Document:

Exhibit
      4(b)

    Registration
      Rights Agreement

    

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of December 30, 2005, by and among Universal Food & Beverage Company, a
      Nevada corporation, with headquarters located at 3830 Commerce Drive, St.
      Charles, Illinois 60174 (the "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the "Securities
      Purchase Agreement"),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer (i)
      convertible notes of the Company (the "Notes")
      which
      will, among other things, be convertible into shares of the Company's common
      stock, par value $0.01 per share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares"),
      in
      accordance with the terms of the Notes, and (ii) warrants (the "Warrants")
      which
      will be exercisable to purchase shares of Common Stock (as exercised
      collectively, the "Warrant
      Shares").

     

    B. To
      induce
      the Buyers to execute and deliver the Securities Purchase 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 "1933
      Act"),
      and
      applicable state securities laws.

    

    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 each of the Buyers hereby agree as
      follows:

     

    Definitions.
      

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

     

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

     

    "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement.

     

    "Effective
      Date"
      means
      the date that the Registration Statement has been declared effective by the
      SEC.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    "Effectiveness
      Deadline"
      means
      the date which is 120 days after the Closing Date.

     

    "Filing
      Deadline"
      means
      45 days after the Closing Date.

     

    "Investor"
      means a
      Buyer or any transferee or assignee of the Notes or Warrants, as applicable,
      to
      whom a Buyer assigns its rights under this Agreement and who agrees to become
      bound by the provisions of this Agreement in accordance with Section 9 and
      any
      transferee or assignee thereof to whom a transferee or assignee of the Notes
      or
      Warrants, as applicable, assigns its rights under this Agreement and who agrees
      to become bound by the provisions of this Agreement in accordance with Section
      9
      and, in each case, is identified in the register of the Company.

     

    "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.

     

    "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 1933 Act and pursuant
      to
      Rule 415 and the declaration of effectiveness of such Registration Statement(s)
      by the SEC.

     

    "Registrable
      Securities"
      means
      (i) the Conversion Shares issued or issuable upon conversion of the Notes,
      (ii) the Warrant Shares issued or issuable upon exercise of the Warrants
      and (iii) any share capital of the Company issued or issuable, with respect
      to
      the Conversion Shares, the Warrant Shares or the Warrants as a result of any
      share split, share dividend, recapitalization, exchange or similar event or
      otherwise, without regard to any limitations on conversions of the Notes or
      exercises of the Warrants.

     

    "Registration
      Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

     

    "Required
      Holders"
      means
      the holders of at least a majority of the Registrable Securities.

     

    "Required
      Registration Amount"
      means
      110% of the sum of (i) the number of Conversion Shares issued and issuable
      pursuant to the Notes as of the trading day immediately preceding the applicable
      date of determination, and (ii) the number of Warrant Shares issued and issuable
      pursuant to the Warrants as of the trading day immediately preceding the
      applicable date of determination, all subject to adjustment as provided in
      Section 2(e).

     

    "Rule
      415"
      means
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous or delayed basis.

     

    "SEC"
      means
      the United States Securities and Exchange Commission.

     

    
      
        
        

      

      
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    Registration.

     

    Mandatory
      Registration.
      The
      Company shall use its best efforts to prepare, and, as soon as practicable,
      but
      in no event later than the Filing Deadline, file with the SEC the Registration
      Statement on Form S-3 covering the resale of all of the Registrable Securities.
      In the event that Form S-3 is unavailable for such a registration, the Company
      shall use such other form as is available for such a registration on another
      appropriate form reasonably acceptable to the Required Holders, subject to
      the
      provisions of Section 2(d). The Registration Statement prepared pursuant hereto
      shall register for resale at least the number of shares of Common Stock equal
      to
      the Required Registration Amount as of the date the Registration Statement
      is
      initially filed with the SEC. The Registration Statement shall contain (except
      if otherwise directed by the Required Holders) the "Selling
      Shareholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      The
      Company shall use its best efforts to have the Registration Statement declared
      effective by the SEC as soon as practicable, but in no event later than the
      Effectiveness Deadline.

     

    Allocation
      of Registrable Securities.
      The
      initial number of Registrable Securities included in any Registration Statement
      and any increase in the number of Registrable Securities included therein shall
      be allocated pro rata among the Investors based on the number of Registrable
      Securities held by each Investor at the time the Registration Statement covering
      such initial number of Registrable Securities or increase thereof is declared
      effective by the SEC. In the event that an Investor sells or otherwise transfers
      any of such Investor's Registrable Securities, each transferee that becomes
      an
      Investor shall be allocated a pro rata portion of the then remaining number
      of
      Registrable Securities included in such Registration Statement for such
      transferor. Any Shares of Common Stock included in a Registration Statement
      and
      which remain allocated to any Person which ceases to hold any Registrable
      Securities covered by such Registration Statement shall be allocated to the
      remaining Investors, pro rata based on the number of Registrable Securities
      then
      held by such Investors which are covered by such Registration Statement. In
      no
      event shall the Company include any securities other than Registrable Securities
      on any Registration Statement without the prior written consent of the Required
      Holders.

     

    Legal
      Counsel.
      Subject
      to Section 5 hereof, the Required Holders shall have the right to select one
      legal counsel to review and oversee any registration pursuant to this Section
      2
      ("Legal
      Counsel"),
      which
      shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
      designated by the Required Holders. The Company and Legal Counsel shall
      reasonably cooperate with each other in regards to the performance of the
      Company's obligations under this Agreement.

     

    Ineligibility
      for Form S-3.
      In the
      event that Form S-3 is not available for the registration of the resale of
      Registrable Securities hereunder, the Company shall (i) register the resale
      of
      the Registrable Securities on another appropriate form reasonably acceptable
      to
      the Required Holders and (ii) undertake to register the Registrable Securities
      on Form S-3 as soon as such form is available, provided that the Company shall
      maintain the effectiveness of the Registration Statement then in effect until
      such time as a Registration Statement on Form S-3 covering the Registrable
      Securities has been declared effective by the SEC, or if earlier, until the
      end
      of the Registration Period (as defined below).

     

    
      
        
        

      

      
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    Sufficient
      Number of Shares Registered.
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section 2(a) is insufficient to cover all of the Registrable
      Securities required to be covered by such Registration Statement or an
      Investor's allocated portion of the Registrable Securities pursuant to Section
      2(b), the Company shall amend the applicable Registration Statement, or file
      a
      new Registration Statement (on the short form available therefor, if
      applicable), or both, so as to cover at least the Required Registration Amount
      as of the trading day immediately preceding the date of the filing of such
      amendment or new Registration Statement, in each case, as soon as practicable,
      but in any event not later than fifteen (15) days after the necessity therefor
      arises. The Company shall use its best efforts to cause such amendment and/or
      new Registration Statement to become effective as soon as practicable following
      the filing thereof. For purposes of the foregoing provision, the number of
      shares available under a Registration Statement shall be deemed "insufficient
      to
      cover all of the Registrable Securities" if at any time the number of shares
      of
      Common Stock available for resale under the Registration Statement is less
      than
      the product determined by multiplying (i) the Required Registration Amount
      as of
      such time by (ii) 0.90. The calculation set forth in the foregoing sentence
      shall be made without regard to any limitations on the conversion of the Notes
      or the exercise of the Warrants and such calculation shall assume that the
      Notes
      are then convertible into Shares of Common Stock at the then prevailing
      Conversion Rate (as defined in the Notes) and that the Warrants are then
      exercisable for Shares of Common Stock at the then prevailing Exercise Price
      (as
      defined in the Warrants).

     

    Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      If (i)
      a Registration Statement covering all of the Registrable Securities required
      to
      be covered thereby and required to be filed by the Company pursuant to this
      Agreement is (A) not filed with the SEC on or before the respective Filing
      Deadline (a "Filing
      Failure")
      or (B)
      not declared effective by the SEC on or before the respective Effectiveness
      Deadline (an "Effectiveness
      Failure")
      or
      (ii) on any day after the Effective Date sales of all of the Registrable
      Securities required to be included on such Registration Statement cannot be
      made
      (other than during an Allowable Grace Period (as defined in Section 3(r))
      pursuant to such Registration Statement (including, without limitation, because
      of a failure to keep such Registration Statement effective, to disclose such
      information as is necessary for sales to be made pursuant to such Registration
      Statement or to register a sufficient number of Shares of Common Stock) (a
      "Maintenance
      Failure")
      then,
      as partial relief for the damages to any holder by reason of any such delay
      in
      or reduction of its ability to sell the underlying Shares of Common Stock (which
      remedy shall be exclusive of any other remedies available at law or in equity),
      the Company shall pay to each holder of Registrable Securities relating to
      such
      Registration Statement an amount in cash equal to three percent (3.0%) of the
      aggregate Purchase Price (as such term is defined in the Securities Purchase
      Agreement) of such Investor's Registrable Securities included in such
      Registration Statement on each of the following dates: (i) the day of a Filing
      Failure and on every thirtieth day (pro rated for periods totaling less than
      thirty days) after a Filing Failure until such Filing Failure is cured; (ii)
      the
      day of an Effectiveness Failure and on every thirtieth day (pro rated for
      periods totaling less than thirty days) after an Effectiveness Failure until
      such Effectiveness Failure is cured; and (iii) the initial day of a Maintenance
      Failure and on every thirtieth day (pro rated for periods totaling less than
      thirty days) after a Maintenance Failure until such Maintenance Failure is
      cured. The payments to which a holder shall be entitled pursuant to this Section
      2(f) are referred to herein as "Registration
      Delay Payments."
      Notwithstanding the foregoing, in no event shall the aggregate of all
      Registration Delay Payments exceed $650,000. Registration Delay Payments shall
      be paid on the day of the Filing Failure, Effectiveness Failure and the initial
      day of a Maintenance Failure, as applicable, and thereafter on the earlier
      of
      (I) the thirtieth day after the event or failure giving rise to the Registration
      Delay Payments has occurred and (II) the third Business Day after the event
      or
      failure giving rise to the Registration Delay Payments is cured. In the event
      the Company fails to make Registration Delay Payments in a timely manner, such
      Registration Delay Payments shall bear interest at the rate of one and one-half
      percent (1.5%) per month (prorated for partial months) until paid in
      full.

     

    
      
        
        

      

      
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    Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2(a), 2(d) or 2(e), the Company will use its reasonable
      best
      efforts to effect the registration of the Registrable Securities in accordance
      with the intended method of disposition thereof and, pursuant thereto, the
      Company shall have the following obligations:

     

    The
      Company shall promptly prepare and file with the SEC a Registration Statement
      with respect to the Registrable Securities and use its reasonable best efforts
      to cause such Registration Statement relating to the Registrable Securities
      to
      become effective as soon as practicable after such filing (but in no event
      later
      than the Effectiveness Deadline). The Company shall keep each Registration
      Statement effective pursuant to Rule 415 at all times until the earlier of
      (i)
      the date as of which all of the Investors (other than any Investors who are
      "affiliates" of the Company as such term is used in Rule 144(k) promulgated
      under the Securities Act) may sell all of the Registrable Securities covered
      by
      such Registration Statement without restriction pursuant to Rule 144(k) (or
      any
      successor thereto) promulgated under the 1933 Act or (ii) the date on which
      the
      Investors shall have sold all of the Registrable Securities covered by such
      Registration Statement (the "Registration
      Period").
      The
      Company shall ensure that each Registration Statement (including any amendments
      or supplements thereto and prospectuses contained therein) shall not contain
      any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein (in the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading. The Company shall submit to the SEC, within two (2) Business Days
      after the later of the date that (i) the Company learns that no review of a
      particular Registration Statement will be made by the staff of the SEC or that
      the staff has no further comments on a particular Registration Statement, as
      the
      case may be, and (ii) the approval of Legal Counsel pursuant to Section 3(c)
      (which approval is immediately sought), a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request; provided however, the Company
      may
      delay the submission of the request for acceleration (or delay the effectiveness
      of such Registration Statement) for up to thirty (30) days if the Company has
      material non-public information concerning the Company if the disclosure of
      such
      information at the time is not, in the good faith judgment of the Board of
      Directors of the Company relying upon the opinion of counsel, in the best
      interests of the Company; provided, further however, that the Company shall
      promptly notify the Investors in writing of the existence of material non-public
      information giving rise to a delay in effectiveness (provided that the Company
      shall not disclose the content of such material non-public information to the
      Investors); and provided further that any delay by the Company in accordance
      with this sentence shall not affect the entitlement of a holder to any
      Registration Delay Payment determined in accordance with Section
      2(f).

     

    
      
        
        

      

      
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    Subject
      to Section 3(r) of this Agreement, the Company shall prepare and file with
      the
      SEC such amendments (including post-effective amendments) and supplements to
      a
      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 1933 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 1933 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 filing a report on Form 10-Q, Form
      10-K or any analogous report under the Securities Exchange Act of 1934, as
      amended (the "1934
      Act"),
      the
      Company shall have incorporated such report by reference into such Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the 1934 Act report is filed which created the
      requirement for the Company to amend or supplement such Registration
      Statement.

     

    The
      Company shall (A) permit Legal Counsel to review and comment upon (i) a
      Registration Statement at least five (5) Business Days prior to its filing
      with
      the SEC and (ii) all amendments and supplements to all Registration Statements
      (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
      Reports on Form 8-K, and any similar or successor reports) within a reasonable
      number of days prior to their filing with the SEC, and (B) not file any
      Registration Statement or amendment or supplement thereto in a form to which
      Legal Counsel reasonably objects. The Company shall not submit a request for
      acceleration of the effectiveness of a Registration Statement or any amendment
      or supplement thereto without the prior approval of Legal Counsel, which consent
      shall not be unreasonably withheld. The Company shall furnish to Legal Counsel,
      without charge, (i) copies of any correspondence from the SEC or the staff
      of
      the SEC to the Company or its representatives relating to any Registration
      Statement, (ii) promptly after the same is prepared and filed with the SEC,
      one
      copy of any Registration Statement and any amendment(s) thereto, including
      financial statements and schedules, all documents incorporated therein by
      reference, if requested by an Investor, and all exhibits and (iii) upon the
      effectiveness of any Registration Statement, one copy of the prospectus included
      in such Registration Statement and all amendments and supplements thereto.
      The
      Company shall reasonably cooperate with Legal Counsel in performing the
      Company's obligations pursuant to this Section 3.

     

    The
      Company shall furnish to each Investor whose Registrable Securities are included
      in any Registration Statement, without charge, (i) promptly after the same
      is
      prepared and filed with the SEC, at least one copy of any Registration Statement
      and any amendment(s) thereto, including financial statements and schedules,
      all
      documents incorporated therein by reference, if requested by an Investor, all
      exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
      Registration Statement, ten (10) copies of the 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, including copies of any preliminary or final prospectus, as such
      Investor may reasonably request from time to time in order to facilitate the
      disposition of the Registrable Securities owned by such Investor.

     

    
      
        
        

      

      
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    Subject
      to Section 3(o) of this Agreement, and excluding any Registrable Securities
      held
      by Investors electing to exclude their Registrable Securities from the
      Registration Statement under Section 4(b), the Company shall use its reasonable
      best efforts to (i) register and qualify, unless an exemption from registration
      and qualification applies, the resale by Investors of the Registrable Securities
      covered by a Registration Statement under such other securities or "blue sky"
      laws of all applicable jurisdictions in the United States, (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 (x) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify but for this Section 3(e), (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
      Legal Counsel and 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 threatening of any
      proceeding for such purpose.

     

    The
      Company shall notify Legal Counsel and each Investor in writing of the happening
      of any event, as promptly as practicable after becoming aware of such 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 the 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, subject to Section 3(r), 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 Legal Counsel and each Investor (or such other number of copies
      as
      Legal Counsel or such Investor may reasonably request). The Company shall also
      promptly notify Legal Counsel and 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 Legal
      Counsel and each Investor by facsimile or e-mail on the same day of such
      effectiveness and by overnight mail), (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
      (subject to Section 3(r) hereof).

     

    Subject
      to Section 3(r), the Company shall use its 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 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 Legal Counsel and each Investor who holds
      Registrable Securities being sold of the issuance of such order and the
      resolution thereof or its receipt of actual notice of the initiation or threat
      of any proceeding for such purpose.

     

    
      
        
        

      

      
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    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 such Investor, at the Investor's
      expense, to undertake appropriate action to prevent disclosure of, or to obtain
      a protective order for, such information.

     

    The
      Company shall use its best efforts either to (i) cause all of the Registrable
      Securities covered by a Registration Statement 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) secure designation and
      quotation of all the Registrable Securities covered by a Registration Statement
      on the Nasdaq National Market, or (iii) if, despite the Company's best efforts
      to satisfy the preceding clause (i) or (ii) the Company is unsuccessful in
      satisfying the preceding clause (i) or (ii), to secure the inclusion for
      quotation on The Nasdaq SmallCap Market for such Registrable Securities and,
      without limiting the generality of the foregoing, to use its best efforts to
      arrange for at least two market makers to register with the National Association
      of Securities Dealers, Inc. ("NASD")
      as
      such with respect to such Registrable Securities. The Company shall pay all
      fees
      and expenses in connection with satisfying its obligation under this Section
      3(k).

     

    The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable, facilitate the timely preparation and
      delivery of certificates (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.

     

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

     

    
      
        
        

      

      
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    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, and in the
      manner provided by, the provisions of Rule 158 under the 1933 Act) covering
      a
      twelve-month period beginning not later than the first day of the Company's
      fiscal quarter next following the effective date of the Registration
      Statement.

     

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

     

    Within
      two (2) Business Days after a Registration Statement which covers Registrable
      Securities is ordered 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.

     

    Notwithstanding
      anything to the contrary herein, at any time after the Registration Statement
      has been declared effective by the SEC, the Company may delay the disclosure
      of
      material, non-public information concerning the Company the disclosure of which
      at the time is not, in the good faith opinion of the Board of Directors of
      the
      Company, in the best interest of the Company and, in the opinion of counsel
      to
      the Company, otherwise required (a "Grace
      Period");
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      (provided that in each notice the Company will not disclose the content of
      such
      material, non-public information to the Investors) and the date on which the
      Grace Period will begin, and (ii) notify the Investors in writing of the
      date on which the Grace Period ends; and, provided further, that no Grace Period
      shall exceed twenty (20) consecutive days and during any three hundred sixty
      five (365) day period such Grace Periods shall not exceed an aggregate of sixty
      (60) days and the first day of any Grace Period must be at least two (2) trading
      days after the last day of any prior Grace Period (each, an "Allowable
      Grace Period").
      For
      purposes of determining the length of a Grace Period above, the Grace Period
      shall begin on and include the date the Investors receive the notice referred
      to
      in clause (i) and shall end on and include the later of the date the Investors
      receive the notice referred to in clause (ii) and the date referred to in such
      notice. The provisions of Section 3(g) hereof shall not be applicable during
      the
      period of any Allowable Grace Period. Upon expiration of the Grace Period,
      the
      Company shall again be bound by the first sentence of Section 3(f) with respect
      to the information giving rise thereto unless such material, non-public
      information is no longer applicable. Notwithstanding anything to the contrary,
      the Company shall cause its transfer agent to deliver unlegended Shares of
      Common Stock to a transferee of an Investor in accordance with the terms of
      the
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an Investor has entered into a contract for
      sale, and delivered a copy of the prospectus included as part of the applicable
      Registration Statement, prior to the Investor's receipt of the notice of a
      Grace
      Period and for which the Investor has not yet settled. 

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    Obligations
      of the Investors.

     

    At
      least
      five (5) Business Days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify each Investor in writing of
      the
      information the Company requires from each such Investor if such Investor elects
      to have any of such Investor's Registrable Securities included in such
      Registration Statement. It shall be a condition precedent to the obligations
      of
      the Company to complete the registration pursuant to this Agreement with respect
      to the Registrable Securities of a particular Investor that such Investor shall
      furnish to the Company such information regarding itself, the Registrable
      Securities held by it and the intended method of disposition of the Registrable
      Securities held by it, as shall be reasonably required to effect and maintain
      the effectiveness of the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request. Each Investor shall promptly notify, as required by
      applicable law, the Company of any material change with respect to such
      information previously provided to the Company by such Investor.

     

    Each
      Investor, by such Investor's acceptance of the Registrable Securities, agrees
      to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor's election
      to
      exclude all of such Investor's Registrable Securities from such Registration
      Statement.

     

    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(g) or the first
      sentence of 3(f), such Investor will immediately discontinue disposition of
      Registrable Securities pursuant to any Registration Statement(s) covering such
      Registrable Securities until such Investor's receipt of the copies of the
      supplemented or amended prospectus contemplated by Section 3(g) or the first
      sentence of 3(f) or receipt of notice that no supplement or amendment is
      required. Notwithstanding anything to the contrary, the Company shall cause
      its
      transfer agent to deliver unlegended Shares of Common Stock to a transferee
      of
      an Investor in accordance with the terms of the Securities Purchase Agreement
      in
      connection with any sale of Registrable Securities with 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(g) or the first sentence of 3(f) and for which the Investor has not
      yet settled.

     

    Each
      Investor covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it in connection with sales of
      Registrable
      Securities pursuant to the Registration Statement.

     

    Expenses
      of Registration.

     

    All
      reasonable expenses, other than underwriting discounts and commissions, incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3, including, without limitation, all registration, listing and
      qualifications fees, printers and accounting fees, and fees and disbursements
      of
      counsel for the Company shall be paid by the Company. The Company shall also
      reimburse the Investors for the fees and disbursements of Legal Counsel in
      connection with registration, filing or qualification pursuant to Sections
      2 and
      3 of this Agreement which amount shall be limited to $10,000.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    Indemnification.

     

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Investor, the directors, officers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls any Investor within the meaning of the 1933 Act or the 1934 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
      preliminary prospectus if used prior to the effective date of such Registration
      Statement, or contained in the 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, (iii) any violation or alleged
      violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement or (iv) any violation of this
      Agreement (the matters in the foregoing clauses (i) through (iv) being,
      collectively, "Violations").
      Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
      promptly as such expenses are incurred and are due and payable, for any legal
      fees 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): (i) 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
      for such Indemnified Person expressly for use in connection with the preparation
      of the Registration Statement or any such amendment thereof or supplement
      thereto; (ii) 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, including a corrected prospectus, if such
      prospectus or corrected prospectus was timely made available by the Company
      pursuant to Section 3(d); and (iii) 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 or
      delayed. 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.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    In
      connection with any Registration Statement in which an Investor is
      participating, each such 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
      who signs the Registration Statement and each Person, if any, who controls
      the
      Company within the meaning of the 1933 Act or the 1934 Act (each, an
      "Indemnified
      Party"),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are 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(c), such Investor will reimburse any legal or other
      expenses reasonably incurred by an Indemnified Party 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
      or
      delayed; 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 preliminary prospectus shall
      not inure to the benefit of any Indemnified Party if the untrue statement or
      omission of material fact contained in the preliminary prospectus was corrected
      on a timely basis in the prospectus, as then amended or
      supplemented.

     

    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 counsel for all 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; provided further, that the indemnifying party shall
      not be responsible for the reasonable fees and expenses of more than one (1)
      separate legal counsel for such Indemnified Person or Indemnified Party. In
      the
      case of an Indemnified Person, legal counsel referred to in the immediately
      preceding sentence shall be selected by the Investors holding at least a
      majority in
      interest of the Registrable Securities included in the Registration Statement
      to
      which the Claim relates. The Indemnified Party or Indemnified Person shall
      cooperate reasonably 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.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

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

     

    The
      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.

     

    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.

     

    Contribution.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    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 contribution
      shall be made under circumstances where the maker would not have been liable
      for
      indemnification under the fault standards set forth in Section 6 of this
      Agreement, (ii) no Person involved in the sale of Registrable Securities which
      Person is guilty of fraudulent misrepresentation (within the meaning of Section
      11(f) of the 1933 Act) in connection with such sale shall be entitled to
      contribution from any Person involved in such sale of Registrable Securities
      who
      was not guilty of fraudulent misrepresentation; and (iii) 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
      pursuant to such Registration Statement.

     

    Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other 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:

     

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

     

    file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 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 Purchase
      Agreement) and the filing of such reports and other documents is required for
      the applicable provisions of Rule 144; and

     

    furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company, if true, that it has
      complied with the reporting requirements of Rule 144, the 1933 Act and the
      1934
      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.

     

    Assignment
      of Registration Rights.
      

     

    The
      rights under this Agreement shall be automatically assignable by the Investors
      to any transferee of all or any portion of such Investor's Registrable
      Securities if: (i) the Investor agrees in writing with the transferee or
      assignee to assign such rights, and a copy of such agreement is furnished to
      the
      Company within a reasonable time after such assignment; (ii) the Company is,
      within a reasonable time after such transfer or assignment, furnished with
      written notice of (a) the name and address of such transferee or assignee,
      and
      (b) the securities with respect to which such registration rights are being
      transferred or assigned; (iii) immediately following such transfer or assignment
      the further disposition of such securities by the transferee or assignee is
      restricted under the 1933 Act and applicable state securities laws; (iv) at
      or
      before the time the Company receives the written notice contemplated by clause
      (ii) of this sentence the transferee or assignee agrees in writing with the
      Company to be bound by all of the provisions contained herein; (v) such transfer
      shall have been made in accordance with the applicable requirements of the
      Securities Purchase Agreement; and (vi) such transfer shall have been conducted
      in accordance with all applicable federal and state securities
      laws.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    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 the Required
      Holders. Any amendment or waiver effected in accordance with this Section 10
      shall be binding upon each Investor and the Company. No such amendment shall
      be
      effective to the extent that it applies to less 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.

     

    Miscellaneous.

     

    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 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 record owner of such
      Registrable Securities.

     

    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 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: 

    

    Universal
      Food & Beverage Company

    3830
      Commerce Drive 

    St.
      Charles, Illinois 60174

     

    Telephone:
       (630)
      584-8670 

     

    Facsimile:
       (630)
      [
      ]-[ ]

     

    Attention:
       Chief
      Executive Officer

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    With
      a
      copy (for informational purposes only) to:

     

    Holland
      & Knight, LLP

     

    One
      MidAmerica Plaza, Suite 1000

     

    Oakbrook
      Terrace, IL 60133

     

    Telephone: (630)
      954-2100

     

    Facsimile:
       (___)
      [___]-[____]

     

    Attention: [ ________________ ]
      Esq.

    

    If
      to the
      Transfer Agent:

     

    [                        ]
      

     

    [                        ]
      

     

    [                        ]
      

     

    Telephone:
      [                       ]

     

    Facsimile:  [                        ]
      

     

    Attention: [                        ]

     

    If
      to
      Legal Counsel:

    

    Schulte 
      Roth
& Zabel LLP

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Telephone:
      (212) 756-2000

    Facsimile:
      (212) 593-5955

    Attention:
      Eleazer N. Klein, Esq.

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, 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.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    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.

     

    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.
      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.

     

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

     

    Subject
      to the requirements of Section 9, this Agreement shall inure to the benefit
      of
      and be binding upon the permitted successors and assigns of each of the parties
      hereto.

     

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

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    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.

     

    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.

     

    All
      consents and other determinations required to be made by the Investors pursuant
      to this Agreement shall be made, unless otherwise specified in this Agreement,
      by the Required Holders.

     

    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, determined as if all of the Notes held by
      Investors then outstanding have been converted into Registrable Securities
      and
      all Warrants then outstanding have been exercised for Registrable Securities
      without regard to any limitations on conversion of the Notes or on exercises
      of
      the Warrants.

     

    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.

     

    The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      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 herein.

     

    *
      * * * *
      *

     

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              COMPANY:

            
	 	 
	 	
              UNIVERSAL
                FOOD & BEVERAGE COMPANY

            
	 
 	 
 	 
 
	 	By:  	/s/ Duane
              N.
              Martin
	 	
              
Duane
              N. Martin, Chairman and
              CEO

    

     

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              BUYERS:

            
	 	 
	 	MAGNETAR CAPITAL
              MASTER
              FUND, LTD.
	 
 	 
 	 
 
	 	By:  	Magnetar
              Financial LLC
	 	Its:	Investment Manager
	 	 	 
	 	 	/s/ Paul
              Smith                       
              
	 	By:	Paul Smith
	 	Its:	General
              Counsel

    

     

    

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    

    SCHEDULE
      OF BUYERS

     

    

    
      	
               

              Buyer

            	
              Buyer
                Address

              and
                Facsimile Number

            	
              Buyer's
                Representative's Address 

              and
                Facsimile Number

            
	 	 	 
	
              Magnetar
                Capital Master Fund, Ltd.

            	
              1603
                Orrington Avenue

              Evanston,
                IL 60201

              Attn:
                Richard Levy and Matthew Ray

              Facsimile:
                (847)
                905-5603

              Telephone:
                (847) 962-2308

            	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, NY 10022

              Attn:
                Eleazer Klein, Esq. 

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2000

            

    

     

    
 

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    
 

    EXHIBIT
      A

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    [Transfer
      Agent]

    [Address]

    Attention:
      

    

    Re: Universal
      Food & Beverage Company

     

    Ladies
      and Gentlemen:

     

    [We
      are][I am] counsel to Universal Food & Beverage Company, a Nevada
      corporation (the "Company"),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the "Securities
      Purchase Agreement")
      entered into by and among the Company and the buyers named therein
      (collectively, the "Holders")
      pursuant to which the Company issued to the Holders subordinated secured
      convertible notes (the "Notes")
      convertible into the Company's common stock, $0.01 par value
      (the "Common
      Stock"),
      warrants exercisable for shares of Common Stock (the "Warrants").
      Pursuant to the Securities Purchase Agreement, the Company also has entered
      into
      a Registration Rights Agreement with the Holders (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),
      including the shares of Common Stock issuable upon conversion of the Notes
      and
      the shares of Common Stock issuable upon exercise of the Warrants, under the
      Securities Act of 1933, as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
      on Form S-3 (File No. 333-_____________) (the "Registration
      Statement")
      with
      the Securities and Exchange Commission (the "SEC")
      relating to the Registrable Securities which names each of the Holders as a
      selling shareholder thereunder.

     

    In
      connection with the foregoing, [we][I] advise you that a member of the SEC's
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at
[ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and
      [we][I] 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 1933 Act
      pursuant to the Registration Statement.

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    This
      letter shall serve as our standing opinion to you that the shares of Common
      Stock are freely transferable by the Holders pursuant to the Registration
      Statement. You need not require further letters from us to effect any future
      legend-free issuance or reissuance of shares of Common Stock to the Holders
      as
      contemplated by the Company's Irrevocable Transfer Agent Instructions dated
      December __, 2005. 

     

     

    Very
      truly yours,

     

    [ISSUER'S
      COUNSEL]

     

    By:_____________________

    CC: [LIST
      NAMES OF HOLDERS]

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    

    

    EXHIBIT
      B

    

    SELLING
      SHAREHOLDERS

     

    The
      shares of Common Stock being offered by the selling shareholders are issuable
      upon conversion of the convertible notes and upon exercise of the warrants.
      For
      additional information regarding the issuance of those convertible notes and
      warrants, see "Private Placement of Convertible Notes and Warrants" above.
      We
      are registering the shares of Common Stock in order to permit the selling
      shareholders to offer the shares for resale from time to time. Except for the
      ownership of the Convertible Notes and Warrants issued pursuant to the
      Securities Purchase Agreement to our knowledge, the selling shareholders have
      not had any material relationship with us within the past three
      years.

     

    The
      table
      below lists the selling shareholders and other information regarding the
      beneficial ownership of the shares of Common Stock by each of the selling
      shareholders. The second column lists the number of shares of Common Stock
      beneficially owned by each selling shareholder, based on its ownership of the
      convertible notes and warrants, as of ________, 200_, assuming conversion of
      all
      convertible notes and exercise of the warrants held by the selling shareholders
      on that date, without regard to any limitations on conversions or
      exercise.

     

    The
      third
      column lists the shares of Common Stock being offered by this prospectus by
      the
      selling shareholders.

     

    In
      accordance with the terms of registration rights agreements with the selling
      shareholders, this prospectus generally covers the resale of at least 110%,
      of
      the sum of (i) the number of shares of Common Stock issuable upon conversion
      of
      the convertible notes (and the interest accrued and payable thereunder) as
      of
      the trading day immediately preceding the date the registration statement is
      initially filed with the SEC and (ii) the number of shares of Common Stock
      issuable upon exercise of the related warrants as of the trading day immediately
      preceding the date the registration statement is initially filed with the
      SEC. Because
      the conversion price of the convertible notes and the exercise price of the
      warrants may be adjusted, the number of shares that will actually be issued
      may
      be more or less than the number of shares being offered by this prospectus.
      The
      fourth column assumes the sale of all of the shares offered by the selling
      shareholders pursuant to this prospectus.

     

    Under
      the
      terms of the convertible notes and the warrants, a selling shareholder may
      not
      convert the convertible notes or exercise the warrants to the extent such
      conversion or exercise would cause such selling shareholder, together with
      its
      affiliates, to beneficially own a number of shares of Common Stock which would
      exceed 4.99% of our then outstanding shares of Common Stock following such
      conversion or exercise, excluding for purposes of such determination shares
      of
      Common Stock issuable upon conversion of the convertible notes which have not
      been converted and upon exercise of the warrants which have not been exercised.
      The number of shares in the second column does not reflect this limitation.
      The
      selling shareholders may sell all, some or none of their shares in this
      offering. See "Plan of Distribution."

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    

     

    
      	
              Name
                of Selling Stockholder

            	
              Number
                of Shares of 

              Common
                Stock Owned 

              Prior
                to Offering

            	
              Maximum
                Number of Shares 

              of
                Common Stock to be Sold 

              Pursuant
                to this Prospectus

            	
              Number
                of Shares of 

              Common
                Stock Owned 

              After
                Offering

            
	 	 	 	 
	
              Magnetar
                Capital Master Fund, Ltd. (1)

            	 	 	
              0

            
	
              [Other
                Buyers]

            	 	 	 

    

    

     

    (1)
      Magnetar Financial LLC is the investment advisor of Magnetar Capital Master
      Fund, Ltd. ("Magnetar Master Fund") and consequently has voting control and
      investment discretion over securities held by Magnetar Master Fund. Magnetar
      Financial LLC disclaims beneficial ownership of the securities held by Magnetar
      Master Fund. Alec Litowitz is the manager of Magnetar Capital Partners LLC,
      which is the sole member of Magnetar Financial LLC. As a result, Mr. Litowitz
      may be considered the beneficial owner of any shares deemed to be beneficially
      owned by Magnetar Financial LLC. Mr. Litowitz disclaims beneficial ownership
      of
      these shares.

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    

    PLAN
      OF DISTRIBUTION

     

    We
      are
      registering the shares of Common Stock issuable upon conversion of the
      convertible notes and upon exercise of the warrants to permit the resale of
      these shares of Common Stock by the holders of the convertible notes and
      warrants from time to time after the date of this prospectus. We will not
      receive any of the proceeds from the sale by the selling shareholders of the
      shares of Common Stock. We will bear all fees and expenses incident to our
      obligation to register the shares of Common Stock.

     

    The
      selling shareholders may sell all or a portion of the shares of Common Stock
      beneficially owned by them and offered hereby from time to time directly or
      through one or more underwriters, broker-dealers or agents. If the shares of
      Common Stock are sold through underwriters or broker-dealers, the selling
      shareholders will be responsible for underwriting discounts or commissions
      or
      agent's commissions. The shares of Common Stock may be sold in one or more
      transactions at fixed prices, at prevailing market prices at the time of the
      sale, at varying prices determined at the time of sale, or at negotiated prices.
      These sales may be effected in transactions, which may involve crosses or block
      transactions, 

     

    
      	·  	
              on
                any national securities exchange or quotation service on which the
                securities may be listed or quoted at the time of
                sale;

            

    

     

    
      	·  	
              in
                the over-the-counter market;

            

    

     

    
      	·  	
              in
                transactions otherwise than on these exchanges or systems or in the
                over-the-counter market;

            

    

     

    
      	·  	
              through
                the writing of options, whether such options are listed on an options
                exchange or otherwise;

            

    

     

    
      	·  	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

     

    
      	·  	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

     

    
      	·  	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

     

    
      	·  	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

     

    
      	·  	
              privately
                negotiated transactions;

            

    

     

    
      	·  	
              short
                sales;

            

    

     

    
      	·  	
              sales
                pursuant to Rule 144;

            

    

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

       

    

    
      	·  	
              broker-dealers
                may agree with the selling securityholders to sell a specified number
                of
                such shares at a stipulated price per
                share;

            

    

     

    
      	·  	
              a
                combination of any such methods of sale;
                and

            

    

     

    
      	·  	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

    If
      the
      selling shareholders effect such transactions by selling shares of Common Stock
      to or through underwriters, broker-dealers or agents, such underwriters,
      broker-dealers or agents may receive commissions in the form of discounts,
      concessions or commissions from the selling shareholders or commissions from
      purchasers of the shares of Common Stock for whom they may act as agent or
      to
      whom they may sell as principal (which discounts, concessions or commissions
      as
      to particular underwriters, broker-dealers or agents may be in excess of those
      customary in the types of transactions involved). In connection with sales
      of
      the shares of Common Stock or otherwise, the selling shareholders may enter
      into
      hedging transactions with broker-dealers, which may in turn engage in short
      sales of the shares of Common Stock in the course of hedging in positions they
      assume. The selling shareholders may also sell shares of Common Stock short
      and
      deliver shares of Common Stock covered by this prospectus to close out short
      positions and to return borrowed shares in connection with such short sales.
      The
      selling shareholders may also loan or pledge shares of Common Stock to
      broker-dealers that in turn may sell such shares.

     

    The
      selling shareholders may pledge or grant a security interest in some or all
      of
      the convertible notes or warrants or shares of Common Stock owned by them and,
      if they default in the performance of their secured obligations, the pledgees
      or
      secured parties may offer and sell the shares of Common Stock from time to
      time
      pursuant to this prospectus or any amendment to this prospectus under Rule
      424(b)(3) or other applicable provision of the Securities Act of 1933, as
      amended, amending, if necessary, the list of selling shareholders to include
      the
      pledgee, transferee or other successors in interest as selling shareholders
      under this prospectus. The selling shareholders also may transfer and donate
      the
      shares of Common Stock in other circumstances in which case the transferees,
      donees, pledgees or other successors in interest will be the selling beneficial
      owners for purposes of this prospectus.

     

    The
      selling shareholders and any broker-dealer participating in the distribution
      of
      the shares of Common Stock may be deemed to be "underwriters" within the meaning
      of the Securities Act, and any commission paid, or any discounts or concessions
      allowed to, any such broker-dealer may be deemed to be underwriting commissions
      or discounts under the Securities Act. At the time a particular offering of
      the
      shares of Common Stock is made, a prospectus supplement, if required, will
      be
      distributed which will set forth the aggregate amount of shares of Common Stock
      being offered and the terms of the offering, including the name or names of
      any
      broker-dealers or agents, any discounts, commissions and other terms
      constituting compensation from the selling shareholders and any discounts,
      commissions or concessions allowed or reallowed or paid to
      broker-dealers.

     

    Under
      the
      securities laws of some states, the shares of Common Stock may be sold in such
      states only through registered or licensed brokers or dealers. In addition,
      in
      some states the shares of Common Stock may not be sold unless such shares have
      been registered or qualified for sale in such state or an exemption from
      registration or qualification is available and is complied with.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    There
      can
      be no assurance that any selling shareholder will sell any or all of the shares
      of Common Stock registered pursuant to the shelf registration statement, of
      which this prospectus forms a part.

     

    The
      selling shareholders and any other person participating in such distribution
      will be subject to applicable provisions of the Securities Exchange Act of
      1934,
      as amended, and the rules and regulations thereunder, including, without
      limitation, Regulation M of the Exchange Act, which may limit the timing of
      purchases and sales of any of the shares of Common Stock by the selling
      shareholders and any other participating person. Regulation M may also restrict
      the ability of any person engaged in the distribution of the shares of Common
      Stock to engage in market-making activities with respect to the shares of Common
      Stock. All of the foregoing may affect the marketability of the shares of Common
      Stock and the ability of any person or entity to engage in market-making
      activities with respect to the shares of Common Stock.

     

    We
      will
      pay all expenses of the registration of the shares of Common Stock pursuant
      to
      the registration rights agreement, estimated to be
      $[     ] in total, including, without limitation,
      Securities and Exchange Commission filing fees and expenses of compliance with
      state securities or "blue sky" laws; provided, however, that a selling
      shareholder will pay all underwriting discounts and selling commissions, if
      any.
      We will indemnify the selling shareholders against liabilities, including some
      liabilities under the Securities Act, in accordance with the registration rights
      agreements, or the selling shareholders will be entitled to contribution. We
      may
      be indemnified by the selling shareholders against civil liabilities, including
      liabilities under the Securities Act, that may arise from any written
      information furnished to us by the selling shareholder specifically for use
      in
      this prospectus, in accordance with the related registration rights agreements,
      or we may be entitled to contribution.

     

    Once
      sold
      under the shelf registration statement, of which this prospectus forms a part,
      the shares of Common Stock will be freely tradable in the hands of persons
      other
      than our affiliates.

     

    
      
        
        

      

      
        -28-Exhibit
      10(a)

     

    Securities
      Purchase Agreement

     

    SECURITIES
      PURCHASE AGREEMENT 

     

    SECURITIES
      PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of December 30, 2005, by and among Universal Food & Beverage
      Company, a Nevada corporation, with headquarters located at 3830 Commerce Drive,
      St. Charles, Illinois 60174 (the "Company"),
      and
      the investors listed on the Schedule of Buyers attached hereto (individually,
      a
      "Buyer"
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A.  The
      Company and each Buyer 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.  The
      Company has authorized a new series of senior secured exchangeable convertible
      notes of the Company, which Notes shall be convertible into the Company's common
      stock, $0.01 par value per share (the "Common
      Stock"),
      in
      accordance with the terms of the Notes.

     

    C.  Each
      Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, (i) that aggregate principal amount of
      Notes, in substantially the form attached hereto as Exhibit
      A
      (the
      "Notes"),
      set
      forth opposite such Buyer's name in column (3) on the Schedule of Buyers (which
      aggregate amount for all Buyers shall be $3,250,000) (as converted,
      collectively, the "Conversion
      Shares"
      and
      (ii) Warrants in substantially the form attached hereto as Exhibit
      B
      (the
      "Warrants"),
      to
      acquire that number of shares of Common Stock (as exercised, collectively,
      the
      "Warrant
      Shares")
      set
      forth opposite such Buyer's name in column (4) on the Schedule of
      Buyers.

     

    D.  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 Conversion Shares and Warrant Shares under the 1933 Act
      and
      the rules and regulations promulgated thereunder, and applicable state
      securities laws.

     

    E.  The
      Notes, the Conversion Shares, the Warrants and the Warrant Shares are
      collectively are referred to herein as the "Securities".

     

    F.  The
      Company is contemplating an additional transaction as reflected in the Savannah
      LOI (as defined below).

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    PURCHASE
      AND SALE OF NOTES AND WARRANTS.

     

    Amount.
      Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, the Company shall issue and sell to each Buyer, and each Buyer severally,
      but not jointly, agrees to purchase from the Company on the Closing Date (as
      defined below), a principal amount of Notes, as is set forth opposite such
      Buyer's name in column (3) on the Schedule of Buyers, along
      with Warrants to acquire that number of Warrant Shares as is set forth opposite
      such Buyer's name in column (4) on the Schedule of Buyers. 

     

    Closing.
      The
      closing (the "Closing")
      of the
      purchase of the Notes and the Warrants by the Buyers shall occur at the offices
      of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022. 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 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 Buyer). 

     

    Purchase
      Price.
      The
      purchase price for each Buyer (the "Purchase
      Price")
      of the
      Notes and related Warrants to be purchased by each Buyer at the Closing shall
      be
      equal to $1.00 for each $1.00 of principal amount of Notes being purchased
      by
      such Buyer at the Closing. The aggregate Purchase Price to be paid by each
      Buyer
      at the Closing is as set forth opposite such Buyer's name in column (3) on
      the
      Schedule of Buyers.

     

    Form
      of Payment.
      On the
      Closing Date, (A) each Buyer shall pay its aggregate Purchase Price to the
      Company for the Notes and the Warrants to be issued and sold to such Buyer
      at
      the Closing, by wire transfer of immediately available funds in accordance
      with
      the Company's written wire instructions, and (B) the Company shall deliver
      to each Buyer the Notes (in
      such
      principal amount
      as
      is set forth opposite such Buyer's name in column (3) on the Schedule
      of
      Buyers), along with the Warrants (exercisable for the number of shares of Common
      Stock as is set forth opposite such Buyer's name in column (4) on the Schedule
      of Buyers), each duly executed on behalf of the Company and registered in the
      name of such Buyer or its designee.

     

    BUYER'S
      REPRESENTATIONS AND WARRANTIES.

     

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

     

    Organization;
      Authority.
      Such
      Buyer 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.

     

    No
      Public Sale or Distribution.
      Such
      Buyer is (i) acquiring the Notes and the Warrants (ii) upon conversion of the
      Notes will acquire the Conversion Shares, and (iii) upon exercise of the
      Warrants will acquire the 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
      Buyer 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 Buyer is acquiring the Securities hereunder in the ordinary
      course of its business. Such Buyer does not presently have any agreement or
      understanding, directly or indirectly, with any Person to distribute any of
      the
      Securities.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

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

     

    Reliance
      on Exemptions.
      Such
      Buyer 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 Buyer's compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    Information.
      Such
      Buyer 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 offer and sale of the Securities which have been requested by such Buyer.
      Such Buyer 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 Buyer or its advisors, if any, or its
      representatives shall modify, amend or affect such Buyer's right to rely on
      the
      Company's representations and warranties contained herein. Such Buyer
      understands that its investment in the Securities involves a high degree of
      risk. Such Buyer has sought such accounting, legal and tax advice as it has
      considered necessary to make an informed investment decision with respect to
      its
      acquisition of the Securities.

     

    No
      Governmental Review.
      Such
      Buyer 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.

     

    Transfer
      or Resale.
      Such
      Buyer 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 Buyer shall
      have delivered to the Company an opinion of counsel, by counsel reasonably
      acceptable to the Company and in form and substance reasonably satisfactory
      to
      the Company, 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 Buyer 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 pursuant to an available
      exemption from registration under the 1933 Act 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 Buyer 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).

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    Legends.
      Such
      Buyer understands that the certificates or other instruments representing the
      Notes and the Warrants and, until such time as the resale of the Conversion
      Shares, the Warrant Shares have been registered under the 1933 Act as
      contemplated by the Registration Rights Agreement, the stock certificates
      representing the Conversion Shares, the 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]
                  [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, AND APPLICABLE STATE SECURITIES LAWS, OR (B)
                  AN OPINION
                  OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
                  NOT
                  REQUIRED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
                  (II)
                  UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.  NOTWITHSTANDING
                  THE FOREGOING, THE SECURITIES MAY BE PLEDGED PURSUANT TO AN AVAILABLE
                  EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT 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, by counsel reasonably acceptable to the Company and in
      form
      and substance reasonably satisfactory to the Company, 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(k).

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

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

     

    No
      Conflicts.
      The
      execution, delivery and performance by such Buyer of this Agreement and the
      Registration Rights Agreement to which such Buyer is a party and the
      consummation by such Buyer of the transactions contemplated hereby and thereby
      will not (i) result in a violation of the organizational documents of such
      Buyer
      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 Buyer is a party, or (iii)
      result in a violation of any law, rule, regulation, order, judgment or decree
      (including federal and state securities laws) applicable to such Buyer, 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
      Buyer to perform its obligations hereunder.

     

    Residency.
      Such
      Buyer is a resident of that jurisdiction specified below its address on the
      Schedule of Buyers.

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

     

    The
      Company represents and warrants to each of the Buyers that:

     

    Organization
      and Qualification.
      The
      Company and its "Subsidiaries"
      (which
      for purposes of this Agreement means 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
      authorization 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
      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, taken as a whole, or on the transactions
      contemplated hereby and by 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).

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement, the Notes, the Warrants, the
      Registration Rights Agreement, the Irrevocable Transfer Agent Instructions
      (as
      defined in Section 5(b)), 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 the 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, the reservation for
      issuance and the issuance of the Conversion Shares issuable upon conversion
      of
      the Notes, the issuance of the Warrants and the reservation for issuance and
      issuance of the Warrant Shares issuable upon exercise of the 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.

     

    Issuance
      of Securities.
      The
      issuance of the Notes and the 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 the sum of (i) 110% of 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) 110%
      of
      the maximum number of shares of Common Stock issuable upon exercise of the
      Warrants (without taking into account any limitations on the exercise of the
      Warrants set forth in the Warrants). Upon issuance or conversion in accordance
      with the Notes or exercise in accordance with the Warrants, as the case may
      be,
      the Conversion Shares and the 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 Buyers in this Agreement,
      the offer and issuance by the Company of the Securities is exempt from
      registration under the 1933 Act.

     

    No
      Conflicts.
      The
      execution, delivery and performance of the 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, the Warrants,
      and reservation for issuance of the Conversion Shares and the Warrant Shares)
      will not (i) result in a violation of the Certificate of Incorporation (as
      defined in Section 3(r)) of the Company or any of its Subsidiaries, any capital
      stock of the Company or Bylaws (as defined in Section 3(r)) of the Company
      or
      any of its Subsidiaries 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 laws and regulations
      and the rules and regulations of the OTC Bulletin Board (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
      to
      the extent such violation would not reasonably be expected to have a Material
      Adverse Effect.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    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
      the
      Transaction Documents, in each case in accordance with the terms hereof or
      thereof, except as to Grayson National Bank. 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, and the Company and its Subsidiaries are unaware of any facts
      or circumstances which might prevent the Company from obtaining or effecting
      any
      of the registration, application or filings pursuant to the preceding sentence.
      The Company is not in violation of the requirements of the Principal Market
      and
      has no knowledge of any facts which would reasonably lead to delisting or
      suspension of the Common Stock in the foreseeable future. 

     

    Acknowledgment
      Regarding Buyer's Purchase of Securities.
      The
      Company acknowledges and agrees that each Buyer is acting solely in the capacity
      of arm's length purchaser with respect to the Transaction Documents and the
      transactions contemplated hereby and thereby and that no Buyer is (i) an officer
      or director of the Company, (ii) an "affiliate" of the Company (as defined
      in
      Rule 144) or (iii) to the knowledge of the Company, 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 Buyer is acting as a financial advisor
      or
      fiduciary of the Company (or in any similar capacity) with respect to the
      Transaction Documents and the transactions contemplated hereby and thereby,
      and
      any advice given by a Buyer or any of its representatives or agents in
      connection with the Transaction Documents and the transactions contemplated
      hereby and thereby is merely incidental to such Buyer's purchase of the
      Securities. The Company further represents to each Buyer that the Company's
      decision to enter into the Transaction Documents has been based solely on the
      independent evaluation by the Company and its representatives.

     

    No
      General Solicitation; Placement Agent's Fees.
      Neither
      the Company, nor any of its 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 Buyer or its investment advisor) relating to or arising
      out of the transactions contemplated hereby. The Company shall pay, and hold
      each Buyer harmless against, any liability, loss or expense (including, without
      limitation, attorney's fees and out-of-pocket expenses) arising in connection
      with any such claim. The Company acknowledges that it has engaged Illington
      Capital as placement agent (the "Agent")
      in
      connection with the sale of the Securities. Other than the Agent, the Company
      has not engaged any placement agent or other agent in connection with the sale
      of the Securities.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    No
      Integrated Offering.
      None of
      the Company, its Subsidiaries, any of their affiliates, and any Person acting
      on
      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 and any Person acting on 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.

     

    Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Conversion Shares
      issuable upon conversion of the Notes, and, the Warrant Shares issuable upon
      exercise of the Warrants, 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 the Notes and
      its
      obligation to issue the Warrant Shares upon exercise of the Warrants in
      accordance with this Agreement and the 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.

     

    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 poison pill (including any distribution under
      a
      rights agreement) or other similar anti-takeover provision which is or could
      become applicable to any Buyer as a result of the transactions contemplated
      by
      this Agreement, including, without limitation, the Company's issuance of the
      Securities and any Buyer'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.

     

    SEC
      Documents; Financial Statements.
      During
      the two (2) years prior to the date hereof, the Company has filed all reports,
      schedules, forms, statements and other documents required to be filed by it
      with
      the SEC pursuant to the reporting requirements of the 1934 Act (all of the
      foregoing filed prior to the date hereof and all exhibits included therein
      and
      financial statements, notes and schedules thereto and documents incorporated
      by
      reference therein being hereinafter referred to as the "SEC
      Documents").
      The
      Company has delivered to the Buyers 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 Buyer. 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. As of their respective dates, 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). 

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    Absence
      of Certain Changes.
      Except
      as disclosed in Section 3(l), since the date of the Company's most recent
      audited financial statements contained in a Form 10-QSB, 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. Except as disclosed in Schedule
      3(l),
      since
      the date of the Company's most recent audited financials statements contained
      in
      a Form 10-QSB, the Company has not (i) declared or paid any dividends, (ii)
      sold
      any assets, individually or in the aggregate, in excess of $50,000 outside
      of
      the ordinary course of business or (iii) had capital expenditures, individually
      or in the aggregate, in excess of $50,000. The Company has not 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 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 assets is less than the
      amount required to pay the Company's total Indebtedness (as defined in Section
      3(s)), (ii) the Company is unable to pay its debts and liabilities,
      subordinated, contingent or otherwise, as such debts and liabilities become
      absolute and matured, (iii) the Company intends to incur or believes that it
      will incur debts that would be beyond its 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.

     

    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 filed with the SEC
      relating to an issuance and sale by the Company of its Common Stock and which
      has not been publicly announced.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    Conduct
      of Business; Regulatory Permits.
      Neither
      the Company nor 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 bylaws, respectively. Neither the Company
      nor
      any of its Subsidiaries is in violation of any judgment, decree or order or
      any
      statute, ordinance, rule or regulation applicable to the Company or its
      Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
      its business in violation of any of the foregoing, except in all cases 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 that
      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, (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.

     

    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
      (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.

     

    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, except where such noncompliance would not
      have,
      individually or in the aggregate, a Material Adverse Effect.

     

    Transactions
      With Affiliates.
      Except
      as set forth in the SEC Documents filed at least ten days prior to the date
      hereof and other than the grant of stock options disclosed on Schedule
      3(q),
      none of
      the officers, directors or employees of the Company 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, 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.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    Equity
      Capitalization.
      As of
      the date hereof, the authorized capital stock of the Company consists of
      100,000,000 shares of Common Stock, of which as of the date hereof, 33,339,684
      are issued and outstanding and 9,657,345 shares are reserved for issuance
      pursuant to securities (other than the Notes and the Warrants) exercisable
      or
      exchangeable for, or convertible into, shares of Common Stock and (ii) no shares
      of preferred stock. All of such outstanding shares have been, or upon issuance
      will be, validly issued and are fully paid and nonassessable. Except as
      disclosed in Schedule
      3(r):
      (i)
      none of the Company's share capital is subject to preemptive rights or any
      other
      similar rights or any liens or encumbrances 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
      share capital 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 share capital 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
      share capital of the Company or any of its Subsidiaries; (iii) there are no
      outstanding debt securities, notes, credit agreements, credit facilities or
      other agreements, documents or instruments evidencing Indebtedness 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 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 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 issuance
      of
      the Securities; (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 the SEC Documents but not so disclosed in the 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 the Buyer 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"),
      and
      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.

     

    
      
        
        

      

      
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    Indebtedness
      and Other Contracts.
      Neither
      the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
      (as
      defined below), (ii) is in violation of any term of or in 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 (iii) 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. Schedule
      3(s)
      provides
      a detailed description of the material terms of any such outstanding
      Indebtedness. 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 principals) (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 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 as 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 mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the 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.

     

    Absence
      of Litigation.
      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, the Common Stock or any of the Company's
      Subsidiaries or any of the Company's or its Subsidiaries' officers or directors,
      that could, individually or in the aggregate, reasonably be expected to result
      in a Material Adverse Effect.

     

    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.

     

    
      
        
        

      

      
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    Employee
      Relations.
      i.
      Neither
      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 or any of its Subsidiaries (as defined in Rule 501(f) of the
      1933
      Act) 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, provided that
      the
      employment agreements with Ralph Passino and Charles Sizer will be modified
      in
      the near future such that Ralph Passino will be receiving no salary and Charles
      Sizer's compensation will remain unchanged. No executive officer of the Company
      or any of its Subsidiaries, to the knowledge of the Company or any such
      Subsidiary, 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 such Subsidiary to any liability
      with respect to any of the foregoing matters.

     

    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.

     

    Title.
      Except
      with regard to the Mortgage, Equipment Line (each, as defined in the Note)
      and
      the IWG Loan, 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 and 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
      buildings by the Company and its Subsidiaries.

     

    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 except where
      the failure to so own or possess would not reasonably be expected to result
      in a
      Material Adverse Effect. None of the Company's Intellectual Property Rights
      have
      expired or terminated, or are expected to expire or terminate, within three
      years from the date of this Agreement. The Company does not have any knowledge
      of any infringement by the Company or 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
      its
      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 properties.

     

    
      
        
        

      

      
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    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.

     

    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.

     

    Investment
      Company.
      The
      Company is not, and is not an affiliate of, an "investment company" within
      the
      meaning of the Investment Company Act of 1940, as amended.

     

    Tax
      Status.
      The
      Company and each of its Subsidiaries (i) has made or filed all foreign,
      Canadian, 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.
      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.

     

    Internal
      Accounting and Disclosure Controls.
      The
      Company 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 designed to ensure 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 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.

     

    
      
        
        

      

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

     

    Ranking
      of Notes.
      Other
      than the Mortgage, the Equipment Line (each, as defined in the Note) and the
      IWG
      Loan, no Indebtedness of the Company is senior to or ranks pari
      passu
      with the
      Notes in right of payment, whether with respect of payment of redemptions,
      interest, damages or upon liquidation or dissolution or otherwise.

     

    Registration
      Eligibility.
      The
      Company is eligible to register the Conversion Shares and the Warrant Shares
      for
      resale by the Buyers using Form SB-2 promulgated under the 1933
      Act.

     

    Manipulation
      of Price.
      The
      Company has not, and to its knowledge no one acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) other than the
      Agent, sold, bid for, purchased, or paid any compensation for soliciting
      purchases of, any of the Securities, or (iii) other than the Agent, paid or
      agreed to pay to any person any compensation for soliciting another to purchase
      any other securities of the Company.

     

    Disclosure.
      Except
      for information that will be disclosed in a periodic report on Form 8-K to
      be
      filed no later than the earlier of the Effective Date and the Effectiveness
      Deadline (as such terms are defined in the Registration Rights Agreement),
      the
      Company confirms that neither it nor any other Person acting on its behalf
      has
      provided any of the Buyers or their agents or counsel with any information
      that
      constitutes or could reasonably be expected to constitute material, nonpublic
      information other than as set forth in the following sentence. The Company
      understands and confirms that each of the Buyers will rely on the foregoing
      representations in effecting transactions in securities of the Company. All
      disclosure provided to the Buyers regarding the Company, its business and the
      transactions contemplated hereby, including the Schedules to this Agreement,
      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 therein, in the light of
      the
      circumstances under which they were made, not misleading. Each press release
      issued by the Company during the twelve (12) months preceding the date of this
      Agreement did not at the time of release contain any untrue statement of a
      material fact or omit to state a material fact required to be stated therein
      or
      necessary in order to make the statements therein, in 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, properties, prospects,
      operations or financial conditions, which, under applicable law, rule or
      regulation, requires public disclosure or announcement by the Company but which
      has not been so publicly announced or disclosed.

     

    
      
        
        

      

      
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    Loans
      Subordinated.
      Each of
      the Martin Loan (as defined below) and the Neviaser Loans (as defined below)
      has
      been expressly subordinated in right of payment, whether in respect of payment
      of interest or upon liquidation or dissolution or otherwise, to the
      Notes.

     

    COVENANTS.

     

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

     

    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 Buyer 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 Buyers 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 Buyers 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.
      

     

    Reporting
      Status.
      Until
      the date on which the Investors (as defined in the Registration Rights
      Agreement) shall have sold all the Conversion Shares and Warrant Shares, and
      none of the Notes or Warrants
      is outstanding (the "Reporting
      Period"),
      the
      Company shall 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 otherwise permit such termination.

     

    Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Securities as set forth
      on
Schedule
      4(d),
      and not
      for, except as specifically set forth on Schedule
      4(d),
      (A)
      repayment of any outstanding Indebtedness of the Company or any of its
      Subsidiaries or (B) redemption or repurchase of any of its or its Subsidiaries'
      equity securities.

     

    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 on Form 10-K or 10-KSB, 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 release thereof, facsimile or e-mailed 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.

     

    
      
        
        

      

      
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    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. The Company shall maintain the Common Stocks'
      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 the Principal
      Market. The Company shall pay all fees and expenses in connection with
      satisfying its obligations under this Section 4(f).

     

    Fees.
      The
      Company shall reimburse Magnetar Capital Master Fund, Ltd. (a Buyer) or its
      designee(s) (in addition to any other expense amounts paid to any Buyer prior
      to
      the date of this Agreement) for all reasonable costs and expenses, not to exceed
      $35,000, incurred in connection with the transactions contemplated by the
      Transaction Documents (including all reasonable legal fees and disbursements
      in
      connection therewith, documentation and implementation of the transactions
      contemplated by the Transaction Documents and due diligence in connection
      therewith), which amount shall be non-accountable and withheld by such Buyer
      from its Purchase Price at the Closing. The Company shall be responsible for
      the
      payment of any placement agent's fees, financial advisory fees, or broker's
      commissions (other than for Persons engaged by any Buyer) relating to or arising
      out of the transactions contemplated hereby, including, without limitation,
      any
      fees payable to the Agent. The Company shall pay, and hold each Buyer harmless
      against, any liability, loss or expense (including, without limitation,
      reasonable attorney's fees and out-of-pocket expenses) arising in connection
      with any claim relating to any such payment. 

     

    Pledge
      of Securities.
      The
      Company acknowledges and agrees that the Securities may be pledged pursuant
      to
      an available exemption from registration under the 1933 Act 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, including, without limitation, Section 2(g) hereof;
      provided that an Investor and its pledgee shall be required to comply with
      the
      provisions of Section 2(g) hereof in order to effect a sale, transfer or
      assignment of Securities to such pledgee. 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.

     

    
      
        
        

      

      
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    Disclosure
      of Transactions and Other Material Information.
      On or
      before 8:30 a.m., New York Time, on the
      first
      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
      the material Transaction Documents (including, without limitation, this
      Agreement (and all schedules to this Agreement), the form of Notes, the form
      of
      Warrant 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 Buyers by the
      Company or any of its Subsidiaries, or any of their respective officers,
      directors, employees 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 Buyer 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 Buyer. 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 Buyer 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 Buyer shall have any liability to the
      Company, its Subsidiaries, or any of its or their respective officers,
      directors, employees, stockholders or agents, for any such disclosure. Subject
      to the foregoing, neither the Company, its Subsidiaries nor any Buyer 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 Buyer, to
      make
      any press release or other public disclosure with respect to such transactions
      (i) in substantial conformity with the 8-K Filings and contemporaneously
      therewith and (ii) as is required by applicable law and regulations (provided
      that in the case of clause (i) each Buyer 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 Buyer, the Company
      shall not disclose the name of any Buyer in any filing, announcement, release
      or
      otherwise. 

     

    Restriction
      on Redemption and Cash Dividends.
      So long
      as any Notes are outstanding, the Company shall not, directly or indirectly,
      redeem, or declare or pay any cash dividend or distribution on, the Common
      Stock
      without the prior express written consent of the holders of Notes representing
      not less than a majority of the aggregate principal amount of the then
      outstanding Notes.

     

    Additional
      Notes; Variable Securities; Dilutive Issuances.
      So long
      as any Buyer beneficially owns any Securities, the Company will not, without
      the
      prior written consent of Buyers holding a majority of the principal amount
      of
      the Notes, issue any Notes (other than to the Buyers as contemplated hereby)
      and
      the Company shall not issue any other securities that would cause a breach
      or
      default under the Notes. For so long as any Notes or Warrants remain
      outstanding, the Company shall not, in any manner, issue or sell any rights,
      warrants or options to subscribe for or purchase Common Stock or directly or
      indirectly convertible into or exchangeable or exercisable for Common Stock
      at a
      conversion, exchange or exercise price which varies or may vary after issuance
      with the market price of the Common Stock, including by way of one or more
      reset(s) to any fixed price unless the conversion, exchange or exercise price
      of
      any such security cannot be less than the then applicable Conversion Price
      (as
      defined in the Notes) with respect to the Common Stock into which any Note
      is
      convertible or the then applicable Exercise Price (as defined in the Warrants)
      with respect to the Common Stock into which any Warrant is exercisable. For
      purposes of clarification, this does not prohibit the issuance of securities
      with customary "weighted average" or "full ratchet" anti-dilution adjustments
      which adjust a fixed conversion or exercise price of securities sold by the
      Company in the future. For so long as any Notes or Warrants remain outstanding,
      the Company shall not, in any manner, enter into or affect any dilutive issuance
      if the effect of such dilutive issuance is to cause the Company to be required
      to issue upon conversion of any Note or exercise of any Warrant any shares
      of
      Common Stock in excess of that number of shares of Common Stock which the
      Company may issue upon conversion of the Notes and exercise of the Warrants
      without breaching the Company's obligations under the rules or regulations
      of
      the Principal Market.

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    Corporate
      Existence.
      So long
      as any Buyer beneficially owns any Securities, 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 Warrants.

     

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

     

    Additional
      Issuances of Securities.

     

    For
      purposes of this Section 4(n), the following definitions
      shall apply.

     

    "Convertible
      Securities"
      means
      any stock or securities (other than Options) convertible into or exercisable
      or
      exchangeable for shares of Common
      Stock.

     

    "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of
Common
      Stock or
      Convertible Securities.

     

    "Common
      Stock Equivalents"
      means,
      collectively, Options and Convertible Securities.

     

    Other
      than in connection with a Subsequent Placement following which the Notes are
      no
      longer outstanding, from the date hereof until two hundred seventy (270) days
      after the Effective Date (as defined in the Registration Rights Agreement)
      the
      Company will not, directly or indirectly, file any registration statement with
      the SEC other than the Registration Statement (as defined in the Registration
      Rights Agreement) or a registration statement on Form S-8 pursuant to the 1933
      Act or issue any securities pursuant to any registration statement on Form
      S-8
      ("S-8
      Issuances").
      From
      the date hereof until the Effective Date, the Company will not, directly or
      indirectly, offer, sell, grant any option to purchase, or otherwise dispose
      of
      (or announce any offer, sale, grant or any option to purchase or other
      disposition of) any of its or its Subsidiaries' equity or equity equivalent
      securities, including without limitation any debt, preferred stock or other
      instrument or security that is, at any time during its life and under any
      circumstances, convertible into or exchangeable or exercisable for shares of
      Common Stock or Common Stock Equivalents (any such offer, sale, grant,
      disposition or announcement being referred to as a "Subsequent
      Placement").

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    The
      Company will not, directly or indirectly, effect any Subsequent Placement unless
      the Company shall have first complied with this Section 4(n)(iii).

     

    The
      Company shall deliver to each Buyer a written notice (the "Offer
      Notice")
      of any
      proposed or intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (w) identify and describe the
      Offered Securities, (x) describe the price and other terms upon which they
      are to be issued, sold or exchanged, and the number or amount of the Offered
      Securities to be issued, sold or exchanged, and (y) identify the persons or
      entities (if known) to which or with which the Offered Securities are to be
      offered, issued, sold or exchanged and (z) offer to issue and sell to or
      exchange with such Buyers at least 80% of the Offered Securities, allocated
      among such Buyers (a) based on such Buyer's pro rata portion of the aggregate
      principal amount of Notes purchased hereunder (the "Basic
      Amount"),
      and
      (b) with respect to each Buyer that elects to purchase its Basic Amount, any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Buyers as such Buyer shall indicate it will purchase or acquire should
      the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
      Amount").

     

    To
      accept
      an Offer, in whole or in part, such Buyer must deliver a written notice to
      the
      Company prior to the end of the fifth (5th)
      Business Day after such Buyer's receipt of the Offer Notice (the "Offer
      Period"),
      setting forth the portion of such Buyer's Basic Amount that such Buyer elects
      to
      purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
      the
      Undersubscription Amount, if any, that such Buyer elects to purchase (in either
      case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Buyers are less than the total of all
      of
      the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
      in its Notice of Acceptance shall be entitled to purchase, in addition to the
      Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
      "Available
      Undersubscription Amount"),
      each
      Buyer who has subscribed for any Undersubscription Amount shall be entitled
      to
      purchase only that portion of the Available Undersubscription Amount as the
      Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
      have subscribed for Undersubscription Amounts, subject to rounding by the
      Company to the extent its deems reasonably necessary.

     

    The
      Company shall have five (5) Business Days from the expiration of the Offer
      Period above to offer, issue, sell or exchange all or any part of such Offered
      Securities as to which a Notice of Acceptance has not been given by the Buyers
      (the "Refused
      Securities"),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer
      Notice.

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in Section
      4(n)(iii)(3) above), then each Buyer may, at its sole option and in its sole
      discretion, reduce the number or amount of the Offered Securities specified
      in
      its Notice of Acceptance to an amount that shall be not less than the number
      or
      amount of the Offered Securities that such Buyer elected to purchase pursuant
      to
      Section 4(n)(iii)(2) above multiplied by a fraction, (i) the numerator of which
      shall be the number or amount of Offered Securities the Company actually
      proposes to issue, sell or exchange (including Offered Securities to be issued
      or sold to Buyers pursuant to Section 4(n)(iii)(3) above prior to such
      reduction) and (ii) the denominator of which shall be the original amount of
      the
      Offered Securities. In the event that any Buyer so elects to reduce the number
      or amount of Offered Securities specified in its Notice of Acceptance, the
      Company may not issue, sell or exchange more than the reduced number or amount
      of the Offered Securities unless and until such securities have again been
      offered to the Buyers in accordance with Section 4(n)(iii)(1)
      above.

     

    Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Buyers shall acquire from the Company, and the Company shall
      issue to the Buyers, the number or amount of Offered Securities specified in
      the
      Notices of Acceptance, as reduced pursuant to Section 4(n)(iii)(3) above if
      the
      Buyers have so elected, upon the terms and conditions specified in the Offer.
      The purchase by the Buyers of any Offered Securities is subject in all cases
      to
      the preparation, execution and delivery by the Company and the Buyers of a
      purchase agreement relating to such Offered Securities reasonably satisfactory
      in form and substance to the Buyers and their respective counsel.

     

    Any
      Offered Securities not acquired by the Buyers or other persons in accordance
      with Section 4(n)(iii)(3) above may not be issued, sold or exchanged until
      they
      are again offered to the Buyers under the procedures specified in this
      Agreement.

     

    The
      restrictions contained in subsections (ii) and (iii) of this Section 4(n) shall
      not apply in connection with the issuance of any Excluded Securities (as defined
      in the Notes), other than S-8 Issuances, or any Qualified Financing (as defined
      in the Notes).

     

    Security.
      The
      Company shall use its best efforts to enter into security documents (the
      "Security
      Documents")
      reasonably satisfactory to the Buyers granting the Buyers a perfected, first
      priority security interest in all assets of the Company; provided that the
      priority will be secondary to the Company's current (i) $2,484,385 mortgage
      and
      a $500,000 equipment financing line with Grayson National Bank secured by the
      Company's deed of trust to certain located in Virginia; and (ii) senior
      subordinated promissory note with a principal amount of $550,000 issued to
      IWG
      on March 31, 2005 secured by the Company's land, building and equipment located
      in Independence, Virginia (the "IWG
      Loan").

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    Good
      Standing.
      No
      later than 10 Business Days after the Closing Date, the Company shall deliver
      to
      each Buyer a certificate evidencing the formation and good standing of the
      Company and each of its Subsidiaires in such entity's jurisdiction of formation
      issued by the Secretary of State (or comparable office) of such
      jurisdiction.

     

    REGISTER;
      TRANSFER AGENT INSTRUCTIONS.

     

    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 Warrants in which the Company
      shall record the name and address of the Person in whose name the Notes
      and the
      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 Warrant Shares issuable upon
      exercise of the Warrants held by such Person. The Company shall keep the
      register open and available at all times during business hours for inspection
      of
      any Buyer or its legal representatives.

     

    Transfer
      Agent Instructions.
      The
      Company shall issue irrevocable instructions to its transfer agent, and any
      subsequent transfer agent, to issue certificates or credit shares to the
      applicable balance accounts at The Depository Trust Company ("DTC"),
      registered in the name of each Buyer or its respective nominee(s), for the
      Conversion Shares, and the Warrant Shares in
      such
      amounts as specified from time to time by each Buyer to the Company upon
      conversion of the Notes or exercise of the Warrants in the form of Exhibit
      D
      attached
      hereto (the "Irrevocable
      Transfer Agent Instructions").
      The
      Company warrants that no instruction other than the Irrevocable Transfer Agent
      Instructions referred to in this Section 5(b), and stop transfer instructions
      to
      give effect to Section 2(g) hereof, will be given by the Company to its transfer
      agent with respect to the Securities, and that the Securities shall otherwise
      be
      freely transferable on the books and records of the Company, as applicable,
      and
      to the extent provided in this Agreement and the other Transaction Documents.
      If
      a Buyer effects a sale, assignment or transfer of the Securities in accordance
      with Section 2(g), the Company shall permit the transfer and shall promptly
      instruct its transfer agent to issue one or more certificates or credit shares
      to the applicable balance accounts at DTC in such name and in such denominations
      as specified by such Buyer to effect such sale, transfer or assignment. In
      the
      event that such sale, assignment or transfer involves Conversion Shares and
      Warrant Shares sold, assigned or transferred pursuant to an effective
      registration statement or pursuant to Rule 144, the transfer agent shall issue
      such Securities to the Buyer, assignee or transferee, as the case may be,
      without any restrictive legend. The Company acknowledges that a breach by it
      of
      its obligations hereunder will cause irreparable harm to a Buyer. Accordingly,
      the Company acknowledges that the remedy at law for a breach of its obligations
      under this Section 5(b) will be inadequate and agrees, in the event of a breach
      or threatened breach by the Company of the provisions of this Section 5(b),
      that
      a Buyer shall be entitled, in addition to all other available remedies, to
      an
      order and/or injunction restraining any breach and requiring immediate issuance
      and transfer, without the necessity of showing economic loss and without any
      bond or other security being required.

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL.

     

    The
      obligation of the Company hereunder to issue and sell the Notes and
      the
      related Warrants to each Buyer 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 Buyer with prior
      written notice thereof:

     

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

     

    Such
      Buyer and each other Buyer shall have delivered to the Company the Purchase
      Price for the Notes and the related Warrants being
      purchased by such Buyer at the Closing by wire transfer of immediately available
      funds pursuant to the wire instructions provided by the Company.

     

    The
      representations and warranties of such Buyer 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 warranties that speak as
      of a
      specific date), and such Buyer 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 Buyer at
      or
      prior to the Closing Date.

     

    CONDITIONS
      TO EACH BUYER'S OBLIGATION TO PURCHASE.

     

    The
      obligation of each Buyer hereunder to purchase the Notes and
      the
      related Warrants 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 Buyer's sole benefit and may be waived by such Buyer
      at
      any time in its sole discretion by providing the Company with prior written
      notice thereof:

     

    The
      Company shall have executed and delivered to such Buyer (A) each of the
      Transaction Documents and (B) the Notes (in such principal amounts as is set
      forth across from such Buyer's name in column (3) of the Schedule of
      Buyers and
      the
      related Warrants (in such principal amounts as is set forth across from such
      Buyer's name in column (4) of the Schedule of Buyers) being purchased by such
      Buyer at the Closing pursuant to this Agreement.

     

    Such
      Buyer shall have received the opinion of Holland & Knight, LLP, the
      Company's outside counsel, dated as of the Closing Date, in substantially the
      form of Exhibit
      E
      attached
      hereto.

     

    The
      Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
      Agent Instructions, in the form of Exhibit
      D
      attached
      hereto, which instructions shall have been delivered to and acknowledged in
      writing by the Company's transfer agent.

     

    The
      Company shall have delivered to such Buyer a written correspondence from the
      Company's service company to the effect that the Company and each of its
      Subsidiaries is in good standing as of a date within ten (10) days of the
      Closing Date.

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    The
      Company shall have delivered to such Buyer a certificate evidencing the
      Company's qualification as a foreign corporation and good standing issued by
      the
      Secretary of State (or comparable office) of each jurisdiction in which the
      Company conducts business and is required to so qualify, as of a date within
      10
      days of the Closing Date.

     

    The
      Company shall have delivered to such Buyer a certified copy of the Certificate
      of Incorporation as certified by the Secretary of State of the State of Nevada
      within ten (10) days of the Closing Date.

     

    The
      Company shall have delivered to such Buyer 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 Buyer, (ii) the Certificate
      of
      Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
      form attached hereto as Exhibit
      F.

     

    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 Buyer 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 Buyer in the form attached hereto as Exhibit
      G.

     

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

     

    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.

     

    The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, necessary for the sale of the Securities.

     

    Simultaneously
      with the Closing, the Company shall have repaid $300,000 of its note issued
      on
      March 31, 2005 to Independence Water Group in the principal amount of
      $850,000.

     

    The
      maturity date of each of the following will be extended to no earlier than
      March
      31, 2006 and each will be subordinated to the Securities to the reasonable
      satisfaction of the Buyer:

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    A
      loan to
      the Company from Duane Martin, CEO of the Company for $300,000 (the "Martin
      Loan").  

     

    Loans
      to
      the Company from Bruce Neviaser, a shareholder of the Company for $250,000
      and
      $200,000 (collectively, the "Neviaser
      Loans"). 
      The former loan is witnessed by a note issued to DNV LLC.

     

    The
      Company shall have executed a Letter of Intent to acquire the plant in Savannah,
      Georgia (the "Savannah
      LOI"),
      which
      Letter of Intent shall grant the Company exclusive negotiation rights through
      the date which is 30 days after the Closing Date.

     

    The
      Company shall have delivered to such Buyer such other documents relating to
      the
      transactions contemplated by this Agreement as such Buyer or its counsel may
      reasonably request.

     

    TERMINATION.
      In the event that the Closing shall not have occurred with respect to a Buyer
      on
      or before five (5) Business Days from the date hereof due to the Company's
      or
      such Buyer's failure to satisfy the conditions set forth in Sections 6 and
      7
      above (and the nonbreaching party's failure to waive such unsatisfied
      condition(s)), the nonbreaching party shall have the option to terminate this
      Agreement with respect to such breaching party at the close of business on
      such
      date without liability of any party to any other party; provided, however,
      if
      this Agreement is terminated pursuant to this Section 8, the Company shall
      remain obligated to reimburse the non-breaching Buyers for the expenses
      described in Section 4(g) above.

     

    MISCELLANEOUS.

     

    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. 

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    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.

     

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

     

    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.

     

    Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents supersede all other prior oral
      or
      written agreements between the Buyers, 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 Buyer 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 aggregate number
      of
      Registrable Securities issued and issuable hereunder, and any amendment to
      this
      Agreement made in conformity with the provisions of this Section 9(e) shall
      be
      binding on all Buyers 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 applicable
      Securities 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 holders
      of
      the Warrants, as the case may be. The Company has not, directly or indirectly,
      made any agreements with any Buyers 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 Buyer has made any commitment
      or
      promise or has any other obligation to provide any financing to the Company
      or
      otherwise.

     

    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:

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Company:

     

    Universal
      Food & Beverage Company

    3830
      Commerce Drive,

    St.
      Charles, Illinois 60174

     

    Telephone:
       (630)
      584-8670

     

    Facsimile:
       (630)
      [
      ]-[ ]

     

    Attention:
       Chief
      Executive Officer

     

    With
      a
      copy (for informational purposes only) to:

     

    Holland
      & Knight, LLP

     

    One
      MidAmerica Plaza, Suite 1000

     

    Oakbrook
      Terrace, IL 60133

     

    Telephone: (630)
      954-2100

     

    Facsimile:
       (___)
      [___]-[____]

     

    Attention: [ ________________ ]
      Esq.

    

    If
      to the
      Transfer Agent:

     

    [ _______________________ ]
      

     

    [ _______________________ ]

     

    [ _______________________ ]

     

    Telephone: (___)
      [___]-[____]

     

    Facsimile:
       (___)
      [___]-[____]

     

    Attention: [ ________________ ],
      Esq.

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
      with copies to such Buyer's representatives as set forth on the Schedule of
      Buyers, 

     

    with
      a
      copy (for informational purposes only) to:

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    Schulte
      Roth & Zabel LLP 

     

    919
      Third
      Avenue

     

    New
      York,
      New York 10022

     

    Telephone: (212)
      756-2000

     

    Facsimile: (212)
      593-5955

     

    Attention: Eleazer
      N. Klein, Esq.

     

    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 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.

     

    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 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 Warrants). A Buyer may assign some
      or all of its rights hereunder in connection with transfer of any of its
      Securities without the consent of the Company, in which event such assignee
      shall be deemed to be a Buyer hereunder with respect to such assigned
      rights.

     

    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.

     

    Survival.
      Unless
      this Agreement is terminated under Section 8, the representations and warranties
      of the Company and the Buyers contained in Sections 2 and 3 and the agreements
      and covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each
      Buyer shall be responsible only for its own representations, warranties,
      agreements and covenants hereunder.

     

    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.

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

     

    Indemnification.
      In
      consideration of each Buyer'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 Buyer and each other holder
      of
      the Securities 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 or any other certificate, instrument or
      document contemplated hereby or thereby, (b) any breach of any covenant,
      agreement or obligation of the Company contained in the Transaction Documents
      or
      any other certificate, instrument or document contemplated hereby or thereby
      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 Buyer pursuant to Section 4(i), or (iv) the status
      of
      such Buyer or holder of the Securities as an investor in the Company pursuant
      to
      the transactions contemplated by the Transaction Documents. 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(l) shall be the
      same
      as those set forth in Section 6 of the Registration Rights
      Agreement.

     

    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.

     

    Remedies.
      Each
      Buyer and each holder of the Securities 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 Buyers. The Company therefore agrees that the Buyers
      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.

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to the Buyers hereunder
      or
      pursuant to any of the other Transaction Documents or the Buyers 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.

     

    Independent
      Nature of Buyers' Obligations and Rights.
      The
      obligations of each Buyer under any Transaction Document are several and not
      joint with the obligations of any other Buyer, and no Buyer shall be responsible
      in any way for the performance of the obligations of any other Buyer under
      any
      Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Buyer pursuant hereto or thereto, shall
      be
      deemed to constitute the Buyers as a partnership, an association, a joint
      venture or any other kind of entity, or create a presumption that the Buyers
      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 Buyers are not acting in concert or as a group with
      respect to such obligations or the transactions contemplated by the Transaction
      Documents. Each Buyer confirms that it has independently participated in the
      negotiation of the transaction contemplated hereby with the advice of its own
      counsel and advisors. Each Buyer 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 Buyer to be joined as an additional party in any
      proceeding for such purpose.

     

    [Signature
      Page Follows]

     

    

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer 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:

              
	 	 
	 	
                UNIVERSAL
                  FOOD & BEVERAGE COMPANY

              
	 
 	 
 	 
 
	 	By:  	
                /s/ Duane
                  N. Martin 

              
	 	 	
                
Duane
                N. Martin, Chairman and CEO 

      

    

     

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

    
 

    IN
      WITNESS WHEREOF,
      each
      Buyer 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.

     

    
      	 	 	 
	 	
              BUYERS:

            
	 	 
	 	
              MAGNETAR
                CAPITAL MASTER FUND, LTD.

            
	 
 	 
 	 
 
	 	By:	
              Magnetar
                Financial LLC

            
	 	Its:	
              Investment
                Manager

            
	 	 	 
	 	By:  	/s/ Paul
              Smith
	 	
              
Paul
              Smith
	 	
              General
                Counsel

            

    

    

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      OF BUYERS

     

    

    
      	
              (1)

            	 	
              (2)

            	 	
              (3)

            	 	
              (4)

            	 	
              (5)

            
	 	 	 	 	 	 	 	 	 
	
              Buyer

            	 	
              Address
                and Facsimile 

              Number

            	 	
              Aggregate
                Principal 

              Amount
                of Notes

            	 	
              Aggregate
                Number 

              of
                Warrants

            	 	
              Legal
                Representative's

              Address
                and Facsimile 

              Number

            
	 	 	 	 	 	 	 	 	 
	
              Magnetar
                Capital Master Fund, Ltd.

            	 	
              1603
                Orrington Avenue

              Evanston,
                IL 60201

              Attn:
                Richard Levy and Matthew Ray

              Facsimile:
                (847)
                905-5603

              Telephone:
                (847) 962-2308

            	 	
              $3,000,000

            	 	
              6,923,077

            	 	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, New York 10022

              Attention:
                Eleazer Klein, Esq.

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2376

            

    

    

     

    
      
         

      

      
        -33-

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