Document:

Exhibit
      10.48

     

    WARRANT
      EXERCISE SUBSCRIPTION AGREEMENT

     

    This
      SUBSCRIPTION
      AGREEMENT
      ("Subscription
      Agreement")
      is
      made and entered into as of May 16, 2008 by and between Neonode
      Inc.,
      a
      Delaware corporation ("Company"),
      and
      the subscribers whose names and addresses are set forth on the signature page
      hereto (each a "Subscriber").
      

     

    Background:
      The
      Company has issued (i) 5,376,453 warrants, each exercisable to purchase one
      share of common stock, par value $.01 per share, of the Company (“Common
      Stock”),
      exercisable at a price of $2.8313 expiring August 10, 2012 (the “$2.83
      Warrants”),
      issued pursuant to the Warrant Agreement, dated August 10, 2007 (the
“$2.83
      Warrant Agreement”),
      (ii)
      206,000 warrants, each exercisable to purchase Common Stock, exercisable at
      a
      price per share of $16.65, expiring July 6, 2010 (the “$16.65
      Warrants”),
      (iii)
      11,000 warrants, each exercisable to purchase Common Stock, exercisable at
      a
      price per share of $7.50, expiring June 26, 2008 (the “$7.50
      Warrants”),
      (iv)
      11,000 warrants, each exercisable to purchase Common Stock, exercisable at
      a
      price per share of $8.75, expiring June 26, 2008 (the “$8.75
      Warrants”),
      (v)
      1,432,445 warrants,
      each exercisable to purchase Common Stock, exercisable at a price per share
      of
      $3.92, expiring September 26, 2012 (the “$3.92
      Warrants”),
      (vi)
      213,077 warrants, each exercisable to purchase Common Stock, exercisable at
      a
      price per share of approximately $3.92, expiring on dates through September
      26,
      2012 (the “Additional
      Warrants”),
      and
      (vii) 10,000 warrants, each exercisable to purchase Common Stock, exercisable
      at
      a price per share of $10.00, expiring June 26, 2008 (the “$10.00
      Warrants”,
      and
      collectively with the $2.83 Warrants, the $16.65 Warrants, the $7.50 warrants,
      the $3.92 Warrants, the Additional Warrants and the $8.75 Warrants the
“Exercise
      Warrants”).
      In
      order to induce exercise of the Exercise Warrants, the Company is offering
      (the
“Warrant
      Offering”) to
      holders of Exercise Warrants (the “Warrantholders”)
      for
      a
      period expiring at 3:30 p.m. on May 19, 2008
      to
      reduce the exercise price per Exercise Warrant to $[__]1 
      (payable
      in cash or by surrender of Company debt only) per share of Common Stock and
      to
      issue two new warrants to purchase Common Stock in the form attached hereto
      as
Exhibit
      A
      (the
“New
      Warrants”)
      for
      each Exercise Warrant exercised. Holders of the $2.83 Warrants are requested
      to
      amend the Warrant Agreement to eliminate a requirement for a 30 day period
      for a
      temporary reduction in exercise price and to waive certain notice provisions
      contained therein to enable the Company to carry out the Warrant Offering.
      The
      New Warrants will be exercisable for a term of five (5) years at an exercise
      price of $[  
      ]2.
      The
      aggregate reduced exercise price is hereafter referred to as the “Subscription
      Price”.
      The
      shares of Common Stock issuable upon exercise of the Exercise Warrants are
      hereafter referred to as the “New
      Shares”.

     

    
      
        

      

      1
        The
        price shall be the closing sale price per share of the Common Stock on the
        date
        hereof (“Market
        Value”)
        plus
        $.01. The closing sale price per share of the Common Stock on May 13, 2008
        was
        $1.37 per share

       

      2 The
        exercise price of the new warrant shall be 115% of Market Value.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

     

    The
      New
      Shares and New Warrants are sometimes referred to herein as the “Securities.”

     

    The
      Company has also entered into a financial advisory agreement (the “Financial
      Advisory Agreement”)
      with
      Empire Asset Management Company (“Empire”)
      in
      connection with the transactions contemplated in this Subscription Agreement.
      Under the Financial Advisory Agreement, Empire Asset Management Company will
      receive cash fees equal to 10% of the gross proceeds from the Warrant offering,
      plus warrants (the “Empire
      Warrants”)
      in
      substantially the form of the New Warrants to purchase a number of shares of
      Common Stock equal to 10% of the aggregate number of New Shares and New Warrants
      issued in the Warrant Offering at an exercise price equal to the Market Value
      plus $.01 and the New Warrant Price, respectively, and a non-accountable expense
      allowance of $35,000.

     

    Holders
      of Exercise Warrants who do not wish to exercise Exercise Warrants pursuant
      to
      this Subscription Agreement (the
      “Transfer
      Holders”)
      may
      transfer the Exercise Warrants to an accredited investor(s) (each, a
“Transferee”)
      who
      will simultaneously exercise such Exercise Warrants for cash or surrender of
      Company debt, in exchange for delivery to the Transfer Holders of one New
      Warrant issuable upon exercise per Exercise Warrant transferred, as provided
      in
      the Warrant Transfer Agreement (the “Transfer
      Agreement”)
      in the
      form attached hereto as Exhibit
      B.
      Accordingly, Transferees who exercise Exercise Warrants acquired pursuant to
      a
      Transfer Agreement shall be required to execute this Subscription Agreement
      and
      shall receive one New Share upon exercise thereof and one New Warrant, with
      one
      additional New Warrant delivered to the Transfer Holder of the exercised
      Exercise Warrant. 

     

    The
      Company has outstanding $3,250,000 principal amount of 8% convertible notes
      (the
“8%
      Notes”).
      The
      8% Notes plus accrued interest are convertible at the option of the holders
      exercised prior to November 10, 2007, into Common Stock and warrants.
      Simultaneously with the issuance of the 8% Notes, the Company also agreed to
      sell up to $750,000 of additional 8% Notes to Ellis International at its option,
      expiring June 30, 2008. The Company has agreed with holders of the 8% Notes
      (the “Warrant
      Extension Agreement”) to
      issue to them warrants, substantially similar to the New Warrants (the
“Extension
      Warrants”),
      to
      purchase an aggregate of 1,252,998 shares of Common Stock, in exchange for
      an
      extension of the maturity date of the 8% Notes to December 31, 2008, and has
      also agreed to extend the Ellis option to December 31, 2008. The foregoing
      is a
      condition to the Closing hereunder. 

     

    This
      Subscription Agreement, the New Warrants, the Financial Advisory Agreement
      and
      the Transfer Agreement are referred to herein as the “Transaction
      Documents.”
      

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    In
      connection with this subscription, each Subscriber and the Company agree as
      follows:

     

    
      1.       
        Subscription;
        Closing.

    

     

    1.1.  Purchase
      of New Shares and New Warrants; Transfer of Exercise Warrants. The
      undersigned Subscriber (which includes both Warrantholders and Transferees
      of
      New Warrants) hereby irrevocably agrees, represents and warrants with, to and
      for the benefit of the Company, that such Subscriber is executing this
      Subscription Agreement in connection with the exercise by the Subscriber of
      the
      number of Exercised Warrants set forth on the signature page hereof. Each
      Subscriber shall receive one New Share and two New Warrants for each Exercise
      Warrant exercised by the Subscriber; provided that Subscribers who are
      Transferees shall deliver one New Warrant to the Applicable Transfer Holder
      for
      each Exercise Warrant in accordance with the applicable Transfer Agreement.
      Subject to the terms and conditions of this Subscription Agreement, upon
      execution and delivery hereof by the Subscriber, the Subscriber hereby agrees
      to
      purchase the Securities pursuant to the terms of this Subscription Agreement,
      and against concurrent delivery to the Company of the Exercise Warrants
      exercised and the Subscription Price for such Securities. 

     

    1.2.  Offering.
      This
      offering of the Securities (the “Offering”)
      is
      being made to a limited group of Warrantholders and Transferees, all of whom
      shall represent to the Company pursuant to this Subscription Agreement that
      they
      are "accredited investors," as that term is defined in Regulation D promulgated
      under the Securities Act of 1933, as amended (the "Securities
      Act")
      or who
      have otherwise been qualified as investors by the Company. All of the Securities
      offered hereby are being sold by the Company. The Company is offering the
      Securities for the consideration set forth herein. The Company may sell less
      than all of the Securities offered hereby, and shall be entitled to accept
      subscriptions and receive the Subscription Price for each subscription prior
      to
      the entire Offering being subscribed for. The Offering is being made on a “best
      efforts” no minimum basis, and accordingly the risk to Subscribers may be
      greater is only a small amount of Securities are sold hereunder.

     

    1.3.  Escrow.
      Each
      Subscriber subscribing for cash shall deliver to Signature Bank, a New York
      State chartered bank and having an office at 261 Madison Avenue, New York,
      New
      York 10016 (the “Escrow
      Agent”),
      via
      wire transfer or a certified check, immediately available funds equal to its
      Subscription Price, which proceeds shall remain in escrow until the Closing
      (as
      defined below) occurs hereunder.

     

    1.4.  Closing.
      The
      closing (“Closing”)
      of the
      purchase and sale of the Securities hereunder shall take place on or about
      May
      19, 2008 (the “Closing
      Date”)
      at the
      offices of Hahn & Hessen LLP, counsel for the Company (“Counsel”),
      in
      New York, NY; provided that the Note Extension Agreement shall be executed
      and
      effective as of Closing. At the Closing:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (a)  The
      Subscriber shall deliver the Exercise Warrants to be exercised (or an
      appropriate Affidavit of Loss);

     

    (b)  The
      Escrow Agent shall deliver the Subscription Price to the Company or as otherwise
      directed by the Company (and Subscribers subscribing by surrender of Company
      debt shall deliver evidence of such debt (or an affidavit of loss and indemnity)
      to Counsel);

     

    (c)  The
      Company shall deliver the New Warrants to the Subscribers; and 

     

    (d)  The
      Company shall cause its transfer agent to deliver the New Shares to the
      Subscriber.

     

    
      2.       
        Representations
        and Warranties of the Subscriber.

    

     

    The
      Subscriber hereby represents and warrants to the Company as of the date
      hereof:

     

    2.1.  Place
      of Business.
      The
      principal place of business address set forth below is such Subscriber's true
      and correct principal place of business and is the only jurisdiction in which
      an
      offer to sell the Securities was made to such Subscriber and such Subscriber
      has
      no present intention of moving its principal place of business to or of becoming
      a resident of any other state or jurisdiction.

     

    2.2.   Sale
      or Transfer of the Securities; Unregistered Securities. The
      Subscriber understands that the Securities have not been registered under the
      Securities Act, or under the laws of any other jurisdiction. The Subscriber
      understands and agrees that transfer or sale of the Securities may be restricted
      or prohibited unless they are subsequently registered under the Securities
      Act
      and, where required, under the laws of other jurisdictions or an exemption
      from
      registration is available. The Subscriber will not offer, sell, transfer or
      assign its Securities or any interest therein in contravention of this
      Subscription Agreement, the Securities Act or any state or federal law. The
      Subscriber understands and acknowledges that, because of the substantial
      restrictions on the transferability of the Securities, it may not be possible
      for the Subscriber to liquidate the Subscriber's investment in the Company
      readily, even in the case of an emergency. Subscriber acknowledges that the
      Offering has not been registered with the Securities and Exchange Commission
      (the “Commission”) because
      the Company is relying on an exemption from registration under Section 4(2)
      of
      the Securities Act and Regulation D promulgated thereunder.

     

    2.3.  Representation
      of Accredited Investor Status (if a U.S. person).
      If
      the Subscriber is a U.S. person (as
      defined in Regulation S of the Commission), (i) such Subscriber, if it is a
      corporation, a partnership, a limited liability company, a trust or other
      business entity, has not been organized for the purpose of purchasing the
      Securities and (ii) Subscriber
      represents that at the time of the sale of the Securities to Subscriber,
      Subscriber (or,
      if
      Subscriber is a corporation, limited liability company or trust, each of its
      equity owners)
      qualifies as an "accredited investor" (as
      defined under Rule 501 of Regulation D promulgated under the Securities Act)
      using the following qualification factors (check all appropriate
      items):

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	(__)	
              $1,000,000
                Net Worth Test:

            

    

     

    I,
      Subscriber, am a natural person and my individual net worth, or joint net worth
      with my spouse (if any), inclusive
      of home,
      furnishings and automobiles, at the time of this purchase is in excess of
      $1,000,000.

     

    
      	(__)	
              $200,000
                Individual/$300,000 Joint Annual Income
                Test:

            

    

     

    I,
      Subscriber, am a natural person and my individual annual gross income (exclusive
      of my spouse’s income) has been in excess of $200,000 in each of the two most
      recent tax years, and I reasonably expect individual annual gross income
      (exclusive of my spouse’s income) to be in excess of $200,000 for the current
      tax year; or I am a natural person and my joint annual gross income (including
      my spouse’s annual gross income) has been in excess of $300,000 in each of the
      two most recent tax years, and I reasonably expect our joint annual gross
      incomes to be in excess of $300,000 for the current tax year.

     

    (“Income”
      under
      this test is defined as adjusted gross income for federal income tax purposes
      plus
      (i)
      deductions for long-term capital gains under the Internal Revenue Code; (ii)
      deductions for depletion under section 611 et seq. of the Code; (iii) any
      exclusion for interest received on tax-exempt securities; and (iv) any losses
      of
      a Company allocated to the individual limited partners of the Company as
      reported on Form 1040).

     

    
      	(__)	
              Bank
                or Investment Company
                Test:

            

    

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	(__)	
              Private
                Business Development Corporation
                Test:

            

    

     

    Subscriber
      is a private business development company as defined in section 202(a)(22)
      of
      the Investment Advisors Act of 1940.

     

    
      	(__)	
              IRC
                Section 501c(3) Organization
                Test:

            

    

     

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

     

    
      	(__)	
              Direct
                Relationship to Issuer
                Test:

            

    

     

    Subscriber
      is a director, executive officer, partner or manager of the Company of the
      securities being offered or sold, or any director, executive officer or manager
      of a partner or partner of that issuer.

     

    
      	(__)	
              $5,000,000
                Noninvestment Trust Test:

            

    

     

    Subscriber
      is a trust with total assets in excess of $5,000,000 not formed for the specific
      purpose of acquiring the securities being offered, whose purchase is directed
      by
      a “sophisticated person” as described in section 230.506(b)(2)(ii).

     

    
      	(__)	
              Equity
                Entity Comprised of Accredited Investors
                Test:

            

    

     

    Subscriber
      is any equity entity in which all of the equity owners are accredited investors
      as defined above. Subscriber has had one of the persons responsible for
      overseeing and/or managing one or more of Subscriber’s financial accounts
      complete the attestation in Section 2 hereof in order to verify the information
      in this Section 2:

     

    Yes
      _________     No
      _________

     

    2.4.  Non
      U.S. Purchasers.
      If the Subscriber is not a U.S. person (each, a “Non-U.S.
      Purchaser”),
      (i) such Non-U.S. Purchaser is not a U.S. person; (ii) such Non-U.S. Purchaser
      was outside the United States at the time the offer to sell the Securities
      was
      made and at the time the buy order for the Securities was originated; (iii)
      such
      Non-U.S. Purchaser will not offer or sell the Securities, or any securities
      of
      the Company received in respect thereof, to a U.S. person or for the account
      or
      benefit of a U.S. person (other than a distributor), for a period of one year
      commencing on the Closing.

     

    2.5.  Investment
      Experience and Ability to Bear Risk.
      Subscriber is knowledgeable and experienced with respect to the financial and
      business activities contemplated by the Company and is capable of evaluating
      the
      risks and merits of investing in the Securities and, in making a decision to
      proceed with this investment, has not relied upon any representations,
      warranties or agreements, other than those set forth in this Subscription
      Agreement and can bear the economic risk of an investment in the Company for
      an
      indefinite period of time, and can afford to suffer the complete loss
      thereof.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    2.6.  Own
      Advice.
      In
      connection with the Subscriber’s investment in the Company, the Subscriber has
      carefully considered and has, to the extent the Subscriber believes such
      discussion necessary, discussed with the Subscriber’s professional legal, tax
      and financial advisers (the “Investment
      Advisors”)
      the
      suitability of an investment in the Securities for the Subscriber’s particular
      tax and financial situation and the Subscriber has determined that the
      Securities are a suitable investment for the Subscriber.

     

    2.7.  Risks.
      The
      Subscriber represents and warrants that the Subscriber is aware (i) that
      the Securities involve a substantial degree of risk of loss of the Subscriber’s
      entire investment and that there is no assurance of any income from the
      Subscriber’s investment; and (ii) that any federal or State income tax
      benefits which may be available to the Subscriber, if any, may be lost through
      the adoption of new laws or regulations, to changes to existing laws and
      regulations and to changes in the interpretation of existing laws and
      regulations. The Subscriber further represents that the Subscriber is relying
      solely on the Subscriber’s own conclusions or the advice of the Subscriber’s
      Investment Advisors with respect to tax aspects of any investment in the
      Securities. The Subscriber further represents that it has read and reviewed
      the
      SEC Documents (as defined below) and Company Disclosure Letter, including
      without limitation the risk factors set forth therein. 

     

    2.8.  Inquiries.
      The
      Subscriber and its Investment Advisors have been given access to, and prior
      to
      the execution of this Subscription Agreement, have been provided with an
      opportunity to ask questions of, and receive answers from, the Company officers
      concerning the Company and the terms and conditions of the Offering and the
      Securities, and to obtain any other information which the Subscriber and the
      Subscriber’s Investment Advisors required with respect to the Company and an
      investment in the Company in order to evaluate such investment and verify the
      accuracy of all information furnished to the Subscriber and its Investment
      Advisors regarding the Company. All such questions, if asked, were answered
      satisfactorily and all information or documents provided were found to be
      satisfactory. Neither the Subscriber nor its Investment Advisors have been
      furnished any offering literature on which they have relied on other this
      Subscription Agreement and the Subscriber and its Investment Advisors have
      relied only on this Subscription Agreement. At no time was the Subscriber
      presented with or solicited by any leaflet, public promotion meeting, newspaper
      or magazine article, radio or television advertisement or any other form of
      general advertising or general solicitation.

     

    2.9.  Authority.
      The
      Subscriber is authorized and has full right and power to subscribe for the
      Securities and to perform the Subscriber’s obligations pursuant to the
      provisions of this Subscription Agreement; the person signing this Subscription
      Agreement and any other instrument executed and delivered herewith on behalf
      of
      such Subscriber has been duly authorized by such entity and has full power
      and
      authority to do so. If the Subscriber is a corporation, partnership,
      unincorporated association or other entity, the person signing this agreement
      has the legal capacity to authorize, deliver and be bound by this Subscription
      Agreement and to take all actions required pursuant hereto and further certifies
      that all necessary approvals of directors, stockholders or otherwise have been
      given and obtained; and if the Subscriber is an individual, it is of the full
      age of majority in the jurisdiction in which the Subscriber is resident and
      is
      legally competent to execute, deliver and be bound by this Subscription
      Agreement and take all action pursuant hereto.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    2.10.  No
      Default.
      The
      execution and delivery of this Subscription Agreement and the consummation
      of
      the transactions contemplated hereby and thereby will not conflict with, or
      result in any violation of or default pursuant to, any provision of any
      governing instrument applicable to the Subscriber, or any agreement or other
      instrument to which the Subscriber is a party or by which the Subscriber or
      any
      of the Subscriber’s properties are bound or any permit, franchise, judgment,
      decree, statute, rule or regulation applicable to the Subscriber or any of
      the
      Subscriber’s business or properties.

     

    2.11.  ERISA.
      If the
      Subscriber is an employee benefit plan subject to ERISA, then such Subscriber
      acknowledges that such Subscriber has been informed of and understands the
      operations and business of the Company, and represents that such Subscriber’s
      investment in the Company (i) is permissible under the documents and instruments
      governing such plan; (ii) satisfies the diversification requirements of ERISA;
      (iii) is prudent considering all the facts and circumstances, including the
      fact
      that there is no trading market for the Securities; and (iv) is not a
“prohibited transaction” within the meaning of Section 406 of
      ERISA.

     

    2.12.  Purchase
      Entirely For Own Account.
      This
      Subscription Agreement is made with the Subscriber in reliance upon the
      Subscriber’s representations to the Company, which by the Subscriber’s execution
      of this Subscription Agreement, the Subscriber hereby confirms, that the
      Securities issuable to the Subscriber will be acquired for investment for the
      Subscriber’s own account, not as a nominee or agent, and not with a view to the
      resale or distribution of any part thereof, and that the Subscriber has no
      present intention of selling, granting any participation in, or otherwise
      distributing the same. The Subscriber represents and warrants that the
      Subscriber has no contract, understanding, agreement or arrangement with any
      person to sell or transfer or pledge to such person or anyone else any of the
      Securities for which the Subscriber hereby subscribes (in whole or in part)
      or
      any interest therein; and the Subscriber represents and warrants that the
      Subscriber has no present plans to enter into any such contract, undertaking,
      agreement or arrangement.

     

    2.13.  Certain
      Legal Issues.
      The
      Subscriber represents and warrants that the funds representing the Subscription
      Price which will be advanced by the Subscriber hereunder will not represent
      proceeds of crime and the Subscriber acknowledges that the Company may in the
      future be required by law to disclose the Subscriber’s name and other
      information relating to this Subscription Agreement and the Subscriber’s
      subscription hereunder, on a confidential basis, and to the best of the
      Subscriber’s knowledge (i) none of the subscription funds to be provided by the
      Subscriber (a) have been or will be derived from or related to any activity
      that
      is deemed criminal under the laws of the United States of America, or any other
      jurisdiction, or (b) are being tendered on behalf of a person or entity who
      has
      not been identified to the Subscriber, and (ii) it shall promptly notify the
      Company if the Subscriber discovers that any of such representations ceases
      to
      be true, and to provide the Company with appropriate information in connection
      therewith.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    The
      Subscriber represents and warrants that the current structure of this
      transaction and all transactions and activities contemplated hereunder is not
      a
      plan or scheme to evade the registration provisions of the Securities
      Act.

     

    The
      Subscriber acknowledges that:

     

    
      	 	
              (i)

               

            	
              no
                securities commission or similar regulatory authority has reviewed
                or
                 passed on the merits of the Securities; and

               

            
	 	
              (ii)

               

            	
              There
                is no government or other insurance covering the Securities;
                and

               

            
	 	
              (iii)

               

            	
              there
                are risks associated with the purchase of the Securities; and

               

            
	 	
              (iv)

               

            	
              there
                are restrictions on the Subscriber’s ability to resell the Securities and
                 it is the responsibility of the Subscriber to find out what those
                restrictions  are and to comply with them before selling the
                Securities; and

               

            
	 	
              (v)

               

            	
              the
                Company has advised the Subscriber that the Company is relying on
 an
                exemption from the requirements to provide the Subscriber with a
                 prospectus and to sell securities through a person or company
                registered to  sell securities under applicable securities laws and,
                as a consequence of  acquiring the Securities pursuant to this
                exemption, certain protections,  rights and remedies provided by
                applicable securities laws, including  statutory rights of rescission
                or damages, will not be available to the
                 Subscriber.

            

    

     

    The
      Subscriber represents and warrants that neither the Company, nor any of their
      respective directors, officers, employees or representatives, have made any
      representations (oral or written) to the Subscriber regarding the future value
      of the Securities.

     

    The
      Subscriber acknowledges that (i) the Company may complete secured or unsecured
      debt financings or equity financings in the future in order to develop the
      Company’s business and to fund its ongoing development, (ii) there is no
      assurance that such financings will be available and, if available, on
      reasonable terms, (iii) any such future financings may have a dilutive effect
      on
      current security holders, including the Subscriber, and (iv) if such future
      financings are not available, the Company may be unable to fund its ongoing
      development and the lack of capital resources may result in the failure of
      its
      business.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    The
      Subscriber will not, directly or indirectly, except in compliance with (that
      is,
      only to the extent required to comply with) the Securities Act and such other
      securities or “Blue Sky” laws as may be applicable, (i) offer, sell, pledge,
      transfer or otherwise dispose of (or solicit any offers to buy, purchase or
      otherwise acquire or take a pledge of) any of the Securities, (ii) engage in
      any
      short sale which results in a disposition of any of the Securities by
      Subscriber, or (iii) hedge the economic risk of the Subscriber’s investment in
      the Securities.

     

    2.14.  The
      Subscriber hereby covenants with the Company not to make any sale of the
      Registrable Shares (as defined below) under the Registration Statement without
      effectively causing the prospectus delivery requirement under the Securities
      Act
      to be satisfied, and the Subscriber acknowledges and agrees that such
      Registrable Shares are not transferable on the books of the Company pursuant
      to
      a sale under a Registration Statement unless the certificate submitted to the
      transfer agent evidencing the Registrable Shares is accompanied by a separate
      Subscriber’s certificate of subsequent sale in reasonable form, executed by an
      officer of, or other authorized person designated by, the Subscriber, to the
      effect that (A) the Registrable Shares have been sold in accordance with the
      Registration Statement, the Securities Act and any applicable state securities
      or Blue Sky laws and (B) if applicable, the requirement of delivering a current
      prospectus has been satisfied. The Subscriber acknowledges that there may
      occasionally be times when the Company must suspend the use of the prospectus
      forming a part of the Registration Statement (a “Suspension”)
      until
      such time as an amendment to the Registration Statement has been filed by the
      Company and declared effective by the Commission, or such time as such
      prospectus has been supplemented, or until such time as the Company has filed
      an
      appropriate report with the Commission pursuant to the Exchange Act. The
      Subscriber hereby covenants that it will not sell any Registrable Shares
      pursuant to said prospectus during the period commencing at the time at which
      it
      receives written notice of the Suspension of the use of said prospectus (without
      providing any other material information other than at the written request
      of
      the Subscriber) and ending at the time the Company gives the Subscriber written
      notice that the Subscriber may thereafter effect sales pursuant to said
      prospectus. The Subscriber shall not be prohibited from selling Registrable
      Shares under the Registration Statement as a result of Suspensions on more
      than
      two occasions of not more than thirty (30) days each in any 12-month period,
      unless, in the good faith judgment of the Company’s Board of Directors following
      the written advice of counsel, the sale of Registrable Shares under the
      Registration Statement in reliance on this paragraph would be reasonably likely
      to cause a violation of the Securities Act or the Exchange Act; provided that
      the Company shall remain liable for liquidated damages pursuant to Section
      7.7
      hereof with respect to any Suspensions exceeding the aforementioned two
      permitted 30-day Suspensions in any 12-month period.

     

    2.15.  If
      the
      Subscriber is exercising $2.83 Warrants, the Subscriber
      hereby agrees (i) to amend the definition of "Purchase Price" set
      forth in the $2.83 Warrant Agreement to delete the phrase "for a period of
      not less than 30 days on not less than 30 days' prior written notice to the
      Registered Holders", so that such definition shall read in its
      entirety: " 'Purchase Price' shall mean, subject to modification and adjustment
      as provided in Section 8, $2.8313 and further subject to the Company's right,
      in
      its sole discretion, to decrease the Purchase Price on notice to the Registered
      Holders."
      and
      (ii) that such amendment be effective immediately prior to the reduction of
      the Purchase Price (as newly defined in the $2.83 Warrant
      Agreement) pursuant to the Warrant Offering. 

     

    
      
        
        

      

      
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      3.       
        Representations
        and Warranties of the Company.

    

     

    3.1.  Corporate
      Organization; Authority; Due Authorization.

     

    (a)  The
      Company (A) is a corporation duly organized, validly existing and in good
      standing under the laws of the jurisdiction of the State of Delaware, (B) has
      the corporate power and authority to own or lease its properties as and in
      the
      places where its business is now conducted and to carry on its business as
      now
      conducted, and (C) is duly qualified as a foreign corporation authorized to
      do
      business in every jurisdiction where the failure to so qualify, individually
      or
      in the aggregate, would have a material adverse effect on the operations,
      assets, liabilities, financial condition or business of the Company taken as
      a
      whole (a “Material
      Adverse Effect”).
      

     

    (b)  The
      Company (A) has the requisite corporate power and authority to execute, deliver
      and perform its obligations under this Subscription Agreement, the Financial
      Advisory Agreement and to issue and perform its obligations under the New
      Warrants and Empire Warrants (except that the Company is barred from taking
      actions that may trigger adjustments under Section 4 of each of the New
      Warrants, Empire Warrants and Extension Warrants) and to incur the obligations
      herein and therein and (B) has been authorized by all necessary corporate action
      to execute, deliver and perform the Transaction Documents and to consummate
      the
      transactions contemplated hereby and thereby (the “Contemplated
      Transactions”).
      The
      Transaction Documents will be on the Closing Date valid and binding obligations
      of the Company enforceable in accordance with their terms except as limited
      by
      applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
      affecting the enforcement of creditors’ rights and the availability of equitable
      remedies (regardless of whether such enforceability is considered in a
      proceeding at law or equity).

     

    
      
        
        

      

      
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    3.2.  Capitalization.
      The
      authorized capital stock of the Company consists of seventy five million
      (75,000,000) shares of common stock, $.01 par value, of which as of May 13,
      2008, 25,919,162 shares of Common Stock are outstanding. All outstanding shares
      of capital stock of the Company were issued in compliance with all applicable
      federal and State securities laws, and the issuance of such shares was duly
      authorized by all necessary corporate action on the part of the Company. Except
      as contemplated by this Subscription Agreement or as set forth in the SEC
      Documents, there are (A) no outstanding subscriptions, warrants, options,
      conversion privileges or other rights or agreements obligating the Company
      to
      purchase or otherwise acquire or issue any shares of capital stock of the
      Company (or shares reserved for such purpose), (B) no preemptive rights
      contained in the Company’s Certificate of Incorporation, as amended (the
“Certificate
      of Incorporation”),
      the
      By-laws of the Company or contracts to which the Company is a party or rights
      of
      first refusal with respect to the issuance of additional shares of capital
      stock
      of the Company, including without limitation the Securities and (C) no
      commitments or understandings (oral or written) of the Company to issue any
      shares, warrants, options or other rights to acquire any equity securities
      of
      the Company other than with respect to existing antidilution rights of existing
      investors (certain of which antidilution rights will be triggered by the sale
      of
      Securities hereunder). To the Company’s knowledge, except as set forth in the
      SEC Documents, none of the shares of common stock are subject to any
      stockholders’ agreement, voting trust agreement or similar arrangement or
      understanding. Except as set forth in the SEC Documents, the Company has no
      outstanding bonds, debentures, Common Stock or other obligations the holders
      of
      which have the right to vote (or which are convertible into or exercisable
      for
      securities having the right to vote) with the stockholders of the Company on
      any
      matter.

     

    3.3.  Due
      Execution, Delivery and Performance of the Transaction Documents.
      The
      Company has all requisite corporate power and authority to enter into each
      Transaction Document and perform the transactions contemplated hereby or
      thereby. Each Transaction Document has been duly authorized, executed and
      delivered by the Company. The execution, delivery and performance of each
      Transaction Document by the Company and the consummation of the transactions
      contemplated herein or therein will not violate any provision of the
      organizational documents of the Company and will not result in the creation
      of
      any lien, charge, security interest or encumbrance upon any assets of the
      Company pursuant to the terms or provisions of, or will not conflict with,
      result in the breach or violation of, or constitute, either by itself or upon
      notice or the passage of time or both, a default under, any agreement, mortgage,
      deed of trust, lease, franchise, license, indenture, permit or other instrument
      to which the Company is a party or by which the Company or any of its properties
      may be bound or affected or, to the Company’s knowledge, any statute or any
      authorization, judgment, decree, order, rule or regulation of any court or
      any
      regulatory body, administrative agency or other governmental body applicable
      to
      the Company or any of its properties where such conflict, breach, violation
      or
      default is reasonably likely to result in a material adverse effect. No consent,
      approval, authorization or other order of any court, regulatory body,
      administrative agency or other governmental body is required for the execution
      and delivery of the Transaction Documents or the consummation of the
      transactions contemplated by the Transaction Documents, except for compliance
      with the Blue Sky laws and federal securities laws applicable to the offering
      of
      the Securities. Upon the execution and delivery of (i) this Subscription
      Agreement by the Company, and assuming the valid execution hereof by the
      Subscriber, (ii) the New Warrants by the Company and (iii) the Financial
      Advisory Agreement and the Transfer Agreement by the applicable parties, each
      Transaction Document will constitute a valid and binding obligation of the
      Company, enforceable in accordance with its terms, except as (x) enforceability
      may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
      or similar laws affecting creditors’ and contracting parties’ rights generally,
      (y) enforceability may be subject to general principles of equity (regardless
      of
      whether such enforceability is considered in a proceeding in equity or at law)
      and (z) the indemnification agreements of the Company in Section 7.3 hereof
      may
      be legally unenforceable.

     

    
      
        
        

      

      
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    3.4.  Validity
      of Securities.
      The
      issuance of the Securities has been duly authorized by all necessary corporate
      action on the part of the Company and, when issued to, delivered to, and paid
      for by the Subscribers in accordance with this Subscription Agreement, the
      Securities will be validly issued, fully paid and non-assessable. 

     

    3.5.  Underlying
      Securities.
      The
      issuance of the New Shares has been duly authorized, and the shares issuable
      upon exercise of the New Warrants (the “New
      Warrant Shares”),
      prior
      to exercise of the New Warrants, will have been duly reserved for issuance
      upon
      such exercise and, when so issued, will be validly issued, fully paid and non
      assessable. 

     

    3.6.  Private
      Offering.
      The
      Company agrees that neither the Company nor anyone authorized to act on its
      behalf will offer the Securities or any part thereof or any similar securities
      for issuance or sale to, or solicit any offer to acquire any of the same from,
      anyone so as to make the issuance and sale of the Securities subject to the
      registration requirements of Section 5 of the Securities Act. 

     

    3.7.  Compliance.
      Except
      as set forth in the SEC Documents (as defined below), the Company is not in
      conflict with, or in default or violation of (i) any law, rule, regulation,
      order, judgment or decree applicable to the Company or by which any property
      or
      asset of the Company is bound or affected (“Legal
      Requirement”),
      or
      (ii) any material agreement, in each case except for any such conflicts,
      defaults or violations that would not, individually or in the aggregate, have
      a
      material adverse effect. The Company has not received any written notice or
      other communication from any governmental body regarding any actual or possible
      violation of, or failure to comply with, any Legal Requirement, except any
      such
      violations or failures that would not, individually or in the aggregate, have
      a
      material adverse effect. 

     

    4.  SEC
      Documents; Financial Statements.

     

    4.1.  (a)The
      information contained in the following documents, did not, as of the date of
      the
      applicable document, include any untrue statement of a material fact or omit
      to
      state any material fact required to be stated therein or necessary to make
      the
      statements therein, in the light of the circumstances in which they were made,
      not misleading, as of their respective filing dates or, if amended, as so
      amended (the following documents, collectively, the “SEC
      Documents”),
      provided that the representation in this sentence shall not apply to any
      misstatement or omission in any SEC Document filed prior to the date of this
      Subscription Agreement which was superseded by a subsequent SEC Document filed
      prior to the date of this Subscription Agreement:

     

    (i)
      the
      Company’s Annual Report on Form 10-K for the year ended December 31, 2007;
      and

     

    
      
        
        

      

      
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    (iii)
      The
      Company’s interim filings on Form 8-K or other appropriate forms filed on any
      date after December 31, 2007 and on or before the Closing.

     

    (b)  In
      addition, as of the date of this Subscription Agreement, when read together
      with
      the SEC Documents and the Company Disclosure Letter in the form attached hereto
      as Exhibit
      C
      (the
“Company
      Disclosure Letter”),
      the
      information, qualifications and exceptions contained in this Subscription
      Agreement do not include any untrue statement of a material fact or omit to
      state a material fact in light of the circumstances in which such written
      disclosures were made.

     

    (c)  The
      Company has filed all forms, reports and documents required to be filed by
      it
      with the SEC for the 12 months preceding the date of this Subscription
      Agreement, including without limitation the SEC Documents. As of their
      respective dates, the SEC Documents filed prior to the date hereof complied
      as
      to form in all material respects with the applicable requirements of the
      Securities Act, the Exchange Act, and the rules and regulations
      thereunder.

     

    (d)  The
      Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007,
      includes consolidated balance sheets as of December 31, 2006 and 2007 and
      consolidated statements of income for the one year periods then ended
      (collectively, the “Form
      10-K Financial Statements”).

     

    (e)  The
      Company Disclosure Letter includes consolidated balance sheets as of March
      31,
      2008 and consolidated statements of income for the quarters ended March 31,
      2007
      and 2008 (the “Interim
      Financial Statements”
and
      together with the Form 10-K Financial Statements, the “Financial
      Statements”).

     

    (f)  The
      Financial Statements (including the related notes and schedules thereto) fairly
      present in all material respects the consolidated financial position, the
      results of operations, retained earnings or cash flows, as the case may be,
      of
      the Company for the periods set forth therein (subject, in the case of unaudited
      statements, to normal year-end audit adjustments that would not be material
      in
      amount or effect), in each case in accordance with generally accepted accounting
      principles consistently applied during the periods involved, except as may
      be
      noted therein.

     

    4.2.  Use
      of
      Proceeds.
      The net
      proceeds received by the Company from the sale of the Securities shall be used
      by the Company for working capital and general corporate purposes. The Company
      will use its best efforts to reduce its burn rate to less than $600,000 per
      month through at least December 31, 2008.

     

    4.3.  Legend.
      The
      certificates representing the Securities issued by the Company shall bear the
      following (or similar) legends:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
      LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
      FROM
      THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
      SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION THEREFROM.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    5.  Variable
      Securities; Dilutive Issuances.

     

    5.1.  So
      long
      as any Subscriber beneficially owns any New Warrants, (a) the Company will
      not
      issue any, the Company shall not, in any manner, issue or sell any rights,
      warrants or options to subscribe for or purchase Common Stock or directly or
      indirectly convertible into or exchangeable or exercisable for Common Stock
      at a
      price which varies or may vary with the market price of the Common Stock,
      including by way of one or more reset(s) to any fixed price unless the
      conversion, exchange or exercise price of any such security cannot be less
      than
      the then applicable Exercise Price (as defined in the New Warrants), and (b)
      the
      Company shall not, in any manner, enter into or effect any issuance of
      securities (a “Dilutive
      Issuance”)
      if the
      effect of such Dilutive Issuance is to cause, or but for the Securities
      Limitations (as defined below) would cause, the Company to be required to issue
      upon exercise of the New Warrants any shares of Common Stock in excess of that
      number of shares of Common Stock which the Company may issue upon exercise
      of
      the New Warrants without breaching the Company's obligations under the rules
      or
      regulations of the NASDAQ Capital Market (the "Securities
      Limitations")
      unless
      or until the Stockholder Approval (as defined below) has been
      obtained.

     

    5.2.  Stockholder
      Approval.
      The
      Company shall provide each stockholder entitled to vote at either (x) the next
      annual meeting of stockholders of the Company or (y) a special meeting of
      stockholder of the Company (the "Stockholder
      Meeting"),
      which
      shall be promptly called and held not later than September 1, 2008 (the
      "Stockholder
      Meeting Deadline"),
      a
      proxy statement, soliciting each such stockholder's affirmative vote at the
      Stockholder Meeting for approval of resolutions ("Stockholder
      Resolutions")
      ratifying the issuance of all of the Securities as described in the Transaction
      Documents and, without limitation on the foregoing, the antidilution provisions
      of the New Warrants, Empire Warrants and the Extension Warrants, in accordance
      with applicable law and the rules and regulations of the NASDAQ Capital Market
      (such affirmative approval being referred to herein as the “Stockholder
      Approval”),
      and
      the Company shall use its reasonable best efforts to solicit its stockholders’
approval of such resolutions and to cause the Board of Directors of the Company
      to recommend to the stockholders that they approve such resolutions. The Company
      shall be obligated to seek to obtain the Stockholder Approval by the Stockholder
      Meeting Deadline. If, despite the Company’s reasonable best efforts, the
      Stockholder Approval is not obtained on or prior to the Stockholder Meeting
      Deadline, the Company shall cause an additional Stockholder Meeting to be held
      once in each twelve month period thereafter until such Stockholder Approval
      is
      obtained, provided that if the Board of Directors of the Company does not
      recommend to the stockholders that they approve the Resolutions at any such
      Stockholder Meeting and the Stockholder Approval is not obtained, the Company
      shall cause an additional Stockholder Meeting to be held each calendar quarter
      thereafter until such Stockholder Approval is obtained.

     

    
      
        
        

      

      
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    6.  Assignability.
      This
      Subscription Agreement and the rights and obligations hereunder are not
      transferable or assignable by the Subscriber.

     

    7.  Registration;
      Compliance with the Securities Act.

     

    7.1.  Registration
      Procedures and Expenses.
      

     

    The
      Company shall:

     

    (a)  Subject
      to receipt of necessary information in writing from the Subscribers that may
      be
      requested by the Company, as soon as reasonably practicable, but in no event
      later than forty five (45) days following the Closing Date (the “Filing
      Date”),
      prepare and file with the Securities and Exchange Commission (the “Commission”)
      a
      Registration Statement on Form S-3 (or such other form which is available to
      the
      Company) relating to the resale of the New Shares and New Warrant Shares
      (collectively, with shares issuable upon exercise of the Extension Warrants
      and
      the Empire Warrants, the “Registrable
      Shares”)
      by the
      Subscribers from time to time on NASDAQ Capital Market or the facilities of
      any
      national securities exchange on which the Common Stock is then traded or in
      privately negotiated transactions (the “Registration
      Statement”)
      and
      will use its best efforts to list such Registrable Shares on NASDAQ Capital
      Market or the facilities of any other national securities exchange on which
      the
      Common Stock is then traded;

     

    (b)  use
      its
      commercially reasonable efforts, subject to receipt of necessary information
      from the Subscribers, to cause the Commission to declare the Registration
      Statement effective within seventy five (75) calendar days after the Closing
      Date (the “Required
      Effective Date”).
      However, so long as the Company filed the Registration Statement by the Filing
      Date, if the Registration Statement receives Commission review, then the
      Required Effective Date will be the one hundred and twenty (120) calendar days
      after the Closing Date. The Company’s commercially reasonable efforts will
      include, but not be limited to, promptly responding to all comments received
      from the staff of the Commission. If the Company receives notification from
      the
      Commission that the Registration Statement will receive no action or review
      from
      the Commission, then the Company will, subject to its rights under this
      Agreement, use its commercially reasonable efforts to cause the Registration
      Statement to become effective within three business days after such Commission
      notification;

     

    (c)  use
      its
      commercially reasonable efforts to promptly prepare and file with the Commission
      such amendments and supplements to the Registration Statement and the prospectus
      used in connection therewith as may be necessary to keep the Registration
      Statement effective until the earliest of (i) the date on which the Subscribers
      may sell all of the Registrable Shares then held by the Subscribers, without
      registration pursuant to Rule 144 of the Securities Act, without any restriction
      as to the number of securities as of a particular date that can then be
      immediately sold and the adequate current public information requirement of
      Rule
      144(c)(1) promulgated under the Securities Act no longer applies to the sale
      of
      such shares without registration or (ii) such time as all Registrable Shares
      issuable to all holders of Securities have been sold pursuant to a Registration
      Statement or Rule 144 promulgated under the Securities Act. Thereafter, the
      Company shall be entitled to withdraw the Registration Statement and the
      Subscribers shall have no further right to offer or sell any of the Registrable
      Shares pursuant to the Registration Statement. The Company shall not file any
      registration statements with the Commission relating to securities other than
      the Registrable Shares until ninety (90) days after the Required Effective
      Date;
      provided nothing herein will prohibit the filing of amendments or supplements
      to
      already filed registration statements;

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (d)  use
      commercially reasonably efforts to furnish (i) to the Subscribers with respect
      to the Registrable Shares registered under the Registration Statement by fax
      or
      email (in each case with answerback confirmed) or other prompt means one copy
      of
      the prospectus promptly after effectiveness of the Registration Statement and
      in
      any case before the next opening of the principal market for the Registrable
      Shares and (ii) to the Subscribers with respect to the Registrable Shares
      registered under the Registration Statement (and to each underwriter, if any,
      of
      such Registrable Shares) such number of copies of prospectuses and such other
      documents as the Subscribers may reasonably request within a reasonable time,
      in
      order to facilitate the public sale or other disposition of all or any of the
      Registrable Shares by the Subscribers;

     

    (e)  file
      documents required of the Company for normal Blue Sky clearance in states
      specified in writing by the Subscribers and reasonably acceptable to the
      Company; provided,
      however,
      that the
      Company shall not be required to (i) qualify to do business in any jurisdiction
      where it would not otherwise be required to qualify but for this Section 7.1;
      (ii) file a general consent to service of process in any such jurisdiction;
      (iii) subject itself to taxation in any such jurisdiction; (iv) provide any
      undertakings that cause material expense or burden to the Company; or (v) make
      any change to its organizational documents, which in each case the Board of
      Directors of the Company determines to be contrary to the best interests of
      the
      Company and its stockholders;

     

    (f)  bear
      all
      expenses in connection with the procedures in paragraphs (a) through (e) of
      this
      Section 7.1 and the registration of the Registrable Shares pursuant to the
      Registration Statement, other than fees and expenses, if any, of counsel or
      other advisers to the Subscribers or underwriting discounts, brokerage fees
      and
      commissions incurred by the Subscribers, if any; and

     

    (g)  promptly
      notify the Subscribers of the effectiveness of a Registration Statement, and
      any
      post-effective amendments thereto, as well as of the receipt by the Company
      of
      any stop orders of the Commission with respect to a Registration Statement
      and
      the lifting of any such order.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      the foregoing, it shall be a condition precedent to the obligations of the
      Company to take any action pursuant to paragraphs (a) through (f) of this
      Section 7.1, that each Subscriber shall furnish to the Company such information
      regarding itself, the Registrable Shares to be sold by the Subscriber, and
      the
      intended method of disposition of such Registrable Shares as shall be required
      to effect the registration of the Registrable Shares, all of which information
      shall be furnished to the Company in writing specifically for use in the
      Registration Statement.

     

    The
      Registration Statement may include additional securities pursuant to existing
      registration rights.

     

    The
      Company understands that each Subscriber disclaims being an underwriter, but
      a
      Subscriber being deemed an underwriter shall not relieve the Company of any
      obligations it has hereunder, provided,
      however,
      that if
      the Company receives notification from the Commission that the Subscriber is
      deemed an underwriter, then the period in which the Company is obligated to
      submit an acceleration request to the Commission shall be extended to the
      earlier of (i) the sixtieth (60th) day after such Commission notification,
      or
      (ii) ninety (90) days after the initial filing of the Registration Statement
      with the Commission. Notwithstanding the foregoing, the parties understand
      and
      agree that the Company shall not be obligated to retain an underwriter with
      respect to the offer and sale of Registrable Shares pursuant to the Registration
      Statement

     

    7.2.  Transfer
      of Securities After Registration.
      While
      the Registration Statement is effective and available for resale, each
      Subscriber agrees that it will not effect any disposition of New Warrants or
      Registrable Shares that would constitute a sale within the meaning of the
      Securities Act, except as contemplated in the Registration Statement referred
      to
      in Section 7.1 hereof in the section titled “Plan of Distribution” or pursuant
      to an applicable exemption from registration, the availability of which is
      confirmed in writing by counsel to the Subscriber (the form, substance and
      scope
      of which opinion shall be reasonably acceptable to the Company) and delivered
      to
      the Company, and that it will promptly notify the Company of any changes in
      the
      information set forth in the Registration Statement regarding the Subscriber
      or
      its plan of distribution.

     

    7.3.  Indemnification.

     

    (a)  For
      purpose of this Agreement, the term “Subscriber/Affiliate”
shall
      mean any affiliate of a Subscriber (as defined in Rule 405 under the Securities
      Act) and any person who controls the Subscriber or any affiliate of the
      Subscriber within the meaning of Section 15 of the Securities Act or Section
      20
      of the Exchange Act; and

     

    (b)  For
      purpose of this Section 7.3, the term “Registration
      Statement”
shall
      include any final prospectus, exhibit, supplement or amendment included in
      or
      relating to, and any document incorporated by reference in, the Registration
      Statement referred to in Section 7.1 hereof.

     

    
      
        
        

      

      
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    The
      Company agrees to indemnify and hold harmless each Subscriber and each
      Subscriber/Affiliate against any losses, claims, damages, liabilities or
      expenses, joint or several, to which the Subscriber or Subscriber/Affiliate
      may
      become subject, under the Securities Act, the Exchange Act, or any other federal
      or state statutory law or regulation, or at common law or otherwise (including
      in settlement of any litigation, if such settlement is effected with the written
      consent of the Company), insofar as such losses, claims, damages, liabilities
      or
      expenses (or actions in respect thereof as contemplated below) arise out of
      or
      are based upon any untrue statement or alleged untrue statement of any material
      fact contained in the Registration Statement, including the prospectus,
      financial statements and schedules, and all other documents filed as a part
      thereof, as amended at the time of effectiveness of the Registration Statement,
      including any information deemed to be a part thereof as of the time of
      effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434,
      of the Rules and Regulations, or the prospectus, in the form first filed with
      the Commission pursuant to Rule 424(b) of the Rules and Regulations, or filed
      as
      part of the Registration Statement at the time of effectiveness if no Rule
      424(b) filing is required (the “Prospectus”),
      or
      any amendment or supplement thereto, or arise out of or are based upon the
      omission or alleged omission to state in any of them a material fact required
      to
      be stated therein or necessary to make the statements in the Registration
      Statement or any amendment or supplement thereto not misleading or in the
      Prospectus or any amendment or supplement thereto not misleading in the light
      of
      the circumstances under which they were made, or arise out of or are based
      in
      whole or in part on any material breach of the representations and warranties
      of
      the Company contained in this Agreement (except that where representations
      and
      warranties are qualified by materiality, any breach), or any material breach
      by
      the Company of its obligations hereunder, and will reimburse the Subscriber
      or
      Subscriber/Affiliate for any legal and other expenses as such expenses are
      reasonably incurred by the Subscriber or Subscriber/Affiliate in connection
      with
      investigating, defending, settling, compromising or paying any such loss, claim,
      damage, liability, expense or action; provided, however, that the Company will
      not be liable in any such case to the extent, but only to the extent, that
      any
      such loss, claim, damage, liability or expense arises out of or is based upon
      (i) an untrue statement or alleged untrue statement or omission or alleged
      omission made in the Registration Statement, the Prospectus or any amendment
      or
      supplement thereto in reliance upon and in conformity with written information
      furnished to the Company by or on behalf of the Subscriber expressly for use
      therein, or (ii) the failure of the Subscriber to comply with the covenants
      and
      agreements contained in Section 2.12 or Section 7.2 hereof respecting the sale
      of the Registrable Shares, or (iii) the inaccuracy of any representations made
      by the Subscriber herein or (iv) any statement or omission in any Prospectus
      that is corrected in any subsequent Prospectus that was delivered to the
      Subscriber prior to the pertinent sale or sales by the Subscriber.

     

    
      
        
        

      

      
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    Each
      Subscriber will severally, but not jointly, indemnify and hold harmless the
      Company, each of its directors, each of its officers who signed the Registration
      Statement and each person, if any, who controls the Company within the meaning
      of Section 15 of the Securities Act or Section 20 of the Exchange Act, against
      any losses, claims, damages, liabilities or expenses to which the Company,
      each
      of its directors, each of its officers who signed the Registration Statement
      or
      controlling person may become subject, under the Securities Act, the Exchange
      Act, or any other federal or state statutory law or regulation, or at common
      law
      or otherwise (including in settlement of any litigation, if such settlement
      is
      effected with the written consent of the Subscriber) insofar as such losses,
      claims, damages, liabilities or expenses (or actions in respect thereof as
      contemplated below) arise out of or are based upon (i) any failure to comply
      with the covenants and agreements contained in Sections 2.12 or 7.2 hereof
      respecting the sale of the Registrable Shares or (ii) any material breach of
      any
      representation made by the Subscriber herein or (iii) any untrue or alleged
      untrue statement of any material fact contained in the Registration Statement,
      the Prospectus, or any amendment or supplement thereto, or arise out of or
      are
      based upon the omission or alleged omission to state therein a material fact
      required to be stated therein or necessary to make the statements in the
      Registration Statement or any amendment or supplement thereto not misleading
      or
      in the Prospectus or any amendment or supplement thereto not misleading in
      the
      light of the circumstances under which they were made, in each case to the
      extent, but only to the extent, that such untrue statement or alleged untrue
      statement or omission or alleged omission was made in the Registration
      Statement, the Prospectus, or any amendment or supplement thereto, in reliance
      upon and in conformity with written information furnished to the Company by
      the
      Subscriber expressly for use therein, and the Subscriber will reimburse the
      Company, each of its directors, each of its officers who signed the Registration
      Statement or controlling person for any legal and other expense reasonably
      incurred by the Company, each of its directors, each of its officers who signed
      the Registration Statement or controlling person in connection with
      investigating, defending, settling, compromising or paying any such loss, claim,
      damage, liability, expense or action; provided, however, that the obligations
      of
      the Subscriber under this Section 7.3 shall not exceed the net proceeds to
      such
      Subscriber from the sale of Registrable Shares pursuant to such Registration
      Statement.

     

    Promptly
      after receipt by an indemnified party under this Section 7.3 of notice of the
      threat or commencement of any action, such indemnified party will, if a claim
      in
      respect thereof is to be made against an indemnifying party under this Section
      7.3, promptly notify the indemnifying party in writing thereof; but the omission
      so to notify the indemnifying party will not relieve it from any liability
      which
      it may have to any indemnified party for contribution or otherwise under the
      indemnity agreement contained in this Section 7.3 (except to the extent that
      such omission materially and adversely affects the indemnifying person’s ability
      to defend such action). Subject to provisions hereinafter stated, in case any
      such action is brought against any indemnified party and such indemnified party
      seeks or intends to seek indemnity from an indemnifying party, the indemnifying
      party will be entitled to participate in, and, to the extent that it may wish,
      jointly with all other indemnifying parties similarly notified, to assume the
      defense thereof with counsel reasonably satisfactory to such indemnified party;
      provided, however, if the defendants in any such action include both the
      indemnified party and the indemnifying party, and the indemnifying party and
      the
      indemnified party, based upon the advice of such indemnified party’s counsel,
      shall have reasonably concluded that there may be a conflict of interest between
      the positions of the indemnifying party and the indemnified party in conducting
      the defense of any such action or that there may be legal defenses available
      to
      it and/or other indemnified parties which are different from or additional
      to
      those available to the indemnifying party, the indemnified party or parties
      shall have the right to select separate counsel to assume such legal defenses
      and to otherwise participate in the defense of such action on behalf of such
      indemnified party or parties. Upon receipt of notice from the indemnifying
      party
      to such indemnified party of its election so to assume the defense of such
      action and approval by the indemnified party of counsel, the indemnifying party
      will not be liable to such indemnified party under this Section 7.3 for any
      legal or other expenses subsequently incurred by such indemnified party in
      connection with the defense thereof unless (i) the indemnified party shall
      have
      employed such counsel in connection with the assumption of legal defenses in
      accordance with the proviso to the preceding sentence (it being understood,
      however, that the indemnifying party shall not be liable for the expenses of
      more than one separate counsel, approved by such indemnifying party in the
      case
      of paragraph (a), representing the indemnified parties who are parties to such
      action (including indemnified parties under Agreements with Other Subscribers,
      plus local counsel, if appropriate) or (ii) the indemnifying party shall not
      have employed counsel reasonably satisfactory to the indemnified party to
      represent the indemnified party within a reasonable time after notice of
      commencement of action, in each of which cases the reasonable fees and expenses
      of counsel shall be at the expense of the indemnifying party. In no event shall
      any indemnifying person be liable in respect of any amounts paid in settlement
      of any action unless the indemnifying person shall have approved the terms
      of
      such settlement; provided that such consent shall not be unreasonably withheld.
      No indemnifying person shall, without the prior written consent of the
      indemnified person, effect any settlement of any pending or threatened
      proceeding in respect of which any indemnified person is or could have been
      a
      party and indemnification could have been sought hereunder by such indemnified
      person, unless such settlement includes an unconditional release of such
      indemnified person from all liability on claims that are the subject matter
      of
      such proceeding.

     

    
      
        
        

      

      
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    If
      the
      indemnification provided for in this Section 7.3 is required by its terms but
      is
      for any reason held to be unavailable to or otherwise insufficient to hold
      harmless an indemnified party under paragraphs (a), (b) or (c) of this Section
      7.3 in respect to any losses, claims, damages, liabilities or expenses referred
      to herein, then each applicable indemnifying party shall contribute to the
      amount paid or payable by such indemnified party as a result of any losses,
      claims, damages, liabilities or expenses referred to herein (i) in such
      proportion as is appropriate to reflect the relative benefits received by the
      Company and the Subscriber from the sale of securities contemplated by this
      Agreement or (ii) if the allocation provided by clause (i) above is not
      permitted by applicable law, in such proportion as is appropriate to reflect
      not
      only the relative benefits referred to in clause (i) above but the relative
      fault of the Company and the Subscriber in connection with the statements or
      omissions or inaccuracies in the representations and warranties in this
      Agreement that resulted in such losses, claims, damages, liabilities or
      expenses, as well as any other relevant equitable considerations. The relative
      fault of the Company on the one hand and the Subscriber on the other shall
      be
      determined by reference to, among other things, whether the untrue or alleged
      statement of a material fact or the omission or alleged omission to state a
      material fact or the inaccurate or the alleged inaccurate representation and/or
      warranty relates to information supplied by the Company or by the Subscriber
      and
      the parties’ relative intent, knowledge, access to information and opportunity
      to correct or prevent such untrue statement or omission. The amount paid or
      payable by a party as a result of the losses, claims, damages, liabilities
      and
      expenses referred to above shall be deemed to include, subject to the
      limitations set forth in paragraph (c) of this Section 7.3, any legal or other
      fees or expenses reasonably incurred by such party in connection with
      investigating or defending any action or claim. The provisions set forth in
      paragraph (c) of this Section 7.3 with respect to the notice of the threat
      or
      commencement of any threat or action shall apply if a claim for contribution
      is
      to be made under this paragraph (d); provided,
      however,
      that no
      additional notice shall be required with respect to any threat or action for
      which notice has been given under paragraph (c) for purposes of indemnification.
      The Company and the Subscriber agree that it would not be just and equitable
      if
      contribution pursuant to this Section 7.3 were determined solely by pro rata
      allocation (even if the Subscriber were treated as one entity for such purpose)
      or by any other method of allocation which does not take account of the
      equitable considerations referred to in this paragraph. Notwithstanding the
      provisions of this Section 7.3, the Subscriber shall not be required to
      contribute any amount in excess of the amount by which the amount realized
      by
      the Subscriber on Sale of Registrable Shares exceeds the amount of any damages
      which such Subscriber has otherwise been required to pay by reason of such
      untrue or alleged untrue statement or omission or alleged omission. No person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the Securities Act) shall be entitled to contribution from any person who was
      not guilty of such fraudulent misrepresentation. The Subscriber’s obligation to
      contribute pursuant to this Section 7.3 is several and not joint.

     

    Each
      Subscriber hereby acknowledges that it is a sophisticated business person who
      was represented by counsel during the negotiations regarding the provisions
      hereof including, without limitation, the provisions of this Section 7.3, and
      is
      fully informed regarding said provisions. Each of the Company and the Subscriber
      is advised that federal or state public policy as interpreted by the courts
      in
      certain jurisdictions may be contrary to certain of the provisions of this
      Section 7.3, and each of the Company and the Subscriber hereby expressly waives
      and relinquishes any right or ability to assert such public policy as a defense
      to a claim under this Section 7.3 and further agrees not to attempt to assert
      any such defense.

     

    7.4.  Termination
      of Conditions and Obligations.
      The
      conditions precedent imposed by Section 2 or this Section 7 upon the
      transferability of Securities or the Registrable Shares shall cease and
      terminate as to any particular number of the Registrable Shares upon the
      earliest to occur of (i) the sale of such Registrable Shares pursuant to the
      Registration Statement, (ii) the sale of such Registrable Shares pursuant to
      Rule 144 under the Securities Act or (iii) the passage of one year from the
      effective date of the Registration Statement covering such Registrable Shares,
      provided that the holder of such Securities is not at such time, and was not
      for
      the 90 days immediately prior thereto, an affiliate of the Company (as such
      term
      is defined in Rule 144) or at such time as an opinion of counsel satisfactory
      in
      form and substance to the Company shall have been rendered to the effect that
      such conditions are not necessary in order to comply with the Securities
      Act.

     

    
      
        
        

      

      
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    7.5.  Information
      Available.
      As long
      as any Subscriber owns New Warrants and the Company is subject to the filing
      requirements of the Exchange Act, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company after the date hereof
      pursuant to the Exchange Act. So long as the Registration Statement is effective
      covering the resale of Registrable Shares, the Company will furnish to the
      Subscriber upon such Subscriber’s request:

     

    (a)  as
      soon
      as practicable after available (but in the case of the Company’s Annual Report
      to Stockholders, concurrently with delivery to its stockholders generally)
      one
      copy of (i) its Annual Report to Stockholders (which Annual Report shall contain
      financial statements audited in accordance with U.S. generally accepted
      accounting principles by a nationally recognized firm of certified public
      accountants), (ii) if not included in substance in the Annual Report to
      Stockholders, upon the request of the Subscriber, its Annual Report on Form
      10-KSB or 10-K, (iii) upon the request of the Subscriber, its Quarterly Reports
      on Form 10-QSB or 10-Q, (iv) upon the request of the Subscriber, its Current
      Reports on Form 8-K, and (v) a full copy of the particular Registration
      Statement covering the Registrable Shares (the foregoing, in each case,
      excluding exhibits);

     

    (b)  all
      exhibits excluded by the parenthetical to subparagraph (a)(v) of this Section
      7.5; and

     

    (c)  upon
      the
      reasonable request of the Subscriber, a reasonable number of copies of the
      prospectuses and supplements thereto to supply to any other party requiring
      such
      prospectuses and supplements.

     

    7.6.  Assignment
      of Registration Rights.
      The
      rights of a Subscriber hereunder, including the right to have the Company
      register the Registrable Shares pursuant to this Agreement, will be
      automatically assigned by the Subscriber to transferees or assignees of
      Securities, but only if (a) the Subscriber agrees in writing with the transferee
      or assignee to assign such rights, and a copy of such agreement is furnished
      to
      the Company within a reasonable time after such assignment, (b) the Company
      is,
      within a reasonable time after such transfer or assignment, furnished with
      written notice of the name and address of such transferee or assignee and the
      Securities with respect to which such registration rights are being transferred
      or assigned, (c) after such transfer or assignment, the further disposition
      of
      such Securities by the transferee or assignee is restricted under the Securities
      Act and applicable state securities laws, (d) at or before the time the Company
      received the written notice contemplated by clause (b) of this sentence, the
      transferee or assignee agrees in writing with the Company to be bound by all
      of
      the provisions contained herein, (e) the transferee is an “accredited investor”
as that term is defined in Rule 501 of Regulation D, and (f) the transfer of
      the
      Securities is made in accordance with the provisions of Section 5 and Section
      7.2 hereof.

     

    
      
        
        

      

      
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    7.7.  Delay
      in Filing or Effectiveness of Registration Statement.
      If the
      Registration Statement is not filed by the Company with the Commission on or
      prior to the Filing Date, then for each day following the Filing Date, until
      but
      excluding the date the Registration Statement is filed, or if a prospectus
      included in the Registration Statement which has been declared effective by
      the
      Commission, is not delivered to the Subscribers (as set forth in Section 7.1(d))
      by the Required Effective Date, then for each day following the Required
      Effective Date, until but excluding the date the Commission declares the
      Registration Statement effective, the Company shall, for each such day, pay
      the
      Subscriber with respect to any such failure, as liquidated damages and not
      as a
      penalty, an amount equal to 0.0333% of the purchase price paid by such
      Subscriber for its Securities pursuant to this Agreement; and for any such
      day,
      such payment shall be made no later than the first business day of the calendar
      month next succeeding the month in which such day occurs. If the Subscriber
      shall be prohibited from selling Registrable Shares under the Registration
      Statement as a result of a Suspension of more than thirty (30) days or
      Suspensions on more than two occasions of not more than thirty (30) days each
      in
      any 12-month period, then for each day on which a Suspension is in effect that
      exceeds the maximum allowed period for a Suspension or Suspensions, but not
      including any day on which a Suspension is lifted, the Company shall pay the
      Subscriber, as liquidated damages and not as a penalty, an amount equal to
      0.0333% of the purchase price paid by such Subscriber for the Securities
      pursuant to this Agreement for each such day, and such payment shall be made
      no
      later than the first business day of the calendar month next succeeding the
      month in which such day occurs. For purposes of this Section 7.7, a Suspension
      shall be deemed lifted on the date that notice that the Suspension has been
      lifted is delivered to the Subscriber pursuant to Section 17 of this
      Subscription Agreement. Any payments made pursuant to this Section 7.7 shall
      not
      constitute the Subscriber’s exclusive remedy for such events. Notwithstanding
      the foregoing provisions, in no event shall the Company be obligated to pay
      such
      liquidated damages to more than one Subscriber in respect of the same Securities
      for the same period of time. The liquidated damage payments imposed hereunder
      shall be made to the Subscriber in cash.

     

    7.8.  Integration
      with Subsequent Transactions.
      The
      Company shall not, indirectly or directly, sell, offer for sale or solicit
      offers to buy or otherwise negotiate with 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 or the issuance of the New Warrant Shares in a manner that
      would require the registration under the Securities Act of the sale of the
      Securities or the issuance of the New Warrant Shares to the Subscriber or that
      would be integrated with the offer or sale of the Securities or the issuance
      of
      the New Warrant Shares for purposes of the rules or regulations of NASDAQ
      Capital Market or any national securities exchange on which the Common Stock
      are
      listed or designated such that it would require stockholder approval prior
      to
      the closing of such other transaction unless stockholder approval is obtained
      prior to the closing of such subsequent transactions.

     

    
      
        
        

      

      
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    8.  Broker’s
      Fees.
      The
      Subscriber acknowledges that the Company intends to pay fees and expenses to
      the
      Financial Advisor in respect of the Financial Advisory Agreement. Each
      Subscriber and the Company hereby agree that the Subscriber shall not be
      responsible for such fees and expenses. Each of the parties hereto hereby
      represents that, on the basis of any actions and agreements by it, there are
      no
      other brokers or finders entitled to compensation in connection with the
      transactions contemplated by the Transaction Documents.

     

    9.  Independent
      Nature of Subscribers’ Obligations and Rights.
      The
      obligations of each Subscriber under this Subscription Agreement are several
      and
      not joint with the obligations of any other Subscriber, and no Subscriber shall
      be responsible in any way for the performance of the obligations of any other
      Subscriber under this Subscription Agreement. The decision of each Subscriber
      to
      purchase Securities pursuant to this Subscription Agreement or a Transfer
      Agreement, has been made independently of any other Subscriber. 

     

    Nothing
      contained herein, and no action taken by any Subscriber thereto, shall be deemed
      to constitute the Subscribers as a partnership, an association, a joint venture
      or any other kind of group or entity, or create a presumption that the
      Subscribers are in any way acting in concert or as a group with respect to
      such
      obligations or transactions contemplated by this Agreement. 

     

    Each
      Subscriber shall be entitled to independently protect and enforce its rights,
      including without limitation, its rights arising out of this Subscription
      Agreement, and it shall not be necessary for any other Subscriber to be joined
      as an additional party in any proceeding for such purpose. No Subscriber shall
      incur any liability to any other Subscriber with respect to exercising or
      refraining from exercising any right or rights that such Subscriber may have
      by
      reason of this Subscription Agreement. 

     

    Each
      Subscriber has been represented or had the opportunity to be represented by
      its
      own separate legal counsel, at such Subscriber’s own expense, in review and
      negotiation of this Subscription Agreement. 

     

    Each
      Subscriber agrees that neither a Subscriber nor any affiliate of a Subscriber
      shall be liable to any other Subscriber or such other Subscriber’s affiliate for
      any action heretofore or hereafter taken or omitted to be taken by any of them
      in connection with the Securities.

     

    10.  Governing
      Law; Jurisdiction.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without giving effect to the principles of conflicts of law.
      Any legal suit, action or proceeding arising out of or based upon this Agreement
      or the transactions contemplated hereby (“Related
      Proceedings”)
      may be
      instituted in the federal courts of the United States of America or the state
      courts of New York State located in New York, New York (collectively, the
“Specified
      Courts”),
      and
      each party irrevocably submits to the non-exclusive jurisdiction of such
      Specified Courts of such courts in any such suit, action or proceeding. Service
      of any process, summons, notice or document by mail to such party’s address set
      forth above shall be effective service of process for any suit, action or other
      proceeding brought in any such court. The parties irrevocably and
      unconditionally waive any objection to the laying of venue of any suit, action
      or other proceeding in the Specified Courts and irrevocably and unconditionally
      waive and agree not to plead or claim in any such court that any such suit,
      action or other proceeding brought in any such court has been brought in an
      inconvenient forum. With respect to any Related Proceeding, each party
      irrevocably waives, to the fullest extent permitted by applicable law, all
      immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
      service of process, attachment (both before and after judgment) and execution
      to
      which it might otherwise be entitled in the Specified Courts or any other court
      of competent jurisdiction.

     

    
      
        
        

      

      
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    11.  Amendments
      and Waivers.
      Unless
      a particular provision or section of this Subscription Agreement requires
      otherwise explicitly in a particular instance, any provision of this
      Subscription Agreement may be amended and the observance of any provision of
      this Agreement may be waived (either generally or in a particular instance
      and
      either retroactively or prospectively), only with the written consent of the
      Company and the holders of a majority of the New Shares (not including for
      this
      purpose any New Shares which have been sold to the public pursuant to a
      Registration Statement under the Securities Act or an exemption therefrom).
      Any
      amendment or waiver effected in accordance with this Section 11 shall be binding
      upon each Subscriber, each holder of any Securities at the time outstanding
      (including without limitation securities into which any such Securities are
      convertible or exercisable), each future holder thereof, and the
      Company.

     

    12.  Survival
      of Representations and Warranties.
      All
      representations and warranties made by the Subscriber and Company in this
      Subscription Agreement shall survive the execution and delivery of this
      Subscription Agreement, as well as any investigation at any time made by or
      on
      behalf of the Company and the issue and sale of the Securities.

     

    13.  Reliance.
      The
      Subscriber understands and acknowledges that the Subscriber's representations,
      warranties, acknowledgements and agreements in this Subscription Agreement
      will
      be relied upon by the Company in determining the Subscriber's suitability as
      a
      Subscriber of the Securities.

     

    14.  Further
      Assurances.
      The
      Subscriber agrees to provide, if requested, any additional information that
      may
      be requested or required to determine the Subscriber's eligibility to purchase
      the Securities.

     

    15.  Entire
      Agreement.
      This
      Subscription Agreement, with the other Transaction Documents, constitutes the
      full and entire understanding and agreement between the parties with regard
      to
      the subject matter hereof and no party shall be liable or bound to any other
      in
      any manner by any representations, warranties, covenants and agreements except
      as specifically set forth herein and therein.

     

    
      
        
        

      

      
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    16.  Severability.
      In the
      event one or more of the provisions of this Subscription Agreement should,
      for
      any reason, be held to be invalid, illegal or unenforceable in any respect,
      such
      invalidity, illegality, or unenforceability shall not affect any other
      provisions of this Subscription Agreement, and this Subscription Agreement
      shall
      be construed as if such invalid, illegal or unenforceable provision had never
      been contained herein.

     

    17.  Notices.
      Any
      notice or other communication required or permitted to be given hereunder (each
      a “Notice”)
      shall
      be given in writing and shall be made by personal delivery, sent by fax (with
      answerback confirmed) or sent by courier or certified or registered first-class
      mail (postage prepaid), addressed to a party at its address shown below or
      at
      such other address as such party may designate by three days’ advance Notice to
      the other parties. 

     

    Any
      Notice to any of the Subscribers shall be sent to the addresses for such
      Subscriber set forth on the signature pages hereof.

     

    Any
      Notice to the Company shall be sent to:

     

    Neonode
      Inc.

    Attn:
      CFO

    4000
      Executive Parkway

    San
      Ramon, California 94549 

    Fax:
      (925) 355-2041

     

    with
      a
      copy to: 

    Hahn
      & Hessen LLP

    488
      Madison Avenue

    New
      York,
      NY 10022

    Fax:
      (212) 478-7400

    Attention:
      James Kardon

     

    Each
      Notice shall be deemed given and effective upon receipt (or refusal of receipt).
      

     

    18.  Conflicts.
      The
      Company and each Subscriber (i) acknowledge that Hahn & Hessen LLP,
      counsel to the Company in the transactions contemplated in this
      Subscription Agreement, has acted, and from time to time continues to act,
      as
      counsel to (A) certain Subscribers, or affiliates thereof, in connection
      with the acquisition of the Existing Warrants, and (B) AIGH Investment
      Partners, LLC in connection with its investments in the Company, and
      in unrelated matters, (ii) consent to the representation of the Company and
      such
      other representation of the Subscribers and AIGH, or affiliates thereof, by
      Hahn & Hessen LLP, (iii) acknowledge that partners of Hahn & Hessen LLP
      own securities of the Company constituting less than 0.1% of
      outstanding stock of the Company, and (iv) waive any conflicts of interest
      claim which may arise from any or all of the foregoing.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    19.  Third
      Party Beneficiary.
      The
      Company and each Subscriber agree that Empire is an intended third
      party beneficiary of the representations and warranties made by (x) the
      Subscribers in Section 2 hereto and (y) the Company in Section 3 hereto and
      the
      covenants of the Company set forth in Section 7 hereto.

     

    20.  Counterparts.
      This
      Agreement may be executed (including by facsimile transmission) with counterpart
      signature pages or in two or more counterparts, each of which shall be deemed
      an
      original, but all of which together shall constitute one and the same
      instrument.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the undersigned has executed this Warrant Exercise Subscription
      Agreement as of the date set forth on this signature page.

     

    Subscription
      Price:     $____________________________

     

    Manner
      of
      exercise: Check applicable box:

     

    o
      Cash     o
      Surrender of Company debt (as described
      below)

     

    _______________________________________________

     

    Number
      of
      Exercise Warrants exercised: ___________

     

    Check
      applicable box:

     

    o
      Warrant Holder   
 o
      Transferee

     

    Name
      of
      Subscriber: 

     

    [___________________________]

    

      
        	
                By:

              	 	 
	
                Name:

              
	
                Title:

              

      

       

      U.S.
        person [please initial]: yes o  no o

    

     

    Date: _____________

     

    Address:
       ______________________________________

             
      ______________________________________

     

    SSN
      or
      U.S. Tax ID No: ___________________________

     

    
      	
               SUBSCRIPTION
                ACCEPTED:

               

              NEONODE
                INC., a Delaware corporation

            	
               

            

    

    

    
      	
              By:

            	 	 	
              Date:

            	 	
              ,
                2008

            
	
              Name:

            
	
              Title:

            

    

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    FORM
      OF

     

    NEW
      WARRANTS

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    FORM
      OF
      WARRANT TRANSFER AGREMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
EXHIBIT
      C

     

    COMPANY
      DISCLOSURE LETTERExhibit
      10.52

     

    Exhibit
      A
      to Amendment 4 to Note Purchase Agreement

    

    EXTENSION
      WARRANT

    

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
      FORM,
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
      TO
      RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER
      LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

    

    [Alternate
      Legend for Non-U.S. Purchasers]

    

    [THIS
      WARRANT AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
      REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR
      UNDER ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SECURITIES
      ISSUABLE UPON CONVERSION HEREOF MAY BE REOFFFERED, SOLD, ASSIGNED, TRANSFERRED,
      PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF WITHIN THE UNITED STATES OR TO,
      OR
      FOR THE ACCOUNT OR BENEFIT OF,
      U.S.
      PERSONS, OTHER THAN TO DISTRIBUTORS (AS DEFINED IN REGULATION S PROMULGATED
      UNDER THE ACT) IN THE ABSENCE OF SUCH REGISTRATION UNTIL (A) A REGISTRATION
      STATEMENT WITH RESEPCT THERETO IS EFFECTIVE UNDER THE ACT OR (2) THE COMPANY
      RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO THE HOLDER
      OF
      SUCH WARRANT WHICH OTHER COUNSEL IS SATISFACTORY TO THE COMPANY THAT SUCH
      WARRANT AND/OR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED,
      SOLD ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE ACT.]

    

    
      	 	
              Right
                to Purchase ____________ shares of Common Stock of 

              Neonode
                Inc. (subject to adjustment as provided
                herein)

            

    

    

    COMMON
      STOCK PURCHASE WARRANT

     

    No. 2008-D-001      Issue
      Date: May ___, 2008

     

    NEONODE
      INC., a corporation organized under the laws of the State of Delaware (the
      “Company”), hereby certifies that, for value received,
      __________________________________,
      _____________________________________________________________, or its assigns
      (the “Holder”), is entitled, subject to the terms set forth below, to purchase
      from the Company at any time commencing six months after the Issue Date until
      5:00 p.m., E.S.T on the third anniversary of the Issue Date (the “Expiration
      Date”), up to ____________ fully paid and nonassessable shares of Common Stock
      at a per share purchase price of $______. The aforedescribed purchase price
      per
      share, as adjusted from time to time as herein provided, is referred to herein
      as the "Purchase Price." The number and character of such shares of Common
      Stock
      and the Purchase Price are subject to adjustment as provided herein. The Company
      may reduce the Purchase Price for some or all of the Warrants, temporarily
      or
      permanently. This Warrant is one of the Warrants issued pursuant to that certain
      Amendment 4 to Note Purchase Agreement (the “Amendment 4 to Note Purchase
      Agreement”), dated as of May ___, 2008, entered into by the Company and certain
      holders of New Notes as described therein. Capitalized terms used and not
      otherwise defined herein shall have the meanings set forth in the Amendment
      4 to
      Note Purchase Agreement.

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    As
      used
      herein the following terms, unless the context otherwise requires, have the
      following respective meanings: 

     

    (a) The
      term
“Company” shall include Neonode Inc. and any corporation which shall succeed or
      assume the obligations of Neonode Inc. hereunder. 

     

    (b) The
      term
“Common Stock” includes (i) the Company's Common Stock, $0.01 par value per
      share, as authorized on the date of the Amendment 4 to Note Purchase Agreement,
      and (ii) any other securities into which or for which any of the securities
      described in (i) may be converted or exchanged pursuant to a plan of
      recapitalization, reorganization, merger, sale of assets or
      otherwise.

     

    (c) The
      term
“Other Securities” refers to any stock (other than Common Stock) and other
      securities of the Company or any other person (corporate or otherwise) which
      the
      holder of the Warrant at any time shall be entitled to receive, or shall have
      received, on the exercise of the Warrant, in lieu of or in addition to Common
      Stock, or which at any time shall be issuable or shall have been issued in
      exchange for or in replacement of Common Stock or Other Securities pursuant
      to
      Section 4 or otherwise. 

     

    (d) The
      term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
      Warrant.

     

    1. Exercise
      of Warrant.

     

    1.1. Number
      of Shares Issuable upon Exercise.
      From
      and after the Issue Date through and including the Expiration Date, the Holder
      hereof shall be entitled to receive, upon exercise of this Warrant in whole
      in
      accordance with the terms of subsection 1.2 or upon exercise of this
      Warrant in part in accordance with subsection 1.3, shares of Common Stock
      of the Company, subject to adjustment pursuant to Sections 3 and 4.

     

    1.2. Full
      Exercise.
      This
      Warrant may be exercised in full by the Holder hereof by delivery of an original
      or facsimile copy of the form of subscription attached as Exhibit A hereto
      (the “Subscription Form”) duly executed by such Holder and delivery within two
      days thereafter of payment, in cash, wire transfer or by certified or official
      bank check payable to the order of the Company, in the amount obtained by
      multiplying the number of shares of Common Stock for which this Warrant is
      then
      exercisable by the Purchase Price then in effect. The original Warrant is not
      required to be surrendered to the Company until it has been fully exercised.
      

     

    1.3. Partial
      Exercise.
      This
      Warrant may be exercised in part (but not for a fractional share) by delivery
      of
      a Subscription Form in the manner and at the place provided in
      subsection 1.2 except that the amount payable by the Holder on such partial
      exercise shall be the amount obtained by multiplying (a) the number of
      whole shares of Common Stock designated by the Holder in the Subscription Form
      by (b) the Purchase Price then in effect. On any such partial exercise
      provided the Holder has surrendered the original Warrant, the Company, at its
      expense, will forthwith issue and deliver to or upon the order of the Holder
      hereof a new Warrant of like tenor, in the name of the Holder hereof or as
      such
      Holder (upon payment by such Holder of any applicable transfer taxes) may
      request, the whole number of shares of Common Stock for which such Warrant
      may
      still be exercised for the balance of.

     

    1.4. Fair
      Market Value.
      Fair
      Market Value of a share of Common Stock as of a particular date (the
      "Determination Date") shall mean: 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (a) If
      the
      Company's Common Stock is traded on an exchange or is quoted on the NASDAQ
      Global Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the
      New
      York Stock Exchange or the American Stock Exchange, LLC, then the average of
      the
      closing or last sale prices, respectively, reported for the ten trading days
      immediately preceding the Determination Date;

     

    (b) If
      the
      Company's Common Stock is not traded on an exchange or on the NASDAQ Global
      Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New York
      Stock Exchange or the American Stock Exchange, LLC, but is traded in the
      over-the-counter market, then the average of the closing bid and ask prices
      reported for the ten trading days immediately preceding the Determination
      Date;

     

    (c) Except
      as
      provided in clause (d) below and Section 3.1, if the Company's Common Stock
      is not publicly traded, then as the Holder and the Company agree, or in the
      absence of such an agreement, by arbitration in accordance with the rules then
      standing of the American Arbitration Association, before a single arbitrator
      to
      be chosen from a panel of persons qualified by education and training to pass
      on
      the matter to be decided; or

     

    (d) If
      the
      Determination Date is the date of a liquidation, dissolution or winding up,
      or
      any event deemed to be a liquidation, dissolution or winding up pursuant to
      the
      Company's charter, then all amounts to be payable per share to holders of the
      Common Stock pursuant to the charter in the event of such liquidation,
      dissolution or winding up, plus all other amounts to be payable per share in
      respect of the Common Stock in liquidation under the charter, assuming for
      the
      purposes of this clause (d) that all of the shares of Common Stock then
      issuable upon exercise of all of the Warrants are outstanding at the
      Determination Date.

     

    1.5. Company
      Acknowledgment.
      The
      Company will, at the time of the exercise of the Warrant, upon the request
      of
      the Holder hereof acknowledge in writing its continuing obligation to afford
      to
      such Holder any rights to which such Holder shall continue to be entitled after
      such exercise in accordance with the provisions of this Warrant. If the Holder
      shall fail to make any such request, such failure shall not affect the
      continuing obligation of the Company to afford to such Holder any such
      rights.

     

    1.6. Trustee
      for Warrant Holders.
      In the
      event that a bank or trust company shall have been appointed as trustee for
      the
      Holder of the Warrants pursuant to Subsection 3.2, such bank or trust
      company shall have all the powers and duties of a warrant agent (as hereinafter
      described) and shall accept, in its own name for the account of the Company
      or
      such successor person as may be entitled thereto, all amounts otherwise payable
      to the Company or such successor, as the case may be, on exercise of this
      Warrant pursuant to this Section 1. 

     

    1.7 Delivery
      of Stock Certificates, etc. on Exercise.
      The
      Company agrees that the shares of Common Stock purchased upon exercise of this
      Warrant shall be deemed to be issued to the Holder hereof as the record owner
      of
      such shares as of the close of business on the date on which delivery of a
      Subscription Form shall have occurred and payment made for such shares as
      aforesaid. As soon as practicable after the exercise of this Warrant in full
      or
      in part, and in any event within three (3) business
      days
      thereafter (“Warrant Share Delivery Date”), the Company at its expense
      (including the payment by it of any applicable issue taxes) will cause to be
      issued in the name of and delivered to the Holder hereof, or as such Holder
      (upon payment by such Holder of any applicable transfer taxes) may direct in
      compliance with applicable securities laws, a certificate or certificates for
      the number of duly and validly issued, fully paid and non-assessable shares
      of
      Common Stock (or Other Securities) to which such Holder shall be entitled on
      such exercise, plus, in lieu of any fractional share to which such Holder would
      otherwise be entitled, cash equal to such fraction multiplied by the then Fair
      Market Value of one full share of Common Stock, together with any other stock
      or
      other securities and property (including cash, where applicable) to which such
      Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
      The Company understands that a delay in the delivery of the Warrant Shares
      after
      the Warrant Share Delivery Date could result in economic loss to the Holder.
      As
      compensation to the Holder for such loss, the Company agrees to pay (as
      liquidated damages and not as a penalty) to the Holder for late issuance of
      Warrant Shares upon exercise of this Warrant the proportionate amount of $100
      per business day after the Warrant Share Delivery Date for each $10,000 of
      Purchase Price of Warrant Shares for which this Warrant is exercised which
      are
      not timely delivered. The Company shall pay any payments incurred under this
      Section in immediately available funds upon demand. Furthermore, in addition
      to
      any other remedies which may be available to the Holder, in the event that
      the
      Company fails for any reason to effect delivery of the Warrant Shares by the
      Warrant Share Delivery Date, the Holder may revoke all or part of the relevant
      Warrant exercise by delivery of a notice to such effect to the Company,
      whereupon the Company and the Holder shall each be restored to their respective
      positions immediately prior to the exercise of the relevant portion of this
      Warrant, except that the liquidated damages described above shall be payable
      through the date notice of revocation or rescission is given to the Company.
      

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    1.8 Buy-In.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      deliver to a Holder the Warrant Shares as required pursuant to this Warrant,
      within seven (7) business days after the Warrant Share Delivery Date and the
      Holder or a broker on the Holder’s behalf, purchases (in an open market
      transaction or otherwise) shares of common stock to deliver in satisfaction
      of a
      sale by such Holder of the Warrant Shares which the Holder was entitled to
      receive from the Company (a "Buy-In"),
      then
      the Company shall pay in cash to the Holder (in addition to any remedies
      available to or elected by the Holder) the amount by which (A) the Holder's
      total purchase price (including brokerage commissions, if any) for the shares
      of
      common stock so purchased exceeds (B) the aggregate Purchase Price of the
      Warrant Shares
      required
      to have been delivered together
      with interest thereon at a rate of 15% per annum, accruing until such amount
      and
      any accrued interest thereon is paid in full (which amount shall be paid as
      liquidated damages and not as a penalty). For
      example, if a Holder purchases shares of Common Stock having a total purchase
      price of $11,000 to cover a Buy-In with respect to $10,000 of Purchase Price
      of
      Warrant Shares to have been received upon exercise of this Warrant, the Company
      shall be required to pay the Holder $1,000,
      plus interest. The
      Holder shall provide the Company written notice indicating the amounts payable
      to the Holder in respect of the Buy-In.

     

    2. Cashless
      Exercise.

     

    (a) If
      a
      registration statement covering all the Warrant Shares (“Registration
      Statement”) is effective and the Holder may sell its Warrant Shares pursuant to
      the Registration Statement, this Warrant may be exercisable in whole or in
      part
      for cash only as set forth in Section 1 above. If such Registration Statement
      is
      not available, then commencing one year after the Issue Date, payment upon
      exercise may be made at the option of the Holder either in (i) cash, wire
      transfer or by certified or official bank check payable to the order of the
      Company equal to the applicable aggregate Purchase Price, (ii) by delivery
      of
      Common Stock issuable upon exercise of the Warrants in accordance with
      Section (b) below or (iii) by a combination of any of the
      foregoing methods, for the number of Common Stock specified in such form (as
      such exercise number shall be adjusted to reflect any adjustment in the total
      number of shares of Common Stock issuable to the holder per the terms of this
      Warrant) and the holder shall thereupon be entitled to receive the number of
      duly authorized, validly issued, fully-paid and non-assessable shares of Common
      Stock (or Other Securities) determined as provided herein.

     

    (b) Subject
      to the provisions herein to the contrary, if the Fair Market Value of one share
      of Common Stock is greater than the Purchase Price (at the date of calculation
      as set forth below), in lieu of exercising this Warrant for cash, the holder
      may
      elect to receive shares equal to the value (as determined below) of this Warrant
      (or the portion thereof being cancelled) by surrender of this Warrant at the
      principal office of the Company together with the properly endorsed Subscription
      Form in which event the Company shall issue to the holder a number of shares
      of
      Common Stock computed using the following formula:

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    
      	 	
              X=Y
                (A-B)

            
	 	
                       A

            

    

    

    
      	 	
              Where

            	
              X=

            	
              the
                number of shares of Common Stock to be issued to the
                holder

            
	 	 	 	 
	 	 	
              Y=

            	
              the
                number of shares of Common Stock purchasable under the Warrant or,
                if only
                a portion of the Warrant is being exercised, the portion of the Warrant
                being exercised (at the date of such calculation)

            
	 	 	 	 
	 	 	
              A=

            	
              the
                average of the closing sale prices of the Common Stock for the five
                (5)
                Trading Days immediately prior to (but not including) the Exercise
                Date,
                or Fair Market Value, whichever is less

            
	 	 	 	 
	 	 	
              B=

            	
              Purchase
                Price (as adjusted to the date of such
                calculation)

            

    

     

    For
      purposes of Rule 144 promulgated under the Securities Act of 1933, as amended
      (the “1933 Act”), it is intended, understood and acknowledged that the Warrant
      Shares issued in a cashless exercise transaction shall be deemed to have been
      acquired by the Holder, and the holding period for the Warrant Shares shall
      be
      deemed to have commenced, on the date this Warrant was originally issued
      pursuant to the Amendment 4 to Senior Secured Notes.

     

    3. Adjustment
      for Reorganization, Consolidation, Merger, etc.

     

    3.1. Fundamental Transaction. 
      If, at any time while this Warrant is outstanding, (A) the Company 
effects any merger or  consolidation  of the Company with or into
      another entity, (B) the Company effects any sale of all or
      substantially all of its assets in one or
      a series of related transactions,  (C)
      any tender offer or exchange offer (whether by the
      Company or another entity) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their
      shares for other securities, cash or property, (D) the
      Company consummates a stock purchase agreement or other business combination
      (including, without limitation, a reorganization, recapitalization, spin-off
      or
      scheme of arrangement) with one or more persons or entities whereby such other
      persons or entities acquire more than the 50% of the outstanding shares of
      Common Stock (not including any shares of Common Stock held by such other
      persons or entities making or party to, or associated or affiliated with the
      other persons or entities making or party to, such stock purchase agreement
      or
      other business combination), (E) any "person" or "group" (as these terms are
      used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall
      become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
      directly or indirectly, of 50% of the aggregate Common Stock of the
      Company, or (F) the Company effects any reclassification of
      the Common Stock or any compulsory share exchange
      pursuant to
      which the Common Stock is effectively converted into
      or exchanged for other securities, cash or property (in any such
      case, a "Fundamental  Transaction"), then, upon
      any subsequent exercise of this Warrant, the Holder shall have the
      right to receive, for each Warrant Share that would have been issuable upon
      such
      exercise immediately prior to the occurrence of such
      Fundamental Transaction, at the option of the Holder, (a) upon
      exercise of this Warrant, the number of shares of Common Stock of
      the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and any additional
      consideration (the "Alternate Consideration") receivable upon or as
      a result of such reorganization,
      reclassification, merger, consolidation or disposition of assets
      by a Holder of the number of shares of Common Stock for
      which this Warrant is exercisable immediately prior to such
      event or (b) if the Company is acquired in (1) a transaction
      where the consideration paid to the holders of the Common Stock consists solely
      of cash, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934
      Act, or (3) a transaction involving a person or entity not traded on a national
      securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market
      or the Nasdaq Capital Market, cash equal to the Black-Scholes
      Value.  For purposes of any such exercise, the
      determination of the Purchase Price shall
      be appropriately adjusted to apply to such Alternate
      Consideration based on the amount of Alternate Consideration issuable in
      respect of one share of Common Stock in such Fundamental Transaction, and the
      Company shall apportion the Purchase Price among the Alternate Consideration
      in
      a reasonable manner reflecting the relative value of any different components
      of
      the Alternate Consideration. If holders of Common Stock are given any choice
      as
      to the securities, cash or property to be received in a Fundamental Transaction,
      then the Holder shall be given the same choice as to the Alternate Consideration
      it receives upon any exercise of this Warrant following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder's right to exercise such warrant into Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor or
      surviving entity to comply with the provisions of this Section 3.1 and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to a Fundamental Transaction.
“Black-Scholes Value” shall be determined in accordance with the Black-Scholes
      Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i)
      a price per share of Common Stock equal to the VWAP of the Common Stock for
      the
      Trading Day immediately preceding the date of consummation of the applicable
      Fundamental Transaction, (ii) a risk-free interest rate corresponding to the
      U.S. Treasury rate for a period equal to the remaining term of this Warrant
      as
      of the date of such request and (iii) an expected volatility equal to the 100
      day volatility obtained from the HVT function on Bloomberg L.P. determined
      as of
      the Trading Day immediately following the public announcement of the applicable
      Fundamental Transaction.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    3.2.Dissolution.
      In the
      event of any dissolution of the Company following the transfer of all or
      substantially all of its properties or assets, the Company, prior to such
      dissolution, shall at its expense deliver or cause to be delivered the stock
      and
      other securities and property (including cash, where applicable) receivable
      by
      the Holder of the Warrants after the effective date of such dissolution pursuant
      to this Section 3 to a bank or trust company (a "Trustee") having its
      principal office in New York, NY, as trustee for the Holder of the
      Warrants. Such property shall be delivered only upon payment of the Warrant
      exercise price. 

     

    3.3. Continuation
      of Terms.
      Upon
      any reorganization, consolidation, merger or transfer (and any dissolution
      following any transfer) referred to in this Section 3, this Warrant shall
      continue in full force and effect and the terms hereof shall be applicable
      to
      the Other Securities and property receivable on the exercise of this Warrant
      after the consummation of such reorganization, consolidation or merger or the
      effective date of dissolution following any such transfer, as the case may
      be,
      and shall be binding upon the issuer of any Other Securities, including, in
      the
      case of any such transfer, the person acquiring all or substantially all of
      the
      properties or assets of the Company, whether or not such person shall have
      expressly assumed the terms of this Warrant as provided in Section 4. In
      the event this Warrant does not continue in full force and effect after the
      consummation of the transaction described in this Section 3, then only in
      such event will the Company's securities and property (including cash, where
      applicable) receivable by the Holder of the Warrants be delivered to the Trustee
      as contemplated by Section 3.2.

     

    4. Other
      Adjustments.

     

    4.1. General.
      Commencing after Stockholder Approval (as defined in the Subscription
      Agreement), in any case to which the provisions of Sections 3 or 5 hereof are
      not applicable, where the Company shall issue or sell shares of its Common
      Stock
      after the Original Issue Date for a consideration per share less than the
      Purchase Price per share in effect pursuant to the terms of this Warrant at
      the
      time of issuance or sale of such additional shares (the “Lower Exercise Price”),
      then the
      Purchase Price in effect hereunder shall simultaneously with such issuance
      or
      sale be reduced to the Lower Exercise Price
      In the
      event of an adjustment to the Purchase Price under this Section 4, the number
      of
      shares of Underlying Securities issuable upon exercise hereof shall be increased
      so that the aggregate exercise price of this Warrant is not reduced as a result
      of such reduction of Purchase Price. The Company shall not issue or sell shares
      of its Common Stock after the Original Issue Date and prior to Stockholder
      Approval at a Lower Exercise Price.

    
      
        
        

      

      
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    4.2. Convertible
      Securities.
      (a) In
      case
      the Company shall issue or sell any securities convertible into Common Stock
      of
      the Company (“Convertible Securities”) after the date hereof, there shall be
      determined the price per share for which Common Stock is issuable upon the
      conversion or exchange thereof, such determination to be made by dividing (a)
      the total amount received or receivable by the Company as consideration for
      the
      issue or sale of such Convertible Securities, plus the minimum aggregate amount
      of additional consideration, if any, payable to the Company upon the conversion
      or exchange thereof, by (b) the maximum number of shares of Common Stock of
      the
      Company issuable upon the conversion or exchange of all of such Convertible
      Securities. 

    

    (b) If
      the
      price per share so determined shall be less than the applicable Purchase Price
      per share, then such issue or sale shall be deemed to be an issue or sale for
      cash (as of the date of issue or sale of such Convertible Securities) of such
      maximum number of shares of Common Stock at the price per share so determined,
      provided that, if such Convertible Securities shall by their terms provide
      for
      an increase or increases or decrease or decreases, with the passage of time,
      in
      the amount of additional consideration, if any, to the Company, or in the rate
      of exchange, upon the conversion or exchange thereof, the adjusted Purchase
      Price per share shall, forthwith upon any such increase or decrease becoming
      effective, be readjusted to reflect the same, and provided further, that upon
      the expiration of such rights of conversion or exchange of such Convertible
      Securities, if any thereof shall not have been exercised, the adjusted Purchase
      Price per share shall forthwith be readjusted and thereafter be the price which
      it would have been had an adjustment been made on the basis that the only shares
      of Common Stock so issued or sold were issued or sold upon the conversion or
      exchange of such Convertible Securities, and that they were issued or sold
      for
      the consideration actually received by the Company upon such conversion or
      exchange, plus the consideration, if any, actually received by the Company
      for
      the issue or sale of all of such Convertible Securities which shall have been
      converted or exchanged.

    

    4.3. Rights
      and Options.
      (a) In
      case
      the Company shall grant any rights or options to subscribe for, purchase or
      otherwise acquire Common Stock (other than pursuant to an incentive plan for
      employees adopted by a majority of the stockholders of the Company), there
      shall
      be determined the price per share for which Common Stock is issuable upon the
      exercise of such rights or options, such determination to be made by dividing
      (i) the total amount, if any, received or receivable by the Company as
      consideration for the granting of such rights or options, plus the minimum
      aggregate amount of additional consideration payable to the Company upon the
      exercise of such rights or options, by (ii) the maximum number of shares of
      Common Stock of the Company issuable upon the exercise of such rights or
      options.

    

    (b) If
      the
      price per share so determined shall be less than the applicable Purchase Price
      per share, then the granting of such rights or options shall be deemed to be
      an
      issue or sale for cash (as of the date of the granting of such rights or
      options) of such maximum number of shares of Common Stock at the price per
      share
      so determined, provided that, if such rights or options shall by their terms
      provide for an increase or increases or decrease or decreases, with the passage
      of time, in the amount of additional consideration payable to the Company upon
      the exercise thereof, the adjusted Purchase Price per share shall, forthwith
      upon any such increase or decrease becoming effective, be readjusted to reflect
      the same, and provided, further, that upon the expiration of such rights or
      options, if any thereof shall not have been exercised, the adjusted Purchase
      Price per share shall forthwith be readjusted and thereafter be the price which
      it would have been had an adjustment been made on the basis that the only shares
      of Common Stock so issued or sold were those issued or sold upon the exercise
      of
      such rights or options and that they were issued or sold for the consideration
      actually received by the Company upon such exercise, plus the consideration,
      if
      any, actually received by the Company for the granting of all such rights or
      options, whether or not exercised.

    
      
        
        

      

      
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    4.4. Exceptions.
      This
      Section 4 shall not apply to the issuance of shares of Common Stock, Convertible
      Securities, rights and options in connection with: (a)a bona fide strategic
      transaction, such as a merger or joint venture which is not intended primarily
      as a financing, (b) equity incentives granted to bona fide commercial finance
      companies or banks, (c) issuances that have been approved by the holders of
      not
      less than a majority of the outstanding shares of Common Stock, (d) a registered
      public offering, or (e) issuances pursuant to the exercise of options, warrants
      and rights outstanding on the date hereof.

     

    5. Extraordinary
      Events Regarding Common Stock.
      In the
      event that the Company shall (a) issue additional shares of the Common Stock
      as
      a dividend or other distribution on outstanding Common Stock, (b) subdivide
      its
      outstanding shares of Common Stock, or (c) combine its outstanding shares
      of the Common Stock into a smaller number of shares of the Common Stock, then,
      in each such event, the Purchase Price shall, simultaneously with the happening
      of such event, be adjusted by multiplying the then Purchase Price by a fraction,
      the numerator of which shall be the number of shares of Common Stock outstanding
      immediately prior to such event and the denominator of which shall be the number
      of shares of Common Stock outstanding immediately after such event, and the
      product so obtained shall thereafter be the Purchase Price then in effect.
      The
      Purchase Price, as so adjusted, shall be readjusted in the same manner upon
      the
      happening of any successive event or events described herein in this Section
      5.
      The number of shares of Common Stock that the Holder of this Warrant shall
      thereafter, on the exercise hereof, be entitled to receive shall be adjusted
      to
      a number determined by multiplying the number of shares of Common Stock that
      would otherwise (but for the provisions of this Section 5 be issuable on such
      exercise by a fraction of which (a) the numerator is the Purchase Price that
      would otherwise (but for the provisions of this Section 5 be in effect, and
      (b)
      the denominator is the Purchase Price in effect on the date of such exercise.
      

     

    6. Certificate
      as to Adjustments.
      In each
      case of any adjustment or readjustment in the shares of Common Stock (or Other
      Securities) issuable on the exercise of the Warrants, the Company at its expense
      will promptly cause its Chief Financial Officer or other appropriate designee
      to
      compute such adjustment or readjustment in accordance with the terms of the
      Warrant and prepare a certificate setting forth such adjustment or readjustment
      and showing in detail the facts upon which such adjustment or readjustment
      is
      based, including a statement of (a) the consideration received or
      receivable by the Company for any additional shares of Common Stock (or Other
      Securities) issued or sold or deemed to have been issued or sold, (b) the
      number of shares of Common Stock (or Other Securities) outstanding or deemed
      to
      be outstanding, and (c) the Purchase Price and the number of shares of
      Common Stock to be received upon exercise of this Warrant, in effect immediately
      prior to such adjustment or readjustment and as adjusted or readjusted as
      provided in this Warrant. The Company will forthwith mail a copy of each such
      certificate to the Holder of the Warrant and any Warrant Agent of the Company
      (appointed pursuant to Section 11 hereof).

     

    7. Reservation
      of Stock, etc. Issuable on Exercise of Warrant; Financial
      Statements.
      The
      Company will at all times reserve and keep available, solely for issuance and
      delivery on the exercise of the Warrants, all shares of Common Stock (or Other
      Securities) from time to time issuable on the exercise of the Warrant. This
      Warrant entitles the Holder hereof to receive copies of all financial and other
      information distributed or required to be distributed to the holders of the
      Company's Common Stock. 

     

    8. Assignment;
      Exchange of Warrant.
      Subject
      to compliance with applicable securities laws, this Warrant, and the rights
      evidenced hereby, may be transferred by any registered holder hereof (a
      "Transferor"). On the surrender for exchange of this Warrant, with the
      Transferor's endorsement in the form of Exhibit B attached hereto (the
“Transferor Endorsement Form") and together with an opinion of counsel
      reasonably satisfactory to the Company that the transfer of this Warrant will
      be
      in compliance with applicable securities laws, the Company will issue and
      deliver to or on the order of the Transferor thereof a new Warrant or Warrants
      of like tenor, in the name of the Transferor and/or the transferee(s) specified
      in such Transferor Endorsement Form (each a "Transferee"), calling in the
      aggregate on the face or faces thereof for the number of shares of Common Stock
      called for on the face or faces of the Warrant so surrendered by the
      Transferor.

    
      
        
        

      

      
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    9. Replacement
      of Warrant.
      On
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of this Warrant and, in the case of any such loss,
      theft or destruction of this Warrant, on delivery of an indemnity agreement
      or
      security reasonably satisfactory in form and amount to the Company or, in the
      case of any such mutilation, on surrender and cancellation of this Warrant,
      the
      Company at its expense, twice only, will execute and deliver, in lieu thereof,
      a
      new Warrant of like tenor.

     

    10. Warrant
      Agent.
      The
      Company may, by written notice to the Holder of the Warrant, appoint an agent
      (a
“Warrant Agent”) for the purpose of issuing Common Stock (or Other Securities)
      on the exercise of this Warrant pursuant to Section 1, exchanging this
      Warrant pursuant to Section 8, and replacing this Warrant pursuant to
      Section 9, or any of the foregoing, and thereafter any such issuance,
      exchange or replacement, as the case may be, shall be made at such office by
      such Warrant Agent. 

     

    11. Maximum
      Exercise.
      The
      Holder shall not be entitled to exercise this Warrant on an exercise
      date in
      connection with that number of shares of Common Stock which would be in excess
      of the sum of (i) the number of shares of Common Stock beneficially owned
      by the Holder and its affiliates on an exercise date, and (ii) the number
      of shares of Common Stock issuable upon the exercise of this Warrant with
      respect to which the determination of this limitation is being made on an
      exercise date, which would result in beneficial ownership by the Holder and
      its
      affiliates of more than 4.99% of the outstanding shares of Common Stock on
      such
      date; provided that the restrictions on exercise set forth in this Section
      11
      shall not apply in event of completion of a Fundamental Transaction. For the
      purposes of the immediately preceding sentence, beneficial ownership shall
      be
      determined in accordance with Section 13(d) of the Securities 1934
      Act, and Rule 13d-3 thereunder. Subject to the foregoing, the Holder shall
      not
      be limited to aggregate exercises which would result in the issuance of more
      than 4.99%. The
      restriction described in this paragraph may be waived, in whole or in part,
      upon sixty-one (61) days prior notice from the Holder to the Company to increase
      such percentage to up to 9.99%, but not in excess of 9.99%. The Holder may
      decide whether to convert a Convertible Note or exercise this Warrant to achieve
      an actual 4.99% or up to 9.99% ownership position as described above, but not
      in
      excess of 9.99%.

     

    12.  Registration
      Rights.
      To the
      extent the Holder of this Warrant is unable to sell Warrant Shares under Rule
      144 of the Securities and Exchange Commission (the “Commission”), commencing
      March 31, 2008, such Holder shall have piggyback registration rights, as
      follows: 

     

    12.1. Registration
      Rights.
      If the
      Company at any time proposes to register any of its securities under the 1933
      Act for sale to the public, whether for its own account or for the account
      of
      other security holders or both, except with respect to registration statements
      on Forms S-4, S-8 or another form not available for registering the Warrant
      Shares for sale to the public, provided the Warrant Shares are not otherwise
      registered for resale by the Holder pursuant to an effective registration
      statement, each such time it will give at least ten (10) days' prior written
      notice to the record holder of the Warrant Shares of its intention so to do.
      Upon the written request of the holder, received by the Company within ten
      (10)
      days after the giving of any such notice by the Company, to register any of
      the
      Warrant Shares not previously registered, the Company will cause such Warrant
      Shares as to which registration shall have been so requested to be included
      with
      the securities to be covered by the registration statement proposed to be filed
      by the Company, all to the extent required to permit the sale or other
      disposition of the Warrant Shares so registered by the holder of such Warrant
      Shares (the “Seller” or “Sellers”). In the event that any registration pursuant
      to this Section 11.1 shall be, in whole or in part, an underwritten public
      offering of common stock of the Company, the number of Warrant Shares to be
      included in such an underwriting may be reduced by the managing underwriter
      if
      and to the extent that the Company and the underwriter shall reasonably be
      of
      the opinion that such inclusion would adversely affect the marketing of the
      securities to be sold by the Company therein; provided, however, that the
      Company shall notify the Seller in writing of any such reduction.
      Notwithstanding the foregoing provisions, the Company may withdraw or delay
      or
      suffer a delay of any registration statement referred to in this Section 11.1
      without thereby incurring any liability to the Seller.

    
      
        
        

      

      
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    12.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1 to effect
      the
      registration of any Warrant Shares under the 1933 Act, the Company will, as
      expeditiously
      as
      possible: 

     

    (a) subject
      to the timelines provided in this Agreement, prepare and file with the
      Commission a registration statement required by Section 11, with respect to
      such
      securities and use its best efforts to cause such registration statement to
      become and remain effective for the period of the distribution contemplated
      thereby (determined as herein provided), promptly provide to the holders of
      the
      Warrant Shares copies of all filings and Commission letters of comment and
      notify the Holders (by telecopier and by e-mail addresses provided by the
      Holders) on or before the second business day thereafter that the Company
      receives notice that (i) the Commission has no comments or no further comments
      on the Registration Statement, and (ii) the registration statement has been
      declared effective; 

     

    (b) prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective until such registration
      statement has been effective for a period of two (2) years after the date of
      this Agreement, and comply with the provisions of the 1933 Act with respect
      to
      the disposition of all of the Warrant Shares covered by such registration
      statement in accordance with the Sellers’ intended method of disposition set
      forth in such registration statement for such period; 

     

    (c) furnish
      to the Sellers, at the Company’s expense, such number of copies of the
      registration statement and the prospectus included therein (including each
      preliminary prospectus) as such persons reasonably may request in order to
      facilitate the public sale or their disposition of the securities covered by
      such registration statement or make them electronically available; 

     

    (d) use
      its
reasonable
      best efforts to register or qualify the Warrant Shares covered by such
      registration statement under the securities or “blue sky” laws of New York and
      such jurisdictions as the Sellers shall request in writing, provided, however,
      that the Company shall not for any such purpose be required to qualify generally
      to transact business as a foreign corporation in any jurisdiction where it
      is
      not so qualified or to consent to general service of process in any such
      jurisdiction; 

     

    (e) if
      applicable, list the Warrant Shares covered by such registration statement
      with
      any securities exchange on which the Common Stock of the Company is then listed;
      

     

    (f) notify
      the Holders within twenty-four hours of the Company’s becoming aware that a
      prospectus relating thereto is required to be delivered under the 1933 Act,
      of
      the happening of any event of which the Company has knowledge as a result of
      which the prospectus contained in such registration statement, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances then existing or which
      becomes subject to a Commission, state or other governmental order suspending
      the effectiveness of the registration statement covering any of the Warrant
      Shares;

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (g) provided
      same would not be in violation of the provision of Regulation FD of the
      Commission, make available for inspection by the Sellers during reasonable
      business hours, and any attorney, accountant or other agent retained by the
      Seller or underwriter, all publicly available, non-confidential financial and
      other records, pertinent corporate documents and properties of the Company,
      and
      cause the Company's officers, directors and employees to supply all publicly
      available, non-confidential information reasonably requested by the seller,
      attorney, accountant or agent in connection with such registration statement
      at
      such requesting Seller’s expense; and 

     

    (h) provide
      to the Sellers copies of the such registration statement and amendments thereto
      five business days prior to the filing thereof with the Commission.

     

    12.3. Provision
      of Documents.
      In
      connection with each registration described in this Section 11, each Seller
      will
      furnish to the Company in writing such information and representation letters
      with respect to itself and the proposed distribution by it as reasonably shall
      be necessary in order to assure compliance with federal and applicable state
      securities laws. 

     

    12.4. Rule
      415.
      The
      amount of Warrant Shares required to be included in the Registration Statement
      as described in Section 11.1 may be reduced in proportion to other securities
      included in such Registration Statement by persons whose registration rights
      are
      on a par with the Holder (and 100% if so required under senior registration
      rights of other persons) in the event failure to effect such a reduction could
      cause the Registration Statement to exceed registration limitations imposed
      by
      the Commission pursuant to Rule 415 of the 1933 Act.

     

    12.5. Expenses.
      All
      expenses incurred by the Company in complying with Section 11, including,
      without limitation, all registration and filing fees, printing expenses (if
      required), fees and disbursements of counsel and independent public accountants
      for the Company, fees and expenses (including reasonable counsel fees) incurred
      in connection with complying with state securities or “blue sky” laws, fees of
      the NASD, transfer taxes, and fees of transfer agents and registrars, are called
      “Registration Expenses.” All underwriting discounts and selling commissions
      applicable to the sale of Warrant Shares are called "Selling Expenses." The
      Company will pay all Registration Expenses in connection with the registration
      statement under Section 11. Selling Expenses in connection with each
      registration statement under Section 11 shall be borne by the Seller and may
      be
      apportioned among the Sellers in proportion to the number of shares sold by
      the
      Seller relative to the number of shares sold under such registration statement
      or as all Sellers thereunder may agree.

     

    12.6. Indemnification
      and Contribution.

     

    (a) In
      the
      event of a registration of any Warrant Shares under the 1933 Act pursuant to
      this Section 11, the Company will, to the extent permitted by law, indemnify
      and
      hold harmless the Seller, each officers, directors, agents, Affiliates, members,
      managers, control persons, and principal shareholders of the Seller, each
      underwriter of such Warrant Shares thereunder and each other person, if any,
      who
      controls such Seller or underwriter within the meaning of the 1933 Act, against
      any losses, claims, damages or liabilities, joint or several, to which the
      Seller, or such underwriter or controlling person may become subject under
      the
      1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
      (or actions in respect thereof) arise out of or are based upon any untrue
      statement or alleged untrue statement of any material fact contained in any
      registration statement under which such Warrant Shares was registered under
      the
      1933 Act pursuant to this Section 11, any preliminary prospectus or final
      prospectus contained therein, or any amendment or supplement thereof, or arise
      out of or are based upon the omission or alleged omission to state therein
      a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances when made, and will subject
      to the provisions of Section 11.6(c) reimburse the Seller, each such underwriter
      and each such controlling person for any legal or other expenses reasonably
      incurred by them in connection with investigating or defending any such loss,
      claim, damage, liability or action; provided, however, that the Company shall
      not be liable to the Seller to the extent that any such damages arise out of
      or
      are based upon an untrue statement or omission made in any preliminary
      prospectus if (i) the Seller failed to send or deliver a copy of the final
      prospectus delivered by the Company to the Seller with or prior to the delivery
      of written confirmation of the sale by the Seller to the person asserting the
      claim from which such damages arise, (ii) the final prospectus would have
      corrected such untrue statement or alleged untrue statement or such omission
      or
      alleged omission, or (iii) to the extent that any such loss, claim, damage
      or
      liability arises out of or is based upon an untrue statement or alleged untrue
      statement or omission or alleged omission so made in conformity with information
      furnished by any such Seller in writing specifically for use in such
      registration statement or prospectus. 

    
      
        
        

      

      
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    (b) In
      the
      event of a registration of any of the Warrant Shares under the 1933 Act pursuant
      to Section 11, each Seller severally but not jointly will, to the extent
      permitted by law, indemnify and hold harmless the Company, and each person,
      if
      any, who controls the Company within the meaning of the 1933 Act, each officer
      of the Company who signs the registration statement, each director of the
      Company, each underwriter and each person who controls any underwriter within
      the meaning of the 1933 Act, against all losses, claims, damages or liabilities,
      joint or several, to which the Company or such officer, director, underwriter
      or
      controlling person may become subject under the 1933 Act or otherwise, insofar
      as such losses, claims, damages or liabilities (or actions in respect thereof)
      arise out of or are based upon any untrue statement or alleged untrue statement
      of any material fact contained in the registration statement under which such
      Warrant Shares were registered under the 1933 Act pursuant to Section 11, any
      preliminary prospectus or final prospectus contained therein, or any amendment
      or supplement thereof, or arise out of or are based upon the omission or alleged
      omission to state therein a material fact required to be stated therein or
      necessary to make the statements therein not misleading, and will reimburse
      the
      Company and each such officer, director, underwriter and controlling person
      for
      any legal or other expenses reasonably incurred by them in connection with
      investigating or defending any such loss, claim, damage, liability or action,
      provided, however, that the Seller will be liable hereunder in any such case
      if
      and only to the extent that any such loss, claim, damage or liability arises
      out
      of or is based upon an untrue statement or alleged untrue statement or omission
      or alleged omission made in reliance upon and in conformity with information
      pertaining to such Seller, as such, furnished in writing to the Company by
      such
      Seller specifically for use in such registration statement or prospectus, and
      provided, further, however, that the liability of the Seller hereunder shall
      be
      limited to the net proceeds actually received by the Seller from the sale of
      Warrant Shares pursuant to such registration statement.

     

    (c) Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel
      satisfactory to such indemnified party, and, after notice from the indemnifying
      party to such indemnified party of its election so to assume and undertake
      the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party under this Section 11.6(c) for any legal expenses subsequently incurred
      by
      such indemnified party in connection with the defense thereof other than
      reasonable costs of investigation and of liaison with counsel so selected,
      provided, however, that, if the defendants in any such action include both
      the
      indemnified party and the indemnifying party and the indemnifying party shall
      have reasonably concluded that there may be reasonable defenses available to
      indemnified party which are different from or additional to those available
      to
      the indemnifying party or if the interests of the indemnified party reasonably
      may be deemed to conflict with the interests of the indemnifying party, the
      indemnified parties, as a group, shall have the right to select one separate
      counsel, reasonably satisfactory to the indemnified and indemnifying party,
      and
      to assume such legal defenses and otherwise to participate in the defense of
      such action, with the reasonable expenses and fees of such separate counsel
      and
      other expenses related to such participation to be reimbursed by the
      indemnifying party as incurred.

    
      
        
        

      

      
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    (d) In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the 1933 Act in any case in which either (i) a Seller, or any controlling
      person of a Seller, makes a claim for indemnification pursuant to this Section
      11.6 but it is judicially determined (by the entry of a final judgment or decree
      by a court of competent jurisdiction and the expiration of time to appeal or
      the
      denial of the last right of appeal) that such indemnification may not be
      enforced in such case notwithstanding the fact that this Section 11.6 provides
      for indemnification in such case, or (ii) contribution under the 1933 Act may
      be
      required on the part of the Seller or controlling person of the Seller in
      circumstances for which indemnification is not provided under this Section
      11.6;
      then, and in each such case, the Company and the Seller will contribute to
      the
      aggregate losses, claims, damages or liabilities to which they may be subject
      (after contribution from others) in such proportion so that the Seller is
      responsible only for the portion represented by the percentage that the public
      offering price of its securities offered by the registration statement bears
      to
      the public offering price of all securities offered by such registration
      statement, provided, however, that, in any such case, (y) the Seller will not
      be
      required to contribute any amount in excess of the public offering price of
      all
      such securities sold by it pursuant to such registration statement; and (z)
      no
      person or entity guilty of fraudulent misrepresentation (within the meaning
      of
      Section 11(f) of the 1933 Act) will be entitled to contribution from any person
      or entity who was not guilty of such fraudulent misrepresentation and provided,
      further, however, that the liability of the Seller hereunder shall be limited
      to
      the net proceeds actually received by the Seller from the sale of Warrant Shares
      pursuant to such Registration Statement.

    

    13. Transfer
      on the Company's Books.
      Until
      this Warrant is transferred on the books of the Company, the Company may treat
      the registered holder hereof as the absolute owner hereof for all purposes,
      notwithstanding any notice to the contrary. 

     

    14. Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: if to the Company, to: Neonode
      Inc., 4000 Executive Parkway, Suite 200, San Ramon, CA 94583, Attn: Chief
      Financial Officer, telecopier:
      (925) 355-2020, with a copy by telecopier only to: Hahn & Hessen LLP, 488
      Madison Avenue, New York, NY 10022, Attn: James Kardon, Esq., telecopier: (212)
      478-7400, and (ii) if to the Holder, to the address and telecopier number listed
      in the records of the Company, or such other address as such party may designate
      by notice hereunder.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    15. Law
      Governing This Warrant.
      This
      Warrant shall be governed by and construed in accordance with the laws of the
      State of New York without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Warrant shall be brought only in the state courts of New
      York or in the federal courts located in the state and county of New York.
      The
      parties to this Warrant hereby irrevocably waive any objection to jurisdiction
      and venue of any action instituted hereunder and shall not assert any defense
      based on lack of jurisdiction or venue or based upon forum
      non conveniens.
      The
      Company and Holder waive trial by jury. The prevailing party shall be entitled
      to recover from the other party its reasonable attorney’s fees and costs. In the
      event that any provision of this Warrant or any other agreement delivered in
      connection herewith is invalid or unenforceable under any applicable statute
      or
      rule of law, then such provision shall be deemed inoperative to the extent
      that
      it may conflict therewith and shall be deemed modified to conform with such
      statute or rule of law. Any such provision which may prove invalid or
      unenforceable under any law shall not affect the validity or enforceability
      of
      any other provision of any agreement. Each party hereby irrevocably waives
      personal service of process and consents to process being served in any suit,
      action or proceeding in connection with this Agreement or any other Transaction
      Document 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.

     

    [signature
      page follows]

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has executed this Warrant as of the date first
      written above.

     

    
      	 	
              NEONODE
                INC.

            
	 	 
	 	 
	 	
              By:

            	
               

            
	 	 	
                  Name:

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    Exhibit A

    

    FORM
      OF
      SUBSCRIPTION

    (to
      be
      signed only on exercise of Warrant)

     

    TO:
      NEONODE INC. 

     

    The
      undersigned, pursuant to the provisions set forth in the attached Warrant
      (No.____), hereby irrevocably elects to purchase (check applicable
      box):

    

    ___ ________
      shares of the Common Stock covered by such Warrant; or

     

    ___ the
      maximum number of shares of Common Stock covered by such Warrant pursuant to
      the
      cashless exercise procedure set forth in Section 2.

    

    The
      undersigned herewith makes payment of the full purchase price for such shares
      at
      the price per share provided for in such Warrant, which is $___________. Such
      payment takes the form of (check applicable box or boxes):

    

    ___ $__________
      in lawful money of the United States; and/or

     

    ___ the
      cancellation of such portion of the attached Warrant as is exercisable for
      a
      total of _______ shares of Common Stock (using a Fair Market Value of $_______
      per share for purposes of this calculation); and/or

    

    ___ the
      cancellation of such number of shares of Common Stock as is necessary, in
      accordance with the formula set forth in Section 2, to exercise this
      Warrant with respect to the maximum number of shares of Common Stock purchasable
      pursuant to the cashless exercise procedure set forth in
      Section 2.

    

    The
      undersigned requests that the certificates for such shares be issued in the
      name
      of, and delivered to _____________________________________________________
      whose
      address is
      ____________________________________________________________________________________________________________

    ___________________________________________________________________________________________________________.

    

    The
      undersigned represents and warrants that all offers and sales by the undersigned
      of the securities issuable upon exercise of the within Warrant shall be made
      pursuant to registration of the Common Stock under the Securities Act of 1933,
      as amended (the "1933 Act"), or pursuant to an exemption from registration
      under
      the 1933 Act.

    

    
      	
              Dated:___________________

            	
               

                

              

              (Signature
                must conform to name of holder as specified on the face of the
                Warrant)

               

               

                

              

               

              
                

              

              (Address)

            

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    Exhibit B

    

    FORM
      OF
      TRANSFEROR ENDORSEMENT

    (To
      be
      signed only on transfer of Warrant)

     

    For
      value
      received, the undersigned hereby sells, assigns, and transfers unto the
      person(s) named below under the heading "Transferees" the right represented
      by
      the within Warrant to purchase the percentage and number of shares of Common
      Stock of NEONODE INC. to which the within Warrant relates specified under the
      headings "Percentage Transferred" and "Number Transferred," respectively,
      opposite the name(s) of such person(s) and appoints each such person Attorney
      to
      transfer its respective right on the books of NEONODE INC. with full power
      of
      substitution in the premises.

    

      
        	
                Transferees

              	 	
                Percentage
                  Transferred

              	 	
                Number
                  Transferred

              
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

      

    

     

    
      	
              Dated:
                ______________, ___________

               

               

               

              Signed
                in the presence of:

               

               

              
                

              

              (Name)

               

               

              ACCEPTED
                AND AGREED:

              [TRANSFEREE]

               

               

              
                

              

              (Name)

            	 	
               

                

              

              (Signature
                must conform to name of holder as specified on the face of the
                warrant)

               

               

              
                
 

                

              

              (address)

               

              
                
 

                

              

              (address)

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