Document:

exhibit4-05.htm

     Exhibit
4.05

    

    INVESTOR
PLUS PLAN

    

    SCANA CORPORATION, a South Carolina
corporation (the "Company"), hereby amends and restates the SCANA Investor Plus
Plan (the "Plan") as follows, effective as of May 1, 2004:

    

    

    ARTICLE
I

    Definitions

    

    The terms defined in this Article I
shall, for all purposes of this Plan, have the following respective
meanings:

    

     Account

    

    The term "Account" shall mean, as to
any Participant, the account maintained by the Company through its Shareholder
Services Department to which is credited (i) the shares (and including any
fraction of a share computed to three decimal places) of Common Stock (a)
purchased through the Plan, or (b) deposited by such Participant into the Plan
pursuant to Section 4.1, and credited to such Participant and (ii) cash held in
the Escrow Account or by the Custodian pending investment in Common Stock for
such Participant and credited to such Participant.

    

    Account Shares

    

    The term "Account Shares" shall mean
all shares (including any fraction of a share) of Common Stock credited to and
at any given time remaining in the Account of a Participant.

    

    Change Form

    

    The term "Change Form" shall mean the
documentation that the Company shall require to be completed prior to a
Participant's (i) changing the number of shares of Common Stock or SCE&G
Preferred Stock with respect to which Dividends are invested pursuant to Section
7.1, (ii) withdrawal of Account Shares pursuant to Section 7.2 and (iii)
termination of participation in the Plan pursuant to Section 7.3.

    

    Common Stock

    

    The term "Common Stock" shall mean the
common stock, without par value, of the Company.

    

    Company

    

    The term "Company" shall mean SCANA
Corporation.

    

    Company Share Purchase
Price

    

    The term "Company Share Purchase Price"
shall mean the average of the high and low sales prices of Common Stock on a
given trading day as reported on The New York Stock Exchange Composite Tape and
published in The Wall Street Journal.  In the event no trading is so
reported for a trading day, the Company Share Purchase Price for such day may be
determined by the Company on the basis of such market quotations as it deems
appropriate.

    
      
         

      

      
         

        
        

      

      
         

      

    

        Custodian

    

    The term "Custodian" shall mean the
Person appointed by the Company from time to time pursuant to Section 10.1 to
hold all shares of Common Stock acquired under or deposited into the Plan, and
to purchase and sell shares on the open market pursuant to Section 3.4 and
5.1.

    

    Direct Deposit Authorization
Form

    

    The term "Direct Deposit Authorization
Form" shall mean the documentation that the Company shall require to be
completed and received prior to a Participant having any Dividends on Account
Shares not being invested in Common Stock paid by electronic direct deposit to
the Participant's predesignated bank, savings association or credit union
account pursuant to Section 7.7.

    

    Dividend

    

    The term "Dividend" shall mean any cash
dividends paid on shares of Common Stock or SCE&G Preferred
Stock.

    

    Dividend Payment Date

    

    The term "Dividend Payment Date" shall
mean a date on which a Dividend is paid.

    

    Enrollment Form

    

    The term "Enrollment Form" shall mean
the documentation that the Company shall require to be completed and received
prior to an investor's enrollment in the Plan pursuant to Article
II.

    

    Escrow Account

    

    The term "Escrow Account" shall have
the meaning set forth in Section 11.1.

    

    Escrow Agent

    

    The term "Escrow Agent" shall have the
meaning set forth in Section 11.2.

    

    Exchange Act

    

    The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.

    

    Fractional Account Shares

    

    The term "Fractional Account Shares"
shall mean the shares (and fractions of shares) of Common Stock held in the
Fractional Share Account.

    

    Fractional Share Account

    

    The term "Fractional Share Account"
shall mean an account under the Plan, consisting of Fractional Account Shares,
which is owned by the Company and administered pursuant to Section
8.3.

    
      
         

      

      
         

        
        

      

      
         

      

    

    

    Independent Agent

    

    The term "Independent Agent" shall mean
an agent independent of the Company who satisfies applicable legal requirements
(including without limitation the requirements of Rule 10b-18 and Regulation M
promulgated under the Exchange Act).

    

    Investment Date

    

    The term "Investment Date" shall mean
(i) in any month in which a Dividend Payment Date occurs, such Dividend Payment
Date and the fifteenth day of the month or, if the fifteenth day is not a
business day, the next business day, and (ii) in any month in which no Dividend
Payment Date occurs, the first business day of such month and the fifteenth day
of the month or, if the fifteenth day is not a business day, the next business
day.

    

    Market Share Purchase
Price

    

    The term "Market Share Purchase Price"
shall mean the weighted average purchase price per share (including brokerage
commissions, any related service charges and applicable taxes) of the aggregate
number of shares purchased in the open market with respect to an Investment
Date.

    

    Market Share Sales Price

    

    The term "Market Share Sales Price"
shall mean the weighted average sales price per share (net of brokerage
commissions, any related service charges and applicable taxes) of the aggregate
number of shares sold in the open market for the relevant day.

    

    Maximum Amount

    

    The term "Maximum Amount" shall have
the meaning set forth in Section 2.4.

    

    Participant

    

    The term "Participant" shall have the
meaning set forth in Section 2.1.

    

    Person

    

    The term "Person" shall mean any
individual, corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust, estate or unincorporated
organization.

    

    Plan

    

    The term "Plan" shall mean this SCANA
Investor Plus Plan.

    

    SCE&G

    

    The term "SCE&G" shall mean South
Carolina Electric & Gas Company.

    

    SCE&G Preferred Stock

    

    The term "SCE&G Preferred Stock"
shall mean the Preferred Stock of SCE&G whether issued prior to, on or after
the date hereof.

     

    
      
         

      

      
         

        
        

      

      
         

      

    

    Share
Deposit Form

    

    The term "Share Deposit Form" shall
mean the documentation that the Company shall require to be completed and
received prior to deposit of shares of Common Stock for a Participant's Account
pursuant to Section 4.1.

    

    Statement of Account

    

    The term "Statement of Account" shall
mean a written statement prepared by the Company and sent to each Participant
(i) each time a transaction takes place in a Participant's Account and (ii) in
January of each year which reflects (a) all transactions to date completed under
the Plan during the calendar year to which it relates, (b) the number of Account
Shares remaining in such Participant's Account at the date of such statement and
(c) such additional information regarding such Participant's Account as the
Company may determine.

    

    Transfer Request Form

    

    The term "Transfer Request Form" shall
mean the documentation that the Company shall require to be completed and
received prior to a Participant's gift or transfer of Account Shares pursuant to
Section 5.2.

    

    Voluntary Payment Form

    

    The term "Voluntary Payment Form" shall
mean the documentation that the Company shall require to be completed and
received prior to an optional cash payment being invested pursuant to Section
2.4.

    

    A pronoun or adjective in the masculine
gender includes the feminine gender, and the singular includes the plural,
unless the context clearly indicates otherwise.

    

    

    ARTICLE
II

    Participation

    

    Section
2.1.  Participation.  Any Person, whether or not a record
holder of Common Stock, may elect to participate in the Plan; provided such
Person is a resident of, or is organized or incorporated under, or has its
principal place of business in, the United States, and its
possessions.

    

    An election by a Person to participate
in the Plan shall be made by such Person completing and returning to the Company
an Enrollment Form in which such Person elects to (i) have Dividends on Common
Stock or SCE&G Preferred Stock of which such Person is the record holder
invested in Common Stock pursuant to Section 2.2, (ii) deposit shares of Common
Stock of which such person is the record holder into the Plan pursuant to
Section 4.1 or (iii) make an initial cash payment pursuant to Section
2.3.

    

    Any Person who has met such
requirements and has made and not revoked such election is referred to herein as
a "Participant."  A Participant may elect to participate in either or
both of the forms of investment provided in Sections 2.2 and 2.4 and to utilize
the Plan's safekeeping services provided in Section 4.1 by so indicating on an
Enrollment Form, Change Form, or Share Deposit Form; provided, however, that a
Participant who has elected to make optional cash investments pursuant to
Section 2.4 shall submit to the Company a completed Voluntary Payment
Form.

     

    
      
         

      

      
         

        
        

      

      
         

      

    

    Section
2.2.  Dividend Investment.  A Participant may elect to have
all or a portion of any Dividend on his Common Stock or SCE&G Preferred
Stock invested in shares of Common Stock to be credited to his Account in lieu
of receiving such Dividend directly.  If a Participant elects to
invest only a portion of the Dividends received on his certificated shares of
Common Stock or SCE&G Preferred Stock, that portion of such Dividends not
invested in Common Stock will be sent to the Participant in the manner otherwise
associated with payment of such Dividends.  If a Participant elects to
invest only a portion of the Dividends received on the shares of Common Stock
credited to his Account, the portion of Dividends not invested will be sent to
the Participant by check or by electronic direct deposit if the Participant has
elected the direct deposit option provided in Section 7.7.

    

    Section 2.3.  Initial Cash
Payment.  A Person not already a Participant may become a Participant
by (i) making an initial cash payment of at least $250 or, (ii) in the case of a
Person who is already a record holder of Common Stock or SCE&G Preferred
Stock, of at least $25 but no more than $100,000, by personal check payable to
SCANA Corporation, to be invested in Common Stock pursuant to Section 3.2;
provided, however, that payment for such initial cash investment must be
accompanied by a completed Enrollment Form.  A fee of $25 will be
charged for any check that is returned by the bank due to non-sufficient
funds.

    

    Section 2.4.  Optional Cash
Payments.  A Participant may elect to make cash payments at any time
or from time to time to the Plan, by personal check or money order payable to
SCANA Corporation, for investment in Common Stock pursuant to Section 3.2 or, in
the case of regular monthly investments, by automatic bank draft; provided,
however that any Participant who elects to make optional cash payments pursuant
to this Section 2.4 must invest at least $25 for any single investment and may
not invest more than $100,000 in aggregate amounts in any calendar year (the
"Maximum Amount").  For purposes of determining whether the Maximum
Amount has been reached, initial cash payments shall be counted as optional cash
payments.  A fee of $25 will be charged against a Participant's
Account if a check or bank draft is returned by the bank due to non-sufficient
funds.

    

    

    ARTICLE
III

    Dividend
Investment and Investment of

    Initial
and Optional Cash Payments

    

    Section 3.1.  Dividend
Investment.  Dividends as to which investment has been elected by a
Participant shall be invested at the Company's election, in either (i) newly
issued shares of Common Stock purchased from the Company pursuant to Section 3.3
or (ii) shares of Common Stock purchased by the Custodian in the open market
pursuant to Section 3.4.  No interest shall be paid on Dividends held
by the Custodian pending investment pursuant to Section 3.4.  Any
Dividends not invested in shares of Common Stock within 30 days of the payment
thereof shall be promptly sent to the Participant by First Class Mail at his
address of record.

    

    Section 3.2.  Investment of
Optional Cash Payments and Initial Cash Payments.  Any optional cash
payments and initial cash payments received by the Company from a Participant at
least two business days prior to an Investment Date shall be invested at the
Company's election, in either (i) newly issued shares of Common Stock purchased
from the Company pursuant to Section 3.3, or (ii) shares of Common Stock
purchased by the Custodian in the open market pursuant to Section
3.4.  Optional cash payments and initial cash payments not received by
the Company at least two business days prior to an Investment Date need not be
invested pursuant to Section 3.3 or 3.4 with respect to such Investment Date;
provided, however, that any such optional cash payments and initial cash
payments not invested pursuant to Section 3.3 or 3.4 on such Investment Date
shall be invested pursuant to Section 3.3 or 3.4 on the next succeeding
Investment Date.  No interest shall be paid on optional cash payments
and initial cash payments held pending investment pursuant to Section 3.3 or
Section 3.4.  Any optional cash payments and initial cash payments to
be invested in shares of Common Stock purchased pursuant to Section 3.3 or 3.4
not invested in shares of Common Stock within 30 days of receipt by the Company
shall be promptly returned to the Participant by First Class Mail at his address
of record.

    

    
      
         

      

      
         

        
        

      

      
         

      

    

    Section 3.3.  Investment in
Newly Issued Shares.  Investment in newly issued shares of Common
Stock shall be governed by this Section 3.3.  On an Investment Date
with respect to which the Company elects to issue new shares to the Plan in
order to effect the investment of Dividends and optional and initial cash
payments, the Company shall issue to the Custodian, for the benefit of the
Participants, and in consideration of the payment of the purchase price thereof,
a number of shares of Common Stock equal to (a)(i) the amount of any Dividends
paid on such Investment Date with respect to which Participants have elected
dividend investment, if any, plus the amount of any optional cash payments and
initial cash payments received by the Company from Participants since the
preceding Investment Date (excluding any amounts received from Participants
within two business days of such current Investment Date but including any
amounts received from such Participants within two business days prior to the
preceding Investment Date that were not invested with respect to the preceding
Investment Date as set forth in Section 3.2) less (ii) Dividends and optional
cash payments and initial cash payments to be returned to Participants pursuant
to Section 3.1 or Section 3.2, if any, divided by (b) the Company Share Purchase
Price on the trading day immediately preceding such Investment
Date.  Such shares shall be issued to, and registered in the name of,
the Custodian, or its nominee, as custodian for the Participants.  The
number of shares (and/or fraction of a share rounded to three decimal places) of
Common Stock that shall be credited to a Participant's Account with respect to
an Investment Date to which this Section 3.3 applies shall be equal to (a) the
amount of Dividends, optional cash payments and initial cash payments, if any,
invested on such Investment Date on behalf of such Participant divided by (b)
the Company Share Purchase Price on the trading day immediately preceding such
Investment Date.

    

    Section 3.4.  Investment in
Shares Purchased in the Open Market.  Investment in shares of Common
Stock purchased in the open market shall be governed by this Section
3.4.  On an Investment Date with respect to which the Company elects
to effect the investment of Dividends and optional and initial cash payments in
shares of Common Stock purchased by the Custodian in the open market, the
Company shall forward to the Custodian to be invested for the benefit of the
Participants an amount equal to (a) the Dividends paid on such Investment Date
with respect to which Participants have elected dividend investment, if any,
plus the amount of any optional cash payments and initial cash payments received
by the Company from Participants since the preceding Investment Date (excluding
any amounts received from Participants within two business days of such current
Investment Date but including any amounts received from such Participants within
two business days prior to the preceding Investment Date that were not invested
with respect to the preceding Investment Date as set forth in Section 3.2) less
(b) any Dividends and optional cash payments and initial cash payments to be
returned to Participants pursuant to Section 3.1 or Section 3.2.  The
Custodian shall apply such funds to the purchase of shares of Common Stock in
the open market pursuant to this Section 3.4.  Such shares shall be
registered in the name of the Custodian, or its nominee, as custodian for the
Participants.  Purchases in the open market pursuant to this Section
3.4 may begin on the applicable Investment Date and shall be completed prior to
the next Investment Date unless completion at a later date is necessary or
advisable under applicable law, including without limitation any federal
securities laws.  Open market purchases pursuant to this Section 3.4
may be made on any securities exchange on which the Common Stock is traded, in
the over-the-counter market or by negotiated transactions, and may be upon such
terms and subject to such conditions with respect to price, delivery and
otherwise to which the Custodian may agree.  With regard to open
market purchases of shares of Common Stock pursuant to this Section 3.4, none of
the Company, any affiliated Purchasers or any Participant shall have any
authority or power to direct the time or price at which shares of Common Stock
may be purchased, the markets on which such shares are to be purchased
(including any securities exchange, in the over-the-counter market or in
negotiated transactions) or the selection of the broker or dealer (other than
the Custodian) through or from whom purchases may be made, except that the
timing of such purchases must be made in accordance with the terms and
conditions of the Plan.  For the purpose of making, or causing to be
made, purchases of shares of Common Stock pursuant to this Section 3.4, and
sales of Account Shares pursuant to Section 5.1, the Custodian shall be entitled
to commingle each Participant's funds with those of all other Participants and
to offset purchases of shares of Common Stock against sales of shares of Common
Stock to be made for participants, resulting in a net purchase or a net sale of
shares.  The number of shares (and/or fraction of a share rounded to
three decimal places) of Common Stock that shall be credited to a Participant's
Account with respect to an Investment Date to which this Section 3.4 applies
shall be equal to (a) the amount of Dividends, optional cash payments and
initial cash payments, if any, invested with respect to such Investment
Date on behalf of such Participant divided by (b) the Market Share Purchase
Price with respect to such Investment Date.

    

    
      
         

      

      
         

        
        

      

      
         

      

    

    Section 3.5.  Request to Stop
Investment.  If a written request to stop investment of optional cash
payments or an initial cash payment is received by the Company from a
Participant at least three business days before the next Investment Date, any
optional cash payments or initial cash payments from such Participant then held
by the Company shall not be invested in Common Stock and shall be returned to
such Participant.  If such a request is not received by the Company at
least three business days prior to an Investment Date, any such optional cash
payments or initial cash payments shall be invested in shares of Common Stock
for such Participant's Account.

    

    

    ARTICLE
IV

    Safekeeping
Services for Deposited Common Stock

    

    Section 4.1.  Deposited
Common Stock.  A Participant may elect to have shares of Common Stock
of which the Participant is the record holder deposited into the Plan by
completing a Share Deposit Form and, if such person is not then a Participant,
an Enrollment Form, or if such person is then a Participant, a Change Form, and
delivering certificates evidencing the shares to be deposited and the Share
Deposit Form along with the Enrollment Form or the Change Form, as applicable,
to the Company.  Shares of Common Stock so deposited shall be
transferred into the name of the Custodian or its nominee and credited to the
depositing Participant's Account.  Dividends paid on shares of Common
Stock deposited into the Plan pursuant to this Section 4.1 shall be invested in
Common Stock pursuant to Article III unless a Participant notifies the Company
otherwise on the Enrollment Form or the Change Form, as applicable.

    

    Section 4.2.  Withdrawal of
Common Stock Deposited Pursuant to Section 4.1.  Shares of Common
Stock deposited pursuant to Section 4.10 may be withdrawn from the Plan pursuant
to Section 7.2.

    

    

    ARTICLE
V

    Sale of
Account Shares; Gift or Transfer of Account Shares

    

    Section 5.1.  Sale of Account
Shares.  A Participant may request, at any time, that all or a portion
of his Account Shares be sold by delivering to the Company instructions to that
effect; provided, however, that no fractional share may be sold unless the
Participant requests the sale of all his Account Shares; and further, provided,
that no Account Shares may be sold until those shares have been held in a
Participant's Account for at least two weeks.  The Company shall
forward such sale instructions to the Custodian within five business days after
receipt thereof (except in the case of instructions to sell all Account Shares
of a Participant described below in the immediately following
paragraph).  The Custodian shall make such sales as soon as
practicable (in accordance with stock transfer requirements and federal and
state securities laws) after processing such sale instructions.  As
soon as practicable following the receipt of proceeds from such sale, the
Company shall mail by First Class Mail to such Participant at his address of
record a check in an amount equal to (a) the Market Share Sales Price multiplied
by (b) the number of Account Shares sold.  If a Participant misplaces
the check there will be a charge of $10 to replace the check, except for the
first replacement and there will be a charge of $10 for each copy of a paid
check.

    

    If instructions for the sale of Account
Shares are received on or after the record date for a Dividend but before the
related Dividend Payment Date, the sale shall be processed as described above,
and the dividends on such shares shall be paid to the Participant or invested in
shares of Common Stock pursuant to the Plan in accordance with the Participant's
then effective instructions under the Plan.  Notwithstanding the
foregoing, if a Participant requests the sale of all his Account Shares and such
Participant has elected to invest Dividends on any of such shares then if a
request is received between a dividend record date and the related Dividend
Payment Date, such sale shall not be effected until after such Dividend has been
invested pursuant to the Plan and the shares of Common Stock purchased therewith
are credited to the Participant's Account).  Following the investment
of such Dividend, the Company shall forward such sale instructions to the
Custodian.

    

    
      
         

      

      
         

        
        

      

      
         

      

    

    With regard to open market sales of
Account Shares pursuant to this Section 5.l, neither the Company nor any
Participant shall have any authority or power to direct the time or price at
which shares of Common Stock may be sold, the markets on which such shares are
to be sold (including on any securities exchange, in the over-the-counter market
or in negotiated transactions) or the selection of the broker or dealer (other
than the Custodian) through or from whom sales may be made, except that the
timing of such sales must be made in accordance with the terms and conditions of
the Plan.

    

    Section 5.2.  Gift or
Transfer of Account Shares.  A Participant may elect to transfer
(whether by gift, private sale or otherwise) ownership of all or a portion of
his Account Shares by delivering to the Company a completed Transfer Request
Form to that effect and a stock assignment (stock power) acceptable to the
Company.  No fraction of a share of Common Stock credited to the
transferor's Account shall be transferred unless the transferor's entire Account
is transferred and no shares may be transferred unless the shares have been held
in the Participant's Account for at least two weeks.  Transfers
outside of the Plan shall be treated as withdrawals and shall be governed by
Section 7.2.

    

    Account Shares transferred to the
Account of another Participant or to establish an Account for a Person not
already a Participant in accordance with the preceding paragraph shall continue
to be registered in the name of the Custodian as custodian and shall be credited
to the transferee's Account.  If the transferee is not already a
Participant, an Account shall be opened in the name of the transferee and in any
event the Company shall send the transferee a Statement of Account showing the
number of shares transferred and now held in his Account as soon as practicable
after such transfer.

    Unless otherwise requested by a
transferee on a completed Change Form, the Dividends on such transferred Account
Shares shall be invested in shares of Common Stock under the
Plan.  The transferor may request that the Company send a gift
certificate directly to such transferee or request that the Company deliver such
gift certificate to the transferor for personal delivery to the
transferee.

    

    If a completed Transfer Request Form
with regard to Account Shares is received after a record date for a Dividend but
before the related Dividend Payment Date, the transfer shall be processed as
described above and the dividends on such shares shall be paid to the
Participant or invested in shares of Common Stock pursuant to the Plan in
accordance with the Participant's then effective instructions under the
Plan.  Notwithstanding the foregoing, if a completed Transfer Request
Form with regard to all Account Shares of a Participant is received by the
Company between a record date for a Dividend and the related Dividend Payment
Date, and such Participant has elected to invest Dividends on any of such
Account Shares, such transfer shall not become effective until after such
Dividend has been invested pursuant to the Plan and the shares of Common Stock
purchased therewith are credited to the Participant's
Account).  Following the investment of such Dividend, the Company
shall effect such transfer.

    

    Section 5.3.  Investment of
Dividends on Remaining Account Shares.  If only a portion of a
Participant's Account Shares are shares with respect to which the Participant
has elected to invest dividends and the Participant elects to (i) sell a portion
of his Account Shares pursuant to Section 5.1, (ii) transfer a portion of his
Account Shares pursuant to Section 5.2 or (iii) withdraw a portion of his
Account Shares pursuant to Section 7.2, all of the Account Shares with respect
to which the Participant has elected to invest Dividends shall be sold,
transferred or withdrawn, as the case may be, before any Account Shares with
respect to which the Participant has elected not to invest Dividends are sold,
transferred or withdrawn unless the Participant gives specific instructions to
the contrary in connection with such sale, transfer or withdrawal of Account
Shares.

    

    

    ARTICLE
VI

    

    [Reserved]

     

     

    
      
         

      

      
         

        
        

      

      
         

      

    

    ARTICLE
VII

    Treatment
of Accounts

    

    Section 7.1.  Changing Plan
Options.  A Participant may elect to change his Plan options,
including (i) changing the investment levels (i.e., full, partial or none) of
Dividends on Common Stock or SCE&G Preferred Stock and (ii) changing the
designation of shares of Common Stock or SCE&G Preferred Stock on which
Dividends are to be invested, by delivering to the Company a Change Form to that
effect.  To be effective with respect to any Dividend, the Change Form
must be received by the Company prior to the record date for such
Dividend.  If the Change Form is not received by the Company prior to
the record date of a Dividend, such change shall not become effective until
after the next Dividend Payment Date.  After the effectiveness of the
Change Form, Dividends on shares of Common Stock and SCE&G Preferred Stock
as to which the investment election has been revoked will be paid in cash or
with regard to Dividends on Account Shares, by direct deposit to the
Participant's designated direct deposit account, if such Participant has elected
the direct deposit option pursuant to Section 7.7.

    

    Section 7.2.  Right of
Withdrawal.  A Participant may, at any time or from time to time,
withdraw from the Plan all or any part (other than fractions) of his Account
Shares by delivering to the Company (i) appropriate withdrawal instructions to
that effect, if such Participant will be the record holder of such Account
Shares after withdrawal or (ii) a completed Transfer Request Form and a stock
assignment (stock power) to that effect, if the Participant will not be the
record holder of such Account Shares after withdrawal.  Subject to the
limitations described in the immediately following paragraph, as soon as
practicable following the Company's receipt of (i) appropriate withdrawal
instructions or (ii) a completed Transfer Request Form and a stock assignment
(stock power), as the case may be, which indicates the Participant's desire to
withdraw whole Account Shares, the Company shall mail by First Class Mail to the
Participant at his address of record, or to the address of the designated
transferee, certificates representing such designated Account Shares; provided,
however, no shares may be withdrawn until such shares have been held in the
Participant's Account for at least two weeks.

    

    If withdrawal instructions or a
Transfer Request Form with regard to Account Shares is received by the Company
after the record date for a Dividend but before the related Dividend Payment
Date, the withdrawal shall be processed as described above and the dividends on
such shares shall be paid to the Participant or, invested in shares of Common
Stock pursuant to the Plan in accordance with the Participant's then effective
instructions under the Plan.  Notwithstanding the foregoing, if
withdrawal instructions or a Transfer Request Form with regard to all the
Account Shares is received by the Company between the record date for a Dividend
and the related Dividend Payment Date, and any of such shares are shares on
which Dividends are invested, such withdrawal shall not become effective until
after such Dividend has been invested pursuant to the Plan and the shares of
Common Stock purchased therewith are credited to the Participant's
Account).  As soon as practicable following such investment of such
Dividend, the Company shall mail by First Class Mail to the Participant at his
address of record, or to the address of the designated transferee, certificates
representing the Account Shares withdrawn.

    

    There is a cost to replace a lost or
stolen stock certificate.  The cost is $10, or two percent of the
current market value, whichever is greater; provided, however, that the Company
will not charge for a stock certificate that is lost in the mail to a
Participant, if the Participant notifies the Company of the non-receipt claim
within a year of the date the certificate is issued.

    

    Withdrawal of Account Shares shall not
affect investment of Dividends on the Account Shares withdrawn unless (i) the
Participant is no longer the record holder of such Account Shares, (ii) such
investment is changed by the Participant by delivering to the Company a Change
Form to that effect pursuant to Section 7.1 or (iii) the Participant has
terminated his participation in the Plan pursuant to Section
7.3.

    
      
         

      

      
         

        
        

      

      
         

      

    

    

    Section 7.3.  Termination of
Participation.  A Participant may terminate his participation in the
Plan at any time by giving notice to the Company.  Participation in
the Plan also will be terminated if the Company receives notice of the
Participant's death.  The Company shall treat any termination of
participation as a request for withdrawal of all of such Participant's whole
Account Shares pursuant to Section 7.2 unless the Participant requests that the
shares in his Account be sold pursuant to Section 5.1.  The Company,
in addition to mailing certificates representing all whole Account Shares, if
any, pursuant to Section 7.2, shall mail by First Class Mail to the Participant
at his address of record a check for an amount equal to the cash value of any
fraction of a share of Common Stock then remaining in the Participant's
Account.  Such fraction of a share shall be valued at the Company
Share Purchase Price for the trading day immediately preceding the date the
termination is processed.  If a Participant misplaces the check there
will be a charge of $10 to replace the check, except for the first replacement
and there will be a charge of $10 for each copy of a paid check.

    

    If the termination notice or the notice
of death is received prior to a record date for a Dividend, the termination will
be processed as soon as practicable after receipt.  If the termination
notice or the notice of death is received between the record date for a Dividend
and the payment date for that Dividend and the Participant has elected Dividend
investment with respect to any shares of Common Stock credited to his Account,
the termination will not be processed until the Dividends on such shares have
been invested.  Any optional cash payment which is received prior to
receipt of the notice also will be invested unless return of the amount is
requested in the notice and such notice is received at least three business days
prior to the next Investment Date.  The termination will be processed
as promptly as possible following the Dividend Payment Date.

    

    Section 7.4. Stock Splits, Stock
Dividends and Rights Offerings.  Any shares or other securities
representing stock dividends or other noncash distributions on Account Shares
shall be credited to Participants' Accounts.  Stock splits,
combinations, recapitalizations and similar events affecting the Common Stock
shall, as to share balances in Accounts of Participants, be credited to such
Accounts on a pro rata basis.  Dividends on such shares will be
invested in shares of Common Stock under the Plan until a Participant notifies
the Company otherwise on a Change Form.

    

    In the event of a rights offering, a
Participant shall receive rights based upon the total number of whole shares of
Common Stock in his Account on the record date for the rights
offering.

    

    Section 7.5.  Shareholder
Materials; Voting Rights.  The Company shall send or forward to each
Participant all applicable proxy solicitation materials, other shareholder
materials or consent solicitation materials.  Participants shall have
the exclusive right to exercise all voting rights respecting Account Shares
credited to their respective Accounts.  A Participant may vote any of
his whole Account Shares in person or by proxy.  A Participant's proxy
card shall include his whole Account Shares and shares of Common Stock of which
he is the record holder.  Account Shares shall not be voted unless a
Participant or his proxy votes them.  Fractions of shares of Common
Stock shall not be voted.

    

    Solicitation of the exercise of
Participants' voting rights by the management of the Company and others under a
proxy solicitation applicable to all holders of Common Stock shall be
permitted.  Solicitation of the exercise of Participants' tender or
exchange offer rights by management of the Company and others shall also be
permitted.  The Company shall notify the Participants of each occasion
for the exercise of their voting rights or rights with respect to a tender offer
or exchange offer within a reasonable time before such rights are to be
exercised.  Such notification shall include all information
distributed to the shareholders of the Company by the Company regarding the
exercise of such rights.

    
      
         

      

      
         

        
        

      

      
         

      

    

    

    Section 7.6.  Statements of
Account.  As soon as practicable after a person becomes a Participant,
the Company shall send such Participant an acknowledgement form notifying him
that an Account has been established in his name.  Thereafter, the
Company shall send each Participant an annual Statement of Account which shall
be mailed on or before January 31 of each calendar year and, in addition, the
Company shall send each Participant a Statement of Account following each time a
Participant has made an optional cash payment, deposited Common Stock into the
Plan pursuant to Section 4.1, transferred, withdrew or sold Account Shares or
had Dividends invested in Common Stock.  Duplicate statements may be
ordered from the Company.  In connection with this service, a
Participant will be charged a fee of $15 which will cover up to one hour of
research.  There will be an additional charge of $10 for each
additional hour.

    

    Section 7.7.  Direct Deposit
Option.  A Participant may elect to have any Dividends on Account
Shares not being invested in Common Stock pursuant to the Plan paid by
electronic direct deposit to the Participant's predesignated bank, savings
association or credit union account.  To receive such direct deposit
of funds, a Participant must complete, sign and return a Direct Deposit
Authorization Form to the Company.  Direct deposit will become
effective as soon as practicable after receipt of a completed Direct Deposit
Authorization Form.  A Participant may change his designated direct
deposit account any time by delivering a new completed Direct Deposit
Authorization Form to the Company.

    

    

    ARTICLE
VIII

    Certificates
and Fractions of Shares

    

    Section
8.1.  Certificates.  A Participant, at any time or from time
to time, may request in writing to receive a certificate for all or a portion of
his whole Account Shares.  The Company shall treat such request as a
request for a withdrawal of shares pursuant to Section 7.2.  Promptly
following such withdrawal the Company shall mail such certificate by First Class
Mail to such Participant at his address of record; provided, however, that upon
the withdrawal of such shares the shares shall no longer be Account Shares but
any of such shares which were designated for investment of Dividends shall
remain shares on which Dividends are invested (except to the extent such
Participant elects not to have Dividends on such Account Shares invested in
Common Stock on a Change Form).  There is a cost to replace a lost or
stolen stock certificate.  The cost is $10, or two percent of the
current market value, whichever is greater; provided, however, that the Company
will not charge for a stock certificate that is lost in the mail to a
Participant, if the Participant notifies the Company of the non-receipt claim
within a year of the date the certificate is issued.

    

    Section 8.2.  Fractional
Shares.  Fractions of shares of Common Stock shall be credited to
Accounts as provided in Article III; provided, however, that no certificate for
a fraction of a share shall be distributed to any Participant at any time; and
provided further, that the Company shall issue and sell only whole shares of
Common Stock to the Custodian in respect of Dividends invested in, and purchases
made by the Custodian of, newly issued shares of Common Stock.

    

    Section 8.3.  Fractional
Share Account.  In the event that, upon a Participant's termination of
participation in the Plan, the Account of such Participant is credited with a
fraction of a share of Common Stock, such fraction of a share shall be purchased
by the Company for the Fractional Share Account at the Company Share Purchase
Price determined as of the trading date specified in Section 7.3, and the
proceeds thereof shall be remitted to such Participant as set forth in Section
7.3.

    

    If on any Investment Date the aggregate
amount of optional cash payments, initial cash payments and Dividends to be
invested with respect to such date is not sufficient to purchase a whole number
of shares of Common Stock, the Company shall issue to the Custodian or the
Custodian shall purchase on the open market, as the case may be, the whole
number of shares which such funds are sufficient to purchase and the Company
shall sell to the Participants out of the Fractional Share Account the fraction
of a share which the remaining funds are sufficient to purchase at the Company
Share Purchase Price on the trading date immediately preceding the applicable
Investment Date.

    

    

    
      
         

      

      
         

        
        

      

      
         

      

    

    ARTICLE
IX

    Concerning
the Plan

    

    Section 9.1.  Suspension,
Modification and Termination.  The Company may at any time and from
time to time, at its sole option, suspend, modify, amend or terminate the Plan,
in whole, in part or in respect of Participants in one or more jurisdictions;
provided, however, no such amendment shall decrease the Account of any
Participant or result in a distribution to the Company of any amount credited to
the Account of any Participant.  Upon complete termination of the
Plan, the Accounts of all Participants (or in the case of partial termination of
the Plan, the Accounts of all affected Participants) shall be treated as if each
such Participant had elected to terminate his participation in the Plan pursuant
to Section 7.3, except that any fraction of a share of Common Stock shall be
valued as of the trading date immediately preceding the date on which the Plan
is terminated.  The Company shall promptly send each affected
Participant notice of such suspension, modification or termination.

    

    Section 9.2.  Rules and
Regulations.  The Company may from time to time adopt such
administrative rules and regulations concerning the Plan as it deems necessary
or desirable for the administration of the Plan.  The Company shall
have the power and authority to interpret the terms and the provisions of the
Plan and shall interpret and construe the Plan and reconcile any inconsistency
or supply any omitted detail in a manner consistent with the general terms of
the Plan and applicable law.

    

    Section
9.3.  Costs.  Except as otherwise set forth herein, all
costs of administering the Plan shall be paid by the Company; provided, however,
that any brokerage commissions, service charges or applicable taxes incurred in
connection with open market purchases and sales of shares of Common Stock made
under the Plan shall be borne by the Participants.

    

    Section 9.4.  Termination of
a Participant's Participation in the Plan.  The Company in its sole
discretion, may terminate any Participant's participation in the Plan after
written notice mailed in advance to such Participant at his address of
record.  Upon such termination, the Account of such Participant shall
be treated as if he had elected to terminate his participation in the Plan
pursuant to Section 7.3, except that any fraction of a share of Common Stock
shall be valued as of the trading date immediately preceding the date on which
such Participant's participation is terminated.

    

    

    ARTICLE
X

    Administration
of the Plan

    

    Section 10.1.  Selection of a
Custodian.  The Custodian shall be appointed by the Company and shall
be an Independent Agent.  The Custodian's appointment to serve as such
may be revoked by the Company at any time.  The Custodian may resign
at any time upon reasonable notice to the Company.

    

    Section
10.2.  Compensation.  The officers of the Company shall make
such arrangements regarding compensation, reimbursement of expenses and
indemnification of the Custodian as they from time to time deem reasonable and
appropriate.

    

    Section 10.3.  Authority and
Duties of Company.  The Company shall have the authority to undertake
any act necessary to fulfill its duties as set forth in the various provisions
of the Plan.  Promptly following receipt thereof, the Company shall
deposit all optional cash payments and initial cash payments in the Escrow
Account.  The Company shall maintain appropriate records of the
Accounts of Participants and the Fractional Share Account.

     

    
      
         

      

      
         

        
        

      

      
         

      

    

        Section
10.4.  Liability of the Company and the Custodian.  Neither
the Company nor the Custodian shall be liable for any act done in good faith, or
for the good faith omission to act in administering or performing their duties
with respect to the Plan, including, without limitation, any claim of liability
arising out of failure to terminate a Participant's Account upon such
Participant's death prior to receipt of notice in writing of such death, or with
respect to the prices at which shares are purchased or sold for a Participant's
Account and the times when such purchases and sales are made, or with respect to
any loss or fluctuation in market value after the purchase or sale of such
shares.

    

    Section 10.5.  Records and
Reports.  The Company shall keep appropriate records concerning the
Plan, Accounts of Participants, purchases and sales of Common Stock made under
the Plan and Participants' addresses of record and shall send Statements of
Account to each Participant in accordance with the provisions of Section
7.6.

    

    Section 10.6.  Source of
Shares of Common Stock.  The Company shall not change the source of
shares of Common Stock purchased by Participants in the Plan (i.e., either (i)
newly issued shares of Common Stock purchased from the Company or (ii) shares of
Common Stock purchased in the open market) more than once every three
months.  At any time that the source of shares of Common Stock
purchased for the Plan is shares purchased in the open market, the Company shall
not exercise its right to change the source of shares absent a determination by
the Company's Board of Directors or Chief Financial Officer that the Company has
a need to raise additional capital or there is another valid reason for the
change.

     

     

    

    ARTICLE
XI

    Escrow
Account

    

    Section 11.1.  Establishment
of Escrow Account.  The Company shall establish and maintain an escrow
account (the "Escrow Account") into which all optional cash payments and initial
cash payments received from Participants shall be deposited by the Company to be
held pending investment in Common Stock.  Such account or such other
non-interest bearing accounts the Company may establish from time to time
hereunder shall be with a commercial bank organized under the laws of the United
States or any state which has assets in excess of $500,000,000.  The
Escrow Account shall be non-interest bearing, but may carry credits for
compensating balances which credit shall be for the exclusive benefit of the
Company.

    

    Section 11.2.  General Duties
of the Company.  The Company shall provide the escrow agent (the
"Escrow Agent") with a true and correct copy of the Plan and true and correct
copies of any amendments to the Plan promptly upon their adoption and shall
certify to the Escrow Agent the names and specimen signatures of any person who
shall have withdrawal authority with respect to the Escrow Account on behalf of
the Company.

    

    Section 11.3.  Escrow Agent's
Compensation.  The Company shall make such arrangements regarding
compensation, reimbursement of expenses and indemnification of the Escrow Agent
as it may from time to time deem reasonable and appropriate and the Company
shall be responsible for the payment of all of such compensation, reimbursement
and indemnification.

    

     

    
      
         

      

      
         

        
        

      

      
         

      

    

    ARTICLE
XII

    Miscellaneous
Provisions

    

    Section 12.1.  Controlling
Law.  The Plan shall be construed, regulated and administered under
the laws of the State of South Carolina.

    

    Section 12.2.  Acceptance of
Terms and Conditions of Plan by Participants.  Each Participant, by
completing an Enrollment Form or Authorization Form and as a condition of
participation herein, for himself, his heirs, executors, administrators, legal
representatives and assigns, approves and agrees to be bound by the provisions
of this Plan and any subsequent amendments hereto, and all actions of the
Company and the Custodian hereunder.exhibit10-93.htm

     

    
      
        

        

      

      
         

        Exhibit
10.93

         

        SECURITIES
PURCHASE AGREEMENT

         

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

         

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

         

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

         

         

        ARTICLE
I.

         

        DEFINITIONS

         

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

         

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

         

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

         

        “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities
Act.  

         

        “Amendment” means an
amendment to the Company’s articles of incorporation that increases the number
of authorized shares of Common Stock from 450,000,000 to
950,000,000.

        

        “August Purchase
Agreement” means the Securities Purchase Agreement, dated August 1, 2008,
by and among the Company and the August Purchaser for the issuance of the August
Debenture and warrants.

        

         “August Debenture”
means 8% Senior Secured Convertible Debenture issued to the August
Purchaser.

        
          
             

          

          
            
            

            
              

            

          

          
             

          

        

        “August Purchaser”
means Whalehaven Capital Fund Limited.

        

        “Authorized Share
Approval” means (i) the vote by the stockholders of the company to
approve the Amendment and (ii) the filing by the Company of the Amendment with
the Secretary of State of the State of Florida and the acceptance of the
Amendment by the Secretary of State of the State of Florida.

        

        “Authorized Share
Approval
Date” means the date that the Authorized Share Approval is obtained by
the Company.

        

         

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

         

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

         

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

         

        “Closing Date” means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.

         

         “Closing Price” means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 p.m. (New York City time)), or (b) if there is no such price on such
date, then the closing bid price on the Trading Market on the date nearest
preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City
time)), or (c)  if the Common Stock is not then listed or quoted on a
Trading Market and if prices for the Common Stock are then reported in the “pink
sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) if the shares of Common Stock
are not then publicly traded the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the Purchasers
of a majority in interest of the Shares then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the
Company.

         

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

         

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

         

        
          
             

          

          
            2

            
              

            

          

          
             

          

        

        

         

        “Common Stock” means
the common stock of the Company, no par value, and any other class of securities
into which such securities may hereafter be reclassified or changed
into.

         

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

         

        “Company Counsel”
means Carlton Fields P.A., with offices located at 4000 International Place, 100
S. E. Second Street, Miami, Florida 33131-2114.

         

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

         

        “Debentures” means the
8% Senior Secured Convertible Debentures due, subject to the terms therein, one
year from their date of issuance, issued by the Company to the Purchasers
hereunder, in the form of Exhibit A attached
hereto.

         

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

         

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

         

        “Effective Date” means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
Commission.

         

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

         

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

        

        “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of
the

         

        
          
             

          

          
            3

            
              

            

          

          
             

          

        

        disinterested
directors of the Company, provided that any such issuance shall only be to a
Person which is, itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities.

         

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

         

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

         

        “FWS” means Feldman
Weinstein & Smith LLP with offices located at 420 Lexington Avenue, Suite
2620, New York, New York 10170-0002.

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

         “Pharmaceutical
Product” shall have the meaning ascribed to such term in Section
3.1(kk).

         

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

         

        
          
             

          

          
            4

            
              

            

          

          
             

          

        

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

         

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

         

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

         

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

         

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

         

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

         

        “Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Purchaser as provided for in the Registration Rights
Agreement.

         

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

         

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

         

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

         

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

         

        “Securities” means the
Debentures and the Underlying Shares.

         

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

         

        
          
             

          

          
            5

            
              

            

          

          
             

          

        

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

         

        

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

         

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

         

         “Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for Debentures
purchased hereunder as specified below such Purchaser’s name on the signature
page of this Agreement and next to the heading “Subscription Amount,” in United
States dollars and in immediately available funds.

         

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

         

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

         

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

         

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

         

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

         

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

         

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

         

        “Transfer Agent” means
Jersey Transfer and Trust Co. the current transfer agent of the Company, with a
mailing address of 201 Bloomfield Avenue, Verona, New Jersey

         

        
          
             

          

          
            6

            
              

            

          

          
             

          

        

        07044 and
a facsimile number of 973.215.2740, and any successor transfer agent of the
Company.

         

        “Underlying Shares”
means the shares of Common Stock issued and issuable upon conversion or
redemption of the Debentures and issued and issuable in lieu of the cash payment
of interest on the Debentures in accordance with the terms of the
Debentures.

         

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

         

        “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b)  if
the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the
Company.

         

         

        ARTICLE
II.

        PURCHASE
AND SALE

         

        2.1           Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, up to an aggregate of $400,000 in principal
amount of the Debentures.  Each Purchaser shall deliver to the Company
via wire transfer or a certified check of immediately available funds equal to
its Subscription Amount and the Company shall deliver to each Purchaser its
respective Debenture, as determined pursuant to Section 2.2(a), and the Company
and each Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of FWS or such other location as the parties shall mutually
agree.

         

        2.2           Deliveries.

         

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

         

        
          
             

          

          
            7

            
              

            

          

          
             

          

        

        
          	
                   
      

                	
                  (i)

                	
                  this
      Agreement duly executed by the
Company;

                

        

         

        (ii)           a
legal opinion of Company Counsel, substantially in the form of Exhibit C attached
hereto;

         

        (iii)           a
Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
registered in the name of such Purchaser;

         

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

         

        (v)           the
Registration Rights Agreement duly executed by the Company.

         

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

         

        
          	
                   
      

                	
                  (i)

                	
                  this
      Agreement duly executed by such
Purchaser;

                

        

         

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

         

        (iii)           the
Security Agreement duly executed by such Purchaser; and

         

        (iv)           the
Registration Rights Agreement duly executed by such Purchaser.

         

        2.3           Closing
Conditions.

         

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

         

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

         

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

         

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

         

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

         

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

         

        
          
             

          

          
            8

            
              

            

          

          
             

          

        

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

         

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

         

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

         

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

         

         

        ARTICLE
III.

        REPRESENTATIONS
AND WARRANTIES

         

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

         

        (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

         

        (b)           Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on

         

        
          
             

          

          
            9

            
              

            

          

          
             

          

        

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

         

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

         

        (d)           No
Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the other transactions contemplated hereby and
thereby to which it is a party do not and will not: (i) subject to the
Authorized Share Approval, conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary

         

        
          
             

          

          
            10

            
              

            

          

          
             

          

        

        debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

         

        (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.6 of this Agreement, (ii)
the filing with the Commission of the Registration Statement, (iii) the notice
and/or application(s) to each applicable Trading Market for the issuance and
sale of the Securities and the listing of the Underlying Shares for trading
thereon in the time and manner required thereby, (iv) the filing of Form D with
the Commission and such filings as are required to be made under applicable
state securities laws and (v) the Authorized Share Approval (collectively, the
“Required
Approvals”).

         

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

         

        (g)           Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
Except as set forth on Schedule 3.1(g), the
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee stock purchase
plans and pursuant to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under the
Exchange Act.  No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.  Except as a
result of the purchase and sale of the Securities, there are no outstanding
options, warrants, scrip

         

        
          
             

          

          
            11

            
              

            

          

          
             

          

        

        rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further approval or authorization of
any stockholder, the Board of Directors or others is required for the issuance
and sale of the Securities.  There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

         

        (h)           SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The Company has never been an issuer subject to Rule
144(i) under the Securities Act. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

         

        
          
             

          

          
            12

            
              

            

          

          
             

          

        

        (i)           Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof: (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.  Except for the
issuance of the Securities contemplated by this Agreement or as set forth on
Schedule
3.1(i), no event, liability or development has occurred or exists with
respect to the Company or its Subsidiaries or their respective business,
properties, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is
made.

         

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

         

        (k)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the

         

        
          
             

          

          
            13

            
              

            

          

          
             

          

        

        Company
and its Subsidiaries believe that their relationships with their employees are
good.  No executive officer, to the knowledge of the Company, is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

         

        (l)           Compliance.  Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse
Effect.

         

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

         

        (n)           Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

         

        
          
             

          

          
            14

            
              

            

          

          
             

          

        

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

         

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

         

        (q)           Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

         

        (r)           Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of

         

        
          
             

          

          
            15

            
              

            

          

          
             

          

        

        financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms.  The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

         

        (s)           Certain
Fees.  Except as set forth on Schedule 3.1(s), no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.  The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.

         

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

         

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

         

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

         

        
          
             

          

          
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        (w)           Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

         

        (x)           Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

         

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

         

        (z)           No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under

         

        
          
             

          

          
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        circumstances
that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of (i) the Securities Act which would
require the registration of any such securities under the Securities Act, or
(ii) any applicable shareholder approval provisions of any Trading Market on
which any of the securities of the Company are listed or
designated.

         

        (aa)           Solvency.  
Based on the consolidated financial condition of the Company as of the Closing
Date, after giving effect to the receipt by the Company of the proceeds from the
sale of the Securities hereunder: (i) the fair saleable value of the Company’s
assets exceeds the amount that will be required to be paid on or in respect of
the Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be
paid.  The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).  The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

         

        (bb)           Tax
Status.   Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any
Subsidiary.

         

        (cc)           No General
Solicitation.  Neither the Company nor any person acting on behalf
of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising.  The Company has offered the
Securities for sale only

         

        
          
             

          

          
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        to the
Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.

         

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

         

        (ee)           Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ended June 30, 2008.

         

        (ff)           Seniority.  Except
for the August Debenture, as of the Closing Date, no Indebtedness or other claim
against the Company is senior to the Debentures in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise, other
than indebtedness secured by purchase money security interests (which is senior
only as to underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered thereby).

         

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

         

        (hh)         Acknowledgment Regarding
Purchasers’ Purchase of Securities.  The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby.  The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities.  The Company further
represents to each Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on
the

         

        
          
             

          

          
            19

            
              

            

          

          
             

          

        

        independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.

         

        (ii)           Acknowledgment Regarding
Purchasers’ Trading Activity.  Notwithstanding anything in this
Agreement or elsewhere herein to the contrary (except for Sections 3.2(f) and
4.16 hereof), it is understood and acknowledged by the Company that: (i) none of
the Purchasers has been asked to agree by the Company, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term, (ii) past or future
open market or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) each Purchaser shall not be deemed to have
any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and
acknowledges that (y) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing stockholders'
equity interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

         

        (jj)           Regulation M
Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

         

        (kk)         FDA.  As to
each product subject to the jurisdiction of the U.S. Food and Drug
Administration (“FDA”) under the
Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder
(“FDCA”) that
is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed
by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical
Product”), such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company in compliance
with all applicable requirements under FDCA and similar laws, rules and
regulations relating to registration, investigational use, premarket clearance,
licensure, or application approval, good manufacturing practices, good
laboratory practices, good clinical practices, product listing, quotas,
labeling,

         

        
          
             

          

          
            20

            
              

            

          

          
             

          

        

        advertising,
record keeping and filing of reports, except where the failure to be in
compliance would not have a Material Adverse Effect.  There is no
pending, completed or, to the Company's knowledge, threatened, action (including
any lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries has received
any notice, warning letter or other communication from the FDA or any other
governmental entity, which (i) contests the premarket clearance, licensure,
registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse
Effect.  The properties, business and operations of the Company have
been and are being conducted in all material respects in accordance with all
applicable laws, rules and regulations of the FDA.  The Company has not
been informed by the FDA that the FDA will prohibit the marketing, sale, license
or use in the United States of any product proposed to be developed, produced or
marketed by the Company nor has the FDA expressed any concern as to approving or
clearing for marketing any product being developed or proposed to be developed
by the Company.

         

        (ll)           Stock Option Plans.
Each stock option granted by the Company under the Company’s stock option plan
was granted (i) in accordance with the terms of the Company’s stock option plan
and (ii) with an exercise price at least equal to the fair market value of the
Common Stock on the date such stock option would be considered granted under
GAAP and applicable law. No stock option granted under the Company’s stock
option plan has been backdated.  The Company has not knowingly
granted, and there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results
or prospects.

         

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

         

        (a)           Organization;
Authority.  Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions

         

        
          
             

          

          
            21

            
              

            

          

          
             

          

        

        contemplated
by the Transaction Documents have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser.  Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

         

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

         

        (c)           Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it converts
any Debentures it will be either: (i) an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or
(ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act.  Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.

         

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

         

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

         

        
          
             

          

          
            22

            
              

            

          

          
             

          

        

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

         

         

        ARTICLE
IV.

        OTHER
AGREEMENTS OF THE PARTIES

         

        4.1           Transfer
Restrictions.

         

        (a)           The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and the Registration Rights
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.

         

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

         

        [NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE] HAS
[NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES

         

        
          
             

          

          
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        COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

         

        The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be required of such
pledge.  At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders (as defined in the Registration Rights Agreement)
thereunder.

         

        (c)           Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such Underlying
Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for
sale under Rule 144, without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to such
Underlying Shares and without volume or manner-of-sale restrictions or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company shall cause its counsel to issue a legal opinion to
the Transfer Agent promptly after the Effective Date if required by the Transfer
Agent to

        
          
             

          

          
            24

            
              

            

          

          
             

          

        

        effect
the removal of the legend hereunder.  If all or any portion of a
Debenture is converted at a time when there is an effective registration
statement to cover the resale of the Underlying Shares, or if such Underlying
Shares may be sold under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale restrictions or if
such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission) then such Underlying Shares shall be issued free of
all legends.  The Company agrees that following the Effective Date or
at such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three Trading Days following the delivery by a Purchaser to
the Company or the Transfer Agent of a certificate representing Underlying
Shares, as applicable, issued with a restrictive legend (such third Trading Day,
the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.  Certificates for Underlying Shares subject
to legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.

        

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

         

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

         

        4.2           Acknowledgment of
Dilution.  The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market
conditions.  The Company further

         

        
          
             

          

          
            25

            
              

            

          

          
             

          

        

        acknowledges
that its obligations under the Transaction Documents, including, without
limitation, its obligation to issue the Underlying Shares pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect of
any such dilution or any claim the Company may have against any Purchaser and
regardless of the dilutive effect that such issuance may have on the ownership
of the other stockholders of the Company.

         

        4.3           Furnishing of Information;
Public Information.

         

        (a)           If
the Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
Act on the date hereof, the Company agrees to cause the Common Stock to be
registered under Section 12(g) of the Exchange Act on or before the 60th
calendar day following the date hereof. Until the time that no Purchaser owns
Securities, the Company covenants to maintain the registration of the Common
Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act.    As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144.  The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act
within the requirements of the exemption provided by Rule 144.

         

        (b)           At
any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold
without the requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, if the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities on the day of a
Public Information Failure and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required  for the Purchasers
to transfer the Underlying Shares pursuant to Rule 144.  The payments to
which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred
to herein as “Public
Information Failure Payments.”  Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.5% per month

         

        
          
             

          

          
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        (prorated
for partial months) until paid in full. Nothing herein shall limit such
Purchaser’s right to pursue actual damages for the Public Information Failure,
and such Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.

         

        4.4           Integration.  The Company shall not
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities to the Purchasers in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.

         

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

         

        4.6           Securities Laws Disclosure;
Publicity.  The Company shall, by 8:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, issue a Current
Report on Form 8-K, disclosing the material terms of the transactions
contemplated hereby, and including the Transaction Documents as exhibits
thereto.  The Company and each Purchaser shall consult with each other
in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement without the
prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal securities law in connection with
(i) any registration statement contemplated by the Registration Rights Agreement
and (ii) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under this clause
(b).

         

        4.7           Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter

         

        
          
             

          

          
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        adopted
by the Company, or that any Purchaser could be deemed to trigger the provisions
of any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

         

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

         

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

         

        4.10         Indemnification of
Purchasers.   Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees

         

        
          
             

          

          
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        and
expenses of such counsel shall be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under
this Agreement (y) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents.

         

        4.11           Reservation and Listing of
Securities.

         

        (a)           Following
the approval by the Company’s stockholders of the Amendment, the Company shall
maintain a reserve from its duly authorized shares of Common Stock for issuance
pursuant to the Transaction Documents in such amount as may then be required to
fulfill its obligations in full under the Transaction Documents.

         

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

         

        (c)           The
Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing or quotation on such Trading Market as soon as possible
thereafter, (iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on any
date at least equal to the Required Minimum on such date on such Trading Market
or another Trading Market.

         

        

        (d)           In
addition, the Company shall hold a special meeting of shareholders (which may
also be at the annual meeting of shareholders) or obtain a written consent of
shareholders (“Written
Consent”) holding in excess of a majority of the issued and outstanding
Common Stock as of the date hereof at the earliest practical date following the
date hereof, and in any event no later than December 29, 2008, for the purpose
of obtaining the Authorized Share Approval, with the recommendation of the Board
of

         

        
          
             

          

          
            29

            
              

            

          

          
             

          

        

        Directors
that such proposal be approved, and the Company shall solicit proxies from its
shareholders in connection therewith (unless the Company’s shareholders act by
Written Consent) in the same manner as all other management proposals in such
proxy statement and all management-appointed proxyholders shall vote their
proxies in favor of such proposal.  In addition, the Company agrees to
use its best efforts to promptly respond to any comments the Commission may have
with respect to any preliminary proxy statement or information
statement.  If the Company does not obtain the Authorized Share
Approval at the first meeting, the Company shall call a meeting every 30 days
thereafter to seek Authorized Share Approval until the earlier of the date the
Authorized Share Approval is obtained or the Debentures are no longer
outstanding.  The Company agrees to file the Amendment with the
Secretary of State of Florida within one Business Day of obtaining the
Authorized Share Approval.

         

        

        4.12           Participation in Future
Financing.

         

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

         

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

         

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

         

        
          
             

          

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

         

        (e)           If
by 5:30 p.m. (New York City time) on the fifth (5th)
Trading Day after all of the Purchasers have received the Pre-Notice, the
Company receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the Participation Maximum,
each such Purchaser shall have the right to purchase its Pro Rata Portion (as
defined below) of the Participation Maximum.  “Pro Rata Portion”
means the ratio of (x) the Subscription Amount of Securities purchased on the
Closing Date by a Purchaser participating under this Section 4.12 and (y) the
sum of the aggregate Subscription Amounts of Securities purchased on the Closing
Date by all Purchasers participating under this Section 4.12.

         

        (f)           The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in
this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 30 Trading Days after the date of the
initial Subsequent Financing Notice.

         

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

         

        4.13           Subsequent Equity
Sales.

         

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

         

        (b)           From
the date hereof until such time as no Purchaser holds any of the Securities, the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the

         

        
          
             

          

          
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        trading
prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to
the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit,
whereby the Company may sell securities at a future determined
price.   Any Purchaser shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.

         

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

         

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

         

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

         

        
          
             

          

          
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        4.16           Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

         

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

         

        4.18           Equity Line. For so
long as the Debentures are outstanding, the Company shall notify the Purchasers
no later than 5 Trading Day prior to each draw down by the Company on the Equity
Line of Credit pursuant to the Company’s Form S-1, File No. 333-150721 (the
“Equity Line”).
Additionally, the Company shall file a Form 8-K with respect to such draw down,
contemporaneously with or immediately prior to providing the Purchaser with such
notice set forth in this Section 4.18.

         

        4.19           Consent of August
Purchaser. In connection with the transactions contemplated by the
Transaction Documents, the August Purchaser hereby consents to the transactions
contemplated hereunder, waives any default of Section 7(a) of the August
Debenture solely in connection with the issuance of the Debentures and consents
that the Debentures shall be pari passu to the August
Debentures.

         

        4.20           Certain Amendments to August
Debenture. The Company hereby agrees to amend the terms of the August
Debenture as follows:

         

        (a)           The
“Conversion
Price” in Section 4(b) of the August Debenture shall be deleted in its
entirety and replaced with the following: ““Conversion
Price.  The conversion price in effect on any Conversion Date
shall be equal to the lesser of (a) $0.019, subject to adjustment herein (the
“Set Price”)
and (b) 80% of the average of the 3 lowest Closing Prices during the 10 Trading
Days immediately prior to the applicable Conversion Date (subject to adjustment
herein) (the “Conversion Price”);
provided, however, the
Conversion Price shall in no event be less than $0.013, subject to further
adjustment herein (the “Floor
Price”).”

         

        (b)           Section
5(a) of the August Debenture shall be deleted in its entirety and replaced with
the following:

         

        “Stock Dividends and Stock
Splits.  If the Company, at any time while this Debenture is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any
Common Stock Equivalents (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company

        
          
             

          

          
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        upon
conversion of, or payment of interest on, the Debentures), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then (y) the Set Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event and (z) the Floor Price shall be ratably
reduced.  Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.”

        

        (c)           Section
5(b) of the August Debenture shall be deleted in its entirety and replaced with
the following:

         

        “Subsequent Equity
Sales.  If, at any time while this Debenture is
outstanding,  the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to reprice, or
otherwise disposes of or issues (or announces any sale, grant or any option to
purchase or other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an effective price per
share that is lower than the then Set Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share that is lower than the Set Price, such issuance shall be deemed
to have occurred for less than the Set Price on such date of the Dilutive
Issuance), then the Set Price shall be reduced to equal the Base Conversion
Price and the Floor Price shall be ratably reduced.  Such adjustments
shall be made whenever such Common Stock or Common Stock Equivalents are
issued.  Notwithstanding the foregoing, no adjustment will be made
under this Section 5(b) in respect of an Exempt Issuance.  If the
Company enters into a Variable Rate Transaction, despite the prohibition set
forth in the Purchase Agreement, the Company shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest possible conversion price
at which such securities may be converted or exercised. The Company shall notify
the Holder in writing, no later than 1 Business Day following the issuance of
any Common Stock or Common Stock Equivalents subject to this Section 5(b),
indicating therein the applicable issuance price, or applicable reset price,
exchange price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance
Notice”).  For purposes of clarification, whether or not
the

         

        
          
             

          

          
            34

            
              

            

          

          
             

          

        

        Company
provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the
occurrence of any Dilutive Issuance, the Holder is entitled to receive a number
of Conversion Shares based upon the Base Conversion Price on or after the date
of such Dilutive Issuance, regardless of whether the Holder accurately refers to
the Base Conversion Price in the Notice of Conversion.”

         

        (d)           Section
5(c) of the August Debenture shall be deleted in its entirety and replaced with
the following:

         

        “Subsequent Rights
Offerings.  If the Company, at any time while the Debenture is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share that is lower than the VWAP on the record date
referenced below, then (y) the Set Price shall be multiplied by a fraction of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming delivery to the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such VWAP
and (z) the Floor Price shall be ratably reduced.  Such adjustments
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.”

        

        (e)           Section
5(d) of the August Debenture shall be deleted in its entirety and replaced with
the following:

         

        “Pro Rata
Distributions. If the Company, at any time while this Debenture is
outstanding, distributes to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security (other than the
Common Stock, which shall be subject to Section 5(b)), then in each such case
(y) the Set Price shall be adjusted by multiplying such Set Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the VWAP determined as of the record date mentioned above, and of which
the numerator shall be such VWAP on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to 1 outstanding share of the Common
Stock as determined by the Board of Directors of the Company in good faith and
(z) the Floor Price shall be ratably reduced.  In either case the
adjustments shall be described in a statement delivered to the Holder describing
the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to 1 share of

        
          
             

          

          
            35

            
              

            

          

          
             

          

        

        Common
Stock.  Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date mentioned
above.”

        

        (f)           Section
5(g)(i) of the August Debenture shall be deleted in its entirety and replaced
with the following:

         

        “Adjustment to Set
Price.  Whenever the Conversion Price, Set Price or Floor Price
is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price, Set
Price or Floor Price, as applicable, after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.”

         

        Subject
to the amendments provided in this Section 4.20, all of the terms and conditions
of the August Debenture and the transaction documents executed pursuant to the
August Purchase Agreement shall continue in full force and effect after the
execution of this Agreement and shall not be in any way changed, modified or
superseded by the terms set forth herein, including but not limited to, any
other obligations the Company may have to the purchasers under the August
Purchase Agreement or August Debenture.  Except as expressly set forth
herein, this Section 4.20 shall not be deemed to be a waiver, amendment or
modification of any provisions of the August Purchase Agreement or the
respective transaction documents or of any right, power or remedy of the
purchasers, or constitute a waiver of any provision of the August Purchase
Agreement or the respective transaction documents (except to the extent set
forth in this Section 4.20), or any other document, instrument and/or agreement
executed or delivered in connection therewith, in each case whether arising
before or after the date hereof or as a result of performance hereunder or
thereunder.

         

         

        ARTICLE
V.

        MISCELLANEOUS

         

        5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before November 30, 2008;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

         

        5.2           Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
Whalehaven Capital Management Fund Ltd. (“Whalehaven”) the
non-accountable sum of up to $10,000 for its legal fees and expenses, none of
which has been paid prior to the Closing.  Accordingly, in lieu of the
foregoing payments, the aggregate amount that Whalehaven is to pay for the
Securities at the Closing shall be reduced by $10,000 in lieu thereof. The
Company shall deliver to each Purchaser, prior to the Closing, a completed and
executed copy of the Closing Statement, attached hereto as Annex
A.  Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers,
counsel,

         

        
          
             

          

          
            36

            
              

            

          

          
             

          

        

        accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement.  The Company shall pay all Transfer Agent fees, stamp
taxes and other taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.

         

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

         

        5.4           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

         

        5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least 67% in
interest of the Securities then outstanding or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

         

        5.6           Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

         

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

         

        5.8           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of,

         

        
          
             

          

          
            37

            
              

            

          

          
             

          

        

        nor may
any provision hereof be enforced by, any other Person, except as otherwise set
forth in Section 4.10.

         

        5.9           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.   If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

         

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

         

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

         

        5.12           Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to

         

        
          
             

          

          
            38

            
              

            

          

          
             

          

        

        achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

         

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

         

        5.14           Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

         

        5.15           Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

         

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

         

        5.17           Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time

         

        
          
             

          

          
            39

            
              

            

          

          
             

          

        

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

         

        5.18           Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.  For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FWS.  FWS does not
represent all of the Purchasers but only Whalehaven. The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.

         

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

         

        
          
             

          

          
            40

            
              

            

          

          
             

          

        

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

         

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

         

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

         

        

         

        (Signature
Pages Follow)

         

        
          
             

          

          
            41

            
              

            

          

          
             

          

        

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

         

        
          
            
              	
                      IMAGING
      DIAGNOSTIC SYSTEMS, INC.

                       

                       

                    	
                      Address for
      Notice:

                      5307 NW 35th Terrace

                      Fort Lauderdale, FL 33309

                    
	
                      By:
      /s/ Linda B.
      Grable

                           Name:
      Linda B. Grable

                           Title: 
      Chief Executive Officer

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

                    	
                      Fax:  954 581-0555

                    
	 
      	 
      

            

          

        

        

        [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

        SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

         

        
          
             

          

          
            42

            
              

            

          

          
             

          

        

        [PURCHASER
SIGNATURE PAGES TO IMDS SECURITIES PURCHASE AGREEMENT]

        

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

         

        Name of
Purchaser:   Whalehaven Capital Fund Limited

        Signature of Authorized Signatory of
Purchaser:  /s/ Brian
Mazella

        Name of
Authorized Signatory:   Brian Mazella

        Title of
Authorized Signatory:  CFO

        Email
Address of Authorized Signatory:  brian@whalehavencapital.com

        Facsimile
Number of Authorized Signatory:  (201) 408-5125

         

        Address
for Notice of Purchaser:

         

        Whalehaven Capital Fund Ltd.

        560 Sylvan Avenue

        3rd Floor

        Englewood Cliffs, NJ 07632

        

        

        

        

        Address
for Delivery of Securities for Purchaser (if not same as address for
notice):

        

        SAME

        

        

        

        Subscription
Amount:  $200,000.00

        

        

        

        

        EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

        

        [SIGNATURE
PAGES CONTINUE]

        

        

         

         

        
           

          
            
               

            

            
              43

              
                

              

            

            
               

            

          

          [PURCHASER
SIGNATURE PAGES TO IMDS SECURITIES PURCHASE AGREEMENT]

          

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

           

          Name of
Purchaser:   Alpha Capital Anstalt

          Signature of Authorized Signatory of
Purchaser:  /s/ Konrad
Ackerman

          Name of
Authorized Signatory:   Konrad Ackerman

          Title of
Authorized Signatory:  Director

          Email
Address of Authorized Signatory: 

          Facsimile
Number of Authorized Signatory:  + 41763841561

           

          Address
for Notice of Purchaser:

           

          Alpha Capital
Anstalt

          Pradafant 7,
9490 Furstentums

          Vaduz,
Liechtenstein

          

          Address
for Delivery of Securities for Purchaser (if not same as address for
notice):

           

          Alpha Capital
Anstalt

          C/O LH Financial
Services Corp.

          150 Central Park
South, 2nd FL

          New York, NY
10019

          
 

          

          Subscription
Amount: $200,000.00

           

          Warrant Shares:

          

          

          

          

          EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

        

        
 

        

44

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