Document:

Exhibit
10.2

EXECUTION
COPY

 

SECURITY AGREEMENT

dated as of

May 18, 2007

among

THE GUARANTORS PARTY HERETO

and

CREDIT SUISSE, CAYMAN ISLANDS BRANCH

as Administrative Agent

 

TABLE
OF CONTENTS

	
  

  	
  PAGE

  
	
   

  	
   

  
	
  Section 1. Definitions.

  	
  2

  
	
  Section 2. Grant of Transaction
  Liens.

  	
  8

  
	
  Section 3. General Representations
  and Warranties

  	
  10

  
	
  Section 4. Further Assurances;
  General Covenants

  	
  11

  
	
  Section 5. Accounts

  	
  14

  
	
  Section 6. Securities Accounts

  	
  15

  
	
  Section 7. Controlled Deposit
  Accounts

  	
  16

  
	
  Section 8. Operation of Collateral
  Accounts.

  	
  16

  
	
  Section 9. Certain Cash
  Distributions

  	
  17

  
	
  Section 10. Remedies upon Event of
  Default

  	
  17

  
	
  Section 11. Application of Proceeds

  	
  18

  
	
  Section 12. Authority to Administer
  Collateral

  	
  20

  
	
  Section 13. Limitation on Duty in
  Respect of Collateral

  	
  20

  
	
  Section 14. General Provisions
  Concerning the Administrative Agent.

  	
  21

  
	
  Section 15. Termination of
  Transaction Liens; Release of Collateral

  	
  22

  
	
  Section 16. Additional Lien Grantors

  	
  23

  
	
  Section 17. Notices

  	
  23

  
	
  Section 18. No Implied Waivers;
  Remedies Not Exclusive

  	
  23

  
	
  Section 19. Successors and Assigns

  	
  23

  
	
  Section 20. Amendments and Waivers

  	
  23

  
	
  Section 21. Governing Law;
  Jurisdiction; Consent to Service of Process

  	
  24

  
	
  Section 22. Waiver of Jury Trial

  	
  24

  
	
  Section 23. Use of English Language

  	
  25

  
	
  Section 24. Severability

  	
  25

  
	
  Section 25. Counterparts,
  Integration, Effectiveness

  	
  25

  

 

 

	
  SCHEDULES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Schedule 1

  	
  Investment Property (Other Than Equity Interests in
  Subsidiaries) Owned by Original Lien Grantors

  
	
   

  	
   

  	
   

  
	
  EXHIBITS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Exhibit A

  	
  Security Agreement Supplement

  
	
   

  	
   

  	
   

  
	
   

  	
  Exhibit B

  	
  Perfection Certificate

  
	
   

  	
   

  	
   

  
	
   

  	
  Exhibit C

  	
  Securities Account Control Agreement

  
	
   

  	
   

  	
   

  
	
   

  	
  Exhibit D

  	
  Deposit Account Control Agreement

  

 

SECURITY AGREEMENT

SECURITY
AGREEMENT dated as of May 18, 2007 among the GUARANTORS party hereto and CREDIT
SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent.

WHEREAS,
the Borrower entered into the Credit Agreement described in Section 1 hereof,
pursuant to which the Borrower borrowed funds for the purposes set forth
therein;

WHEREAS,
Section 5.12(d) of the Credit Agreement provides, inter alia,
that if at any time on or after the Trigger Date (1) the corporate family
rating of the Borrower is not at least Ba1 by Moody’s or the corporate rating
of the Borrower is not at least BB+ by S&P, in each case with no negative
outlook or (2) the Borrower does not have a corporate family rating from Moody’s
or a corporate rating from S&P, the Borrower will (x) promptly (and in any
event within seven Business Days or such longer period as the Administrative
Agent shall agree, such agreement not to be unreasonably withheld or delayed)
cause each Domestic Subsidiary not already party thereto to deliver to the
Administrative Agent a supplement to the Guarantee Agreement in the form
specified therein, duly executed and delivered on behalf of each such Domestic
Subsidiary and (y) promptly (and in any event within ten Business Days or such
longer period as the Administrative Agent shall agree, such agreement not to be
unreasonably withheld or delayed) cause each Domestic Subsidiary to deliver to
the Administrative Agent a counterpart to this Agreement duly executed and
delivered on behalf of such Domestic Subsidiary (or in the case of any Person
that subsequently becomes a Domestic Subsidiary, a supplement to the Security
Agreement, in the form specified herein, duly executed and delivered on behalf
of such Domestic Subsidiary);

WHEREAS,
the Trigger Date occurred on the date hereof, and, as of such date, the
condition described in clause (1) of the preceding recital has been met;

WHEREAS,
each of the parties hereto as Lien Grantor is a Domestic Subsidiary that has
either previously executed and delivered the Guarantee Agreement or is
executing and delivering a Guarantee Agreement Supplement (as defined in the
Guarantee Agreement) concurrent with its execution and delivery of this
Agreement; and

WHEREAS,
upon any foreclosure or other enforcement of the Security Documents, the net
proceeds of the relevant Collateral are to be received by or paid over to the
Administrative Agent and applied as provided herein;

 1
 

NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

Section 1.  Definitions.

(a)        Terms Defined in Credit Agreement.  Terms defined in the Credit Agreement and not
otherwise defined in subsection (b) or (c) of this Section have, as used herein,
the respective meanings provided for therein.

(b)        Terms Defined in UCC. 
As used herein, each of the following terms has the meaning specified in
the UCC:

	
  Term

  	
   

  	
  UCC

  
	
  Account

  	
   

  	
  9-102

  
	
  Authenticate

  	
   

  	
  9-102

  
	
  Chattel Paper

  	
   

  	
  9-102

  
	
  Commodity
  Account

  	
   

  	
  9-102

  
	
  Commodity
  Customer

  	
   

  	
  9-102

  
	
  Deposit Account

  	
   

  	
  9-102

  
	
  Document

  	
   

  	
  9-102

  
	
  Entitlement
  Holder

  	
   

  	
  8-102

  
	
  Entitlement
  Order

  	
   

  	
  8-102

  
	
  Equipment

  	
   

  	
  9-102

  
	
  Financial Asset

  	
   

  	
  8-102 & 103

  
	
  Instrument

  	
   

  	
  9-102

  
	
  Inventory

  	
   

  	
  9-102

  
	
  Investment
  Property

  	
   

  	
  9-102

  
	
  Record

  	
   

  	
  9-102

  
	
  Securities
  Account

  	
   

  	
  8-501

  
	
  Securities
  Intermediary

  	
   

  	
  8-102

  
	
  Security

  	
   

  	
  8-102 & 103

  
	
  Security
  Entitlement

  	
   

  	
  8-102

  
	
  Supporting
  Obligations

  	
   

  	
  9-102

  

 

(c)        Additional Definitions. 
The following additional terms, as used herein, have the following
meanings:

“Agreement” means this Security Agreement.

“Borrower” means Marvell Technology Group
Ltd., a Bermuda exempted company.

 2
 

“Cash Distributions” means dividends,
interest and other distributions and payments (including proceeds of
liquidation, sale or other disposition) made or received in cash upon or with
respect to any Collateral.

“Collateral” means all property, whether now
owned or hereafter acquired, on which a Lien is granted or purports to be
granted to the Administrative Agent pursuant to the Security Documents.  When used with respect to a specific Lien
Grantor, the term “Collateral” means all its property on which such a Lien is
granted or purports to be granted by such Lien Grantor.

“Collateral Accounts” means the Controlled
Deposit Accounts and the Controlled Securities Accounts.

“Contingent Secured Obligation” means, at
any time, any Secured Obligation (or portion thereof) that is contingent in
nature at such time, including any Secured Obligation that is:

(i)       an obligation under a
Hedging Agreement to make payments that cannot be quantified at such time;

(ii)      any other obligation
(including any guarantee) that is contingent in nature at such time; or

(iii)     an obligation to provide
collateral to secure any of the foregoing types of obligations.

“Control” has the following meanings:

(a)      when used with respect to
any Security Entitlement, the meaning specified in UCC Section 8-106; and

(b)      when used with respect to
any Deposit Account, the meaning specified in UCC Section 9-104.

“Controlled Deposit Account” means a Deposit
Account (i) that is subject to a Deposit Account Control Agreement or (ii) as
to which the Administrative Agent is the Depositary Bank’s “customer” (as
defined in UCC Section 4-104).

“Controlled Securities Account” means a
Securities Account that (i) is maintained in the name of a Lien Grantor at an
office of a Securities Intermediary located in the United States and (ii)
together with all Financial Assets credited thereto and all related Security
Entitlements, is subject to a Securities Account Control Agreement among such
Lien Grantor, the Administrative Agent and such Securities Intermediary.

 3
 

“Credit Agreement” means the Credit
Agreement dated as of November 8, 2006 among Marvell Technology Group Ltd., the
Lenders party thereto and Credit Suisse, Cayman Islands Branch, as
Administrative Agent.

“Deposit Account Control Agreement” means,
with respect to any Deposit Account of any Lien Grantor, a Deposit Account
Control Agreement substantially in the form of Exhibit D (or in such other form
that the Administrative Agent shall have approved, such approval not to be
unreasonably withheld) among such Lien Grantor, the Administrative Agent and
the relevant Depositary Bank, (i) providing that such Depositary Bank will
comply with instructions originated by the Administrative Agent directing
disposition of the funds in such Deposit Account without further consent by
such Lien Grantor and (ii) subordinating to the relevant Transaction Lien all
claims of the Depositary Bank to such Deposit Account (except its right to
deduct its normal operating charges and any uncollected funds previously
credited thereto).

“Depositary Bank” means a bank at which a
Controlled Deposit Account is maintained.

“Effective Date” means the date hereof.

“Guarantee Agreement” means that certain Guarantee Agreement
dated as of November 8, 2006 among Marvell Technology Group Ltd., as Borrower,
the Guarantors party thereto and Credit Suisse, Cayman Islands Branch, as
Administrative Agent.

“Guarantors” means each Subsidiary listed on
the signature pages hereof and each Subsidiary that shall, at any time after
the date hereof, become a “Lien Grantor” pursuant to Section 16.

“Lien Grantors” means the Guarantors.

“Mortgage” means a mortgage or deed of trust
in form satisfactory to the Administrative Agent in each case creating a Lien
on real property in favor of the Administrative Agent (or a sub-agent appointed
pursuant to Section 14(b)) for the benefit of the Secured Parties and with such
changes in the form thereof as the Administrative Agent shall request for the
purpose of conforming to local practice for similar instruments in the
jurisdiction where such real property is located.

“Non-Contingent Secured Obligation”
means at any time any Secured Obligation (or portion thereof) that is not a
Contingent Secured Obligation at such time.

 4
 

“Opinion of Counsel” means a written opinion
of legal counsel (who may be counsel to a Lien Grantor or other counsel, in
either case approved by the Administrative Agent) addressed and delivered to
the Administrative Agent.

“Original Lien Grantor” means any Lien
Grantor that grants a Lien on any of its assets hereunder on the Effective
Date.

“own” refers to the possession of sufficient
rights in property to grant a security interest therein as contemplated by UCC
Section 9-203, and “acquire”
refers to the acquisition of any such rights.

“Perfection Certificate” means, with respect
to any Lien Grantor, a certificate substantially in the form of Exhibit B,
completed and supplemented with the schedules contemplated thereby to the
satisfaction of the Administrative Agent, and signed by an officer of such Lien
Grantor.

“Permitted Liens” means (i) the Transaction
Liens and (ii) any other Liens on the Collateral permitted to be created or
assumed or to exist pursuant to Section 6.02 of the Credit Agreement.

“Personal Property Collateral” means all
property included in the Collateral except Real Property Collateral.

“Pledged”, when used in conjunction with any
type of asset, means at any time an asset of such type that is included (or
that creates rights that are included) in the Collateral at such time.

“Post-Petition Interest” means any
interest that accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of any one or
more of the Lien Grantors (or would accrue but for the operation of applicable
bankruptcy or insolvency laws), whether or not such interest is allowed or
allowable as a claim in any such proceeding.

“Proceeds” means all proceeds of, and all
other profits, products, rents or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other disposition
of, or other realization upon, any Collateral, including all claims of the
relevant Lien Grantor against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums with
respect to, policies of insurance in respect of, any Collateral, and any
condemnation or requisition payments with respect to any Collateral.

“Primary Deposit Account” means account number 1233832746 at
Bank of America N.A., 1850 Gateway Blvd., 3rd Floor, Concord, CA  94520.

 5
 

“Ratings Release Conditions” means the following conditions
for terminating all the Transaction Liens granted pursuant to this Agreement:

(i) the Borrower shall
have given notice to the Administrative Agent at least 15 days prior to a date
(the “Release Date”) specifying such Release
Date;

(ii)      as of the Release Date, the
corporate family rating of the Borrower shall be at least Ba1 by Moody’s and
the corporate rating of the Borrower shall be at least BB+ by S&P, in each
case with no negative outlook;

(iii)     as of the Release Date, no
Default shall have occurred and be continuing; and

(iv) on the Release Date,
the Administrative Agent shall have received a certificate, dated the Release
Date and executed by a Financial Officer, confirming the satisfaction of the
preceding conditions.

“Real Property Collateral” means all real
property included in the Collateral.

“Release Conditions” means the following
conditions for terminating all the Transaction Liens:

(i)       all Commitments under the
Credit Agreement shall have expired or been terminated;

(ii)      all Non-Contingent Secured
Obligations shall have been paid in full; and

(iii)     no Contingent Secured
Obligation (other than contingent indemnification and expense reimbursement
obligations as to which no claim shall have been asserted) shall remain
outstanding.

“Secured Agreement”, when used with respect
to any Secured Obligation, refers collectively to the instruments, agreements
and other documents that set forth the obligations of a Credit Party and/or the
rights of a Secured Party with respect to such Secured Obligation.

“Secured Obligations” means (i) all
principal of all Loans outstanding from time to time under the Credit
Agreement, all interest (including Post-Petition Interest) on such Loans
and all other amounts now or hereafter payable by the Borrower pursuant to the
Loan Documents, and (ii) all obligations of any Lien Grantor under any Hedging
Agreement that is entered into with any counterparty 

 6
 

that is the Arranger, the Administrative Agent or a
Lender or an Affiliate of the Arranger, the Administrative Agent or a Lender,
in each case at the time such Hedging Agreement is entered into.

“Secured Parties” means the holders from
time to time of the Secured Obligations.

“Secured Party Requesting Notice” means, at
any time, a Secured Party that has, at least five Business Days prior thereto,
delivered to the Administrative Agent a written notice (i) stating that it
holds one or more Secured Obligations and wishes to receive copies of the
notices referred to in Section 14(e) and (ii) setting forth its address,
facsimile number and e-mail address to which copies of such notices should be
sent.

“Securities Account Control Agreement”
means, when used with respect to a Securities Account, a Securities Account
Control Agreement substantially in the form of Exhibit C (with any changes or
alternate form that the Administrative Agent shall have approved, such approval
not to be unreasonably withheld) among the relevant Securities Intermediary,
the relevant Lien Grantor and the Administrative Agent to the effect that such
Securities Intermediary will comply with Entitlement Orders originated by the
Administrative Agent with respect to such Securities Account without further
consent by the relevant Lien Grantor.

“Security Agreement Supplement” means a
Security Agreement Supplement, substantially in the form of Exhibit A, signed
and delivered to the Administrative Agent for the purpose of adding a
Subsidiary as a party hereto pursuant to Section 16 and/or adding additional
property to the Collateral.

“Security Documents” means this Agreement,
the Security Agreement Supplements, the Deposit Account Control Agreements, the
Securities Account Control Agreements, the Mortgages and all other supplemental
or additional security agreements, control agreements, mortgages or similar
instruments delivered pursuant to the Loan Documents.

“Transaction Liens” means the Liens granted
by the Lien Grantors under the Security Documents.

“US Pledge Agreement” means the US Pledge Agreement dated as
of November 8, 2006 among Marvell Technology Group Ltd., the guarantors party
thereto and Credit Suisse, Cayman Islands Branch, as Administrative Agent.

“UCC” means the Uniform Commercial Code as
in effect from time to time in the State of New York; provided that, if perfection or the effect
of 

 7
 

perfection or non-perfection or the priority of
any Transaction Lien on any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, “UCC” means the
Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.

(d)        Terms Generally.  The
definitions of terms herein (including those incorporated by reference to the
UCC or to another document) apply equally to the singular and plural forms of
the terms defined.  Whenever the context
may require, any pronoun includes the corresponding masculine, feminine and
neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be construed to have the same
meaning and effect as the word “shall”.  Unless the context requires otherwise, (i)
any definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth in any Loan Document), (ii) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (iii) the words “herein”, “hereof”
and “hereunder”, and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (iv) all references herein to
Sections, Exhibits and Schedules shall be construed to refer to Sections of,
and Exhibits and Schedules to, this Agreement and (v) the word “property” shall be construed to refer to
any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.

(e)        If the Loans or any
portion thereof shall have been declared to be due and payable (or shall
automatically have become due and payable) as set forth in Article 7 of the
Credit Agreement, then for all purposes hereof the Administrative Agent shall
be deemed to have notified each of the Lien Grantors concurrently with the
occurrence of such event of its intention to exercise its rights under the
Security Documents.

Section 2.  Grant of Transaction Liens.

(a)        Each Guarantor listed on
the signature pages hereof, in order to secure its Transaction Guarantee,
grants to the Administrative Agent for the benefit of the Secured Parties a
continuing security interest in all the following property of such Guarantor,
whether now owned or existing or hereafter acquired or arising and regardless
of where located:

(i)            all Accounts;

 8
 

(ii)           all Chattel Paper;

(iii)          all Deposit Accounts;

(iv)          all Investment Property,
other than Equity Interests in such Guarantor’s subsidiaries;

(v)           all Documents;

(vi)          all Equipment;

(vii)         all Instruments;

(viii)        all Inventory;

(ix)           all Securities
Accounts;

(x)            all books and records
(including customer lists, credit files, computer programs, printouts and other
computer materials and records) of such Original Lien Grantor pertaining to any
of its Collateral;

(xi)           such Original Lien
Grantor’s ownership interest in (1) its Collateral Accounts, (2) all Financial
Assets credited to its Collateral Accounts from time to time and all Security
Entitlements in respect thereof, (3) all cash held in its Collateral Accounts
from time to time and (4) all other money in the possession of the
Administrative Agent; and

(xii)          all Proceeds of the
Collateral described in the foregoing clauses (i) through (xi);

provided
that the following property is excluded from the foregoing security interests:
(A) motor vehicles the perfection of a security interest in which is excluded
from the Uniform Commercial Code in the relevant jurisdiction, (B) Equipment
leased by an Original Lien Grantor under a lease that prohibits the granting of
a Lien on such Equipment and any general intangibles or other rights arising
under any contract, instrument, license or other document, in each such case if
(but only to the extent that) the grant of a security interest therein would
constitute a material violation of a valid and effective restriction in favor
of a third party, unless and until all required consents shall have been
obtained, (C) any Deposit Account (other than the Primary Deposit Account)
established solely to fund obligations in respect of payroll or medical plan
payments, disability payments, flex spending payments and other similar
payments in respect of employees of the Lien Grantors, so long as such Deposit
Account is funded and maintained solely for such purpose and in a manner
consistent with past practices and (D) any Deposit Account or Instrument (other
than the Primary Deposit 

 9
 

Account) that is subject
to a perfected Lien permitted under Section 6.02(iii) or (vi) of the Credit
Agreement.

(b)        With respect to each right
to payment or performance included in the Collateral from time to time, the
Transaction Lien granted therein includes a continuing security interest in (i)
any Supporting Obligation that supports such payment or performance and (ii)
any Lien that (x) secures such right to payment or performance or (y) secures
any such Supporting Obligation.

(c)        The Transaction Liens are
granted as security only and shall not subject the Administrative Agent or any
other Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of any Lien Grantor with respect to any of the
Collateral or any transaction in connection therewith.

Section 3.  General Representations and
Warranties.  Each Original
Lien Grantor represents and warrants that:

(a)        Such Lien Grantor is duly
organized, validly existing and in good standing under the laws of the
jurisdiction identified as its jurisdiction of organization in its Perfection
Certificate.

(b)        Schedule 1 lists, as of
the Effective Date, (i) all Securities owned by such Lien Grantor (except
Securities evidencing Equity Interests in Subsidiaries and Affiliates) and (ii)
all Securities Accounts to which Financial Assets are credited in respect of
which such Lien Grantor owns Security Entitlements.  Such Lien Grantor owns no Commodity Account
in respect of which such Lien Grantor is the Commodity Customer.

(c)        Such Lien Grantor has good
and marketable title to all its Collateral (subject to exceptions that are, in
the aggregate, not material), free and clear of any Lien other than Permitted
Liens.

(d)        No financing statement,
security agreement, mortgage or similar or equivalent document or instrument
covering all or part of the Collateral owned by such Lien Grantor is on file or
of record in any jurisdiction in which such filing or recording would be
effective to perfect or record a Lien on such Collateral, except financing
statements, mortgages or other similar or equivalent documents with respect to
Permitted Liens.  After the Effective
Date, no Collateral owned by such Lien Grantor will be in the possession or
under the Control of any other Person having a claim thereto or security
interest therein, other than a Permitted Lien.

(e)        The Transaction Liens on
all Personal Property Collateral owned by such Lien Grantor (i) have been
validly created, (ii) will attach to each item of such Collateral on the
Effective Date (or, if such Lien Grantor first obtains rights 

 10
 

thereto on a later date, on such later date) and (iii)
when so attached, will secure such Lien Grantor’s Transaction Guarantee.

(f)         When the relevant
Mortgages have been duly executed and delivered, the Transaction Liens on all
Real Property Collateral owned by such Lien Grantor as of the Effective Date
will have been validly created and will secure such Lien Grantor’s Transaction
Guarantee.  When such Mortgages have been
duly recorded, such Transaction Liens will rank prior to all other Liens
(except Permitted Liens) on such Real Property Collateral.

(g)        Such Lien Grantor has
delivered a Perfection Certificate to the Administrative Agent.  The information set forth therein is correct
and complete as of the Effective Date.

(h)        When UCC financing
statements describing the Collateral as set forth in Schedule 1 to such Lien
Grantor’s Perfection Certificate have been filed in the offices specified in
such Perfection Certificate, the Transaction Liens will constitute perfected
security interests in the Personal Property Collateral owned by such Lien Grantor
to the extent that a security interest therein may be perfected by filing
pursuant to the UCC, prior to all Liens and rights of others therein except
Permitted Liens.  Except for (i) the
filing of such UCC financing statements and (ii) the due recordation of the
Mortgages, no registration, recordation or filing with any governmental body,
agency or official is required in connection with the execution or delivery of
the Security Documents or is necessary for the validity or enforceability
thereof or for the perfection or due recordation of the Transaction Liens or
for the enforcement of the Transaction Liens.

(i)         Such Lien Grantor has
taken, and will continue to take, all actions necessary under the UCC to
perfect its interest in any Accounts or Chattel Paper purchased or otherwise
acquired by it, as against its assignors and creditors of its assignors.

(j)         Such Lien Grantor’s
Collateral is insured as required by the Credit Agreement.

(k)        All of such Lien Grantor’s
Inventory has or will have been produced in compliance with the applicable
requirements of the Fair Labor Standards Act, as amended.

Section 4.  Further Assurances;
General Covenants.  Each Lien
Grantor covenants as follows:

(a)        Such Lien Grantor will,
from time to time, at the Borrower’s expense, execute, deliver, file and record
any statement, assignment, instrument, 

 11
 

document, agreement or other paper and take any other
action (including any filing of financing or continuation statements under the
UCC) that from time to time may be necessary or reasonably desirable, or that
the Administrative Agent may reasonably request, in order to:

(i)    create, preserve, perfect,
confirm or validate the Transaction Liens on such Lien Grantor’s Collateral;

(ii)   in the case of Pledged Deposit
Accounts (except with respect to Pledged Deposit Accounts containing less than
$3,500,000 in the aggregate) and Pledged Investment Property, cause the
Administrative Agent to have Control thereof;

(iii)  enable the Administrative Agent
and the other Secured Parties to obtain the full benefits of the Security
Documents; or

(iv)  enable the Administrative Agent
to exercise and enforce any of its rights, powers and remedies with respect to
any of such Lien Grantor’s Collateral.

Notwithstanding the
foregoing, the actions required by the Lien Grantors pursuant to the foregoing
provisions of this Section to perfect and ensure the priority of the Liens
granted hereunder shall be limited to filings of Uniform Commercial Code
financing statements, delivering possession of Collateral the security
interests in which can be perfected only by taking possession, execution and
delivery of Deposit Account Control Agreements and Securities Account Control
Agreements and, to the extent any additional actions are required to effect
such perfection or priority as a result of a change in law, such actions.

To the extent permitted
by applicable law, such Lien Grantor authorizes the Administrative Agent to
execute and file such financing statements or continuation statements without
such Lien Grantor’s signature appearing thereon.  Such Lien Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement.  Such Lien Grantor constitutes the
Administrative Agent its attorney-in-fact to execute and file all
filings required or so requested for the foregoing purposes, all acts of such
attorney being hereby ratified and confirmed; and such power, being coupled
with an interest, shall be irrevocable until all the Transaction Liens granted
by such Lien Grantor terminate pursuant to Section 15.  The Borrower will pay the costs of, or
incidental to, any recording or filing of any financing or continuation
statements or other documents recorded or filed pursuant hereto.

 12
 

(b)        Such Lien Grantor will not
(i) change its name or corporate structure, (ii) change its location
(determined as provided in UCC Section 9-307) or (iii) become bound, as
provided in UCC Section 9-203(d), by a security agreement entered into by
another Person as lien grantor, unless it shall have given the Administrative
Agent prior notice thereof and delivered a certificate of a Financial Officer
with respect thereto in accordance with Section 4(c).

(c)        At least 30 days before it
takes any action contemplated by Section 4(b), such Lien Grantor will, at the
Borrower’s expense, cause to be delivered to the Administrative Agent a
certificate of a Financial Officer, in form and substance reasonably
satisfactory to the Administrative Agent, to the effect that (i) all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be filed or recorded in order to perfect and
protect the Transaction Liens against all creditors of and purchasers from such
Lien Grantor after it takes such action (except any continuation statements
specified in such certificate that are to be filed more than six months after
the date thereof) have been filed or recorded in each office necessary for such
purpose, (ii) all fees and taxes, if any, payable in connection with such
filings or recordations have been paid in full and (iii) except as otherwise
agreed by the Required Lenders, such action will not adversely affect the
perfection or priority of the Transaction Lien on any Collateral to be owned by
such Lien Grantor after it takes such action or the accuracy of such Lien
Grantor’s representations and warranties herein relating to such Collateral.

(d)        If any of its Collateral
is in the possession or control of a warehouseman, bailee or agent at any time,
such Lien Grantor will (i) notify such warehouseman, bailee or agent of the
relevant Transaction Liens, (ii) instruct such warehouseman, bailee or agent to
hold all such Collateral for the Administrative Agent’s account subject to the
Administrative Agent’s instructions (which shall permit such Collateral to be
removed by such Lien Grantor in the ordinary course of business until the
Administrative Agent notifies such warehouseman, bailee or agent that an Event
of Default has occurred and is continuing and the Administrative Agent has
notified such Lien Grantor of its intent to exercise its rights hereunder),
(iii) cause such warehouseman, bailee or agent to Authenticate a Record
acknowledging that it holds possession of such Collateral for the
Administrative Agent’s benefit and (iv) make such Authenticated Record
available to the Administrative Agent.

(e)        Such Lien Grantor will not
sell, lease, exchange, assign or otherwise dispose of, or grant any option with
respect to, any of its Collateral; provided
that such Lien Grantor may do any of the foregoing unless (i) doing so would
violate a covenant in the Credit Agreement or (ii) an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have notified
such Lien Grantor that it intends to exercise its rights hereunder and the Lien
Grantor’s right 

 13
 

to do so is terminated, suspended or otherwise
limited.  Concurrently with any sale,
lease or other disposition (except a sale or disposition to another Lien
Grantor or a lease) permitted by the foregoing proviso,
the Transaction Liens on the assets sold or disposed of (but not in any
Proceeds arising from such sale or disposition) will cease immediately without
any action by the Administrative Agent or any other Secured Party.  The Administrative Agent will, at the
Borrower’s expense, execute and deliver to the relevant Lien Grantor such
documents as such Lien Grantor shall reasonably request to evidence the fact
that any asset so sold or disposed of is no longer subject to a Transaction
Lien.

(f)         Such Lien Grantor will,
promptly upon request, provide to the Administrative Agent all information and
evidence concerning such Lien Grantor’s Collateral that the Administrative
Agent may reasonably request from time to time to enable it to enforce the
provisions of the Security Documents.

(g)        From time to time upon
reasonable request by the Required Lenders, such Lien Grantor will, at the
Borrower’s expense, cause to be delivered to the Secured Parties an Opinion of Counsel
reasonably satisfactory to the Administrative Agent as to such matters relating
to the transactions contemplated hereby as the Required Lenders may reasonably
request.

Section 5.  Accounts.  Each Lien Grantor represents,
warrants and covenants as follows:

(a)        Such Lien Grantor will use
commercially reasonable efforts to cause to be collected from its account
debtors, when due, all amounts owing under its Accounts (including delinquent
Accounts, which will be collected in accordance with lawful collection
procedures) and will apply all amounts collected thereon, forthwith upon
receipt thereof, in accordance with its customary practices.  The costs and expenses (including attorney’s
fees) of collection, whether incurred by such Lien Grantor or the Administrative
Agent, shall be paid by such Lien Grantor.

(b)        If payments with respect
to any of such Lien Grantor’s Accounts are received in a lockbox or similar
account, such Lien Grantor will (i) at all times cause such account to be a
Controlled Deposit Account and (ii) cause the relevant depositary bank to
subordinate to the relevant Transaction Lien all its claims to such account
(except its right to deduct its normal operating charges and any uncollected
funds previously credited thereto).  The
Administrative Agent will instruct the relevant depositary bank to transfer
funds credited to any such account, as promptly as practicable after receipt
thereof, to a Controlled Deposit Account designated by such Lien Grantor; provided that, if an Event of Default shall
have occurred and be continuing and the Administrative Agent has notified such
Lien Grantor of its intent to exercise its rights hereunder, the Administrative

 14
 

Agent may designate the Controlled Deposit Account to
which such funds are transferred.

(c)        If an Event of Default
shall have occurred and be continuing and the Administrative Agent has notified
such Lien Grantor of its intent to exercise its rights hereunder, such Lien
Grantor will, if requested to do so by the Administrative Agent, promptly notify
(and such Lien Grantor authorizes the Administrative Agent so to notify) each
account debtor in respect of any of its Accounts that such Accounts have been
assigned to the Administrative Agent hereunder, and that any payments due or to
become due in respect of such Accounts are to be made directly to the
Administrative Agent or its designee.

Section 6.  Securities Accounts.  Each Lien Grantor represents,
warrants and covenants as follows:

(a)        Security
Entitlements.  On the
Effective Date (in the case of an Original Lien Grantor) or the date on which
it signs and delivers its first Security Agreement Supplement (in the case of
any other Lien Grantor), such Lien Grantor will, with respect to each Security
Entitlement then owned by it, enter into (and cause the relevant Securities
Intermediary to enter into) a Securities Account Control Agreement in respect
of such Security Entitlement and the Securities Account to which the underlying
Financial Asset is credited and will deliver such Securities Account Control
Agreement to the Administrative Agent (which shall enter into the same).  Thereafter, whenever such Lien Grantor
acquires any other Security Entitlement, such Lien Grantor will, as promptly as
practicable, cause the underlying Financial Asset to be credited to a
Controlled Securities Account.

(b)        Perfection
as to Security Entitlements. 
So long as the Financial Asset underlying any Security Entitlement owned
by such Lien Grantor is credited to a Controlled Securities Account, the
Transaction Lien on such Security Entitlement will be perfected, subject to no
prior Liens or rights of others (except Liens and rights of the relevant
Securities Intermediary that are Permitted Liens), the Administrative Agent
will have Control of such Security Entitlement and no action based on an
adverse claim to such Security Entitlement or such Financial Asset, whether
framed in conversion, replevin, constructive trust, equitable lien or other
theory, may be asserted against the Administrative Agent or any other Secured Party.

(c)        Agreement as
to Applicable Jurisdiction. 
In respect of all Security Entitlements owned by such Lien Grantor, and
all Securities Accounts to which the related Financial Assets are credited, the
Securities Intermediary’s jurisdiction (determined as provided in UCC Section
8-110(e)) will at all times be located in the United States.

 15

Section 7.  Controlled Deposit
Accounts.  Each Lien Grantor
represents, warrants and covenants as follows:

(a)        Except for cash deposited
in Deposit Accounts not included in the Collateral or distributed to its
shareholders, all cash owned by such Lien Grantor will be deposited, upon or
promptly after the receipt thereof, in one or more Controlled Deposit Accounts.
Each Controlled Deposit Account will be operated as provided in Section 8.

(b)        In respect of each
Controlled Deposit Account, the Depositary Bank’s jurisdiction (determined as
provided in UCC Section 9-304) will at all times be a jurisdiction in which
Article 9 of the Uniform Commercial Code is in effect.

(c)        So long as the
Administrative Agent has Control of a Controlled Deposit Account, the Transaction
Lien on such Controlled Deposit Account will be perfected, subject to no prior
Liens or rights of others (except the Depositary Bank’s right to deduct its
normal operating charges and any uncollected funds previously credited
thereto).

Section 8.  Operation of Collateral
Accounts. (a) All Cash Distributions received with respect to assets
held in any Collateral Account shall be deposited therein promptly upon receipt
thereof.

(b)        Funds held in any
Controlled Securities Account may, until withdrawn, be invested and reinvested
in such Permitted Investments as the relevant Lien Grantor shall request from
time to time; provided that, if
an Event of Default shall have occurred and be continuing and the
Administrative Agent has notified the relevant Lien Grantor of its intent to
exercise its rights hereunder, the Administrative Agent may select such
Permitted Investments.

(c)        Funds held in any
Controlled Deposit Account may, until withdrawn, be invested and reinvested in
such Permitted Investments as the relevant Lien Grantor shall request from time
to time; provided that if an
Event of Default shall have occurred and be continuing and the Administrative
Agent has notified the relevant Lien Grantor of its intent to exercise its
rights hereunder, the Administrative Agent may select such Permitted
Investments.

(d)        With respect to each
Collateral Account, the Administrative Agent will instruct the relevant
Securities Intermediary or Depositary Bank that the relevant Lien Grantor may
withdraw, or direct the disposition of, funds held therein unless and until the
Administrative Agent rescinds such instruction. 
The Administrative Agent will not rescind such instructions unless an
Event of 

 16
 

Default shall have occurred and be continuing and the
Administrative Agent has notified the relevant Lien Grantor of its intent to
exercise its rights hereunder.

(e)        If an Event of Default
shall have occurred and be continuing and the Administrative Agent has notified
the relevant Lien Grantor of its intent to exercise its rights hereunder, the
Administrative Agent may (i) retain, or instruct the relevant Securities
Intermediary or Depositary Bank to retain, all cash and investments then held
in any Collateral Account, (ii) liquidate, or instruct the relevant Securities
Intermediary or Depositary Bank to liquidate, any or all investments held
therein and/or (iii) withdraw any amounts held therein and apply such amounts
as provided in Section 11.

(f)         If immediately available
cash on deposit in any Collateral Account is not sufficient to make any
distribution or withdrawal to be made pursuant hereto, the Administrative Agent
will cause to be liquidated, as promptly as practicable, such investments held
in or credited to such Collateral Account as shall be required to obtain
sufficient cash to make such distribution or withdrawal and, notwithstanding
any other provision hereof, such distribution or withdrawal shall not be made
until such liquidation has taken place.

Section 9.  Certain Cash
Distributions.  Cash
Distributions with respect to assets held in a Collateral Account shall be
deposited and held therein, or withdrawn therefrom, as provided in Section
8.  Cash Distributions with respect to
any Pledged Debt that is not held in a Collateral Account (whether held in the
name of a Lien Grantor or in the name of the Administrative Agent or its
nominee) shall be deposited, promptly upon receipt thereof, in a Controlled
Deposit Account of the relevant Lien Grantor; provided
that, if an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have notified the Lien Grantors of its intent to
exercise its rights under the Security Documents, the Administrative Agent may
deposit, or direct the recipient thereof to deposit, each such Cash
Distribution in a Controlled Deposit Account.

Section 10.  Remedies upon Event of
Default.  (a) If an Event of
Default shall have occurred and be continuing, the Administrative Agent may
exercise (or cause its sub-agents to exercise) any or all of the remedies
available to it (or to such sub-agents) under the Security Documents.

(b)        Without limiting the
generality of the foregoing, if an Event of Default shall have occurred and be
continuing, the Administrative Agent may exercise on behalf of the Secured
Parties all the rights of a secured party under the UCC (whether or not in
effect in the jurisdiction where such rights are exercised) with respect to any
Personal Property Collateral and, in addition, the Administrative Agent may,
without being required to give any notice, except as herein provided or as may
be required by mandatory provisions of law, withdraw 

 17
 

all cash held in the Collateral Accounts and apply
such cash as provided in Section 11 and, if there shall be no such cash or if
such cash shall be insufficient to pay all the Secured Obligations in full,
sell, lease, license or otherwise dispose of the Collateral or any part
thereof.  Notice of any such sale or
other disposition shall be given to the relevant Lien Grantor(s) as required by
Section 12.  The foregoing provisions of
this subsection shall apply to Real Property Collateral only to the extent
permitted by applicable law and the provisions of any applicable Mortgage or
other document.

Section 11.  Application of Proceeds.  (a) If an Event of Default shall
have occurred and be continuing, the Administrative Agent may apply (i) any
cash held in the Collateral Accounts and (ii) the proceeds of any sale or other
disposition of all or any part of the Collateral, in the following order of
priorities:

first,     to pay the expenses of such
sale or other disposition, including reasonable compensation to agents of and
counsel for the Administrative Agent, and all expenses, liabilities and
advances incurred or made by the Administrative Agent in connection with the
Security Documents, and any other amounts then due and payable to the
Administrative Agent pursuant to Section 9.03 of the Credit Agreement;

second,  to pay the unpaid principal of
the Secured Obligations ratably (or provide for the payment thereof pursuant to
Section 11(b)), until payment in full of the principal of all Secured
Obligations shall have been made (or so provided for);

third,   to pay ratably all interest
(including Post-Petition Interest) on the Secured Obligations payable
under the Credit Agreement, until payment in full of all such interest and fees
shall have been made;

fourth, to pay all other Secured
Obligations ratably (or provide for the payment thereof pursuant to Section
11(b)), until payment in full of all such other Secured Obligations shall have
been made (or so provided for); and

finally, to pay to the relevant Lien
Grantor, or as a court of competent jurisdiction may direct, any surplus then
remaining from the proceeds of the Collateral owned by it;

provided
that Collateral and any proceeds thereof shall be applied pursuant to the
foregoing clauses first, second, third
and fourth only to the extent
permitted by the limitation in Section 2(i) of the Guarantee Agreement.  The Administrative Agent may make such
distributions hereunder in cash or in kind or, on a ratable basis, in any
combination thereof.

 18
 

(b)        If at any time any portion
of any monies collected or received by the Administrative Agent would, but for
the provisions of this Section 11(b), be payable pursuant to Section 11(a) in
respect of a Contingent Secured Obligation, the Administrative Agent shall not
apply any monies to pay such Contingent Secured Obligation but instead shall
request the holder thereof, at least 10 days before each proposed distribution
hereunder, to notify the Administrative Agent as to the maximum amount of such
Contingent Secured Obligation if then ascertainable.  If the holder of such Contingent Secured
Obligation does not notify the Administrative Agent of the maximum ascertainable
amount thereof at least two Business Days before such distribution, such holder
will not be entitled to share in such distribution.  If such holder does so notify the
Administrative Agent as to the maximum ascertainable amount thereof, the
Administrative Agent will allocate to such holder a portion of the monies to be
distributed in such distribution, calculated as if such Contingent Secured
Obligation were outstanding in such maximum ascertainable amount.  However, the Administrative Agent will not apply
such portion of such monies to pay such Contingent Secured Obligation, but
instead will hold such monies or invest such monies in Permitted
Investments.  All such monies and
Permitted Investments and all proceeds thereof will constitute Collateral hereunder,
but will be subject to distribution in accordance with this Section 11(b)
rather than Section 11(a).  The
Administrative Agent will hold all such monies and Permitted Investments and
the net proceeds thereof in trust until all or part of such Contingent Secured
Obligation becomes a Non-Contingent Secured Obligation, whereupon the
Administrative Agent at the request of the relevant Secured Party will apply
the amount so held in trust to pay such Non-Contingent Secured
Obligation; provided that, if the
other Secured Obligations theretofore paid pursuant to the same clause of
Section 11(a) (i.e., clause second or fourth)
were not paid in full, the Administrative Agent will apply the amount so held
in trust to pay the same percentage of such Non-Contingent Secured
Obligation as the percentage of such other Secured Obligations theretofore paid
pursuant to the same clause of Section 11(a). 
If (i) the holder of such Contingent Secured Obligation shall advise the
Administrative Agent that no portion thereof remains in the category of a
Contingent Secured Obligation and (ii) the Administrative Agent still holds any
amount held in trust pursuant to this Section 11(b) in respect of such
Contingent Secured Obligation (after paying all amounts payable pursuant to the
preceding sentence with respect to any portions thereof that became Non-Contingent
Secured Obligations), such remaining amount will be applied by the
Administrative Agent in the order of priorities set forth in Section 11(a).

(c)        In making the payments and
allocations required by this Section, the Administrative Agent may rely upon
information supplied to it pursuant to Section 14(c).  All distributions made by the Administrative
Agent pursuant to this Section shall be final (except in the event of manifest
error) and the 

 19
 

Administrative Agent shall have no duty to inquire as
to the application by any Secured Party of any amount distributed to it.

Section 12.  Authority to Administer
Collateral.  Each Lien Grantor
irrevocably appoints the Administrative Agent its true and lawful attorney,
with full power of substitution, in the name of such Lien Grantor, any Secured
Party or otherwise, for the sole use and benefit of the Secured Parties, but at
the Borrower’s expense, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have notified the Lien Grantor of
its intent to enforce its security interest in such Lien Grantor’s Collateral,
all or any of the following powers with respect to all or any of such Lien
Grantor’s Collateral:

(a)           to demand, sue for,
collect, receive and give acquittance for any and all monies due or to become
due upon or by virtue thereof,

(b)           to settle, compromise,
compound, prosecute or defend any action or proceeding with respect thereto,

(c)           to sell, lease, license
or otherwise dispose of the same or the proceeds or avails thereof, as fully
and effectually as if the Administrative Agent were the absolute owner thereof,
and

(d)           to extend the time of
payment of any or all thereof and to make any allowance or other adjustment
with reference thereto;

provided
that, except in the case of Personal Property Collateral that is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Administrative Agent will give the relevant Lien Grantor
at least ten days’ prior written notice of the time and place of any public
sale thereof or the time after which any private sale or other intended
disposition thereof will be made. Any such notice shall (i) contain the information specified in UCC Section 9-613,
(ii) be Authenticated and (iii) be sent to the parties required
to be notified pursuant to UCC Section 9-611(c); provided that, if the Administrative Agent
fails to comply with this sentence in any respect, its liability for such
failure shall be limited to the liability (if any) imposed on it as a matter of
law under the UCC.

Section 13.  Limitation on Duty in Respect
of Collateral.  Beyond the
exercise of reasonable care in the custody and preservation thereof, the
Administrative Agent will have no duty as to any Collateral in its possession
or control or in the possession or control of any sub-agent or bailee or any
income therefrom or as to the preservation of rights against prior parties or
any other 

 20
 

rights pertaining thereto.  The
Administrative Agent will be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession or control if such
Collateral is accorded treatment substantially equal to that which it accords
its own property, and will not be liable or responsible for any loss or damage
to any Collateral, or for any diminution in the value thereof, by reason of any
act or omission of any sub-agent or bailee selected by the Administrative Agent
in good faith, except to the extent that such liability arises from the
Administrative Agent’s gross negligence or willful misconduct.

Section 14.  General Provisions Concerning
the Administrative Agent.

(a)        The provisions of Article
8 of the Credit Agreement shall inure to the benefit of the Administrative
Agent, and shall be binding upon all Lien Grantors and all Secured Parties, in
connection with this Agreement and the other Security Documents.  Without limiting the generality of the
foregoing, (i) the Administrative Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether an Event of Default has occurred
and is continuing, (ii) the Administrative Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Security
Documents that the Administrative Agent is required in writing to exercise by
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 9.02 of
the Credit Agreement), and (iii) except as expressly set forth in the Loan
Documents, the Administrative Agent shall not have any duty to disclose, and
shall not be liable for any failure to disclose, any information relating to
the Borrower or any of the Guarantors that is communicated to or obtained by
the bank serving as Administrative Agent or any of its Affiliates in any
capacity.  The Administrative Agent shall
not be responsible for the existence, genuineness or value of any Collateral or
for the validity, perfection, priority or enforceability of any Transaction
Lien, whether impaired by operation of law or by reason of any action or omission
to act on its part under the Security Documents. The Administrative Agent shall
be deemed not to have knowledge of any Event of Default unless and until
written notice thereof is given to the Administrative Agent by the Borrower or
a Secured Party.

(b)        Sub-Agents and Related Parties.  The Administrative Agent may perform any of
its duties and exercise any of its rights and powers through one or more
sub-agents appointed by it.  The
Administrative Agent and any such sub-agent may perform any of its duties and
exercise any of its rights and powers through its Related Parties.  The exculpatory provisions of Section 13 and
this Section shall apply to any such sub-agent and to the Related Parties of
the Administrative Agent and any such sub-agent.

 21
 

(c)        Information as to Secured Obligations and Actions by Secured
Parties.  For all purposes of
the Security Documents, including determining the amounts of the Secured
Obligations and whether a Secured Obligation is a Contingent Secured Obligation
or not, or whether any action has been taken under any Secured Agreement, the
Administrative Agent will be entitled to rely on information from (i) its own records for information
as to the Lender Parties, their Secured Obligations and actions taken by them, (ii) any Secured Party (or any
trustee, agent or similar representative) for information as to its Secured
Obligations and actions taken by it, to the extent that the Administrative
Agent has not obtained such information from its own records, and (iii) the Borrower, to the extent
that the Administrative Agent has not obtained information from the foregoing
sources.

(d)        Refusal to
Act.  The Administrative Agent
may refuse to act on any notice, consent, direction or instruction from any
Secured Parties or any agent, trustee or similar representative thereof that,
in the Administrative Agent’s opinion, (i)
is contrary to law or the provisions of any Security Document, (ii) may expose the Administrative
Agent to liability (unless the Administrative Agent shall have been indemnified,
to its reasonable satisfaction, for such liability by the Secured Parties that
gave such notice, consent, direction or instruction) or (iii) is unduly prejudicial to Secured Parties not joining in
such notice, consent, direction or instruction.

(e)        Copies of
Certain Notices.  Within two
Business Days after it receives or sends any notice referred to in this
subsection, the Administrative Agent shall send to the Lenders and each Secured
Party Requesting Notice, copies of any notice given by the Administrative Agent
to any Lien Grantor, or received by it from any Lien Grantor, pursuant to
Section 10, 11, 12 or 15.

Section 15.  Termination of Transaction
Liens; Release of Collateral.  (a) The Transaction Liens granted by
each Guarantor pursuant to this Agreement shall terminate upon the earlier of
(i) the satisfaction of all of the Release Conditions and (ii) the satisfaction
of all of the Ratings Release Conditions (subject to reinstatement as set forth
in Section 5.12 of the Credit Agreement).

(b)        At any time before the
Transaction Liens granted by all the Lien Grantors pursuant to this Agreement
terminate, the Administrative Agent may, at the written request of the
Borrower, (i) release any
Collateral (but not all or substantially all the Collateral) with the prior
written consent of the Required Lenders or (ii) release all or substantially all the Collateral with the
prior written consent of all Lenders.

(c)        The Administrative Agent
shall be fully protected in relying upon a certificate of a Financial Officer
of the Borrower as to whether all of the Ratings 

 22
 

Release Conditions are satisfied.  Upon any termination of a Transaction Lien or
release of Collateral, the Administrative Agent will, at the expense of the
relevant Lien Grantor, execute and deliver to such Lien Grantor such documents
as such Lien Grantor shall reasonably request to evidence the termination of
such Transaction Lien or the release of such Collateral, as the case may be.

Section 16.  Additional Lien Grantors.  Any Subsidiary may become a party
hereto by signing and delivering to the Administrative Agent a Security
Agreement Supplement, whereupon such Subsidiary shall become a “Lien Grantor”
as defined herein.

Section 17.  Notices.  Each notice, request or other
communication given to any party hereunder shall be given in accordance with
Section 9.01 of the Credit Agreement, and in the case of any such notice,
request or other communication to a Lien Grantor, shall be given to it in care
of the Borrower.Section 18.  No Implied Waivers; Remedies Not
Exclusive.  No failure by the
Administrative Agent or any Secured Party to exercise, and no delay in
exercising and no course of dealing with respect to, any right or remedy under
any Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise by the Administrative Agent or any Secured Party of any right
or remedy under any Loan Document preclude any other or further exercise
thereof or the exercise of any other right or remedy.  The rights and remedies specified in the Loan
Documents are cumulative and are not exclusive of any other rights or remedies
provided by law.

Section 19.  Successors and Assigns.  This Agreement is for the benefit
of the Administrative Agent and the Secured Parties.  If all or any part of any Secured Party’s
interest in any Secured Obligation is assigned or otherwise transferred, the
transferor’s rights hereunder, to the extent applicable to the obligation so
transferred, shall be automatically transferred with such obligation.  This Agreement shall be binding on the Lien
Grantors and their respective successors and assigns.

Section 20.  Amendments and Waivers.  Neither this Agreement nor any
provision hereof may be waived, amended, modified or terminated except pursuant
to an agreement or agreements in writing entered into by the Administrative
Agent, with the consent of such Lenders as are required to consent thereto
under Section 9.02 of the Credit Agreement. 
No such waiver, amendment or modification shall (i) be binding upon any
Lien Grantor, except with its written consent, or (ii) affect the rights of a
Secured Party (other than a Lender) hereunder more adversely than it affects
the comparable rights of the Lenders hereunder, without the consent of such
Secured Party.

 23
 

Section 21.  Governing Law; Jurisdiction; Consent to Service of Process.  (a)
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws
of any jurisdiction other than the State of New York are governed by the laws
of such jurisdiction.

(b)        Each of the Lien Grantors
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York sitting
in New York County and of the United States District Court of the Southern
District of New York, and any relevant appellate court, in any action or
proceeding arising out of or relating to any Loan Document, or for recognition
or enforcement of any judgment, and each party hereto irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. 
Each party hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.  Nothing in any Loan Document shall affect any
right that any Secured Party may otherwise have to bring any action or
proceeding relating to any Loan Document against any Lien Grantor or its
properties in the courts of any jurisdiction.

(c)        Each of the Lien Grantors
irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement in any court referred to in subsection (b) of this Section.  Each party hereto irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of any such suit, action or proceeding in any such court.

(d)        Each party hereto
irrevocably consents to service of process in the manner provided for notices
in Section 9.01 of the Credit Agreement. 
Nothing in any Loan Document will affect the right of any party hereto
to serve process in any other manner permitted by law.

Section 22.  Waiver of Jury Trial.  EACH PARTY HERETO WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY 

 24
 

HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

Section 23.  Use of English Language.  Any translation of this Agreement
into another language shall have no interpretive effect. All documents or
notices to be delivered pursuant to or in connection with this Agreement shall
be in the English language or, if any such document or notice is not in the
English language, accompanied by an English translation thereof, and the
English language version of any such document or notice shall control for
purposes hereof.

Section 24.  Severability.  If any provision of any Loan
Document is invalid, illegal or unenforceable in any jurisdiction then, to the
fullest extent permitted by law, (i) such provision shall, as to such
jurisdiction, be ineffective to the extent (but only to the extent) of such
invalidity, illegality or unenforceability, (ii) the other provisions of the
Loan Documents shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Administrative Agent and the
Secured Parties in order to carry out the intentions of the parties thereto as
nearly as may be possible and (iii) the invalidity, illegality or
unenforceability of any such provision in any jurisdiction shall not affect the
validity, legality or enforceability of such provision in any other jurisdiction.

Section 25.  Counterparts, Integration,
Effectiveness.  This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract.  This Agreement, the other Loan Documents and
any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01 of the
Credit Agreement, this Agreement (i) will become effective when the
Administrative Agent shall have signed this Agreement and received counterparts
hereof that, when taken together, bear the signatures of each of the other
parties hereto and (ii) thereafter will be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by facsimile will be effective as delivery of
a manually executed counterpart of this Agreement.

 25

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

	
  

  	
  MARVELL TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sehat Sutardja

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MARVELL SEMICONDUCTOR, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sehat Sutardja

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SYSKONNECT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sehat Sutardja

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AVAGO TECHNOLOGIES IMAGING 

  
	
   

  	
   

  	
  (U.S.A.) INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sehat Sutardja

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 

	
  

  	
  ZENOGRAPHICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike Tate

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MARVELL SEMICONDUCTOR, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sehat Sutardja

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE, CAYMAN ISLANDS 

  
	
   

  	
   

  	
  BRANCH, as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian T. Caldwell

  	
   

  
	
   

  	
   

  	
  Name: Brian T. Caldwell

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shaheen Malik

  	
   

  
	
   

  	
   

  	
  Name: Shaheen Malik

  
	
   

  	
   

  	
  Title: Associate

  
					

 

SCHEDULE 1

INVESTMENT PROPERTY
(OTHER THAN EQUITY INTERESTS IN

SUBSIDIARIES) OWNED BY ORIGINAL LIEN GRANTORS

(as of the Effective Date)

PART 1 — Securities

	
  Issuer

  	
   

  	
  Jurisdiction

  of

  Organization

  	
   

  	
  Owner of Securities

  	
   

  	
  Amount

  Owned

  	
   

  	
  Type of

  Security

  
	
               

  	
   

  	
               

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
               

  	
   

  	
               

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
               

  	
   

  	
               

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
               

  	
   

  	
               

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

PART 2 — Securities
Accounts

The Original Lien
Grantors own Security Entitlements with respect to Financial Assets credited to
the following Securities Accounts:

	
  Owner

  	
   

  	
  Securities

  Intermediary

  	
   

  	
  Account Number

  
	
                       

  	
   

  	
                       

  	
   

  	
   

  
	
                       

  	
   

  	
                       

  	
   

  	
   

  
	
                       

  	
   

  	
                       

  	
   

  	
   

  
	
                       

  	
   

  	
                       

  	
   

  	
   

  
	
                       

  	
   

  	
                       

  	
   

  	
   

  
	
                       

  	
   

  	
                       

  	
   

  	
   

  

 

 S-1-1

EXHIBIT A

to Security Agreement

SECURITY AGREEMENT
SUPPLEMENT

SECURITY
AGREEMENT SUPPLEMENT dated as of                 ,
             ,
between [NAME OF LIEN GRANTOR] (the “Lien
Grantor”) and CREDIT SUISSE, CAYMAN ISLANDS BRANCH, as
Administrative Agent.

WHEREAS,
Marvell Technology Group Ltd. (the “Borrower”), the
lenders party thereto and Credit Suisse, Cayman Islands Branch, as
Administrative Agent, are parties to a Credit Agreement dated as of November 8,
2006 (as heretofore amended and/or supplemented, the “Credit Agreement”);

WHEREAS,
the Borrower, the Guarantors and Credit Suisse, Cayman Islands Branch, as
Administrative Agent (the “Administrative Agent”),
are parties to a Guarantee Agreement dated as of November 8, 2006 (as
heretofore amended and/or supplemented, the “Guarantee
Agreement”) pursuant to which the Guarantors party thereto have
guaranteed certain obligations of the Borrower, including under the Credit
Agreement;

WHEREAS,
the Guarantors party thereto and the Administrative Agent are parties to a
Security Agreement dated as of [            
] (as heretofore amended and/or supplemented, the “Security Agreement”) under which the
Guarantors secure certain obligations (the “Secured
Obligations”);

WHEREAS,
[name of Lien Grantor] has become [is] a party to the Guarantee Agreement as a
Guarantor;

WHEREAS,
[name of Lien Grantor] is willing to become [is] a party to the Security
Agreement as a Lien Grantor thereunder; and

WHEREAS,
terms defined in the Security Agreement (or whose definitions are incorporated
by reference in Section 1 of the Security Agreement) and not otherwise defined
herein have, as used herein, the respective meanings provided for therein;

NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

1.     Grant of Transaction Liens.  (a) In order to secure its Transaction
Guarantee, the Lien Grantor grants to the Administrative Agent for the benefit
of the Secured Parties a continuing security interest in all the following
property of 

 A-1
 

the Lien Grantor, whether now owned or existing or
hereafter acquired or arising and regardless of where located (the “New Collateral”):

[describe
property being added to the Collateral]

(b)   With respect to each right to payment or
performance included in the Collateral from time to time, the Transaction Lien
granted therein includes a continuing security interest in (i) any Supporting
Obligation that supports such payment or performance and (ii) any Lien that (x)
secures such right to payment or performance or (y) secures any such Supporting
Obligation.

(c)   The foregoing Transaction Liens are granted
as security only and shall not subject the Administrative Agent or any other Secured
Party to, or transfer or in any way affect or modify, any obligation or
liability of the Lien Grantor with respect to any of the New Collateral or any
transaction in connection therewith.

2.     Delivery of Collateral.  Concurrently with delivering this Security
Agreement Supplement to the Administrative Agent, the Lien Grantor is complying
with the provisions of Section 6 of the Security Agreement with respect to each
Securities Account, in each case if and to the extent included in the New
Collateral at such time.

3.     Party to Security Agreement.  Upon delivering this Security Agreement
Supplement to the Administrative Agent, the Lien Grantor will become a party to
the Security Agreement and will thereafter have all the rights and obligations
of a Lien Grantor thereunder and be bound by all the provisions thereof as
fully as if the Lien Grantor were one of the original parties thereto.(1)

4.     Representations and
Warranties.  (a) The Lien
Grantor is duly organized, validly existing and in good standing under the laws
of [jurisdiction of organization].

(b)   The Lien Grantor has delivered a Perfection
Certificate to the Administrative Agent. 
The information set forth therein is correct and complete as of the date
hereof.

(1)             Delete Section 4 if
the Lien Grantor is already a party to the Security Agreement.

 

 A-2
 

(c)   Each of the representations and warranties
set forth in the Security Agreement and the Credit Agreement is true as applied
to the Lien Grantor and the New Collateral. 
For purposes of the foregoing sentence, references in said agreements to
a “Lien Grantor”, a “Subsidiary” or a “Credit Party” shall be deemed to refer
to the Lien Grantor, references to Schedules to the Security Agreement shall be
deemed to refer to the corresponding Schedules to this Security Agreement
Supplement, references to “Collateral” shall be deemed to refer to the New
Collateral, and references to the “Closing Date” or the “Effective Date” shall
be deemed to refer to the date on which the Lien Grantor signs and delivers
this Security Agreement Supplement.

5.     Governing Law.  This Security Agreement Supplement shall be
construed in accordance with and governed by the laws of the State of New York.

IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement
Supplement to be duly executed by their respective authorized officers as of
the day and year first above written.

	
  

  	
  [NAME OF LIEN GRANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE,
  CAYMAN ISLANDS

  BRANCH, as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 A-3
 

Schedule 1

to Security Agreement Supplement

INVESTMENT PROPERTY

(OTHER THAN EQUITY INTERESTS IN SUBSIDIARIES)

OWNED BY LIEN GRANTOR

PART 1 — Securities

	
  Issuer

  	
   

  	
  Jurisdiction

  of

  Organization

  	
   

  	
  Amount Owned

  	
   

  	
  Type of Security

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  
	
                   

  	
   

  	
                   

  	
   

  	
   

  	
   

  	
   

  

 

PART 2 — Securities
Accounts

The Lien Grantor owns
Security Entitlements with respect to Financial Assets credited to the
following Securities Accounts:

	
  Securities Intermediary

  	
   

  	
  Account Number

  
	
                        

  	
   

  	
                        

  
	
                        

  	
   

  	
                        

  
	
                        

  	
   

  	
                        

  
	
                        

  	
   

  	
                        

  
	
                        

  	
   

  	
                        

  
	
                        

  	
   

  	
                        

  

 

 A-4

EXHIBIT B

to Security Agreement

PERFECTION CERTIFICATE

The
undersigned is a duly authorized officer of [NAME OF LIEN GRANTOR] (the “Lien Grantor”).  With reference to the Security Agreement
dated as of [    ] among the Lien
Grantors party thereto and Credit Suisse, Cayman Islands Branch, as
Administrative Agent (terms defined therein being used herein as therein
defined), the undersigned certifies to the Administrative Agent and each other
Secured Party as follows:

A.    Information Required for Filings and Searches for Prior  Filings.

1.     Jurisdiction
of Organization.  The Lien
Grantor is a corporation(2) organized under the laws of                                         .

2.     Name.  The exact [corporate] name of the Lien
Grantor as it appears in its [[certificate] [articles] of incorporation] is as
follows:

3.     Prior Names.  (a) Set forth below is each other [corporate]
name that the Lien Grantor has had since its organization, together with the
date of the relevant change:

(b)   Except as set forth in Schedule      
hereto, the Lien Grantor has not changed its corporate structure(3) in any way
within the past five years.

(2)      Modify
as needed if the Lien Grantor is not a corporation.

(3)  Changes in corporate structure would include
mergers and consolidations, as well as any change in the Lien Grantor’s form of
organization.  If any such change has
occurred, include in Schedule      the information required
by Part A of this certificate as to each constituent party to a merger or
consolidation and any other predecessor organization.

 B-1
 

4.     Filing
Office.  In order to perfect
the Transaction Liens granted by the Lien Grantor, a duly completed financing
statement on Form UCC-1, with the collateral described as set forth on Schedule
1 hereto, should be on file in the office of                             
in                       (4).

B.    Search Reports.

Attached
hereto as Schedule 2 is a true copy of a file search report from the central
UCC filing office in each jurisdiction identified in Part A–4 above with
respect to each name set forth in Part A–2 and Part A–3 above (searches in
local filing offices, if any, are not required).  Attached hereto as Schedule     
is a true copy of each financing statement or other filing identified in such
file search reports.

IN WITNESS WHEREOF, I
have hereunto set my hand this       day of                             ,
            .

	
  

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

(4)      Insert
Lien Grantor’s “location” determined as provided in UCC Section 9-307.

 B-2
 

Schedule
1

to Perfection Certificate

DESCRIPTION OF COLLATERAL

All the following
property of the Debtor, whether now owned or existing or hereafter acquired or
arising and regardless of where located: 
accounts, chattel paper, deposit accounts, investment property other
than Equity Interests in the Debtor’s subsidiaries, documents, equipment,
instruments, inventory, securities accounts, books and records (including
customer lists, credit files, computer programs, printouts and other computer
materials and records) pertaining to the foregoing, ownership interests in any
collateral accounts (including any financial assets credited thereto from time
to time and all security entitlements in respect thereof) and all cash held
therein from time to time, all other money in the possession of the
Administrative Agent and all proceeds of the foregoing.

 B-3
 

Schedule
2 to

Perfection Certificate

SCHEDULE OF FILINGS

AGAINST                           ,

AS DEBTOR

	
  Filing Office

  	
   

  	
  File Number

  	
   

  	
  Date of Filing(9)

  
	
                                    

  	
   

  	
                                    

  	
   

  	
   

  
	
                                    

  	
   

  	
                                    

  	
   

  	
   

  
	
                                    

  	
   

  	
                                    

  	
   

  	
   

  

 

(9)      Also indicate lapse date, if
other than fifth anniversary.

 B-4

EXHIBIT C

to Security Agreement

SECURITIES ACCOUNT
CONTROL AGREEMENT

SECURITIES
ACCOUNT CONTROL AGREEMENT dated as of                  ,
            among                       
(the “Lien Grantor”), CREDIT
SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent (the “Secured Party”), and                
(the “Securities Intermediary”).  All references herein to the “UCC” refer to the Uniform Commercial Code
as in effect from time to time in the State of New York.  Terms defined in the UCC have the same meanings
when used herein.

W I T N E S S E T
H :

WHEREAS,
the Lien Grantor is the entitlement holder with respect to the Account (as
defined below);

WHEREAS,
pursuant to a Security Agreement dated as of [•] (as such agreement may be
amended and/or supplemented from time to time, the “Security Agreement”), the Lien Grantor has granted to the
Secured Party a continuing security interest (the “Transaction Lien”) in all right, title and interest of the
Lien Grantor in, to and under the Account, all financial assets credited
thereto and all security entitlements in respect thereof, whether now owned or
existing or hereafter acquired or arising; and

WHEREAS,
the parties hereto are entering into this Agreement in order to perfect the
Transaction Lien on the Account, all financial assets from time to time
credited thereto and all security entitlements in respect thereof;

NOW,
THEREFORE, the parties hereto agree as follows:

Section 1.  Establishment of Account.  The
Securities Intermediary confirms that:

(i)    the Securities Intermediary has established
account number [identify account number] in the name of “[name of Lien
Grantor]” (such account and any successor account, the “Account”),

(ii)   the Account is a “securities account” as
defined in Section 8-501 of the UCC,

 C-1
 

(iii)  the Securities Intermediary is acting as a
“securities intermediary” (as defined in Section 8-102 of the UCC) in
respect of the Account,

(iv)  the Securities Intermediary shall, subject to
the terms of this Agreement, treat the Lien Grantor as entitled to exercise the
rights that comprise all financial assets from time to time credited to the
Account,

(v)   all property delivered to the Securities
Intermediary by or on behalf of the Lien Grantor will be promptly credited to
the Account, and

(vi)  all financial assets (except cash) credited to
the Account will be registered in the name of the Securities Intermediary,
indorsed to the Securities Intermediary or in blank or credited to another
securities account maintained in the name of the Securities Intermediary and in
no case will any financial asset credited to the Account be registered in the
name of the Lien Grantor, payable to the order of the Lien Grantor or specially
indorsed to the Lien Grantor unless such financial asset has been further
indorsed to the Securities Intermediary or in blank.

Section 2.  “Financial Assets” Election.  The
parties hereto agree that each item of property (whether investment property,
financial asset, security, instrument, cash or other property) credited to the
Account shall be treated as a “financial asset” within the meaning of Sections
8-102(a)(9) and 8-103 of the UCC.

Section 3.  Entitlement Orders.  The
Securities Intermediary agrees to comply with any “entitlement order” (as
defined in Section 8-102 of the UCC) originated by the Secured Party and
relating to the Account or any financial asset credited thereto without further
consent by the Lien Grantor or any other person.  The Lien Grantor consents to the foregoing
agreement by the Securities Intermediary.

Section 4.  Waiver of Lien; Waiver of Set-off. 
The Securities Intermediary waives any security interest,
lien or right to make deductions or setoffs that it may now have or hereafter
acquire in or with respect to the Account, any financial asset credited thereto
or any security entitlement in respect thereof. 
Neither the financial assets credited to the Account nor the security
entitlements in respect thereof will be subject to deduction, set-off,
banker’s lien, or any other right in favor of any person other than the Secured
Party [(except that the Securities Intermediary may set off (i) all amounts due
to it in respect of its customary fees and expenses for the routine maintenance
and operation of the Account and (ii) 

 C-2
 

the face amount of any checks that have been credited
to the Account but are subsequently returned unpaid because of uncollected or
insufficient funds)].

Section 5.  Choice of Law.  This
Agreement shall be construed in accordance with and governed by the laws of the
State of New York.  The State of New York
shall be deemed to be the Securities Intermediary’s jurisdiction for purposes
of the UCC (including, without limitation, Section 8-110 thereof).

Section 6.  Conflict with Other Agreements.  There
is no agreement (except this Agreement) between the Securities Intermediary and
the Lien Grantor with respect to the Account [except for [identify any existing
other agreements] the “Existing Other Agreements”].  In the event of any conflict between this
Agreement (or any portion hereof) and any other agreement [(including any
Existing Other Agreement)] between the Securities Intermediary and the Lien
Grantor with respect to the Account, whether now existing or hereafter entered
into, the terms of this Agreement shall prevail.  If any Existing Other Agreement does not
specify that it is governed by the laws of the State of New York. such Existing
Other Agreement is hereby amended to specify that it is governed by the laws of
the State of New York.

Section 7.  Amendments.  No
amendment or modification of this Agreement or waiver of any right hereunder
shall be binding on any party hereto unless it is in writing and is signed by
all the parties hereto.

Section 8.  Notice of Adverse Claims.  Except
for the claims and interests of the Secured Party and the Lien Grantor, the
Securities Intermediary does not know of any claim to, or interest in, the
Account, any financial asset credited thereto or any security entitlement in
respect thereof.  If any person asserts
any lien, encumbrance or adverse claim (including any writ, garnishment,
judgment, attachment, execution or similar process) against the Account, any
financial asset credited thereto or any security entitlement in respect
thereof, the Securities Intermediary will promptly notify the Secured Party and
the Lien Grantor thereof.

Section 9.  Maintenance of Account.  In
addition to, and not in lieu of, the obligation of the Securities Intermediary
to honor entitlement orders as agreed in Section 3 hereof, the Securities
Intermediary agrees to maintain the Account as follows:

(i)    Lien
Grantor Entitlement Orders; Notice of Exclusive Control.  So long as the Securities Intermediary has
not received a Notice of Exclusive Control (as defined below), the Securities
Intermediary may, subject to paragraph (iii) below, comply with entitlement
orders of the Lien Grantor or any duly authorized agent of the Lien Grantor in
respect of the Account and any or all financial assets credited thereto.  After the 

 C-3
 

Securities Intermediary
receives a written notice from the Secured Party that is exercising exclusive
control over the Account (a “Notice of
Exclusive Control”), the Securities Intermediary will cease
complying with entitlement orders of the Lien Grantor or any of its agents.

(ii)   Voting
Rights.  Until the Securities
Intermediary receives a Notice of Exclusive Control, the Lien Grantor shall be
entitled to direct the Securities Intermediary with respect to the voting of
any financial assets credited to the Account.

(iii)  Permitted
Investments.  Until the
Securities Intermediary receives a Notice of Exclusive Control, the Lien
Grantor shall be entitled to direct the Securities Intermediary with respect to
the selection of investments to be made and credited to the Account; provided that the Securities Intermediary
shall not honor any instruction or entitlement order to purchase any investment
except investments of a type described in Exhibit B hereto.

(iv)  Statements
and Confirmations.  The
Securities Intermediary will promptly send copies of all statements,
confirmations and other correspondence concerning the Account and/or any
financial assets credited thereto simultaneously to each of the Lien Grantors
and the Secured Party at their respective addresses specified in Section 12
hereof.

(v)   Tax
Reporting.  All items of
income, gain, expense and loss recognized in the Account or in respect of any
financial assets credited thereto shall be reported to the Internal Revenue
Service and all state and local taxing authorities under the name and taxpayer
identification number of the Lien Grantor.

Section 10.  Representations, Warranties and Covenants of the Securities
Intermediary.  The Securities
Intermediary makes the following representations, warranties and covenants:

(i)    The Account has been established as set
forth in Section 1 above and will be maintained in the manner set forth herein
until this Agreement is terminated.  The
Securities Intermediary will not change the name or account number of the
Account without the prior written consent of the Secured Party.

(ii)   No financial asset credited to the Account is
or will be registered in the name of the Lien Grantor, payable to the order of
the Lien Grantor, or specially indorsed to the Lien Grantor, unless such
financial 

 C-4
 

asset has been further
indorsed by the Lien Grantor to the Securities Intermediary or in blank.

(iii)  This Agreement is a valid and binding
agreement of the Securities Intermediary enforceable in accordance with its
terms.

(iv)  The Securities Intermediary has not entered
into, and until the termination of this Agreement will not enter into, any
agreement with any person (other than the Secured Party) relating to the
Account and/or any financial asset credited thereto pursuant to which it has
agreed, or will agree, to comply with entitlement orders of such person.  The Securities Intermediary has not entered
into any other agreement with the Lien Grantor or the Secured Party purporting
to limit or condition the obligation of the Securities Intermediary to comply
with entitlement orders as agreed in Section 3 hereof.

Section 11.  Successors.  This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns.

Section 12.  Notices.  Each notice,
request or other communication given to any party hereunder shall be in writing
(which term includes facsimile or other electronic transmission) and shall be
effective (i) when delivered to such party at its address specified below, (ii)
when sent to such party by facsimile or other electronic transmission, addressed
to it at its facsimile number or electronic address specified below, and such
party sends back an electronic confirmation of receipt or (iii) ten days after
being sent to such party by certified or registered United States mail,
addressed to it at its address specified below, with first class or airmail
postage prepaid:

Lien
Grantor:

Secured
Party:

Securities
Intermediary:

Any party may change its
address, facsimile number and/or e-mail address for purposes of this Section by
giving notice of such change to the other parties in the manner specified
above.

 C-5
 

Section 13.  Termination.  The
rights and powers granted herein to the Secured Party (i) have been granted in
order to perfect the Transaction Lien, (ii) are powers coupled with an interest
and (iii) will not be affected by any bankruptcy of the Lien Grantor or any
lapse of time.  The obligations of the
Securities Intermediary hereunder shall continue in effect until the Secured
Party has notified the Securities Intermediary in writing that the Transaction
Lien has been terminated pursuant to the terms of the Security Agreement.

Section 14.  Counterparts.  This
Agreement may be executed in any number of counterparts, all of which shall
constitute one and the same instrument, and any party hereto may execute this
Agreement by signing and delivering one or more counterparts.

	
  

  	
  [NAME OF LIEN GRANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE, CAYMAN ISLANDS 

  
	
   

  	
   

  	
  BRANCH, 

  
	
   

  	
   

  	
  as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [NAME OF SECURITIES INTERMEDIARY]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 C-6
 

Exhibit A

[Letterhead of
Secured Party]

[Date]

[Name and Address of
Securities Intermediary]

Attention:                                         

Re:  Notice of Exclusive
Control

Ladies and Gentlemen:

As
referenced in the Securities Account Control Agreement dated as of              ,
              
among [name of Lien Grantor], us and you (a copy of which is attached), we
notify you that we will hereafter exercise exclusive control over securities
account number                   (the
“Account”), all financial assets
from time to time credited thereto and all security entitlements in respect
thereof.  You are instructed not to
accept any directions, instructions or entitlement orders with respect to the
Account or the financial assets credited thereto from any person other than the
undersigned unless otherwise ordered by a court of competent jurisdiction.

You
are instructed to deliver a copy of this notice by facsimile transmission to
[name of Lien Grantor].

Very truly yours,

	
  

  	
  CREDIT SUISSE, CAYMAN ISLANDS

  BRANCH,

  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

cc: [name of Lien Grantor]

 C-7
 

Exhibit B

Permitted Investments

 C-8

EXHIBIT D

to Security Agreement

DEPOSIT ACCOUNT CONTROL
AGREEMENT

DEPOSIT
ACCOUNT CONTROL AGREEMENT dated as of              ,
             
among                         
(the “Lien Grantor”), CREDIT
SUISSE, CAYMAN ISLANDS BRANCH, as Administrative Agent (the “Secured Party”), and                  
(the “Bank”).  All references herein to the “UCC” refer to the Uniform Commercial Code
as in effect from time to time in the State of New York. Terms defined in the
UCC have the same meanings when used herein.

W I T N E S S E T
H :

WHEREAS,
the Lien Grantor is the Bank’s customer (as defined in Section 4-104(1)(e) of
the UCC) with respect to the Account (as defined below);

WHEREAS,
pursuant to a Security Agreement dated as of [    ] (as such agreement may be amended and/or
supplemented from time to time, the “Security
Agreement”), the Lien Grantor has granted to the Secured Party a
continuing security interest (the “Transaction
Lien”) in all right, title and interest of the Lien Grantor in, to
and under the Account; and

WHEREAS,
the parties hereto are entering into this Agreement in order to perfect the
Transaction Lien on the Account and any and all funds or deposits from time to
time held therein or credited thereto, whether now owned or existing or
hereafter acquired or arising;

NOW,
THEREFORE, the parties hereto agree as follows:

Section 1.  Establishment
of Account.  The Bank confirms that:

(i)    the Bank has established account number
[identify account number] in the name of “[name of Lien Grantor]” (such account
and any successor account, the “Account”);

(ii)   the Account is a “deposit account” as defined
in Section 9-102(a)(29) of the UCC; and

(iii)  the Bank is a “bank” (as defined in section
9-102 of the UCC) and is acting in such capacity in respect of the Account.

 D-1
 

Section 2.  Instructions.  The
Lien Grantor, the Secured Party and the Bank agree that the Bank will comply
with (i) any instruction originated by the Secured Party directing disposition
of funds in the Account and (ii) any other instruction from the Secured Party
in respect of the Account, in each case without further consent by the Lien
Grantor or any other person.

Section 3.  Waiver of Lien; Waiver of Set-off. 
The Bank waives any security interest, lien or right to make
deductions or setoffs that it may now have or hereafter acquire in or with
respect to the Account or any or all funds or deposits from time to time held
therein or credited thereto.  No amounts
credited to the Account will be subject to deduction, set-off, banker’s
lien, or any other right in favor of any person other than the Secured Party
[(except that the Bank may set off (i) all amounts due to it in respect of its
customary fees and expenses for the routine maintenance and operation of the
Account and (ii) the face amount of any checks that have been credited to the
Account but are subsequently returned unpaid because of uncollected or
insufficient funds)].

Section 4.  Choice of Law.  This
Agreement shall be construed in accordance with and governed by the laws of the
State of New York.  The State of New York
shall be deemed to be the bank’s jurisdiction (as defined in Section 9-304 of
the UCC) with respect to the Account.

Section 5.  Conflict with Other Agreements.  There
is no agreement (except this Agreement) between the Bank and the Lien Grantor
with respect to the Account [except for [identify any existing other
agreements] the “Existing  Other
Agreements”].  In the event of any conflict between this
Agreement (or any portion hereof) and any other agreement [(including any Existing
Other Agreement)] between the Bank and the Lien Grantor with respect to the
Account, whether now existing or hereafter entered into, the terms of this
Agreement shall prevail.  If any Existing
Other Agreement does not specify that it is governed by the laws of the State
of New York. such Existing Other Agreement is hereby amended to specify that it
is governed by the laws of the State of New York.

Section 6.  Amendments.  No
amendment or modification of this Agreement or waiver of any right hereunder shall
be binding on any party hereto unless it is in writing and is signed by all the
parties hereto.

Section 7.  Notice of Adverse Claims.  Except
for the claims and interests of the Secured Party and the Lien Grantor, the
Bank does not know of any claim to, or interest in, the Account or any or all
funds or deposits held therein or credited thereto.  If any person asserts any lien, encumbrance
or adverse claim (including any writ, garnishment, judgment, attachment, execution
or similar process) against the Account or any or all funds or deposits held
therein or

 D-2
 

credited thereto, the Bank will promptly notify the
Secured Party and the Lien Grantor thereof.

Section 8.  Maintenance of Account.  In
addition to, and not in lieu of, the obligation of the Bank to honor
instructions originated by the Secured Party as agreed in Section 3 hereof, the
Bank agrees to maintain the Account as follows:

(i)    Lien
Grantor Entitlement Orders; Notice of Exclusive Control.  So long as the Bank has not received a Notice
of Exclusive Control (as defined below), the Bank may comply with instructions
originated by the Lien Grantor or any duly authorized agent of the Lien Grantor
in respect of the Account and any or all funds or deposits held therein or
credited thereto.  After the Bank
receives a written notice from the Secured Party that it is exercising
exclusive control over the Account (a “Notice
of Exclusive Control”), the Bank will cease complying with
instructions originated by the Lien Grantor or any of its agents.

(ii)   Statements.  The Bank will promptly send copies of all
statements and other correspondence concerning the Account simultaneously to
each of the Lien Grantor and the Secured Party at their respective addresses
specified in Section 12 hereof.

(iii)  Tax
Reporting.  All items of income, gain, expense and loss
recognized in the Account or in respect of any funds or deposits held therein
or credited thereto shall be reported to the Internal Revenue Service and all
state and local taxing authorities under the name and taxpayer identification
number of the Lien Grantor.

Section 9.  Representations, Warranties and Covenants of the Bank.  The Bank makes the following
representations, warranties and covenants:

(i)    The Account has been established as set
forth in Section 1 above and will be maintained in the manner set forth herein
until this Agreement is terminated.  The
Bank will not change the name or account number of the Account without the
prior written consent of the Secured Party.

(ii)   Neither the Account nor any funds or deposits
at any time held therein or credited thereto is or will be evidenced by any
instrument (as defined in Section 9-102 of the UCC) or constitutes or will
constitute investment property (as defined in Section 9-102 of the UCC)

(iii)  This Agreement is a valid and binding
agreement of the Bank enforceable in accordance with its terms.

 D-3
 

(iv)  The Bank has not entered into, and until the
termination of this Agreement will not enter into, any agreement with any
person (other than the Secured Party) relating to the Account and/or any funds
or deposits held therein or credited thereto pursuant to which it has agreed,
or will agree, to comply with instructions of such person.  The Bank has not entered into any other agreement
with the Lien Grantor or the Secured Party purporting to limit or condition the
obligation of the Bank to comply with instructions originated by the Secured
Party as agreed in Section 3 hereof.

Section 10.  Successors.  This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns.

Section 11.  Notices.  Each notice,
request or other communication given to any party hereunder shall be in writing
(which term includes facsimile or other electronic transmission) and shall be
effective (i) when delivered to such party at its address specified below, (ii)
when sent to such party by facsimile or other electronic transmission,
addressed to it at its facsimile number or electronic address specified below,
and such party sends back an electronic confirmation of receipt or (iii) ten
days after being sent to such party by certified or registered United States
mail, addressed to it at its address specified below, with first class or
airmail postage prepaid:

Lien
Grantor:

Secured
Party:

Bank:

Any party may change its
address, facsimile number and/or e-mail address for purposes of this Section by
giving notice of such change to the other parties in the manner specified
above.

Section 12.  Termination.  The
rights and powers granted herein to the Secured Party (i) have been granted in
order to perfect the Transaction Lien, (ii) are powers coupled with an interest
and (iii) will not be affected by any bankruptcy of the Lien Grantor or any
lapse of time.  The obligations of the
Bank hereunder shall continue in effect until the Secured Party has notified
the Bank in writing that the Transaction Lien has been terminated pursuant to
the terms of the Security Agreement.

 D-4
 

Section 13.  Counterparts.  This
Agreement may be executed in any number of counterparts, all of which shall
constitute one and the same instrument, and any party hereto may execute this
Agreement by signing and delivering one or more counterparts.

	
  

  	
  [NAME OF LIEN GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT SUISSE, CAYMAN ISLANDS 

  
	
   

  	
   

  	
  BRANCH, 

  
	
   

  	
   

  	
  as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [NAME OF BANK]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 D-5
 

Exhibit A

[Letterhead of
Secured Party]

[Date]

[Name and Address of
Bank]

Attention:                                               

Re:  Notice of Exclusive
Control

Ladies and Gentlemen:

As
referenced in the Deposit Account Control Agreement dated as of                ,
           among [name of
Lien Grantor], us and you (a copy of which is attached), we notify
you that we will hereafter exercise exclusive control over deposit account
number                 (the
“Account”) and all funds and
deposits from time to time held therein or credited thereto.  You are instructed not to accept any
directions or instructions with respect to the Account or the funds or deposits
held therein or credited thereto from any person other than the undersigned
unless otherwise ordered by a court of competent jurisdiction.

You
are instructed to deliver a copy of this notice by facsimile transmission to
[name of Lien Grantor].

Very truly yours,

	
   

  	
  CREDIT SUISSE, CAYMAN ISLANDS

  BRANCH,

  as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

cc: [name of Lien
Grantor]

 D-6EXECUTION COPY

                          SECURITIES EXCHANGE AGREEMENT

     SECURITIES  EXCHANGE  AGREEMENT  (the  "AGREEMENT"),  dated as of April 30,
2007,  by  and  among  Charys  Holding  Company,  Inc.  (the  "COMPANY") and the
investors  listed  on the Schedule of Investors attached hereto (individually, a
"INVESTOR"  and  collectively,  the  "INVESTORS").

                                    WHEREAS:

     A.     The  Company  and  each  Investor  is  executing and delivering this
Agreement  in  reliance upon the exemption from securities registration afforded
by  Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and
Rule  506  of  Regulation D ("REGULATION D") as promulgated by the United States
Securities  and  Exchange  Commission  (the  "SEC")  under  the  1933  Act.

     B.     In  exchange  for  refinancing  the  shares  of  Series D Cumulative
Preferred Stock in the Company set forth opposite such Investor's name in column
(4)  on  the  Schedule  of Investors, the Company has authorized the issuance of
subordinated  unsecured  convertible  notes  of the Company in substantially the
form attached hereto as Exhibit A (together with any convertible notes issued in
                        ---------
replacement  thereof  in  accordance with the terms thereof, the "NOTES"), which
Notes shall be convertible into the Company's common stock, par value $0.001 per
share  (the  "COMMON  STOCK"),  in  accordance  with  the  terms  of  the Notes.

     C.     Each Investor wishes to exchange and the Company wishes to exchange,
upon the terms and conditions stated in this Agreement, that aggregate principal
amount  of  Notes  set  forth opposite such Investor's name in column (3) on the
Schedule  of Investors (which aggregate principal amount for all Investors shall
be  $15,037,278  and  the  shares  of  Common  Stock  into  which such Notes are
convertible  being  referred  to herein as the "CONVERSION SHARES"), in exchange
for  such number of Series D Cumulative Preferred Stock in the Company as is set
forth  opposite  such  Buyer's  name in column (4) on the Schedule of Investors.

     D.     The  Company and Buyer intend that the aforementioned exchange shall
be  in  accordance  with the requirements of Rule 144(d)(3) of the 1933 Act such
that  the  Notes  shall  be deemed to have been acquired at the same time as the
Series  D  Cumulative  Preferred  Stock in the Company surrendered in connection
with  the  exchange.

     E.     In  the event of certain defaults with respect to payments under the
Notes,  the  Company  shall  issue  warrants  in substantially the form attached
hereto  as  Exhibit B (the "DEFAULT WARRANTS"), to acquire that number of shares
            ---------
of  Common  Stock  as  provided  in  the  Notes  (the "DEFAULT WARRANT SHARES").

     F.     Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS
                                             ---------
AGREEMENT"),  pursuant  to  which  the  Company  has  agreed  to provide certain
registration  rights  with  respect to the Registrable Securities (as defined in
the  Registration  Rights  Agreement),  under  the  1933  Act  and the rules and
regulations  promulgated  thereunder,  and  applicable  state  securities  laws.

     G.     At the Closing, that certain Escrow Shares Escrow Agreement pursuant
to  which  the  Company  issued  and  delivered  to  Gottbetter  & Partners, LLP
8,666,666  shares  of  Common  Stock  as  "security  stock" shall be terminated.

     H.     Those certain warrants issued to the Investors on May 19, 2006 shall
continue  to  be  outstanding  following  the  Closing.

     I.     The  Notes,  the  Conversion  Shares,  the  Default Warrants and the
Default  Warrant Shares are collectively referred to herein as the "SECURITIES."

     NOW,  THEREFORE,  the  Company  and  each Investor hereby agree as follows:

<PAGE>
     1.     PURCHASE  AND  PLACECITYSALE  OF  NOTES.

     (a)     Amount.  Subject  to the satisfaction (or waiver) of the conditions
             ------
set  forth  in Sections 6 and 7 below, the Company shall issue to each Investor,
and  each  Investor  severally,  but  not  jointly,  agrees to exchange with the
Company  on the Closing Date (as defined below), a principal amount of Notes, as
is  set  forth  opposite  such  Investor's name in column (3) on the Schedule of
Investors.

     (b)     Closing.  The  closing (the "CLOSING") of the purchase of the Notes
             -------
by  the Investors shall occur at the offices of McDermott, Will & Emery LLP, 340
Madison Avenue, New York, New York 10173.  The date and time of the Closing (the
"CLOSING  DATE")  shall  be  10:00 a.m., New York City time, on the date hereof,
subject to the notification of satisfaction (or waiver) of the conditions to the
Closing  set  forth in Sections 6 and 7 below (or such later date as is mutually
agreed  to  by  the  Company  and each Investor).  As used herein "Business Day"
means  any  day  other  than a Saturday, Sunday or other day on which commercial
banks  in  The  City  of  New  York  are authorized or required by law to remain
closed.

     (c)     Exchange  Consideration.  The  aggregate exchange consideration for
             -----------------------
the  Notes  to be received by each Investor (the "Exchange Consideration") shall
be  the  number  of shares of Series D Cumulative Preferred Stock in the Company
set  forth  opposite  such  Investor's  name  in  column  (4) on the Schedule of
Investors.

     (d)     Exchange  of  Shares.  On the Closing Date, (A) each Investor shall
             --------------------
deliver  its  portion of the Exchange Consideration to the Company for the Notes
to  be  issued  to  such  Investor  at  the Closing, by delivery of certificates
representing  such  number of Series D Cumulative Preferred Stock in the Company
as  is  set forth opposite such Investor's name in column (4) on the Schedule of
Investors  (the "SERIES D CUMULATIVE PREFERRED CERTIFICATES"), duly endorsed (or
accompanied  by  duly executed stock powers) for transfer to the Company and (B)
the  Company  shall deliver to each Investor the Notes (in the principal amounts
as  is  set forth opposite such Investor's name in column (3) on the Schedule of
Investors),  each  duly  executed on behalf of the Company and registered in the
name  of  such  Investor  or  its  designee.

     2.     REPRESENTATIONS  AND  WARRANTIES.

     Each  Investor  represents  and  warrants with respect to only itself that:

     (a)     Organization;  Authority.  Such  Investor  is  an  entity  duly
             ------------------------
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization with the requisite power and authority to enter
into  and  to  consummate  the  transactions  contemplated  by  the  Transaction
Documents  (as  defined below) to which it is a party and otherwise to carry out
its  obligations  hereunder  and  thereunder.

     (b)     No Public Sale or Distribution.  Such Investor is (i) acquiring the
             ------------------------------
Notes  and,  if  applicable,  the  Default Warrants, (ii) upon conversion of the
Notes  will  acquire  the  Conversion  Shares,  and  (iii),  if applicable, upon
exercise  of  the  Default  Warrants will acquire the Default Warrant Shares, in
each  case,  for  its  own account and not with a view towards, or for resale in
connection  with,  the  public  sale or distribution thereof, except pursuant to
sales  registered  or  exempted  under  the 1933 Act; provided, however, that by
making  the  representations herein, such Investor does not agree to hold any of
the  Securities for any minimum or other specific term and reserves the right to
dispose  of  the  Securities  at  any  time  in accordance with or pursuant to a
registration  statement or an exemption under the 1933 Act. Such Investor is not
a broker-dealer registered, or required to be registered, with the SEC under the
1934  Act.  Such  Investor is acquiring the Securities hereunder in the ordinary
course  of its business.  Such Investor does not presently have any agreement or
understanding,  directly or indirectly, with any Person to distribute any of the
Securities.

     (c)     Accredited  Investor  Status.  Such  Investor  is  an  "accredited
             ----------------------------
investor"  as  that  term  is  defined  in  Rule  501(a)  of  Regulation  D.

     (d)     Reliance  on  Exemptions.  Such  Investor  understands  that  the
             ------------------------
Securities  are  being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such  Investor's  compliance  with,

                                     -2-
<PAGE>
the  representations, warranties, agreements, acknowledgments and understandings
of such Investor set forth herein in order to determine the availability of such
exemptions  and  the  eligibility  of  such  Investor to acquire the Securities.

     (e)     Information.  Such  Investor  and  its  advisors, if any, have been
             -----------
furnished  with  all materials relating to the business, finances and operations
of  the  Company  and materials relating to the transactions contemplated hereby
which  have been requested by such Investor.  Such Investor and its advisors, if
any,  have  been  afforded  the  opportunity  to  ask  questions of the Company.
Neither  such  inquiries nor any other due diligence investigations conducted by
such  Investor  or  its  advisors,  if any, or its representatives shall modify,
amend  or  affect such Investor's right to rely on the Company's representations
and  warranties contained herein.  Such Investor understands that its investment
in the Securities involves a high degree of risk.  Such Investor has sought such
accounting,  legal  and  tax  advice  as  it has considered necessary to make an
informed  investment  decision with respect to its investment in the Securities.
Specifically,  such  Investor  has  been  provided  with  access  to  all of the
Company's  SEC  Documents  (as  defined below), including the following: (i) the
Company's  annual  report  to  stockholders  for the fiscal year ended April 30,
2006,  and  the  definitive proxy statement filed in connection with that annual
report;  (ii) the information contained in an annual report on Form 10-KSB under
the 1934 Act for the fiscal year ended April 30, 2006; and (iii) the information
contained  in any reports or documents required to be filed by the Company under
Sections  13(a),  14(a), 14(c), and 15(d) of the 1934 Act since the distribution
or filing of the reports specified above.  As used herein, "SEC Documents" means
all reports, schedules, exhibits, forms, statements and other documents required
to  be  filed by the Company with the SEC pursuant to the reporting requirements
of  the  1934  Act  (including  documents  incorporated  by  reference therein),
including  the registration statement filed by the Company on Form SB-2 on April
30,  2007 and any other registration statements filed by the Company pursuant to
the  1933  Act.

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

     (g)     Transfer  or  Resale.  Such  Investor  understands  that  except as
             --------------------
provided  in the Registration Rights Agreement: (i) the Securities have not been
and  are  not  being registered under the 1933 Act or any state securities laws,
and  may  not  be  offered  for  sale,  sold, assigned or transferred unless (A)
subsequently  registered  thereunder,  (B) such Investor shall have delivered to
the Company an opinion of counsel, in a generally acceptable form, to the effect
that  such  Securities to be sold, assigned or transferred may be sold, assigned
or  transferred  pursuant  to  an  exemption from such registration, or (C) such
Investor provides the Company with reasonable assurance that such Securities can
be  sold,  assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under  the  1933  Act,  as  amended (or a successor rule thereto) (collectively,
"RULE 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be
made  only  in accordance with the terms of Rule 144 and further, if Rule 144 is
not  applicable,  any  resale of the Securities under circumstances in which the
seller  (or  the  Person  (as  defined in Section 3(s)) through whom the sale is
made)  may  be  deemed to be an underwriter (as that term is defined in the 1933
Act)  may require compliance with some other exemption under the 1933 Act or the
rules  and  regulations of the SEC thereunder; and (iii) neither the Company nor
any  other  Person  is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of  any exemption thereunder. The Securities may be pledged in connection with a
bona  fide  margin account or other loan or financing arrangement secured by the
Securities  and  such pledge of Securities shall not be deemed to be a transfer,
sale  or  assignment  of  the  Securities hereunder, and no Investor effecting a
pledge  of  Securities  shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or  any  other  Transaction  Document  (as  defined in Section 3(b)), including,
without  limitation,  this  Section  2(g).

     (h)     Legends.  Such  Investor understands that the certificates or other
             -------
instruments representing the Notes and, if applicable, the Default Warrants and,
until  such  time as the resale of the Conversion Shares and the Default Warrant
Shares  have  been  registered  under  the  1933  Act  as  contemplated  by  the
Registration  Rights  Agreement,  the  stock  certificates  representing  the
Conversion  Shares  and  the  Default Warrant Shares, except as set forth below,
shall  bear  any  legend  as  required by the "blue sky" laws of any state and a
restrictive  legend  in  substantially  the  following form (and a stop-transfer
order  may  be  placed  against  transfer  of  such  stock  certificates):

     [NEITHER  THE  ISSUANCE  AND  SALE  OF  THE  SECURITIES REPRESENTED BY THIS
CERTIFICATE  NOR  THE  SECURITIES  INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]

                                     -3-
<PAGE>
[EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN]  REGISTERED  UNDER  THE  SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE  SECURITIES  LAWS.  THE  SECURITIES  MAY  NOT  BE  OFFERED FOR SALE, SOLD,
TRANSFERRED  OR  ASSIGNED  (I)  IN  THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT  FOR  THE  SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B)  AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT  REQUIRED  UNDER  SAID  ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR 144A
UNDER  SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION  WITH  A  BONA  FIDE  MARGIN  ACCOUNT  OR  OTHER  LOAN  OR  FINANCING
ARRANGEMENT  SECURED  BY  THE  SECURITIES.

     The  legend  set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped,  if,  unless  otherwise  required  by  state  securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a  sale,  assignment or other transfer, such holder provides the Company with an
opinion  of  counsel,  in  a  generally acceptable form, to the effect that such
sale,  assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the  Company with reasonable assurance that the Securities can be sold, assigned
or  transferred  pursuant  to Rule 144 or Rule 144A.  The Company shall bear all
fees  and  expenses related to the removal of the legend and issuance of any new
unlegended  Securities.

     (i)     Validity;  Enforcement.  This Agreement and the Registration Rights
             ----------------------
Agreement  have  been  duly  and  validly  authorized, executed and delivered on
behalf  of  such  Investor  and  shall  constitute  the legal, valid and binding
obligations  of  such  Investor  enforceable against such Investor in accordance
with  their  respective  terms,  except as such enforceability may be limited by
general  principles  of  equity  or  applicable  bankruptcy,  insolvency,
reorganization,  moratorium,  liquidation and other similar laws relating to, or
affecting  generally,  the  enforcement  of  applicable  creditors'  rights  and
remedies.

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

     (k)     Residency.  Such  Investor  is  a  resident  of  that  jurisdiction
             ---------
specified  below  its  address  on  the  Schedule  of  Investors.

     (l)     General  Solicitation.  No Investor is 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.

     3.     REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.

     The  Company  represents and warrants to each of the Investors that, except
as  otherwise  set  forth  in  the SEC Documents or otherwise on the schedule of
exceptions  delivered  to the Investors in connection with the execution of this
Agreement  (the  "SCHEDULES"):

     (a)     Organization  and  Qualification.   The  Company  and  its
             --------------------------------
"Subsidiaries"  (which for purposes of this Agreement means any joint venture or
any  entity  in which the Company, directly or indirectly, owns capital stock or
holds  an  equity  or  similar interest) are entities duly organized and validly
existing  in  good standing under the laws of the jurisdiction in which they are
formed,  and  have the requisite power and authority to own their properties and
to  carry on their business as now being conducted.  Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing  in every jurisdiction in which its ownership of property or the nature
of  the  business  conducted by it makes such qualification necessary, except to
the  extent  that  the  failure  to  be

                                     -4-
<PAGE>
so  qualified  or  be in good standing would not have a Material Adverse Effect.
As  used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect  on  the business, properties, assets, operations, results of operations,
condition  (financial  or  otherwise)  or  prospects  of  the  Company  and  its
Subsidiaries,  both  taken as a whole and individually as to any Subsidiary that
is  a  Significant  Subsidiary  (as  defined  in  Regulation  S-X),  or  on  the
transactions  contemplated  hereby and the other Transaction Documents or by the
agreements  and  instruments  to  be  entered  into  in  connection  herewith or
therewith,  or  on  the  authority  or  ability  of  the  Company to perform its
obligations under the Transaction Documents (as defined below).  The Company has
no  Subsidiaries  except  as  set  forth  on  Schedule  3(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, except for Permitted Liens (as
defined  in  the  Notes),  and  all the issued and outstanding shares of capital
stock  of  each Subsidiary are validly issued and are fully paid, non-assessable
and  free  of  preemptive  and  similar  rights  to  subscribe  for  or purchase
securities.  For  purposes  of this Agreement, "Lien" means, with respect to any
property,  any  mortgage,  pledge, hypothecation, assignment, security interest,
tax  lien,  charge,  or  other  lien,  easement  or  encumbrance.

     (b)     Authorization;  Enforcement;  Validity.  The  Company  has  the
             --------------------------------------
requisite  corporate  power  and  authority  to  enter  into  and  perform  its
obligations  under  this  Agreement,  if  applicable,  the Default Warrants, the
Registration  Rights  Agreement and each of the other agreements entered into by
the  parties  hereto  in  connection  with the transactions contemplated by this
Agreement  (collectively,  the  "TRANSACTION  DOCUMENTS")  and  to  issue  the
Securities  in  accordance with the terms hereof and thereof.  The execution and
delivery  of  this  Agreement and the other Transaction Documents by the Company
and  the consummation by the Company of the transactions contemplated hereby and
thereby,  including,  without  limitation,  the  issuance  of  the Notes and the
reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion  of  the  Notes,  the  issuance  of  the  Default  Warrants  and  the
reservation  for  issuance  and  issuance of the Default Warrant Shares issuable
upon  exercise  of  the  Default  Warrants,  have  been  duly  authorized by the
Company's  Board  of Directors and (other than the filing with the SEC of one or
more  Registration  Statements  in  accordance  with  the  requirements  of  the
Registration  Rights  Agreement  and any other filings as may be required by any
state  securities  agencies)  no  further  filing,  consent, or authorization is
required  by  the  Company,  its  Board  of  Directors or its stockholders. This
Agreement  and  the  other Transaction Documents of even date herewith have been
duly  executed and delivered by the Company, and constitute the legal, valid and
binding  obligations  of  the  Company,  enforceable  against  the  Company  in
accordance  with  their  respective  terms, except as such enforceability may be
limited  by  general  principles of equity or applicable bankruptcy, insolvency,
reorganization,  moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting  generally,  the  enforcement  of  applicable  creditors'  rights  and
remedies  and  except  as  rights  to indemnification and to contribution may be
limited  by  federal  or  state  securities  law.

     (c)     Issuance  of  Securities.  The  issuance  of  the  Notes  and,  if
             ------------------------
applicable,  the  Default  Warrants  are  duly  authorized  and upon issuance in
accordance  with  the  terms of the Transaction Documents shall be free from all
taxes,  liens and charges with respect to the issue thereof.  As of the Closing,
the  Company shall have reserved from its duly authorized capital stock not less
than  130%  of  the sum of the maximum number of shares of Common Stock issuable
upon conversion of the Notes (without taking into account any limitations on the
conversion  of the Notes set forth in the Notes.  Upon issuance or conversion in
accordance  with  the Notes or exercise in accordance with the Default Warrants,
as  the  case  may  be,  the  Conversion  Shares and the Default Warrant Shares,
respectively, will be validly issued, fully paid and nonassessable and free from
all  preemptive  or similar rights, taxes, liens and charges with respect to the
issue  thereof,  with  the  holders  being  entitled to all rights accorded to a
holder  of  Common  Stock.  Subject to the representations and warranties of the
Investors  in  this  Agreement,  the  offer  and  issuance by the Company of the
Securities  is  exempt  from  registration  under  the  1933  Act.

     (d)     No  Conflicts.  The  execution,  delivery  and  performance of this
             -------------
Agreement  and  the  other  Transaction  Documents  by  the  Company  and  the
consummation  by the Company of the transactions contemplated hereby and thereby
(including,  without  limitation,  the issuance of the Notes, if applicable, the
Default  Warrants, and reservation for issuance of the Conversion Shares and the
Default Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation  (as defined in Section 3(r)) of the Company or Bylaws (as defined
in  Section  3(r)) of the Company or (ii) conflict with, or constitute a default
(or  an event which with notice or lapse of time or both would become a default)
under,  or  give to others any rights of termination, amendment, acceleration or
cancellation  of, any agreement, indenture or instrument to which the Company or
any  of its Subsidiaries is a party, except to the extent such conflict, default
or termination right would not reasonably be expected to have a Material Adverse
Effect,  or  (iii)  result  in  a violation of any law, rule, regulation, order,
judgment  or  decree  (including  federal  and  state  securities

                                     -5-
<PAGE>
laws  and  regulations  and  the  rules  and regulations of the Over-The-Counter
Bulletin Board of the NASD (the "PRINCIPAL MARKET") applicable to the Company or
any  of its Subsidiaries or by which any property or asset of the Company or any
of  its  Subsidiaries is bound or affected except, in the case of clause (ii) or
(iii)  above,  to the extent such violations would not reasonably be expected to
have  a  Material  Adverse  Effect.

     (e)     Consents.  The  Company  is  not  required  to  obtain any consent,
             --------
authorization  or  order of, or make any filing or registration with, any court,
governmental  agency  or  any  regulatory or self-regulatory agency or any other
Person  in  order  for  it to execute, deliver or perform any of its obligations
under  or contemplated by this Agreement and the other Transaction Documents, in
each  case  in  accordance  with  the  terms  hereof  or thereof.  All consents,
authorizations,  orders, filings and registrations which the Company is required
to  obtain  pursuant to the preceding sentence have been obtained or effected on
or prior to the Closing Date or as may be otherwise permitted hereunder, and the
Company is unaware of any facts or circumstances which might prevent the Company
from  obtaining  or  effecting  any  of the registration, application or filings
pursuant  to  the  preceding  sentence.

     (f)     Acknowledgment  Regarding  Investors'  Purchase of Securities.  The
             -------------------------------------------------------------
Company  acknowledges  and  agrees  that  each  Investor is acting solely in the
capacity  of  an  arm's-length  purchaser with respect to this Agreement and the
other Transaction Documents and the transactions contemplated hereby and thereby
and  that  no  Investor  is  (i)  an officer or director of the Company, (ii) an
"affiliate"  of  the Company or any of its Subsidiaries (as defined in Rule 144)
or  (iii)  to its knowledge, a "beneficial owner" of more than 10% of the shares
of  Common  Stock  (as  defined  for  purposes  of  Rule 13d-3 of the Securities
Exchange  Act  of  1934,  as  amended  (the  "1934  ACT")).  The Company further
acknowledges  that  no Investor is acting as a financial advisor or fiduciary of
the Company or any of its Subsidiaries (or in any similar capacity) with respect
to  the  Transaction  Documents  and  the  transactions  contemplated hereby and
thereby,  and  any  advice  given by a Investor or any of its representatives or
agents in connection with this Agreement and the other Transaction Documents and
the  transactions  contemplated  hereby and thereby is merely incidental to such
Investor's  purchase  of  the Securities. The Company further represents to each
Investor  that the Company's decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation by the
Company  and  its  representatives.

     (g)     No  General  Solicitation;  Placement  Agent's  Fees.  Neither  the
             ----------------------------------------------------
Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its
or  their  behalf,  has  engaged  in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale  of the Securities. The Company shall be responsible for the payment of any
placement  agent's fees, financial advisory fees, or brokers' commissions (other
than  for persons engaged by any Investor or its investment advisor) relating to
or  arising  out of the transactions contemplated hereby. The Company shall pay,
and  hold  each  Investor  harmless  against,  any  liability,  loss  or expense
(including,  without  limitation,  attorneys'  fees  and out-of-pocket expenses)
arising in connection with any such claim.  The Company acknowledges that it has
engaged  Gottbetter  Capital  Finance,  LLC  to  structure  the  transaction  in
connection with the exchange of the Securities.  The Company has not engaged any
placement  agent  or  other  agent  in  connection  with  the  exchange  of  the
Securities.

     (h)     No Integrated Offering.  None of the Company, its Subsidiaries, any
             ----------------------
of  their  affiliates, or any Person acting on its or their behalf has, directly
or  indirectly, made any offers or sales of any security or solicited any offers
to  buy any security, under circumstances that would require registration of any
of the Securities under the 1933 Act or cause this offering of the Securities to
be  integrated  with prior offerings by the Company for purposes of the 1933 Act
or  any  applicable  stockholder  approval  provisions,  including,  without
limitation,  under  the  rules  and  regulations  of  any  exchange or automated
quotation  system  on  which  any of the securities of the Company are listed or
designated.  None  of  the  Company,  its  Subsidiaries, their affiliates or any
Person  acting  on its or their behalf will take any action or steps referred to
in  the  preceding  sentence  that  would  require  registration  of  any of the
Securities  under  the  1933  Act  or cause the offering of the Securities to be
integrated  with  other  offerings.

     (i)     Dilutive Effect.  The Company understands and acknowledges that the
             ---------------
number of Conversion Shares and/or Default Warrant Shares issuable upon exercise
of  the  Notes  and/or Default Warrants, as applicable, will increase in certain
circumstances.  The  Company  further  acknowledges that its obligation to issue
Conversion Shares upon conversion of the Notes in accordance with this Agreement
and  its  obligation  to  issue  the Default Warrant Shares upon exercise of the
Default  Warrants  in  accordance with the Notes and the Default Warrants is, in
each  case,  absolute  and  unconditional regardless of the dilutive effect that
such  issuance  may have on the ownership interests of other stockholders of the
Company.

                                     -6-
<PAGE>
     (j)     Application of Takeover Protections; Rights Agreement.  The Company
             -----------------------------------------------------
and  its board of directors have taken all necessary action, if any, in order to
render  inapplicable any control share acquisition, business combination, poison
pill  (including  any  distribution  under  a rights agreement) or other similar
anti-takeover  provision  under  the Certificate of Incorporation or the laws of
the jurisdiction of its incorporation which is or could become applicable to any
Investor  as  a  result  of  the  transactions  contemplated  by this Agreement,
including,  without limitation, the Company's issuance of the Securities and any
Investor's  ownership  of  the  Securities.  The  Company  has  not  adopted  a
stockholder  rights  plan  or  similar  arrangement relating to accumulations of
beneficial  ownership  of  Common  Stock  or a change in control of the Company.

     (k)     SEC  Documents;  Financial  Statements.  Except as disclosed in the
             --------------------------------------
SEC  Documents  or  on Schedule 3(k), during the two (2) years prior to the date
hereof,  the Company has filed all SEC Documents required to be filed by it with
the  SEC.  The  Company  has  delivered  to  the  Investors  or their respective
representatives  true,  correct and complete copies of each of the SEC Documents
not  available on the EDGAR system that have been requested by each Investor. As
of  their  respective dates, the SEC Documents complied in all material respects
with  the  requirements of the 1934 Act and the rules and regulations of the SEC
promulgated  thereunder  applicable  to  the  SEC Documents, and none of the SEC
Documents,  at  the  time  they  were  filed  with the SEC, contained any untrue
statement  of a material fact or omitted to state a material fact required to be
stated  therein  or  necessary  in  order to make the statements therein, in the
light  of  the  circumstances  under  which  they were made, not misleading. The
financial statements of the Company included in the SEC Documents complied as to
form  in  all  material respects with applicable accounting requirements and the
published  rules and regulations of the SEC with respect thereto as in effect as
of  the  time  of  filing.  Such  financial  statements  have  been  prepared in
accordance  with generally accepted accounting principles, consistently applied,
during  the  periods  involved (except (i) as may be otherwise indicated in such
financial  statements  or  the  notes  thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position  of  the  Company  as  of  the  dates  thereof  and  the results of its
operations  and  cash  flows for the periods then ended (subject, in the case of
unaudited  statements,  to  normal  year-end  audit  adjustments).  No  other
information  provided  by  or on behalf of the Company to the Investors which is
not  included  in  the SEC Documents, including, without limitation, information
referred  to in Section 2(e) of this Agreement, contains any untrue statement of
a  material  fact or omits to state any material fact necessary in order to make
the  statements  therein  not misleading, in the light of the circumstance under
which  they  are  or  were  made.

     (l)     Absence  of  Certain  Changes.  Except  as  disclosed  in  the  SEC
             -----------------------------
Documents  filed  at  least  three  Business  Days  prior  to  the  date of this
Agreement,  since  the  date  of  the  Company's  most  recent audited financial
statements contained in a Form 10-KSB, there has been no material adverse change
and  no  material  adverse  development  in  the  business,  assets, properties,
operations,  condition  (financial  or  otherwise),  results  of  operations  or
prospects  of  the  Company or its Subsidiaries. Since the date of the Company's
most recent audited financial statements contained in a Form 10-KSB, neither the
Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii)
sold any assets, individually or in the aggregate, in excess of $500,000 outside
of  the  ordinary  course  of  business  or  (iii)  had  capital  expenditures,
individually  or  in  the aggregate, in excess of $500,000.  Neither the Company
nor  any  of its Subsidiaries has taken any steps to seek protection pursuant to
any  bankruptcy law nor does the Company have any knowledge or reason to believe
that  its creditors intend to initiate involuntary bankruptcy proceedings or any
actual  knowledge  of  any fact which would reasonably lead a creditor to do so.
The  Company,  individually  and  on a consolidated basis, is not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at  the Closing, will not be Insolvent (as defined below).  For purposes of this
Section  3(l),  "Insolvent"  means  (i)  the  present fair saleable value of the
Company's  and  its Subsidiaries' assets is less than the amount required to pay
the  Company's  and  its Subsidiaries' total Indebtedness (as defined in Section
3(s)),  (ii)  the Company and its Subsidiaries are unable to pay their debts and
liabilities,  subordinated,  contingent  or  otherwise,  as  such  debts  and
liabilities  become  absolute  and  matured  or  (iii)  the  Company  and  its
Subsidiaries intend to incur or believe that they will incur debts that would be
beyond  their  ability  to  pay  as  such  debts  mature or (iv) the Company has
unreasonably  small  capital  with  which to conduct the business in which it is
engaged  as  such  business  is  now  conducted and is proposed to be conducted.

     (m)     No  Undisclosed Events, Liabilities, Developments or Circumstances.
             ------------------------------------------------------------------
No  event,  liability, development or circumstance has occurred or exists, or is
contemplated  to  occur  with  respect to the Company, its Subsidiaries or their
respective  business,  properties, prospects, operations or financial condition,
that  would  be  required  to  be  disclosed  by  the  Company  under applicable
securities  laws  on  a  registration  statement  on  Form  S-1  or

                                     -7-
<PAGE>
any other applicable form filed with the SEC relating to an issuance and sale by
the  Company  of  its  Common  Stock  and which has not been publicly announced.

     (n)     Conduct  of  Business; Regulatory Permits.  Neither the Company nor
             -----------------------------------------
any  of  its Subsidiaries is in violation of any term of or in default under its
Certificate  of  Incorporation  or  Bylaws  or  their  organizational charter or
certificate  of  incorporation  or  any  certificate  of  designation or bylaws,
respectively.  Neither  the  Company nor any of its Subsidiaries is in violation
of  any  judgment,  decree  or  order  or  any  law, statute, ordinance, rule or
regulation  applicable  to  the  Company  or  its  Subsidiaries, and neither the
Company  nor  any  of  its  Subsidiaries  is,  or  will conduct its business, in
violation  of  any  of the foregoing, except for possible violations which would
not,  individually or in the aggregate, have a Material Adverse Effect.  Without
limiting the generality of the foregoing, the Company is not in violation of any
of  the  rules,  regulations  or requirements of the Principal Market and has no
knowledge of any facts or circumstances which would reasonably lead to delisting
or  suspension  of  the  Common Stock by the Principal Market in the foreseeable
future.  During  the two (2) years prior to the date hereof, except as disclosed
in  the  SEC  Documents  filed at least three Business Days prior to the date of
this  Agreement,  (i)  the Common Stock has been designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written  or  oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market.  The Company and its
Subsidiaries  possess all certificates, authorizations and permits issued by the
appropriate  regulatory  authorities  necessary  to  conduct  their  respective
businesses,  except  where  the  failure  to  possess  such  certificates,
authorizations  or  permits  would not have, individually or in the aggregate, a
Material  Adverse  Effect,  and  neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any  such  certificate,  authorization  or  permit.

     (o)     Foreign  Corrupt  Practices.  Neither  the  Company  nor any of its
             ---------------------------
Subsidiaries  nor  any director, officer, agent, employee or other Person acting
on  behalf  of  the Company or any of its Subsidiaries has, in the course of its
actions  for,  or  on behalf of, the Company or any of its Subsidiaries (i) used
any  corporate funds for any unlawful contribution, gift, entertainment or other
unlawful  expenses  relating  to  political  activity;  (ii)  made any direct or
indirect  unlawful  payment  to  any  foreign or domestic government official or
employee  from  corporate  funds;  (iii)  violated  or  is  in  violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made  any  unlawful  bribe, rebate, payoff, influence payment, kickback or other
unlawful  payment  to  any  foreign or domestic government official or employee.

     (p)     Sarbanes-Oxley  Act.  The Company is in compliance with any and all
             -------------------
applicable  requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by  the  SEC  thereunder  that  are  effective  as  of  the  date  hereof.

     (q)     Transactions  with  Affiliates.  Except  as  set  forth  on the SEC
             ------------------------------
Documents  filed  at  least  three  Business  Days  prior  to  the  date of this
Agreement, or in Schedules to this Agreement, none of the officers, directors or
employees  of the Company or any of its Subsidiaries is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course  services  as  employees, officers or 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 such officer, director or employee or, to the
knowledge  of  the  Company  or  any  of  its  Subsidiaries,  any  corporation,
partnership,  trust  or  other  entity  in  which any such officer, director, or
employee  has  a  substantial  interest  or  is an officer, director, trustee or
partner.

     (r)     Equity Capitalization.  As of  February  28,  2007,  the authorized
             ---------------------
capital stock of the Company consists of (i) 300,000,000 shares of Common Stock,
of  which  as  of  such  date,  40,264,710  were  issued  and outstanding, up to
8,000,000  shares  were  reserved  for  issuance pursuant to the Company's stock
option  and  purchase  plans  and  223,300,000 shares were reserved for issuance
pursuant to securities (including the Notes) exercisable or exchangeable for, or
convertible  into, shares of Common Stock and (ii) 5,000,000 shares of preferred
stock, par value $0.001 per share, of which as of such date, 1,000,000 shares of
Series A Preferred Stock were issued and outstanding, 500,000 shares of Series C
Preferred  Stock  were  issued  and  outstanding,  and  900  shares  of Series D
Preferred  Stock  were  issued  and outstanding.  All of such outstanding shares
have  been,  or  upon  issuance  will  be, validly issued and are fully paid and
nonassessable.  Except  as disclosed on Schedule 3(m) or as set forth in the SEC
Documents  filed at least three Business Days prior to the date hereof, (i) none
of  the  Company's  capital  stock  is

                                     -8-
<PAGE>
subject to any preemptive rights or any similar rights, or any Liens suffered or
permitted  by  the  Company;  (ii)  there  are no outstanding options, warrants,
scrip,  rights to subscribe to, calls or commitments of any character whatsoever
relating  to,  or  securities  or  rights  convertible  into,  or exercisable or
exchangeable  for,  any capital stock of the Company or any of its Subsidiaries,
or  contracts,  commitments, understandings or arrangements by which the Company
or  any  of  its Subsidiaries is or may become bound to issue additional capital
stock  of  the  Company  or any of its Subsidiaries or options, warrants, scrip,
rights  to  subscribe  to,  calls  or  commitments  of  any character whatsoever
relating  to,  or  securities  or  rights  convertible  into,  or exercisable or
exchangeable  for,  any capital stock of the Company or any of its Subsidiaries;
(iii)  there  are  no  outstanding  debt  securities,  notes,  credit  or  loan
agreements,  credit  facilities  or  other  agreements, documents or instruments
evidencing  Indebtedness  (as  defined  below)  of  the  Company  or  any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may become
bound;  (iv)  there  are  no  financing  statements  securing obligations in any
material  amounts,  either  singly or in the aggregate, filed in connection with
the  Company  or  any  of  its  Subsidiaries;  (v)  there  are  no agreements or
arrangements  under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except pursuant
to  the Registration Rights Agreement); (vi) there are no outstanding securities
or  instruments  of  the  Company  or  any of its Subsidiaries which contain any
redemption  or  similar  provisions,  and  there  are no contracts, commitments,
understandings  or  arrangements by which the Company or any of its Subsidiaries
is  or  may become bound to purchase, repurchase, retire or redeem a security of
the  Company  or  any  of  its  Subsidiaries;  (vii)  there are no securities or
instruments  containing  anti-dilution  or  similar  provisions  that  will  be
triggered  by  the transactions contemplated hereby; (viii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar  plan  or  agreement;  and (ix) the Company and its Subsidiaries have no
liabilities  or  obligations  required to be disclosed in such SEC Documents but
not  so  disclosed  in  such  SEC  Documents,  other  than those incurred in the
ordinary  course of the Company's or its Subsidiaries' respective businesses and
which,  individually  or  in  the aggregate, do not or would not have a Material
Adverse  Effect.  The  Company  has furnished to each Investor true, correct and
complete copies of the Company's Certificate of Incorporation, as amended and as
in  effect  on  the  date  hereof  (the "Certificate of Incorporation"), and the
Company's  Bylaws, as amended and as in effect on the date hereof (the "Bylaws")
not  available  on  the  EDGAR  system  if such Certificate of Incorporation and
Bylaws  have  been  requested  in  writing  by  such  Holder.  The  terms of all
securities  convertible  into,  or  exercisable  or  exchangeable for, shares of
Common  Stock  and the material rights of the holders thereof in respect thereto
are  disclosed in the SEC Documents that have been filed at least three Business
Days  prior  to  the  date  of  this  Agreement.

     (s)     Indebtedness  and Other Contracts.  Except as disclosed on Schedule
             ---------------------------------
3(s),  the SEC Documents filed at least three Business Days prior to the date of
this  Agreement,  or  any  of  the  other Schedules attached hereto, neither the
Company  nor  any  of  its Subsidiaries (i) has any outstanding Indebtedness (as
defined  below),  (ii)  is a party to any contract, agreement or instrument, the
violation  of  which,  or  default  under which, by the other party(ies) to such
contract,  agreement  or  instrument  would result in a Material Adverse Effect,
(iii)  is  in  violation  of  any  term  of or in default under (and no event or
circumstance  has  occurred  or  is  existing that, with the giving of notice or
passage  of  time,  or  both,  would constitute any such violation of or default
under)  any  contract,  agreement  or  instrument  relating to any Indebtedness,
except  where  such violations and defaults would not result, individually or in
the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement  or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse  Effect.  For  purposes  of  this  Agreement:  (x) "Indebtedness" of any
Person  means,  without duplication (A) all indebtedness for borrowed money, (B)
all  obligations issued, undertaken or assumed as the deferred purchase price of
property or services including (without limitation) capital leases in accordance
with generally accepted accounting principles (other than trade payables entered
into  in  the  ordinary  course  of  business), (C) all reimbursement or payment
obligations  with  respect  to letters of credit, surety bonds and other similar
instruments,  (D)  all  obligations  evidenced  by  notes,  bonds, debentures or
similar  instruments,  including  obligations  so  evidenced  and  incurred  in
connection  with  the  acquisition  of  property,  assets or businesses, (E) all
indebtedness  created  or  arising  under  any  conditional  sale or other title
retention  agreement, or incurred in connection with a financing, in either case
with  respect  to  any  property  or  assets  acquired with the proceeds of such
indebtedness  (even  though  the rights and remedies of the seller or bank under
such  agreement  in  the event of default are limited to repossession or sale of
such  property),  (F)  all  monetary  obligations  under  any leasing or similar
arrangement  which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by  (or  for  which  the  holder  of  such  Indebtedness  has an existing right,
contingent  or  otherwise, to be secured by) any Lien upon or in any property or
assets (including accounts and contract rights) owned by any Person, even though
the

                                     -9-
<PAGE>
Person  which  owns such assets or property has not assumed or become liable for
the  payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through  (G)  above;  (y)  "Contingent  Obligation" means, as to any Person, any
direct  or  indirect  liability,  contingent  or  otherwise, of that Person with
respect  to  any  Indebtedness,  lease,  dividend or other obligation of another
Person  if the primary purpose or intent of the Person incurring such liability,
or  the  primary  effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating  thereto  will  be complied with, or that the holders of such liability
will  be  protected (in whole or in part) against loss with respect thereto; and
(z)  "Person" means an individual, a limited liability company, a partnership, a
joint  venture,  a  corporation,  a  trust, an unincorporated organization and a
government  or  any  department  or  agency  thereof.

     (t)     Absence  of  Litigation.  Except  as disclosed on the SEC Documents
             -----------------------
filed  at  least three Business Days prior to the date of this Agreement, or any
of  the  other  Schedules attached hereto, there is no action, suit, proceeding,
inquiry  or  investigation  before or by the Principal Market, any court, public
board,  government  agency,  self-regulatory organization or body pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
of  its  Subsidiaries,  the Common Stock or any of the Company's Subsidiaries or
any of the Company's or its Subsidiaries' officers or directors which is outside
of  the ordinary course of business or individually or in the aggregate material
to  the  Company.

     (u)     Insurance.  The Company and each of its Subsidiaries are insured by
             ---------
insurers  of  recognized  financial responsibility against such losses and risks
and  in  such  amounts  as  management of the Company believes to be prudent and
customary  in  the  businesses  in  which  the  Company and its Subsidiaries are
engaged.  Neither  the  Company  nor  any  such  Subsidiary has been refused any
insurance  coverage  sought  or applied for and neither the Company nor any such
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  at  a  cost  that  would  not  have  a  Material  Adverse  Effect.

     (v)     Employee  Relations.
             -------------------

          (i)     Neither  the Company nor any of its Subsidiaries is a party to
any  collective  bargaining  agreement  or  employs  any member of a union.  The
Company  and  its Subsidiaries believe that their relations with their employees
are  good. No executive officer of the Company (as defined in Rule 501(f) of the
1933  Act)  or  any  of  its  Subsidiaries  has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or  otherwise  terminate  such officer's employment with the Company or any such
Subsidiary.  No  executive officer of the Company or any of its Subsidiaries is,
or  is  now  expected to be, in violation of any material term of any employment
contract,  confidentiality,  disclosure  or  proprietary  information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant,  and  the continued employment of each such executive officer does not
subject  the Company or any of its Subsidiaries to any liability with respect to
any  of  the  foregoing  matters.

          (ii)     The  Company  and its Subsidiaries are in compliance with all
federal,  state,  local  and  foreign  laws  and  regulations  respecting labor,
employment  and  employment  practices  and  benefits,  terms  and conditions of
employment  and  wages and hours, except where failure to be in compliance would
not,  either  individually or in the aggregate, reasonably be expected to result
in  a  Material  Adverse  Effect.

          (iii)     To the knowledge of the Company, no key employee or group of
employees  has  any  plans  to  terminate  employment  with  the  Company or any
Subsidiary.

     (w)     Title.  The  Company  and its Subsidiaries have good and marketable
             -----
title  in  fee  simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects  except  such as do not materially affect the value of such property and
do  not  interfere with the use made and proposed to be made of such property by
the  Company  and any of its Subsidiaries. Any real property and facilities held
under  lease  by  the  Company or any of its Subsidiaries are held by them under
valid,  subsisting  and  enforceable  leases  with  such  exceptions  as are not
material  and do not interfere with the use made and proposed to be made of such
property  and  facilities  by  the  Company  and  its  Subsidiaries.

                                      -10-
<PAGE>
     (x)     Intellectual Property Rights.  The Company and its Subsidiaries own
             ----------------------------
or  possess  adequate  rights  or  licenses  to use all trademarks, trade names,
service  marks,  service  mark  registrations,  service  names,  patents, patent
rights,  copyrights,  inventions,  licenses,  approvals,  governmental
authorizations,  trade  secrets  and  other  intellectual  property  rights
("INTELLECTUAL  PROPERTY  RIGHTS")  necessary  to  conduct  their  respective
businesses  as  now  conducted.  None  of  the  Company's  or  its Subsidiaries'
Intellectual  Property Rights have expired, terminated or been abandoned, or are
expected  to expire, terminate or be abandoned, within three years from the date
of  this  Agreement. The Company does not have any knowledge of any infringement
by  the  Company  or  any of its Subsidiaries of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or brought, or to the
knowledge  of  the  Company, being threatened, against the Company or any of its
existing Subsidiaries regarding its Intellectual Property Rights. The Company is
unaware  of  any  facts  or  circumstances  which  might give rise to any of the
foregoing  infringements  or claims, actions or proceedings. The Company and its
Subsidiaries  have  taken  reasonable  security measures to protect the secrecy,
confidentiality  and  value  of  all  of  their  Intellectual  Property  Rights.

     (y)     Environmental  Laws.  The  Company  and its Subsidiaries (i) are in
             -------------------
compliance  with  any  and all Environmental Laws (as hereinafter defined), (ii)
have  received  all  permits, licenses or other approvals required of them under
applicable  Environmental  Laws to conduct their respective businesses and (iii)
are  in  compliance with all terms and conditions of any such permit, license or
approval  where,  in  each  of  the  foregoing  clauses (i), (ii) and (iii), the
failure  to  so  comply could be reasonably expected to have, individually or in
the  aggregate,  a  Material Adverse Effect. The term "ENVIRONMENTAL LAWS" means
all federal, state, local or foreign laws relating to pollution or protection of
human  health  or  the  environment (including, without limitation, ambient air,
surface  water,  groundwater,  land  surface  or  subsurface strata), including,
without  limitation,  laws  relating  to  emissions,  discharges,  releases  or
threatened  releases  of  chemicals,  pollutants,  contaminants,  or  toxic  or
hazardous  substances  or  wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as  well  as  all  authorizations,  codes,  decrees,  demands or demand letters,
injunctions,  judgments,  licenses,  notices or notice letters, orders, permits,
plans  or  regulations  issued,  entered,  promulgated  or  approved thereunder.

     (z)     Subsidiary  Rights.  The Company or one of its Subsidiaries has the
             ------------------
unrestricted  right  to  vote, and (subject to limitations imposed by applicable
law)  to  receive  dividends and distributions on, all capital securities of its
Subsidiaries  as  owned  by  the  Company  or  such  Subsidiary.

     (aa)     Tax Status.  The Company and each of its Subsidiaries (i) has made
              ----------
or  filed  all  foreign,  federal  and  state  income and all other tax returns,
reports  and  declarations  required by any jurisdiction to which it is subject,
(ii)  has paid all taxes and other governmental assessments and charges that are
material  in  amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on  its  books  provision  reasonably  adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  Except  as disclosed on Schedule 3(aa), the SEC Documents filed at least
three  Business  Days  prior  to the date of this Agreement, or any of the other
Schedules  attached  hereto,  there  are  no unpaid taxes in any material amount
claimed  to be due by the taxing authority of any jurisdiction, and the officers
of  the  Company  know  of  no  basis  for  any  such  claim.

     (bb)     Internal Accounting and Disclosure Controls.  The Company and each
              -------------------------------------------
of  its  Subsidiaries  maintains  a  system  of  internal  accounting  controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance  with  management's  general  or  specific  authorizations,  (ii)
transactions  are  recorded  as  necessary  to  permit  preparation of financial
statements  in  conformity  with generally accepted accounting principles and to
maintain  asset  and  liability  accountability,  (iii)  access  to  assets  or
incurrence  of  liabilities  is  permitted  only in accordance with management's
general  or  specific  authorization  and  (iv)  the recorded accountability for
assets  and  liabilities is compared with the existing assets and liabilities at
reasonable  intervals  and  appropriate  action  is  taken  with  respect to any
difference.  The  Company  maintains disclosure controls and procedures (as such
term  is  defined  in  Rule  13a-14  under  the  1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that  it  files or submits under the 1934 Act is recorded, processed, summarized
and  reported,  within  the time periods specified in the rules and forms of the
SEC,  including,  without  limitation,  controls  and  procedures designed in to
ensure  that  information required to be disclosed by the Company in the reports
that  it  files or submits under the 1934 Act is accumulated and communicated to
the  Company's management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow timely

                                      -11-
<PAGE>
decisions  regarding  required disclosure. During the twelve months prior to the
date  hereof  neither  the Company nor any of its Subsidiaries have received any
notice  or correspondence from any accountant relating to any potential material
weakness  in  any  part  of  the  system  of internal accounting controls of the
Company  or  any  of  its  Subsidiaries.

     (cc)     Off  Balance  Sheet  Arrangements.  There  is  no  transaction,
              ---------------------------------
arrangement,  or  other  relationship  between  the  Company  or  any  of  its
Subsidiaries  and  an  unconsolidated  or other off balance sheet entity that is
required  to  be  disclosed by the Company in its 1934 Act filings and is not so
disclosed  or  that  otherwise  would  be  reasonably  likely to have a Material
Adverse  Effect.

     (dd)     Investment  Company  Status.  The  Company  is  not,  and  upon
              ---------------------------
consummation of the sale of the Securities will not be, an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are  defined  in  the  Investment  Company  Act  of  1940,  as  amended.

     (ee)     Transfer  Taxes.  On the Closing Date, all stock transfer or other
              ---------------
taxes  (other  than  income  or  similar taxes) which are required to be paid in
connection  with  the  sale  and transfer of the Securities to be issued to each
Investor hereunder will be, or will have been, fully paid or provided for by the
Company,  and  all  laws  imposing such taxes will be or will have been complied
with.

     (ff)     Acknowledgement  Regarding  Investors'  Trading  Activity.  It  is
              ---------------------------------------------------------
understood  and  acknowledged  by  the  Company  (i)  that  following the public
disclosure  of  the  transactions  contemplated by the Transaction Documents, in
accordance  with the terms thereof, none of the Investors have been asked by the
Company  or  its  Subsidiaries  to  agree,  nor has any Investor agreed with the
Company  or  its Subsidiaries, 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)
that any Investor, and counter parties in "derivative" transactions to which any
such  Investor  is a party, directly or indirectly, presently may have a "short"
position  in  the  Common  Stock which were established prior to such Investor's
knowledge  of  the  transactions  contemplated by the Transaction Documents, and
(iii)  that  each  Investor  shall not be deemed to have any affiliation with or
control over any arm's-length counterparty in any "derivative" transaction.  The
Company  further  understands  and  acknowledges  that  following  the  public
disclosure  of  the  transactions  contemplated by the Transaction Documents, in
accordance  with  the terms thereof, one or more Investors may engage in hedging
and/or trading activities at various times during the period that the Securities
are  outstanding,  including,  without  limitation,  during the periods that the
value  of  the  Conversion Shares and, if applicable, the Default Warrant Shares
deliverable with respect to Securities are being determined and (b) such hedging
and/or  trading  activities,  if  any,  can  reduce  the  value  of the existing
stockholders'  equity  interest  in  the  Company both at and after the time the
hedging and/or trading activities are being conducted.  The Company acknowledges
that  such  aforementioned hedging and/or trading activities do not constitute a
breach  of this Agreement, the Notes, if applicable, the Default Warrants or any
of  the  documents  executed  in  connection  herewith.

     (gg)     Registration Eligibility.  The Company is eligible to register the
              ------------------------
Conversion  Shares  and, if applicable, the Default Warrant Shares for resale by
the  Investors  using Form S-1 or any other available form promulgated under the
1933  Act.

     (hh)     Manipulation of Price.  The Company and its Subsidiaries have not,
              ---------------------
and  to  the  Company's  knowledge no one acting on their 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.

     (ii)     U.S.  Real  Property Holding Corporation.  The Company is not, nor
              ----------------------------------------
has  ever  been,  a U.S. real property holding corporation within the meaning of
Section  897  of  the Internal Revenue Code of 1986, as amended, and the Company
shall  so  certify  upon  Investor's  request.

                                      -12-
<PAGE>
     (jj)     Disclosure.  The  Company  confirms  that neither it nor any other
              ----------
Person acting on its behalf has provided any of the Investors or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute  material,  nonpublic  information.  The  Company  understands  and
confirms  that  each of the Investors will rely on the foregoing representations
in effecting transactions in securities of the Company.  All disclosure provided
to  the Investors regarding the Company and its Subsidiaries, their business and
the  transactions  contemplated  by  this  Agreement  and  the other Transaction
Documents, including the Schedules and Exhibits hereto and thereto, furnished by
or  on behalf of the Company 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  herein  or  therein, in the light of the
circumstances  under  which  they  were  made, not misleading.  No press release
issued  by  the  Company  or  its  Subsidiaries  during  the  twelve (12) months
preceding the date of this Agreement contained at the time of release 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 the
light  of the circumstances under which they are made, not misleading.  No event
or  circumstance  has occurred or information exists with respect to the Company
or  any  of  its  Subsidiaries  or  its  or their business, assets, liabilities,
properties, prospects, operations or conditions (financial or otherwise), which,
under  applicable  law,  rule  or  regulation,  requires public disclosure at or
before  the date hereof or announcement by the Company but which has not been so
publicly  announced  or  disclosed.

     (kk)     Ranking of Notes.  All existing Indebtedness of the Company or its
              ----------------
Subsidiaries  is  senior  to  or  ranks  pari  passu  with the Notes in right of
payment, whether in respect of payment of redemptions, interest, damages or upon
liquidation  or  dissolution  or  otherwise.  In  that  regard,  the  Investors
specifically  acknowledge  that  all  of  those certain 8.75% Senior Convertible
Notes  issued  February  16,  2007  in the principal amount of $175 million, and
issued  March  6,  2007  in the principal amount of $26.25 million in connection
with  the  issuance  of securities of the Company by McMahan Securities Co. L.P.
are  expressly  acknowledged  to  be  senior  to  the Notes in right of payment,
whether  in  respect  of  payment  of  redemptions,  interest,  damages  or upon
liquidation  or  dissolution  or  otherwise.

     4.     COVENANTS.

     (a)     Best  Efforts.  Each  party  shall  use its reasonable best efforts
             -------------
timely  to  satisfy  each of the conditions to be satisfied by it as provided in
Sections  6  and  7  of  this  Agreement.

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

     (c)     Reporting Status.  Until the date on which the Investors shall have
             ----------------
sold all the Conversion Shares and Default Warrant Shares, and none of the Notes
or  Default  Warrants is outstanding (the "REPORTING PERIOD"), the Company shall
timely  file  all reports required to be filed with the SEC pursuant to the 1934
Act,  and  the  Company  shall not terminate its status as an issuer required to
file  reports  under  the  1934  Act  even  if  the  1934  Act  or the rules and
regulations  thereunder  would  no  longer  require  or  otherwise  permit  such
termination.

     (d)     Intentionally  Omitted.
             ----------------------

     (e)     Financial Information.  The Company agrees to send the following to
             ---------------------
each  Investor  (as  defined  in  the  Registration Rights Agreement) during the
Reporting  Period  (i) unless the following are filed with the SEC through EDGAR
and  are  available  to  the  public  through  the  EDGAR system, within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual Reports
and  Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports
or  any  consolidated  balance  sheets,  income statements, stockholders' equity
statements  and/or  cash  flow  statements for any period other than annual, any
Current  Reports on Form 8-K and any registration statements (other than on Form
S-8)  or  amendments filed pursuant to the 1933 Act, (ii) on the same day as the

                                      -13-
<PAGE>
release thereof, facsimile copies of all press releases issued by the Company or
any  of  its Subsidiaries, and (iii) copies of any notices and other information
made  available  or  given  to  the  stockholders  of  the  Company  generally,
contemporaneously  with  the  making  available  or  giving  thereof  to  the
stockholders.

     (f)     Listing.  The  Company  shall promptly secure the listing of all of
             -------
the  Registrable  Securities  (as  defined in the Registration Rights Agreement)
upon  each  national securities exchange and automated quotation system, if any,
upon  which  the  Common  Stock  is  then  listed (subject to official notice of
issuance)  and  shall  maintain  such listing of all Registrable Securities from
time  to  time  issuable  under  the  terms of the Transaction Documents on such
exchange or automated quotation system or an Eligible Market.  The Company shall
maintain the Common Stock's authorization for quotation on the Principal Market.
Neither  the  Company  nor  any  of its Subsidiaries shall take any action which
would  be  reasonably  expected  to result in the delisting or suspension of the
Common Stock on an Eligible Market.  The Company shall pay all fees and expenses
in  connection  with  satisfying  its  obligations  under  this  Section  4(f).

     (g)     Fees.  The  Company  shall  reimburse Castlerigg Master Investments
             ----
Ltd.,  or its designee(s), and  Gottbetter Partners, LLP, or its designee(s) (in
each  case,  in addition to any other expense amounts paid to any Investor prior
to  the  date of this Agreement), for all reasonable costs and expenses incurred
in  connection  with  the transactions contemplated by the Transaction Documents
(including  reasonable  legal fees and disbursements in connection therewith and
documentation  and  implementation  of  the Transaction Documents), which amount
shall  be  paid  at the Closing.  The Company represents and warrants that there
are  no placement agent's fees, financial advisory fees, or broker's commissions
(other  than  for Persons engaged by any Investor) relating to or arising out of
the  transactions contemplated by the Transaction Documents, other than a $2,000
fee payable to Gottbetter Capital Finance, LLC.  The Company shall pay, and hold
each  Investor  harmless  against,  any  liability,  loss or expense (including,
without  limitation,  reasonable  attorneys'  fees  and  out-of-pocket expenses)
arising  in  connection  with  any  claim  relating  to  any  such  fees.

     (h)     Pledge of Securities.  The Company acknowledges and agrees that the
             --------------------
Securities, subject to the provisions of Rule 144, may be pledged by an Investor
(as defined in the Registration Rights Agreement) in connection with a bona fide
margin  agreement  or other loan or financing arrangement that is secured by the
Securities.  The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities  shall  be required to provide the Company with any notice thereof or
otherwise  make  any  delivery  to the Company pursuant to this Agreement or any
other  Transaction  Document.  The  Company hereby agrees to execute and deliver
such  documentation  as  a  pledgee  of the Securities may reasonably request in
connection  with  a  pledge  of  the  Securities to such pledgee by an Investor.

     (i)     Disclosure  of  Transactions and Other Material Information.  On or
             -----------------------------------------------------------
before  8:30  a.m., New York time, on the fourth Business Day following the date
of  this  Agreement,  the  Company  shall  file  a  Current  Report  on Form 8-K
describing  the  terms  of  the  transactions  contemplated  by  the Transaction
Documents in the form required by the 1934 Act and attaching (unless the Company
shall  elect  to  defer the filing of exhibits as permitted by the Exchange Act)
the  material  Transaction  Documents  (including,  without  limitation,  this
Agreement,  the  form of Notes and the Registration Rights Agreement) (including
all attachments, the "8-K FILING").  From and after the filing of the 8-K Filing
with  the  SEC,  the  Company  shall  have  disclosed  any  material  nonpublic
information  delivered  to  the  Investors  by  the  Company  or  any  of  its
Subsidiaries,  or  any  of  their  respective  officers,  directors,  employees,
stockholders, representatives or agents.  The Company shall not, and shall cause
each  of  its  Subsidiaries  and  its  and  each  of  their respective officers,
directors, employees and agents, not to, provide any Investor with any material,
nonpublic  information regarding the Company or any of its Subsidiaries from and
after  the  filing  of  the  8-K Filing with the SEC without the express written
consent of such Investor.  In the event of a breach of the foregoing covenant by
the  Company,  or  any  of  its  Subsidiaries, or any of its or their respective
officers,  directors,  employees  and  agents,  in  addition to any other remedy
provided herein or in the Transaction Documents, a Investor shall have the right
to  make  a  public  disclosure,  in  the  form  of  a  press  release,  public
advertisement  or otherwise, of such material, nonpublic information without the
prior  approval  by  the  Company,  its  Subsidiaries,  or  any  of its or their
respective officers, directors, employees or agents.  No Investor shall have any
liability  to  the  Company,  any  of  its  Subsidiaries, or any of its or their
respective  officers, directors, employees, stockholders or agents, for any such
disclosure.  Subject  to the foregoing, none of the Company, its Subsidiaries or
any  Investor shall issue any press releases or any other public statements with
respect  to  the  transactions  contemplated hereby; provided, however, that the
Company  shall  be entitled, without the prior approval of any Investor, to make
any  press  release  or  other  public

                                      -14-
<PAGE>
disclosure  with respect to such transactions (i) in substantial conformity with
the  8-K  Filing  and  contemporaneously  therewith  and  (ii) as is required by
applicable  law  and  regulations  (provided that in the case of clause (i) each
Investor  shall  be  consulted  by the Company in connection with any such press
release  or  other  public  disclosure prior to its release).  Without the prior
written  consent  of any applicable Investor, neither the Company nor any of its
Subsidiaries  shall  disclose  the  name  of  any  Investor  in  any  filing,
announcement,  release  or  otherwise.

     (j)     Corporate Existence.  So long as any Investor beneficially owns any
             -------------------
Notes  or  Default  Warrants,  the Company shall not be party to any Fundamental
Transaction  (as  defined in the Notes) unless the Company is in compliance with
the  applicable  provisions  governing Fundamental Transactions set forth in the
Notes  and  the  Default  Warrants.

     (k)     Reservation of Shares.  The Company shall take all action necessary
             ---------------------
to  at  all  times have authorized, and reserved for the purpose of issuance, no
less than 130% of (i) the maximum number of shares of Common Stock issuable upon
conversion  of  the  Notes  (assuming  for  purposes  hereof, that the Notes are
convertible  at  the  Conversion  Price  and  without  taking  into  account any
limitations  on  the conversion of the Notes set forth in the Notes) and (ii) if
applicable,  the maximum number of shares of Common Stock issuable upon exercise
of  the  Default  Warrants  (assuming for purposes hereof the Exercise Price (as
defined  in  the  Default  Warrants), subject to adjustment for stock splits and
stock  dividends and without taking into account any limitations on the exercise
of  the  Default  Warrants  set  forth  in  the  Default  Warrants).

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

     (m)     Legend.  Certificates  evidencing  the  Default  Warrant Shares and
             ------
Conversion  Shares  shall not contain any legend (including the legend set forth
above),  (A) while a registration statement covering the resale of such security
is  effective  under  the  1933  Act  (provided,  however,  that  the Investor's
prospectus  delivery requirements under the 1933 Act will remain applicable), or
(B)  following  any sale of such Default Warrant Shares and/or Conversion Shares
pursuant  to  Rule  144, or (C) if such Default Warrant Shares and/or Conversion
Shares  are  eligible  for  sale under Rule 144(k), or (D) if such legend is not
required  under  applicable  requirements  of  the  1933 Act (including judicial
interpretations  and pronouncements issued by the Staff of the SEC).  Subject to
the foregoing, upon written request of the Investor to have such legend removed,
the  Company  shall  cause its counsel to issue a legal opinion to the Company's
transfer  agent  promptly after the effective date of any registration statement
(the "EFFECTIVE DATE") if required by the Company's transfer agent to effect the
removal  of  the  legend  hereunder.  The  Company  agrees  that  following  the
Effective  Date  or at such time as such legend is no longer required under this
Section  4(m),  it will, no later than three (3) Trading Days (as defined in the
Notes)  following  the  delivery by the Investor to the Company or the Company's
transfer  agent  of  a  certificate  representing  Default Warrant Shares and/or
Conversion  Shares  issued  with  a  restrictive  legend, deliver or cause to be
delivered  to  such  Investor  a  certificate  representing such Default Warrant
Shares  and/or  Conversion  Shares  that  is free from all restrictive and other
legends.  The  Company  may  not  make  any  notation  on  its  records  or give
instructions  to  any  transfer  agent  of  the  Company  that  enlarge(s)  the
restrictions  on  transfer  set  forth  herein.

     (n)     Removal  of  Legend.  In addition to the Investor's other available
             -------------------
remedies  and  provided  that  the  conditions  permitting the removal of legend
specified  in  Section  4(m)  are met, the Company shall pay to the Investor, in
cash,  as  partial  liquidated  damages and not as a penalty, for each $1,000 of
Default Warrant Shares and/or Conversion Shares (based on the Closing Sale Price
(as  defined  in the Notes) of the Common Stock on the date such Default Warrant
Shares  and/or Conversion Shares are submitted to the Company's transfer agent),
$5  per  trading  day  (increasing  to $10 per Trading Day five (5) trading days
after  such damages have begun to accrue) for each Trading Day after the seventh
(7th)  trading  day  following  delivery  by  the Investor to the Company or the
Company's  transfer  agent  of a certificate representing Default Warrant Shares
and/or  Conversion  Shares  issued  with  a  restrictive  legend,  until  such
certificate  is  delivered  to  the  Investor with such legend removed.  Nothing
herein shall limit the Investor's right to pursue actual damages for the failure
of  the  Company and its transfer agent to deliver certificates representing any
securities  as  required hereby, and the Investor 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.

                                      -15-
<PAGE>
     (o)     Publicity.  The  Company  and  the Investor shall have the right to
             ---------
approve,  before  issuance  any press release or any other public statement with
respect  to  the  transactions  contemplated hereby made by any party; provided,
however,  that  the Company shall be entitled, without the prior approval of the
Investor,  to issue any press release or other public disclosure with respect to
such  transactions  required  under  applicable  securities  or  other  laws  or
regulations  provided,  that  the  Company shall use its commercially reasonable
best  efforts  to consult the Investor in connection with any such press release
or  other  public disclosure prior to its release and Investor shall be provided
with  a  copy  thereof  upon  release  thereof.

     (p)     Company's Failure to Timely Deliver Securities.  In addition to the
             ----------------------------------------------
foregoing,  if  within three (3) Trading Days after the Company's receipt of the
facsimile  copy  of  an  exercise or conversion notice the Company shall fail to
issue the Conversion Shares or Default Warrant Shares to the Investor, and if on
or after such third Trading Day the Investor is required to purchase (in an open
market  transaction  or otherwise) shares of Common Stock in order to deliver in
satisfaction  of  a  sale initiated by the Investor in anticipation of receiving
from  the  Company  the  shares  of  Common Stock issuable upon such exercise or
conversion  (a "BUY-IN"), then the Company shall, within three (3) Business Days
after  the  Investor's  request and in the Investor's discretion, either (i) pay
cash  to  the Investor in an amount equal to the Investor's total purchase price
(including  brokerage  commissions,  if  any)  for the shares of Common Stock so
purchased  (the  "BUY-IN  PRICE"),  at  which  point the Company's obligation to
deliver  such  Conversion  Shares  or Default Warrant Shares resulting from such
exercise or conversion shall terminate, or (ii) promptly honor its obligation to
deliver  to  the  Investor  a  certificate  or  certificates  representing  such
Conversion  Shares  or  Default  Warrant Shares and pay cash to the holder in an
amount  equal to the excess (if any) of the Buy-In Price over the product of (A)
such  number  of shares of Common Stock, times (B) the Closing Sale Price on the
date  of  exercise.  Nothing  herein  shall  limit  the holder's right to pursue
actual  damages  for  the  Company's  failure to maintain a sufficient number of
authorized  shares  of Common Stock or to otherwise issue shares of Common Stock
upon  conversion  of  the Notes or exercise of the Default Warrant in accordance
with  the  terms  thereof,  and  the  holder  shall have the right to pursue all
remedies  available  at  law  or  in  equity  (including  a  decree  of specific
performance  and/or  injunctive  relief).  Notwithstanding  the  foregoing,  the
Company  shall  have  no  obligations  to  deliver  Conversion Shares or Default
Warrant Shares or to pay any Buy-In Price under this Section 4(q) if the Company
has  timely  delivered in good faith a bona fide objection to such conversion or
exercise  notice.

     5.     REGISTER.

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

     6.     CONDITIONS  TO  THE  COMPANY'S  OBLIGATION  TO  ISSUE.

     (a)     The  obligation of the Company hereunder to issue the Notes to each
Investor at the Closing is subject to the satisfaction, at or before the Closing
Date,  of  each  of the following conditions, provided that these conditions are
for  the  Company's sole benefit and may be waived by the Company at any time in
its  sole  discretion  by  providing  each  Investor  with  prior written notice
thereof.

     (b)     Such Investor shall have executed each of the Transaction Documents
to  which  it  is  a  party  and  delivered  the  same  to  the  Company.

     (c)     Such  Investor  and each other Investor shall have delivered to the
Company  the  Exchange  Consideration  by  delivery  of  the Series D Cumulative
Preferred  Certificates,  duly  endorsed  (or accompanied by duly executed stock
powers)  for  transfer  to  the  Company.

     (d)     The  representations  and warranties of such Investor shall be true
and  correct  in  all  material  respects as of the date when made and as of the
Closing  Date  as  though  made  at  that  time  (except for representations and

                                      -16-
<PAGE>
warranties  that  speak  as  of  a  specific date), and such Investor shall have
performed,  satisfied  and complied in all material respects with the covenants,
agreements  and conditions required by this Agreement to be performed, satisfied
or  complied  with  by  such  Investor  at  or  prior  to  the  Closing  Date.

     (e)     The Company shall have obtained approval of the Principal Market to
list  the  Conversion  Shares  and  the  Default  Warrant  Shares.

     7.     CONDITIONS  TO  EACH  INVESTOR'S  OBLIGATION.

     (a)     The  obligation  of  each Investor hereunder to accept the Notes at
the  Closing  is  subject to the satisfaction, at or before the Closing Date, of
each  of  the  following conditions, provided that these conditions are for each
Investor's  sole  benefit  and may be waived by such Investor at any time in its
sole  discretion  by  providing  the  Company with prior written notice thereof:

     (i)     The Company shall have duly executed and delivered to such Investor
(A)  each  of  the  Transaction  Documents  and (B) the Notes (in such principal
amounts  as  is  set forth across from such Investor's name in column (3) of the
Schedule  of  Investors being purchased by such Investor at the Closing pursuant
to  this  Agreement.

     (ii)     Such Investor shall have received the opinion of Glast, Phillips &
Murray,  P.C., the Company's outside counsel, dated as of the Closing Date, in a
form  reasonably  acceptable  to  Investors.

     (iii)     The  Company  shall have delivered to such Investor a certificate
evidencing  the  formation  and  good  standing  of  the  Company  issued by the
Secretary  of State of Delaware as of a date within five (5) days of the Closing
Date.

     (iv)     The Company shall have delivered to such Investor a certified copy
of  the  Certificate  of Incorporation as certified by the Secretary of State of
the  State  of  Delaware  within  five  (5)  days  of  the  Closing  Date.

     (v)     The  Company  shall  have delivered to such Investor a certificate,
executed by the Secretary of the Company and dated as of the Closing Date, as to
(i)  the  resolutions  consistent  with Section 3(b) as adopted by the Company's
board  of  directors  in a form reasonably acceptable to such Investor, (ii) the
Certificate  of  Incorporation  and  (iii)  the Bylaws, each as in effect at the
Closing.

     (vi)     The  representations  and  warranties of the Company shall be true
and  correct  as of the date when made and as of the Closing Date as though made
at  that  time  (except  for  representations  and warranties that speak as of a
specific  date)  and the Company shall have performed, satisfied and complied in
all  respects  with  the  covenants,  agreements  and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at  or  prior  to  the  Closing  Date.  Such  Investor  shall  have  received  a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably  requested  by  such  Investor.

     (vii)     The  Company  shall have delivered to such Investor a letter from
the  Company's  transfer  agent  certifying the number of shares of Common Stock
outstanding  as  of  a  date  within  five  (5)  days  of  the  Closing  Date.

     (viii)     The Common Stock (I) shall be designated for quotation or listed
on  the  Principal  Market  and  (II)  shall  not have been suspended, as of the
Closing  Date,  by the SEC or the Principal Market from trading on the Principal
Market  nor  shall  suspension  by  the  SEC  or  the Principal Market have been
threatened,  as  of  the  Closing  Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum maintenance requirements of
the  Principal  Market.

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

                                      -17-
<PAGE>
     (x)     The  Company  shall  have  delivered  to  such  Investor such other
documents  relating  to  the transactions contemplated by this Agreement as such
Investor  or  its  counsel  may  reasonably  request.

     8.     MISCELLANEOUS.

     (a)     Governing  Law; Jurisdiction; Jury Trial.  All questions concerning
             ----------------------------------------
the  construction,  validity,  enforcement  and interpretation of this Agreement
shall  be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State  of  New York or any other jurisdictions) that would cause the application
of  the  laws  of any jurisdictions other than the State 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, 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 brought in an inconvenient forum or that the
venue  of  such  suit,  action  or  proceeding  is  improper.  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 to such
party at the address for such notices to it under this Agreement and agrees that
such  service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to  serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY
WAIVES  ANY  RIGHT  IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION  OF  ANY  DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS  AGREEMENT  OR  ANY  TRANSACTION  CONTEMPLATED  HEREBY.

     (b)     Counterparts.  This  Agreement  may  be  executed  in  two  or more
             ------------
identical  counterparts,  all  of  which  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; provided that a facsimile signature
shall  be  considered  due  execution  and  shall  be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a  facsimile  signature.

     (c)     Headings.  The  headings  of  this Agreement are for convenience of
             --------
reference  and  shall  not  form  part of, or affect the interpretation of, this
Agreement.

     (d)     Severability.  If  any provision of this Agreement shall be invalid
             ------------
or  unenforceable in any jurisdiction, such invalidity or unenforceability shall
not  affect the validity or enforceability of the remainder of this Agreement in
that  jurisdiction  or  the  validity or enforceability of any provision of this
Agreement  in  any  other  jurisdiction.

     (e)     Entire  Agreement;  Amendments.  This  Agreement  and  the  other
             ------------------------------
Transaction  Documents  supersede  all  other  prior  oral or written agreements
between the Investors, the Company, their affiliates and Persons acting on their
behalf  with  respect  to  the matters discussed herein, and this Agreement, the
other  Transaction  Documents  and the instruments referenced herein and therein
contain  the  entire  understanding  of  the parties with respect to the matters
covered  herein  and  therein  and,  except  as specifically set forth herein or
therein,  neither  the  Company  nor  any  Investor  makes  any  representation,
warranty, covenant or undertaking with respect to such matters.  No provision of
this  Agreement  may be amended other than by an instrument in writing signed by
the  Company  and  the  holders  of  at least a majority of the Notes issued and
issuable  hereunder, and any amendment to this Agreement made in conformity with
the  provisions  of  this  Section  8(e)  shall  be binding on all Investors and
holders  of  Securities, as applicable.  No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought.  No  such  amendment shall be effective to the extent that it applies to
less  than  all  of the holders of the Notes then outstanding.  No consideration
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  also  is  offered  to all of the parties to the Transaction
Documents,  holders of Notes or, if applicable, holders of the Default Warrants,
as  the  case  may  be.  The  Company  has not, directly or indirectly, made any
agreements  with  any  Investors  relating  to  the  terms  or conditions of the
transactions  contemplated  by  the Transaction Documents except as set forth in
the Transaction Documents.  Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Investor has made any commitment
or  promise  or has any other obligation to provide any financing to the Company
or  otherwise.

                                      -18-
<PAGE>
     (f)     Notices.  Any  notices,  consents,  waivers or other communications
             -------
required  or  permitted to be given under the terms of this Agreement must be in
writing  and  will  be  deemed  to  have  been delivered: (i) upon receipt, when
delivered  personally;  (ii)  upon  receipt,  when  sent  by facsimile (provided
confirmation  of  transmission  is  mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an  overnight  courier  service, in each case properly addressed to the party to
receive  the  same.  The addresses and facsimile numbers for such communications
shall  be:

     If to the Company:

     Charys Holding Company, Inc.
     1117 Perimeter Center West, Suite N415
     Atlanta, Georgia 30338
     Attention:     Billy V. Ray, Jr.
     Telephone:     (678) 443-2300
     Facsimile:     (678) 443-2320

     With a copy (for informational purposes only) to:

     Glast, Phillips & Murray, P.C.
     815 Walker Street, Suite 1250
     Houston, Texas 77002
     Attention:     Norman T. Reynolds, Esq.
     Telephone:     (713) 237-3135
     Facsimile:     (713) 237-3202

     If to the Transfer Agent:

     Fidelity Transfer Company
     1800 S. West Temple, Suite 301
     Salt Lake City, Utah 84115
     Attention:     Heidi Sadowski
     Telephone:     (801) 484-7222
     Facsimile:     (801) 466-4122

     If  to  a  Investor,  to  its address and facsimile number set forth on the
Schedule  of  Investors,  with  copies to such Investor's representatives as set
forth  on  the  Schedule of Investors, or to such other address and/or facsimile
number  and/or  to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness  of  such  change  provided, that Gottbetter & Partners, LLP shall
                                 --------
only  receive  notices  sent  to  clients  of its firm.  Written confirmation of
receipt  (A)  given  by  the  recipient of such notice, consent, waiver or other
communication,  (B)  mechanically  or  electronically  generated by the sender's
facsimile  machine  containing the time, date, recipient facsimile number and an
image  of  the  first  page of such transmission or (C) provided by an overnight
courier  service  shall  be  rebuttable evidence of personal service, receipt by
facsimile or receipt from an overnight courier service in accordance with clause
(i),  (ii)  or  (iii)  above,  respectively.

     (g)     Successors  and  Assigns.  This Agreement shall be binding upon and
             ------------------------
inure to the benefit of the parties and their respective successors and assigns,
including  any  purchasers  of  the  Notes or the Default Warrants.  The Company
shall  not  assign this Agreement or any rights or obligations hereunder without
the prior written consent of the holders of at least a majority of the aggregate
number of Registrable Securities issued and issuable hereunder, including by way
of  a  Fundamental  Transaction  (unless  the  Company is in compliance with the
applicable  provisions governing Fundamental Transactions set forth in the Notes
and  the  Default  Warrants).  An  Investor may assign some or all of its rights
hereunder  in  connection  with  transfer of any of its Notes or, if applicable,
Default  Warrants,  subject  to compliance with the securities laws, without the
consent  of  the  Company, in which event such assignee shall be deemed to be an
Investor  hereunder  with  respect  to  such  assigned  rights.

                                      -19-
<PAGE>
     (h)     No  Third  Party Beneficiaries.  This Agreement is intended for the
             ------------------------------
benefit  of  the  parties  hereto  and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by,  any  other  Person.

     (i)     Survival.  The  representations  and  warranties of the Company and
             --------
the  Investors  contained  in Sections 2 and 3 shall survive the Closing and the
agreements  and  covenants  set  forth  in Sections 4, 5 and 8 shall survive the
Closing.  Each  Investor  shall be responsible only for its own representations,
warranties,  agreements  and  covenants  hereunder.

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

     (k)     Indemnification.  In consideration of each Investor's execution and
             ---------------
delivery  of  the  Transaction Documents and acquiring the Securities thereunder
and  in addition to all of the Company's other obligations under the Transaction
Documents,  the  Company shall defend, protect, indemnify and hold harmless each
Investor  and  each affiliate of a Investor that holds Notes or Default Warrants
and all of their stockholders, partners, members, officers, directors, employees
and  direct  or  indirect  investors and any of the foregoing Persons' agents or
other  representatives  (including,  without  limitation,  those  retained  in
connection  with the transactions contemplated by this Agreement) (collectively,
the  "INDEMNITEES")  from  and  against  any  and all actions, causes of action,
suits,  claims,  losses,  costs,  penalties,  fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a  party  to  the  action  for  which  indemnification hereunder is sought), and
including  reasonable  attorneys'  fees  and  disbursements  (the  "INDEMNIFIED
LIABILITIES"),  incurred by any Indemnitee as a result of, or arising out of, or
relating  to  (a)  any  misrepresentation  or  breach  of  any representation or
warranty made by the Company in the Transaction Documents, (b) any breach of any
covenant,  agreement  or  obligation of the Company contained in the Transaction
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee  by  a  third party (including for these purposes a derivative action
brought  on  behalf of the Company) and arising out of or resulting from (i) the
execution,  delivery, performance or enforcement of the Transaction Documents or
any  other  certificate,  instrument or document contemplated hereby or thereby,
(ii) any transaction financed or to be financed in whole or in part, directly or
indirectly,  with  the  proceeds  of  the  issuance of the Securities, (iii) any
disclosure made by such Investor pursuant to Section 4(i), or (iv) the status of
such Investor or holder of the Securities as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents; provided, that no
Investor shall be entitled to indemnification to the extent any of the foregoing
is  caused by its gross negligence or willful misconduct. To the extent that the
foregoing  undertaking  by  the Company may be unenforceable for any reason, the
Company  shall  make the maximum contribution to the payment and satisfaction of
each  of  the Indemnified Liabilities which is permissible under applicable law.
Except  as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Section 9(k) shall be the same as those
set  forth  in  Section  6  of  the  Registration  Rights  Agreement.

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

     (m)     Remedies.  Each  Investor  and  each  affiliate  of a Investor that
             --------
holds  Notes or Default Warrants shall have all rights and remedies set forth in
the  Transaction  Documents  and all rights and remedies which such holders have
been  granted  at  any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights under
any  provision  of  this  Agreement  shall  be  entitled  to enforce such rights
specifically  (without  posting a bond or other security), to recover damages by
reason  of  any  breach  of  any provision of this Agreement and to exercise all
other  rights  granted  by law.  Furthermore, the Company recognizes that in the
event  that  it  fails  to  perform,  observe,  or  discharge  any or all of its
obligations  under  the Transaction Documents, any remedy at law may prove to be
inadequate  relief  to  the  Investors.  The  Company  therefore agrees that the
Investors shall be entitled to seek temporary and permanent injunctive relief in
any  such  case  without  the  necessity  of  proving actual damages and without
posting  a  bond  or  other  security.

                                      -20-
<PAGE>
     (n)     Rescission  and  Withdrawal Right.  Notwithstanding anything to the
             ---------------------------------
contrary  contained  in  (and  without  limiting  any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or  option  under a Transaction Document and the Company does not timely perform
its  related obligations within the periods therein provided, then such Investor
may  rescind  or withdraw, in its sole discretion from time to time upon written
notice  to  the  Company, any relevant notice, demand or election in whole or in
part  without  prejudice  to  its  future  actions  and  rights.

     (o)     Payment  Set Aside.  To the extent that the Company makes a payment
             ------------------
or  payments  to  the  Investors  hereunder  or  pursuant  to  any  of the other
Transaction  Documents  or  the  Investors  enforce  or  exercise  their  rights
hereunder  or  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,  foreign, 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.

     (p)     Independent  Nature  of  Investors'  Obligations  and  Rights.  The
             -------------------------------------------------------------
obligations  of each Investor under any Transaction Document are several and not
joint  with  the  obligations  of  any  other Investor, and no Investor shall be
responsible  in  any  way  for  the  performance of the obligations of any other
Investor  under  any  Transaction  Document.  Nothing contained herein or in any
other  Transaction Document, and no action taken by any Investor pursuant hereto
or  thereto,  shall  be  deemed to constitute the Investors as a partnership, an
association,  a  joint  venture  or  any  other  kind  of  entity,  or  create a
presumption  that  the  Investors are in any way acting in concert or as a group
with  respect  to  such  obligations  or  the  transactions  contemplated by the
Transaction  Documents  and  the Company acknowledges that the Investors are not
acting  in  concert  or  as  a  group  with  respect  to such obligations or the
transactions  contemplated  by the Transaction Documents. Each Investor confirms
that  it  has  independently  participated in the negotiation of the transaction
contemplated  hereby  with  the  advice  of  its own counsel and advisors.  Each
Investor  shall  be  entitled  to  independently protect and enforce its rights,
including,  without  limitation, the rights arising out of this Agreement or out
of  any other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.

     (q)     Exculpation Among Investors.  Each Investor acknowledges that it is
             ---------------------------
not relying upon any Person (including, without limitation, any other Investor),
other  than the Company and its officers and directors (acting in their capacity
as  representatives  of  the  Company),  in deciding to invest and in making its
investment  in the Company.  Each Investor agrees that no other Investor nor the
respective  controlling  Persons,  officers,  directors,  partners,  members,
shareholders,  agents or employees of any other Investor shall be liable to such
Investor  for  any  losses  incurred  by  such  Investor  in connection with its
investment  in  the  Company.

     (r)     Controlling  Agreement.  In  the  event of any conflict between the
provisions  of  this  Agreement  and any of the other Transaction Documents, the
terms  of  this  Agreement  shall  control.

                            [SIGNATURE PAGE FOLLOWS]

                                      -21-
<PAGE>
     IN  WITNESS  WHEREOF,  each  Investor  and  the  Company  have caused their
respective  signature  page  to  this  Securities  Purchase Agreement to be duly
executed  as  of  the  date  first  written  above.

     COMPANY:

     CHARYS HOLDING COMPANY, INC.

     By
       -----------------------------------------------
       Billy V. Ray, Jr., Chief Executive Officer

     BUYERS:

     GOTTBETTER CAPITAL MASTER, LTD.

     By
       -----------------------------------------------
       Adam S. Gottbetter, Director

     CASTLERIGG MASTER INVESTMENTS LTD.

     By
       ------------, ------------

     UBS O'CONNOR LLC F/B/O O'CONNOR PIPES CORPORATE STRATEGIES MASTER LTD.

     By
       -----------------------------------------------

       ------------, ------------

                                      -22-
<PAGE>
<TABLE>
<CAPTION>
                                           SCHEDULE OF INVESTORS

(1)                                     (2)                (3)         (4)                  (5)
                                                                    AGGREGATE
                                                        AGGREGATE   NUMBER OF
                                                        PRINCIPAL   PREFERRED   LEGAL REPRESENTATIVE'S
                             ADDRESS AND                AMOUNT OF   SHARES      ADDRESS AND
INVESTOR                     FACSIMILE NUMBER           NOTES       TENDERED    FACSIMILE NUMBER
---------------------------  -------------------------  ----------  ----------  ---------------------------
<S>                          <C>                        <C>         <C>         <C>
Gottbetter Capital Master,   488 Madison Avenue                     500         Jason M. Rimland, Esq.
Ltd.                         12th Floor                                         Gottbetter & Partners, LLP
                             New York, NY 10022                                 488 Madison Avenue
                             Facsimile:  212.400.6999                           12th Floor
                                                                                New York, NY 10022
                                                                                Facsimile:  212.400.6901
-----------------------------------------------------------------------------------------------------------
Castlerigg Master            40 W. 57th Street                      300
Investments Ltd.             26th Floor
                             New York, NY 10019
                             Facsimile:  212.603.5710
-----------------------------------------------------------------------------------------------------------
UBS O'Connor LLC F/B/O                                              100
O'Connor Pipes Corporate
Strategies Master Ltd.
-----------------------------------------------------------------------------------------------------------
</TABLE>

                                      -23-
<PAGE>
                                  SCHEDULE 3(a)
                                  SUBSIDIARIES

    Charys Holding Company, Inc.
     1117 Perimeter Center West
            Suite N415
        Atlanta, GA 30338

Personnel Resources of Georgia, Inc.
          669 N Academy St
        Greenville, NC 29607

          CCI Telecom, Inc.
          2100 Couch Drive
         McKinney, TX 75069

           Method IQ, Inc.
         1750 Founders Pkwy
             Suite 180
        Alpharetta, GA 30004

        Viasys Services, Inc.
          2944 Drane Field
         Lakeland, FL 33811

    Viasys Network Services, Inc.
          2944 Drane Field
         Lakeland, FL 33811

   Crochet & Borel Services, Inc.
         346 Twin City Hwy
        Port Neches, TX 77651

Digital Communication Services, Inc.
            96 North 5th
       Delray Beach, FL 33483

      Ayin Holding Company Inc.
            17314 SH 249
             Suite 230
         Houston, TX 77064

Ayin Tower Management Services, Inc.
            17314 SH 249
              Suite 230
         Houston, TX 77064

<PAGE>
              LFC, Inc.
             17314 SH 249
              Suite 230
          Houston, TX 77064

       Aeon Technologies, Inc.
          2100 Couch Drive
         McKinney, TX 75069

       Berkshire Wireless, Inc.
            480 Pleasant
           St Lee, MA01238

   CCI Integrated Solutions, Inc.
          2100 Couch Drive
         McKinney, TX 75069

     Complete Tower Sources, Inc
          765 Vatican Road
         Carencro, LA 70520

      Mitchell Site Acq., Inc.
         119 Veterinarian Rd
         Lafayette, LA 70507

    Cotton Restoration of Central
              Texas, LP
          14345 NW Freeway
          Houston, TX 77040

      Cotton Commercial USA, LP
          14345 NW Freeway
          Houston, TX 77040

       Cotton Holdings 1, Inc.
          14345 NW Freeway
          Houston, TX 77040

                                      -24-
<PAGE>
                                  SCHEDULE 3(k)
                      EXCEPTIONS TO SEC FILING REQUIREMENTS

     None.

                                      -25-
<PAGE>
                                  SCHEDULE 3(r)
                          EXCEPTIONS TO EQUITY CAPITAL

<TABLE>
<CAPTION>
CHARYS HOLDING COMPANY, INC.
CAPITALIZATION TABLE
AS OF 3/31/07

<S>                                                      <C>
SUMMARY

Preferred Shares Authorized, par value $0.001              5,000,000
Preferred Shares Issued and Outstanding as of 3/31/2007    1,500,900

Common Shares Authorized, par value $0.001               300,000,000
Common Shares Issued and Outstanding as of 3/31/2007      44,266,775
</TABLE>

<TABLE>
<CAPTION>
FULLY DILUTED SUMMARY:                                   FULLY DILUTED    SHARES     OPTIONS   CONVERSION      WARRANTS
                                                         -------------  ----------  ---------  ----------  ----------------
<S>                                                      <C>            <C>         <C>        <C>         <C>
COMMON STOCK:
Public Stockholders                                          6,342,290   6,342,290          0           0                 0
Management & Officers & Directors Shares (detail below)      7,053,379   3,049,492  4,003,887           0            0  (A)
Employees and Consultants:                                  22,818,205  18,628,216  3,339,989           0       850,000 (B)
Financing Sources                                          280,525,796  16,246,777    750,000  84,276,389  179,252,630  (C)
                                                         ------------------------------------------------------------------
TOTAL OUTSTANDING COMMON STOCK. OPTIONS AND WARRANTS       316,739,670  44,266,775  8,093,876  84,276,389  180,102,630
TRANSACTIONS PENDING POST 3/31/07:                                   0           0          0           0             0 (I)

PREFERRED STOCK:
Series A Preferred Stock - Billy V. Ray                      1,000,000   1,000,000          0           0             0 (G)
Series B Preferred Stock - Frost Bank                                0           0          0           0             0 (D)
Series C Preferred Stock - Frost Bank                          500,000     500,000          0           0             0 (E)
Series D Preferred Stock - Gotterbetter                     16,018,674         900          0   4,000,000        12,017,774
                                                         ------------------------------------------------------------------
TOTAL PREFERRED STOCK                                       17,518,674   1,500,900          0   4,000,000        12,017,774

                                                         ------------------------------------------------------------------
TOTAL OUTSTANDING                                          334,258,344  45,767,675  8,093,876  88.276,389       192,120,404
                                                         ==================================================================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
NOTES:                                                         Total     Shares     Options   Conversion  Warrants
                                                             ---------  ---------  ---------  ----------  --------
<S>                                                          <C>        <C>        <C>        <C>         <C>
(A) Management (Officers & Directors) Shares:
    Richard Mangiarelli - Former Director                       87,500     87,500          0           0         0
    Ray Smith - Officer                                        600,000          0    600,000           0         0
    Ray Smith - Officer                                         25,000          0     25,000           0         0
    Michael Oyster - Director                                  185,000     85,000    100,000           0         0
    Michael Oyster - Director                                  300,000          0    300,000           0         0
    Michael Oyster - Director                                   25,000          0     25,000           0         0
    Alec McLarty - Director                                     85,000     85,000          0           0         0
    Catherine McKee - Director                                  20,000     20,000          0           0         0
    Gisle Larsen - Director                                     20,000     20,000          0           0         0
    John Jordon - Director                                      87,842     87,842          0           0         0
    Ed Acosta - Former Officer                                 100,000          0    100,000           0         0
    Benjamin Holcomb - Former Officer                          300,000          0    300,000           0         0
    David Gergacz - Director                                    85,000     85,000          0           0         0
    Billy Ray -Officer and Director                          4,422,372  2,185,150  2,237,222           0         0
    Billy Ray -Officer and Director                             16,665          0     16,665           0         0
    Ralph DeLucia - Former Director                            630,000    330,000    300,000           0         0
    Dennis Hayes - Director                                     64,000     64,000          0           0         0
                                                             -----------------------------------------------------
    Total Management (Officers & Directors) Shares /Options  7,053,379  3,049,492  4,003,887           0         0
                                                             =====================================================

                                                                      EXERCISE PRICE
                                                             -------------------------------
NOTES:                                                        Options   Conversion  Warrants
                                                             ---------  ----------  --------
<S>                                                          <C>        <C>         <C>
(A) Management (Officers & Directors) Shares:
    Richard Mangiarelli - Former Director
    Ray Smith - Officer                                      $    0.40
    Ray Smith - Officer                                      $    8.15
    Michael Oyster - Director                                $    1.05
    Michael Oyster - Director                                $    1.09
    Michael Oyster - Director                                $    8.15
    Alec McLarty - Director
    Catherine McKee - Director                               $    0.40
    Gisle Larsen - Director                                  $    0.40
    John Jordon - Director
    Ed Acosta - Former Officer                               $    0.40
    Benjamin Holcomb - Former Officer                        $    0.40
    David Gergacz - Director                                 $    0.40
    Billy Ray -Officer and Director                          $    0.40
    Billy Ray -Officer and Director                          $    8.15
    Ralph DeLucia - Former Director                                (F)
    Dennis Hayes - Director

    Total Management (Officers & Directors) Shares /Options
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                 Total       Shares     Options   Conversion  Warrants
                                                               ----------  ----------  ---------  ----------  --------
<S>                                                            <C>         <C>         <C>        <C>         <C>
(B) Employees and Consultants:
    Subsidiary Employees                                        1,183,207     716,941    466,266           0         0
    Michael Brenner                                               200,000           0    200,000           0         0
    Michael Brenner                                                25,000           0     25,000           0         0
    Nat'l Financial Communication                                 200,000           0    200,000           0         0
    Spiderboy Consultants                                       4,300,000   1,851,277  2,448,723           0         0
    Larry Hogue                                                   500,000     500,000          0           0         0
    Whonor, Inc.                                                  100,000           0          0           0   100,000
    Steven Posner                                                 650,000     650,000          0           0         0
    Ron Berkovitz                                                 250,000     250,000          0           0         0
    Platinum Advisors Services                                  2,400,000   2,400,000          0           0         0
    Gunn Allen                                                  1,900,000   1,550,000          0           0   350,000
    Sam Del Presto                                                425,000      25,000          0           0   400,000
    Joseph Gourlay                                                300,000     300,000          0           0         0
    Your Equity Advisor                                            12,500      12,500          0           0         0
    Scott Boruff                                                        0           0          0           0         0
    Even Blum                                                      40,000      40,000          0           0         0
    Steven Schaeffer - consulting svcs. (Cotton)                  200,000     200,000          0           0         0
    New Century Capital - consulting svcs. (C&B)                1,300,000   1,300,000          0           0         0
    Norman Reynolds - pmt. For legal services                      70,300      70,300          0           0         0
    Mel Harris - consulting svcs. (VSI)                           479,805     479,805          0           0         0
    Steven Posner - consulting svcs. (VSI)                        245,195     245,195          0           0         0
    Joseph Gourlay - consulting svcs. (MSAI/CTSI)                 225,000     225,000          0           0         0
    Steven Posner - consulting svcs. (C&B)                        375,000     375,000          0           0         0
    Michael Thomas - consulting svcs. (C&B)                       250,000     250,000          0           0         0
    Sam Del Presto - consulting svcs. (New Stream/Gottbetter)     100,000     100,000          0           0         0
    Greater Bay Bank                                              630,499     630,499          0           0         0
    Frank Pellegrino (S-8)                                         50,000      50,000          0           0         0
    Steven Schaeffer (S-8)                                        200,000     200,000          0           0         0
    Richard Schmidt                                               100,000     100,000          0           0         0
    Francis Zubrowski                                              31,912      31,912          0           0         0
    Sam Del Presto                                                300,000     300,000          0           0         0
    Gideon Taylor                                                  40,000      40,000          0           0         0
    Shawn Posner                                                  200,000     200,000          0           0         0
    Norm Reynolds                                                  24,500      24,500          0           0         0
    Ronald Berkovitz                                              375,000     375,000          0           0         0
    Larry Hogue                                                     9,800       9,800          0           0         0
    Dale Ponder                                                     5,140       5,140          0           0         0
    Troutman Sander                                               200,000     200,000          0           0         0
    Michael J Novak                                                20,000      20,000          0           0         0
    Stites and Harbison PLLP                                      120,300     120,300          0           0         0
    York Equity Analyst                                            12,500      12,500          0           0         0
    Sam Del Presto                                                200,000     200,000          0           0         0
    Norman Reynolds                                                56,000      56,000          0           0         0
    Morris Gore                                                    25,000      25,000          0           0         0
    Mel Harris                                                    100,000     100,000          0           0         0
    Steven S. Posner                                              100,000     100,000          0           0         0
    S. Posner/M. Harris                                           200,000     200,000          0           0         0
    Richard Schmidt                                               100,000     100,000          0           0         0
    Steven Schaeffer                                              200,000     200,000          0           0         0
    Richard Chancis                                                50,000      50,000          0           0         0
    Sound Capital                                                 375,000     375,000          0           0         0
    Dale Ponder                                                     4,728       4,728          0           0         0
    Evan Blum                                                      40,000      40,000          0           0         0
    Douglas Topkis                                                248,819     248,819          0           0         0
    Sound Capital                                                 375,000     375,000          0           0         0
    Michael Thomas                                                 80,000      80,000          0           0         0
    Norm Reynolds                                                  59,000      59,000    3     0           0         0
    Richard Chancis                                                50,000      50,000          0           0         0
    Ron Berkovitz                                                 100,000     100,000          0           0         0

                                                                        EXERCISE PRICE
                                                               -------------------------------
                                                               Options   Conversion  Warrants
                                                               --------  ----------  ---------
<S>                                                            <C>       <C>         <C>
(B) Employees and Consultants:
    Subsidiary Employees                                       $   0.23
    Michael Brenner                                            $   0.40
    Michael Brenner                                            $   8.15
    Nat'l Financial Communication                              $   2.00
    Spiderboy Consultants                                      $   0.00
    Larry Hogue
    Whonor, Inc.                                               $   1.22
    Steven Posner
    Ron Berkovitz
    Platinum Advisors Services
    Gunn Allen                                                                       $    2.00
    Sam Del Presto                                                                   $    1.50
    Joseph Gourlay
    Your Equity Advisor
    Scott Boruff
    Even Blum
    Steven Schaeffer - consulting svcs. (Cotton)
    New Century Capital - consulting svcs. (C&B)
    Norman Reynolds - pmt. For legal services
    Mel Harris - consulting svcs. (VSI)
    Steven Posner - consulting svcs. (VSI)
    Joseph Gourlay - consulting svcs. (MSAI/CTSI)
    Steven Posner - consulting svcs. (C&B)
    Michael Thomas - consulting svcs. (C&B)
    Sam Del Presto - consulting svcs. (New Stream/Gottbetter)
    Greater Bay Bank
    Frank Pellegrino (S-8)
    Steven Schaeffer (S-8)
    Richard Schmidt
    Francis Zubrowski
    Sam Del Presto
    Gideon Taylor
    Shawn Posner
    Norm Reynolds
    Ronald Berkovitz
    Larry Hogue
    Dale Ponder
    Troutman Sander
    Michael J Novak
    Stites and Harbison PLLP
    York Equity Analyst
    Sam Del Presto
    Norman Reynolds
    Morris Gore
    Mel Harris
    Steven S. Posner
    S. Posner/M. Harris
    Richard Schmidt
    Steven Schaeffer
    Richard Chancis
    Sound Capital
    Dale Ponder
    Evan Blum
    Douglas Topkis
    Sound Capital
    Michael Thomas
    Norm Reynolds
    Richard Chancis
    Ron Berkovitz

<PAGE>
    Ron Berkovitz                                                 100,000     100,000          0           0         0
    Ron Berkovitz                                                 100,000     100,000          0           0         0
    Ron Berkovitz                                                 100,000     100,000          0           0         0
    Steven Posner                                                 200,000     200,000          0           0         0
    Steven Posner                                                 200,000     200,000          0           0         0
    New Century Capital Consultants                             1,500,000   1,500,000          0           0         0
    Gregory A. Buchholz                                            42,000      42,000          0           0         0
    Jerry J. Harrison Jr.                                          25,000      25,000          0           0         0
    Michael Novak                                                  20,000      20,000          0           0         0
    Stite & Harbison                                               12,000      12,000          0           0         0
    Kenneth Brown                                                   5,000       5,000          0           0         0
    Jimmy Taylor                                                  100,000     100,000          0           0         0
                                                                        0
                                                                        0
                                                               -------------------------------------------------------
    Total Employee and Consultants                             22,818,205  18,628,216  3,339,989           0   850,000
                                                               =======================================================

    Ron Berkovitz
    Ron Berkovitz
    Ron Berkovitz
    Steven Posner
    Steven Posner
    New Century Capital Consultants
    Gregory A. Buchholz
    Jerry J. Harrison Jr.
    Michael Novak
    Stite & Harbison
    Kenneth Brown
    Jimmy Taylor

    Total Employee and Consultants
-------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                           Total       Shares    Options  Conversion   Warrants
                                                        -----------  ----------  -------  ----------  -----------
<S>                                                     <C>          <C>         <C>      <C>         <C>
(C) Financing / Acquisitions:
    Venture Banking Group                                   821,133     821,133        0           0            0
    Greater Bay Bank                                         28,400           0        0           0       28,400
    Highgate                                              1,966,370     966,370        0           0    1,000,000
    M Harris and S Posner                                   250,000           0        0           0      250,000
    Jadeco / Schwarrtz                                      500,000           0        0           0      500,000
    T Crochet                                             8,008,000   7,258,000  750,000           0            0
    Harris, Posner, Posner                                  350,000     250,000        0           0      100,000
    W Clark / Acquisition                                   309,768     309,768        0           0            0
    L Ford Clark / Acquisition                            1,817,019   1,817,019        0           0            0
    New Stream                                            2,000,000           0        0           0    2,000,000
    Shaw / Acquisition                                       62,500      62,500        0           0            0
    Gotterbetter / Warrant                               11,030,614           0        0           0   11,030,614
    Aries Equity Corp.                                      250,000           0        0           0      250,000
    CSH Advisors Inc.                                       250,000           0        0           0      250,000
    Cotton / Acquisition                                  2,355,532   2,355,532        0           0            0
    Rock Creek                                            1,250,000   1,250,000        0           0            0
    Lubermanns                                              500,000     500,000        0           0            0
    Vision Capital                                          422,222           0        0     422,222            0
    Vision Capital                                       19,983,330           0        0           0   19,983,330
    Imperium Master Fund, LTD                               551,531           0        0           0      551,531
    New Stream Commercial Finance, LLC - New Stream II      600,000           0        0           0      600,000
    Mathew Mitchell                                          72,939      72,939        0           0            0
    Lori Mitchell                                           583,516     583,516        0           0            0
    Alan Streiter                                         2,562,667           0        0           0    2,562,667
    McMahan Securities Co., L.P.                          4,271,111           0        0           0    4,271,111
    McMahan Securities Co., L.P.                         67,083,266           0        0           0   67,083,266
    McMahan Securities Co., L.P.                         67,083,266           0        0           0   67,083,266
    McMahan Securities Co., L.P.                         83,854,167           0        0  83,854,167            0
    Seth Appel                                            1,708,445           0        0           0    1,708,445
                                                                  0           0        0           0
                                                        ---------------------------------------------------------
    Total Financing / Acquisitions                      280,525,796  16,246,777  750,000  84,276,389  179,252,630
                                                        =========================================================

                                                                   EXERCISE PRICE
                                                        ---------------------------------
                                                        Options   Conversion    Warrants
                                                        --------  -----------  ----------
<S>                                                     <C>       <C>          <C>
(C) Financing / Acquisitions:
    Venture Banking Group                                                      $     0.35
    Greater Bay Bank                                                           $     1.69
    Highgate                                                                          (H)
    M Harris and S Posner                                                      $     0.80
    Jadeco / Schwarrtz                                                         $     1.10
    T Crochet                                           $   0.00
    Harris, Posner, Posner                                                     $     5.00
    W Clark / Acquisition
    L Ford Clark / Acquisition
    New Stream                                                                 $     4.80
    Shaw / Acquisition
    Gotterbetter / Warrant                                                     $     2.25
    Aries Equity Corp.
    CSH Advisors Inc.
    Cotton / Acquisition
    Rock Creek
    Lubermanns
    Vision Capital                                                $      2.25
    Vision Capital                                                   see note
    Imperium Master Fund, LTD                                                  $     2.25
    New Stream Commercial Finance, LLC - New Stream II                         $     4.00
    Mathew Mitchell
    Lori Mitchell
    Alan Streiter                                                              $     2.25
    McMahan Securities Co., L.P.                                               $     2.25
    McMahan Securities Co., L.P.                                               $     2.25
    McMahan Securities Co., L.P.                                               $     2.25
    McMahan Securities Co., L.P.                                  $      2.40
    Seth Appel                                                                 $     2.25

    Total Financing / Acquisitions
</TABLE>

(D)  Series B Preferred Stock held by Frost Bank converts in a 1 to 1 ratio into
     common stock at the holders election. Conversion Right expires April, 2015.

(E)  Series C Preferred Stock held by Frost Bank converts in a 1 to 1 ratio into
     common stock at the holders election. Conversion Right are effective
     starting April, 2007 and expire April, 2009 Holder has a Put Option to
     Michael Novak @ $3.50 per share 725,000

(F)  100,000 at $1.50
     100,000 at $3.00
     100,000 at $5.00

(G)  No conversion rights.

(H)  200,000  at  $0.25
     400,000  at  $0.50
     200,000  at  $0.75
     200,000  at  $1.00

(I)  Transactions Pending
     Total Transactions Pending:

<TABLE>
<CAPTION>
                                                                                  EXERCISE PRICE
                                                                           -----------------------------
                             Total  Shares  Options  Conversion  Warrants  Options  Conversion  Warrants
                             -----  ------  -------  ----------  --------  -------  ----------  --------
<S>                          <C>    <C>     <C>      <C>         <C>       <C>      <C>         <C>
                             --------------------------------------------
Total Transactions Pending:      0       0        0           0         0
                             ============================================
</TABLE>

                                      -26-
<PAGE>
                                  SCHEDULE 3(s)
                        INDEBTEDNESS AND OTHER CONTRACTS

<TABLE>
<CAPTION>
Charys  Holding  Company,  Inc.
Debt  Schedule

==========================================================================================================
($  in  thousands)

Obligation                                                                 Due To:                 Amount
------------------------------------------------------------  ----------------------------------  --------
<S>                                                           <C>                                 <C>
HOLDING COMPANY
---------------
8.75 Senior Convertible Notes                                 McMahan                             $201,250
    Due 2/18/12
9.5% Unsecured Promissory Note                                Harris, Posner, Posner              $  1,000
    Due 5/1/07, subject to other conditions
    Interest                                                                                      $     71
15% Promissory Note                                           HarPos                              $    800
    Interest & Other                                                                              $    200
10% Convertible Debenture                                     Various                             $  4,267
    Maturity 8/30/06
    Interest
    Redemption Premium
    Liquidated Damages
Series D Convertible Preferred Stock                          Various                             $  9,000
    Maturity 11/19/06
    Dividens                                                                                      $  1,554
    Liquidated Damages                                                                            $    900
    Redemption Premium                                                                            $      -
8% Subordinated Note                                          Vision                              $    950
4% Subordinated Convertible Note                              Jade Securities                     $    380
    Due 12/31/07
----------------------------------------------------------------------------------------------------------
TOTAL FINANCING DEBT                                                                              $220,372
----------------------------------------------------------------------------------------------------------

8% Note                                                       Seller of Aeon                      $    473
    Due: $156 on 4/9/07
    Due: $156 on 4/9/08
    Due: $157 on 4/9/09
10% Unsecured Promissory Note                                 Sellers of DCI                      $    640
8.75% Promissory Note                                         Seller of MSAI                      $  2,210
    Due 2/18/12
9% Promissory Note                                            Seller of MSAI                      $  5,400
    Due: $2,700 on 2/15/06
    Due: $2,700 on 2/15/09
8.75% Promissory Note                                         Seller of CTSI                      $  5,790
    Due 12/16/12
9% Promissory Note                                            Seller of CTSI                      $ 14,200
    Due: $7,100 on 2/15/06
    Due: $7,100 on 2/15/09
4.74% Unsecured Promissory Note                               Sellers of C&B Services             $ 47,632
    Due 12/16/12
Note                                                          Cotton                              $  5,100
Payment                                                       Florida Tel Con                     $  3,350
----------------------------------------------------------------------------------------------------------
TOTAL SELLERS NOTES                                                                               $ 84,796
----------------------------------------------------------------------------------------------------------

<PAGE>
Personal Recourses of Georgia
-----------------------------
Unsecured Note[No Due Date]                                   C Sauls                             $     15
Unsecured Note[No Due Date]                                   J Coyle                             $     29
Unsecured Note[No Due Date]                                   B Cutchin (Related Party)           $     15

CCI Telecom
-----------
Credit Facility expires 8/29/06                               CAPCO Capital                       $  2,200
    Secured by Accounts Receivable and certain other assets

Viasys Services
---------------
Letter of Credit                                                                                  $      -

Avin Holding Company
--------------------
LIBOR + 485 Basis Points (10.18%) Secured Promissory Note     New Stream Commercial Finance II    $  6,500
    Due 11/7/06

Method IQ
---------
Credit Facility expires 8/29/06                               CAPCO Capital                       $    220
    Secured by Accounts Receivable and certain other assets

LFC
---

Digital Communication Services
------------------------------
Line of Credit                                                Various                             $  1,000

C & B Services
--------------
$35 million credit facility                                   New Stream Commercial Finance I     $  2,400

CTSI
----
New Stream

                                                                                                  --------
                                               TOTAL DEBT                                         $317,589
                                                                                                  ========
</TABLE>

                                      -27-
<PAGE>
                                 SCHEDULE 3(aa)
                                   TAX STATUS

     None.

                                      -28-
<PAGE>
                                    EXHIBITS
                                    --------

     Exhibit A     Form of Notes
     Exhibit B     Form of Default Warrants
     Exhibit C     Form of Registration Rights Agreement

                                      -29-
<PAGE>
                                                                       Exhibit A

                                                                  EXECUTION COPY

NEITHER  THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR  THE  SECURITIES  INTO  WHICH  THESE  SECURITIES  ARE  CONVERTIBLE HAVE BEEN
REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES  LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR  ASSIGNED  (I)  IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE  SECURITIES  UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF  COUNSEL,  IN  A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER  SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH  A  BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY  THE  SECURITIES.  ANY  TRANSFEREE  OF  THIS NOTE SHOULD CAREFULLY REVIEW THE
TERMS  OF  THIS  NOTE,  INCLUDING  SECTIONS  3(C)(III)  AND  19(A)  HEREOF.  THE
PRINCIPAL  AMOUNT  REPRESENTED  BY  THIS  NOTE  AND, ACCORDINGLY, THE SECURITIES
ISSUABLE  UPON  CONVERSION  HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
FACE  HEREOF  PURSUANT  TO  SECTION  3(C)(III)  OF  THIS  NOTE.

                          CHARYS HOLDING COMPANY, INC.

                     SUBORDINATED UNSECURED CONVERTIBLE NOTE

Issuance Date: April 30, 2007                      Principal: U.S. $8,354,043.00

     FOR  VALUE  RECEIVED,  Charys Holding Company, Inc., a Delaware corporation
(the  "COMPANY"),  hereby  promises  to  pay  to the order of GOTTBETTER CAPITAL
MASTER,  LTD.  or  registered assigns ("HOLDER") the amount set out above as the
Principal  (as  reduced  pursuant  to  the  terms hereof pursuant to redemption,
conversion  or  otherwise,  the "PRINCIPAL") when due, whether upon the Maturity
Date (as defined below), on any Installment Date with respect to the Installment
Amount  due  on  such  Installment Date (each, as defined herein), acceleration,
redemption  or  otherwise (in each case in accordance with the terms hereof) and
to  pay  interest  ("INTEREST")  on any outstanding Principal at a rate equal to
8.75%  per  annum  (the  "INTEREST  RATE"),  from  the date set out above as the
Issuance  Date  (the  "ISSUANCE  DATE")  until the same becomes due and payable,
whether  upon  any  Installment  Date  or,  the  Maturity  Date,  acceleration,
conversion,  redemption  or otherwise (in each case in accordance with the terms
hereof).  This  Subordinated  Unsecured  Convertible  Note  (including  all
Subordinated  Unsecured  Convertible  Notes  issued  in  exchange,  transfer  or
replacement  hereof,  this  "NOTE") is one of an issue of Subordinated Unsecured
Convertible  Notes  issued  pursuant  to  the  Securities Exchange Agreement (as
defined  below)  on  the  Closing Date (collectively, the "NOTES" and such other
Subordinated  Unsecured  Convertible  Notes,  the  "OTHER  NOTES").  Certain
capitalized  terms  used  herein  are  defined  in  Section  27. Notwithstanding
anything  herein  contained  to  the  contrary  or  in  the  Securities Exchange
Agreement  defined below, the Holder specifically acknowledges that all of those
certain  8.75%  Senior  Convertible  Notes issued by the Company on February 16,
2007 in the principal amount of $175 million, and issued on March 6, 2007 in the
principal amount of $26.25 million in connection with the issuance of securities
of  the  Company by McMahan Securities Co. L.P. are senior to this Note in right
of  payment,  whether in respect of payment of redemptions, interest, damages or
upon  liquidation  or  dissolution  or  otherwise.

     (1)     PAYMENTS OF PRINCIPAL.  On each Installment Date, the Company shall
             ---------------------
pay  to  the  Holder  an  amount  equal  to  the  Installment Amount due on such
Installment  Date.  The "MATURITY DATE" shall be May 1, 2008, as may be extended
at  the option of the Holder (i) in the event that, and for so long as, an Event
of Default (as defined in Section 4(a)) shall have occurred and be continuing or
any  event  shall have occurred and be continuing which with the passage of time
and the failure to cure would result in an Event of Default and (ii) through the
date  that is ten (10) days after the consummation of a Change of Control in the
event  that  a  Change  of  Control is publicly announced or a Change of Control
Notice  (as defined in Section 5(b)) is delivered prior to the Maturity Date and
(iii) in connection with a deferral in accordance with the provisions of Section
8(b).

     (2)     INTEREST;  INTEREST  RATE.  Interest  on  this  Note shall commence
             -------------------------
accruing  on  the  Issuance Date and shall be computed on the basis of a 365-day
year  and  actual  days elapsed and shall be payable in arrears for each Payment
Month  on  the Installment Date during the period beginning on the Issuance Date
and  ending  on,

                                      - 1 -
<PAGE>
and including, the Maturity Date.  Interest shall be payable on each Installment
Date,  to the record holder of this Note on the applicable Installment Date, and
to  the extent that any Principal amount of this Note is converted prior to such
Installment  Date,  accrued  and  unpaid Interest with respect to such converted
Principal  amount  and  accrued  and  unpaid  Late  Charges with respect to such
Principal  and  Interest  shall  be paid through the Conversion Date (as defined
below) on the next succeeding Installment Date to the record holder of this Note
on  the  applicable  Conversion  Date,  in cash ("CASH INTEREST").  Prior to the
payment  of  Interest on an Installment Date, Interest on this Note shall accrue
at  the  Interest  Rate.  Upon  the  occurrence and during the continuance of an
Event of Default, the Interest Rate shall be increased to fifteen percent (15%).
In  the  event  that such Event of Default is subsequently cured, the adjustment
referred to in the preceding sentence shall cease to be effective as of the date
of  such  cure;  provided  that  the  Interest  as calculated and unpaid at such
increased rate during the continuance of such Event of Default shall continue to
apply  to  the extent relating to the days after the occurrence of such Event of
Default  through  and  including the date of cure of such Event of Default.  The
Company  shall  pay  any  and  all taxes that may be payable with respect to the
issuance and delivery of Interest Shares; provided that the Company shall not be
                                          --------
required  to  pay  any  tax  that  may  be payable in respect of any issuance of
Interest  Shares  to  any  Person  other  than the Holder or with respect to any
income  tax  due  by  the  Holder  with  respect  to  such  Interest  Shares.

     (3)     CONVERSION OF NOTES.  This Note shall be convertible into shares of
             -------------------
the  Company's common stock, par value $0.001 per share (the "COMMON STOCK"), on
the  terms  and  conditions  set  forth  in  this  Section 3 (the "CONVERSION").

          (a)     Conversion  Right.  Subject to the provisions of Section 3(d),
                  -----------------
at any time or times on or after the Issuance Date, the Holder shall be entitled
to  convert  any  portion  of  the  outstanding and unpaid Conversion Amount (as
defined  below)  into  fully  paid  and  nonassessable shares of Common Stock in
accordance  with  Section  3(c), at the Conversion Rate (as defined below).  The
Company  shall  not  issue  any  fraction  of  a  share of Common Stock upon any
Conversion.  If  the  issuance  would  result in the issuance of a fraction of a
share  of  Common  Stock,  the  Company  shall round such fraction of a share of
Common  Stock  up to the nearest whole share.  The Company shall pay any and all
taxes  that  may  be payable with respect to the issuance and delivery of Common
Stock  upon  Conversion  of  any  Conversion  Amount.

          (b)     Conversion  Rate.  The  number  of  shares  of  Common  Stock
                  ----------------
issuable upon Conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the  "CONVERSION  RATE").

               (i)     "CONVERSION AMOUNT" means the portion of the Principal to
be  converted, redeemed or otherwise with respect to which this determination is
being  made.

               (ii)     "CONVERSION  PRICE" means, as of any Conversion Date (as
defined  below)  or other date of determination, $2.25, subject to adjustment as
provided  herein.

          (c)     Mechanics  of  Conversion.
                  -------------------------

               (i)     Optional  Conversion.  To  convert  any Conversion Amount
                       --------------------
into  shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall
(A)  transmit  by  facsimile  (or otherwise deliver), for receipt on or prior to
11:59  p.m.,  New  York  Time,  on  such  date,  a copy of an executed notice of
Conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to
                                          ---------
the  Company  and (B) if required by Section 3(c)(iii), surrender this Note to a
common  carrier  for  delivery  to  the  Company  as  soon  as practicable on or
following such date (or an indemnification undertaking with respect to this Note
in  the  case  of its loss, theft or destruction).  On or before the first (1st)
Business  Day  following the date of receipt of a Conversion Notice, the Company
shall  transmit by facsimile a confirmation of receipt of such Conversion Notice
to  the  Holder  and  the  Transfer Agent.  On or before the second Business Day
following  the  date  of  receipt  of  a  Conversion Notice (the "SHARE DELIVERY
DATE"),  the Company shall (X) provided that the Transfer Agent is participating
in  the  DTC  Fast  Automated Securities Transfer Program, credit such aggregate
number  of  shares  of Common Stock to which the Holder shall be entitled to the
Holder's  or  its  designee's  balance  account  with  DTC  through  its Deposit
Withdrawal  Agent  Commission  system  or  (Y)  if  the  Transfer  Agent  is not
participating  in  the DTC Fast Automated Securities Transfer Program, issue and
deliver  to  the  address  as specified in the Conversion Notice, a certificate,
registered  in  the name of the Holder or its designee, for the number of shares
of  Common  Stock  to  which  the  Holder  shall  be

                                      - 2 -
<PAGE>
entitled.  If  this Note is physically surrendered for Conversion as required by
Section 3(c)(iii) and the outstanding Principal of this Note is greater than the
Principal  portion  of  the  Conversion Amount being converted, then the Company
shall  as soon as practicable and in no event later than three (3) Business Days
after  receipt  of  this  Note  and at its own expense, issue and deliver to the
holder  a  new  Note  (in  accordance  with  Section  17(d))  representing  the
outstanding  Principal not converted.  The Person or Persons entitled to receive
the  shares  of  Common  Stock  issuable upon a Conversion of this Note shall be
treated  for  all  purposes  as  the  record holder or holders of such shares of
Common  Stock  on  the Conversion Date.  In the event of a partial Conversion of
this Note pursuant hereto, the principal amount converted shall be deducted from
the  Installment  Amounts  relating to the Installment Dates as set forth in the
Conversion  Notice.

               (ii)     Company's  Failure  to  Timely Convert.  If within three
                        --------------------------------------
(3)  Trading  Days  after  the  Company's  receipt  of  the  facsimile copy of a
Conversion  Notice  the Company shall fail to issue and deliver a certificate to
the  Holder  or  credit  the Holder's balance account with DTC for the number of
shares  of  Common  Stock  to  which  the  Holder is entitled upon such holder's
Conversion of any Conversion Amount (a "CONVERSION FAILURE"), and if on or after
such  Trading  Day  the  Holder  purchases  (in  an  open  market transaction or
otherwise)  Common  Stock  to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such Conversion that the Holder anticipated receiving
from the Company (a "BUY-IN"), then the Company shall, within three (3) Business
Days  after  the Holder's request and in the Holder's discretion, either (i) pay
cash  to  the  Holder  in  an  amount equal to the Holder's total purchase price
(including  brokerage  commissions,  if  any)  for the shares of Common Stock so
purchased  (the  "BUY-IN  PRICE"),  at  which  point the Company's obligation to
deliver  such  certificate  (and to issue such Common Stock) shall terminate, or
(ii)  promptly  honor  its  obligation to deliver to the Holder a certificate or
certificates  representing  such  Common  Stock and pay cash to the Holder in an
amount  equal to the excess (if any) of the Buy-In Price over the product of (A)
such  number  of  shares of Common Stock, times (B) the Closing Bid Price on the
Conversion  Date.

               (iii)     Book-Entry.  Notwithstanding  anything  to the contrary
                         ----------
set forth herein, upon Conversion of any portion of this Note in accordance with
the  terms hereof, the Holder shall not be required to physically surrender this
Note  to  the  Company unless (A) the full Conversion Amount represented by this
Note  is  being  converted or (B) the Holder has provided the Company with prior
written  notice (which notice may be included in a Conversion Notice) requesting
reissuance  of  this  Note upon physical surrender of this Note.  The Holder and
the  Company  shall  maintain  records  showing the Principal, Interest and Late
Charges  converted  and  the  dates  of such Conversions or shall use such other
method,  reasonably  satisfactory  to  the  Holder and the Company, so as not to
require  physical  surrender  of  this  Note  upon  Conversion.

               (iv)     Pro  Rata  Conversion;  Disputes.  In the event that the
                        --------------------------------
Company  receives a Conversion Notice from more than one holder of Notes for the
same  Conversion  Date  and  the  Company can convert some, but not all, of such
portions  of the Notes submitted for Conversion, the Company, subject to Section
3(d),  shall  convert from each holder of Notes electing to have Notes converted
on  such  date a pro rata amount of such holder's portion of its Notes submitted
for  Conversion  based on the principal amount of Notes submitted for Conversion
on  such  date  by such holder relative to the aggregate principal amount of all
Notes  submitted  for  Conversion on such date.  In the event of a dispute as to
the number of shares of Common Stock issuable to the Holder in connection with a
Conversion  of  this  Note,  the Company shall issue to the Holder the number of
shares  of  Common  Stock  not in dispute and resolve such dispute in accordance
with  Section  24.

          (d)     Limitations  on  Conversions.
                  ----------------------------

               (i)     Beneficial  Ownership.  The  Company shall not effect any
                       ---------------------
Conversion of this Note, and the Holder of this Note shall not have the right to
convert  any  portion  of this Note pursuant to Section 3(a), to the extent that
after  giving  effect to such Conversion, the Holder (together with the Holder's
affiliates) would beneficially own in excess of 4.99% (the "MAXIMUM PERCENTAGE")
of  the  number  of  shares of Common Stock outstanding immediately after giving
effect  to  such Conversion.  For purposes of the foregoing sentence, the number
of  shares  of  Common Stock beneficially owned by the Holder and its affiliates
shall  include  the number of shares of Common Stock issuable upon Conversion of
this  Note  with  respect  to  which the determination of such sentence is being
made,  but  shall  exclude  the  number of shares of Common Stock which would be
issuable upon (A) Conversion of the remaining, nonconverted portion of this Note
beneficially  owned  by  the Holder or any of its affiliates and (B) exercise or
Conversion of the unexercised or nonconverted portion of any other securities of
the

                                      - 3 -
<PAGE>
Company  (including, without limitation, any Other Notes or warrants) subject to
a  limitation  on  Conversion  or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates.  Except as set
forth  in  the  preceding  sentence,  for  purposes  of  this  Section  3(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities  Exchange  Act of 1934, as amended (the "1934 ACT").  For purposes of
this  Section 3(d)(i), in determining the number of outstanding shares of Common
Stock,  the  Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company's most recent Form 10-Q or Form 8-K, as the case
may  be  (y)  a  more recent public announcement by the Company or (z) any other
notice  by  the Company or the Transfer Agent setting forth the number of shares
of  Common  Stock  outstanding.  For any reason at any time, upon the written or
oral  request  of  the Holder, the Company shall within one Business Day confirm
orally  and  in  writing to the Holder the number of shares of Common Stock then
outstanding.  In  any  case,  the  number  of outstanding shares of Common Stock
shall  be  determined  after  giving  effect  to  the  Conversion or exercise of
securities  of the Company, including this Note, by the Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported.  By written notice to the Company, the Holder may increase or decrease
the  Maximum Percentage to any other percentage not in excess of 9.99% specified
in  such notice; provided that (i) any such increase will not be effective until
the  sixty-first  (61st)  day after such notice is delivered to the Company, and
(ii)  any such increase or decrease will apply only to the Holder and not to any
other  holder  of  Notes.

               (ii)     Principal  Market  Regulation.  The Company shall not be
                        -----------------------------
obligated  to  issue  any shares of Common Stock upon Conversion of this Note if
the issuance of such shares of Common Stock would exceed the aggregate number of
shares  of Common Stock which the Company may issue upon Conversion or exercise,
as  applicable,  of  the  Notes  and  Warrants  without  breaching the Company's
obligations  under  the  rules  or  regulations  of  the  Principal  Market (the
"EXCHANGE  CAP"),  except that such limitation shall not apply in the event that
the  Company  (A)  obtains  the  approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of Common Stock in excess
of  such  amount  or  (B)  obtains a written opinion from outside counsel to the
Company  that  such  approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders.  Until such approval or written opinion is
obtained,  no  holder of the Notes pursuant to the Securities Exchange Agreement
(the  "HOLDERS")  shall be issued in the aggregate, upon Conversion or exercise,
as applicable, of Notes or Warrants, shares of Common Stock in an amount greater
than  the product of the Exchange Cap multiplied by a fraction, the numerator of
which  is  the  principal  amount of Notes issued to the Holders pursuant to the
Securities  Exchange  Agreement on the Closing Date and the denominator of which
is the aggregate principal amount of all Notes issued to the Holders pursuant to
the  Securities  Exchange  Agreement  on  the Closing Date (with respect to each
Purchaser,  the  "EXCHANGE  CAP  ALLOCATION").  In  the event that any Purchaser
shall  sell  or otherwise transfer any of such Purchaser's Notes, the transferee
shall  be  allocated  a  pro  rata  portion  of  such  Purchaser's  Exchange Cap
Allocation,  and  the  restrictions  of  the  prior sentence shall apply to such
transferee  with respect to the portion of the Exchange Cap Allocation allocated
to  such transferee.  In the event that any holder of Notes shall convert all of
such  holder's  Notes  into  a  number  of  shares of Common Stock which, in the
aggregate,  is  less  than  such  holder's  Exchange  Cap  Allocation,  then the
difference  between  such  holder's  Exchange  Cap  Allocation and the number of
shares  of Common Stock actually issued to such holder shall be allocated to the
respective  Exchange  Cap Allocations of the remaining holders of Notes on a pro
rata  basis  in  proportion  to the aggregate principal amount of the Notes then
held  by  each  such  holder.

     (4)     RIGHTS  UPON  EVENT  OF  DEFAULT.
             --------------------------------

          (a)     Event  of  Default.  Each  of  the  following  events  shall
                  ------------------
constitute  an  "EVENT  OF  DEFAULT":

               (i)     The  failure  of  the  applicable  Registration Statement
required  to  be  filed  pursuant  to  the  Registration  Rights Agreement to be
declared  effective  by the SEC, or, while the applicable Registration Statement
is required to be maintained effective pursuant to the terms of the Registration
Rights  Agreement,  the  effectiveness  of the applicable Registration Statement
lapses  for  any  reason  (including, without limitation, the issuance of a stop
order)  or  is  unavailable  to  any holder of the Notes for sale of all of such
holder's  Registrable  Securities  (as  defined  in  the  Registration  Rights
Agreement)  in  accordance  with the terms of the Registration Rights Agreement,
and  such lapse or unavailability continues for a period of five (5) consecutive
Trading  Days  or  for  more  than  an aggregate of ten (10) days in any 365-day
period  (other  than  days  during  an Allowable Grace Period (as defined in the
Registration  Rights  Agreement));

                                      - 4 -
<PAGE>
               (ii)     If  after  Conversion,  the  suspension  from trading or
failure  of  the Common Stock to be listed on an Eligible Market for a period of
five  (5)  consecutive  Trading  Days  or for more than an aggregate of ten (10)
Trading  Days  in  any  365-day  period;

               (iii)     The  Company's (A) failure to cure a Conversion Failure
by  delivery  of  the  required number of shares of Common Stock within ten (10)
Business  Days  after  the  applicable Conversion Date or (B) notice, written or
oral,  to  any  holder  of the Notes, including by way of public announcement or
through  any  of  its agents, at any time, of its intention not to comply with a
request for Conversion of any Notes into shares of Common Stock that is tendered
in  accordance  with the provisions of the Notes, other than pursuant to Section
3(d);

               (iv)     At  any time following the 10th consecutive Business Day
that  the Holder's Authorized Share Allocation is less than the number of shares
of  Common  Stock that the Holder would be entitled to receive upon a Conversion
of the full Conversion Amount of this Note (without regard to any limitations on
Conversion  set  forth  in  Section  3(d)  or  otherwise);

               (v)     The  Company's failure to pay to the Holder any amount of
Principal,  Interest,  Late  Charges or other amounts when and as due under this
Note (including, without limitation, the Company's failure to pay any redemption
payments  or amounts hereunder) or any other Transaction Document (as defined in
the Securities Exchange Agreement) or any other agreement, document, certificate
or  other  instrument delivered in connection with the transactions contemplated
hereby  and  thereby  to  which  the Holder is a party, except, in the case of a
failure  to pay Interest and Late Charges when and as due, in which case only if
such  failure  continues  for  a  period  of  at  least  five (5) Business Days;

               (vi)     The entry by a court having jurisdiction in the premises
of  (i) a decree or order for relief in respect of the Company or any Subsidiary
of  a  voluntary  case  or  proceeding  under  any  applicable  Federal or State
bankruptcy,  insolvency, reorganization or other similar law or (ii) a decree or
order  adjudging  the  Company  or  any  Subsidiary as bankrupt or insolvent, or
approving  as  properly  filed  a  petition seeking reorganization, arrangement,
adjustment  or  composition  of  or  in respect of the Company or any Subsidiary
under  any  applicable  Federal  or  State  law or (iii) appointing a custodian,
receiver,  liquidator, assignee, trustee, sequestrator or other similar official
of  the Company or any Subsidiary or of any substantial part of its property, or
ordering  the  winding  up or liquidation of its affairs, and the continuance of
any  such  decree or order for relief or any such other decree or order unstayed
and  in  effect  for  a  period  of  60  consecutive  days;

               (vii)     The  commencement by the Company or any Subsidiary of a
voluntary  case  or proceeding under any applicable Federal or State bankruptcy,
insolvency,  reorganization  or  other  similar  law  or  of  any  other case or
proceeding  to  be  adjudicated a bankrupt or insolvent, or the consent by it to
the  entry  of  a  decree  or  order for relief in respect of the Company or any
Subsidiary  in an involuntary case or proceeding under any applicable Federal or
State  bankruptcy,  insolvency,  reorganization  or  other similar law or to the
commencement  of  any bankruptcy or insolvency case or proceeding against it, or
the  filing  by  it of a petition or answer or consent seeking reorganization or
relief  under  any  applicable Federal or State law, or the consent by it to the
filing  of  such  petition  or  to  the appointment of or taking possession by a
custodian,  receiver,  liquidator,  assignee,  trustee,  sequestrator  or  other
similar  official of the Company or any Subsidiary or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay its debts generally as
they  become  due,  or  the  taking  of  corporate  action by the Company or any
Subsidiary  in  furtherance  of  any  such  action;

               (viii)     The  Company  breaches  any  material  representation,
warranty,  covenant  or  other  term  or  condition of any Transaction Document,
except,  in the case of a breach of a covenant or other term or condition of any
Transaction  Document  which  is  curable,  only  if  the  Holder gives five (5)
Business Days prior notice of such breach and it remains uncured for a period of
at  least  five  (5)  Business  Days;

               (ix)     (A)  the  indictment  or  conviction of any of the named
executive  officers  (as  defined in Item 402(a)(3) of Regulation S-K) or any of
the  directors of the Company of a violation of federal or state securities laws
or  (B)  the  settlement  in  an  amount  over $1,000,000 by any such officer or
director  of  an action relating to such officer's violation of federal or state
securities  laws,  breach  of  fiduciary  duties  or  self-dealing;

                                      - 5 -
<PAGE>
               (x)     Any  breach  or  failure  in  any  respect to comply with
Section  9  of  this  Note;  or

               (xi)     Any  Event  of  Default  (as defined in the Other Notes)
occurs  with  respect  to  any  Other  Notes.

          (b)     Redemption  Right.  Promptly  after the occurrence of an Event
                  -----------------
of  Default  with  respect  to  this  Note  or any Other Note, the Company shall
deliver written notice thereof via facsimile and overnight courier (an "EVENT OF
DEFAULT  NOTICE")  to the Holder.  At any time after the earlier of the Holder's
receipt  of an Event of Default Notice and the Holder becoming aware of an Event
of  Default,  the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the portion of this Note the Holder is electing to redeem.  Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be
redeemed  by  the  Company at a price equal to the greater of (i) the product of
(x)  the  sum  of the Conversion Amount to be redeemed together with accrued and
unpaid  Interest  with  respect to such Conversion Amount and accrued and unpaid
Late  Charges  with  respect  to such Conversion Amount and Interest and (y) the
Redemption  Premium and (ii) the product of (A) the Conversion Rate with respect
to  such  sum of the Conversion Amount together with accrued and unpaid Interest
with  respect to such Conversion Amount and accrued and unpaid Late Charges with
respect  to  such  Conversion  Amount and Interest in effect at such time as the
Holder  delivers  an Event of Default Redemption Notice and (B) the Closing Sale
Price  of  the  Common  Stock  on  the  date immediately preceding such Event of
Default (the "EVENT OF DEFAULT REDEMPTION PRICE").  Redemptions required by this
Section  4(b) shall be made in accordance with the provisions of Section 12.  In
the  event  of  a partial redemption of this Note pursuant hereto, the principal
amount  redeemed  shall be deducted from the Installment Amounts relating to the
applicable  Installment  Dates  as  set forth in the Event of Default Redemption
Notice.

          (c)     In  addition,  and  without limitation of any other rights and
remedies hereunder, upon the first occurrence of a default under Section 4(a)(v)
                                                                 ---------------
of  this  Note,  without  regard  to  any  cure  period thereunder, and upon the
expiration  of  each  additional  30  day  thereafter  during which the Event of
Default  continues,  in  whole  or  in  part (such late payment, the "DELINQUENT
PAYMENT  AMOUNT"),  the  Company shall issue a Warrant to the Holder in the form
attached  to the Securities Exchange Agreement (including any warrants issued in
exchange  therefore  or  replacement  thereof,  a  "WARRANT") for such number of
shares  of Common Stock of the Company equal to the Delinquent Payment Amount at
such  time  divided  by  the Conversion Price.  Upon the second occurrence of an
Event  of Default under Section 4(a)(v) of this Note, without regard to any cure
                        ---------------
period  thereunder,  the  Company  shall  issue a Warrant to the Holder for such
number  of  shares  of  Common  Stock  of  the  Company equal to the outstanding
principal balance of the Note at such time divided by the Conversion Price.  The
issuance  of  any  Warrant hereunder is not a cure of any Event of Default.  The
Company  and  the  Holder  agree  that  it  would  be  extremely  difficult  and
impracticable  under the presently known and anticipated facts and circumstances
to  ascertain  and  fix with precision the actual damages the Holder would incur
should  the Company delay in making timely payments hereunder, and, accordingly,
the  Company  and  the  Holder  agree that a Warrant shall be issued as provided
herein  as liquidated damages for such delay, and not as a penalty.  The Company
and  the  Holder  agree  that the liquidated damages identified herein are not a
penalty, but instead are a good faith and reasonable estimate of the damages and
loss  the  Holder  would suffer in the event the Company delays in making timely
payments  under  this  Note.

                                      - 6 -
<PAGE>
     (5)     RIGHTS  UPON  FUNDAMENTAL  TRANSACTION  AND  CHANGE  OF  CONTROL.
             -----------------------------------------------------------------

          (a)     Assumption.  The Company shall not enter into or be party to a
                  ----------
Fundamental  Transaction unless (i)  the Successor Entity assumes in writing all
of  the  obligations  of  the  Company under this Note and the other Transaction
Documents  in  accordance  with  the provisions of this Section 5(a) pursuant to
written agreements in form and substance reasonably satisfactory to the Required
Holders  and  approved  by  the  Required  Holders  prior  to  such  Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for  such  Notes  a  security  of  the  Successor  Entity evidenced by a written
instrument  substantially similar in form and substance to the Notes, including,
without  limitation,  having  a  principal amount and interest rate equal to the
principal  amounts  and  the interest rates of the Notes held by such holder and
having  similar  ranking  to the Notes, and satisfactory to the Required Holders
and  (ii)  the  Successor  Entity  (including  its  Parent Entity) is a publicly
traded  corporation  whose common stock is quoted on or listed for trading on an
Eligible  Market  (a  "PUBLIC  SUCCESSOR  ENTITY").  Upon  the occurrence of any
Fundamental  Transaction,  the  Successor  Entity  shall  succeed  to,  and  be
substituted  for  (so  that  from  and  after  the  date  of  such  Fundamental
Transaction,  the provisions of this Note referring to the "Company" shall refer
instead  to the Successor Entity), and may exercise every right and power of the
Company  and  shall assume all of the obligations of the Company under this Note
with  the  same effect as if such Successor Entity had been named as the Company
herein.  Upon  consummation of the Fundamental Transaction, the Successor Entity
shall  deliver  to  the  Holder  confirmation  that  there  shall be issued upon
Conversion  or redemption of this Note at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of the Company's Common Stock (or
other  securities,  cash,  assets  or  other  property)  purchasable  upon  the
Conversion  or  redemption  of  the Notes prior to such Fundamental Transaction,
such  shares  of  the  publicly  traded  common stock (or its equivalent) of the
Successor  Entity  (including its Parent Entity), as adjusted in accordance with
the  provisions  of  this  Note.  The  provisions  of  this  Section shall apply
similarly  and  equally  to  successive  Fundamental  Transactions  and shall be
applied  without  regard  to  any limitations on the Conversion or redemption of
this  Note.

          (b)     Redemption  Right.  No sooner than fifteen (15) days nor later
                  -----------------
than  ten  (10)  days  prior to the consummation of a Change of Control, but not
prior  to  the  public announcement of such Change of Control, the Company shall
deliver written notice thereof via facsimile and overnight courier to the Holder
(a  "CHANGE  OF CONTROL NOTICE").  At any time during the period beginning after
the Holder's receipt of a Change of Control Notice and ending on the date of the
consummation  of  such  Change  of Control (or, in the event a Change of Control
Notice  is not delivered at least ten (10) days prior to a Change of Control, at
any  time  on  or  after  the  date  which is ten (10) days prior to a Change of
Control  and  ending  ten  (10)  days  after  the consummation of such Change of
Control),  the  Holder  may  require the Company to redeem all or any portion of
this  Note  by  delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE")  to  the  Company,  which  Change  of  Control  Redemption Notice shall
indicate the Conversion Amount the Holder is electing to redeem.  The portion of
this  Note subject to redemption pursuant to this Section 5 shall be redeemed by
the  Company  at  a price equal to the greater of (i) the product of (x) 125% of
the sum of the Conversion Amount being redeemed together with accrued and unpaid
Interest  with  respect  to  such  Conversion Amount and accrued and unpaid Late
Charges with respect to such Conversion Amount and Interest and (y) the quotient
determined  by  dividing  (A)  the  Closing  Sale  Price  of  the  Common  Stock
immediately following the public announcement of such proposed Change of Control
by  (B)  the  Conversion Price and (ii) 125% of the sum of the Conversion Amount
being  redeemed  together  with accrued and unpaid Interest with respect to such
Conversion  Amount  and  accrued  and  unpaid  Late Charges with respect to such
Conversion  Amount  and  Interest  (the  "CHANGE  OF CONTROL REDEMPTION PRICE").
Redemptions  required  by  this  Section  5 shall be made in accordance with the
provisions  of Section 12 and shall have priority to payments to stockholders in
connection  with  a Change of Control.  Notwithstanding anything to the contrary
in  this  Section  5,  but  subject to Section 3(d), until the Change of Control
Redemption  Price  (together  with  any  interest  thereon) is paid in full, the
Conversion  Amount  submitted  for  redemption under this Section 5(c) (together
with  any interest thereon) may be converted, in whole or in part, by the Holder
into  Common  Stock pursuant to Section 3.  In the event of a partial redemption
of  this  Note  pursuant hereto, the principal amount redeemed shall be deducted
from the Installment Amounts relating to the applicable Installment Dates as set
forth  in  the  Change  of  Control  Redemption  Notice.

                                      - 7 -
<PAGE>
     (6)     RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
             -------------------------------------------------------------------

          (a)     Purchase  Rights.  Except  with respect to the purchase of any
                  ----------------
current  Subsidiaries or any proposed acquisition of a new Subsidiary and except
as  disclosed  in  the SEC Documents filed at least three Business Days prior to
the  date  of this Agreement), or the issuance of any shares of the Common Stock
to  employees  or  consultants  for  services  rendered  to  the  Company or any
Subsidiary,  or  the issuance of any shares of the Common Stock in settlement of
debts  or  disputes  of  the  Company  or any Subsidiary, or the issuance of any
shares  of  the  Common Stock to any lender in connection with financings of the
Company  or  any  Subsidiary,  or the issuance of any shares of the Common Stock
pursuant  to  any Stock Option Plan adopted by the Company or any Subsidiary, or
shares  of  the  Common  Stock issued pursuant to any S-8 Registration Statement
filed  by the Company with the SEC, or as otherwise consented to by the Required
Holders  (an  "EXCLUDED SECURITY"), if at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities  or  other  property  pro  rata to the record holders of any class of
Common  Stock  (the  "PURCHASE  RIGHTS"),  then  the  Holder will be entitled to
acquire,  upon  the  terms  applicable  to  such  Purchase Rights, the aggregate
Purchase  Rights which the Holder could have acquired if the Holder had held the
number  of  shares  of  Common Stock acquirable upon complete Conversion of this
Note  (without  taking  into  account  any  limitations  or  restrictions on the
convertibility  of  this  Note) immediately before the date on which a record is
taken  for  the  grant, issuance or sale of such Purchase Rights, or, if no such
record  is taken, the date as of which the record holders of Common Stock are to
be  determined  for  the  grant, issue or sale of such Purchase Rights.  As used
herein,  "SEC  Documents"  means  all  reports,  schedules,  exhibits,  forms,
statements  and other documents required to be filed by the Company with the SEC
pursuant  to  the  reporting  requirements  of the 1934 Act (including documents
incorporated  by  reference therein), including the registration statement filed
by  the  Company  on  Form  SB-2  on  April  30, 2007 and any other registration
statements  filed  by  the  Company  pursuant  to the Securities Act of 1933, as
amended  (the  "1933  ACT").

          (b)     Other  Corporate  Events.  In  addition  to  and  not  in
                  ------------------------
substitution  for  any  other rights hereunder, prior to the consummation of any
Fundamental  Transaction pursuant to which holders of shares of Common Stock are
entitled  to  receive  securities or other assets with respect to or in exchange
for  shares  of  Common  Stock  (a  "CORPORATE  EVENT"),  the Company shall make
appropriate  provision  to ensure that the Holder will thereafter have the right
to  receive  upon  a  Conversion  of this Note, (i) in addition to the shares of
Common Stock receivable upon such Conversion, such securities or other assets to
which  the Holder would have been entitled with respect to such shares of Common
Stock  had  such  shares  of  Common  Stock  been  held  by  the Holder upon the
consummation  of  such  Corporate  Event  (without  taking  into  account  any
limitations  or restrictions on the convertibility of this Note) or (ii) in lieu
of  the  shares  of Common Stock otherwise receivable upon such Conversion, such
securities  or other assets received by the holders of shares of Common Stock in
connection  with the consummation of such Corporate Event in such amounts as the
Holder  would  have been entitled to receive had this Note initially been issued
with  Conversion rights for the form of such consideration (as opposed to shares
of  Common  Stock) at a Conversion rate for such consideration commensurate with
the Conversion Rate.  Provision made pursuant to the preceding sentence shall be
in a form and substance satisfactory to the Required Holders.  The provisions of
this  Section  shall  apply similarly and equally to successive Corporate Events
and  shall  be  applied  without  regard to any limitations on the Conversion or
redemption  of  this  Note.

     (7)     RIGHTS  UPON  ISSUANCE  OF  OTHER  SECURITIES.
             ---------------------------------------------

          (a)     Adjustment  of Conversion Price upon Issuance of Common Stock.
                  -------------------------------------------------------------
Subject  to  the  Exchange  Agreement,  if and whenever on or after the Issuance
Date,  the  Company  issues or sells, or in accordance with this Section 7(a) is
deemed  to  have  issued  or  sold,  any  shares  of Common Stock (including the
issuance  or  sale of shares of Common Stock owned or held by or for the account
of  the Company, but excluding shares of Common Stock deemed to have been issued
or  sold  by  the  Company  in  connection  with  any  Excluded  Security) for a
consideration  per  share  (the  "NEW  ISSUANCE  PRICE")  less than a price (the
"APPLICABLE PRICE") equal to the Conversion Price in effect immediately prior to
such issue or sale (the foregoing a "DILUTIVE ISSUANCE"), then immediately after
such  Dilutive  Issuance the Conversion Price then in effect shall be reduced to
an  amount  equal  to  the  New Issuance Price.  For purposes of determining the
adjusted  Conversion  Price  under  this  Section  7(a),  the following shall be
applicable:

               (i)     Issuance of Options.  If the Company in any manner grants
                       -------------------
or  sells  any  Options  and  the  lowest price per share for which one share of
Common  Stock  is  issuable  upon  the  exercise  of  any  such

                                      - 8 -
<PAGE>
Option  or upon Conversion or exchange or exercise of any Convertible Securities
issuable  upon  exercise  of such Option is less than the Applicable Price, then
such  share  of  Common Stock shall be deemed to be outstanding and to have been
issued  and  sold  by  the  Company  at the time of the granting or sale of such
Option  for  such  price  per  share.  For purposes of this Section 7(a)(i), the
"lowest price per share for which one share of Common Stock is issuable upon the
exercise  of  any  such Option or upon Conversion or exchange or exercise of any
Convertible  Securities issuable upon exercise of such Option" shall be equal to
the  sum  of the lowest amounts of consideration (if any) received or receivable
by  the  Company  with respect to any one share of Common Stock upon granting or
sale  of the Option, upon exercise of the Option and upon Conversion or exchange
or  exercise  of any Convertible Security issuable upon exercise of such Option.
No  further  adjustment  of  the  Conversion Price shall be made upon the actual
issuance  of  such  Common  Stock  or  of  such  Convertible Securities upon the
exercise  of  such Options or upon the actual issuance of such Common Stock upon
Conversion  or  exchange  or  exercise  of  such  Convertible  Securities.

               (ii)     Issuance  of  Convertible Securities.  If the Company in
                        ------------------------------------
any  manner  issues or sells any Convertible Securities and the lowest price per
share  for  which  one share of Common Stock is issuable upon such Conversion or
exchange  or exercise thereof is less than the Applicable Price, then such share
of  Common  Stock  shall be deemed to be outstanding and to have been issued and
sold  by  the  Company  at  the time of the issuance of sale of such Convertible
Securities for such price per share.  For the purposes of this Section 7(a)(ii),
the  "price  per share for which one share of Common Stock is issuable upon such
Conversion  or  exchange  or  exercise"  shall be equal to the sum of the lowest
amounts  of  consideration  (if  any) received or receivable by the Company with
respect  to  any  one  share  of  Common  Stock upon the issuance or sale of the
Convertible  Security  and  upon  the Conversion or exchange or exercise of such
Convertible  Security.  No  further  adjustment of the Conversion Price shall be
made  upon  the actual issuance of such Common Stock upon Conversion or exchange
or  exercise  of  such  Convertible Securities, and if any such issue or sale of
such  Convertible  Securities  is  made  upon  exercise of any Options for which
adjustment  of the Conversion Price had been or are to be made pursuant to other
provisions  of  this Section 7(a), no further adjustment of the Conversion Price
shall  be  made  by  reason  of  such  issue  or  sale.

               (iii)     Change  in  Option Price or Rate of Conversion.  If the
                         ----------------------------------------------
purchase  price  provided  for  in any Options, the additional consideration, if
any, payable upon the issue, Conversion, exchange or exercise of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or  exchangeable  or  exercisable  for  Common  Stock  changes  at any time, the
Conversion  Price  in effect at the time of such change shall be adjusted to the
Conversion  Price  which would have been in effect at such time had such Options
or  Convertible  Securities provided for such changed purchase price, additional
consideration  or  changed  Conversion  rate,  as  the  case may be, at the time
initially  granted,  issued or sold.  For purposes of this Section 7(a)(iii), if
the  terms  of any Option or Convertible Security that was outstanding as of the
Issuance  Date  are changed in the manner described in the immediately preceding
sentence,  then  such Option or Convertible Security and the Common Stock deemed
issuable  upon  exercise, Conversion or exchange thereof shall be deemed to have
been  issued as of the date of such change.  No adjustment shall be made if such
adjustment  would  result in an increase of the Conversion Price then in effect.

               (iv)     Calculation  of  Consideration  Received.  In  case  any
                        ----------------------------------------
Option is issued in connection with the issue or sale of other securities of the
Company,  together  comprising  one  integrated transaction in which no specific
consideration  is  allocated to such Options by the parties thereto, the Options
will  be  deemed  to  have  been  issued for a consideration of $.0.001.  If any
Common  Stock, Options or Convertible Securities are issued or sold or deemed to
have  been  issued or sold for cash, the consideration received therefor will be
deemed  to  be  the  net amount received by the Company therefor.  If any Common
Stock,  Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company  will  be  the  fair  value  of  such  consideration,  except where such
consideration  consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such securities on the
date  of  receipt.  If  any  Common Stock, Options or Convertible Securities are
issued  to  the owners of the non-surviving entity in connection with any merger
in  which  the  Company  is  the  surviving  entity, the amount of consideration
therefor  will  be deemed to be the fair value of such portion of the net assets
and  business  of  the  non-surviving  entity  as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be.  The fair value of
any  consideration  other  than cash or securities will be determined jointly by
the  Company  and  the  Required  Holders.  If  such parties are unable to reach
agreement  within  ten  (10)  days  after  the  occurrence of an event requiring
valuation  (the "VALUATION EVENT"), the fair value of such consideration will be
determined  within  five  (5)  Business

                                      - 9 -
<PAGE>
Days after the tenth (10th) day following the Valuation Event by an independent,
reputable  appraiser  jointly  selected by the Company and the Required Holders.
The  determination  of  such  appraiser shall be deemed binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by  the  Company.

               (v)     Record  Date.  If  the  Company  takes  a  record  of the
                       ------------
holders  of  Common  Stock  for  the  purpose of entitling them (A) to receive a
dividend  or  other  distribution  payable  in  Common  Stock,  Options  or  in
Convertible Securities or (B) to subscribe for or purchase Common Stock, Options
or  Convertible  Securities, then such record date will be deemed to be the date
of the issue or sale of the Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or the
date  of the granting of such right of subscription or purchase, as the case may
be.

          (b)     Adjustment of Conversion Price upon Subdivision or Combination
                  --------------------------------------------------------------
of  Common  Stock.  If  the  Company  at  any time on or after the Issuance Date
-----------------
subdivides  (by  any stock split, stock dividend, recapitalization or otherwise)
one  or  more  classes  of its outstanding shares of Common Stock into a greater
number  of  shares,  the  Conversion  Price  in effect immediately prior to such
subdivision  will  be proportionately reduced.  If the Company at any time on or
after  the  Issuance  Date  combines  (by  combination,  reverse  stock split or
otherwise)  one or more classes of its outstanding shares of Common Stock into a
smaller  number  of  shares, the Conversion Price in effect immediately prior to
such  combination  will  be  proportionately  increased.

          (c)     Other Events.  If any event occurs of the type contemplated by
                  ------------
the  provisions  of  this  Section  7  but  not  expressly  provided for by such
provisions  (including,  without  limitation, the granting of stock appreciation
rights,  phantom  stock  rights  or other rights with equity features), then the
Company's  Board  of  Directors  will  make  an  appropriate  adjustment  in the
Conversion  Price  so  as  to  protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined  pursuant  to  this  Section  7.

          (d)     Notices.
                  -------

               (i)     Immediately  upon  any adjustment of the Conversion Price
pursuant  to this Section 7, the Company will give written notice thereof to the
Holder,  setting  forth in reasonable detail, and certifying, the calculation of
such  adjustment.  In  the  case  of  a  dispute as to the determination of such
adjustment,  then  such  dispute  shall  be  resolved  in  accordance  with  the
procedures  set  forth  in  Section  24.

               (ii)     The  Company  will give written notice to each Holder at
least  ten  (10) Business Days prior to the date on which the Company closes its
books  or  takes  a record (I) with respect to any dividend or distribution upon
the  Common  Stock,  (II)  with  respect  to  any pro rata subscription offer to
holders  of Common Stock or (III) for determining rights to vote with respect to
any Fundamental Transaction or Liquidation Event, provided that such information
shall  be  made  known to the public prior to or in conjunction with such notice
being  provided  to  such  Holder.

               (iii)     The  Company  will  also  give  written  notice to each
Holder  no  later than (i) ten (10) Business Days prior to the date on which any
Fundamental  Transaction  or Liquidation Event will take place and (ii) the date
upon which such Fundamental Transaction or Liquidation Event is announced to the
public;  provided  that such information shall be made known to the public prior
to  or  in  conjunction  with  such  notice  being  provided  to  such  Holder.

     (8)     COMPANY  REDEMPTION.  The  Company  may  prepay  (a  "COMPANY
             -------------------
REDEMPTION")  all or any portion of this Note (the "COMPANY REDEMPTION AMOUNT"),
subject,  however to the payment of a prepayment penalty which shall be equal to
110%  of  the  outstanding  Principal, together with accrued and unpaid Interest
with  respect  to  such  Company  Redemption  Amount and accrued and unpaid Late
Charges  with  respect  to  such Company Redemption Amount and Interest.  If the
Company elects a Company Redemption, then the Company Redemption Amount which is
to  be  paid  to  the  Holder on the applicable Company Redemption Date shall be
redeemed  by  the Company on such Company Redemption Date, and the Company shall
pay  to  the  Holder  on  such  Company  Redemption  Date,  by  wire transfer of
immediately  available  funds, an amount in cash equal to the Company Redemption
Amount.

                                     - 10 -
<PAGE>
     (9)     MANDATORY  REDEMPTION AT MATURITY.  If any Notes remain outstanding
             ---------------------------------
on  the  Maturity Date, the Company shall redeem such Notes in cash in an amount
equal to the outstanding Principal plus any accrued but unpaid Interest and Late
Charges  (the  "MATURITY  DATE  REDEMPTION  PRICE").  The  Company shall pay the
Maturity  Date  Redemption  Price  on  the  Maturity  Date  by  wire transfer of
immediately  available funds to an account designated in writing by such Holder.
If  the Company fails to redeem all of the Principal outstanding on the Maturity
Date  by  payment of the Maturity Date Redemption Price, then in addition to any
remedy  such  Holder may have under any Transaction Document, (I) the applicable
Maturity  Date  Redemption Price payable in respect of such unredeemed Principal
shall  bear interest at the rate of 3.0% per month, prorated for partial months,
until  paid  in  full,  and (II) any Holder shall have the option to require the
Company  to  convert any or all of such Holder's Note and for which the Maturity
Date  Redemption  Price  (together  with any interest thereon) has not been paid
into  shares of Common Stock equal to the number which results from dividing the
Maturity  Date  Redemption  Price  (together  with  any interest thereon) by the
Conversion Price.  If the Company has failed to pay the Maturity Date Redemption
Price  in  a  timely  manner as described above, then the Maturity Date shall be
automatically  extended  for  the  Note  until the date the Holders receive such
shares of Common Stock or Maturity Date Redemption Price.  All redemptions shall
be  made  on  a  pro-rata  basis  to  all  holders  of  the  Notes.

     (10)     NONCIRCUMVENTION.  The  Company  hereby  covenants and agrees that
              ----------------
the  Company  will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of  this  Note,  and  will  at  all  times  in  good  faith carry out all of the
provisions  of  this  Note and take all action as may be required to protect the
rights  of  the  Holder  of  this  Note.

     (11)     RESERVATION  OF  AUTHORIZED  SHARES.
              -----------------------------------

          (a)     Reservation.  The  Company  shall initially reserve out of its
                  -----------
authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 130% of the Conversion Rate with respect to the Conversion
Amount  of  each such Note as of the Issuance Date.  So long as any of the Notes
are outstanding, the Company shall take all action necessary to reserve and keep
available  out  of  its  authorized  and  unissued  Common Stock, solely for the
purpose  of  effecting the Conversion of the Notes, 130% of the number of shares
of Common Stock as shall from time to time be necessary to effect the Conversion
of all of the Notes then outstanding pursuant to Sections 2 and 3; provided that
at  no  time shall the number of shares of Common Stock so reserved be less than
the  number  of shares required to be reserved by the previous sentence (without
regard  to any limitations on Conversions) (the "REQUIRED RESERVE AMOUNT").  The
initial  number  of shares of Common Stock reserved for Conversions of the Notes
and  each  increase  in  the number of shares so reserved shall be allocated pro
rata  among  the holders of the Notes based on the principal amount of the Notes
held  by  each  holder  at  the  Closing  (as defined in the Securities Exchange
Agreement) or increase in the number of reserved shares, as the case may be (the
"AUTHORIZED  SHARE  ALLOCATION").  In  the  event  that  a  holder shall sell or
otherwise  transfer  any  of  such  holder's  Notes,  each  transferee  shall be
allocated  a pro rata portion of such holder's Authorized Share Allocation.  Any
shares of Common Stock reserved and allocated to any Person which ceases to hold
any  Notes  shall be allocated to the remaining holders of Notes, pro rata based
on  the  principal  amount  of  the  Notes  then  held  by  such  holders.

          (b)     Insufficient  Authorized  Shares.  If at any time while any of
                  --------------------------------
the  Notes  remain  outstanding the Company does not have a sufficient number of
authorized  and  unreserved  shares of Common Stock to satisfy its obligation to
reserve for issuance upon Conversion of the Notes at least a number of shares of
Common  Stock  equal  to  the  Required  Reserve  Amount  (an  "AUTHORIZED SHARE
FAILURE"),  then  the  Company  shall  immediately  take all action necessary to
increase the Company's authorized shares of Common Stock to an amount sufficient
to  allow  the Company to reserve the Required Reserve Amount for the Notes then
outstanding.  Without limiting the generality of the foregoing sentence, as soon
as  practicable after the date of the occurrence of an Authorized Share Failure,
but  in  no  event  later  than  sixty  (60)  days  after the occurrence of such
Authorized  Share  Failure, the Company shall hold a meeting of its stockholders
for  the  approval  of  an increase in the number of authorized shares of Common
Stock.  In  connection  with  such  meeting,  the  Company  shall  provide  each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of Common Stock and
to  cause  its  board  of  directors  to recommend to the stockholders that they
approve  such  proposal.

     (12)     HOLDER'S  REDEMPTIONS.
              ---------------------

                                     - 11 -
<PAGE>
          (a)     Reservation.  The  Company  shall initially reserve out of its
                  -----------
authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 130% of the Conversion Rate with respect to the Conversion
Amount  of  each such Note as of the Issuance Date.  So long as any of the Notes
are outstanding, the Company shall take all action necessary to reserve and keep
available  out  of  its  authorized  and  unissued  Common Stock, solely for the
purpose  of  effecting the Conversion of the Notes, 130% of the number of shares
of Common Stock as shall from time to time be necessary to effect the Conversion
of all of the Notes then outstanding pursuant to Sections 2 and 3; provided that
at  no  time shall the number of shares of Common Stock so reserved be less than
the  number  of shares required to be reserved by the previous sentence (without
regard  to any limitations on Conversions) (the "REQUIRED RESERVE AMOUNT").  The
initial  number  of shares of Common Stock reserved for Conversions of the Notes
and  each  increase  in  the number of shares so reserved shall be allocated pro
rata  among  the holders of the Notes based on the principal amount of the Notes
held  by  each  holder  at  the  Closing  (as defined in the Securities Exchange
Agreement) or increase in the number of reserved shares, as the case may be (the
"AUTHORIZED  SHARE  ALLOCATION").  In  the  event  that  a  holder shall sell or
otherwise  transfer  any  of  such  holder's  Notes,  each  transferee  shall be
allocated  a pro rata portion of such holder's Authorized Share Allocation.  Any
shares of Common Stock reserved and allocated to any Person which ceases to hold
any  Notes  shall be allocated to the remaining holders of Notes, pro rata based
on  the  principal  amount  of  the  Notes  then  held  by  such  holders.

          (b)     Redemption  by  Other  Holders.  Upon the Company's receipt of
                  ------------------------------
notice from any of the holders of the Other Notes for redemption or repayment as
a  result  of  an  event  or  occurrence  substantially similar to the events or
occurrences  described  in  Section  4(b)  or  Section  5(b)  (each,  an  "OTHER
REDEMPTION  NOTICE"),  the  Company  shall  immediately forward to the Holder by
facsimile  a  copy  of such notice.  If the Company receives a Redemption Notice
and  one  or  more  Other  Redemption Notices, during the seven (7) Business Day
period  beginning  on  and  including  the date which is three (3) Business Days
prior  to  the Company's receipt of the Holder's Redemption Notice and ending on
and  including  the  date  which  is three (3) Business Days after the Company's
receipt  of  the  Holder's Redemption Notice and the Company is unable to redeem
all  principal,  interest and other amounts designated in such Redemption Notice
and  such  Other  Redemption Notices received during such seven (7) Business Day
period,  then the Company shall redeem a pro rata amount from each holder of the
Notes  (including  the  Holder)  based  on  the  principal  amount  of the Notes
submitted  for  redemption  pursuant  to  such  Redemption Notice and such Other
Redemption  Notices  received  by  the  Company  during  such seven Business Day
period.

     (13)     VOTING  RIGHTS.  The  Holder  shall  have  no voting rights as the
              --------------
holder  of  this Note, except as required by law, including, but not limited to,
the  General Corporation Law of the State of Delaware, and as expressly provided
in  this  Note.

     (14)     PARTICIPATION.  If  converted,  The  Holder, as the holder of this
              -------------
Note, shall be entitled to receive such dividends paid and distributions made to
the  holders  of  Common Stock to the same extent as if the Holder had converted
this  Note  into  Common  Stock (without regard to any limitations on Conversion
herein or elsewhere) and had held such shares of Common Stock on the record date
for  such  dividends  and  distributions.  Payments under the preceding sentence
shall  be  made concurrently with the dividend or distribution to the holders of
Common  Stock.

     (15)     VOTE  TO  ISSUE,  OR  CHANGE THE TERMS OF, NOTES.  The affirmative
              ------------------------------------------------
vote  at a meeting duly called for such purpose or the written consent without a
meeting of the Required Holders shall be required for any change or amendment to
this  Note  or  the  Other  Notes.

                                     - 12 -
<PAGE>
     (16)     TRANSFER.  This  Note  and  any shares of Common Stock issued upon
              --------
Conversion  of  this  Note  may be offered, sold, assigned or transferred by the
Holder  without  the  consent  of the Company, subject only to the provisions of
Section  2(f)  of  the  Securities  Exchange Agreement and the Securities Act of
1933,  as  amended.

     (17)     REISSUANCE  OF  THIS  NOTE.
              --------------------------

          (a)     Transfer.  If this Note is to be transferred, the Holder shall
                  --------
surrender  this  Note to the Company, whereupon the Company will forthwith issue
and  deliver upon the order of the Holder a new Note (in accordance with Section
17(d)),  registered  as  the  Holder  may  request, representing the outstanding
Principal  being  transferred  by  the  Holder  and,  if  less  then  the entire
outstanding  Principal  is  being  transferred,  a  new Note (in accordance with
Section  17(d))  to  the Holder representing the outstanding Principal not being
transferred.  The  Holder  and  any  assignee,  by  acceptance  of  this  Note,
acknowledge  and  agree  that,  by reason of the provisions of Section 3(c)(iii)
following  Conversion or redemption of any portion of this Note, the outstanding
Principal  represented by this Note may be less than the Principal stated on the
face  of  this  Note.

          (b)     Lost,  Stolen  or Mutilated Note.  Upon receipt by the Company
                  --------------------------------
of  evidence  reasonably  satisfactory  to  the  Company  of  the  loss,  theft,
destruction  or  mutilation  of  this  Note,  and, in the case of loss, theft or
destruction,  of any indemnification undertaking by the Holder to the Company in
customary  form  and, in the case of mutilation, upon surrender and cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance  with  Section  17(d))  representing  the  outstanding  Principal.

          (c)     Note  Exchangeable  for Different Denominations.  This Note is
                  -----------------------------------------------
exchangeable, upon the surrender hereof by the Holder at the principal office of
the  Company,  for  a new Note or Notes (in accordance with Section 17(d) and in
principal  amounts  of  at  least  $100,000)  representing  in the aggregate the
outstanding  Principal  of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of  such  surrender.

          (d)     Issuance  of  New  Notes.  Whenever the Company is required to
                  ------------------------
issue  a new Note pursuant to the terms of this Note, such new Note (i) shall be
of  like tenor with this Note, (ii) shall represent, as indicated on the face of
such new Note, the Principal remaining outstanding (or in the case of a new Note
being  issued  pursuant  to  Section  17(a)  or  Section  17(c),  the  Principal
designated  by  the Holder which, when added to the principal represented by the
other  new  Notes  issued  in connection with such issuance, does not exceed the
Principal  remaining  outstanding  under  this  Note  immediately  prior to such
issuance  of  new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall  have the same rights and conditions as this Note, and (v) shall represent
accrued  Interest  and  Late Charges on the Principal and Interest of this Note,
from  the  Issuance  Date.

     (18)     REMEDIES,  CHARACTERIZATIONS,  OTHER  OBLIGATIONS,  BREACHES  AND
              -----------------------------------------------------------------
INJUNCTIVE  RELIEF.  The  remedies provided in this Note shall be cumulative and
------------------
in addition to all other remedies available under this Note and any of the other
Transaction  Documents  at  law  or  in  equity  (including a decree of specific
performance  and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual and consequential damages for any failure by the
Company  to  comply  with the terms of this Note.  Amounts set forth or provided
for  herein  with  respect  to  payments,  Conversion  and  the  like  (and  the
computation thereof) shall be the amounts to be received by the Holder and shall
not,  except as expressly provided herein, be subject to any other obligation of
the  Company  (or  the  performance  thereof).  The  Company acknowledges that a
breach  by  it  of  its obligations hereunder will cause irreparable harm to the
Holder  and  that  the remedy at law for any such breach may be inadequate.  The
Company  therefore  agrees  that,  in the event of any such breach or threatened
breach,  the  Holder  shall  be  entitled,  in  addition  to all other available
remedies,  to  an  injunction  restraining  any breach, without the necessity of
showing  economic  loss  and  without any bond or other security being required.

     (19)     PAYMENT  OF  COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this
              ----------------------------------------------------
Note  is  placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action  to  collect  amounts due under this Note or to enforce the provisions of
this  Note  or  (b) there occurs any bankruptcy, reorganization, receivership of
the  Company  or  other  proceedings  affecting  Company  creditors'  rights and
involving  a  claim  under  this  Note,  then  the  Company  shall pay the costs

                                     - 13 -
<PAGE>
incurred  by  the  Holder  for  such  collection,  enforcement  or  action or in
connection  with  such  bankruptcy,  reorganization,  receivership  or  other
proceeding,  including,  but  not limited to, attorneys' fees and disbursements.

     (20)     CONSTRUCTION;  HEADINGS.  This  Note shall be deemed to be jointly
              -----------------------
drafted  by  the  Company and all the Holders and shall not be construed against
any person as the drafter hereof.  The headings of this Note are for convenience
of  reference  and shall not form part of, or affect the interpretation of, this
Note.

     (21)     FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part
              --------------------------------
of  the  Holder in the exercise of any power, right or privilege hereunder shall
operate  as  a  waiver  thereof, nor shall any single or partial exercise of any
such  power, right or privilege preclude other or further exercise thereof or of
any  other  right,  power  or  privilege.

     (22)     DISPUTE  RESOLUTION.  In  the  case  of  a  dispute  as  to  the
              -------------------
determination  of  the  Closing  Bid  Price  or  the  Closing  Sale Price or the
arithmetic  calculation  of  the  Conversion  Rate  or the Redemption Price, the
Company  shall submit the disputed determinations or arithmetic calculations via
facsimile  within  one  (1)  Business  Day of receipt, or deemed receipt, of the
Conversion  Notice  or  Redemption  Notice  or  other  event giving rise to such
dispute,  as  the case may be, to the Holder.  If the Company fails to object to
the  calculation of the number of Escrow Shares to be released or otherwise with
respect  to  the  Conversion Notice, within said time, then the Company shall be
deemed  to  have  waived  any  objections to said calculation and the Conversion
Notice. In the case of a dispute, the Company shall instruct the Escrow Agent to
transfer to the Holder the number of Common Shares that is not disputed, if any,
and  shall  transmit an explanation of the disputed determinations or arithmetic
calculations  to  the  Holder  and  Escrow  Agent  via  facsimile within one (1)
Business  Day  of  receipt  of  such Holder's Conversion Notice or other date of
determination.  If  the  Holder  and  the  Company are unable to agree upon such
determination  or  calculation  within  one  (1)  Business  Day of such disputed
determination  or arithmetic calculation being submitted to the Holder, then the
Company  shall,  within  one  Business Day submit via facsimile (a) the disputed
determination  of  the  Closing  Bid  Price  or  the  Closing  Sale  Price to an
independent,  reputable  investment bank selected by the Company and approved by
the  Holder or (b) the disputed arithmetic calculation of the Conversion Rate or
the  Redemption  Price  to  the  Company's independent, outside accountant.  The
Company,  at  the  Company's  expense,  shall  cause  the investment bank or the
accountant,  as  the  case may be, to perform the determinations or calculations
and  notify  the  Company  and  the  Holder of the results no later than one (1)
Business  Day  from  the  time  it  receives  the  disputed  determinations  or
calculations.  Such  investment  bank's  or  accountant's  determination  or
calculation,  as  the  case  may  be,  shall  be binding upon all parties absent
manifest  error.

     (23)     NOTICES;  PAYMENTS.
              ------------------

          (a)     Notices.  Whenever  notice  is required to be given under this
                  -------
Note, unless otherwise provided herein, such notice shall be given in accordance
with  Section  10(f)  of  the  Securities Exchange Agreement.  The Company shall
provide  the  Holder with prompt written notice of all actions taken pursuant to
this  Note,  including in reasonable detail a description of such action and the
reason therefore.  Without limiting the generality of the foregoing, the Company
will  give  written  notice to the Holder (i) immediately upon any adjustment of
the  Conversion  Price,  setting forth in reasonable detail, and certifying, the
calculation  of  such  adjustment and (ii) at least 20 days prior to the date on
which  the  Company  closes  its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any pro rata
subscription  offer  to holders of Common Stock or (C) for determining rights to
vote  with  respect  to any Fundamental Transaction, dissolution or liquidation,
provided  in  each  case that such information shall be made known to the public
prior  to  or  in  conjunction  with  such  notice being provided to the Holder.

          (b)     Payments.  Whenever  any  payment of cash is to be made by the
                  --------
Company  to  any  Person  pursuant  to  this Note, such payment shall be made in
lawful  money of the United States of America by a check drawn on the account of
the  Company  and  sent  via  overnight  courier  service to such Person at such
address  as previously provided to the Company in writing (which address, in the
case  of each of the Holders, shall initially be as set forth on the Schedule of
Buyers  attached to the Securities Exchange Agreement); provided that the Holder
may  elect  to  receive  a  payment  of  cash  via  wire transfer of immediately
available  funds  by providing the Company with prior written notice setting out
such  request  and the Holder's wire transfer instructions.  Whenever any amount
expressed  to  be due by the terms of this Note is due on any day which is not a
Business  Day, the same shall instead be due on the next succeeding day which is
a  Business  Day  and,  in  the  case  of  any Installment Date which is not the

                                     - 14 -
<PAGE>
date  on  which this Note is paid in full, the extension of the due date thereof
shall  not  be  taken  into  account  for  purposes of determining the amount of
Interest  due  on such date.  Any amount of Principal or other amounts due under
the Transaction Documents, other than Interest, which is not paid when due shall
result  in  a late charge being incurred and payable by the Company in an amount
equal to interest on such amount at the rate of eighteen percent (18%) per annum
from  the  date  such  amount  was  due  until  the  same is paid in full ("LATE
CHARGE").

     (24)     CANCELLATION.  After  all  Principal,  accrued  Interest and other
              ------------
amounts  at  any  time owed on this Note have been paid in full, this Note shall
automatically  be  deemed  canceled,  shall  be  surrendered  to the Company for
cancellation  and  shall  not  be  reissued.

     (25)     WAIVER  OF  NOTICE.  To  the  extent permitted by law, the Company
              ------------------
hereby  waives  demand,  notice,  protest  and  all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this  Note  and  the  Securities  Exchange  Agreement.

     (26)     GOVERNING  LAW.  This  Note  shall  be  construed  and enforced in
              --------------
accordance  with,  and  all  questions  concerning  the  construction, validity,
interpretation  and  performance of this Note shall be governed by, the internal
laws  of  the  State  of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other  than  the  State  of  New  York.

     (27)     CERTAIN  DEFINITIONS.  For  purposes  of  this Note, the following
              --------------------
terms  shall  have  the  following  meanings:

          (a)     "APPROVED  STOCK  PLAN"  means any employee benefit plan which
has  been  approved  by the Board of Directors of the Company, pursuant to which
the  Company's securities may be issued to any employee, officer or director for
services  provided  to  the  Company.

          (b)     "BLOOMBERG"  means  Bloomberg  Financial  Markets.

          (c)     "BUSINESS  DAY"  means  any day other than Saturday, Sunday or
other  day  on  which commercial banks in The City of New York are authorized or
required  by  law  to  remain  closed.

          (d)     "CHANGE  OF  CONTROL"  means any Fundamental Transaction other
than  (i)  any  reorganization,  recapitalization  or  reclassification in which
holders  of the Company's voting power immediately prior to such reorganization,
recapitalization  or  reclassification  continue  after  such  reorganization,
recapitalization  or  reclassification  to  hold publicly traded securities and,
directly  or  indirectly,  the  voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent  if  other  than  a  corporation)  of  such  entity or entities, (ii)
pursuant  to  a migratory merger effected solely for the purpose of changing the
jurisdiction  of incorporation of the Company or (iii) a Fundamental Transaction
that has been previously authorized by a written consent of the Required Holders
prior  to  the  consummation  of  such  Fundamental  Transaction.

          (e)     "CLOSING  BID  PRICE"  and "CLOSING SALE PRICE" means, for any
security  as  of  any  date,  the  last closing bid price and last closing trade
price,  respectively,  for such security on the Principal Market, as reported by
Bloomberg,  or,  if  the Principal Market begins to operate on an extended hours
basis  and  does not designate the closing bid price or the closing trade price,
as  the  case may be, then the last bid price or last trade price, respectively,
of such security prior to 5:00:00 p.m., New York Time, as reported by Bloomberg,
or,  if the Principal Market is not the principal securities exchange or trading
market  for  such  security,  the  last  closing  bid price or last trade price,
respectively,  of  such security on the principal securities exchange or trading
market  where  such security is listed or traded as reported by Bloomberg, or if
the  foregoing  do  not  apply,  the last closing bid price or last trade price,
respectively,  of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price  or  last  trade  price,  respectively,  is  reported for such security by
Bloomberg,  the  average  of the bid prices, or the ask prices, respectively, of
any  market  makers  for  such security as reported in the "pink sheets" by Pink
Sheets  LLC  (formerly the National Quotation Bureau, Inc.).  If the Closing Bid
Price  or  the  Closing  Sale  Price  cannot  be  calculated for a security on a
particular  date  on  any  of  the  foregoing  bases,

                                     - 15 -
<PAGE>
the  Closing  Bid  Price  or the Closing Sale Price, as the case may be, of such
security  on  such date shall be the fair market value as mutually determined by
the  Company  and the Holder.  If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant  to  Section  24.  All such determinations to be appropriately adjusted
for  any  stock  dividend,  stock  split,  stock  combination  or  other similar
transaction  during  the  applicable  calculation  period.

          (f)     "CLOSING  DATE"  shall  have  the  meaning  set  forth  in the
Securities  Exchange  Agreement,  which  date  is the date the Company initially
issued  Notes  pursuant  to  the  terms  of  the  Securities Exchange Agreement.

          (g)     "COMPANY CONVERSION PRICE" means, as of any Conversion Date or
other  date  of  determination,  the  applicable  Conversion  Price.  All  such
determinations to be appropriately adjusted for any stock split, stock dividend,
stock combination or other similar transaction that proportionately decreases or
increases  the  Common  Stock  the  applicable such Company Conversion Measuring
Period.

          (h)     "CONVERTIBLE  SECURITIES" means any stock or securities (other
than  Options)  directly  or  indirectly  convertible  into  or  exercisable  or
exchangeable  for  Common  Stock.

          (i)     "ELIGIBLE  MARKET"  means  the  Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange or The Nasdaq SmallCap Market.

          (j)     "EXCLUDED  SECURITIES"  means  any  Common  Stock  issued  or
issuable: (i) in connection with any Approved Stock Plan or shares of the Common
Stock  issued  pursuant  to  any S-8 Registration Statement filed by the Company
with the SEC; (ii) upon Conversion of the Notes or the exercise of the Warrants;
(iii)  pursuant to a bona fide firm commitment underwritten public offering with
a  nationally  recognized  underwriter  which  generates  gross  proceeds to the
Company  in  excess  of  $25,000,000  (other than an "at-the-market offering" as
defined  in  Rule  415(a)(4)  under  the  1933  Act and "equity lines"); (iv) in
connection  with  the  payment  of  any  Interest  Shares  on  the Notes; (v) in
connection  with  any acquisition by the Company, whether through an acquisition
of stock or a merger of any business, assets or technologies the primary purpose
of  which  is  not  to  raise  equity capital in an amount not to exceed, in the
aggregate  20%  of  the outstanding shares of Common Stock in any calendar year;
(vi)  upon  Conversion  of  any  Options  or  Convertible  Securities  which are
outstanding  on  the  day immediately preceding the Issuance Date, provided that
the terms of such Options or Convertible Securities are not amended, modified or
changed  on  or after the Issuance Date; (vii) the issuance of any shares of the
Common  Stock  in  settlement  of  debts  or  disputes  of  the  Company  or any
Subsidiary;  (viii)  the issuance of any shares of the Common Stock to employees
or  consultants for services rendered to the Company or any Subsidiary; (ix) the
issuance  of  any  shares  of  the Common Stock to any lender in connection with
financings  of  the  Company  or  any Subsidiary; and (viii) as may be otherwise
provided  in  the  Securities  Exchange  Agreement  or  in  this  Note.

          (k)     "FISCAL  QUARTER" means each of the fiscal quarters adopted by
the  Company  for  financial reporting purposes that correspond to the Company's
fiscal  year  that  ends on December 31, or such other fiscal quarter adopted by
the  Company  for  financial  reporting  purposes  in  accordance  with  GAAP.

          (l)     "FUNDAMENTAL  TRANSACTION"  means  that (i) the Company shall,
directly  or indirectly, in one or more related transactions, (A) consolidate or
merge  with  or  into  (whether or not the Company is the surviving corporation)
another  Person,  or  (B) sell, assign, transfer, convey or otherwise dispose of
all  or  substantially all of the properties or assets of the Company to another
Person, or (C) allow another Person to make a purchase, tender or exchange offer
that  is  accepted by the holders of more than the 50% of the outstanding shares
of  Common Stock (not including any shares of Common Stock held by the Person or
Persons  making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (D) consummate a share
purchase agreement or other business combination (including, without limitation,
a  reorganization,  recapitalization,  spin-off  or  scheme of arrangement) with
another  Person  whereby  such  other  Person  acquires more than the 50% of the
outstanding  shares  of  Common  Stock (not including any shares of Common Stock
held  by  the other Person or other Persons making or party to, or associated or
affiliated  with  the  other  Persons  making  or  party to, such stock purchase
agreement  or  other  business  combination), or (v) reorganize, recapitalize or
reclassify  its Common Stock or (ii) any "person" or "group" (as these terms are
used  for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of
1934,  as amended) is or shall become the "beneficial owner" (as defined in Rule
13d-3  under  the

                                     - 16 -
<PAGE>
Securities  Exchange Act of 1934, as amended), directly or indirectly, of 50% of
the  issued  and outstanding Common Stock or the aggregate ordinary voting power
represented  by  issued  and  outstanding  Common  Stock.  Provided,  however,
notwithstanding  anything  herein  contained  or in any of the other Transaction
Documents,  any  consolidation  of  a  Subsidiary  into  another  Subsidiary  or
Subsidiaries  shall  not  be  deemed  to  be  a  Fundamental  Transaction.

          (m)     "GAAP"  means  United  States  generally  accepted  accounting
principles,  consistently  applied.

          (n)     "INSTALLMENT  AMOUNT"  means  with  respect to any Installment
Date, the lesser of (A) with respect each Installment Date, the amount set forth
opposite  such date on Exhibit II attached hereto (in each case, plus the sum of
any accrued and unpaid Interest with respect thereto and accrued and unpaid Late
Charges  with  respect  thereto and Interest and any accrued and unpaid interest
thereon),  and  (B) the Principal amount (plus the sum of any accrued and unpaid
Interest  with  respect  to  such  Principal  amount and accrued and unpaid Late
Charges  with  respect  to  such  Principal  amount and Interest any accrued and
unpaid  interest  thereon)  under  this Note as of such Installment Date, as any
such  Installment  Amount  may  be  reduced  pursuant to the terms of this Note,
whether  upon  Conversion, redemption or otherwise.  For the avoidance of doubt,
any  accrued  and  unpaid interest which may be paid pursuant to this definition
shall  be deducted from the total interest to be paid on any subsequent Interest
Payment  Date.  In  the  event  the  Holder shall sell or otherwise transfer any
portion  of  this  Note, the transferee shall be allocated a pro rata portion of
the  each  unpaid  Installment  Amount  hereunder.

          (o)     "INSTALLMENT  DATE"  means May 15, 2007 and the first calendar
day of July 2007 and each subsequent calendar month through May 1, 2008, and any
other  Installment  Date  scheduled  by the Holder in connection with a Deferral
Amount  pursuant  to  Section  8(b)  hereof.

          (p)     "ISSUANCE  DATE"  means  the  Issuance  Date.

          (q)     "LIQUIDATION  EVENT"  means  the  voluntary  or  involuntary
liquidation,  dissolution  or winding up of the Company or such Subsidiaries the
assets  of  which  constitute  all  or  substantially all of the business of the
Company and its Subsidiaries taken as a whole, in a single transaction or series
of  transactions.

          (r)     "OPTIONS"  means  any rights, warrants or options to subscribe
for  or  purchase  shares  of  Common  Stock  or  Convertible  Securities.

          (s)     "PARENT  ENTITY" of a Person means an entity that, directly or
indirectly,  controls the applicable Person and whose common stock or equivalent
equity  security is quoted or listed on an Eligible Market, or, if there is more
than  one  such  Person  or  Parent Entity, the Person or Parent Entity with the
largest  public  market  capitalization  as  of  the date of consummation of the
Fundamental  Transaction.

          (t)     "PAYMENT  MONTH"  means  each  of: the period beginning on and
including  the  Issuance Date and ending on and including May 31, 2007; and each
of  the  monthly  periods  commencing  on  the  first  day of June 2007 and each
subsequent month and ending on the last day of each such calendar month, so long
as  Principal  or  Interest  or  Late  Charges  are  outstanding under the Note.

          (u)     "PERMITTED  LIENS"  means  subject  to the Securities Exchange
Agreement (i) any Lien for taxes not yet due or delinquent or being contested in
good  faith  by  appropriate  proceedings  for which adequate reserves have been
established  in  accordance  with  GAAP,  (ii) any statutory Lien arising in the
ordinary course of business by operation of law with respect to a liability that
is  not  yet due or delinquent, (iii) any Lien created by operation of law, such
as materialmen's liens, mechanics' liens and other similar liens, arising in the
ordinary  course  of business with respect to a liability that is not yet due or
delinquent or that are being contested in good faith by appropriate proceedings,
and  (iv)  any  Lien  described  in  the  Company's SEC documents as of the date
hereof.

          (v)     "PERSON"  means  an individual, a limited liability company, a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
organization,  any  other  entity  and  a government or any department or agency
thereof.

                                     - 17 -
<PAGE>
          (w)     "PRINCIPAL  MARKET"  means  The  National  Association  of
Securities  Dealers  Inc.'s  Over-The-Counter  Bulletin  Board.

          (x)     "REDEMPTION  PREMIUM"  means  (i) in the case of the Events of
Default  described  in  Section 4(a)(i) - (vi) and (ix) - (xii), 120% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.

          (y)     "REGISTRATION  RIGHTS  AGREEMENT"  means  that  certain
registration  rights  agreement  dated  as of the Issuance Date by and among the
Company  and  the  initial holders of the Notes relating to, among other things,
the  registration  of the resale of the Common Stock issuable upon Conversion of
the  Notes  and  exercise  of  the  Warrants.

          (z)     "REQUIRED  HOLDERS" means the holders of Notes representing at
least  a  majority  of  the  aggregate  principal  amount  of  the  Notes  then
outstanding.

          (aa)     "SEC"  means  the  United  States  Securities  and  Exchange
Commission.

          (bb)     "SECURITIES EXCHANGE AGREEMENT" means that certain Securities
Exchange  Agreement  dated  as of the Issuance Date by and among the Company and
the initial holders of the Notes pursuant to which the Company issued the Notes.

          (cc)     "SUCCESSOR  ENTITY"  means  the  Person,  which  may  be  the
Company,  formed  by, resulting from or surviving any Fundamental Transaction or
the  Person  with  which  such  Fundamental  Transaction  shall  have been made,
provided  that if such Person is not a publicly traded entity whose common stock
or  equivalent  equity  security  is quoted or listed for trading on an Eligible
Market,  Successor  Entity  shall  mean  such  Person's  Parent  Entity.

          (dd)     "TRADING  DAY"  means  any  day  on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading  market  for the Common Stock, then on the principal securities exchange
or  securities  market  on  which the Common Stock is then traded; provided that
"Trading  Day"  shall not include any day on which the Common Stock is scheduled
to  trade on such exchange or market for less than 4.5 hours or any day that the
Common  Stock is suspended from trading during the final hour of trading on such
exchange  or market (or if such exchange or market does not designate in advance
the  closing  time  of  trading on such exchange or market, then during the hour
ending  at  5:00:00  p.m.,  New  York  Time).

     (28)     DISCLOSURE.  Upon receipt or delivery by the Company of any notice
              ----------
in  accordance with the terms of this Note, unless the Company has in good faith
determined  that the matters relating to such notice do not constitute material,
nonpublic  information  relating to the Company or its Subsidiaries, the Company
shall  within  one  (1) Business Day after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise.  In  the  event  that  the  Company  believes  that a notice contains
material, nonpublic information relating to the Company or its Subsidiaries, the
Company so shall indicate to such Holder contemporaneously with delivery of such
notice,  and  in the absence of any such indication, the Holder shall be allowed
to  presume that all matters relating to such notice do not constitute material,
nonpublic  information  relating  to  the  Company  or  its  Subsidiaries.

     IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as
of  the  Issuance  Date  set  out  above.

                                     CHARYS HOLDING COMPANY, INC.

                                     By
                                       -----------------------------------------
                                       Billy V. Ray, Jr. Chief Executive Officer

                                     - 18 -
<PAGE>
                                    EXHIBIT I

                          CHARYS HOLDING COMPANY, INC.
                                CONVERSION NOTICE

Reference  is  made  to the Subordinated Unsecured Convertible Note (the "NOTE")
issued  to  the undersigned by Charys Holding Company, Inc. (the "COMPANY").  In
accordance  with  and  pursuant  to  the  Note, the undersigned hereby elects to
convert  the  Conversion  Amount  (as defined in the Note) of the Note indicated
below  into  shares  of  Common  Stock  par  value $0.001 per share (the "COMMON
STOCK")  of  the  Company,  as  of  the  date  specified  below.

     Date of Conversion:
                          ------------------------------------------------------

     Aggregate Conversion Amount to be converted:
                                                   -----------------------------

Please  confirm  the  following  information:

     Conversion Price:
                        --------------------------------------------------------

     Number of shares of Common Stock to be issued:
                                                     ---------------------------

Please  issue  the  Common  Stock  into which the Note is being converted in the
following  name  and  to  the  following  address:

     Issue to:
                ----------------------------------------------------------------

                ----------------------------------------------------------------

                ----------------------------------------------------------------

     Facsimile Number:
                        --------------------------------------------------------

     Authorization:
                     -----------------------------------------------------------

          By:
               -----------------------------------------------------------------

               Title:
                       ---------------------------------------------------------

Dated:
       -------------------------------------------------------------------------

     Account Number:
                      ----------------------------------------------------------
     (if electronic book entry transfer)

     Transaction Code Number:
                               -------------------------------------------------
     (if electronic book entry transfer)
     Installment Amounts to be reduced and amount of reduction:
                                                                 ---------------

<PAGE>
                                 ACKNOWLEDGMENT

     The  Company  hereby acknowledges this Conversion Notice and hereby directs
____________  to  issue  the above indicated number of shares of Common Stock in
accordance  with  the  Conversion  Notice.

                                               CHARYS HOLDING COMPANY, INC.

                                               By:
                                                  ------------------------------
                                                  Name:
                                                  Title:

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT  II  (GOTTBETTER)
-------------------------
DATE       PAYMENT ($)

---------  --------------
<S>        <C>
5/15/2007         500,000
---------  --------------
7/1/2007       447,663.89
---------  --------------
8/1/2007       847,478.40
---------  --------------
9/1/2007       726,180.07
---------  --------------
10/1/2007      721,242.79
---------  --------------
11/1/2007      716,305.51
---------  --------------
12/1/2007      817,244.07
---------  --------------
1/1/2008       811,534.78
---------  --------------
2/1/2008       805,825.49
---------  --------------
3/1/2008       800,116.20
---------  --------------
4/1/2008       794,406.91
---------  --------------
5/01/2008      788,697.62
-------------------------
</TABLE>

<PAGE>
                                                                       Exhibit B

                                                                   NTR 5/14/2007
NEITHER  THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR  THE  SECURITIES  INTO  WHICH  THESE  SECURITIES  ARE EXERCISEABLE HAVE BEEN
REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES  LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR  ASSIGNED  (I)  IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE  SECURITIES  UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF  COUNSEL,  IN  A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER  SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING  THE  FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT TO
AN  AVAILABLE EXEMPTION UNDER THE 1933 ACT IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT  OR  OTHER  LOAN  OR  FINANCING  ARRANGEMENT  SECURED BY THE SECURITIES.

                          CHARYS HOLDING COMPANY, INC.

                        WARRANT TO PURCHASE COMMON STOCK

Warrant  No.:  [   ]
Number  of  Shares  of  Common  Stock:  [   ]
Date  of  Issuance:  [   ]  ("ISSUANCE  DATE")

     Charys  Holding  Company,  Inc.,  a  Delaware  corporation (the "COMPANY"),
hereby  certifies  that,  for  good  and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [APPLICABLE BUYER], the registered
holder  hereof  or its permitted assigns (the "HOLDER"), is entitled, subject to
the  terms  set forth below, to purchase from the Company, at the Exercise Price
(as  defined  below)  then in effect, upon surrender of this Warrant to Purchase
Common  Stock  (including  any  Warrants  to  Purchase  Common  Stock  issued in
exchange,  transfer  or replacement hereof, the "WARRANT"), at any time or times
on  or  after  the  date  hereof but not after 11:59 p.m., New York Time, on the
Expiration  Date (as defined below), [NUMBER OF SHARES] fully paid nonassessable
shares  of  Common  Stock  (as defined below) (the "WARRANT SHARES").  Except as
otherwise  defined  herein,  capitalized  terms  in  this Warrant shall have the
meanings  set  forth  in  Section  16.  This  Warrant  is one of the Warrants to
purchase  Common  Stock (the "DEFAULT WARRANTS") issued pursuant to Section 2 of
those  certain  Subordinated  Unsecured Convertible Notes, dated as of ________,
2007  (the  "ISSUANCE  DATE"),  by  the  Company to the investors (the "BUYERS")
referred  to  therein  (the  "NOTES").

     1.   EXERCISE  OF  WARRANT.
          ---------------------

          (a)     Mechanics  of  Exercise.  Subject  to the terms and conditions
                  -----------------------
hereof  (including,  without  limitation,  the  limitations set forth in Section
1(f)),  this  Warrant  may be exercised by the Holder on any day on or after the
date  hereof,  in  whole or in part, by (i) delivery of a written notice, in the
form  attached  hereto  as  Exhibit  A  (the "EXERCISE NOTICE"), of the Holder's
                            ----------
election  to  exercise  this  Warrant  and (ii) (A) payment to the Company of an
amount  equal  to  the  applicable  Exercise  Price  multiplied by the number of
Warrant  Shares  as  to  which

                                        1
<PAGE>
                                                                   NTR 5/14/2007
this Warrant is being exercised (the "AGGREGATE EXERCISE PRICE") in cash or wire
transfer  of  immediately  available  funds or (B) by notifying the Company that
this  Warrant  is being exercised pursuant to a Cashless Exercise (as defined in
Section  1(d)). The Holder shall not be required to deliver the original Warrant
in order to effect an exercise hereunder. Execution and delivery of the Exercise
Notice  with  respect to less than all of the Warrant Shares shall have the same
effect  as  cancellation  of  the original Warrant and issuance of a new Warrant
evidencing  the  right to purchase the remaining number of Warrant Shares. On or
before  the  second  Business  Day  following  the date on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of  a  Cashless Exercise) (the "EXERCISE DELIVERY DOCUMENTS"), the Company shall
transmit  by  facsimile  an  acknowledgment  of  confirmation  of receipt of the
Exercise  Delivery  Documents  to  the  Holder and the Company. On or before the
third  Business  Day following the date on which the Company has received all of
the  Exercise  Delivery Documents (the "SHARE DELIVERY DATE"), the Company shall
(X)  provided  that  the  Company's  transfer  agent  is  participating  in  The
Depository  Trust  Company  ("DTC")  Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of shares of Common
Stock  to which the Holder is entitled pursuant to such exercise to the Holder's
or  its designee's balance account with DTC through its Deposit Withdrawal Agent
Commission  system,  or (Y) if the Company's transfer agent is not participating
in  the DTC Fast Automated Securities Transfer Program, transfer and dispatch by
overnight  courier  to  the  address  as  specified  in  the  Exercise  Notice,
certificates  for  the approximate number of shares of Common Stock to which the
Holder  is  entitled  pursuant  to  such exercise. Upon delivery of the Exercise
Notice  and  Aggregate  Exercise  Price  referred  to in clause (ii)(A) above or
notification  to the Company of a Cashless Exercise referred to in Section 1(d),
the  Holder shall be deemed for all corporate purposes to have become the holder
of  record  of  the  Warrant  Shares with respect to which this Warrant has been
exercised,  irrespective  of the date of delivery of the certificates evidencing
such  Warrant  Shares.  If  this  Warrant  is  submitted  in connection with any
exercise  pursuant  to  this  Section  1(a)  and  the  number  of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant  Shares  being acquired upon an exercise, then the Company shall as soon
as  practicable and in no event later than five Business Days after any exercise
and  at  its  own expense, issue a new Warrant (in accordance with Section 7(d))
representing  the  right  to  purchase  the number of Warrant Shares purchasable
immediately  prior  to  such  exercise  under  this  Warrant, less the number of
Warrant  Shares  with  respect to which this Warrant is exercised. No fractional
shares  of Common Stock are to be transferred upon the exercise of this Warrant,
but  rather  the  number  of  shares  of Common Stock to be transferred shall be
rounded  up to the nearest whole number. The Company shall pay any and all taxes
which may be payable with respect to the issuance and delivery of Warrant Shares
upon  exercise  of  this  Warrant.

          (b)     Exercise  Price.  For  purposes  of  this  Warrant,  "EXERCISE
                  ---------------
PRICE"  means  $5.00,  subject  to  adjustment  as  provided  herein.

          (c)     Company's  Failure  to Timely Deliver Securities.  In addition
                  ------------------------------------------------
to  the  foregoing, if within three (3) Trading Days after the Company's receipt
of  the  facsimile copy of an exercise notice the Company shall fail to transfer
the  Warrant  Shares to the Buyer, and if on

                                        2
<PAGE>
                                                                   NTR 5/14/2007
or  after  such  third Trading Day the Buyer is required to purchase (in an open
market  transaction  or otherwise) shares of Common Stock in order to deliver in
satisfaction  of a sale initiated by the Buyer in anticipation of receiving from
the Company the shares of Common Stock issuable upon such exercise (a "BUY-IN"),
then the Company shall, within three (3) Business Days after the Buyer's request
and  in  the  Buyer's  discretion, either (i) pay cash to the Buyer in an amount
equal  to  the Buyer's total purchase price (including brokerage commissions, if
any)  for the shares of Common Stock so purchased (the "BUY-IN PRICE"), at which
point  the  Company's  obligation to deliver such certificate (and to issue such
shares  of  Common  Stock) resulting from such exercise shall terminate, or (ii)
promptly  honor  its  obligation  to  deliver  to  the  Buyer  a  certificate or
certificates representing such shares of Common Stock and pay cash to the holder
in  an  amount equal to the excess (if any) of the Buy-In Price over the product
of  (A)  such number of shares of Common Stock, times (B) the Closing Sale Price
on the date of exercise. Nothing herein shall limit the holder's right to pursue
actual  damages  for  the  Company's  failure to maintain a sufficient number of
authorized  shares  of Common Stock or to otherwise issue shares of Common Stock
upon  exercise  of  this  Warrant  in  accordance with the terms hereof, and the
holder shall have the right to pursue all remedies available at law or in equity
(including  a  decree  of  specific  performance  and/or  injunctive  relief).

          (d)     Cashless  Exercise.  Notwithstanding anything contained herein
                  ------------------
to  the  contrary,  if  a Registration Statement (as defined in the Registration
Rights  Agreement)  covering  the  Warrant  Shares  that  are the subject of the
Exercise  Notice  (the  "UNAVAILABLE  WARRANT  SHARES") is not available for the
resale  of  such  Unavailable  Warrant  Shares,  the  Holder  may,  in  its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in  payment  of the Aggregate Exercise Price, elect instead to receive upon such
exercise  the "Net Number" of shares of Common Stock determined according to the
following  formula  (a  "CASHLESS  EXERCISE"):

                         Net Number = (A x B) - (A x C)

                                        B

                     For purposes of the foregoing formula:

                    A=  the total number of Warrant Shares with respect to which
                    this  Warrant  is  then  being  exercised.

                    B=  the  average  of the Closing Sale Price of the shares of
                    Common  Stock (as reported by Bloomberg) on the five Trading
                    Days  immediately preceding the date of the Exercise Notice.

                    C=  the  Exercise  Price  then  in effect for the applicable
                    Warrant  Shares  at  the  time  of  such  exercise.

                                        3
<PAGE>
                                                                   NTR 5/14/2007
          (e)     Disputes.  In the case of a dispute as to the determination of
                  --------
the  Exercise  Price  or  the  arithmetic calculation of the Warrant Shares, the
Company  shall promptly transfer to the Holder the number of Warrant Shares that
are  not  disputed  and  resolve  such  dispute  in  accordance with Section 12.

          (f)     (i)     Limitations  on  Exercises; Beneficial Ownership.  The
                          ------------------------------------------------
Company  shall not effect the exercise of this Warrant, and the Holder shall not
have  the right to exercise this Warrant, to the extent that after giving effect
to  such  exercise,  such  Person (together with such Person's affiliates) would
beneficially own (directly or indirectly through Warrant Shares or otherwise) in
excess  of  4.99%  of  the  shares of Common Stock outstanding immediately after
giving  effect  to  such  exercise.  For purposes of the foregoing sentence, the
aggregate  number  of  shares  of  Common  Stock beneficially owned (directly or
indirectly  through  Warrant  Shares  or  otherwise)  by  such  Person  and  its
affiliates  shall  include  the  number  of shares of Common Stock issuable upon
exercise  of  this  Warrant  with  respect  to  which  the determination of such
sentence  is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially  owned  by  such  Person  and  its  affiliates and (ii) exercise or
conversion  of the unexercised or unconverted portion of any other securities of
the  Company  beneficially  owned  by such Person and its affiliates (including,
without  limitation,  any  convertible  notes  or convertible preferred stock or
warrants)  subject  to  a  limitation on conversion or exercise analogous to the
limitation contained herein.  Except as set forth in the preceding sentence, for
purposes  of  this  subsection,  beneficial  ownership  shall  be  calculated in
accordance  with  Section  13(d)  of  the  Securities  Exchange  Act of 1934, as
amended.  For purposes of this Warrant, in determining the number of outstanding
shares  of Common Stock, the Holder may rely on the number of outstanding shares
of  Common  Stock  as reflected in (1) the Company's most recent Form 10-K, Form
10-Q,  Current Report on Form 8-K or other public filing with the Securities and
Exchange  Commission,  as the case may be, (2) a more recent public announcement
by  the Company or (3) any other notice by the Company or the Company's transfer
agent  setting  forth  the number of shares of Common Stock outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined after
giving  effect  to  the  conversion  or  exercise  of securities of the Company,
including  the  SEA  Securities  and the Default Warrants, by the Holder and its
affiliates  since  the  date  as  of  which such number of outstanding shares of
Common  Stock  was  reported.  By  written notice to the Company, the Holder may
increase  or  decrease  the  Maximum  Percentage  to any other percentage not in
excess  of  9.99%  specified in such notice; provided that (i) any such increase
will  not  be  effective  until  the sixty-first (61st) day after such notice is
delivered to the Company, and (ii) any such increase or decrease will apply only
to  the  Holder  and  not  to  any  other  holder  of  Default  Warrants.

               (ii)     Principal  Market  Regulation.  The Company shall not be
                        -----------------------------
obligated  to  issue any shares of Common Stock upon exercise of this Warrant if
the issuance of such shares of Common Stock would exceed the aggregate number of
shares  of  Common Stock which the Company may issue upon conversion or exercise
or  otherwise, as applicable, of the SEA Securities and Default Warrants without
breaching  the  Company's  obligations  under  the  rules  or regulations of the
Principal  Market  (the  "EXCHANGE  CAP"), except that such limitation shall not

                                        4
<PAGE>
                                                                   NTR 5/14/2007
apply in the event that the Company (A) obtains the approval of its stockholders
as  required  by  the  applicable rules of the Principal Market for issuances of
Common  Stock  in  excess  of  such amount or (B) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall  be  reasonably satisfactory to the Required Holders.  Until such approval
or  written  opinion  is  obtained, no purchaser of the Warrants pursuant to the
Securities  Exchange  Agreement  (the  "PURCHASERS")  shall  be  issued  in  the
aggregate,  upon  conversion  or  exercise  or  otherwise, as applicable, of SEA
Securities or Default Warrants, shares of Common Stock in an amount greater than
the product of the Exchange Cap multiplied by a fraction, the numerator of which
is  the  number  of Warrants issued to the Purchasers pursuant to the Securities
Exchange  Agreement  on  the  Closing  Date  and the denominator of which is the
aggregate number of Warrants issued to the Purchasers pursuant to the Securities
Exchange  Agreement  on  the  Closing  Date (with respect to each Purchaser, the
"EXCHANGE  CAP  ALLOCATION").  In  the  event  that  any Purchaser shall sell or
otherwise  transfer  any  of  such  Purchaser's  Warrants,  the transferee, if a
registered  Holder  of  such  Warrants, shall be allocated a pro rata portion of
such  Purchaser's  Exchange  Cap  Allocation,  and the restrictions of the prior
sentence  shall  apply  to  such  transferee  with respect to the portion of the
Exchange  Cap  Allocation  allocated  to such transferee.  In the event that any
holder of Warrants shall exercise all of such holder's Warrants into a number of
shares  of  Common  Stock  which,  in  the aggregate, is less than such holder's
Exchange  Cap Allocation, then the difference between such holder's Exchange Cap
Allocation  and  the  number  of  shares of Common Stock actually issued to such
holder  shall  be  allocated  to  the respective Exchange Cap Allocations of the
remaining  registered  holders  of Warrants on a pro rata basis in proportion to
the  aggregate number of shares of Common Stock underlying the then held by each
such  holder.  To the extent required by the Principal Market, the provisions of
the  Exchange  Cap  shall  be  modified  to comply with the applicable rules and
regulations  of  the Principal Market, provided that any such changes shall not,
in  the  Holder's  reasonable  discretion,  materially  change  the terms of the
transaction  contemplated  hereby.

     Notwithstanding anything in this Warrant to the contrary, the Company shall
be  entitled  to  treat the registered holder of this Warrant as such appears in
its  records,  as the owner of this Warrant for all purposes; provided that such
records  are  kept  current using a reasonably satisfactory and customary method
intended  for  such  purpose.

     2.     ADJUSTMENT  OF  EXERCISE  PRICE  AND  NUMBER OF WARRANT SHARES.  The
            --------------------------------------------------------------
Exercise  Price  and the number of Warrant Shares shall be adjusted from time to
time  as  follows:

          (a)     Adjustment  upon  Issuance  of shares of Common Stock.  If and
                  -----------------------------------------------------
whenever  on  or  after  the  Issuance  Date  the Company issues or sells, or in
accordance  with  this Section 2 is deemed to have issued or sold, any shares of
Common  Stock (including the issuance or sale of shares of Common Stock owned or
held  by or for the account of the Company, but excluding shares of Common Stock
deemed  to  have  been  issued  by  the  Company in connection with any Excluded
Securities (as defined in the SEA Securities) for a consideration per share (the
"NEW  ISSUANCE  PRICE")  less than a price (the "APPLICABLE PRICE") equal to the
Exercise  Price  in  effect

                                        5
<PAGE>
                                                                   NTR 5/14/2007
immediately  prior  to  such  issue  or  sale  or  deemed  issuance or sale (the
foregoing a "DILUTIVE ISSUANCE"), then immediately after such Dilutive Issuance,
the Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance  Price.  Upon each such adjustment of the Exercise Price hereunder, the
number  of  Warrant  Shares  shall be adjusted to the number of shares of Common
Stock  determined  by multiplying the Exercise Price in effect immediately prior
to  such  adjustment by the number of Warrant Shares acquirable upon exercise of
this  Warrant  immediately  prior  to  such  adjustment and dividing the product
thereof  by  the  Exercise Price resulting from such adjustment. For purposes of
determining  the  adjusted Exercise Price under this Section 2(a), the following
shall  be  applicable:

               (i)     Issuance  of  Options.  If the Company grants any Options
                       ---------------------
               and  the  lowest  price  per  share for which one share of Common
               Stock  is  issuable  upon the exercise of any such Option or upon
               conversion,  exercise  or  exchange of any Convertible Securities
               issuable  upon  exercise  of  any  such  Option  is less than the
               Applicable Price, then such share of Common Stock shall be deemed
               to be outstanding and to have been issued and sold by the Company
               at the time of the granting or sale of such Option for such price
               per  share.  For  purposes  of  this Section 2(a)(i), the "lowest
               price  per  share for which one share of Common Stock is issuable
               upon  exercise  of  such  Options or upon conversion, exercise or
               exchange  of  such  Convertible Securities" shall be equal to the
               sum  of  the lowest amounts of consideration (if any) received or
               receivable by the Company with respect to any one share of Common
               Stock  upon  the granting or sale of the Option, upon exercise of
               the  Option  and  upon  conversion,  exercise  or exchange of any
               Convertible  Security  issuable  upon exercise of such Option. No
               further  adjustment  of  the  Exercise Price or number of Warrant
               Shares  shall  be made upon the actual issuance of such shares of
               Common  Stock or of such Convertible Securities upon the exercise
               of  such  Options  or  upon the actual issuance of such shares of
               Common  Stock  upon  conversion,  exercise  or  exchange  of such
               Convertible  Securities.

               (ii)     Issuance  of  Convertible Securities.  If the Company in
                        ------------------------------------
               any  manner  issues  or  sells any Convertible Securities and the
               lowest  price  per  share  for which one share of Common Stock is
               issuable  upon  the  conversion,  exercise or exchange thereof is
               less  than  the Applicable Price, then such share of Common Stock
               shall  be  deemed  to  be outstanding and to have been issued and
               sold  by  the Company at the time of the issuance or sale of such
               Convertible Securities for such price per share. For the purposes
               of  this  Section 2(a)(ii), the "lowest price per share for which
               one  share  of  Common  Stock  is  issuable  upon the conversion,
               exercise  or  exchange"  shall  be equal to the sum of the lowest
               amounts  of  consideration (if any) received or receivable by the
               Company  with  respect  to  one  share  of  Common Stock upon the
               issuance or sale of the Convertible Security and upon conversion,
               exercise  or  exchange  of  such  Convertible  Security.  No

                                        6
<PAGE>
                                                                   NTR 5/14/2007
               further  adjustment  of  the  Exercise Price or number of Warrant
               Shares  shall  be made upon the actual issuance of such shares of
               Common  Stock  upon  conversion,  exercise  or  exchange  of such
               Convertible  Securities,  and  if  any such issue or sale of such
               Convertible  Securities  is made upon exercise of any Options for
               which  adjustment  of  this  Warrant  has  been  or is to be made
               pursuant  to  other  provisions  of this Section 2(a), no further
               adjustment  of  the  Exercise  Price  or number of Warrant Shares
               shall  be  made  by  reason  of  such  issue  or  sale.

               (iii)     Change  in  Option Price or Rate of Conversion.  If the
                         -----------------------------------------------
               purchase  price  provided  for  in  any  Options,  the additional
               consideration,  if  any,  payable  upon  the  issue,  conversion,
               exercise  or  exchange of any Convertible Securities, or the rate
               at  which  any  Convertible  Securities  are  convertible into or
               exercisable  or exchangeable for shares of Common Stock increases
               or  decreases  at  any time, the Exercise Price and the number of
               Warrant Shares in effect at the time of such increase or decrease
               shall be adjusted to the Exercise Price and the number of Warrant
               Shares  which  would  have  been  in effect at such time had such
               Options  or Convertible Securities provided for such increased or
               decreased  purchase  price, additional consideration or increased
               or  decreased  conversion  rate,  as the case may be, at the time
               initially  granted,  issued or sold. For purposes of this Section
               2(a)(iii),  if  the  terms  of any Option or Convertible Security
               that  was  outstanding as of the date of issuance of this Warrant
               are  increased  or  decreased  in  the  manner  described  in the
               immediately  preceding  sentence, then such Option or Convertible
               Security  and  the  shares  of  Common Stock deemed issuable upon
               exercise,  conversion or exchange thereof shall be deemed to have
               been  issued  as  of  the  date  of such increase or decrease. No
               adjustment  pursuant  to  this Section 2(a) shall be made if such
               adjustment would result in an increase of the Exercise Price then
               in  effect  or  a  decrease  in  the  number  of  Warrant Shares.

               (iv)     Calculation  of  Consideration  Received.  In  case  any
                        ----------------------------------------
               Option  is  issued  in connection with the issue or sale of other
               securities  of  the  Company,  together comprising one integrated
               transaction  in  which  no specific consideration is allocated to
               such  Options  by the parties thereto, the Options will be deemed
               to  have  been issued for a consideration of $0.01. If any shares
               of  Common Stock, Options or Convertible Securities are issued or
               sold  or  deemed  to  have  been  issued  or  sold  for cash, the
               consideration  received  therefor  will  be  deemed to be the net
               amount  received by the Company therefor. If any shares of Common
               Stock, Options or Convertible Securities are issued or sold for a
               consideration  other  than cash, the amount of such consideration
               received  by  the  Company  will  be  the  fair  value  of  such
               consideration,  except  where  such

                                        7
<PAGE>
                                                                   NTR 5/14/2007
               consideration consists of securities, in which case the amount of
               consideration  received  by  the Company will be the Closing Sale
               Price  of  such security on the date of receipt. If any shares of
               Common Stock, Options or Convertible Securities are issued to the
               owners  of the non-surviving entity in connection with any merger
               in  which  the  Company  is  the  surviving entity, the amount of
               consideration  therefor  will  be  deemed to be the fair value of
               such  portion of the net assets and business of the non-surviving
               entity as is attributable to such shares of Common Stock, Options
               or  Convertible Securities, as the case may be. The fair value of
               any  consideration  other  than  cash  or  securities  will  be
               determined  jointly  by  the Company and the Required Holders. If
               such  parties  are unable to reach agreement within ten (10) days
               after  the  occurrence  of  an  event  requiring  valuation  (the
               "Valuation  Event"), the fair value of such consideration will be
               determined  within  five  (5)  Business  Days after the tenth day
               following  the  Valuation  Event  by  an  independent,  reputable
               appraiser  jointly  selected  by  the  Company  and  the Required
               Holders.  The  determination of such appraiser shall be final and
               binding  upon  all parties absent manifest error and the fees and
               expenses  of  such  appraiser  shall  be  borne  by  the Company.

               (v)     Record  Date.  If  the  Company  takes  a  record  of the
                       ------------
               holders  of  shares  of Common Stock for the purpose of entitling
               them  (A)  to receive a dividend or other distribution payable in
               shares  of  Common Stock, Options or in Convertible Securities or
               (B)  to subscribe for or purchase shares of Common Stock, Options
               or  Convertible  Securities, then such record date will be deemed
               to be the date of the issue or sale of the shares of Common Stock
               deemed  to  have been issued or sold upon the declaration of such
               dividend  or the making of such other distribution or the date of
               the  granting  of  such right of subscription or purchase, as the
               case  may  be.

          (b)     Adjustment upon Subdivision or Combination of shares of Common
                  --------------------------------------------------------------
Stock.  If  the Company at any time on or after the Issuance Date subdivides (by
-----
any  stock  split,  stock  dividend,  recapitalization or otherwise) one or more
classes  of  its  outstanding  shares  of  Common Stock into a greater number of
shares,  the Exercise Price in effect immediately prior to such subdivision will
be  proportionately  reduced  and  the  number  of  Warrant  Shares  will  be
proportionately  increased.  If the Company at any time on or after the Issuance
Date  combines  (by  combination,  reverse stock split or otherwise) one or more
classes  of  its  outstanding  shares  of  Common Stock into a smaller number of
shares,  the Exercise Price in effect immediately prior to such combination will
be  proportionately  increased  and  the  number  of  Warrant  Shares  will  be
proportionately  decreased.  Any adjustment under this Section 2(b) shall become
effective  at  the  close of business on the date the subdivision or combination
becomes  effective.

                                        8
<PAGE>
                                                                   NTR 5/14/2007
          (c)     Other Events.  If any event occurs of the type contemplated by
                  ------------
the  provisions  of  this  Section  2(c)  but not expressly provided for by such
provisions  (including,  without  limitation, the granting of share appreciation
rights,  phantom  share  rights  or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price  so  as  to  protect  the  rights  of  the  Holders; provided that no such
adjustment  will increase the Exercise Price as otherwise determined pursuant to
this  Section  2(c).

     3.     RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or
            ----------------------------------
make  any dividend or other distribution of its assets (or rights to acquire its
assets)  to  Holders  of  shares of Common Stock, by way of return of capital or
otherwise  (including,  without  limitation,  any distribution of cash, stock or
other  securities  not addressed by Section 2, property or options not addressed
by  Section  2  by  way  of  a  dividend,  spin off, reclassification, corporate
rearrangement,  scheme  of  arrangement  or  other  similar  transaction)  (a
"DISTRIBUTION"),  at  any time after the issuance of this Warrant, then, in each
such  case:

          (a)     any Exercise Price in effect immediately prior to the close of
business  on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution shall be reduced, effective as
of  the  close  of  business  on  such  record  date,  to  a price determined by
multiplying  such  Exercise Price by a fraction of which (i) the numerator shall
be  the  Closing  Bid  Price  of  a  share  of  Common  Stock on the trading day
immediately  preceding  such record date minus the value of the Distribution (as
determined  in good faith by the Company's Board of Directors) applicable to one
share  of  Common Stock, and (ii) the denominator shall be the Closing Bid Price
of  the  shares  of  Common  Stock on the trading day immediately preceding such
record  date;  and

          (b)     the number of Warrant Shares shall be increased to a number of
shares  equal  to  the  number  of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination of
holders  of  shares  of  Common  Stock  entitled  to  receive  the  Distribution
multiplied  by  the  reciprocal  of  the  fraction  set forth in the immediately
preceding  paragraph (a); provided that in the event that the Distribution is of
shares  of  Common Stock (or common stock) ("OTHER SHARES OF COMMON STOCK") of a
company  whose  common  shares are traded on a national securities exchange or a
national  automated  quotation  system,  then  the Holder may elect to receive a
warrant  to  purchase Other Shares of Common Stock in lieu of an increase in the
number of Warrant Shares, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the number of shares
of  Other  Shares  of  Common  Stock  that would have been payable to the Holder
pursuant  to  the Distribution had the Holder exercised this Warrant immediately
prior  to  such  record  date  and with an aggregate exercise price equal to the
product  of the amount by which the exercise price of this Warrant was decreased
with  respect  to  the  Distribution  pursuant  to  the terms of the immediately
preceding  paragraph  (a)  and  the  number  of  Warrant  Shares  calculated  in
accordance  with  the  first  part  of  this  paragraph  (b).

     4.     PURCHASE  RIGHTS;  FUNDAMENTAL  TRANSACTIONS.
            --------------------------------------------

                                        9
<PAGE>
                                                                   NTR 5/14/2007
          (a)     Purchase  Rights.  In  addition to any adjustments pursuant to
                  ----------------
Section 2 above, if at any time the Company grants, issues or sells any Options,
Convertible  Securities  or  rights  to  purchase stock, warrants, securities or
other  property  pro rata to the record holders of any class of shares of Common
Stock  (the  "PURCHASE RIGHTS"), then, upon exercise of this Warrant, the Holder
will  be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which the Holder could have acquired if the Holder
had  held  the  proportionate  number  of shares of Common Stock acquirable upon
exercise  of  this Warrant (without regard to any limitations on the exercise of
this  Warrant)  immediately  before  the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the  date  as  of  which  the record holders of shares of Common Stock are to be
determined  for  the  grant,  issue  or  sale  of  such  Purchase  Rights.

          (b)     Fundamental  Transactions.  If  the  Company enters into or is
                  -------------------------
party  to  a  Fundamental  Transaction,  then the Holder shall have the right to
either (A) purchase and receive upon the basis and upon the terms and conditions
herein  specified  and  in  lieu  of  the Warrant Shares immediately theretofore
issuable  upon  exercise  of  the  Warrant,  such shares of stock, securities or
assets  (including  cash) as would have been issuable or payable with respect to
or  in  exchange  for  a number of Warrant Shares equal to the number of Warrant
Shares  immediately  theretofore issuable upon exercise of the Warrant, had such
Fundamental  Transaction  not  taken place or (B) require the repurchase of this
Warrant  for  a  purchase  price,  payable in cash within five (5) business days
after  such  request,  equal  to  the  Black  Scholes  Value  of  the  remaining
unexercised  portion  of this Warrant on the date of such request.  The terms of
any  agreement  pursuant  to  which  a Fundamental Transaction is effected shall
include  terms  requiring  any  such successor or surviving entity and Holder to
comply with the provisions of this Section 4(b).  The provisions of this Section
                                   ------------
shall  apply  similarly  and  equally to successive Fundamental Transactions and
shall  be  applied  without  regard  to  any limitations on the exercise of this
Warrant.

     5.     NONCIRCUMVENTION.  The  Company hereby covenants and agrees that the
            ----------------
company  will  not,  by  amendment  of  its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement,  dissolution,  issue  or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of  this  Warrant,  and  will  at  all  times  in  good  faith carry out all the
provisions  of  this  Warrant  and take all action that is required hereunder to
protect  the  rights  of  the  holder.  Without  limiting  the generality of the
foregoing,  the  Company  (i)  shall not increase the par value of any shares of
Common  Stock  receivable  upon  the exercise of this Warrant above the Exercise
Price  then  in  effect, (ii) shall take all such actions as may be necessary or
appropriate  in  order  that the Company may validly and legally have the Common
Stock  fully  paid  and  nonassessable shares of Common Stock transferred to the
Holder upon the exercise of this Warrant, and (iii) shall, so long as any of the
Default  Warrants are outstanding, take all action necessary to reserve and keep
available  out of its authorized and unissued shares of Common Stock, solely for
the  purpose  of  effecting  the exercise of the Default Warrants, 130% (or such
lesser  amount  limited  by  the SEC) of the number of shares of Common Stock as
shall

                                       10
<PAGE>
                                                                   NTR 5/14/2007
from  time  to  time be necessary to effect the exercise of the Default Warrants
then  outstanding  (without  regard  to  any  limitations  on  exercise).

     6.     WARRANT  HOLDER  NOT  DEEMED  A  STOCKHOLDER.  Except  as  otherwise
            --------------------------------------------
specifically  provided herein, the Holder, solely in such person's capacity as a
Holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed  the  Holder  of  share capital of the Company for any purpose, nor shall
anything  contained  in  this  Warrant  be  construed to confer upon the Holder,
solely  in  such  person's  capacity  as  the Holder of this Warrant, any of the
rights  of  a  shareholder of the Company or any right to vote, give or withhold
consent  to  any  corporate  action (whether any reorganization, issue of stock,
reclassification  of  stock,  consolidation,  merger,  conveyance or otherwise),
receive  notice  of  meetings,  receive  dividends  or  subscription  rights, or
otherwise,  prior to the issuance to the Holder of the Warrant shares which such
person  is  then  entitled to receive upon the due exercise of this Warrant.  In
addition,  nothing  contained in this Warrant shall be construed as imposing any
liabilities  on  the  Holder  to  purchase any securities (upon exercise of this
Warrant  or otherwise) or as a shareholder of the Company.  Notwithstanding this
Section  6, the Company shall provide the Holder with copies of the same notices
and  other  information  given  to  the  shareholders  of the Company generally,
contemporaneously  with  the  giving  thereof  to  its  shareholders.

     7.     REISSUANCE  OF  WARRANTS.
            ------------------------

          (a)     Transfer  of  Warrant.  If  this Warrant is to be transferred,
                  ---------------------
the  Holder  shall  surrender this Warrant to the Company, whereupon the Company
will  forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance  with  Section  7(d)),  registered  as  the  Holder  may  request,
representing  the  right  to  purchase  the  number  of  Warrant  Shares  being
transferred  by  the Holder and, if less then the total number of Warrant Shares
then  underlying this Warrant is being transferred, a new Warrant (in accordance
with  Section  7(d)) to the Holder representing the right to purchase the number
of  Warrant  Shares  not  being  transferred.

          (b)     Lost,  Stolen  or  Mutilated  Warrant.  Upon  receipt  by  the
                  -------------------------------------
Company  of  evidence reasonably satisfactory to the Company of the loss, theft,
destruction  or  mutilation  of this Warrant, and, in the case of loss, theft or
destruction,  of any indemnification undertaking by the Holder to the Company in
customary  form  and, in the case of mutilation, upon surrender and cancellation
of  this  Warrant,  the  Company  shall  execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant  Shares  then  underlying  this  Warrant.

          (c)     Exchangeable  for  Multiple  Warrants.  This  Warrant  is
                  -------------------------------------
exchangeable, upon the surrender hereof by the Holder at the principal office of
the  Company,  for  a  new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to  purchase  such portion of such Warrant Shares as is designated by the Holder
at  the  time  of  such  surrender;  provided,  however,  that  no  Warrants for
fractional  shares  of  Common  Stock  shall  be  given.

                                       11
<PAGE>
                                                                   NTR 5/14/2007
          (d)     Issuance of New Warrants.  Whenever the Company is required to
                  ------------------------
issue  a new Warrant pursuant to the terms of this Warrant, such new Warrant (i)
shall  be of like tenor with this Warrant, (ii) shall represent, as indicated on
the  face  of  such  new  Warrant, the right to purchase the Warrant Shares then
underlying  this  Warrant (or in the case of a new Warrant being issued pursuant
to  Section  7(a)  or  Section 7(c), the Warrant Shares designated by the Holder
which,  when  added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of  Warrant  Shares  then underlying this Warrant), (iii) shall have an issuance
date,  as  indicated  on  the  face of such new Warrant which is the same as the
Issuance  Date,  and  (iv)  shall  have  the  same rights and conditions as this
Warrant.

     8.     NOTICES.  Whenever  notice  is  required  to  be  given  under  this
            -------
Warrant,  unless  otherwise  provided  herein,  such  notice  shall  be given in
accordance  with Section 9(f) of the Securities Exchange Agreement.  The Company
shall  provide  the  Holder  with  prompt  written  notice  of all actions taken
pursuant  to  this Warrant, including in reasonable detail a description of such
action  and  the  reason  therefore.  Without  limiting  the  generality  of the
foregoing, the Company will give written notice to the Holder (i) promptly after
any  adjustment  of  the exercise price, setting forth in reasonable detail, and
certifying,  the calculation of such adjustment and (ii) at least ten days prior
to  the  date  on  which the Company closes its books or takes a record (a) with
respect  to  any  dividend  or distribution upon the shares of Common Stock, (b)
with  respect  to  any  grants,  issuances  or sales of any Options, Convertible
Securities  or  rights to purchase stock, warrants, securities or other property
to  Holders of shares of Common Stock or (c) for determining rights to vote with
respect  to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in
conjunction  with  such  notice  being  provided  to  the  Holder.

     9.     AMENDMENT  AND  WAIVER.  Except  as  otherwise  provided herein, the
            ----------------------
provisions  of  this  Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it,  only  if  the  Company  has  obtained  the  written consent of the Required
Holders;  provided  that  no  such action may increase the exercise price of any
Default  Warrant  or  decrease the number of shares or class of stock obtainable
upon  exercise of any Default Warrant without the written consent of the Holder.
No  such amendment shall be effective to the extent that it applies to less than
all  of  the  Holders  of  the  Default  Warrants  then  outstanding.

     10.     SEVERABILITY.  If  any provision of this Warrant or the application
             ------------
thereof  becomes  or  is  declared  by  a  court of competent jurisdiction to be
illegal,  void or unenforceable, the remainder of the terms of this Warrant will
continue  in  full  force  and  effect.

     11.     GOVERNING LAW.  This Warrant shall be governed by and construed and
             -------------
enforced  in  accordance  with,  and  all questions concerning the construction,
validity,  interpretation  and performance of this Warrant shall be governed by,
the  internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule

                                       12
<PAGE>
                                                                   NTR 5/14/2007
(whether  of  the State of New York or any other jurisdictions) that would cause
the  application  of  the  laws of any jurisdictions other than the State of New
York.

     12.     CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
             ----------------------
drafted by the Company and all the Buyers and shall not be construed against any
person  as the drafter hereof.  The headings of this Warrant are for convenience
of  reference  and shall not form part of, or affect the interpretation of, this
Warrant.

     13.     DISPUTE  RESOLUTION.  In  the  case  of  a  dispute  as  to  the
             -------------------
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares,  the  Company  shall  submit  the  disputed determinations or arithmetic
calculations  via  facsimile within two Business Days of receipt of the Exercise
Notice  giving  rise to such dispute, as the case may be, to the Holder.  If the
Holder  and  the  Company  are  unable  to  agree  upon  such  determination  or
calculation  of  the  Exercise Price or the Warrant Shares within three Business
Days of such disputed determination or arithmetic calculation being submitted to
the  Holder,  then  the  Company  shall,  within  two  Business  Days submit via
facsimile  (a)  the  disputed  determination  of  the  Exercise  Price  to  an
independent,  reputable  investment bank selected by the Company and approved by
the  Holder  or (b) the disputed arithmetic calculation of the Warrant Shares to
the  Company's independent, outside accountant.  The Company shall cause, at the
expense  of the losing party, the investment bank or the accountant, as the case
may be, to perform the determinations or calculations and notify the Company and
the  Holder  of  the  results  no  later than ten Business Days from the time it
receives the disputed determinations or calculations.  Such investment bank's or
accountant's  determination or calculation, as the case may be, shall be binding
upon  all  parties  absent  demonstrable  error.

     14.     REMEDIES,  OTHER  OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The
             -------------------------------------------------------------
remedies  provided  in  this  Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at  law  or  in  equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of  this  Warrant.  The  Company  acknowledges  that  a  breach  by  it  of  its
obligations  hereunder  will  cause  irreparable harm to the Holder and that the
remedy  at  law  for  any  such breach may be inadequate.  The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder of
this  Warrant shall be entitled, in addition to all other available remedies, to
an  injunction restraining any breach, without the necessity of showing economic
loss  and  without  any  bond  or  other  security  being  required.

     15.     TRANSFER.  This  Warrant may be offered for sale, sold, transferred
             --------
or  assigned  without  the  consent  of  the Company, except as may otherwise be
required  by  Section  2(f)  of  the  Securities  Exchange  Agreement.

     16.     CONTROLLING  AGREEMENT.  In  the  event of any conflict between the
             ----------------------
provisions of this Warrant and any of the other Transaction Documents, the terms
of  the  Securities  Exchange  Agreement  shall  control.

                                       13
<PAGE>
                                                                   NTR 5/14/2007
     17.     CERTAIN  DEFINITIONS.  For  purposes of this Warrant, the following
             --------------------
terms  shall  have  the  following  meanings:

          (a)     "BLACK SCHOLES VALUE" means the value of this Warrant based on
the  Black  and  Scholes Option Pricing Model obtained from the "OV" function on
Bloomberg determined as of the day immediately following the public announcement
of  the  applicable  Fundamental  Transaction  and  reflecting  (i)  a risk-free
interest  rate corresponding to the U.S. Treasury rate for a period equal to the
remaining  term  of this Warrant as of such date of request and (ii) an expected
volatility  equal to the greater of 60% and the 100 day volatility obtained from
the  HVT  function  on  Bloomberg.

          (b)     "BLOOMBERG"  means  Bloomberg  Financial  Markets.

          (c)     "BUSINESS  DAY"  means  any day other than Saturday, Sunday or
other  day  on  which commercial banks in The City of New York are authorized or
required  by  law  to  remain  closed.

          (d)     "CLOSING  BID  PRICE"  and "CLOSING SALE PRICE" means, for any
security  as  of  any  date,  the  last closing bid price and last closing trade
price,  respectively,  for such security on the Principal Market, as reported by
Bloomberg,  or,  if  the Principal Market begins to operate on an extended hours
basis  and  does not designate the closing bid price or the closing trade price,
as  the  case may be, then the last bid price or last trade price, respectively,
of such security prior to 5:00:00 p.m., New York Time, as reported by Bloomberg,
or,  if the Principal Market is not the principal securities exchange or trading
market  for  such  security,  the  last  closing  bid price or last trade price,
respectively,  of  such security on the principal securities exchange or trading
market  where  such security is listed or traded as reported by Bloomberg, or if
the  foregoing  do  not  apply,  the last closing bid price or last trade price,
respectively,  of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price  or  last  trade  price,  respectively,  is  reported for such security by
Bloomberg,  the  average  of the bid prices, or the ask prices, respectively, of
any  market  makers  for  such security as reported in the "pink sheets" by Pink
Sheets  LLC  (formerly the National Quotation Bureau, Inc.).  If the Closing Bid
Price  or  the  Closing  Sale  Price  cannot  be  calculated for a security on a
particular  date  on  any  of  the foregoing bases, the Closing Bid Price or the
Closing  Sale  Price, as the case may be, of such security on such date shall be
the  fair market value as mutually determined by the Company and the Holder.  If
the  Company  and  the  Holder are unable to agree upon the fair market value of
such  security, then such dispute shall be resolved pursuant to Section 12.  All
such  determinations  to be appropriately adjusted for any stock dividend, stock
split,  stock  combination  or  other  similar transaction during the applicable
calculation  period.

          (e)     "COMMON STOCK" means (i) the Company's shares of Common Stock,
$0.001  par  value  per share, and (ii) any share capital into which such Common
Stock  shall  have  been  changed  or  any  share  capital  resulting  from  a
reclassification  of  such  Common  Stock.

          (f)     "COMMON  STOCK  DEEMED  OUTSTANDING" means, at any given time,
the number of shares of Common Stock actually outstanding at such time, plus the
number  of  shares

                                       14
<PAGE>
                                                                   NTR 5/14/2007
of  Common  Stock  deemed  to  be  outstanding  pursuant to Sections 2(a)(i) and
2(a)(ii)  hereof regardless of whether the Options or Convertible Securities are
actually  exercisable  at  such  time,  but excluding any shares of Common Stock
owned  or  held by or for the account of the Company or issuable upon conversion
and  exercise,  as  applicable,  of  the  SEA  Securities  and  the  Warrants.

          (g)     "CONVERTIBLE  SECURITIES" means any stock or securities (other
than  Options)  directly  or  indirectly  convertible  into  or  exercisable  or
exchangeable  at  the  option  of the holder thereof for shares of Common Stock.

          (h)     "ELIGIBLE  MARKET"  means  the  Principal Market, the American
Stock  Exchange, The New York Stock Exchange, Inc., the Nasdaq Capital Market or
the  Nasdaq  National  Market.

          (i)     "EXPIRATION  DATE"means  the  date  sixty  months  after  the
Issuance  Date  or,  if such date falls on a day other than a Business Day or on
which  trading  does  not  take place on the Principal Market (a "Holiday"), the
next  date  that  is  not  a  Holiday.

          (j)     "FUNDAMENTAL  TRANSACTION"  means  that (i) the Company shall,
directly  or indirectly, in one or more related transactions, (A) consolidate or
merge  with  or  into  (whether or not the Company is the surviving corporation)
another  Person,  or  (B) sell, assign, transfer, convey or otherwise dispose of
all  or  substantially all of the properties or assets of the Company to another
Person, or (C) allow another Person to make a purchase, tender or exchange offer
that is accepted by such number of holders of outstanding shares of Common Stock
resulting  in  such Person (together with any affiliates of such Person) holding
more  than the 50% of the outstanding Common Stock of the Company following such
purchase, tender or exchange offer, or (D) consummate a stock purchase agreement
or  other business combination (including, without limitation, a reorganization,
recapitalization,  spin-off  or  scheme  of  arrangement)  with  another  Person
resulting  in  such  other  Person (together with any affiliates of such person)
holding  more  than  the  50%  of  the  outstanding  Common Stock of the Company
following  such  stock  purchase agreement or other business combination, or (E)
reorganize,  recapitalize or reclassify its Common Stock or (ii) any "person" or
"group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Securities  Exchange Act of 1934, as amended) is or shall become the "beneficial
owner"  (as  defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended),  directly  or  indirectly, of 50% of the issued and outstanding Common
Stock  or  the  aggregate  ordinary  voting  power  represented  by  issued  and
outstanding  Common  Stock.  Provided,  however, notwithstanding anything herein
contained  or  in any of the other Transaction Documents, any consolidation of a
Subsidiary  into  another Subsidiary or Subsidiaries shall not be deemed to be a
Fundamental  Transaction.

          (k)     "OPTIONS"  means  any rights, warrants or options to subscribe
for  or  purchase  shares  of  Common  Stock  or  Convertible  Securities.

          (l)     "PERSON"  means  an individual, a limited liability company, a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
organization,  any  other  entity  and  a government or any department or agency
thereof.

                                       15
<PAGE>
                                                                   NTR 5/14/2007
          (m)     "PRINCIPAL  MARKET"  means  the  NASD  OTC  Bulletin  Board.

          (n)     "REGISTRATION  RIGHTS  AGREEMENT"  means  that  certain
registration  rights  agreement  by  and  among  the  Company  and  the  Buyers.

          (o)     "REQUIRED  HOLDERS"  means the holders of the Default Warrants
representing  at  least  a  majority  of  shares  of Common Stock underlying the
Default  Warrants  then  outstanding.

          (p)     "SEA  SECURITIES"  means  the  Notes  issued  pursuant  to the
Securities  Exchange  Agreement.

          (q)     "SECURITIES  EXCHANGE AGREEMENT" means that certain Securities
Exchange  Agreement  dated  as  of  April  30, 2007, between the Company and the
Holder.

     IN  WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Stock  to  be  duly  executed  as  of  the  Issuance  Date  set  out  above.

                                    CHARYS  HOLDING  COMPANY,  INC.

                                    By__________________________________________
                                      Billy V. Ray, Jr., Chief Executive Officer

                                       16
<PAGE>
                                                                       EXHIBIT A

                                 EXERCISE NOTICE

            TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
                        WARRANT TO PURCHASE COMMON STOCK

                          CHARYS HOLDING COMPANY, INC.

     The  undersigned  holder  hereby  exercises  the  right  to  purchase
_______________  of  the  shares  of  Common  Stock ("WARRANT SHARES") of Charys
Holding  Company, Inc., a Delaware corporation (the "COMPANY"), evidenced by the
attached  Warrant  to  Purchase  Common Stock (the "WARRANT"). Capitalized terms
used  herein  and  not  otherwise defined shall have the respective meanings set
forth  in  the  Warrant.

     1.     Form  of  Exercise  Price.  The  Holder  intends that payment of the
Exercise  Price  shall  be  made  as:

            ____________     a "Cash Exercise" with respect to ________________
                                -------------
                             Warrant  Shares;  and/or

            ____________     a "Cashless Exercise" with respect to _____________
                                -----------------
                             Warrant Shares.

     2.     Notwithstanding  anything  to  the  contrary  contained herein, this
Exercise  Notice  shall constitute a representation by the Holder of the Warrant
submitting  this  Exercise  Notice  that,  after  giving  effect to the exercise
provided for in this Exercise Notice, such Holder (together with its affiliates)
will  not  have  beneficial ownership (together with the beneficial ownership of
such  Person's  affiliates)  of a number of shares of Common Stock which exceeds
the  maximum  percentage  of  the  total  outstanding  shares of Common Stock as
determined  pursuant  to  the  provisions  of  Section  1(f)(i)  of the Warrant.

     3.     Payment of Exercise Price.  In the event that the holder has elected
a  Cash  Exercise  with  respect  to  some  or  all  of the Warrant Shares to be
transferred  pursuant  hereto, the holder shall pay the Aggregate Exercise Price
in  the  sum of $___________________ to the Company in accordance with the terms
of  the  Warrant.

     4.     Delivery of Warrant Shares.  The Company shall deliver to the holder
__________  Warrant  Shares  in  accordance  with  the  terms  of  the  Warrant.

Date:  _______________  __,  ______

___________________________________
Name  of  Registered  Holder

By:________________________________
      Name:
      Title:

<PAGE>
                                                                       Exhibit C

                     INVESTOR REGISTRATION RIGHTS AGREEMENT
                     --------------------------------------

     THIS  REGISTRATION  RIGHTS  AGREEMENT (this "Agreement"), dated as of April
                                                  ---------
30,  2007 by and among CHARYS HOLDING COMPANY, INC., a Delaware corporation (the
"Company"),  and (the undersigned investors listed on Schedule I attached hereto
 -------
(each,  an  "Investor"  and  collectively,  the  "Investors").
             --------                             ---------

                                       WHEREAS:

     A.     The  Company  and  Investors have entered into a Securities Exchange
Agreement  (the  "Securities Exchange Agreement"), pursuant to which the Company
                  -----------------------------
proposes  to  issue  convertible  notes of the Company (the "Convertible Notes")
                                                             -----------------
which shall be convertible into the Company's Common Stock, par value $0.001 per
share  (the  "Common  Stock"),  and  in  connection  therewith,  under  certain
              -------------
conditions,  the  Company  has  agreed  to  issue  certain  warrants to purchase
additional  shares  of  Common  Stock  (the  "Default Warrants");
                                              ----------------

     B.     To  induce  the  Investors  to  execute  and  deliver the Securities
Exchange  Agreement,  the  Company  has  agreed  to provide certain registration
rights  under  the  Securities  Act  of  1933,  as  amended,  and  the rules and
regulations  thereunder,  or  any  similar  successor statute (collectively, the
"Securities  Act"),  and  applicable  state  securities  laws;
 ---------------

     C.     Notwithstanding  anything  to  the  contrary  contained  herein, the
Investors  acknowledge  that the Company filed a registration statement on April
30, 2007 with respect to securities issued to McMahan Securities Co., L.P.,, and
that  the  Registrable Securities (as defined below) will not be included in nor
registered  pursuant  to  any  such  registration  statement;  and

     D.     Capitalized  terms  used but not otherwise defined herein shall have
the  meanings  set  forth  in  the  Securities  Exchange  Agreement.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein  and  other  good  and valuable consideration, the receipt and
sufficiency  of  which  are  hereby  acknowledged, the Company and the Investors
hereby  agree  as  follows:

     1.     DEFINITIONS.
            -----------

     As  used  in  this  Agreement, the following terms shall have the following
meanings:

          (a)     "Person"  means a corporation, a limited liability company, an
                   ------
association,  a  partnership,  an  organization,  a  business,  an individual, a
governmental or political subdivision thereof or a governmental agency.

          (b)     "Register,"  "registered,"  and  "registration"  refer  to  a
                   --------     ----------          ------------
registration  effected  by  preparing  and  filing  one  or  more  Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to  Rule  415  under  the  Securities  Act  or  any successor rule providing for
offering  securities  on  a  continuous  or  delayed basis ("Rule 415"), and the
                                                             --------
declaration  or  ordering  of effectiveness of such Registration Statement(s) by
the  United  States  Securities  and  Exchange  Commission  (the  "SEC").
                                                                   ---

          (c)     "Registrable  Securities"  means  shares of Common Stock in an
                   -----------------------
amount  equal  to  (a) the shares of Common Stock issuable to the Investors upon
conversion  of  the  Convertible  Notes  pursuant  to  the  Securities  Exchange
Agreement  and  the  Notes  and  (b)  the shares of Common Stock issuable to the
Investors  upon  exercise  of  the  Warrant  Shares,  as  defined in the Default
Warrants.

          (d)     "Registration  Statement" means a registration statement under
                   -----------------------
the Securities Act which covers any of the Registrable Securities.

          (e)     "Scheduled  Filing  Deadline"  means three hundred sixty (360)
                   ---------------------------
days  from  the  date  hereof.

<PAGE>
     2.     REGISTRATION.
            ------------

          (a)     Subject  to  the  terms  and conditions of this Agreement, the
Company shall prepare and file, no later the Scheduled Filing Deadline, with the
SEC a registration statement on Form SB-2 (or similar form) under the Securities
Act  (the  "SB-2 Registration Statement") for the resale by the Investors of all
            ---------------------------
Registrable  Securities,  or if it becomes eligible, a registration statement on
Form  S-3  under the Securities Act (the "Registration Statement").  The Company
                                          ----------------------
shall keep the Registration Statement "Evergreen" until payment or conversion in
full  of  the  Convertible  Notes  and  exercise  or  expiration  of the Default
Warrants, if any, or until Rule 144(k) of the Securities Act is available to the
Investors  with  respect  to  all  of  the  Conversion Shares and Warrant Shares
whichever  is  later.  The  Company shall retain, and pay at its sole expense, a
law  firm  to file the Registration Statement subject to the reasonable approval
of  a  majority of the Required Holders (as defined in the Convertible Notes) of
the Investors; provided, however, that in no event shall the Company be required
to  retain  any  law  firm  in  addition  to  its current securities counsel for
purposes  of  this Agreement.  Prior to the filing of the Registration Statement
with  the  SEC,  the  Company  shall  furnish a copy of the Initial Registration
Statement  to  the  Investors for their review and comment.  The Investors shall
furnish comments on the Registration Statement to the Company within twenty-four
(24)  hours  of  the  receipt  thereof  from  the  Company.

          (b)     Effectiveness  of  the  Registration  Statement.  The  Company
                  -----------------------------------------------
shall  use  its  best  efforts  (i)  to have the Registration Statement declared
effective  by the SEC no later than one hundred eighty (180) days after the date
filed  (the  "Scheduled  Effective  Deadline")  and  (ii)  to  insure  that  the
              ------------------------------
Registration Statement remains in effect until all of the Registrable Securities
have been sold, subject to the terms and conditions of this Agreement.  It shall
be  an  event of default hereunder if the Registration Statement is not declared
effective  by the SEC within one hundred eighty (180) days after filing thereof.

          (c)     Failure  to  File  or Obtain and Maintain Effectiveness of the
                  --------------------------------------------------------------
Registration Statement.  In the event the Registration Statement is not filed by
----------------------
the  Scheduled  Filing  Deadline  or  is not declared effective by the SEC on or
before  the Scheduled Effective Deadline, or if after the Registration Statement
has  been  declared  effective  by the SEC, sales cannot be made pursuant to the
Registration  Statement  (whether  because of a failure to keep the Registration
Statement  effective,  failure  to disclose such information as is necessary for
sales  to  be  made  pursuant to the Registration Statement, failure to register
sufficient  shares of Common Stock or otherwise), then as partial relief for the
damages  to  any holder of Registrable Securities by reason of any such delay in
or reduction of its ability to sell the underlying shares of Common Stock (which
remedy  shall  not  be exclusive of any other remedies at law or in equity), the
Company  will  pay as liquidated damages (the "Liquidated Damages") and not as a
                                               ------------------
penalty,  to the Investors, a cash amount equal to two percent (2%) per month of
the  principal  amount  of  the  Convertible  Notes outstanding and held by such
Investors.  The initial payment of Liquidated Damages shall be made within three
(3)  business  days  from  the  end  of  the month in which the Scheduled Filing
Deadline or Scheduled Effective Deadline occurred, as the case may be, and shall
continue  thereafter  until  the  Registration  Statement  is  filed or declared
effective,  or  the  Convertible Notes have been redeemed by the Company, as the
case  may  be.  In the event that the Liquidated Damages are caused by a failure
to  maintain  the  effectiveness of the Registration Statement for more than ten
days  in  any 365 day period, the initial payment of Liquidated Damages shall be
made  within three (3) business days from the end of the month in which the 11th
day in such 365 day period that the Company failed to maintain the effectiveness
of  the  Registration  Statement  falls  and shall continue thereafter until the
effectiveness  of  the  Registration  Statement  has  been  restored.

          (d)     Liquidated  Damages.  The  Company  and  the  Investors hereto
                  -------------------
acknowledge  and  agree  that the sums payable under subsection 2(c) above shall
constitute liquidated damages and not penalties and are in addition to all other
rights  of the Investors, including the right to call a default.  Any Liquidated
Damages  (and  any accrued but unpaid interest thereon) that remain unpaid after
the  date  set forth in Section 2(c) shall accrue interest at the rate of twelve
percent  (12%)  per  annum.  All  Liquidated  Damages  paid  pursuant  to  this
Agreement,  but not including any interest accrued thereon, shall not exceed, in
the aggregate, 10% of the aggregate Exchange Price (as defined in the Securities
Exchange Agreement) delivered to the Company pursuant to the Securities Exchange
Agreement  (the  "Liquidated  Damages  Maximum"),  and,  at  such  time  as  the
Liquidated  Damages  Maximum  has  been  paid, the Company shall have no further
obligation  to  pay  amounts  under  subsection 2(c) above other than interested
accrued  on  such  Liquidated  Damages  not otherwise paid.  The parties further
acknowledge  that  (i)  the  amount  of loss or damages likely to be incurred is
incapable  or  is difficult to precisely estimate, (ii) the amounts specified in
such  subsection  bear  a  reasonable  relationship  to,  and  are  not  plainly

                                      - 2 -
<PAGE>
or  grossly  disproportionate  to,  the  probable  loss likely to be incurred in
connection  with  any failure by the Company to file a Registration Statement or
to  obtain  or maintain the effectiveness of a Registration Statement, (iii) one
of  the  reasons  for  the Company and the Investors reaching an agreement as to
such  amounts  was the uncertainty and cost of litigation regarding the question
of  actual  damages,  and  (iv)  the Company and the Investors are sophisticated
business  parties  and  have  been  represented  by sophisticated and able legal
counsel  and  negotiated  this  Agreement  at  arm's  length.

     3.     RELATED  OBLIGATIONS.
            --------------------

          (a)     The  Company  shall  keep the Registration Statement effective
pursuant  to  Rule  415 at all times until the date on which the Investors shall
have  sold all the Registrable Securities covered by such Registration Statement
(the  "Registration  Period"),  which  Registration  Statement  (including  any
       --------------------
amendments  or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required  to  be stated therein, or necessary to make the statements therein, in
light  of  the  circumstances  in  which  they  were  made,  not  misleading.

          (b)     The  Company  shall  prepare  and  file  with  the  SEC  such
amendments  (including  post-effective  amendments)  and  supplements  to  the
Registration  Statement  and  the  prospectus  used  in  connection  with  such
Registration  Statement,  which  prospectus  is to be filed pursuant to Rule 424
promulgated  under  the  Securities  Act,  as  may  be  necessary  to  keep such
Registration  Statement  effective  at all times during the Registration Period,
and,  during  such period, comply with the provisions of the Securities Act with
respect  to the disposition of all Registrable Securities of the Company covered
by  such  Registration  Statement  until  such  time  as all of such Registrable
Securities  shall  have been disposed of in accordance with the intended methods
of  disposition  by  the  seller  or  sellers  thereof  as  set  forth  in  such
Registration  Statement.  In  the  case  of  amendments  and  supplements  to  a
Registration Statement which are required to be filed pursuant to this Agreement
(including  pursuant  to  this Section 3(b)) by reason of the Company's filing a
report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous report under the
Securities  Exchange  Act  of 1934, as amended (the "Exchange Act"), the Company
                                                     ------------
shall  incorporate  such report by reference into the Registration Statement, if
applicable,  or  shall  file  such amendments or supplements with the SEC on the
same day on which the Exchange Act report is filed which created the requirement
for  the  Company  to  amend  or  supplement  the  Registration  Statement.

          (c)     The  Company  shall furnish to each Investor whose Registrable
Securities  are  included  in any Registration Statement, without charge, (i) at
least  one  (1) copy of such Registration Statement as declared effective by the
SEC  and any amendment(s) thereto, including financial statements and schedules,
all  documents  incorporated  therein  by  reference,  all  exhibits  and  each
preliminary prospectus, (ii) ten (10) copies of the final prospectus included in
such  Registration Statement and all amendments and supplements thereto (or such
other  number  of copies as such Investor may reasonably request) and (iii) such
other  documents  as  such  Investor may reasonably request from time to time in
order  to facilitate the disposition of the Registrable Securities owned by such
Investor.

          (d)     The Company shall use its commercially reasonable best efforts
to (i) register and qualify the Registrable Securities covered by a Registration
Statement  under  such other securities or "blue sky" laws of such jurisdictions
in  the United States as any Investor reasonably requests, (ii) prepare and file
in  those  jurisdictions,  such amendments (including post-effective amendments)
and  supplements to such registrations and qualifications as may be necessary to
maintain  the  effectiveness  thereof during the Registration Period, (iii) take
such  other  actions  as  may  be  necessary  to maintain such registrations and
qualifications  in  effect at all times during the Registration Period, and (iv)
take  all  other  actions  reasonably  necessary  or  advisable  to  qualify the
Registrable  Securities  for sale in such jurisdictions; provided, however, that
the  Company  shall  not  be  required in connection therewith or as a condition
thereto  to  (w) make any change to its certificate of incorporation or by-laws,
(x)  qualify  to do business in any jurisdiction where it would not otherwise be
required  to  qualify  but  for this Section 3(d), (y) subject itself to general
taxation  in  any such jurisdiction, or (z) file a general consent to service of
process  in  any  such  jurisdiction.  The  Company  shall  promptly notify each
Investor  who  holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the  initiation  or  threat  of  any  proceeding  for  such  purpose.

                                      - 3 -
<PAGE>
          (e)     As  promptly as practicable after becoming aware of such event
or  development,  the  Company  shall  notify  each  Investor  in writing of the
happening  of  any  event  as  a  result  of  which the prospectus included in a
Registration  Statement,  as  then  in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which  they  were  made,  not  misleading  (provided that in no event shall such
notice  contain  any  material,  nonpublic  information), and promptly prepare a
supplement  or  amendment  to such Registration Statement to correct such untrue
statement  or  omission,  and  deliver  ten  (10)  copies  of such supplement or
amendment  to each Investor.  Notwithstanding any provision of this Agreement to
the  contrary, if the Company makes such a notification, the Company may suspend
the  use  of  any prospectus contained in any Registration Statement for periods
not  to  exceed  forty-five  (45) business days in any three month period or two
periods  not to exceed an aggregate of ninety (90) business days in any 12 month
period  in  the  event  that  the  Company  determines,  in  the exercise of its
reasonable  discretion,  confirmed by a legal opinion from outside counsel, that
sales  of  Registrable  Securities thereunder could constitute violations of the
Securities  Act due to the Registration Statement containing an untrue statement
of  a  material  fact or omission to state a material fact required to be stated
therein  or  necessary  to  make  the  statements  therein,  in  light  of  the
circumstances  under  which  they  were  made, not misleading.  In each case the
Company  shall use commercially reasonable best efforts to remedy the deficiency
in  the  Registration  Statement  within thirty (30) business days.  The Company
shall also promptly notify each Investor in writing (i) when a prospectus or any
prospectus  supplement  or  post-effective  amendment has been filed, and when a
Registration  Statement  or  any  post-effective  amendment has become effective
(notification  of  such  effectiveness  shall  be  delivered to each Investor by
facsimile on the same day of such effectiveness), (ii) of any request by the SEC
for  amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination that
a  post-effective  amendment  to  a Registration Statement would be appropriate.

          (f)     The Company shall use its commercially reasonable best efforts
to  prevent  the issuance of any stop order or other suspension of effectiveness
of  a  Registration  Statement, or the suspension of the qualification of any of
the Registrable Securities for sale in any jurisdiction within the United States
of  America  and,  if  such  an  order  or  suspension  is issued, to obtain the
withdrawal  of  such  order or suspension at the earliest possible moment and to
notify  the Investors who hold Registrable Securities being sold of the issuance
of  such order and the resolution thereof or its receipt of actual notice of the
initiation  or  threat  of  any  proceeding  for  such  purpose.

          (g)     At  the  reasonable request of any Investor, the Company shall
furnish  to  such Investor, on the date of the effectiveness of the Registration
Statement  and  thereafter  from  time  to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company's independent
certified  public  accountants  in form and substance as is customarily given by
independent  certified  public  accountants  to  underwriters in an underwritten
public  offering,  and  (ii)  an  opinion,  dated  as  of  such date, of counsel
representing  the  Company for purposes of such Registration Statement, in form,
scope  and substance as is customarily given in an underwritten public offering,
addressed  to  the  Investors.

          (h)     The  Company  shall  make  available for inspection by (i) any
Investor  and  (ii)  one (1) firm of accountants or other agents retained by the
Investors  (collectively,  the  "Inspectors")  all pertinent financial and other
                                 ----------
records,  and  pertinent  corporate  documents  and  properties  of  the Company
(collectively,  the  "Records"), as shall be reasonably deemed necessary by each
                      -------
Inspector,  and  cause the Company's officers, directors and employees to supply
all  information  which the Inspector may reasonably request; provided, however,
that  each  Inspector  shall  agree,  and any Investor hereby agrees, to hold in
strict  confidence  and shall not make any disclosure (except to an Investor) or
use  any  Record or other information which the Company determines in good faith
to  be  confidential, and of which determination the Inspectors are so notified,
unless  (a)  the  disclosure  of such Records is necessary to avoid or correct a
misstatement  or omission in any Registration Statement or is otherwise required
under the Securities Act, (b) the release of such Records is ordered pursuant to
a  final,  non-appealable  subpoena  or order from a court or government body of
competent  jurisdiction,  or  (c)  the information in such Records has been made
generally  available to the public other than by disclosure in violation of this
or  any  other  agreement of which the Inspector and the Investor has knowledge.
Each  Investor  agrees  that  it  shall,  upon  learning that disclosure of such
Records  is  sought  in  or  by  a  court  or  governmental  body  of  competent
jurisdiction or through other means, give prompt notice to the Company and allow
the  Company,  at  its  expense,  to  undertake  appropriate  action  to prevent
disclosure  of,  or  to  obtain  a  protective  order  for,  the  Records deemed
confidential.

                                      - 4 -
<PAGE>
          (i)     The  Company  shall  hold  in  confidence  and  not  make  any
disclosure  of information concerning an Investor provided to the Company unless
(i)  disclosure of such information is necessary to comply with federal or state
securities  laws,  (ii) the disclosure of such information is necessary to avoid
or  correct  a misstatement or omission in any Registration Statement, (iii) the
release  of  such  information is ordered pursuant to a subpoena or other final,
non-appealable  order  from  a  court  or  governmental  body  of  competent
jurisdiction,  or (iv) such information has been made generally available to the
public  other  than  by  disclosure  in violation of this Agreement or any other
agreement.  The  Company  agrees that it shall, upon learning that disclosure of
such  information  concerning  an  Investor  is  sought  in  or  by  a  court or
governmental  body of competent jurisdiction or through other means, give prompt
written  notice  to  such  Investor  and  allow the Investor, at such Investor's
expense,  to undertake appropriate action to prevent disclosure of, or to obtain
a  protective  order  for,  such  information.

          (j)     The Company shall use its commercially reasonable best efforts
either  to  cause  all  the  Registrable  Securities  covered  by a Registration
Statement  (i)  to  be listed on each securities exchange on which securities of
the  same  class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such
exchange  or  (ii)  the  inclusion  for quotation on the National Association of
Securities  Dealers,  Inc.  OTC  Bulletin Board for such Registrable Securities.
The  Company  shall  pay all fees and expenses in connection with satisfying its
obligation  under  this  Section  3(j).

          (k)     The  Company  shall  cooperate  with  the  Investors  who hold
Registrable  Securities  being  offered  and,  to  the  extent  applicable,  to
facilitate  the  timely preparation and delivery of certificates to a transferee
of  the  Investor  (not  bearing  any  restrictive  legend)  representing  the
Registrable  Securities  to  be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be,  as the Investors may reasonably request and registered in such names as the
Investors  may  request.

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

          (m)     The  Company  shall  make  generally available to its security
holders  as  soon  as  practical,  but not later than ninety (90) days after the
close  of  the  period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a twelve (12)
month  period  beginning  not  later  than the first day of the Company's fiscal
quarter  next  following  the  effective  date  of  the  Registration Statement.

          (n)     The  Company  shall  otherwise use its commercially reasonable
best  efforts  to comply with all applicable rules and regulations of the SEC in
connection  with  any  registration  hereunder.

          (o)     Within  two  (2)  business days after a Registration Statement
which  covers  Registrable  Securities  is  declared  effective  by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to  the  transfer  agent  for  such  Registrable  Securities (with copies to the
Investors  whose  Registrable  Securities  are  included  in  such  Registration
Statement)  confirmation  that  such  Registration  Statement  has been declared
effective  by  the  SEC  in  the  form  attached  hereto  as  Exhibit  A.
                                                              ----------

          (p)     The  Company shall take all other reasonable actions necessary
to  expedite  and  facilitate  disposition  by  the  Investors  of  Registrable
Securities  pursuant  to  a  Registration  Statement.

     4.     OBLIGATIONS  OF  THE  INVESTORS.
            -------------------------------

     Each  Investor  agrees that, upon receipt of any notice from the Company of
the  happening  of  any event of the kind described in Section 3(f) or the first
sentence of Section 3(e), such Investor will immediately discontinue disposition
of  Registrable  Securities  pursuant  to any Registration Statement(s) covering
such Registrable Securities until such event has been remedied.  Notwithstanding
anything  to the contrary, the Company shall cause its transfer agent to deliver
unlegended  certificates  for  shares  of  Common  Stock  to  a transferee of an
Investor  in  accordance  with the terms of the Securities Exchange Agreement in
connection  with  any  sale  of  Registrable  Securities  with

                                      - 5 -
<PAGE>
respect  to  which an Investor has entered into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of any event of
the  kind  described in Section 3(f) or the first sentence of 3(e) and for which
the  Investor  has  not  yet  settled.

     5.     EXPENSES  OF  REGISTRATION.
            --------------------------

     All  expenses  incurred  in  connection  with  registrations,  filings  or
qualifications  pursuant  to  the  Agreement  including, without limitation, all
registration,  listing  and  qualifications fees, printers, legal and accounting
fees  shall  be  paid  by  the  Company.

     6.     INDEMNIFICATION.
            ---------------

     With respect to Registrable Securities which are included in a Registration
Statement  under  this  Agreement:

          (a)     To  the fullest extent permitted by law, the Company will, and
hereby  does,  indemnify, hold harmless and defend each Investor, the directors,
officers,  partners,  employees, agents, representatives of, and each Person, if
any,  who  controls any Investor within the meaning of the Securities Act or the
Exchange  Act  (each,  an  "Indemnified  Person"),  against  any losses, claims,
                            -------------------
damages,  liabilities,  judgments,  fines, penalties, charges, costs, reasonable
attorneys'  fees,  amounts  paid  in  settlement  or  expenses, joint or several
(collectively,  "Claims")  incurred in investigating, preparing or defending any
                 ------
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing  by  or  before  any  court  or  governmental, administrative or other
regulatory  agency,  body  or the SEC, whether pending or threatened, whether or
not  an  indemnified party is or may be a party thereto ("Indemnified Damages"),
                                                          -------------------
to  which  any  of them may become subject insofar as such Claims (or actions or
proceedings,  whether  commenced or threatened, in respect thereof) arise out of
or  are  based  upon:  (i) any untrue statement or alleged untrue statement of a
material  fact  in  a  Registration  Statement  or  any post-effective amendment
thereto  or  in  any  filing  made  in  connection with the qualification of the
offering  under  the  securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
                                           ---------------
alleged  omission  to  state  a  material  fact required to be stated therein or
necessary  to  make  the  statements  therein  not  misleading;  (ii) any untrue
statement  or alleged untrue statement of a material fact contained in any final
prospectus  (as  amended  or  supplemented,  if  the Company files any amendment
thereof  or supplement thereto with the SEC) or the omission or alleged omission
to  state  therein  any  material  fact  necessary  to  make the statements made
therein,  in  light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of  the  Securities  Act,  the  Exchange  Act, any other law, including, without
limitation,  any  state  securities  law,  or any rule or regulation there under
relating  to  the  offer  or  sale  of  the Registrable Securities pursuant to a
Registration  Statement  (the matters in the foregoing clauses (i) through (iii)
being,  collectively,  "Violations").  The Company shall reimburse the Investors
                        ----------
and  each such controlling Person promptly as such expenses are incurred and are
due  and  payable,  for  any  legal  fees  or  disbursements or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim.  Notwithstanding  anything  to  the  contrary  contained  herein,  the
indemnification agreement contained in this Section 6(a): (x) shall not apply to
a  Claim by an Indemnified Person arising out of or based upon a Violation which
occurs  in reliance upon and in conformity with information furnished in writing
to  the  Company by such Indemnified Person expressly for use in connection with
the  preparation  of the Registration Statement or any such amendment thereof or
supplement thereto; (y) shall not be available to the extent such Claim is based
on  a  failure  of  the  Investor  to  deliver  or  to cause to be delivered the
prospectus  made  available  by  the Company, if such prospectus was timely made
available  by  the  Company pursuant to Section 3(c); and (z) shall not apply to
amounts  paid  in settlement of any Claim if such settlement is effected without
the  prior  written  consent  of  the  Company,  which  consent  shall  not  be
unreasonably  withheld.  Such  indemnity  shall  remain in full force and effect
regardless  of  any investigation made by or on behalf of the Indemnified Person
and  shall  survive  the transfer of the Registrable Securities by the Investors
pursuant  to  Section  9  hereof.

          (b)     In  connection  with  a  Registration Statement, each Investor
agrees  to severally and not jointly indemnify, hold harmless and defend, to the
same extent and in the same manner as is set forth in Section 6(a), the Company,
each  of  its  directors,  each  of its officers, employees, representatives, or
agents  and  each Person, if any, who controls the Company within the meaning of
the  Securities  Act  or the Exchange Act (each an "Indemnified Party"), against
                                                    -----------------
any  Claim or Indemnified Damages to which any of them may become subject, under

                                      - 6 -
<PAGE>
the  Securities  Act,  the  Exchange  Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or is based upon any Violation, in each case to
the  extent, and only to the extent, that such Violation occurs in reliance upon
and  in  conformity  with  written  information furnished to the Company by such
Investor  expressly for use in connection with such Registration Statement; and,
subject  to  Section  6(d),  such  Investor  will  reimburse  any legal or other
expenses  reasonably  incurred  by  them  in  connection  with  investigating or
defending  any  such  Claim;  provided,  however,  that  the indemnity agreement
contained  in  this  Section 6(b) and the agreement with respect to contribution
contained  in  Section  7  shall  not apply to amounts paid in settlement of any
Claim  if  such settlement is effected without the prior written consent of such
Investor,  which  consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount  of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration  Statement.  Such  indemnity  shall remain in full force and effect
regardless  of  any investigation made by or on behalf of such Indemnified Party
and  shall  survive  the transfer of the Registrable Securities by the Investors
pursuant  to  Section  9.  Notwithstanding  anything  to  the contrary contained
herein,  the  indemnification  agreement  contained  in  this  Section 6(b) with
respect  to  any  prospectus  shall  not inure to the benefit of any Indemnified
Party  if  the  untrue  statement  or omission of material fact contained in the
prospectus  was corrected and such new prospectus was delivered to each Investor
prior  to  such Investor's use of the prospectus to which the Claim relates. The
indemnification  provided  for  in  this  Section  6(b) shall not exceed for any
Investor,  the  positive  difference  between  the  Exchange  Price paid for its
portion  of  the  Registrable  Shares and the closing bid price on the Principal
Market (as defined in the Securities Exchange Agreement) of the Company's Common
Stock  on  the  day  that  such  Investor  sells  or  transfers  such  shares.

          (c)     Promptly after receipt by an Indemnified Person or Indemnified
Party  under  this  Section  6  of  notice  of the commencement of any action or
proceeding  (including any governmental action or proceeding) involving a Claim,
such  Indemnified  Person  or  Indemnified  Party  shall,  if a Claim in respect
thereof  is  to  be  made  against  any indemnifying party under this Section 6,
deliver  to the indemnifying party a written notice of the commencement thereof,
and  the  indemnifying party shall have the right to participate in, and, to the
extent  the  indemnifying  party so desires, jointly with any other indemnifying
party  similarly  noticed, to assume control of the defense thereof with counsel
mutually  satisfactory  to  the indemnifying party and the Indemnified Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person  or Indemnified Party shall have the right to retain its own
counsel  with  the  fees  and expenses of not more than one (1) counsel for such
Indemnified  Person  or  Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation  by  such  counsel of the Indemnified Person or Indemnified Party
and  the  indemnifying  party  would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other  party  represented  by  such counsel in such proceeding.  The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection  with  any  negotiation or defense of any such action or claim by the
indemnifying  party  and shall furnish to the indemnifying party all information
reasonably  available  to  the  Indemnified  Party  or  Indemnified Person which
relates  to  such  action  or  claim.  The  indemnifying  party  shall  keep the
Indemnified  Party  or  Indemnified Person fully apprised at all times as to the
status  of  the defense or any settlement negotiations with respect thereto.  No
indemnifying  party  shall  be liable for any settlement of any action, claim or
proceeding  effected  without its prior written consent; provided, however, that
the  indemnifying  party shall not unreasonably withhold, delay or condition its
consent.  No  indemnifying party shall, without the prior written consent of the
Indemnified  Party  or  Indemnified  Person, consent to entry of any judgment or
enter  into  any  settlement  or  other  compromise which does not include as an
unconditional  term  thereof  the  giving  by  the claimant or plaintiff to such
Indemnified  Party  or  Indemnified  Person  of  a release from all liability in
respect  to such claim or litigation.  Following indemnification as provided for
hereunder,  the  indemnifying  party  shall  be  subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or  corporations relating to the matter for which indemnification has been made.
The  failure  to  deliver  written  notice  to  the  indemnifying party within a
reasonable  time  of  the commencement of any such action shall not relieve such
indemnifying  party  of  any  liability to the Indemnified Person or Indemnified
Party  under this Section 6, except to the extent that the indemnifying party is
prejudiced  in  its  ability  to  defend  such  action.

          (d)     The  indemnification  required by this Section 6 shall be made
by  periodic  payments  of  the  amount  thereof  during  the  course  of  the
investigation  or defense, as and when bills are received or Indemnified Damages
are  incurred.

                                      - 7 -
<PAGE>
          (e)     The indemnity agreements contained herein shall be in addition
to  (i)  any  cause  of  action  or  similar  right  of the Indemnified Party or
Indemnified  Person  against  the  indemnifying  party  or  others, and (ii) any
liabilities  the  indemnifying  party  may  be  subject  to pursuant to the law.

     7.     CONTRIBUTION.
            -----------

     To the extent any indemnification by an indemnifying party is prohibited or
limited  by  law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no seller
of  Registrable  Securities  guilty  of fraudulent misrepresentation (within the
meaning  of  Section  11(f)  of  the  Securities  Act)  shall  be  entitled  to
contribution  from  any  seller  of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities  shall be limited in amount to the net amount of proceeds received by
such  seller  from  the  sale  of  such  Registrable  Securities.

     8.     REPORTS  UNDER  THE  EXCHANGE  ACT.
            ----------------------------------

     With  a  view to making available to the Investors the benefits of Rule 144
promulgated  under  the  Securities Act or any similar rule or regulation of the
SEC  that may at any time permit the Investors to sell securities of the Company
to  the  public  without  registration  ("Rule  144")  the  Company  agrees  to:
                                          ---------

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

          (b)     File  with  the  SEC  in a timely manner all reports and other
documents  required of the Company under the Securities Act and the Exchange Act
so long as the Company remains subject to such requirements (it being understood
that  nothing herein shall limit the Company's obligations under Section 4(c) of
the  Securities  Exchange  Agreement)  and  the filing of such reports and other
documents  as  are  required  by  the  applicable  provisions  of  Rule 144; and

          (c)     Furnish  to  each  Investor  so  long  as  such  Investor owns
Registrable  Securities,  promptly  upon request, (i) a written statement by the
Company  that  it  has complied with the reporting requirements of Rule 144, the
Securities  Act  and  the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the  Company, and (iii) such other information as may be reasonably requested to
permit  the  Investors  to  sell  such  securities  pursuant to Rule 144 without
registration.

     9.     AMENDMENT  OF  REGISTRATION  RIGHTS.
            -----------------------------------

     Provisions  of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or  prospectively),  only with the written consent of the Company and a majority
of  the  Required  Holders.  Any amendment or waiver effected in accordance with
this  Section  9  shall  be binding upon each Investor and the Company.  No such
amendment  shall be effective to the extent that it applies to fewer than all of
the holders of the Registrable Securities.  No consideration shall be offered or
paid  to  any  Person  to  amend  or  consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered
to  all  of  the  parties  to  this  Agreement.

     10.     MISCELLANEOUS.
              ------------

          (a)     A  Person  is  deemed to be a holder of Registrable Securities
whenever  such  Person  owns  or  is  deemed  to  own of record such Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two  (2)  or  more Persons with respect to the same Registrable
Securities,  the  Company  shall  act  upon the basis of instructions, notice or
election  received  from  the  registered  owner of such Registrable Securities.

          (b)     Any  notices,  consents,  waivers  or  other  communications
required  or  permitted to be given under the terms of this Agreement must be in
writing  and  will  be  deemed  to  have  been delivered: (i) upon receipt, when
delivered  personally;  (ii)  upon  receipt,  when  sent  by facsimile (provided
confirmation  of  transmission

                                      - 8 -
<PAGE>
is  mechanically  or  electronically  generated  and kept on file by the sending
party); or (iii) one (1) business day after deposit with a nationally recognized
overnight  delivery  service,  in  each  case properly addressed to the party to
receive  the  same.  The addresses and facsimile numbers for such communications
shall  be:

If  to  the  Company,  to:            Charys Holding Company, Inc.
                                      1117 Perimeter Center West, Suite N415
                                      Atlanta, Georgia 30338
                                      Attention:  Billy V. Ray, Jr.
                                      Telephone:  (678)  443-2300
                                      Facsimile:  (678)  443-2320

With  a  copy  to:                    Glast,  Phillips  &  Murray,  P.C.
                                      815  Walker  Street,  Suite  1250
                                      Houston,  Texas  77002
                                      Attention:  Norman  T.  Reynolds,  Esq.
                                      Telephone:  (713)  237-3135
                                      Facsimile:  (713)  237-3202

If  to  an  Investor,  to  its  address  and facsimile number on the Schedule of
Investors attached hereto, with copies to such Investor's representatives as set
forth  on  the  Schedule  of Investors or to such other address and/or facsimile
number  and/or  to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness  of such change.  Written confirmation of receipt (A) given by the
recipient  of  such  notice,  consent,  waiver  or  other  communication,  (B)
mechanically  or  electronically  generated  by  the  sender's facsimile machine
containing  the time, date, recipient facsimile number and an image of the first
page  of  such  transmission  or  (C) provided by a courier or overnight courier
service  shall  be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with  clause  (i),  (ii)  or  (iii)  above,  respectively.

          (c)     Failure  of  any  party  to exercise any right or remedy under
this  Agreement  or  otherwise,  or delay by a party in exercising such right or
remedy,  shall  not  operate  as  a  waiver  thereof.

          (d)     The  parties  hereto  acknowledge  that  the  transactions
contemplated  by  this  Agreement  and  the  exhibits  hereto  bear a reasonable
relation  to  the State of New York.  The parties hereto agree that the internal
laws  of  the  State  of  New  York shall govern this Agreement and the exhibits
hereto,  including, but not limited to, all issues related to usury.  Any action
to  enforce  the terms of this Agreement or any of its exhibits shall be brought
exclusively  in the state and/or federal courts situated in the County and State
of  New  York.  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 to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to  limit  in any way any right to serve process in any manner permitted by law.
If  any  provision  of  this  Agreement shall be invalid or unenforceable in any
jurisdiction,  such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity  or  enforceability  of  any  provision  of this Agreement in any other
jurisdiction.  EACH  PARTY  HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES  NOT  TO  REQUEST,  A  JURY  TRIAL  FOR  THE  ADJUDICATION OF ANY DISPUTE
HEREUNDER  OR  IN  CONNECTION  HEREWITH  OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION  CONTEMPLATED  HEREBY.

          (e)     This  Agreement, the Securities Exchange Agreement and related
documents  including  the Convertible Notes and the Default Warrants, constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof  and  thereof.  There  are  no  restrictions,  promises,  warranties  or
undertakings,  other  than  those  set  forth or referred to herein and therein.
This  Agreement,  the  Securities  Exchange  Agreement  and  related  documents
including  the  Convertible  Notes and the Default Warrants, supersede all prior
agreements  and  understandings  among  the  parties  hereto with respect to the
subject  matter  hereof  and  thereof.  In  the  event  of  any

                                      - 9 -
<PAGE>
conflict  between  the  provisions of this Agreement and the Securities Exchange
Agreement,  the  Convertible  Notes  and  the Default Warrants, the terms of the
Securities  Exchange  Agreement  shall  control.

          (f)     This  Agreement  shall  inure to the benefit of and be binding
upon  the  permitted  successors  and  assigns  of  each  of the parties hereto.

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

          (h)     This Agreement may be executed in identical counterparts, each
of  which  shall be deemed an original but all of which shall constitute one and
the  same agreement.  This Agreement, once executed by a party, may be delivered
to  the other party hereto by facsimile transmission of a copy of this Agreement
bearing  the  signature  of  the  party  so  delivering  this  Agreement.

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

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

          (j)     This  Agreement  is  intended  for  the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit  of,  nor  may  any  provision  hereof be enforced by, any other Person.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      - 10 -
<PAGE>

     IN  WITNESS  WHEREOF,  the  parties  have caused this Investor Registration
Rights  Agreement  to  be  duly executed as of day and year first above written.

                                    COMPANY:
                                    CHARYS  HOLDING  COMPANY,  INC.

                                    By:
                                       -----------------------------------------
                                    Name:  Billy  V.  Ray,  Jr.
                                    Title:  Chief  Executive  Officer

                                    INVESTORS:
                                    GOTTBETTER  CAPITAL  MASTER,  LTD.

                                    By:
                                       -----------------------------------------
                                    Name:  Adam  S.  Gottbetter
                                    Title:  Director

                                    CASTLERIGG  MASTER  INVESTMENTS  LTD.

                                    By:
                                       -----------------------------------------
                                    Name:
                                    Title:

                                    UBS  O'CONNOR  LLC  F/B/O  O'CONNOR  PIPES
                                    CORPORATE STRATEGIES MASTER LTD.

                                    By:
                                       -----------------------------------------
                                    Name:
                                    Title:

                                     - 11 -
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE I
                                   ----------

                              SCHEDULE OF INVESTORS
                              ---------------------

                                              ADDRESS/FACSIMILE
NAME                                         NUMBER OF INVESTOR
-------------------------------------  -------------------------------
<S>                                    <C>

Gottbetter Capital Master, Ltd.        488 Madison Avenue
                                       New York, NY 10022
                                       Facsimile: (212) 400-6999

With a copy to:                        Jason M. Rimland, Esq.
                                       Gottbetter & Partners, LLP
                                       488 Madison Avenue
                                       New York, NY 10022
                                       Facsimile: (212) 400-6901

Castlerigg Master Investments          40 West 57th Street, 26th Floor
                                       New York, NY 100192
                                       Facsimile: (212) 603-5710
                                       Email: mpliskin@sandellmgmt.com

UBS O'Connor LLC F/B/O O'Connor Pipes  1 North Wacker
Corporate Strategies Master Ltd.       Chicago, IL 60606
                                       Facsimile: (312) 525-5868
</TABLE>

                                     - 11 -
<PAGE>
                                    EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                         -------------------------------
                            OF REGISTRATION STATEMENT
                            -------------------------

Attention:

     Re:     CHARYS  HOLDING  COMPANY,  INC.

Ladies  and  Gentlemen:

     We are counsel to Charys Holding Company, Inc., a Delaware corporation (the
"Company"),  and  have  represented  the Company in connection with that certain
 -------
Securities Exchange Agreement (the "Securities Exchange Agreement") entered into
 --                                 -----------------------------
by  and  among  the  Company  and the investors named therein (collectively, the
"Investors")  pursuant to which the Company issued to the Investors Subordinated
 ---------
Unsecured  Convertible  Notes (the "Notes"), and if applicable, Default Warrants
                                    -----
("Default  Warrants"),  which  Notes  and  Default Warrants are convertible into
  -----------------
shares  of  Common  Stock,  par  value  $0.001  per  share (the "Common Stock").
                                                                 ------------
Pursuant to the Securities Exchange Agreement, the Company also has entered into
a  Registration  Rights  Agreement  with the Investors (the "Registration Rights
                                                             -------------------
Agreement")  pursuant  to  which  the  Company  agreed,  among  other things, to
---------
register  the  Registrable  Securities  (as  defined  in the Registration Rights
Agreement)  under the Securities Act of 1933, as amended (the "Securities Act").
                                                               --------------
In  connection  with  the  Company's  obligations  under the Registration Rights
Agreement,  on                    the Company filed a Registration Statement on
                ------------ ----,
Form            (File No. 333              )(the "Registration Statement") with
      --------               --------------       ----------------------
the  Securities  and Exchange Commission (the "SEC") relating to the Registrable
                                               ---
Securities  which  names  each  of  the  Investors  as  a  selling  stockholder
thereunder.

     In  connection with the foregoing, we advise you that a member of the SEC's
staff  has  advised  us by telephone that the SEC has entered an order declaring
the  Registration Statement effective under the Securities Act at [ENTER TIME OF
EFFECTIVENESS]  on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic  inquiry  of  a  member  of  the  SEC's  staff,  that  any stop order
suspending  its  effectiveness  has been issued or that any proceedings for that
purpose  are  pending  before,  or  threatened  by,  the SEC and the Registrable
Securities  are  available  for  resale under the Securities Act pursuant to the
Registration  Statement.

                                          Very  truly  yours,

                                          [LAW  FIRM]

                                          By:
                                             ----------------------------

cc:     [LIST NAMES OF INVESTOR]

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