 5 Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).  Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than 1 Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser.  The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.    

(c)

Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the 5th Trading Day after all of the Purchasers have received the Pre-Notice that the Purchaser is willing to participate in the Subsequent Financing, the amount of the Purchaser’s participation, and that the Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice.  If the Company receives no notice from a Purchaser as of such 5th Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.  

(d)

If by 5:30 p.m. (New York City time) on the 5th Trading Day after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.  

29

(e)

If by 5:30 p.m. (New York City time) on the 5th Trading Day after all of the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum.  “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a Purchaser participating under this Section 4.12 and (y) the sum of the aggregate Subscription Amounts of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.12 plus the aggregate Subscription Amounts of investors party to securities purchase agreement(s) contemplated by clause (d) in the definition of Exempt Issuance that are participating in such Subsequent Financing pursuant to participation rights granted to such investors under such agreements that are substantially similar to this Section 4.12.

(f)

The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within 60 Trading Days after the date of the initial Subsequent Financing Notice. 

(g)

Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt Issuance or (ii) an underwritten public offering of Common Stock.

4.13

Subsequent Equity Sales.  

(a)

From the date hereof until 90 days after the Effective Date, neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents; provided, however, the 90 day period set forth in this Section 4.13 shall be extended for the number of Trading Days during such period in which (i) trading in the Common Stock is suspended by any Trading Market, or (ii) following the Effective Date, a Registration Statement is not effective or the prospectus included in a Registration Statement may not be used by the Purchasers for the resale of the Underlying Shares. 

(b)

From the date hereof until the earlier of (x) the date the Debentures are no longer outstanding or (y) the 12 month anniversary of the Effective Date, the Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent Financing involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock 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 debt or equity securities, 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 debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the 

30

business of the Company or the market for the Common Stock 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.   Any Purchaser 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.

(c)

Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance. 

4.14

Equal Treatment of Purchasers.  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. Further, the Company shall not make any payment of principal on the Debentures in amounts which are disproportionate to the respective principal amounts outstanding on the Debentures at any applicable time.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

4.15

Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period commencing at the Discussion Time and ending at the time that the transactions contemplated by this Agreement are first publicly announced as described in Section 4.6.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules.  Each Purchaser severally and not jointly with any other Purchaser understands and acknowledges, and agrees, to act in a manner that will not violate the positions of the Commission as set forth in Item 65, Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no Purchaser makes any representation, warranty or covenant hereby that it will not engage in Short Sales in the securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced as described in Section 4.6.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

31

4.16

Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall 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 Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

4.17

Capital Changes.  Until the one year anniversary of the Effective Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in principal amount outstanding of the Debentures.

4.18

Piggy-Back Registration Rights. If at any time after the date hereof, the Company shall determine to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of others of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their then equivalents, relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send a written notice of such determination to each Purchaser and, if within ten calendar days after the date of delivery of such notice, any such Purchaser shall so request in writing, the Company shall include in such Registration Statement all or any part of the Underlying Shares as the Purchaser requests to be registered so long as such Underlying Shares are proposed to be disposed in the same manner as those securities set forth in the Registration Statement; provided, however, if the offering is an underwritten offering and was initiated by the Company or at the request of a shareholder, and if the managing underwriters advise the Company that the inclusion of Underlying Shares requested to be included in the Registration Statement would cause an adverse effect on the success of any such offering, based on market conditions or otherwise (an "Adverse Effect"), then the Company shall be required to include in such Registration Statement, to the extent of the amount of securities that the managing underwriters advise may be sold without causing such Adverse Effect, (a) first, the securities of the Company and (b) second, the shares, including the Underlying Shares, of all shareholders, on a pro rata basis, requesting registration and whose shares the Company is obligated by contract to include in the Registration Statement; provided, further, however, to the extent that all of the Underlying Shares are not included in the initial Registration Statement, the Purchaser shall have the right to request the inclusion of its Underlying Shares in subsequent Registration Statements until all such Underlying Shares have been registered in accordance with the terms hereof.  If the offering in which the Underlying Shares is being included in a Registration Statement is a firm commitment underwritten offering, unless otherwise agreed by the Company, the Purchaser shall sell its Underlying Shares in such offering using the same underwriters and, subject to the provisions hereof, on the same terms and conditions as the other shares of Common Stock that are included in such underwritten offering.  The Company shall use its best efforts to cause any Registration Statement to be declared effective by the Commission as promptly as is possible following it being filed with the Commission and to remain effective until all Underlying Shares subject thereto have been sold.  All fees and expenses incident to the performance of or compliance with this Section 4.18 by the Company 

32

shall be borne by the Company whether or not any Underlying Shares are sold pursuant to the Registration Statement.  The Company shall indemnify and hold harmless the Purchaser, the officers, directors, members, partners, agents, brokers, investment advisors and employees of each of them, each person who controls the Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), and the officers, directors, members, shareholders, partners, agents and employees of each such controlling person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, the “Losses”), as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus included therein or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, 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 or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Section 4.18, except to the extent, but only to the extent, that such untrue statements or omissions referred to in (i) above are based solely upon information regarding the Purchaser furnished in writing to the Company by the Purchaser expressly for use therein, or to the extent that such information relates to the Purchaser or the Purchaser’s proposed method of distribution of Underlying Shares and was reviewed and expressly approved in writing by the Purchaser expressly for use in the Registration Statement, such prospectus or such form of prospectus or in any amendment or supplement thereto. The rights of the Purchaser under this Section 4.18 shall survive until all have been either registered under a Registration Statement or been sold pursuant to an exemption to the registration requirements of the Securities Act. Notwithstanding anything to the contrary, the Company shall have no obligations pursuant to this Section 4.18 after such time that the Underlying Shares are not subject to the current public information requirement under Rule 144 and that are eligible for resale without volume or manner-of-sale restrictions without current public information pursuant to Rule 144 promulgated by the Commission pursuant to a written opinion letter to such effect, addressed, delivered and reasonably acceptable to the Transfer Agent and the affected Purchasers. 

4.19

Most Favored Nation Provision.  From the date hereof until such time that the Debentures are no longer outstanding, if the Company effects a Subsequent Financing, each Purchaser may elect, in its sole discretion, to exchange all or some of the Debentures (but not Warrants) then held by such Purchaser for any securities issued in a Subsequent Financing on a $1.00 for $1.00 basis (that is, for each $1.00 principal amount of Debentures surrendered by the Purchaser, the Purchaser shall receive $1.00 of units in such Subsequent Financing) based on the outstanding Principal Amount of such Debentures, along with any liquidated damages and other amounts owing thereon, and the effective price at which such securities were sold in such Subsequent Financing. By way of example, if the Company undertakes a Subsequent Financing of $100,000 of preferred stock and warrants, the Purchaser shall have the right, but not the obligation, in its sole discretion, to purchase $100,000 of preferred stock and warrants of such Subsequent Financing by surrendering $100,000 in Principal Amount of such Purchaser’s Debenture. This Section 4.19 shall not apply with respect to (i) an Exempt Issuance or (ii) an 

33

underwritten public offering of Common Stock. The Company shall provide each Purchaser with notice of any such Subsequent Financing in the manner set forth in Section 4.12.

ARTICLE V.

MISCELLANEOUS

5.1

Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before July 31, 2008; provided, however, that such termination will not affect the right of any party to sue for any breach by the other party (or parties).

5.2

Fees and Expenses.  The Company shall deliver to each Purchaser, prior to the Closing, a completed and executed copy of the Closing Statement attached hereto as Annex A.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its 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 this Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

5.3

Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

5.4

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 at the facsimile number set forth on the signature pages attached hereto prior to 5:30 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 set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

5.5

Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers of at least 67% in interest of the Securities still held by Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or 

34

requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

5.6

Headings.  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.

5.7

Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

5.8

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 4.10.

5.9

Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal 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, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof 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 other manner permitted by law.   If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

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5.10

Survival.  The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for the applicable statute of limitations.

5.11

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 or by e-mail delivery of a “.pdf” format data file, 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 or “.pdf” signature page were an original thereof.

5.12

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 commercially 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.

5.13

Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of a Debenture or exercise of a Warrant, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice.

5.14

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 (in the case of mutilation), 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.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

5.15

Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any 

36

breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.  

5.16

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

5.17

Usury.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

5.18

Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to 

37

independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents.  

5.19

Liquidated Damages.  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

5.20

Saturdays, Sundays, Holidays, etc.

If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

5.21

Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to share prices in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

5.22

WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

(Signature Pages Follow)

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

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[PURCHASER SIGNATURE PAGES TO BLKL SECURITIES PURCHASE AGREEMENT]

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

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

40

[PURCHASER SIGNATURE PAGES TO BLKL SECURITIES PURCHASE AGREEMENT]

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

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