Document:

Unassociated Document

    
Exhibit
      10.24

     

    Lease
      Agreement

    (English
      Translation)

    

    

    Note:
      This is an English translation of an agreement originally drafted in Chinese,
      and accordingly this
      translation is not legally effective or binding on the parties. This translation
      is being furnished for disclosure purposes. 

    

    

    Lessor
      (Party A): Jiangsu Ever-Glory International Group Co. 

    

    Lessee
      (Party B): Nanjing New-Tailun Garments Co., Ltd. 

    

    

    Whereas,
      in accordance with the rules and regulations stipulated in the Contract Law
      of
      the People's Republic of China, the parties are freely entering into this
      agreement regarding the land and building leased by Party A to Party B, and
      the
      parties have prepare this agreement through negotiations mutual agreement,
      in
      order to define rights and obligations of both parties under the lease.

    

    Article
      One

    

    Party
      A
      represents that all the buildings leased are owned by Party A in conformity
      with
      national regulations concerning building ownership. 

    

    Article
      Two

    

    Location,
      Acreage, Decoration, and Facilities 

    

    
      	
              1.

            	
              Party
                A agrees to lease the plot of land and the buildings on the plot
                to Party
                B, which is located at No. 58 Chenling Road, Shangfang Township,
                Jiangning
                District, Nanjing. 

            

    

    

    
      	
              2.

            	
              The
                National Land Rights Certificate for this plot is numbered Jiangning
                National Rights 2004 Number 0020, and encompasses an area sized 8053.33
                square meters, and a floor area of 10,000 square meters (subject
                to Party
                A's measurements). 

            

    

    

    Article
      Three

    

    Party
      B
      is required to show its identity certificate. The two parties shall have the
      certificates of each other copied for future reference. 

    

    Article
      Four

    

    Term
      and
      Purpose of the Lease 

    

    
      	1.	
              The
                term shall be for 2 years commencing from April 1, 2006 and ending
                March
                31, 2008. 

            

    

    

    
      	2.	
              Party
                B promises to Party A that the buildings shall only used for office
                purposes. 

            

    

    

    
      	
              3.

            	
              Upon
                expiration of the term, Party A has the right to recover possession
                of the
                building, and Party B agrees to return possession in a timely manner.
                

            

    

    

    
      	
              4.

            	
              If
                the parties wish to extend the term of this lease, Party B should
                give
                Party A three-months' notice before the expiration, and this lease
                contract shall be renewable upon consent by Party A.
                

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Article
      Five

    

    Rent
      and
      Payments 

    

    
      	
              1.

            	
              Yearly
                rent of the land and buildings is RMB 200,000 (Two Hundred Thousand
                RMB
                Yuan). 

            

    

    

    
      	
              2.

            	
              The
                rent shall be paid in the following manner: Party B will pay annual
                rent
                applicable for the year on April 10 of such year, and promises to
                properly
                maintain the building and use it (walls, floors and windows, etc.)
                in a
                reasonable manner. 

            

    

    

    Article
      Six

    

    Party
      B
      shall pay fees and utilities related to operation of the building during the
      lease term including: water expenses, electricity charges, estate maintenance
      and related expenditures. 

    

    Article
      Seven

    

    Maintenance
      and Usage of the Building 

    

    
      	
              1.

            	
              During
                the term of lease, Party B promises to ensure the safe use of the
                building, and bears the responsibility of repairing the buildings
                and all
                the facilities if and when they require repair. If the repairing
                necessitates cooperation from Party A, Party B will give Party A
                seven-days’ advance notice and Party A agrees to actively cooperate.
                

            

    

    

    
      	
              2.

            	
              Party
                A shall use the leased premises in a reasonable manner. If any damage
                should occur that is caused by improper usage, Party B shall repair
                the
                facilities immediately or make a timely and appropriate compensation
                to
                Party A. Any alterations of the interior structure, decor, or installation
                of any equipment or fixtures within the building, shall require approval
                in writing from Party A prior to buildout in relation to the designed
                scale, construction scope, process and material. Upon expiration
                of the
                lease term or termination of the lease due to Party B's violation
                of any
                term of this lease, except as provided by written agreement made
                by both
                parties, Party A shall have the right to do any the following:
                

            

    

    

    
      	
            	(1)	
              take
                possession and ownership of any modifications to the premises, including
                décor, improvements, fixtures, etc.;

            

    

    

    
      	
            	(2)	
              have
                the building restored to its previous condition by Party B;
                

            

    

    

    
      	
            	(3)	
              charge
                Party B for the cost of restoring the premises to its original state
                prior
                to the modifications made by Party B.

            

    

    

    
      	
              3.

            	
              The
                fixtures and equipment installed by Party B which can be removed
                (such as
                air conditioners) shall be removed by Party B. However, any materials
                which cannot be removed (such as floors, tiles, partitions) shall
                be taken
                over by Party A. 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Article
      Eight

    

    The
      Transfer and Sub-lease of the Land and Buildings 

    

    
      	
              1.

            	
              During
                the term of lease, Party A has the right to transfer the land and
                building
                according to the required legal formalities and after the transfer,
                this
                contract shall continue to be effective as between the new owner
                and Party
                B. 

            

    

    

    
      	2.	
              Without
                Party As consent, Party B is not allowed to sub-lease the premises
                to any
                third party. 

            

    

    

    
      	
              3.

            	
              In
                case Party A sells the property, Party A shall give Party B two months
                notice in advance. Party B shall have a right of first refusal to
                purchase
                the land and buildings on the same terms and conditions as it is
                proposed
                to be sold by Party A. 

            

    

    

    

    Article
      Nine

    

    Modification,
      Dissolving, and Termination of the Contract 

    

    
      	1.	
              The
                two parties can modify or terminate the contract through negotiations.
                

            

    

    

    
      	2.	
              If
                Party A assigns this agreement to another party, Party B has the
                right to
                dissolve the contract if: 

            

    

    

    
      	
            	(1)	
              the
                new party to this agreement fails to provide the land and buildings
                or
                those provided are not up to the contracted conditions and seriously
                affects normal usage. 

            

    

    

    
      
        	
              	(2)	
                the
                  new party fails to do its duty in repairing the buildings and this
                  seriously affects normal usage.

              

      

    

    

    
      	
              3.

            	
              During
                the lease term, Party A has the right to dissolve the contract and
                repossess the leased buildings if any of the following actions are
                taken
                by Party B: 

            

    

    

    (1)
      Party B sub-leases or lends the leased buildings without Party A's written
      permission. 

    

    (2)
      Party B demolishes or changes the structure of the buildings without Party
      A's written permission. 

    

    (3)
      Party B causes damage the leased buildings, and fails to repair such damage
      within a reasonable period provided by Party A. 

    

    (4)
      Party B uses the buildings in a way other than that stipulated in this
      agreement without Party A's written permission. 

    

    (5)
      Party B uses the leased buildings to store perilous goods or have illegal
      activities in it. 

    

    (6)
      Party B delays the payment of fees and expenses stipulated in this
      agreement. 

    

    (7)
      Party B is more than one month delinquent with the payment of rent due.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              4.

            	
              For
                an extended term, Party B shall give Party A written notice three
                months
                in advance of the expiration. In case Party A continues to lease
                the
                buildings, Party B shall have a right of first refusal to obtain
                a lease
                from Party A under same terms and conditions.

            

    

    

    
      	
              5.

            	
              This
                lease automatically terminates upon the expiration date unless extended
                according to the terms of this agreement.

            

    

    

    
      	6.	
              This
                lease shall terminate if it cannot be implemented due to a force
                majeure
                event. 

            

    

    

    Article
      Ten

    

    Examinations
      Upon Repossession of the Leased Property 

    

    
      	1.	
              Party
                A shall inspect the premises to ensure that the building is in a
                normal
                usable state. 

            

    

    

    
      	
              2.

            	
              The
                two parties collectively shall take part in the examination and
                inspection, and shall agree on issues such as decoration, hardware
                and
                facilities. 

            

    

    

    
      	
              3.

            	
              Party
                B shall turn over possession of the buildings and facilities to Party
                A
                upon the expiration of this agreement.

            

    

    

    
      	
              4.

            	
              Upon
                the above turn-over of possession, Party B shall maintain the buildings
                and facilities in good condition, and shall not leave any articles
                in it
                or do anything to adversely affect the building's normal usage. Party
                A
                has the right to dispose of anything left by Party B without the
                approval
                of Party A. 

            

    

    

    Article
      Eleven

    

    Responsibilities
      in the Event of Default by Party A 

    

    
      	
              1.

            	
              If
                this agreement is terminated due to Party As failure to provide the
                land
                and building stipulated in this agreement, Party A shall be obligated
                to
                pay Party B 20% of the total amount of this agreement as a penalty.
                In
                addition, Party A shall compensate Party B for any losses suffered
                by
                Party B as a result of such failure.

            

    

    

    
      	
              2.

            	
              If
                Party A breaches the agreement and repossess to the land and buildings
                prior to the termination or expiration of this Agreement, Party A
                shall
                pay Party B 10% of the total amount of this agreement as a penalty.
                If
                this payment does not sufficiently compensation Party B for the actual
                losses sustained by Party B, Party A shall have the responsibility
                of
                compensating Party B by any means necessary in order to make Party
                B
                whole. 

            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Article
      Twelve

    

    Responsibilities
      in the Event of Default by Party B 

    

    
      	
              1.

            	
              During
                the lease term, Party A has the right to dissolve the agreement and
                repossess the leased buildings in the event that Party B takes any
                of the
                following actions. Party B shall pay 10% of the total amount of this
                agreement to Party A as a penalty. If this payment cannot make up
                for the
                actual losses suffered by Party A, Party B shall have the responsibility
                of compensating Party A by any means necessary in order to make Party
                A
                whole. 

            

    

     

    
      	
            	(1)	
              Party
                B sub-leases or lends the leased buildings without Party A’s written
                permission. 

            

    

    

    
      	
            	(2)	
              Party
                B demolishes or changes the structure of the buildings without Party
                A’s
                written permission. 

            

    

    

    
      	
            	(3)	
              Party
                B unilaterally dissolves this agreement without Party A’s written
                permission. 

            

    

    

    
      	
            	(4)	
              Party
                B uses the buildings in a way other than that stipulated in this
                agreement
                or conducts illegal activities in it.

            

    

    

    
      	
            	(5)	
              Party
                B fails to pay rent timely for over one month.

            

    

    

    
      	
              2.

            	
              For
                every day of overdue payment by Party B, Party B should pay a penalty
                of
                two times of the amount calculated as daily rent.
                

            

    

    

    
      	
              3.

            	
              Upon
                expiration of the contract, Party B shall return possession of the
                building in a timely manner. For every day of the delay of repossession
                of
                the property, Party B should pay find five times of the amount calculated
                as daily rent. 

            

    

    

    Article
      Thirteen

    

    Exemption
      from Liabilities 

    

    
      	
              1.

            	
              In
                the event this contract cannot be fulfilled and any losses are sustained
                by either of the parties due to a force majeure event, Party A and
                Party B
                shall not have any obligations the other party for any resulting
                losses.
                

            

    

    

    
      	
              2.

            	
              In
                the event that any demolition or rebuilding of the leased properties
                is
                required by government action, neither party shall have any liability
                to
                the other party for resulting damages.

            

    

    

    
      	
              3.

            	
              In
                the event the agreement is terminated due any of the above-mentioned
                causes, the rent shall be calculated by actual length of time when
                the
                property is used, and for any deficient month, the rent is calculated
                day
                by day, with credit back for any surplus and charge back for any
                deficiency. 

            

    

    

    
      	
              4.

            	
              Force
                Majeure means a disruptive event or condition which is unforeseen
                and
                beyond the reasonable control of the parties.

            

    

    

    Article
      Fourteen

    

    This
      agreement may be amended or supplemented in writing signed by both parties.
      Any
      supplementary clauses appended to this agreement shall form a part of this
      agreement, and shall be enforceable as such. 

    

    Article
      Fifteen

    

    Dispute
      Resolution

    

    All
      disputes in connection with this agreement or the execution thereof shall be
      settled through amicable negotiations by the contracting parties. If no
      settlement can be reached through negotiations, the case may then be submitted
      as a lawsuit to the People's Law Court in the jurisdiction in which Party A
      is
      located. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Article
      Sixteen

    

    This
      agreement takes effect when both parties execute and deliver it with each
      parties’ respective corporate seal. 

    

    Article
      Seventeen

    

    This
      agreement and its attachments have been executed in multiple counterparts,
      and
      each counterpart shall have equal force and effect as if it were an original.
      

     

     

    

    
      	Lessor (Party A): 	
              Jiangsu
                Ever-Glory International Group Co. 

              

              (seal)

            
	
               

               

            	 
	Lessee (Party B): 	
              
                Nanjing
                  New-Tailun Garments Co., Ltd. 

                 

                (seal)SECURITIES
        PURCHASE AGREEMENT

       

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of March 11, 2008 between Capital Growth Systems, Inc., a Florida
        corporation (the “Company”),
        and
        each purchaser identified on the signature pages hereto (each, including
        its
        successors and assigns, a “Purchaser”
and
        collectively, the “Purchasers”).

       

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

       

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

       

      ARTICLE
        I.

      DEFINITIONS

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

      “Company
        Counsel”
means
        Shefsky & Froelich, with offices located at 111 E. Wacker Drive, Suite 2800,
        Chicago, Illinois 60601.

       

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

       

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

       

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

       

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

       

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

       

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

       

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

      

      “Exempt
        Issuance”
means
        the issuance of (a) shares of Common Stock or options to employees, officers
        or
        directors of the Company pursuant to any stock or option plan duly adopted
        for
        such purpose by a majority of the non-employee members of the Board of Directors
        or a majority of the members of a committee of non-employee directors
        established for such purpose, (b) securities upon the exercise or exchange
        of or
        conversion of any Securities issued hereunder and/or other securities
        exercisable or exchangeable for or convertible into shares of Common Stock
        issued and outstanding on the date of this Agreement, provided that such
        securities have not been amended since the date of this Agreement to increase
        the number of such securities or to decrease the exercise, exchange or
        conversion price of such securities, (c) securities issued pursuant to
        acquisitions or strategic transactions approved by a majority of the
        disinterested directors of the Company, provided that any such issuance shall
        only be to a Person which is, itself or through its subsidiaries, an operating
        company in a business synergistic with the business of the Company and in
        which
        the Company receives benefits in addition to the investment of funds, but
        shall
        not include a transaction in which the Company is issuing securities primarily
        for the purpose of raising capital or to an entity whose primary business
        is
        investing in securities, and (d) for purposes of Section 4.12 only, an issuance
        of Common Stock or Common Stock Equivalents, without registration rights,
        for
        cash consideration, to the global carrier referenced in the Company’s press
        release dated February 20, 2008, provided, however, any such issuance of
        Common
        Stock Equivalents shall be expressly subordinate to the Debentures pursuant
        to a
        written subordination agreement with the Purchasers that is acceptable to
        each
        Purchaser in its sole and absolute discretion.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      “Transfer
        Agent”
means
        Continental Stock Transfer & Trust Company, the current transfer agent of
        the Company with a mailing address of 17 Battery Place, New York, New York
        10004
        and a facsimile number of 212-509-5150, and any successor transfer agent
        of the
        Company.

       

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

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      “Warrants”
means,
        collectively, the Common Stock purchase warrants delivered to the Purchasers
        at
        the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
        be
        exercisable immediately and have a term of exercise equal to 5 years from
        the
        Closing Date, in the form of Exhibit C
        attached
        hereto.

       

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

       

      ARTICLE
        II.

      PURCHASE
        AND SALE

       

      2.1  Closing. 
        On the Closing Date, upon the terms and subject to the conditions set forth
        herein, substantially concurrent with the execution and delivery of this
        Agreement by the parties hereto, the Company agrees to sell, and the Purchasers,
        severally and not jointly, agree to purchase, in the aggregate, a minimum
        of
        $14.0 million and a maximum of $19.0 million in principal amount of the
        Debentures. Each Purchaser shall deliver to the Company via wire transfer
        or a
        certified check, immediately available funds equal to its Subscription Amount
        and the Company shall deliver to each Purchaser its respective Debenture
        and a
        Warrant, as determined pursuant to Section 2.2(a), and the Company and each
        Purchaser shall deliver the other items set forth in Section 2.2 deliverable
        at
        the Closing. Upon satisfaction of the conditions set forth in Sections 2.2
        and
        2.3, the Closing shall occur at the offices of FWS or such other location
        as the
        parties shall mutually agree.

       

      
        
          
          

        

        
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      2.2  Deliveries

       

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

       

      
        (i)  this
          Agreement duly executed by the Company; 

      

       

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

       

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

       

      (iv)  a
        Warrant
        registered in the name of such Purchaser to purchase up to a number of shares
        of
        Common Stock equal to 50% of such Purchaser’s Subscription Amount divided by
        $0.50, with an exercise price equal to $0.73,
        subject
        to adjustment therein;

       

      (v)  the
        Security Agreement, duly executed by the Company and each Subsidiary, along
        with
        all of the Security Documents (including, without limitation, documents and
        agreements evidencing the Purchasers’ security interest in the assets of the
        Company’s Subsidiary that is organized in the UK), including the Subsidiary
        Guarantee, duly executed by the parties thereto; and

       

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

       

      

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

      
         

        
          (i)  this
            Agreement duly executed by such Purchaser;

        

         

      

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

       

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

       

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

       

      2.3  Closing
        Conditions. 

       

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

       

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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

      (iii)  all
        existing debtholders of the Company and its Subsidiaries (the “Existing
        Debtholders”),
        shall
        each have executed and delivered the Purchasers an agreement whereby each
        Existing Debtholders shall agree, that all amounts owed to it shall not
mature
        or
        require payments of any nature prior to the repayment of all amounts due
        under
        the Debentures, and whereby such indebtedness is made expressly subordinate
        in
        right of payment to the indebtedness evidenced by the Debentures, as reflected
        in a written agreement reasonably acceptable to, and approved by, the
        Purchasers;
        

       

      (iv)  the
        Company shall have received payoff, release and waiver letters, and UCC-3
        termination statements, as applicable from Hilco Financial, LLC, the holders
        of
        the Short Term Notes, the holders of the CGSI Two Year Term Note and the
        Company’s lawyers (each as described on Schedule
        4.9 attached
        hereto),
        in form
        and substance reasonably acceptable to the Purchasers;

       

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

       

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

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        III.

      REPRESENTATIONS
        AND WARRANTIES

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (d)  No
        Conflicts. 
        The execution, delivery and performance by the Company of the Transaction
        Documents and the consummation by it to which it is a party of the other
        transactions contemplated hereby and thereby do not and will not: (i) conflict
        with or violate any provision of the Company’s or any Subsidiary’s certificate
        or articles of incorporation, bylaws or other organizational or charter
        documents, or (ii) conflict with, or constitute a default (or an event that
        with
        notice or lapse of time or both would become a default) under, result in
        the
        creation of any Lien upon any of the properties or assets of the Company
        or any
        Subsidiary, or give to others any rights of termination, amendment, acceleration
        or cancellation (with or without notice, lapse of time or both) of, any
        agreement, credit facility, debt or other instrument (evidencing a Company
        or
        Subsidiary debt or otherwise) or other understanding to which the Company
        or any
        Subsidiary is a party or by which any property or asset of the Company or
        any
        Subsidiary is bound or affected, (iii) subject to the Required Approvals,
        conflict with or result in a violation of any law, rule, regulation, order,
        judgment, injunction, decree or other restriction of any court or governmental
        authority to which the Company or a Subsidiary is subject (including federal
        and
        state securities laws and regulations), or by which any property or asset
        of the
        Company or a Subsidiary is bound or affected; except in the case of each
        of
        clauses (ii) and (iii), such as could not have or reasonably be expected
        to
        result in a Material Adverse Effect.

       

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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (h)  SEC
        Reports; Financial Statements.
        The
        Company has filed all reports, schedules, forms, statements and other documents
        required to be filed by the Company under the Securities Act and the Exchange
        Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
        preceding the date hereof (or such shorter period as the Company was required
        by
        law or regulation to file such material) (the foregoing materials, including
        the
        exhibits thereto and documents incorporated by reference therein, being
        collectively referred to herein as the “SEC
        Reports”)
        on a
        timely basis or has received a valid extension of such time of filing and
        has
        filed any such SEC Reports prior to the expiration of any such extension.
        As of
        their respective dates, the SEC Reports complied in all material respects
        with
        the requirements of the Securities Act and the Exchange Act, as applicable,
        and
        none of the SEC Reports, when filed, contained any untrue statement of a
        material fact or omitted to state a material fact required to be stated therein
        or necessary in order to make the statements therein, in the light of the
        circumstances under which they were made, not misleading. The financial
        statements of the Company included in the SEC Reports comply in all material
        respects with applicable accounting requirements and the rules and regulations
        of the Commission with respect thereto as in effect at the time of filing.
        Such
        financial statements have been prepared in accordance with United States
        generally accepted accounting principles applied on a consistent basis during
        the periods involved (“GAAP”),
        except as may be otherwise specified in such financial statements or the
        notes
        thereto and except that unaudited financial statements may not contain all
        footnotes required by GAAP, and fairly present in all material respects the
        financial position of the Company and its consolidated Subsidiaries as of
        and
        for the dates thereof and the results of operations and cash flows for the
        periods then ended, subject, in the case of unaudited statements, to normal,
        immaterial, year-end audit adjustments.

       

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

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

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

       

      (k)  Labor
        Relations.
        No
        material labor dispute exists or, to the knowledge of the Company, is imminent
        with respect to any of the employees of the Company which could reasonably
        be
        expected to result in a Material Adverse Effect. None of the Company’s or its
        Subsidiaries’ employees is a member of a union that relates to such employee’s
        relationship with the Company or such Subsidiary, and neither the Company
        nor
        any of its Subsidiaries is a party to a collective bargaining agreement,
        and the
        Company and its Subsidiaries believe that their relationships with their
        employees are good. No executive officer, to the knowledge of the Company,
        is,
        or is now expected to be, in violation of any material term of any employment
        contract, confidentiality, disclosure or proprietary information agreement
        or
        non-competition agreement, or any other contract or agreement or any restrictive
        covenant in favor of any third party, and the continued employment of each
        such
        executive officer does not subject the Company or any of its Subsidiaries
        to any
        liability with respect to any of the foregoing matters. Except as disclosed
        on
Schedule
        3.1(k),
        the
        Company and its Subsidiaries are in compliance with all U.S. federal, state,
        local and foreign laws and regulations relating to employment and employment
        practices, terms and conditions of employment and wages and hours, except
        where
        the failure to be in compliance could not, individually or in the aggregate,
        reasonably be expected to have a Material Adverse Effect.

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      (p)  Insurance.
        The
        Company and the Subsidiaries are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as are prudent
        and customary in the businesses in which the Company and the Subsidiaries
        are
        engaged, including, but not limited to, directors and officers insurance
        coverage in the amount of $10.0 million. Neither the Company nor any Subsidiary
        has any reason to believe that it will not be able to renew its existing
        insurance coverage as and when such coverage expires or to obtain similar
        coverage from similar insurers as may be necessary to continue its business
        without a significant increase in cost.

       

      
        
          
          

        

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

       

      (r)  Sarbanes-Oxley;
        Internal Accounting Controls.
        The
        Company is in material compliance with all provisions of the Sarbanes-Oxley
        Act
        of 2002 which are applicable to it as of the Closing Date. The
        Company and the Subsidiaries maintain a system of internal accounting controls
        sufficient to provide reasonable assurance that: (i) transactions are executed
        in accordance with management’s general or specific authorizations, (ii)
        transactions are recorded as necessary to permit preparation of financial
        statements in conformity with GAAP and to maintain asset accountability,
        (iii)
        access to assets is permitted only in accordance with management’s general or
        specific authorization, and (iv) the recorded accountability for assets is
        compared with the existing assets at reasonable intervals and appropriate
        action
        is taken with respect to any differences. The Company has established disclosure
        controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
        15d-15(e)) for the Company and designed such disclosure controls and procedures
        to ensure that information required to be disclosed by the Company in the
        reports it files or submits under the Exchange Act is recorded, processed,
        summarized and reported, within the time periods specified in the Commission’s
        rules and forms. The Company’s certifying officers have evaluated the
        effectiveness of the Company’s disclosure controls and procedures as of the end
        of the period covered by the Company’s most recently filed periodic report under
        the Exchange Act (such date, the “Evaluation
        Date”).
        The
        Company presented in its most recently filed periodic report under the Exchange
        Act the conclusions of the certifying officers about the effectiveness of
        the
        disclosure controls and procedures based on their evaluations as of the
        Evaluation Date. Since the Evaluation Date, there have been no changes in
        the
        Company’s internal control over financial reporting (as such term is defined in
        the Exchange Act) that has materially affected, or is reasonably likely to
        materially affect, the Company’s internal control over financial
        reporting.

       

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

       

      
        
          
          

        

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

       

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

       

      (v)  Registration
        Rights.
        Other
        than each of the Purchasers, no Person has any right to cause the Company
        to
        effect the registration under the Securities Act of any securities of the
        Company.

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      (ee)  Accountants.
        The
        Company’s accounting firm is Plante Moran. To the knowledge and belief of the
        Company, such accounting firm (i) is a registered public accounting firm
        as
        required by the Exchange Act and (ii) shall express its opinion with respect
        to
        the financial statements to be included in the Company’s Annual Report for the
        year ended December 31, 2007.

       

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

       

      
        
          
          

        

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

       

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

       

      (ii)  Acknowledgment
        Regarding Purchasers’ Trading Activity.
        Notwithstanding anything in this Agreement or elsewhere herein to the contrary
        (except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged
        by the Company that: (i) none of the Purchasers has been asked to agree by
        the
        Company, nor has any Purchaser agreed, to desist from purchasing or selling,
        long and/or short, securities of the Company, or “derivative” securities based
        on securities issued by the Company or to hold the Securities for any specified
        term, (ii) past or future open market or other transactions by any Purchaser,
        specifically including, without limitation, Short Sales or “derivative”
transactions, before or after the closing of this or future private placement
        transactions, may negatively impact the market price of the Company’s
        publicly-traded securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
        indirectly, may presently have a “short” position in the Common Stock and (iv)
        each Purchaser shall not be deemed to have any affiliation with or control
        over
        any arm’s length counter-party in any “derivative” transaction. The
        Company further understands and acknowledges that (y) one or more Purchasers
        may
        engage in hedging activities at various times during the period that the
        Securities are outstanding, including, without limitation, during the periods
        that the value of the Underlying Shares deliverable with respect to Securities
        are being determined, and (z) such hedging activities (if any) could reduce
        the
        value of the existing stockholders' equity interests in the Company at and
        after
        the time that the hedging activities are being conducted.  The Company
        acknowledges that such aforementioned hedging activities do not constitute
        a
        breach of any of the Transaction Documents.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

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

       

      (kk)  Form
        S-3 Eligibility.The
        Company is eligible to register the resale of the Underlying Shares for resale
        by the Purchaser on Form S-3 promulgated under the Securities Act.

       

      

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

       

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

       

      (b)  Own
        Account.
        Such
        Purchaser understands that the Securities are “restricted securities” and have
        not been registered under the Securities Act or any applicable state securities
        law and is acquiring the Securities as principal for its own account and
        not
        with a view to or for distributing or reselling such Securities or any part
        thereof in violation of the Securities Act or any applicable state securities
        law, has no present intention of distributing any of such Securities in
        violation of the Securities Act or any applicable state securities law and
        has
        no direct or indirect arrangement or understandings with any other persons
        to
        distribute or regarding the distribution of such Securities (this representation
        and warranty not limiting such Purchaser’s right to sell the Securities pursuant
        to the Registration Statement or otherwise in compliance with applicable
        federal
        and state securities laws) in violation of the Securities Act or any applicable
        state securities law. Such Purchaser is acquiring the Securities hereunder
        in
        the ordinary course of its business. Notwithstanding the foregoing, Midsummer
        Investment Ltd. (“Midsummer”)
        has
        been approached by an institutional accredited investor that was introduced
        to
        Midsummer by the placement agent for this transaction (the “Potential
        Purchaser”)
        about
        purchasing a portion of its Securities purchased hereunder after the Closing
        in
        a private transaction.  Midsummer represents there are no present
        understandings or agreements to transfer any of its Securities to such Potential
        Purchaser, however, any such transfer otherwise in accordance with the
        provisions of Section 4.1(a) hereof shall in no way be deemed a breach of
        Midsummer’s representations and warranties hereunder or under any other
        Transaction Document.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      (f)  Short
        Sales and Confidentiality Prior To The Date Hereof.
        Other
        than consummating the transactions contemplated hereunder, such Purchaser
        has
        not directly or indirectly, nor has any Person acting on behalf of or pursuant
        to any understanding with such Purchaser, executed any purchases or sales,
        including Short Sales, of the securities of the Company during the period
        commencing from
        the time
        that such Purchaser first received a term sheet (written or oral) from the
        Company or any other Person representing the Company setting forth the material
        terms of the transactions contemplated hereunder until the date hereof
(“Discussion
        Time”).
        Notwithstanding
        the foregoing, in the case of a Purchaser that is a multi-managed investment
        vehicle whereby separate portfolio managers manage separate portions of such
        Purchaser’s assets and the portfolio managers have no direct knowledge of the
        investment decisions made by the portfolio managers managing other portions
        of
        such Purchaser’s assets, the representation set forth above shall only apply
        with respect to the portion of assets managed by the portfolio manager that
        made
        the investment decision to purchase the Securities covered by this Agreement.
        Other than to other Persons party to this Agreement, such Purchaser has
        maintained the confidentiality of all disclosures made to it in connection
        with
        this transaction (including the existence and terms of this
        transaction).

       

      
        
          
          

        

        
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      ARTICLE
        IV.

      OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1  Transfer
        Restrictions.

       

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

       

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

       

      [NEITHER]
        THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
        [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
        COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
        EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
        (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
        TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
        TO
        AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
        APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
        TO
        THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
        ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON
        [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH
        A
        BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

       

      
        
          
          

        

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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      4.4  Integration.
        The
        Company shall not sell, offer for sale or solicit offers to buy or otherwise
        negotiate in respect of any security (as defined in Section 2 of the Securities
        Act) that would be integrated with the offer or sale of the Securities to
        the
        Purchasers in a manner that would require the registration under the Securities
        Act of the sale of the Securities to the Purchasers or that would be integrated
        with the offer or sale of the Securities for purposes of the rules and
        regulations of any Trading Market.

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

      4.10  Indemnification
        of Purchasers.
        Subject
        to the provisions of this Section 4.10, the Company will indemnify and hold
        each
        Purchaser and its directors, officers, shareholders, members, partners,
        employees and agents (and any other Persons with a functionally equivalent
        role
        of a Person holding such titles notwithstanding a lack of such title or any
        other title), each Person who controls such Purchaser (within the meaning
        of
        Section 15 of the Securities Act and Section 20 of the Exchange Act), and
        the
        directors, officers, shareholders, agents, members, partners or employees
        (and
        any other Persons with a functionally equivalent role of a Person holding
        such
        titles notwithstanding a lack of such title or any other title) of such
        controlling person (each, a “Purchaser
        Party”)
        harmless from any and all losses, liabilities, obligations, claims,
        contingencies, damages, costs and expenses, including all judgments, amounts
        paid in settlements, court costs and reasonable attorneys’ fees and costs of
        investigation that any such Purchaser Party may suffer or incur as a result
        of
        or relating to (a) any breach of any of the representations, warranties,
        covenants or agreements made by the Company in this Agreement or in the other
        Transaction Documents or (b) any action instituted against a Purchaser in
        any
        capacity, or any of them or their respective Affiliates, by any stockholder
        of
        the Company who is not an Affiliate of such Purchaser, with respect to any
        of
        the transactions contemplated by the Transaction Documents (unless such action
        is based upon a breach of such Purchaser’s representations, warranties or
        covenants under the Transaction Documents or any agreements or understandings
        such Purchaser may have with any such stockholder or any violations by the
        Purchaser of state or federal securities laws or any conduct by such Purchaser
        which constitutes fraud, gross negligence, willful misconduct or malfeasance).
        If any action shall be brought against any Purchaser Party in respect of
        which
        indemnity may be sought pursuant to this Agreement, such Purchaser Party
        shall
        promptly notify the Company in writing, and the Company shall have the right
        to
        assume the defense thereof with counsel of its own choosing reasonably
        acceptable to the Purchaser Party. Any Purchaser Party shall have the right
        to
        employ separate counsel in any such action and participate in the defense
        thereof, but the fees and expenses of such counsel shall be at the expense
        of
        such Purchaser Party except to the extent that (i) the employment thereof
        has
        been specifically authorized by the Company in writing, (ii) the Company
        has
        failed after a reasonable period of time to assume such defense and to employ
        counsel or (iii) in such action there is, in the reasonable opinion of such
        separate counsel, a material conflict on any material issue between the position
        of the Company and the position of such Purchaser Party, in which case the
        Company shall be responsible for the reasonable fees and expenses of no more
        than one such separate counsel. The Company will not be liable to any Purchaser
        Party under this Agreement (y) for any settlement by a Purchaser Party effected
        without the Company’s prior written consent, which shall not be unreasonably
        withheld or delayed; or (z) to the extent, but only to the extent that a
        loss,
        claim, damage or liability is attributable to any Purchaser Party’s breach of
        any of the representations, warranties, covenants or agreements made by such
        Purchaser Party in this Agreement or in the other Transaction
        Documents.

       

      
        
          
          

        

        
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      4.11  Reservation
        and Listing of Securities.

       

      (a)  The
        Company shall maintain a reserve from its duly authorized shares of Common
        Stock
        for issuance pursuant to the Transaction Documents in such amount as may
        then be
        required to fulfill its obligations in full under the Transaction Documents.
        As
        of the Closing Date, the Company has reserved the following amount of its
        shares
        of Common Stock: (i) 48,000,000 shares underlying the Debentures and (ii)
        19,000,000 shares underlying the Warrants. In reserving the foregoing amount
        of
        shares for the Purchasers of the Debentures and Warrants, the Company: (a)
        has
        obtained the irrevocable agreement from each of Patrick Shutt, George King
        and
        Robert Pollan that effective as of the closing of the Purchase Agreement,
        they
        shall each not exercise their rights to purchase up to 2,000,000 shares of
        Common Stock (6,000,000 shares in the aggregate) with respect to their
        performance options granted in December 2007 to the extent that the issuance
        of
        the shares underlying such options would reduce the presently reserved shares
        for the Purchasers; and (ii) the Company acknowledges and agrees that it
        will
        only issue shares of its Common Stock toward the payment of interest with
        respect to the Debentures if it satisfies all of the Equity Conditions (as
        defined in the Debentures) with respect to such payment, including, without
        limitation, to the extent that at that time of such payment, it has reserved
        a
        number of shares equal to the Required Minimum as of such date.

       

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

       

      
        
          
          

        

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

       

      4.12  Participation
        in Future Financing.
        

       

      (a)  From
        the
        date hereof until the date that the Debentures are no longer outstanding,
        upon
        any issuance by the Company or any of its Subsidiaries of Common Stock, Common
        Stock Equivalents, Indebtedness (or a combination of units hereof) (a
“Subsequent
        Financing”),
        each
        Purchaser shall have the right to participate in up to an amount of the
        Subsequent Financing equal to 30% of the Subsequent Financing (the “Participation
        Maximum”)
        on the
        same terms, conditions and price provided for in the Subsequent Financing.
        

       

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

       

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

       

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

       

      
        
          
          

        

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

       

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

       

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

       

      4.13  Subsequent
        Equity Sales.
        

       

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

       

      (b)  From
        the
        date hereof until such time as no Purchaser holds any of the Securities,
        the
        Company shall be prohibited from effecting or entering into an agreement
        to
        effect any Subsequent Financing involving a Variable Rate Transaction.
“Variable
        Rate Transaction”
means
        a
        transaction in which the Company issues or sells (i) any debt or equity
        securities that are convertible into, exchangeable or exercisable for, or
        include the right to receive additional shares of Common Stock either (A)
        at a
        conversion price, exercise price or exchange rate or other price that is
        based
        upon and/or varies with the trading prices of or quotations for the shares
        of
        Common Stock at any time after the initial issuance of such debt or equity
        securities or (B) with a conversion, exercise or exchange price that is subject
        to being reset at some future date after the initial issuance of such debt
        or
        equity security or upon the occurrence of specified or contingent events
        directly or indirectly related to the business of the Company or the market
        for
        the Common Stock or (ii) enters into any agreement, including, but not limited
        to, an equity line of credit, whereby the Company may sell securities at
        a
        future determined price. 

       

      
        
          
          

        

        
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      (c)  So
        long
        as the Debentures or Warrants are outstanding, neither the Company nor any
        Subsidiary shall make any issuance whatsoever of Common Stock or Common Stock
        Equivalents at an effective price per share less than $0.50 (subject to
        adjustment for forward and reverse stock splits, stock dividends and
        combinations and similar transactions affecting the Common Stock after the
        Closing Date). Any Purchaser shall be entitled to obtain injunctive relief
        against the Company to preclude any such issuance, which remedy shall be
        in
        addition to any right to collect damages. 

       

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

       

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

       

      4.15  Short
        Sales and Confidentiality After The Date Hereof.
        Each
        Purchaser, severally and not jointly with the other Purchasers, covenants
        that
        neither it, nor any Affiliate acting on its behalf or pursuant to any
        understanding with it, will execute any Short Sales during the period commencing
        with the Discussion Time and ending at such time the transactions contemplated
        by this Agreement are first publicly announced as described in Section
        4.6. 
        Each
        Purchaser, severally and not jointly with the other Purchasers, covenants
        that
        until such time as the transactions contemplated by this Agreement are publicly
        disclosed by the Company as described in Section 4.6, such Purchaser will
        maintain the confidentiality of the existence and terms of this transaction
        and
        the information included in the Transaction Documents and the Disclosure
        Schedules. Notwithstanding
        the foregoing, no Purchaser makes any representation, warranty or covenant
        hereby that it will not engage in Short Sales in the securities of the Company
        after the time that the transactions contemplated by this Agreement are first
        publicly announced as described in Section 4.6; provided,
        however, each Purchaser agrees, severally and not jointly with any other
        Purchasers, that they will not enter into any Net Short Sales (as hereinafter
        defined) from the period commencing on the Closing Date and ending on the
        date
        that is the earlier of (x) the 6-month anniversary of the Closing Date or
        (y)
        the date that such Purchaser no longer holds any Debentures.  For purposes
        of this Section 4.15, a “Net
        Short Sale”
by
        any
        Purchaser shall mean a sale of Common Stock by such Purchaser that is marked
        as
        a short sale and that is made at a time when there is no equivalent offsetting
        long position in Common Stock held by such Purchaser.  For purposes of
        determining whether there is an equivalent offsetting long position in Common
        Stock held by the Purchaser, Underlying Shares that have not yet been converted
        pursuant to the Debentures and Warrant Shares that have not yet been exercised
        pursuant to the Warrants shall be deemed to be held long by the Purchaser,
        and
        the amount of shares of Common Stock held in a long position shall be all
        unconverted Underlying
        Shares and
        unexercised Warrant Shares (ignoring any exercise limitations included therein)
        issuable to such Purchaser on such date, plus any shares of Common Stock
        or
        other Common Stock Equivalents (other than the unconverted Underlying Shares
        and
        unexercised Warrant Shares described in this sentence) otherwise then held
        by
        such Purchaser.  Notwithstanding
        the foregoing, in the case of a Purchaser that is a multi-managed investment
        vehicle whereby separate portfolio managers manage separate portions of such
        Purchaser’s assets and the portfolio managers have no direct knowledge of the
        investment decisions made by the portfolio managers managing other portions
        of
        such Purchaser’s assets, the covenant set forth above shall only apply with
        respect to the portion of assets managed by the portfolio manager that made
        the
        investment decision to purchase the Securities covered by this
        Agreement.

       

      
        
          
          

        

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

       

      4.17  Capital
        Changes.
        Until
        the one year anniversary of the Effective Date, other than in connection
        with a
        Permitted Reverse Stock Split (as defined below), the Company shall not
        undertake a reverse or forward stock split or reclassification of the Common
        Stock without the prior written consent of the Purchasers holding a majority
        in
        principal amount outstanding of the Debentures. As used herein, a “Permitted
        Reverse Stock Split” is a reverse stock split of the Common Stock that is
        approved on or before April 15, 2009 for purposes of satisfying minimum bid
        requirements of the New York Stock Exchange, the Nasdaq Capital Market, the
        Nasdaq Global Market or the Nasdaq Global Select Market, and is effective
        contemporaneous with, or immediately prior to, the approval of the Common
        Stock
        for listing on the New York Stock Exchange, the Nasdaq Capital Market, the
        Nasdaq Global Market or the Nasdaq Global Select Market.

       

      ARTICLE
        V.

      MISCELLANEOUS

       

      5.1  Termination. 
        This Agreement may be terminated by any Purchaser, as to such Purchaser’s
        obligations hereunder only and without any effect whatsoever on the obligations
        between the Company and the other Purchasers, by written notice to the other
        parties, if the Closing has not been consummated on or before March 12, 2008;
        provided,
        however,
        that
        such termination will not affect the right of any party to sue for any breach
        by
        the other party (or parties).

       

      
        
          
          

        

        
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      5.2  Fees
        and Expenses.
        At the
        Closing, the Company has agreed to reimburse Enable Capital Management, LLC
        (“Enable”)
        the
        non-accountable sum of $50,000 for its legal fees and expenses, none of which
        has been paid prior to the Closing. The Company shall deliver to each Purchaser,
        prior to the Closing, a completed and executed copy of the Closing Statement
        attached hereto as Annex
        A.
        Except
        as expressly set forth in the Transaction Documents to the contrary, each
        party
        shall pay the fees and expenses of its advisers, counsel, accountants and
        other
        experts, if any, and all other expenses incurred by such party incident to
        the
        negotiation, preparation, execution, delivery and performance of this Agreement.
        The Company shall pay all transfer agent fees, stamp taxes and other taxes
        and
        duties levied in connection with the delivery of any Securities to the
        Purchasers.

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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      5.8  No
        Third-Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        successors and permitted assigns and is not for the benefit of, nor may any
        provision hereof be enforced by, any other Person, except as otherwise set
        forth
        in Section 4.10.

       

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

       

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

       

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

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      5.12  Severability.
        If any
        term, provision, covenant or restriction of this Agreement is held by a court
        of
        competent jurisdiction to be invalid, illegal, void or unenforceable, the
        remainder of the terms, provisions, covenants and restrictions set forth
        herein
        shall remain in full force and effect and shall in no way be affected, impaired
        or invalidated, and the parties hereto shall use their commercially reasonable
        efforts to find and employ an alternative means to achieve the same or
        substantially the same result as that contemplated by such term, provision,
        covenant or restriction. It is hereby stipulated and declared to be the
        intention of the parties that they would have executed the remaining terms,
        provisions, covenants and restrictions without including any of such that
        may be
        hereafter declared invalid, illegal, void or unenforceable.

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

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

       

      5.21  Construction.
        The
        parties agree that each of them and/or their respective counsel has reviewed
        and
        had an opportunity to revise the Transaction Documents and, therefore, the
        normal rule of construction to the effect that any ambiguities are to be
        resolved against the drafting party shall not be employed in the interpretation
        of the Transaction Documents or any amendments hereto.

       

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

      

       

      [SIGNATURE
        PAGES FOLLOW]

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

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

       

      

      
        	
                CAPITAL
                  GROWTH SYSTEMS, INC.

                 

              	
                Address
                  for Notice:

                 

                Attention
                  Chief Executive Officer

                500
                  W. Madison St., Suite 2060

                Chicago,
                  Illinois 60661

                 

                Facsimile:
                  312-673-2422

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

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

              	 
	
                Shefsky
                  & Froelich Ltd.

                 

                111
                  E. Wacker Dr., Suite 2800

                Chicago,
                  Illinois 60601

                Facsimile:
                  312-275-7569

                 

              	 

      

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASER FOLLOWS]

       

      
        
          
          

        

        
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      [PURCHASER
        SIGNATURE PAGES TO CGSY SECURITIES PURCHASE AGREEMENT]

      

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

       

      Name
        of
        Purchaser: ________________________________________________________

      Signature
        of Authorized Signatory of Purchaser:
        __________________________________

      Name
        of
        Authorized Signatory:
        ____________________________________________________

      Title
        of
        Authorized Signatory:
        _____________________________________________________

      Email
        Address of Authorized Signatory:
        _____________________________________________

      Facsimile
        Number of Authorized Signatory:
        __________________________________________

      

      Address
        for Notice of Purchaser:

      

      

      

      

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

      

      

      

      

      

      Subscription
        Amount: _____________

      

      

      Warrant
        Shares: _________________

      

      

      

      

      EIN
        Number: [PROVIDE
        THIS UNDER SEPARATE COVER]

      

      [SIGNATURE
        PAGES CONTINUE]

      

      

      

      
        
          
          

        

        
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      Annex
        A 

      

      CLOSING
        STATEMENT

      

      Pursuant
        to the attached Securities Purchase Agreement, dated as of the date hereto,
        the
        purchasers shall purchase up to $19,000,000 of Debentures and Warrants from
        Capital Growth Systems, Inc., a Florida corporation (the “Company”).
        All
        funds will be wired into an account maintained by the Company. All funds
        will be
        disbursed in accordance with this Closing Statement. 

      

      Disbursement
        Date: March
        ___, 2008

       

      

      
        	
                I.
                  PURCHASE
                  PRICE

              	 
	 	 
	
                Gross
                  Proceeds to be Received 

              	
                $

              
	 	 
	
                II. DISBURSEMENTS

              	 
	
                 

              	
                $

              
	
                 

              	
                $

              
	 	
                $

              
	 	
                $

              
	 	
                $

              
	 	 
	
                Total
                  Amount Disbursed:

              	
                $

              
	 	 
	 	 
	 	 
	
                WIRE
                  INSTRUCTIONS:

                 

              	 
	
                To:
                  _____________________________________

                 

                 

                 

                 

              	 
	
                To:
                  _____________________________________

                 

                 

                 

                 

              	 

      

      

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

    

    

      EXHIBIT
        A

      

      NEITHER
        THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
        HAVE
        BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
        MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
        STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
        FROM,
        OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
        SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
        EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
        THE
        SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
        AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED
        IN
        CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
        SECURITIES.

      

      Original
        Issue Date: March ___, 2008

      Original
        Conversion Price (subject to adjustment herein): $0.50

      

      $_______________

      

      

      VARIABLE
        RATE SENIOR SECURED CONVERTIBLE DEBENTURE

      DUE
        MARCH ___, 2013

       

      THIS
        SENIOR SECURED DEBENTURE is one of a series of duly authorized and validly
        issued Variable Rate Senior Secured Convertible Debentures of Capital Growth
        Systems, Inc., a Florida corporation, (the “Company”),
        having its principal place of business at 500 W. Madison Street, Suite 2060,
        Chicago, Illinois 60661, designated as its Variable Rate Senior Secured
        Convertible Debenture due March ___, 2013 (this debenture, the “Debenture”
and,
        collectively with the other debentures of such series, the “Debentures”).

      

      FOR
        VALUE
        RECEIVED, the Company promises to pay to ________________________ or its
        registered assigns (the “Holder”),
        or
        shall have paid pursuant to the terms hereunder, the principal sum of
        $_______________ on March ___, 2013 (the “Maturity
        Date”)
        or
        such earlier date as this Debenture is required or permitted to be repaid
        as
        provided hereunder, and to pay interest to the Holder on the aggregate
        unconverted and then outstanding principal amount of this Debenture in
        accordance with the provisions hereof. This Debenture is subject to the
        following additional provisions:

      

      Section
        1. Definitions.
        For the
        purposes hereof, in addition to the terms defined elsewhere in this Debenture,
        (a) capitalized terms not otherwise defined herein shall have the meanings
        set
        forth in the Purchase Agreement and (b) the following terms shall have the
        following meanings:

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Alternate
        Consideration”
shall
        have the meaning set forth in Section 5(e).

      

      “Bankruptcy
        Event”
means
        any of the following events: (a) the Company or any Significant Subsidiary
        (as
        such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences
        a case
        or other proceeding under any bankruptcy, reorganization, arrangement,
        adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
        or
        similar law of any jurisdiction relating to the Company or any Significant
        Subsidiary thereof, (b) there is commenced against the Company or any
        Significant Subsidiary thereof any such case or proceeding that is not dismissed
        within 60 days after commencement, (c) the Company or any Significant Subsidiary
        thereof is adjudicated insolvent or bankrupt or any order of relief or other
        order approving any such case or proceeding is entered, (d) the Company or
        any
        Significant Subsidiary thereof suffers any appointment of any custodian or
        the
        like for it or any substantial part of its property that is not discharged
        or
        stayed within 60 calendar days after such appointment, (e) the Company or
        any
        Significant Subsidiary thereof makes a general assignment for the benefit
        of
        creditors, (f) the Company or any Significant Subsidiary thereof calls a
        meeting
        of its creditors with a view to arranging a composition, adjustment or
        restructuring of its debts or (g) the Company or any Significant Subsidiary
        thereof, by any act or failure to act, expressly indicates its consent to,
        approval of or acquiescence in any of the foregoing or takes any corporate
        or
        other action for the purpose of effecting any of the foregoing.

      

      “Base
        Conversion Price”
shall
        have the meaning set forth in Section 5(b).

      

      “Beneficial
        Ownership Limitation”
shall
        have the meaning set forth in Section 4(c)(ii). 

      

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

      

      “Buy-In”
shall
        have the meaning set forth in Section 4(d)(v).

      

      “Change
        of Control Transaction”
means
        the occurrence after the date hereof of any of (a) an acquisition after the
        date
        hereof by an individual or legal entity or “group” (as described in Rule
        13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
        through legal or beneficial ownership of capital stock of the Company, by
        contract or otherwise) of in excess of 40% of the voting securities of the
        Company (other than by means of conversion or exercise of the Debentures
        and the
        Securities issued together with the Debentures), (b) the Company merges into
        or
        consolidates with any other Person, or any Person merges into or consolidates
        with the Company and, after giving effect to such transaction, the stockholders
        of the Company immediately prior to such transaction own less than 60% of
        the
        aggregate voting power of the Company or the successor entity of such
        transaction, or (c) the Company sells or transfers all or substantially all
        of
        its assets to another Person and the stockholders of the Company immediately
        prior to such transaction own less than 60% of the aggregate voting power
        of the
        acquiring entity immediately after the transaction, (d) a replacement at
        one
        time or within a three year period of more than one-half of the members of
        the
        Board of Directors which is not approved by a majority of those individuals
        who
        are members of the Board of Directors on the date hereof (or by those
        individuals who are serving as members of the Board of Directors on any date
        whose nomination to the Board of Directors was approved by a majority of
        the
        members of the Board of Directors who are members on the date hereof), or
        (e)
        the execution by the Company of an agreement to which the Company is a party
        or
        by which it is bound, providing for any of the events set forth in clauses
        (a)
        through (d) above.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Conversion”
shall
        have the meaning ascribed to such term in Section 4. 

      

      “Conversion
        Date”
shall
        have the meaning set forth in Section 4(a).

      

      “Conversion
        Price”
shall
        have the meaning set forth in Section 4(b).

      

      “Conversion
        Schedule”
means
        the Conversion Schedule in the form of Schedule
        1
        attached
        hereto.

      

      “Conversion
        Shares”
means,
        collectively, the shares of Common Stock issuable upon conversion of this
        Debenture in accordance with the terms hereof.

      

      “Debenture
        Register”
shall
        have the meaning set forth in Section 2(c).

      

      “Dilutive
        Issuance”
shall
        have the meaning set forth in Section 5(b).

      

      “Dilutive
        Issuance Notice”
shall
        have the meaning set forth in Section 5(b).

      

      “Effectiveness
        Period”
shall
        have the meaning set forth in the Registration Rights Agreement. 

      

      “Equity
        Conditions”
means,
        during the period in question, (a)
        the
        Company shall have duly honored all conversions and redemptions scheduled
        to
        occur or occurring by virtue of one or more Notices of Conversion of the
        Holder,
        if any, (b) the Company shall have paid all liquidated damages and other
        amounts
        owing to the Holder in respect of this Debenture, (c)(i)
        there is an effective Registration Statement pursuant to which the Holder
        is
        permitted to utilize the prospectus thereunder to resell all of the shares
        of
        Common Stock issuable pursuant to the Transaction Documents (and the Company
        believes, in good faith, that such effectiveness will continue uninterrupted
        for
        the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant
        to the Transaction Documents may be resold pursuant to Rule 144 without volume
        or manner-of-sale restrictions or current public information requirements
        as
        determined by the counsel to the Company pursuant to a written opinion letter
        to
        such effect, addressed and acceptable to the Transfer Agent and the Holder,
        (d)
        the Common Stock is trading on a Trading Market and all of the shares issuable
        pursuant to the Transaction Documents are listed or quoted for trading on
        such
        Trading Market (and the Company believes, in good faith, that trading of
        the
        Common Stock on a Trading Market will continue uninterrupted for the foreseeable
        future), (e) there is a sufficient number of authorized but unissued and
        otherwise unreserved shares of Common Stock for the issuance of all of the
        shares issuable pursuant to the Transaction Documents, (f) there is no existing
        Event of Default or no existing event which, with the passage of time or
        the
        giving of notice, would constitute an Event of Default, (g) the issuance
        of the
        shares in question (or, in the case of an Optional Redemption, the shares
        issuable upon conversion in full of the Optional Redemption Amount to the
        Holder
        would not violate the limitations set forth in Section 4(c) herein, (h)
        there
        has been no public announcement of a pending or proposed Fundamental Transaction
        or Change of Control Transaction that has not been consummated, (i) the Holder
        is not in possession of any information provided by the Company that
        constitutes, or may constitute, material non-public information and (j) for
        each
        Trading Day in a period of 20 consecutive Trading Days prior to the applicable
        date in question, the daily trading volume for the Common Stock on the principal
        Trading Market exceeds 300,000 shares per Trading Day (subject to adjustment
        for
        forward and reverse stock splits, stock dividends, stock
        combinations, recapitalizations and other similar transactions of the Common
        Stock that occur after the Original Issue Date).
        

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Event
        of Default”
shall
        have the meaning set forth in Section 8(a).

      

      “First
        Year Optional Redemption”
shall
        have the meaning set forth in Section 6(a).

      

      “First
        Year Optional Redemption Amount”
means
        105% of the sum of (a) 25% of the then outstanding principal amount of the
        Debenture, (b) accrued but unpaid interest, (c) an amount equal to all interest
        that would have accrued if the principal amount subject to such First Year
        Optional Redemption had remained outstanding through the Maturity Date and
        (d)
        all liquidated damages and other amounts due in respect of the
        Debenture.

      

      “First
        Year Optional Redemption Date”
shall
        have the meaning set forth in Section 6(a).

      

      “First
        Year Optional Redemption Notice”
shall
        have the meaning set forth in Section 6(a).

      

      “First
        Year Optional Redemption Notice Date”
shall
        have the meaning set forth in Section 6(a).

      

      “First
        Year Optional Redemption Period” shall
        have the meaning set forth in Section 6(a).

      

      “Fundamental
        Transaction”
shall
        have the meaning set forth in Section 5(e).

       

      “Interest
        Conversion Rate”
means
        the
        lesser of (a) the Conversion Price or (b) 90%
        of
        the lesser of (i) the average of the VWAPs for the 20 consecutive Trading
        Days
        ending on the Trading Day that is immediately prior to the applicable Interest
        Payment Date or (ii) the average of the VWAPs for the 20 consecutive Trading
        Days ending on the Trading Day that is immediately prior to the date the
        applicable Interest Conversion Shares are issued and delivered if such delivery
        is after the Interest Payment Date.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Interest
        Conversion Shares”
shall
        have the meaning set forth in Section 2(a).

      

      “Interest
        Notice Period”
shall
        have the meaning set forth in Section 2(a).

       

      “Interest
        Payment Date”
shall
        have the meaning set forth in Section 2(a).

      

      “Interest
        Share Amount”
shall
        have the meaning set forth in Section 2(a).

      

      “Late
        Fees”
shall
        have the meaning set forth in Section 2(d).

      

      “Mandatory
        Default Amount”
means
        the sum of (a) the greater of (i) the outstanding principal amount of this
        Debenture, plus all accrued and unpaid interest hereon, divided by the
        Conversion Price on the date the Mandatory Default Amount is either (A) demanded
        (if demand or notice is required to create an Event of Default) or otherwise
        due
        or (B) paid in full, whichever has a lower Conversion Price, multiplied by
        the
        VWAP on the date the Mandatory Default Amount is either (x) demanded or
        otherwise due or (y) paid in full, whichever has a higher VWAP, or (ii) 120%
        of
        the outstanding principal amount of this Debenture, plus 100% of accrued
        and
        unpaid interest hereon, (b) all other amounts, costs, expenses and liquidated
        damages due in respect of this Debenture and (c) an amount equal to all interest
        that would have accrued if the principal amount subject to such Mandatory
        Default had remained outstanding through the Maturity Date.

      

      “New
        York Courts”
shall
        have the meaning set forth in Section 9(d).

      

      “Notice
        of Conversion”
shall
        have the meaning set forth in Section 4(a).

      

      “Optional
        Redemption”
shall
        have the meaning set forth in Section 6(b).

      

      “Optional
        Redemption Amount”
means
        the sum of (a) 100% of the then outstanding principal amount of the Debenture,
        (b) accrued but unpaid interest, (c) an amount equal to all interest that
        would
        have accrued if the principal amount subject to such Optional Redemption
        had
        remained outstanding through the Maturity Date and (d) all liquidated damages
        and other amounts due in respect of the Debenture.

      

      “Optional
        Redemption Date”
shall
        have the meaning set forth in Section 6(b).

      

      “Optional
        Redemption Notice”
shall
        have the meaning set forth in Section 6(b).

      

      “Optional
        Redemption Notice Date”
shall
        have the meaning set forth in Section 6(b).

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Optional
        Redemption Period” shall
        have the meaning set forth in Section 6(b).

      

      “Original
        Issue Date”
means
        the date of the first issuance of the Debentures, regardless of any transfers
        of
        any Debenture and regardless of the number of instruments which may be issued
        to
        evidence such Debentures.

      

      “Permitted
        Indebtedness”
        means (a) the
        indebtedness evidenced by the Debentures, (b) the Indebtedness existing on
        the
        Original Issue Date and set forth on Schedule
        3.1(aa)
        attached
        to the Purchase Agreement and (c) lease obligations and purchase money
        indebtedness of up to $250,000, in the aggregate, incurred in connection
        with
        the acquisition of capital assets and lease obligations with respect to newly
        acquired or leased assets.

      

      “Permitted
        Lien”
means
        the individual and collective reference to the following: (a) Liens for taxes,
        assessments and other governmental charges or levies not yet due or Liens
        for
        taxes, assessments and other governmental charges or levies being contested
        in
        good faith and by appropriate proceedings for which adequate reserves (in
        the
        good faith judgment of the management of the Company) have been established
        in
        accordance with GAAP; (b) Liens imposed by law which were incurred in the
        ordinary course of the Company’s business, such as carriers’, warehousemen’s and
        mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
        the ordinary course of the Company’s business, and which (x) do not individually
        or in the aggregate materially detract from the value of such property or
        assets
        or materially impair the use thereof in the operation of the business of
        the
        Company and its consolidated Subsidiaries or (y) are being contested in good
        faith by appropriate proceedings, which proceedings have the effect of
        preventing for the foreseeable future the forfeiture or sale of the property
        or
        asset subject to such Lien; (c) Liens incurred in connection with Permitted
        Indebtedness under clause (a) thereunder; and (d) Liens incurred in connection
        with Permitted Indebtedness under clause (c) thereunder, provided that such
        Liens are not secured by assets of the Company or its Subsidiaries other
        than
        the assets so acquired or leased.

       

      “Purchase
        Agreement”
means
        the Securities Purchase Agreement, dated as of March 11, 2008 among the Company
        and the original Holders, as amended, modified or supplemented from time
        to time
        in accordance with its terms.

      

      “Registration
        Rights Agreement”
means
        the Registration Rights Agreement, dated as of the date of the Purchase
        Agreement, among the Company and the original Holders, as amended, modified
        or
        supplemented from time to time in accordance with its terms.

      

      “Registration
        Statement”
means
        a
        registration statement that registers the resale of all Conversion Shares
        and
        Interest Conversion Shares of the Holder, names the Holder as a “selling
        stockholder” therein, and meets the requirements of the Registration Rights
        Agreement.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

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

      

      “Share
        Delivery Date”
shall
        have the meaning set forth in Section 4(d)(ii).

      

      “Subsidiary”
shall
        have the meaning set forth in the Purchase Agreement.

      

      “Trading
        Day”
means
        a
        day on which the New York Stock Exchange is open for business.

      

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

      

      “Transaction
        Documents”
shall
        have the meaning set forth in the Purchase Agreement.

      

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

      

      Section
        2. Interest.

       

      a)  Payment
        of Interest in Cash or Kind.
        The
        Company shall pay interest to the Holder on the aggregate unconverted and
        then
        outstanding principal amount of this Debenture at the rate of 5% per annum
        until
        the second anniversary of the Original Issue Date and 10% per annum thereafter,
        payable quarterly on January 1, April 1, July 1 and October 1, beginning
        on the
        first such date after the Original Issue Date, on each Conversion Date (as
        to
        that principal amount then being converted), on each Optional Redemption
        Date
        (as to that principal amount then being redeemed), on each First Year Optional
        Redemption Date (as to that principal amount then being redeemed) and on
        the
        Maturity Date (each such date, an “Interest
        Payment Date”)
        (if
        any Interest Payment Date is not a Business Day, then the applicable payment
        shall be due on the next succeeding Business Day), in cash or, at the Company’s
        option, in duly authorized, validly issued, fully paid and non-assessable
        shares
        of Common Stock at the Interest Conversion Rate (the dollar amount to be
        paid in
        shares, the “Interest
        Share Amount”)
        or a
        combination thereof; provided,
        however,
        that
        payment in shares of Common Stock may only occur if (i) all of the Equity
        Conditions have been met (unless waived by the Holder in writing) during
        the 20
        Trading Days immediately prior to the applicable Interest Payment Date (the
        “Interest
        Notice Period”)
        and
        through and including the date such shares of Common Stock are actually issued
        to the Holder, (ii) the Company shall have given the Holder notice in accordance
        with the notice requirements set forth below and (iii) as to such Interest
        Payment Date, prior to such Interest Notice Period (but not more than five
        (5)
        Trading Days prior to the commencement of such Interest Notice Period), the
        Company shall have delivered to the Holder’s account with The Depository Trust
        Company a number of shares of Common Stock to be applied against such Interest
        Share Amount equal to the quotient of (x) the applicable Interest Share Amount
        divided by (y) the lesser of the (i) then Conversion Price and (ii) the Interest
        Conversion Rate assuming for such purposes that the Interest Payment Date
        is the
        Trading Day immediately prior to the commencement of the Interest Notice
        Period
        (the “Interest
        Conversion Shares”).
        

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      b)  Company’s
        Election to Pay Interest in Cash or Shares of Common Stock.
        Subject
        to the terms and conditions herein, the decision whether to pay interest
        hereunder in cash, shares of Common Stock or a combination thereof shall
        be at
        the sole discretion of the Company. Prior to the commencement of any Interest
        Notice Period, the Company shall deliver to the Holder a written notice of
        its
        election to pay interest hereunder on the applicable Interest Payment Date
        either in cash, shares of Common Stock or a combination thereof and the Interest
        Share Amount as to the applicable Interest Payment Date, provided that the
        Company may indicate in such notice that the election contained in such notice
        shall apply to future Interest Payment Dates until revised by a subsequent
        notice. During any Interest Notice Period, the Company’s election (whether
        specific to an Interest Payment Date or continuous) shall be irrevocable
        as to
        such Interest Payment Date. Subject to the aforementioned conditions, failure
        to
        timely deliver such written notice to the Holder shall be deemed an election
        by
        the Company to pay the interest on such Interest Payment Date in cash. At
        any
        time the Company delivers a notice to the Holder of its election to pay the
        interest in shares of Common Stock, the Company shall timely file a prospectus
        supplement pursuant to Rule 424 disclosing such election. The aggregate number
        of shares of Common Stock otherwise issuable to the Holder on an Interest
        Payment Date shall be reduced by the number of Interest Conversion Shares
        previously issued to the Holder in connection with such Interest Payment
        Date.

       

      c)  Interest
        Calculations.
        Interest shall be calculated on the basis of a 360-day year, consisting of
        twelve 30 calendar day periods, and shall accrue daily commencing on the
        Original Issue Date until payment in full of the outstanding principal, together
        with all accrued and unpaid interest, liquidated damages and other amounts
        which
        may become due hereunder, has been made. Payment of interest in shares of
        Common
        Stock (other than the Interest Conversion Shares issued prior to an Interest
        Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) herein
        and,
        solely for purposes of the payment of interest in shares, the Interest Payment
        Date shall be deemed the Conversion Date. Interest shall cease to accrue
        with
        respect to any principal amount converted, provided that, the Company actually
        delivers the Conversion Shares within the time period required by Section
        4(d)(ii) herein. Interest hereunder will be paid to the Person in whose name
        this Debenture is registered on the records of the Company regarding
        registration and transfers of this Debenture (the “Debenture
        Register”).
        Except as otherwise provided herein, if at any time the Company pays interest
        partially in cash and partially in shares of Common Stock to the holders
        of the
        Debentures, then such payment of cash shall be distributed ratably among
        the
        holders of the then-outstanding Debentures based on their (or their
        predecessor’s) initial purchases of Debentures pursuant to the Purchase
        Agreement.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      d)  Late
        Fee.
        All
        overdue accrued and unpaid interest to be paid hereunder shall entail a late
        fee
        at an interest rate equal to the lesser of 16% per annum or the maximum rate
        permitted by applicable law (the “Late
        Fees”)
        which
        shall accrue daily from the date such interest is due hereunder through and
        including the date of actual payment in full. Notwithstanding anything to
        the
        contrary contained herein, if, on any Interest Payment Date the Company has
        elected to pay accrued interest in the form of Common Stock but the Company
        is
        not permitted to pay accrued interest in Common Stock because it fails to
        satisfy the conditions for payment in Common Stock set forth in Section 2(a)
        herein, then, at
        the
        option of the Holder, the
        Company, in lieu of delivering either
        shares
        of
        Common Stock pursuant to this Section 2 or
        paying
        the regularly scheduled interest payment in cash, shall deliver, within three
        (3) Trading Days of each applicable Interest Payment Date, an amount in cash
        equal to the product of (x) the number of shares of Common Stock otherwise
        deliverable to the Holder in connection with the payment of interest due
        on such
        Interest Payment Date multiplied by (y) the highest VWAP during the period
        commencing on the Interest Payment Date and ending on the Trading Day prior
        to
        the date such payment is actually made. If any Interest Conversion Shares
        are
        issued to the Holder in connection with an Interest Payment Date and are
        not
        applied against an Interest Share Amount, then the Holder shall promptly
        return
        such excess shares to the Company.

       

      e)  Prepayment.
        Except
        as otherwise set forth in this Debenture, the Company may not prepay any
        portion
        of the principal amount of this Debenture without the prior written consent
        of
        the Holder. 

      

      Section
        3.  Registration
        of Transfers and Exchanges.
        

       

      a)  Different
        Denominations.
        This
        Debenture is exchangeable for an equal aggregate principal amount of Debentures
        of different authorized denominations, as requested by the Holder surrendering
        the same. No service charge will be payable for such registration of transfer
        or
        exchange.

       

      b)  Investment
        Representations.
        This
        Debenture has been issued subject to certain investment representations of
        the
        original Holder set forth in the Purchase Agreement and may be transferred
        or
        exchanged only in compliance with the Purchase Agreement and applicable federal
        and state securities laws and regulations. 

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      c)  Reliance
        on Debenture Register.
        Prior
        to due presentment for transfer to the Company of this Debenture, the Company
        and any agent of the Company may treat the Person in whose name this Debenture
        is duly registered on the Debenture Register as the owner hereof for the
        purpose
        of receiving payment as herein provided and for all other purposes, whether
        or
        not this Debenture is overdue, and neither the Company nor any such agent
        shall
        be affected by notice to the contrary.

      

      Section
        4.  Conversion.

       

      a)  Voluntary
        Conversion.
        At any
        time after the Original Issue Date until this Debenture is no longer
        outstanding, this Debenture shall be convertible, in whole or in part, into
        shares of Common Stock at the option of the Holder, at any time and from
        time to
        time (subject to the conversion limitations set forth in Section 4(c)
        hereof). The Holder shall effect conversions by delivering to the Company
        a
        Notice of Conversion, the form of which is attached hereto as Annex
        A
        (each, a
“Notice
        of Conversion”),
        specifying therein the principal amount of this Debenture to be converted
        and
        the date on which such conversion shall be effected (such date, the
“Conversion
        Date”).
        If no
        Conversion Date is specified in a Notice of Conversion, the Conversion Date
        shall be the date that such Notice of Conversion is deemed delivered hereunder.
        To effect conversions hereunder, the Holder shall not be required to physically
        surrender this Debenture to the Company unless the entire principal amount
        of
        this Debenture, plus all accrued and unpaid interest thereon, has been so
        converted. Conversions hereunder shall have the effect of lowering the
        outstanding principal amount of this Debenture in an amount equal to the
        applicable conversion. The Holder and the Company shall maintain records
        showing
        the principal amount(s) converted and the date of such conversion(s). The
        Company may deliver an objection to any Notice of Conversion within 2 Business
        Days of delivery of such Notice of Conversion. In the event of any dispute
        or
        discrepancy, the records of the Holder shall be controlling and determinative
        in
        the absence of manifest error. The
        Holder, and any assignee by acceptance of this Debenture, acknowledge and
        agree
        that, by reason of the provisions of this paragraph, following conversion
        of a
        portion of this Debenture, the unpaid and unconverted principal amount of
        this
        Debenture may be less than the amount stated on the face
        hereof.

       

      b)  Conversion
        Price.
        The
        conversion price in effect on any Conversion Date shall be equal to $0.50,
        subject
        to adjustment herein (the “Conversion
        Price”).

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      c)  Conversion
        Limitations.
        The
        Company shall not effect any conversion of this Debenture, and a Holder shall
        not have the right to convert any portion of this Debenture, to the extent
        that
        after giving effect to the conversion set forth on the applicable Notice
        of
        Conversion, the Holder (together with the Holder’s Affiliates, and any other
        person or entity acting as a group together with the Holder or any of the
        Holder’s Affiliates) would beneficially own in excess of the Beneficial
        Ownership Limitation (as defined below).  For purposes of the foregoing
        sentence, the number of shares of Common Stock beneficially owned by the
        Holder
        and its Affiliates shall include the number of shares of Common Stock issuable
        upon conversion of this Debenture with respect to which such determination
        is
        being made, but shall exclude the number of shares of Common Stock which
        are
        issuable upon (A) conversion of the remaining, unconverted principal amount
        of
        this Debenture beneficially owned by the Holder or any of its Affiliates
        and (B)
        exercise or conversion of the unexercised or unconverted portion of any other
        securities of the Company subject to a limitation on conversion or exercise
        analogous to the limitation contained herein (including, without limitation,
        any
        other Debentures or the Warrants) beneficially owned by the Holder or any
        of its
        Affiliates.  Except as set forth in the preceding sentence, for purposes of
        this Section 4(c), beneficial ownership shall be calculated in accordance
        with
        Section 13(d) of the Exchange Act and the rules and regulations promulgated
        thereunder. To the extent that the limitation contained in this Section 4(c)
        applies, the determination of whether this Debenture is convertible (in relation
        to other securities owned by the Holder together with any Affiliates) and
        of
        which principal amount of this Debenture is convertible shall be in the sole
        discretion of the Holder, and the submission of a Notice of Conversion shall
        be
        deemed to be the Holder’s determination of whether this Debenture may be
        converted (in relation to other securities owned by the Holder together with
        any
        Affiliates) and which principal amount of this Debenture is convertible,
        in each
        case subject to the Beneficial Ownership Limitation. To ensure compliance with
        this restriction, the Holder will be deemed to represent to the Company each
        time it delivers a Notice of Conversion that such Notice of Conversion has
        not
        violated the restrictions set forth in this paragraph and the Company shall
        have
        no obligation to verify or confirm the accuracy of such determination.
In
        addition, a determination as to any group status as contemplated above shall
        be
        determined in accordance with Section 13(d) of the Exchange Act and
        the
        rules and regulations promulgated thereunder. For
        purposes of this Section 4(c), in determining the number of outstanding shares
        of Common Stock, the Holder may rely on the number of outstanding shares
        of
        Common Stock as stated in the most recent of the following: (A) the Company’s
        most recent periodic or annual report, as the case may be; (B) a more recent
        public announcement by the Company; or (C) a more recent notice by the Company
        or the Company’s transfer agent setting forth the number of shares of Common
        Stock outstanding.  Upon the written or oral request of a Holder, the
        Company shall within two Trading Days confirm orally and in writing to the
        Holder the number of shares of Common Stock then outstanding.  In any case,
        the number of outstanding shares of Common Stock shall be determined after
        giving effect to the conversion or exercise of securities of the Company,
        including this Debenture, by the Holder or its Affiliates since the date
        as of
        which such number of outstanding shares of Common Stock was reported. The
        “Beneficial
        Ownership Limitation”
shall
        be 4.99% of the number of shares of the Common Stock outstanding immediately
        after giving effect to the issuance of shares of Common Stock issuable upon
        conversion of this Debenture held by the Holder. The Holder, upon not less
        than
        61 days’ prior notice to the Company, may increase or decrease the Beneficial
        Ownership Limitation provisions of this Section 4(c), provided that the
        Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
        shares of the Common Stock outstanding immediately after giving effect to
        the
        issuance of shares of Common Stock upon conversion of this Debenture held
        by the
        Holder and the Beneficial Ownership Limitation provisions of this Section
        4(c)
        shall continue to apply. Any such increase or decrease will not be effective
        until the 61st
        day
        after such notice is delivered to the Company.  The
        Beneficial Ownership Limitation provisions of this paragraph shall be construed
        and implemented in a manner otherwise than in strict conformity with the
        terms
        of this Section 4(c) to correct this paragraph (or any portion hereof) which
        may
        be defective or inconsistent with the intended Beneficial Ownership Limitation
        contained herein or to make changes or supplements necessary or desirable
        to
        properly give effect to such limitation.
        The
        limitations contained in this paragraph shall apply to a successor holder
        of
this
        Debenture.

       

      
        
          
          

        

        
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      d)  Mechanics
        of Conversion.

       

      i.  Conversion
        Shares Issuable Upon Conversion of Principal Amount.
        The
        number of Conversion Shares issuable upon a conversion hereunder shall be
        determined by the quotient obtained by dividing (x) the outstanding principal
        amount of this Debenture to be converted by (y) the Conversion
        Price.

      

      ii.  Delivery
        of Certificate Upon Conversion.
        Not
        later than three Trading Days after each Conversion Date (the “Share
        Delivery Date”),
        the
        Company shall deliver, or cause to be delivered, to the Holder (A) a certificate
        or certificates representing the Conversion Shares which, on or after the
        earlier of (i) the six month anniversary of the Original Issue Date or (ii)
        the
        Effective Date, shall be free of restrictive legends and trading restrictions
        (other than those which may then be required by the Purchase Agreement)
        representing the number of Conversion Shares being acquired upon the conversion
        of this Debenture (including, if the Company has given continuous notice
        pursuant to Section 2(b) for payment of interest in shares of Common Stock
        at
        least 20 Trading Days prior to the date on which the Notice of Conversion
        is
        delivered to the Company, shares of Common Stock representing the payment
        of
        accrued interest otherwise determined pursuant to Section 2(a) but assuming
        that
        the Interest Notice Period is the 20 Trading Days period immediately prior
        to
        the date on which the Notice of Conversion is delivered to the Company and
        excluding for such issuance the condition that the Company deliver Interest
        Conversion Shares as to such interest payment), (B) a bank check or wire
        transfer in the amount of accrued and unpaid interest (if the Company has
        elected or is required to pay accrued interest in cash) and (C) a bank check
        or
        wire transfer in the amount equal to all interest that would have accrued
        if the
        principal amount subject to such Notice of Conversion had remained outstanding
        through the Maturity Date. On or after the earlier of (i) the six month
        anniversary of the Original Issue Date or (ii) the Effective Date, the Company
        shall use its best efforts to deliver any certificate or certificates required
        to be delivered by the Company under this Section 4(d) electronically through
        the Depository Trust Company or another established clearing corporation
        performing similar functions. 

       

      iii.  Failure
        to Deliver Certificates.
        If in
        the case of any Notice of Conversion such certificate or certificates are
        not
        delivered to or as directed by the applicable Holder by the third Trading
        Day
        after the Conversion Date, the Holder shall be entitled to elect by written
        notice to the Company at any time on or before its receipt of such certificate
        or certificates, to rescind such Conversion, in which event the Company shall
        promptly return to the Holder any original Debenture delivered to the Company
        and the Holder shall promptly return to the Company the Common Stock
        certificates representing the principal amount of this Debenture unsuccessfully
        tendered for conversion to the Company. 

       

      
        
          
          

        

        
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      iv.  Obligation
        Absolute; Partial Liquidated Damages.
        The
        Company’s obligations to issue and deliver the Conversion Shares upon conversion
        of this Debenture in accordance with the terms hereof are absolute and
        unconditional, irrespective of any action or inaction by the Holder to enforce
        the same, any waiver or consent with respect to any provision hereof, the
        recovery of any judgment against any Person or any action to enforce the
        same,
        or any setoff, counterclaim, recoupment, limitation or termination, or any
        breach or alleged breach by the Holder or any other Person of any obligation
        to
        the Company or any violation or alleged violation of law by the Holder or
        any
        other Person, and irrespective of any other circumstance which might otherwise
        limit such obligation of the Company to the Holder in connection with the
        issuance of such Conversion Shares; provided,
        however,
        that
        such delivery shall not operate as a waiver by the Company of any such action
        the Company may have against the Holder. In the event the Holder of this
        Debenture shall elect to convert any or all of the outstanding principal
        amount
        hereof, the Company may not refuse conversion based on any claim that the
        Holder
        or anyone associated or affiliated with the Holder has been engaged in any
        violation of law, agreement or for any other reason, unless an injunction
        from a
        court, on notice to Holder, restraining and or enjoining conversion of all
        or
        part of this Debenture shall have been sought and obtained, and the Company
        posts a surety bond for the benefit of the Holder in the amount of 150% of
        the
        outstanding principal amount of this Debenture, which is subject to the
        injunction, which bond shall remain in effect until the completion of
        arbitration/litigation of the underlying dispute and the proceeds of which
        shall
        be payable to the Holder to the extent it obtains judgment. In the absence
        of
        such injunction, the Company shall issue Conversion Shares or, if applicable,
        cash, upon a properly noticed conversion. If the Company fails for any reason
        to
        deliver to the Holder such certificate or certificates pursuant to Section
        4(d)(ii) by the fifth Trading Day after the Conversion Date, the Company
        shall
        pay to the Holder, in cash, as liquidated damages and not as a penalty, for
        each
        $1,000 of principal amount being converted, $10 per Trading Day (increasing
        to
        $20 per Trading Day on the fifth (5th)
        Trading
        Day after such liquidated damages begin to accrue) for each Trading Day after
        such fifth (5rd)
        Trading
        Day until such certificates are delivered. Nothing herein shall limit a Holder’s
        right to pursue actual damages or declare an Event of Default pursuant to
        Section 8 hereof for the Company’s failure to deliver Conversion Shares within
        the period specified herein and the Holder shall have the right to pursue
        all
        remedies available to it hereunder, at law or in equity including, without
        limitation, a decree of specific performance and/or injunctive relief. The
        exercise of any such rights shall not prohibit the Holder from seeking to
        enforce damages pursuant to any other Section hereof or under applicable
        law.

       

      
        
          
          

        

        
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      v.  Compensation
        for Buy-In on Failure to Timely Deliver Certificates Upon
        Conversion.
        In
        addition to any other rights available to the Holder, if the Company fails
        for
        any reason to deliver to the Holder such certificate or certificates by the
        Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share
        Delivery Date the Holder is required by its brokerage firm to purchase (in
        an
        open market transaction or otherwise), or the Holder’s brokerage firm otherwise
        purchases, shares of Common Stock to deliver in satisfaction of a sale by
        the
        Holder of the Conversion Shares which the Holder was entitled to receive
        upon
        the conversion relating to such Share Delivery Date (a “Buy-In”),
        then
        the Company shall (A) pay in cash to the Holder (in addition to any other
        remedies available to or elected by the Holder) the amount by which (x) the
        Holder’s total purchase price (including any brokerage commissions) for the
        Common Stock so purchased exceeds (y) the product of (1) the aggregate number
        of
        shares of Common Stock that the Holder was entitled to receive from the
        conversion at issue multiplied by (2) the actual sale price at which the
        sell
        order giving rise to such purchase obligation was executed (including any
        brokerage commissions) and (B) at the option of the Holder, either reissue
        (if
        surrendered) this Debenture in a principal amount equal to the principal
        amount
        of the attempted conversion or deliver to the Holder the number of shares
        of
        Common Stock that would have been issued if the Company had timely complied
        with
        its delivery requirements under Section 4(d)(ii). For example, if the Holder
        purchases Common Stock having a total purchase price of $11,000 to cover
        a
        Buy-In with respect to an attempted conversion of this Debenture with respect
        to
        which the actual sale price of the Conversion Shares (including any brokerage
        commissions) giving rise to such purchase obligation was a total of $10,000
        under clause (A) of the immediately preceding sentence, the Company shall
        be
        required to pay the Holder $1,000. The Holder shall provide the Company written
        notice indicating the amounts payable to the Holder in respect of the Buy-In
        and, upon request of the Company, evidence of the amount of such loss. Nothing
        herein shall limit a Holder’s right to pursue any other remedies available to it
        hereunder, at law or in equity including, without limitation, a decree of
        specific performance and/or injunctive relief with respect to the Company’s
        failure to timely deliver certificates representing shares of Common Stock
        upon
        conversion of this Debenture as required pursuant to the terms
        hereof.

       

      vi.  Reservation
        of Shares Issuable Upon Conversion.
        The
        Company covenants that it will at all times reserve and keep available out
        of
        its authorized and unissued shares of Common Stock for the sole purpose of
        issuance upon conversion of this Debenture and payment of interest on this
        Debenture, each as herein provided, free from preemptive rights or any other
        actual contingent purchase rights of Persons other than the Holder (and the
        other holders of the Debentures), not less than such aggregate number of
        shares
        of the Common Stock as shall (subject to the terms and conditions set forth
        in
        the Purchase Agreement) be issuable (taking into account the adjustments
        and
        restrictions of Section 5) upon the conversion of the outstanding principal
        amount of this Debenture and payment of interest hereunder. The Company
        covenants that all shares of Common Stock that shall be so issuable shall,
        upon
        issue, be duly authorized, validly issued, fully paid and nonassessable and,
        if
        the Registration Statement is then effective under the Securities Act, shall
        be
        registered for public sale in accordance with such Registration
        Statement.

       

      
        
          
          

        

        
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      vii.  Fractional
        Shares.
        No
        fractional shares or scrip representing fractional shares shall be issued
        upon
        the conversion of this Debenture. As to any fraction of a share which Holder
        would otherwise be entitled to purchase upon such conversion, the Company
        shall
        at its election, either pay a cash adjustment in respect of such final fraction
        in an amount equal to such fraction multiplied by the Conversion Price or
        round
        up to the next whole share.

      

      viii.  Transfer
        Taxes.
        The
        issuance of certificates for shares of the Common Stock on conversion of
        this
        Debenture shall be made without charge to the Holder hereof for any documentary
        stamp or similar taxes that may be payable in respect of the issue or delivery
        of such certificates, provided that, the Company shall not be required to
        pay
        any tax that may be payable in respect of any transfer involved in the issuance
        and delivery of any such certificate upon conversion in a name other than
        that
        of the Holder of this Debenture so converted and the Company shall not be
        required to issue or deliver such certificates unless or until the person
        or
        persons requesting the issuance thereof shall have paid to the Company the
        amount of such tax or shall have established to the satisfaction of the Company
        that such tax has been paid.

      

      Section
        5. Certain
        Adjustments.

       

      a)  Stock
        Dividends and Stock Splits.
        If the
        Company, at any time while this Debenture is outstanding: (i) pays a stock
        dividend or otherwise makes a distribution or distributions payable in shares
        of
        Common Stock on shares of Common Stock or any Common Stock Equivalents (which,
        for avoidance of doubt, shall not include any shares of Common Stock issued
        by
        the Company upon conversion of, or payment of interest on, the Debentures),
        (ii)
        subdivides outstanding shares of Common Stock into a larger number of shares,
        (iii) combines (including by way of a reverse stock split) outstanding shares
        of
        Common Stock into a smaller number of shares or (iv) issues, in the event
        of a
        reclassification of shares of the Common Stock, any shares of capital stock
        of
        the Company, then the Conversion Price shall be multiplied by a fraction
        of
        which the numerator shall be the number of shares of Common Stock (excluding
        any
        treasury shares of the Company) outstanding immediately before such event
        and of
        which the denominator shall be the number of shares of Common Stock outstanding
        immediately after such event. Any adjustment made pursuant to this Section
        shall
        become effective immediately after the record date for the determination
        of
        stockholders entitled to receive such dividend or distribution and shall
        become
        effective immediately after the effective date in the case of a subdivision,
        combination or re-classification.

       

      
        
          
          

        

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

       

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

       

      
        
          
          

        

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

       

      e)  Fundamental
        Transaction.
        If, at
        any time while this Debenture is outstanding, (i) the Company effects any
        merger
        or consolidation of the Company with or into another Person, (ii) the Company
        effects any sale of all or substantially all of its assets in one transaction
        or
        a series of related transactions, (iii) any tender offer or exchange offer
        (whether by the Company or another Person) is completed pursuant to which
        holders of Common Stock are permitted to tender or exchange their shares
        for
        other securities, cash or property, or (iv) the Company effects any
        reclassification of the Common Stock or any compulsory share exchange pursuant
        to which the Common Stock is effectively converted into or exchanged for
        other
        securities, cash or property (in any such case, a “Fundamental
        Transaction”),
        then,
        upon any subsequent conversion of this Debenture, the Holder shall have the
        right to receive, for each Conversion Share that would have been issuable
        upon
        such conversion immediately prior to the occurrence of such Fundamental
        Transaction, the same kind and amount of securities, cash or property as
        it
        would have been entitled to receive upon the occurrence of such Fundamental
        Transaction if it had been, immediately prior to such Fundamental Transaction,
        the holder of 1 share of Common Stock (the “Alternate
        Consideration”).
        For
        purposes of any such conversion, the determination of the Conversion Price
        shall
        be appropriately adjusted to apply to such Alternate Consideration based
        on the
        amount of Alternate Consideration issuable in respect of 1 share of Common
        Stock
        in such Fundamental Transaction, and the Company shall apportion the Conversion
        Price among the Alternate Consideration in a reasonable manner reflecting
        the
        relative value of any different components of the Alternate Consideration.
        If
        holders of Common Stock are given any choice as to the securities, cash or
        property to be received in a Fundamental Transaction, then the Holder shall
        be
        given the same choice as to the Alternate Consideration it receives upon
        any
        conversion of this Debenture following such Fundamental Transaction. To the
        extent necessary to effectuate the foregoing provisions, any successor to
        the
        Company or surviving entity in such Fundamental Transaction shall issue to
        the
        Holder a new debenture consistent with the foregoing provisions and evidencing
        the Holder’s right to convert such debenture into Alternate Consideration. The
        terms of any agreement pursuant to which a Fundamental Transaction is effected
        shall include terms requiring any such successor or surviving entity to comply
        with the provisions of this Section 5(e) and insuring that this Debenture
        (or
        any such replacement security) will be similarly adjusted upon any subsequent
        transaction analogous to a Fundamental Transaction.

       

      
        
          
          

        

        
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      f)  Calculations.
        All
        calculations under this Section 5 shall be made to the nearest cent or the
        nearest 1/100th of a share, as the case may be. For purposes of this Section
        5,
        the number of shares of Common Stock deemed to be issued and outstanding
        as of a
        given date shall be the sum of the number of shares of Common Stock (excluding
        any treasury shares of the Company) issued and outstanding.

      

      g)  Notice
        to the Holder.

      

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

       

      ii.  Notice
        to Allow Conversion by Holder.
        If (A)
        the Company shall declare a dividend (or any other distribution in whatever
        form) on the Common Stock, (B) the Company shall declare a special nonrecurring
        cash dividend on or a redemption of the Common Stock, (C) the Company shall
        authorize the granting to all holders of the Common Stock of rights or warrants
        to subscribe for or purchase any shares of capital stock of any class or
        of any
        rights, (D) the approval of any stockholders of the Company shall be required
        in
        connection with any reclassification of the Common Stock, any consolidation
        or
        merger to which the Company is a party, any sale or transfer of all or
        substantially all of the assets of the Company, of any compulsory share exchange
        whereby the Common Stock is converted into other securities, cash or property
        or
        (E) the
        Company shall authorize the voluntary or involuntary dissolution, liquidation
        or
        winding up of the affairs of the Company, then, in each case, the Company
        shall
        cause to be filed at each office or agency maintained for the purpose of
        conversion of this Debenture, and shall cause to be delivered
        to the Holder at its last address as it shall appear upon the Debenture
        Register, at least twenty (20) calendar days prior to the applicable record
        or
        effective date hereinafter specified, a notice stating (x)
        the
        date on which a record is to be taken for the purpose of such dividend,
        distribution, redemption, rights or warrants, or if a record is not to be
        taken,
        the date as of which the holders of the Common Stock of record to be entitled
        to
        such dividend, distributions, redemption, rights or warrants are to be
        determined or (y) the date on which such reclassification, consolidation,
        merger, sale, transfer or share exchange is expected to become effective
        or
        close, and the date as of which it is expected that holders of the Common
        Stock
        of record shall be entitled to exchange their shares of the Common Stock
        for
        securities, cash or other property deliverable upon such reclassification,
        consolidation, merger, sale, transfer or share exchange, provided that the
        failure to deliver such notice or any defect therein or in the delivery thereof
        shall not affect the validity of the corporate action required to be specified
        in such notice. The Holder is entitled to convert this Debenture during the
        20-day period commencing on the date of such notice through the effective
        date
        of the event triggering such notice. 

       

      
        
          
          

        

        
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      h)  Other
        Adjustments.
        On the
        210th
        calendar
        day following the Original Issue Date (the “Trigger
        Date”),
        the
        Conversion Price shall be reduced to equal the lesser of (i) the then Conversion
        Price and (ii) a price equal to 90% of the average of each of the VWAPs for
        the
        5 Trading Days immediately prior to the Trigger Date. For clarity, the
        Conversion Price can only be adjusted downward pursuant to this Section 5(h).
        

       

      Section
        6. Redemption.

      

      a)  First
        Year Optional Redemption at Election of Company.
        Subject
        to the provisions of this Section 6(a), at any time prior to the 12-month
        anniversary of the Original Issue Date, the Company may deliver a notice
        to the
        Holder (a “First
        Year Optional Redemption Notice”
and
        the
        date such notice is deemed delivered hereunder, the “First
        Year Optional Redemption Notice Date”)
        of its
        irrevocable election to redeem some or all of up to 25% of the then outstanding
        principal amount of this Debenture for cash in an amount equal to the First
        Year
        Optional Redemption Amount on the 5th
        Trading
        Day following the First Optional Redemption Notice Date (such date, the
“First
        Year Optional Redemption Date”,
        such 5
        Trading Day period, the “First
        Year Optional Redemption Period”
and
        such redemption, the “First
        Year Optional Redemption”).
        The
        First Year Optional Redemption Amount is payable in full on the First Year
        Optional Redemption Date. The Company covenants and agrees that it will honor
        all Notices of Conversion for any principal amount not subject to a First
        Year
        Optional Redemption Notice that are tendered from the time of delivery of
        the
        First Year Optional Redemption Notice through the date all amounts owing
        thereon
        are due and paid in full. The
        Company’s determination to effect a First Year Optional Redemption shall be
        applied ratably to all of the holders of the then outstanding Debentures
        based
        on their (or their predecessor’s) initial purchases of Debentures pursuant to
        the Purchase Agreement.

       

      
        
          
          

        

        
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      b)  Optional
        Redemption at Election of Company.
        Subject
        to the provisions of this Section 6(b), if after the 12-month anniversary
        of the
        Original Issue Date, the
        VWAP
        for each of any 20 consecutive Trading Days, which period shall have commenced
        only after the 12-month anniversary of the Original Issue Date (such period
        the
“Threshold
        Period”),
        exceeds $1.00 (subject to adjustment for reverse and forward stock splits,
        stock
        dividends, stock combinations and other similar transactions of the Common
        Stock
        that occur after the Original Issue Date), the Company may, within 1 Trading
        Day
        after the end of any such Threshold Period, deliver a written notice to the
        Holder (an
        “Optional
        Redemption Notice”
and
        the
        date such notice is deemed delivered hereunder, the “Optional
        Redemption Notice Date”)
        of its
        irrevocable election to redeem some or all of the then outstanding principal
        amount of this Debenture for cash in an amount equal to the Optional Redemption
        Amount on the 20th
        Trading
        Day following the Optional Redemption Notice Date (such date, the “Optional
        Redemption Date”,
        such
        20 Trading Day period, the “Optional
        Redemption Period”
and
        such redemption, the “Optional
        Redemption”).
        The
        Optional Redemption Amount is payable in full on the Optional Redemption
        Date.
        The Company may only effect an Optional Redemption if each of the Equity
        Conditions shall have been met (unless waived in writing by the Holder) on
        each
        Trading Day during the period commencing on the Optional Redemption Notice
        Date
        through to the Optional Redemption Date and
        through and including the date payment of the Optional Redemption Amount
        is
        actually made in full.
        If any
        of the Equity Conditions shall cease to be satisfied at any time during the
        Optional Redemption Period, then the Holder may elect to nullify the Optional
        Redemption Notice by notice to the Company within 3 Trading Days after the
        first
        day on which any such Equity Condition has not been met (provided that if,
        by a
        provision of the Transaction Documents, the Company is obligated to notify
        the
        Holder of the non-existence of an Equity Condition, such notice period shall
        be
        extended to the third Trading Day after proper notice from the Company) in
        which
        case the Optional Redemption Notice shall be null and void, ab initio.
        The
        Company covenants and agrees that it will honor all Notices of Conversion
        tendered from the time of delivery of the Optional Redemption Notice through
        the
        date all amounts owing thereon are due and paid in full. The
        Company’s determination to pay an Optional Redemption in cash shall be applied
        ratably to all of the holders of the then outstanding Debentures based on
        their
        (or their predecessor’s) initial purchases of Debentures pursuant to the
        Purchase Agreement.

      

      c)  Redemption
        Procedure.
        The
        payment of cash pursuant to an Optional Redemption or a First Year Optional
        Redemption shall be payable on the Optional Redemption Date or First Year
        Optional Redemption Date, as applicable. If any portion of the payment pursuant
        to an Optional Redemption or First Year Optional Redemption shall not be
        paid by
        the Company by the applicable due date, interest shall accrue thereon at
        an
        interest rate equal to the lesser of 16% per annum or the maximum rate permitted
        by applicable law until such amount is paid in full. Notwithstanding anything
        herein contained to the contrary, if any portion of the Optional Redemption
        Amount or First Year Optional Redemption Amount remains unpaid after such
        date,
        the Holder may elect, by written notice to the Company given at any time
        thereafter, to invalidate such Optional Redemption or First Year Optional
        Redemption, ab initio,
        and,
        the Company shall have no further right to exercise such Optional Redemption
        or
        First Year Optional Redemption, as applicable. The
        Holder may elect to convert the outstanding principal amount of the Debenture
        pursuant to Section 4 prior to actual payment in cash for any redemption
        under
        this Section 6 by the delivery of a Notice of Conversion to the
        Company.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      Section
        7. Negative
        Covenants.
        As long
        as any portion of this Debenture remains outstanding, unless the holders
        of at
        least 67% in principal amount of the then outstanding Debentures shall have
        otherwise given prior written consent, the Company shall not, and shall not
        permit any of its subsidiaries (whether or not a Subsidiary on the Original
        Issue Date) to, directly or indirectly:

      

      a)  other
        than Permitted Indebtedness, enter into, create, incur, assume, guarantee
        or
        suffer to exist any indebtedness for borrowed money of any kind, including,
        but
        not limited to, a guarantee, on or with respect to any of its property or
        assets
        now owned or hereafter acquired or any interest therein or any income or
        profits
        therefrom;

       

      b)  other
        than Permitted Liens, enter into, create, incur, assume or suffer to exist
        any
        Liens of any kind, on or with respect to any of its property or assets now
        owned
        or hereafter acquired or any interest therein or any income or profits
        therefrom;

      

      c)  amend
        its
        charter documents, including, without limitation, its certificate of
        incorporation and bylaws, in any manner that materially and adversely affects
        any rights of the Holder;

      

      d)  repay,
        repurchase or offer to repay, repurchase or otherwise acquire more than a
        de minimis
        number
        of shares of its Common Stock or Common Stock Equivalents other than as to
        (i)
        the Conversion Shares or Warrant Shares as permitted or required under the
        Transaction Documents and (ii) repurchases of Common Stock or Common Stock
        Equivalents of departing officers and directors of the Company, provided
        that
        such repurchases shall not exceed an aggregate of $100,000 for all officers
        and
        directors during the term of this Debenture; 

      

      e)  repay,
        repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness,
        other than the Debentures if on a pro-rata basis, other than regularly scheduled
        principal and interest payments as such terms are in effect as of the Original
        Issue Date, provided that such payments shall not be permitted if, at such
        time,
        or after giving effect to such payment, any Event of Default exist or
        occur;

      

      f)  pay
        cash
        dividends or distributions on any equity securities of the Company;

      

      g)  enter
        into any transaction with any Affiliate of the Company which would be required
        to be disclosed in any public filing with the Commission, unless such
        transaction is made on an arm’s-length basis and expressly approved by a
        majority of the disinterested directors of the Company (even if less than
        a
        quorum otherwise required for board approval); or

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      h)  enter
        into any agreement with respect to any of the foregoing.

       

      Section
        8. Events
        of Default.
        

      

      a)  “Event
        of Default”
means,
        wherever used herein, any of the following events (whatever the reason for
        such
        event and whether such event shall be voluntary or involuntary or effected
        by
        operation of law or pursuant to any judgment, decree or order of any court,
        or
        any order, rule or regulation of any administrative or governmental
        body):

      

      i.  any
        default in the payment of (A) the principal amount of any Debenture or (B)
        interest, liquidated damages and other amounts owing to a Holder on any
        Debenture, as and when the same shall become due and payable (whether on
        a
        Conversion Date or the Maturity Date or by acceleration or otherwise) which
        default, solely in the case of an interest payment or other default under
        clause
        (B) above, is not cured within 5 Trading Days;

       

      ii.  the
        Company shall fail to observe or perform any other covenant or agreement
        contained in the Debentures (other than a breach by the Company of its
        obligations to deliver shares of Common Stock to the Holder upon conversion,
        which breach is addressed in clause (xi) below) which failure is not cured,
        if
        possible to cure, within the earlier to occur
        of
(A)
        7
Trading
        Days after notice of such failure sent by the Holder or by any other
        Holder
        to the
        Company and (B) 10 Trading Days after the Company has become or should have
        become aware of such failure;

      

      iii.  a
        default
        or event of default (subject to any grace or cure period provided in the
        applicable agreement, document or instrument) shall occur under (A) any of
        the
        Transaction Documents or (B) any other material agreement, lease, document
        or
        instrument to which the Company or any Subsidiary is obligated (and not covered
        by clause (vi) below);

      

      iv.  any
        representation
        or warranty made in this Debenture, any other Transaction Documents, any
        written
        statement pursuant hereto or thereto or any other report, financial statement
        or
        certificate made or delivered to the Holder or any other Holder shall
        be
        untrue or incorrect in any material respect as of the date when made or deemed
        made;

      

      v.  the
        Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w)
        of Regulation S-X) shall be subject to a Bankruptcy Event;

       

      vi.  the
        Company or any Subsidiary shall default on any of its obligations under any
        mortgage, credit agreement or other facility, indenture agreement, factoring
        agreement or other instrument under which there may be issued, or by which
        there
        may be secured or evidenced, any indebtedness for borrowed money or money
        due
        under any long term leasing or factoring arrangement that (a) involves an
        obligation greater than $150,000, whether such indebtedness now exists or
        shall
        hereafter be created, and (b) results in such indebtedness becoming or being
        declared due and payable prior to the date on which it would otherwise become
        due and payable; 

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      vii.  the
        Common Stock shall not be eligible for listing or quotation for trading on
        a
        Trading Market and shall not be eligible to resume listing or quotation for
        trading thereon within five Trading Days;

      

      viii.  the
        Company shall be a party to any Change of Control Transaction or Fundamental
        Transaction or shall agree to sell or dispose of all or in excess of 40%
        of its
        assets in one transaction or a series of related transactions (whether or
        not
        such sale would constitute a Change of Control Transaction);

      

      ix.  the
        Company does not meet the current public information requirements under Rule
        144
        in respect of the Registrable Securities (as defined under the Registration
        Rights Agreement); 

      

      x.  if,
        during the Effectiveness Period (as defined in the Registration Rights
        Agreement), either (a) the effectiveness of the Registration Statement lapses
        for any reason or (b) the Holder shall not be permitted to resell Registrable
        Securities (as defined in the Registration Rights Agreement) under the
        Registration Statement for a period of more than 30 consecutive Trading Days
        or
        45 non-consecutive Trading Days during any 12 month period; provided,
        however,
        that if
        the Company
        is negotiating a merger, consolidation, acquisition or sale of all or
        substantially all of its assets or a similar transaction and, in the written
        opinion of counsel to the Company, the Registration Statement would be required
        to be amended to include information concerning such pending transaction(s)
        or
        the parties thereto which information is not available or may not be publicly
        disclosed at the time, the Company shall be permitted an additional 10
        consecutive Trading Days during any 12 month period pursuant to this Section
        8(a)(x);

      

      xi.  the
        Company shall fail for any reason to deliver certificates to a Holder prior
        to
        the seventh Trading Day after a Conversion Date pursuant to Section 4(d)
        pursuant to Section 6(d) or the Company shall provide at any time notice
        to the
        Holder, including by way of public announcement, of the Company’s intention to
        not honor requests for conversions of any Debentures in accordance with the
        terms hereof; or

      

      xii.  any
        monetary judgment, writ or similar final process shall be entered or filed
        against the Company, any subsidiary or any of their respective property or
        other
        assets for more than $50,000, and such judgment, writ or similar final process
        shall remain unvacated, unbonded or unstayed for a period of 45 calendar
        days.

      

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      

      b)  Remedies
        Upon Event of Default.
        If any
        Event of Default occurs, the outstanding principal amount of this Debenture,
        plus accrued but unpaid interest, liquidated damages and other amounts owing
        in
        respect thereof through the date of acceleration, shall become, at the Holder’s
        election, immediately due and payable in cash at the Mandatory Default Amount.
        Commencing 5 days after the occurrence of any Event of Default that results
        in
        the eventual acceleration of this Debenture, the interest rate on this Debenture
        shall accrue at an interest rate equal to the lesser of 16% per annum or
        the
        maximum rate permitted under applicable law. Upon the payment in full of
        the
        Mandatory Default Amount, the Holder shall promptly surrender this Debenture
        to
        or as directed by the Company. In connection with such acceleration described
        herein, the Holder need not provide, and the Company hereby waives, any
        presentment, demand, protest or other notice of any kind, and the Holder
        may
        immediately and without expiration of any grace period enforce any and all
        of
        its rights and remedies hereunder and all other remedies available to it
        under
        applicable law. Such acceleration may be rescinded and annulled by Holder
        at any
        time prior to payment hereunder and the Holder shall have all rights as a
        holder
        of the Debenture until such time, if any, as the Holder receives full payment
        pursuant to this Section 8(b). No such rescission or annulment shall affect
        any
        subsequent Event of Default or impair any right consequent thereon.

       

      Section
        9. Miscellaneous.
        

       

      a)  Notices.
        Any and
        all notices or other communications or deliveries to be provided by the Holder
        hereunder, including, without limitation, any Notice of Conversion, shall
        be in
        writing and delivered personally, by facsimile, or sent by a nationally
        recognized overnight courier service, addressed to the Company, at the address
        set forth above, or such other facsimile number or address as the Company
        may
        specify for such purpose by notice to the Holder delivered in accordance
        with
        this Section 9(a). Any and all notices or other communications or deliveries
        to
        be provided by the Company hereunder shall be in writing and delivered
        personally, by facsimile, or sent by a nationally recognized overnight courier
        service addressed to each Holder at the facsimile number or address of the
        Holder appearing on the books of the Company, or if no such facsimile number
        or
        address appears, at the principal place of business of the Holder. Any notice
        or
        other communication or deliveries hereunder shall be deemed given and effective
        on the earliest of (i) the date of transmission, if such notice or communication
        is delivered via facsimile at the facsimile number specified on the signature
        page prior to 5:30 p.m. (New York City time), (ii) the date immediately
        following the date of transmission, if such notice or communication is delivered
        via facsimile at the facsimile number specified on the signature page between
        5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any
        date,
        (iii) the second Business Day following the date of mailing, if sent by
        nationally recognized overnight courier service or (iv) upon actual receipt
        by
        the party to whom such notice is required to be given.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      b)  Absolute
        Obligation.
        Except
        as expressly provided herein, no provision of this Debenture shall alter
        or
        impair the obligation of the Company, which is absolute and unconditional,
        to
        pay the principal of, liquidated damages and accrued interest, as applicable,
        on
        this Debenture at the time, place, and rate, and in the coin or currency,
        herein
        prescribed. This Debenture is a direct debt obligation of the Company. This
        Debenture ranks pari passu
        with all
        other Debentures now or hereafter issued under the terms set forth
        herein. 

       

      c)  Lost
        or Mutilated Debenture.
        If this
        Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
        execute and deliver, in exchange and substitution for and upon cancellation
        of a
        mutilated Debenture, or in lieu of or in substitution for a lost, stolen
        or
        destroyed Debenture, a new Debenture for the principal amount of this Debenture
        so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
        of
        such loss, theft or destruction of such Debenture, and of the ownership hereof,
        reasonably satisfactory to the Company.

      

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

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      e)  Waiver.
        Any
        waiver by the Company or the Holder of a breach of any provision of this
        Debenture shall not operate as or be construed to be a waiver of any other
        breach of such provision or of any breach of any other provision of this
        Debenture. The failure of the Company or the Holder to insist upon strict
        adherence to any term of this Debenture on one or more occasions shall not
        be
        considered a waiver or deprive that party of the right thereafter to insist
        upon
        strict adherence to that term or any other term of this Debenture. Any waiver
        by
        the Company or the Holder must be in writing.

       

      f)  Severability.
        If any
        provision of this Debenture is invalid, illegal or unenforceable, the balance
        of
        this Debenture shall remain in effect, and if any provision is inapplicable
        to
        any Person or circumstance, it shall nevertheless remain applicable to all
        other
        Persons and circumstances. If it shall be found that any interest or other
        amount deemed interest due hereunder violates the applicable law governing
        usury, the applicable rate of interest due hereunder shall automatically
        be
        lowered to equal the maximum rate of interest permitted under applicable
        law.
        The Company covenants (to the extent that it may lawfully do so) that it
        shall
        not at any time insist upon, plead, or in any manner whatsoever claim or
        take
        the benefit or advantage of, any stay, extension or usury law or other law
        which
        would prohibit or forgive the Company from paying all or any portion of the
        principal of or interest on this Debenture as contemplated herein, wherever
        enacted, now or at any time hereafter in force, or which may affect the
        covenants or the performance of this indenture, and the Company (to the extent
        it may lawfully do so) hereby expressly waives all benefits or advantage
        of any
        such law, and covenants that it will not, by resort to any such law, hinder,
        delay or impede the execution of any power herein granted to the Holder,
        but
        will suffer and permit the execution of every such as though no such law
        has
        been enacted.

       

      g)  Next
        Business Day.
        Whenever any payment or other obligation hereunder shall be due on a day
        other
        than a Business Day, such payment shall be made on the next succeeding Business
        Day.

      

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

      

      i)  Assumption. 
        Any successor to the Company or any surviving entity in a Fundamental
        Transaction shall (i) assume, prior to such Fundamental Transaction, all
        of the
        obligations of the Company under this Debenture and the other Transaction
        Documents pursuant to written agreements in form and substance satisfactory
        to
        the Holder (such approval not to be unreasonably withheld or delayed) and
        (ii)
        issue to the Holder a new debenture of such successor entity evidenced by
        a
        written instrument substantially similar in form and substance to this
        Debenture, including, without limitation, having a principal amount and interest
        rate equal to the principal amount and the interest rate of this Debenture
        and
        having similar ranking to this Debenture, which shall be satisfactory to
        the
        Holder (any such approval not to be unreasonably withheld or delayed).  The
        provisions of this Section 9(i) shall apply similarly and equally to successive
        Fundamental Transactions and shall be applied without regard to any limitations
        of this Debenture.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      j)  Secured
        Obligation.
        The
        obligations of the Company under this Debenture are secured by all assets
        of the
        Company and each Subsidiary pursuant to the Security Agreement, dated as
        of
        March 5, 2008 between the Company, the Subsidiaries of the Company and the
        Secured Parties (as defined therein).

      

      k)  Amendments.
        This
        Debenture may be modified or amended or the provisions hereof waived with
        the
        prior written consent of the Company and Holders holding Debentures at least
        equal to 67% of the aggregate principal amount then outstanding under all
        Debentures.

      

      

      *********************

      

      

       

      [SIGNATURE
        PAGES FOLLOW]

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the Company has caused this Debenture to be duly executed
        by a
        duly authorized officer as of the date first above indicated.

      

      

      
        	
                CAPITAL
                  GROWTH SYSTEMS, INC. 

                 

              
	
                By:__________________________________________

                Name:

                Title:

                Facsimile
                  No. for delivery of Notices: _______________

              
	 
	 

      

      

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      ANNEX
        A

      

      NOTICE
        OF CONVERSION

      

      The
        undersigned hereby elects to convert principal under the Variable Rate Senior
        Secured Convertible Debenture due March ___, 2013 of Capital Growth Systems,
        Inc., a Florida corporation (the “Company”),
        into
        shares of common stock (the “Common
        Stock”),
        of
        the Company according to the conditions hereof, as of the date written below.
        If
        shares of Common Stock are to be issued in the name of a person other than
        the
        undersigned, the undersigned will pay all transfer taxes payable with respect
        thereto and is delivering herewith such certificates and opinions as reasonably
        requested by the Company in accordance therewith. No fee will be charged
        to the
        holder for any conversion, except for such transfer taxes, if any.

      

      By
        the
        delivery of this Notice of Conversion the undersigned represents and warrants
        to
        the Company that its ownership of the Common Stock does not exceed the amounts
        specified under Section 4 of this Debenture, as determined in accordance
        with
        Section 13(d) of the Exchange Act.

      

      The
        undersigned agrees to comply with the prospectus delivery requirements under
        the
        applicable securities laws in connection with any transfer of the aforesaid
        shares of Common Stock. 

      

      Conversion
        calculations:   

      Date
        to
        Effect Conversion:

      

      Principal
        Amount of Debenture to be Converted:

      

      Payment
        of Interest in Common Stock __ yes __ no

      If
        yes,
        $_____ of Interest Accrued on Account of Conversion at Issue.

      Number
        of
        shares of Common Stock to be issued:

      Signature:

      Name:

      Address
        for Delivery of Common Stock Certificates:

      

      Or

      

      DWAC
        Instructions:

      

      Broker
        No:       

      Account
        No:      

      
        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

      

      

      Schedule
        1

      

      CONVERSION
        SCHEDULE

      

      The
        Variable Rate Senior Secured Convertible Debenture due on March ___, 2013
        in the
        original principal amount of $____________ is issued by Capital Growth Systems,
        Inc., a Florida corporation. This Conversion Schedule reflects conversions
        made
        under Section 4 of the above referenced Debenture.

      

      Dated:
        

      

      

      
        	
                 

                Date
                  of Conversion

                (or
                  for first entry, Original Issue Date)

              	
                 

                Amount
                  of Conversion

              	
                 

                Aggregate
                  Principal Amount Remaining Subsequent to Conversion

                (or
                  original Principal Amount)

              	
                 

                Company
                  Attest

              
	 	 	 	 
	 	 	 	 
	
                 

                 

                 

              	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

      

      

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      

          EXHIBIT
          B 

        

        REGISTRATION
          RIGHTS AGREEMENT

        

        This
          Registration Rights Agreement (this “Agreement”)
          is
          made and entered into as of March 11, 2008, between Capital Growth Systems,
          Inc., a Florida corporation (the “Company”)
          and
          each of the several purchasers signatory hereto (each such purchaser, a
          “Purchaser”
and,
          collectively, the “Purchasers”).

        

        This
          Agreement is made pursuant to the Securities Purchase Agreement, dated
          as of the
          date hereof, between the Company and each Purchaser (the “Purchase
          Agreement”).

        

        The
          Company and each Purchaser hereby agrees as follows:

        

        1.
           Definitions

        

        Capitalized
          terms used and not otherwise defined herein that are defined in the Purchase
          Agreement shall have the meanings given such terms in the Purchase
          Agreement.
          As used
          in this Agreement, the following terms shall have the following
          meanings:

        

        “Advice”
shall
          have the meaning set forth in Section 6(d).

        

        “Effectiveness
          Date”
means,
          with respect to the Initial Registration Statement required to be filed
          hereunder, the 60th
          calendar
          day following the earlier of (i) the Filing Date or (ii) the date such
          Registration Statement is initially filed with the Commission (or, in the
          event
          of a “full review” by the Commission, the 90th
          calendar
          day following the earlier of (i) the Filing Date or (ii) the date such
          Registration Statement is initially filed with the Commission) and with
          respect
          to any additional Registration Statements which may be required pursuant
          to
          Section 3(c), the 60th
          calendar
          day following the date on which an additional Registration Statement is
          required
          to be filed hereunder; provided,
          however,
          that in
          the event the Company is notified by the Commission that one or more of
          the
          above Registration Statements will not be reviewed or is no longer subject
          to
          further review and comments, the Effectiveness Date as to such Registration
          Statement shall be the fifth Trading Day following the date on which the
          Company
          is so notified if such date precedes the dates otherwise required
          above.

        

        “Effectiveness
          Period”
shall
          have the meaning set forth in Section 2(a).

        

        “Event”
shall
          have the meaning set forth in Section 2(b).

        

        “Event
          Date”
shall
          have the meaning set forth in Section 2(b).

        

        “Filing
          Date”
means,
          with respect to the Initial Registration Statement required hereunder,
          the
          earlier of (a) May 1, 2008 and (b) the 15th
          calendar
          day following the date the Company files its Annual Report with the Commission
          for its year ended December 31, 2007, and, with respect to any additional
          Registration Statements which may be required pursuant to Section 3(c),
          the
          earliest practical date on which the Company is permitted by SEC Guidance
          to
          file such additional Registration Statement related to the Registrable
          Securities.

         

        
          
            
            

          

          
            1

            
              

            

          

          
            
            

          

        

         

        “Holder”
or
          “Holders”
means
          the holder or holders, as the case may be, from time to time of Registrable
          Securities.

        

        “Indemnified
          Party”
shall
          have the meaning set forth in Section 5(c).

        

        “Indemnifying
          Party”
shall
          have the meaning set forth in Section 5(c).

        

        “Initial
          Registration Statement”
means
          the initial Registration Statement filed pursuant to this
          Agreement.

        

        “Initial
          Shares”
means
          a
          number of Registrable Securities equal to the lesser of (i) the total number
          of
          Registrable Securities and (ii) one-third of the number of issued and
          outstanding shares of Common Stock that are held by non-affiliates of the
          Company on the day immediately prior to the filing date of the Initial
          Registration Statement.

        

        “Losses”
shall
          have the meaning set forth in Section 5(a).

        

        “Plan
          of Distribution”
shall
          have the meaning set forth in Section 2(a). 

        

        “Prospectus”
means
          the prospectus included in a Registration Statement (including, without
          limitation, a prospectus that includes any information previously omitted
          from a
          prospectus filed as part of an effective registration statement in reliance
          upon
          Rule 430A promulgated by the Commission pursuant to the Securities Act),
          as
          amended or supplemented by any prospectus supplement, with respect to the
          terms
          of the offering of any portion of the Registrable Securities covered by
          a
          Registration Statement, and all other amendments and supplements to the
          Prospectus, including post-effective amendments, and all material incorporated
          by reference or deemed to be incorporated by reference in such
          Prospectus.

        

        “Registrable
          Securities”
means
          (a) all of the shares of Common Stock issuable upon conversion in full
          of the
          Debentures (assuming on the date of determination the Debentures are converted
          in full without regard to any conversion limitations therein), (b) all
          shares of
          Common Stock issuable as interest or principal on the Debentures assuming
          all
          permissible interest and principal payments are made in shares of Common
          Stock
          and the Debentures are held until maturity, (c) all Warrant Shares (assuming
          on
          the date of determination the Warrants are exercised in full without regard
          to
          any exercise limitations therein), (d) any additional shares of Common
          Stock
          issuable in connection with any anti-dilution provisions in the Debentures
          or
          the Warrants (in each case, without giving effect to any limitations on
          conversion set forth in the Debentures or limitations on exercise set forth
          in
          the Warrants) and (e) any securities issued or issuable upon any stock
          split,
          dividend or other distribution, recapitalization or similar event with
          respect
          to the foregoing; provided, however,
          that
          the Company shall not be required to maintain the effectiveness, or file
          another
          Registration Statement hereunder with respect to any Registrable Securities
          that
          are not subject to the current public information requirement under Rule
          144 and
          that are eligible for resale without volume or manner-of-sale restrictions
          without current public information pursuant to Rule 144 promulgated by
          the
          Commission pursuant to a written opinion letter to such effect, addressed,
          delivered and acceptable to the Transfer Agent and the affected
          Holders.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        “Registration
          Statement”
means
          any registration statement required to be filed hereunder pursuant to Section
          2(a) and any additional registration statements contemplated by Section
          3(c),
          including (in each case) the Prospectus, amendments and supplements to
          any such
          registration statement or Prospectus, including pre- and post-effective
          amendments, all exhibits thereto, and all material incorporated by reference
          or
          deemed to be incorporated by reference in any such registration
          statement.

        

        “Rule
          415”
means
          Rule 415 promulgated by the Commission pursuant to the Securities Act,
          as such
          Rule may be amended or interpreted from time to time, or any similar rule
          or
          regulation hereafter adopted by the Commission having substantially the
          same
          purpose and effect as such Rule.

        

        “Rule
          424”
means
          Rule 424 promulgated by the Commission pursuant to the Securities Act,
          as such
          Rule may be amended or interpreted from time to time, or any similar rule
          or
          regulation hereafter adopted by the Commission having substantially the
          same
          purpose and effect as such Rule.

        

        “Selling
          Stockholder Questionnaire”
shall
          have the meaning set forth in Section 3(a).

        

        “SEC
          Guidance”
means
          (i) any publicly-available written or oral guidance, comments, requirements
          or
          requests of the Commission staff and (ii) the Securities Act.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        2.
           Shelf
          Registration

        

        (a)  On
          or
          prior to each Filing Date, the Company shall prepare and file with the
          Commission a Registration Statement covering the resale of all or such
          maximum
          portion of the Registrable Securities as permitted by SEC Guidance (provided
          that, the Company shall use diligent efforts to advocate with the Commission
          for
          the registration of all of the Registrable Securities in accordance with
          the SEC
          Guidance, including without limitation, the Manual of Publicly Available
          Telephone Interpretations D.29) that are not then registered on an effective
          Registration Statement for an offering to be made on a continuous basis
          pursuant
          to Rule 415. Each Registration Statement filed hereunder shall be on Form
          S-3
          (except if the Company is not then eligible to register for resale the
          Registrable Securities on Form S-3, in which case such registration shall
          be on
          another appropriate form in accordance herewith) and shall contain (unless
          otherwise directed by at least an 85% majority in interest of the Holders)
          substantially the “Plan
          of Distribution”
          attached hereto as Annex
          A.
          Subject
          to the terms of this Agreement, the Company shall use its best efforts
          to cause
          a Registration Statement to be declared effective under the Securities
          Act as
          promptly as possible after the filing thereof, but in any event prior to
          the
          applicable Effectiveness Date, and shall use its best efforts to keep such
          Registration Statement continuously effective under the Securities Act
          until all
          Registrable Securities covered by such Registration Statement have been
          sold, or
          may be sold without volume or manner-of-sale restrictions pursuant to Rule
          144,
          without the requirement for the Company to be in compliance with the current
          public information requirement under Rule 144, as determined by the counsel
          to
          the Company pursuant to a written opinion letter to such effect, addressed
          and
          acceptable to the Transfer Agent and the affected Holders (the “Effectiveness
          Period”).
          The
          Company shall telephonically request effectiveness of a Registration Statement
          as of 5:00 p.m. New York City time on a Trading Day. The Company shall
          immediately notify the Holders via facsimile or by e-mail of the effectiveness
          of a Registration Statement on the same Trading Day that the Company
          telephonically confirms effectiveness with the Commission, which shall
          be the
          date requested for effectiveness of such Registration Statement. The Company
          shall, by 9:30 a.m. New York City time on the Trading Day after the effective
          date of such Registration Statement, file a final Prospectus with the Commission
          as required by Rule 424. Failure to so notify the Holder within 1 Trading
          Day of
          such notification of effectiveness or failure to file a final Prospectus
          as
          foresaid shall be deemed an Event under Section 2(b). Notwithstanding
          any other provision of this Agreement and subject to the payment of liquidated
          damages pursuant to Section 2(b), if any SEC Guidance sets forth a limitation
          on
          the number of Registrable Securities permitted to be registered on a particular
          Registration Statement (and notwithstanding that the Company used diligent
          efforts to advocate with the Commission for the registration of all or
          a greater
          portion of Registrable Securities), unless otherwise directed in writing
          by a
          Holder as to its Registrable Securities, the number of Registrable Securities
          to
          be registered on such Registration Statement will first be reduced by
          Registrable Securities represented by Warrant Shares (applied, in the case
          that
          some Warrant Shares may be registered, to the Holders on a pro rata basis
          based
          on the total number of unregistered Warrant Shares held by such Holders),
          and
          second by Registrable Securities represented by Conversion Shares (applied,
          in
          the case that some Conversion Shares may be registered, to the Holders
          on a pro
          rata basis based on the total number of unregistered Conversion Shares
          held by
          such Holders); provided,
          however,
          that,
          prior to any reduction in the number of Registrable Securities included
          in a
          Registration Statement as set forth in this sentence, all shares of Common
          Stock
          set forth on Schedule
          6(b)
          hereto
          shall be reduced first. In the event of a cutback hereunder, the Company
          shall
          give the Holder at least 5 Trading Days prior written notice along with
          the
          calculations as to such Holder’s allotment. 

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        (b)  If:
          (i)
          the Initial Registration Statement is not filed on or prior to its Filing
          Date
          (if the Company files the Initial Registration Statement without affording
          the
          Holders the opportunity to review and comment on the same as required by
          Section
          3(a) herein, the Company shall be deemed to have not satisfied this clause
          (i)),
          or (ii) the Company fails to file with the Commission a request for acceleration
          of a Registration Statement in accordance with Rule 461 promulgated by
          the
          Commission pursuant to the Securities Act, within five Trading Days of
          the date
          that the Company is notified (orally or in writing, whichever is earlier)
          by the
          Commission that such Registration Statement will not be “reviewed” or will not
          be subject to further review, or (iii) prior to the effective date of a
          Registration Statement, the Company fails to file a pre-effective amendment
          and
          otherwise respond in writing to comments made by the Commission in respect
          of
          such Registration Statement within ten calendar days after the receipt
          of
          comments by or notice from the Commission that such amendment is required
          in
          order for such Registration Statement to be declared effective, or (iv)
          as to,
          in the aggregate among all Holders on a pro-rata basis based on their purchase
          of the Securities pursuant to the Purchase Agreement, a Registration Statement
          registering for resale all of the Initial Shares is not declared effective
          by
          the Commission by the Effectiveness Date of the Initial Registration Statement,
          or (v) all of the Registrable Securities are not registered for resale
          pursuant
          to one or more effective Registration Statements on or before September
          30, 2008
          or (vi) after the effective date of a Registration Statement, such Registration
          Statement ceases for any reason to remain continuously effective as to
          all
          Registrable Securities included in such Registration Statement, or the
          Holders
          are otherwise not permitted to utilize the Prospectus therein to resell
          such
          Registrable Securities, (A) because the Company is negotiating a merger,
          consolidation, acquisition or sale of all or substantially all of its assets
          or
          a similar transaction which, in the good faith judgment of the Board of
          Directors, requires the Registration Statement to be amended to include
          information in connection with such pending transaction (including the
          parties
          thereto) and such information is not yet available or publicly disclosable,
          for
          more than an aggregate of 30 calendar days (which need not be consecutive
          days)
          during any 12-month period or (B) for any reason (including (A) above),
          more
          than an aggregate of 60 calendar days (which need not be consecutive calendar
          days) during any 12-month period or (vii) the Company shall fail for any
          reason
          to satisfy the current public information requirement under Rule 144 as
          to the
          applicable Registrable Securities (any such failure or breach being referred
          to
          as an “Event”,
          and
          for purposes of clauses (i), (iv), (v) and (vii), the date on which such
          Event
          occurs, and for purpose of clause (ii) the date on which such five Trading
          Day
          period is exceeded, and for purpose of clause (iii) the date which such
          ten
          calendar day period is exceeded, and for purpose of clause (vi), the date
          on
          which such 30 or 60 calendar day period, as applicable, is exceeded being
          referred to as “Event
          Date”),
          then,
          in addition to any other rights the Holders may have hereunder or under
          applicable law, on each such Event Date and on each monthly anniversary
          of each
          such Event Date (if the applicable Event shall not have been cured by such
          date)
          until the applicable Event is cured, the Company shall pay to each Holder
          an
          amount in cash, as partial liquidated damages and not as a penalty, equal
          to 2%
          of the aggregate purchase price paid by such Holder pursuant to the Purchase
          Agreement for any unregistered Registrable Securities then held by such
          Holder.
          The parties agree that (1) the Company shall not be liable for liquidated
          damages under this Agreement with respect to any unexercised Warrants or
          Warrant
          Shares and (2) the maximum aggregate liquidated damages payable to a Holder
          under this Agreement shall be 12% of the aggregate Subscription Amount
          paid by
          such Holder pursuant to the Purchase Agreement. If the Company fails to
          pay any
          partial liquidated damages pursuant to this Section in full within seven
          days
          after the date payable, the Company will pay interest thereon at a rate
          of 16%
          per annum (or such lesser maximum amount that is permitted to be paid by
          applicable law) to the Holder, accruing daily from the date such partial
          liquidated damages are due until such amounts, plus all such interest thereon,
          are paid in full. The partial liquidated damages pursuant to the terms
          hereof
          shall apply on a daily pro rata basis for any portion of a month prior
          to the
          cure of an Event.

         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

        3.
           Registration
          Procedures.

        

        In
          connection with the Company’s registration obligations hereunder, the Company
          shall:

        

        (a)  Not
          less
          than five (5) Trading Days prior to the filing of each Registration Statement
          and not less than one (1) Trading Day prior to the filing of any related
          Prospectus or any amendment or supplement thereto (including any document
          that
          would be incorporated or deemed to be incorporated therein by reference),
          the
          Company shall (i) furnish to each Holder copies of all such documents proposed
          to be filed, which documents (other than those incorporated or deemed to
          be
          incorporated by reference) will be subject to the review of such Holders,
          and
          (ii) cause its officers and directors, counsel and independent registered
          public
          accountants to respond to such inquiries as shall be necessary, in the
          reasonable opinion of respective counsel to each Holder, to conduct a reasonable
          investigation within the meaning of the Securities Act. The Company shall
          not
          file a Registration Statement or any such Prospectus or any amendments
          or
          supplements thereto to which the Holders of a majority of the Registrable
          Securities shall reasonably object in good faith, provided that, the Company
          is
          notified of such objection in writing no later than five (5) Trading Days
          after
          the Holders have been so furnished copies of a Registration Statement or
          one (1)
          Trading Day after the Holders have been so furnished copies of any related
          Prospectus or amendments or supplements thereto. Each Holder agrees to
          furnish
          to the Company a completed questionnaire in the form attached to this Agreement
          as Annex
          B
          (a
“Selling
          Stockholder Questionnaire”)
          on a
          date that is not less than two (2) Trading Days prior to the Filing Date
          or by
          the end of the fourth (4th)
          Trading
          Day following the date on which such Holder receives draft materials in
          accordance with this Section. 

        

        (b)  (i)
          Prepare and file with the Commission such amendments, including post-effective
          amendments, to a Registration Statement and the Prospectus used in connection
          therewith as may be necessary to keep a Registration Statement continuously
          effective as to the applicable Registrable Securities for the Effectiveness
          Period and prepare and file with the Commission such additional Registration
          Statements in order to register for resale under the Securities Act all
          of the
          Registrable Securities, (ii) cause the related Prospectus to be amended
          or
          supplemented by any required Prospectus supplement (subject to the terms
          of this
          Agreement), and, as so supplemented or amended, to be filed pursuant to
          Rule
          424, (iii) respond as promptly as reasonably possible to any comments received
          from the Commission with respect to a Registration Statement or any amendment
          thereto and provide as promptly as reasonably possible to the Holders true
          and
          complete copies of all correspondence from and to the Commission relating
          to a
          Registration Statement (provided that, the Company may excise any information
          contained therein which would constitute material non-public information
          as to
          any Holder which has not executed a confidentiality agreement with the
          Company),
          and (iv) comply in all material respects with the provisions of the Securities
          Act and the Exchange Act with respect to the disposition of all Registrable
          Securities covered by a Registration Statement during the applicable period
          in
          accordance (subject to the terms of this Agreement) with the intended methods
          of
          disposition by the Holders thereof set forth in such Registration Statement
          as
          so amended or in such Prospectus as so supplemented.

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

         

        (c)  If
          during
          the Effectiveness Period, the number of Registrable Securities at any time
          exceeds 100% of the number of shares of Common Stock then registered in
          a
          Registration Statement, then the Company shall file as soon as reasonably
          practicable, but in any case prior to the applicable Filing Date, an additional
          Registration Statement covering the resale by the Holders of not less than
          the
          number of such Registrable Securities. 

        

        (d)  Notify
          the Holders of Registrable Securities to be sold (which notice shall, pursuant
          to clauses (iii) through (vi) hereof, be accompanied by an instruction
          to
          suspend the use of the Prospectus until the requisite changes have been
          made) as
          promptly as reasonably possible (and, in the case of (i)(A) below, not
          less than
          one Trading Day prior to such filing) and (if requested by any such Person)
          confirm such notice in writing no later than one Trading Day following
          the day
          (i)(A) when a Prospectus or any Prospectus supplement or post-effective
          amendment to a Registration Statement is proposed to be filed, (B) when
          the
          Commission notifies the Company whether there will be a “review” of such
          Registration Statement and whenever the Commission comments in writing
          on such
          Registration Statement, and (C) with respect to a Registration Statement
          or any
          post-effective amendment, when the same has become effective, (ii) of any
          request by the Commission or any other federal or state governmental authority
          for amendments or supplements to a Registration Statement or Prospectus
          or for
          additional information, (iii) of the issuance by the Commission or any
          other
          federal or state governmental authority of any stop order suspending the
          effectiveness of a Registration Statement covering any or all of the Registrable
          Securities or the initiation of any Proceedings for that purpose; (iv)
          of the
          receipt by the Company of any notification with respect to the suspension
          of the
          qualification or exemption from qualification of any of the Registrable
          Securities for sale in any jurisdiction, or the initiation or threatening
          of any
          Proceeding for such purpose, (v) of the occurrence of any event or passage
          of
          time that makes the financial statements included in a Registration Statement
          ineligible for inclusion therein or any statement made in a Registration
          Statement or Prospectus or any document incorporated or deemed to be
          incorporated therein by reference untrue in any material respect or that
          requires any revisions to a Registration Statement, Prospectus or other
          documents so that, in the case of a Registration Statement or the Prospectus,
          as
          the case may be, it will not contain any untrue statement of a material
          fact or
          omit to state any material fact required to be stated therein or necessary
          to
          make the statements therein, in light of the circumstances under which
          they were
          made, not misleading and (vi) of the occurrence or existence of any pending
          corporate development with respect to the Company that the Company believes
          may
          be material and that, in the determination of the Company, makes it not
          in the
          best interest of the Company to allow continued availability of a Registration
          Statement or Prospectus, provided that, any and all of such information
          shall
          remain confidential to each Holder until such information otherwise becomes
          public, unless disclosure by a Holder is required by law; provided,
          further,
          that
          notwithstanding each Holder’s agreement to keep such information confidential,
          each such Holder makes no acknowledgement that any such information is
          material,
          non-public information.

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

         

        (e)  Use
          its
          best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
          of
          (i) any order stopping or suspending the effectiveness of a Registration
          Statement, or (ii) any suspension of the qualification (or exemption from
          qualification) of any of the Registrable Securities for sale in any
          jurisdiction, at the earliest practicable moment.

        

        (f)  Furnish
          to each Holder, without charge, at least one conformed copy of each such
          Registration Statement and each amendment thereto, including financial
          statements and schedules, all documents incorporated or deemed to be
          incorporated therein by reference to the extent requested by such Person,
          and
          all exhibits to the extent requested by such Person (including those previously
          furnished or incorporated by reference) promptly after the filing of such
          documents with the Commission; provided, that any such item which is available
          on the EDGAR system need not be furnished in physical form.

        

        (g)  Subject
          to the terms of this Agreement, the Company hereby consents to the use
          of such
          Prospectus and each amendment or supplement thereto by each of the selling
          Holders in connection with the offering and sale of the Registrable Securities
          covered by such Prospectus and any amendment or supplement thereto, except
          after
          the giving of any notice pursuant to Section 3(d).

        

        (h)  
          The
          Company shall cooperate with any broker-dealer through which a Holder proposes
          to resell its Registrable Securities in effecting a filing with the FINRA
          Corporate Financing Department pursuant to NASD Rule 2710, as requested
          by any
          such Holder, and the Company shall pay the filing fee required by such
          filing
          within two (2) Business Days of request therefor.

        

        (i)  Prior
          to
          any resale of Registrable Securities by a Holder, use its commercially
          reasonable efforts to register or qualify or cooperate with the selling
          Holders
          in connection with the registration or qualification (or exemption from
          the
          Registration or qualification) of such Registrable Securities for the resale
          by
          the Holder under the securities or Blue Sky laws of such jurisdictions
          within
          the United States as any Holder reasonably requests in writing, to keep
          each
          registration or qualification (or exemption therefrom) effective during
          the
          Effectiveness Period and to do any and all other acts or things reasonably
          necessary to enable the disposition in such jurisdictions of the Registrable
          Securities covered by each Registration Statement; provided, that, the
          Company
          shall not be required to qualify generally to do business in any jurisdiction
          where it is not then so qualified, subject the Company to any material
          tax in
          any such jurisdiction where it is not then so subject or file a general
          consent
          to service of process in any such jurisdiction.

        

        (j)  If
          requested by a Holder, cooperate with such Holders to facilitate the timely
          preparation and delivery of certificates representing Registrable Securities
          to
          be delivered to a transferee pursuant to a Registration Statement, which
          certificates shall be free, to the extent permitted by the Purchase Agreement,
          of all restrictive legends, and to enable such Registrable Securities to
          be in
          such denominations and registered in such names as any such Holder may
          request.

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

         

        (k)  Upon
          the
          occurrence of any event contemplated by Section 3(d), as promptly as reasonably
          possible under the circumstances taking into account the Company’s good faith
          assessment of any adverse consequences to the Company and its stockholders
          of
          the premature disclosure of such event, prepare a supplement or amendment,
          including a post-effective amendment, to a Registration Statement or a
          supplement to the related Prospectus or any document incorporated or deemed
          to
          be incorporated therein by reference, and file any other required document
          so
          that, as thereafter delivered, neither a Registration Statement nor such
          Prospectus will contain an untrue statement of a material fact or omit
          to state
          a material fact required to be stated therein or necessary to make the
          statements therein, in light of the circumstances under which they were
          made,
          not misleading. If
          the
          Company notifies the Holders in accordance with clauses (iii) through (vi)
          of
          Section 3(d) above to suspend the use of any Prospectus until the requisite
          changes to such Prospectus have been made, then the Holders shall suspend
          use of
          such Prospectus. The Company will use its best efforts to ensure that the
          use of
          the Prospectus may be resumed as promptly as is practicable. The Company
          shall
          be entitled to exercise its right under this Section 3(k) to suspend the
          availability of a Registration Statement and Prospectus, subject to the
          payment
          of partial liquidated damages otherwise required pursuant to Section 2(b),
          for a
          period not to exceed 60 calendar days (which need not be consecutive days)
          in
          any 12 month period.

        

        (l)  Comply
          with all applicable rules and regulations of the Commission.

        

        (m)  The
          Company may require each selling Holder to furnish to the Company a certified
          statement as to the number of shares of Common Stock beneficially owned
          by such
          Holder and, if required by the Commission, the natural persons thereof
          that have
          voting and dispositive control over the shares. During any periods that
          the
          Company is unable to meet its obligations hereunder with respect to the
          registration of the Registrable Securities solely because any Holder fails
          to
          furnish such information within three Trading Days of the Company’s request, any
          liquidated damages that are accruing at such time as to such Holder only
          shall
          be tolled and any Event that may otherwise occur solely because of such
          delay
          shall be suspended as to such Holder only, until such information is delivered
          to the Company.

        

        4.
           Registration
          Expenses.
          All
          fees and expenses incident to the performance of or compliance with this
          Agreement by the Company shall be borne by the Company whether or not any
          Registrable Securities are sold pursuant to a Registration Statement. The
          fees
          and expenses referred to in the foregoing sentence shall include, without
          limitation, (i) all registration and filing fees (including, without limitation,
          fees and expenses of the Company’s counsel and independent registered public
          accountants) (A) with respect to filings made with the Commission, (B)
          with
          respect to filings required to be made with any Trading Market on which
          the
          Common Stock is then listed for trading, (C) in compliance with applicable
          state
          securities or Blue Sky laws reasonably agreed to by the Company in writing
          (including, without limitation, fees and disbursements of counsel for the
          Company in connection with Blue Sky qualifications or exemptions of the
          Registrable Securities) and (D) if not previously paid by the Company in
          connection with an Issuer Filing, with respect to any filing that may be
          required to be made by any broker through which a Holder intends to make
          sales
          of Registrable Securities with the FINRA pursuant to NASD Rule 2710, so
          long as
          the broker is receiving no more than a customary brokerage commission in
          connection with such sale, (ii) printing expenses (including, without
          limitation, expenses of printing certificates for Registrable Securities),
          (iii)
          messenger, telephone and delivery expenses, (iv) fees and disbursements
          of
          counsel for the Company, (v) Securities Act liability insurance, if the
          Company
          so desires such insurance, and (vi) fees and expenses of all other Persons
          retained by the Company in connection with the consummation of the transactions
          contemplated by this Agreement. In addition, the Company shall be responsible
          for all of its internal expenses incurred in connection with the consummation
          of
          the transactions contemplated by this Agreement (including, without limitation,
          all salaries and expenses of its officers and employees performing legal
          or
          accounting duties), the expense of any annual audit and the fees and expenses
          incurred in connection with the listing of the Registrable Securities on
          any
          securities exchange as required hereunder. In no event shall the Company
          be
          responsible for any broker or similar commissions of any Holder or, except
          to
          the extent provided for in the Transaction Documents, any legal fees or
          other
          costs of the Holders.

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        5.
           Indemnification.

        

        (a)  Indemnification
          by the Company.
          The
          Company shall, notwithstanding any termination of this Agreement, indemnify
          and
          hold harmless each Holder, the officers, directors, members, partners,
          agents,
          brokers (including brokers who offer and sell Registrable Securities as
          principal as a result of a pledge or any failure to perform under a margin
          call
          of Common Stock), investment advisors and employees (and any other Persons
          with
          a functionally equivalent role of a Person holding such titles, notwithstanding
          a lack of such title or any other title) of each of them, each Person who
          controls any such Holder (within the meaning of Section 15 of the Securities
          Act
          or Section 20 of the Exchange Act) and the officers, directors, members,
          stockholders, partners, agents and employees (and any other Persons with
          a
          functionally equivalent role of a Person holding such titles, notwithstanding
          a
          lack of such title or any other title) of each such controlling Person,
          to the
          fullest extent permitted by applicable law, from and against any and all
          losses,
          claims, damages, liabilities, costs (including, without limitation, reasonable
          attorneys’ fees) and expenses (collectively, “Losses”),
          as
          incurred, arising out of or relating to (1) any untrue or alleged untrue
          statement of a material fact contained in a Registration Statement, any
          Prospectus or any form of prospectus or in any amendment or supplement
          thereto
          or in any preliminary prospectus, or arising out of or relating to any
          omission
          or alleged omission of a material fact required to be stated therein or
          necessary to make the statements therein (in the case of any Prospectus
          or
          supplement thereto, in light of the circumstances under which they were
          made)
          not misleading or (2) any violation or alleged violation by the Company
          of the
          Securities Act, the Exchange Act or any state securities law, or any rule
          or
          regulation thereunder, in connection with the performance of its obligations
          under this Agreement, except to the extent, but only to the extent, that
          (i)
          such untrue statements or omissions are based solely upon information regarding
          such Holder furnished in writing to the Company by such Holder expressly
          for use
          therein, or to the extent that such information relates to such Holder
          or such
          Holder’s proposed method of distribution of Registrable Securities and was
          reviewed and expressly approved in writing by such Holder expressly for
          use in a
          Registration Statement, such Prospectus or in any amendment or supplement
          thereto (it being understood that the Holder has approved Annex A hereto
          for
          this purpose) or (ii) in the case of an occurrence of an event of the type
          specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated
          or
          defective Prospectus after the Company has notified such Holder in writing
          that
          the Prospectus is outdated or defective and prior to the receipt by such
          Holder
          of the Advice contemplated in Section 6(d). The Company shall notify the
          Holders
          promptly of the institution, threat or assertion of any Proceeding arising
          from
          or in connection with the transactions contemplated by this Agreement of
          which
          the Company is aware.

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

         

        (b)  Indemnification
          by Holders.
          Each
          Holder shall, severally and not jointly, indemnify and hold harmless the
          Company, its directors, officers, agents and employees, each Person who
          controls
          the Company (within the meaning of Section 15 of the Securities Act and
          Section
          20 of the Exchange Act), and the directors, officers, agents or employees
          of
          such controlling Persons, to the fullest extent permitted by applicable
          law,
          from and against all Losses, as incurred, to the extent arising out of
          or based
          solely upon: (x) such Holder’s failure to comply with the prospectus delivery
          requirements of the Securities Act or (y) any untrue or alleged untrue
          statement
          of a material fact contained in any Registration Statement, any Prospectus,
          or
          in any amendment or supplement thereto or in any preliminary prospectus,
          or
          arising out of or relating to any omission or alleged omission of a material
          fact required to be stated therein or necessary to make the statements
          therein
          not misleading (i) to the extent, but only to the extent, that such untrue
          statement or omission is contained in any information so furnished in writing
          by
          such Holder to the Company specifically for inclusion in such Registration
          Statement or such Prospectus or (ii) to the extent that such information
          relates
          to such Holder’s proposed method of distribution of Registrable Securities and
          was reviewed and expressly approved in writing by such Holder expressly
          for use
          in a Registration Statement (it being understood that the Holder has approved
          Annex A hereto for this purpose), such Prospectus or in any amendment or
          supplement thereto or (ii) in the case of an occurrence of an event of
          the type
          specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated
          or
          defective Prospectus after the Company has notified such Holder in writing
          that
          the Prospectus is outdated or defective and prior to the receipt by such
          Holder
          of the Advice contemplated in Section 6(d). In no event shall the liability
          of
          any selling Holder hereunder be greater in amount than the dollar amount
          of the
          net proceeds received by such Holder upon the sale of the Registrable Securities
          giving rise to such indemnification obligation.

        

        (c)  Conduct
          of Indemnification Proceedings.
          If any
          Proceeding shall be brought or asserted against any Person entitled to
          indemnity
          hereunder (an “Indemnified
          Party”),
          such
          Indemnified Party shall promptly notify the Person from whom indemnity
          is sought
          (the “Indemnifying
          Party”)
          in
          writing, and the Indemnifying Party shall have the right to assume the
          defense
          thereof, including the employment of counsel reasonably satisfactory to
          the
          Indemnified Party and the payment of all fees and expenses incurred in
          connection with defense thereof; provided, that, the failure of any Indemnified
          Party to give such notice shall not relieve the Indemnifying Party of its
          obligations or liabilities pursuant to this Agreement, except (and only)
          to the
          extent that it shall be finally determined by a court of competent jurisdiction
          (which determination is not subject to appeal or further review) that such
          failure shall have prejudiced the Indemnifying Party.

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

         

        An
          Indemnified Party shall have the right to employ separate counsel in any
          such
          Proceeding and to participate in the defense thereof, but the fees and
          expenses
          of such counsel shall be at the expense of such Indemnified Party or Parties
          unless: (1) the Indemnifying Party has agreed in writing to pay such fees
          and
          expenses, (2) the Indemnifying Party shall have failed promptly to assume
          the
          defense of such Proceeding and to employ counsel reasonably satisfactory
          to such
          Indemnified Party in any such Proceeding, or (3) the named parties to any
          such
          Proceeding (including any impleaded parties) include both such Indemnified
          Party
          and the Indemnifying Party, and counsel to the Indemnified Party shall
          reasonably believe that a material conflict of interest is likely to exist
          if
          the same counsel were to represent such Indemnified Party and the Indemnifying
          Party (in which case, if such Indemnified Party notifies the Indemnifying
          Party
          in writing that it elects to employ separate counsel at the expense of
          the
          Indemnifying Party, the Indemnifying Party shall not have the right to
          assume
          the defense thereof and the reasonable fees and expenses of no more than
          one
          separate counsel shall be at the expense of the Indemnifying Party). The
          Indemnifying Party shall not be liable for any settlement of any such Proceeding
          effected without its written consent, which consent shall not be unreasonably
          withheld or delayed. No Indemnifying Party shall, without the prior written
          consent of the Indemnified Party, effect any settlement of any pending
          Proceeding in respect of which any Indemnified Party is a party, unless
          such
          settlement includes an unconditional release of such Indemnified Party
          from all
          liability on claims that are the subject matter of such Proceeding.

        

        Subject
          to the terms of this Agreement, all reasonable fees and expenses of the
          Indemnified Party (including reasonable fees and expenses to the extent
          incurred
          in connection with investigating or preparing to defend such Proceeding
          in a
          manner not inconsistent with this Section) shall be paid to the Indemnified
          Party, as incurred, within ten Trading Days of written notice thereof to
          the
          Indemnifying Party; provided, that, the Indemnified Party shall promptly
          reimburse the Indemnifying Party for that portion of such fees and expenses
          applicable to such actions for which such Indemnified Party is judicially
          determined not to be entitled to indemnification hereunder.

        

        (d)  Contribution.
          If the
          indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified
          Party or insufficient to hold an Indemnified Party harmless for any Losses,
          then
          each Indemnifying Party shall contribute to the amount paid or payable
          by such
          Indemnified Party, in such proportion as is appropriate to reflect the
          relative
          fault of the Indemnifying Party and Indemnified Party in connection with
          the
          actions, statements or omissions that resulted in such Losses as well as
          any
          other relevant equitable considerations. The relative fault of such Indemnifying
          Party and Indemnified Party shall be determined by reference to, among
          other
          things, whether any action in question, including any untrue or alleged
          untrue
          statement of a material fact or omission or alleged omission of a material
          fact,
          has been taken or made by, or relates to information supplied by, such
          Indemnifying Party or Indemnified Party, and the parties’ relative intent,
          knowledge, access to information and opportunity to correct or prevent
          such
          action, statement or omission. The amount paid or payable by a party as
          a result
          of any Losses shall be deemed to include, subject to the limitations set
          forth
          in this Agreement, any reasonable attorneys’ or other fees or expenses incurred
          by such party in connection with any Proceeding to the extent such party
          would
          have been indemnified for such fees or expenses if the indemnification
          provided
          for in this Section was available to such party in accordance with its
          terms.

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

        The
          parties hereto agree that it would not be just and equitable if contribution
          pursuant to this Section 5(d) were determined by pro rata allocation or
          by any
          other method of allocation that does not take into account the equitable
          considerations referred to in the immediately preceding paragraph.
          Notwithstanding the provisions of this Section 5(d), no Holder shall be
          required
          to contribute, in the aggregate, any amount in excess of the amount by
          which the
          net proceeds actually received by such Holder from the sale of the Registrable
          Securities subject to the Proceeding exceeds the amount of any damages
          that such
          Holder has otherwise been required to pay by reason of such untrue or alleged
          untrue statement or omission or alleged omission.

         

        The
          indemnity and contribution agreements contained in this Section are in
          addition
          to any liability that the Indemnifying Parties may have to the Indemnified
          Parties.

        

        6.
           Miscellaneous.

        

        (a)  Remedies.
          In the
          event of a breach by the Company or by a Holder of any of their respective
          obligations under this Agreement, each Holder or the Company, as the case may
          be, in addition to being entitled to exercise all rights granted by law
          and
          under this Agreement, including recovery of damages, shall be entitled
          to
          specific performance of its rights under this Agreement. The Company and
          each
          Holder agree that monetary damages would not provide adequate compensation
          for
          any losses incurred by reason of a breach by it of any of the provisions
          of this
          Agreement and hereby further agrees that, in the event of any action for
          specific performance in respect of such breach, it shall not assert or
          shall
          waive the defense that a remedy at law would be adequate.

        

        (b)  No
          Piggyback on Registrations; Prohibition on Filing Other Registration
          Statements.
          Neither
          the Company nor any of its security holders (other than the Holders in
          such
          capacity pursuant hereto) may include securities of the Company in any
          Registration Statements other than the Registrable Securities. The Company
          shall
          not file any other registration statements until all Registrable Securities
          are
          registered pursuant to a Registration Statement that is declared effective
          by
          the Commission, provided that this Section 6(b) shall not prohibit the
          Company
          from filing amendments to registration statements filed prior to the date
          of
          this Agreement.

         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         

        (c)  Compliance.
          Each
          Holder covenants and agrees that it will comply with the prospectus delivery
          requirements of the Securities Act as applicable to it in connection with
          sales
          of Registrable Securities pursuant to a Registration Statement.

        

        (d)  Discontinued
          Disposition.
          By its
          acquisition of Registrable Securities, each Holder agrees that, upon receipt
          of
          a notice from the Company of the occurrence of any event of the kind described
          in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue
          disposition of such Registrable Securities under a Registration Statement
          until
          it is advised in writing (the “Advice”)
          by the
          Company that the use of the applicable Prospectus (as it may have been
          supplemented or amended) may be resumed. The Company will use its best
          efforts
          to ensure that the use of the Prospectus may be resumed as promptly as
          is
          practicable. The Company agrees and acknowledges that any periods during
          which
          the Holder is required to discontinue the disposition of the Registrable
          Securities hereunder shall be subject to the provisions of Section
          2(b).

        

        (e)  Piggy-Back
          Registrations.
          If, at
          any time during the Effectiveness Period, there is not an effective Registration
          Statement covering all of the Registrable Securities and the Company shall
          determine to prepare and file with the Commission a registration statement
          relating to an offering for its own account or the account of others under
          the
          Securities Act of any of its equity securities, other than on Form S-4
          or Form
          S-8 (each as promulgated under the Securities Act) or their then equivalents
          relating to equity securities to be issued solely in connection with any
          acquisition of any entity or business or equity securities issuable in
          connection with the Company’s stock option or other employee benefit plans, then
          the Company shall deliver to each Holder a written notice of such determination
          and, if within fifteen days after the date of the delivery of such notice,
          any
          such Holder shall so request in writing, the Company shall include in such
          registration statement all or any part of such Registrable Securities such
          Holder requests to be registered; provided,
          however,
          that
          the Company shall not be required to register any Registrable Securities
          pursuant to this Section 6(e) that are eligible for resale pursuant to
          Rule 144
          promulgated by the Commission pursuant to the Securities Act or that are
          the
          subject of a then effective Registration Statement.

        

        (f)  Amendments
          and Waivers.
          The
          provisions of this Agreement, including the provisions of this sentence,
          may not
          be amended, modified or supplemented, and waivers or consents to departures
          from
          the provisions hereof may not be given, unless the same shall be in writing
          and
          signed by the Company and the Holders of 67% or more of the then outstanding
          Registrable Securities (including, for this purpose any Registrable Securities
          issuable upon exercise or conversion of any Security). If a Registration
          Statement does not register all of the Registrable Securities pursuant
          to a
          waiver or amendment done in compliance with the previous sentence, then
          the
          number of Registrable Securities to be registered for each Holder shall
          be
          reduced pro rata among all Holders and each Holder shall have the right
          to
          designate which of its Registrable Securities shall be omitted from such
          Registration Statement. Notwithstanding the foregoing, a waiver or consent
          to
          depart from the provisions hereof with respect to a matter that relates
          exclusively to the rights of a Holder or some Holders and that does not
          directly
          or indirectly affect the rights of other Holders may be given by such Holder
          or
          Holders of all of the Registrable Securities to which such waiver or consent
          relates; provided,
          however,
          that
          the provisions of this sentence may not be amended, modified, or supplemented
          except in accordance with the provisions of the first sentence of this
          Section
          6(f). 

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

        (g)  Notices.
          Any and
          all notices or other communications or deliveries required or permitted
          to be
          provided hereunder shall be delivered as set forth in the Purchase Agreement.
          

        

        (h)  Successors
          and Assigns.
          This
          Agreement shall inure to the benefit of and be binding upon the successors
          and
          permitted assigns of each of the parties and shall inure to the benefit
          of each
          Holder. The Company may not assign (except by merger) its rights or obligations
          hereunder without the prior written consent of all of the Holders of the
          then
          outstanding Registrable Securities. Each Holder may assign their respective
          rights hereunder in the manner and to the Persons as permitted under the
          Purchase Agreement.

        

        (i)  No
          Inconsistent Agreements.
          Neither
          the Company nor any of its Subsidiaries has entered, as of the date hereof,
          nor
          shall the Company or any of its Subsidiaries, on or after the date of this
          Agreement, enter into any agreement with respect to its securities, that
          would
          have the effect of impairing the rights granted to the Holders in this
          Agreement
          or otherwise conflicts with the provisions hereof. Except as set forth
          on
Schedule
          3(l),
          to the
          Purchase Agreement neither the Company nor any of its Subsidiaries has
          previously entered into any agreement granting any registration rights
          with
          respect to any of its securities to any Person that have not been satisfied
          in
          full.

        

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

        

        (k)  Governing
          Law.
          All
          questions concerning the construction, validity, enforcement and interpretation
          of this Agreement shall be determined in accordance with the provisions
          of the
          Purchase Agreement.

        

        (l)  Cumulative
          Remedies.
          The
          remedies provided herein are cumulative and not exclusive of any other
          remedies
          provided by law.

        

        (m)  Severability.
          If any
          term, provision, covenant or restriction of this Agreement is held by a
          court of
          competent jurisdiction to be invalid, illegal, void or unenforceable, the
          remainder of the terms, provisions, covenants and restrictions set forth
          herein
          shall remain in full force and effect and shall in no way be affected,
          impaired
          or invalidated, and the parties hereto shall use their commercially reasonable
          efforts to find and employ an alternative means to achieve the same or
          substantially the same result as that contemplated by such term, provision,
          covenant or restriction. It is hereby stipulated and declared to be the
          intention of the parties that they would have executed the remaining terms,
          provisions, covenants and restrictions without including any of such that
          may be
          hereafter declared invalid, illegal, void or unenforceable.

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

         

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

        

        (o)  Independent
          Nature of Holders’ Obligations and Rights.
          The
          obligations of each Holder hereunder are several and not joint with the
          obligations of any other Holder hereunder, and no Holder shall be responsible
          in
          any way for the performance of the obligations of any other Holder hereunder.
          Nothing contained herein or in any other agreement or document delivered
          at any
          closing, and no action taken by any Holder pursuant hereto or thereto,
          shall be
          deemed to constitute the Holders as a partnership, an association, a joint
          venture or any other kind of entity, or create a presumption that the Holders
          are in any way acting in concert with respect to such obligations or the
          transactions contemplated by this Agreement. Each Holder shall be entitled
          to
          protect and enforce its rights, including without limitation the rights
          arising
          out of this Agreement, and it shall not be necessary for any other Holder
          to be
          joined as an additional party in any proceeding for such purpose.

        

        ********************

        

         

        (Signature
          Pages Follow)

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

        

        IN
          WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
          as
          of the date first written above.

        

        
          	
                  CAPITAL
                    GROWTH SYSTEMS, INC.

                   

                
	
                  By:__________________________________________

                       
                    Name:

                       
                    Title:

                

        

             

        

        

        [SIGNATURE
          PAGE OF HOLDERS FOLLOWS]

        

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

        [SIGNATURE
          PAGE OF HOLDERS TO CGSY RRA]

        

         

        Name
          of
          Holder: __________________________

        

        Signature
          of Authorized Signatory of Holder:
          __________________________

        

        Name
          of
          Authorized Signatory: _________________________

        

        Title
          of
          Authorized Signatory: __________________________

         

        

        

        [SIGNATURE
          PAGES CONTINUE]

        

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

        Annex
          A

        

        Plan
          of Distribution

        

        Each
          Selling Stockholder (the “Selling
          Stockholders”)
          of the
          common stock and any of their pledgees, assignees and successors-in-interest
          may, from time to time, sell any or all of their shares of common stock
          on the
          [principal Trading Market] or any other stock exchange, market or trading
          facility on which the shares are traded or in private transactions. These
          sales
          may be at fixed or negotiated prices. A Selling Stockholder may use any
          one or
          more of the following methods when selling shares:

         

        	·  	
                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;

              

         

        	·  	
                settlement
                  of short sales entered into after the effective date of the registration
                  statement of which this prospectus is a part;

              

         

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

              

         

        	·  	
                through
                  the writing or settlement of options or other hedging transactions,
                  whether through an options exchange or
                  otherwise;

              

         

        	·  	
                a
                  combination of any such methods of sale;
                  or

              

         

        	·  	
                any
                  other method permitted pursuant to applicable
                  law.

              

         

        The
          Selling Stockholders may also sell shares under Rule 144 under the Securities
          Act of 1933, as amended (the “Securities
          Act”),
          if
          available, rather than under this prospectus.

         

        Broker-dealers
          engaged by the Selling Stockholders may arrange for other brokers-dealers
          to
          participate in sales. Broker-dealers may receive commissions or discounts
          from
          the Selling Stockholders (or, if any broker-dealer acts as agent for the
          purchaser of shares, from the purchaser) in amounts to be negotiated, but,
          except as set forth in a supplement to this Prospectus, in the case of
          an agency
          transaction not in excess of a customary brokerage commission in compliance
          with
          FINRA NASD Rule 2440; and in the case of a principal transaction a markup
          or
          markdown in compliance with NASD IM-2440. 

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

         

        In
          connection with the sale of the common stock or interests therein, the
          Selling
          Stockholders may enter into hedging transactions with broker-dealers or
          other
          financial institutions, which may in turn engage in short sales of the
          common
          stock in the course of hedging the positions they assume. The Selling
          Stockholders may also sell shares of the common stock short and deliver
          these
          securities to close out their short positions, or loan or pledge the common
          stock to broker-dealers that in turn may sell these securities. The Selling
          Stockholders may also enter into option or other transactions with
          broker-dealers or other financial institutions or the creation of one or
          more
          derivative securities which require the delivery to such broker-dealer
          or other
          financial institution of shares offered by this prospectus, which shares
          such
          broker-dealer or other financial institution may resell pursuant to this
          prospectus (as supplemented or amended to reflect such
          transaction).

         

        The
          Selling Stockholders and any broker-dealers or agents that are involved
          in
          selling the shares may be deemed to be “underwriters” within the meaning of the
          Securities Act in connection with such sales. In such event, any commissions
          received by such broker-dealers or agents and any profit on the resale
          of the
          shares purchased by them may be deemed to be underwriting commissions or
          discounts under the Securities Act. Each Selling Stockholder has informed
          the
          Company that it does not have any written or oral agreement or understanding,
          directly or indirectly, with any person to distribute the Common Stock.
          In no
          event shall any broker-dealer receive fees, commissions and markups which,
          in
          the aggregate, would exceed eight percent (8%).

         

        The
          Company is required to pay certain fees and expenses incurred by the Company
          incident to the registration of the shares. The Company has agreed to indemnify
          the Selling Stockholders against certain losses, claims, damages and
          liabilities, including liabilities under the Securities Act. 

         

        Because
          Selling Stockholders may be deemed to be “underwriters” within the meaning of
          the Securities Act, they will be subject to the prospectus delivery requirements
          of the Securities Act including Rule 172 thereunder. In addition, any securities
          covered by this prospectus which qualify for sale pursuant to Rule 144
          under the
          Securities Act may be sold under Rule 144 rather than under this prospectus.
          There is no underwriter or coordinating broker acting in connection with
          the
          proposed sale of the resale shares by the Selling Stockholders.

         

        We
          agreed
          to keep this prospectus effective until the earlier of (i) the date on
          which the
          shares may be resold by the Selling Stockholders without registration and
          without regard to any volume or manner-of-sale limitations by reason of
          Rule
          144, without the requirement for the Company to be in compliance with the
          current public information under Rule 144 under the Securities Act or any
          other
          rule of similar effect or (ii) all of the shares have been sold pursuant
          to this
          prospectus or Rule 144 under the Securities Act or any other rule of similar
          effect. The resale shares will be sold only through registered or licensed
          brokers or dealers if required under applicable state securities laws.
          In
          addition, in certain states, the resale shares may not be sold unless they
          have
          been registered or qualified for sale in the applicable state or an exemption
          from the registration or qualification requirement is available and is
          complied
          with.

         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

         

        Under
          applicable rules and regulations under the Exchange Act, any person engaged
          in
          the distribution of the resale shares may not simultaneously engage in
          market
          making activities with respect to the common stock for the applicable restricted
          period, as defined in Regulation M, prior to the commencement of the
          distribution. In addition, the Selling Stockholders will be subject to
          applicable provisions of the Exchange Act and the rules and regulations
          thereunder, including Regulation M, which may limit the timing of purchases
          and
          sales of shares of the common stock by the Selling Stockholders or any
          other
          person. We will make copies of this prospectus available to the Selling
          Stockholders and have informed them of the need to deliver a copy of this
          prospectus to each purchaser at or prior to the time of the sale (including
          by
          compliance with Rule 172 under the Securities Act).

         

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

        Annex
          B

         

        Capital
          Growth Systems, Inc.

         

        Selling
          Stockholder Notice and Questionnaire

         

        The
          undersigned beneficial owner of common stock (the “Registrable
          Securities”)
          of
          Capital Growth Systems, Inc., a Florida corporation (the “Company”),
          understands that the Company has filed or intends to file with the Securities
          and Exchange Commission (the “Commission”)
          a
          registration statement (the “Registration
          Statement”)
          for
          the registration and resale under Rule 415 of the Securities Act of 1933,
          as
          amended (the “Securities
          Act”),
          of
          the Registrable Securities, in accordance with the terms of the Registration
          Rights Agreement (the “Registration
          Rights Agreement”)
          to
          which this document is annexed. A copy of the Registration Rights Agreement
          is
          available from the Company upon request at the address set forth below.
          All
          capitalized terms not otherwise defined herein shall have the meanings
          ascribed
          thereto in the Registration Rights Agreement.

         

        Certain
          legal consequences arise from being named as a selling stockholder in the
          Registration Statement and the related prospectus. Accordingly, holders
          and
          beneficial owners of Registrable Securities are advised to consult their
          own
          securities law counsel regarding the consequences of being named or not
          being
          named as a selling stockholder in the Registration Statement and the related
          prospectus.

         

        NOTICE

         

        The
          undersigned beneficial owner (the “Selling
          Stockholder”)
          of
          Registrable Securities hereby elects to include the Registrable Securities
          owned
          by it in the Registration Statement.

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

        The
          undersigned hereby provides the following information to the Company and
          represents and warrants that such information is accurate:

         

        QUESTIONNAIRE

         

        1. Name.

         

        
          	 	
                  (a)

                	
                  Full
                    Legal Name of Selling Stockholder

                

          	 	 	
                

          	 	 	 

        

         

        
          	 	
                  (b)

                	
                  Full
                    Legal Name of Registered Holder (if not the same as (a) above)
                    through
                    which Registrable Securities are held:

                

          	 	 	 

          	 	 	 

        

         

        
          	 	
                  (c)

                	
                  Full
                    Legal Name of Natural Control Person (which means a natural person
                    who
                    directly or indirectly alone or with others has power to vote
                    or dispose
                    of the securities covered by this
                    Questionnaire):

                

          	 	 	 

          	 	 	 

        

         

         

        2.
          Address for Notices to Selling Stockholder:

         

        
          	 	 
	 	 
	 	 
	
                  Telephone: 

                	 
	
                  Fax: 

                	 
	
                  Contact
                    Person: 

                	 

        

        

        3.
          Broker-Dealer Status:

         

        
          	 	
                  (a)

                	
                  Are
                    you a broker-dealer?

                

        

         

        Yes
o      No
o

         

        
          	 	
                  (b)

                	
                  If
                    “yes” to Section 3(a), did you receive your Registrable Securities
                    as
                    compensation for investment banking services to the
                    Company?

                

        

         

        Yes
o      No
o

         

        
          	 	
                  Note:

                	
                  If
                    “no” to Section 3(b), the Commission’s staff has indicated that you should
                    be identified as an underwriter in the Registration
                    Statement.

                

        

         

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (c)

                	
                  Are
                    you an affiliate of a
                    broker-dealer?

                

        

         

        Yes
o      No
o

         

        
          	 	
                  (d)

                	
                  If
                    you are an affiliate of a broker-dealer, do you certify that
                    you purchased
                    the Registrable Securities in the ordinary course of business,
                    and at the
                    time of the purchase of the Registrable Securities to be resold,
                    you had
                    no agreements or understandings, directly or indirectly, with
                    any person
                    to distribute the Registrable
                    Securities?

                

        

         

        Yes
o      No
o

         

        
          	 	
                  Note:

                	
                  If
                    “no” to Section 3(d), the Commission’s staff has indicated that you should
                    be identified as an underwriter in the Registration
                    Statement.

                

        

         

        4.
          Beneficial Ownership of Securities of the Company Owned by the Selling
          Stockholder.

         

        Except
          as set forth below in this Item 4, the undersigned is not the beneficial
          or
          registered owner of any securities of the Company other than the securities
          issuable pursuant to the Purchase Agreement.

         

        
          	 	
                  (a)

                	
                  Type
                    and Amount of other securities beneficially owned by the Selling
                    Stockholder:

                

          	 	 	 

          	 	 	 

          	 	 	 

        

         

         

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

        5.
          Relationships with the Company:

         

        Except
          as set forth below, neither the undersigned nor any of its affiliates,
          officers,
          directors or principal equity holders (owners of 5% of more of the equity
          securities of the undersigned) has held any position or office or has had
          any
          other material relationship with the Company (or its predecessors or affiliates)
          during the past three years.

         

        State
          any
          exceptions here:

         

        
          	
                   

                
	 
	 

        

        

         

        The
          undersigned agrees to promptly notify the Company of any inaccuracies or
          changes
          in the information provided herein that may occur subsequent to the date
          hereof
          at any time while the Registration Statement remains effective.

         

        By
          signing below, the undersigned consents to the disclosure of the information
          contained herein in its answers to Items 1 through 5 and the inclusion
          of such
          information in the Registration Statement and the related prospectus
and
          any
          amendments or supplements thereto.
          The
          undersigned understands that such information will be relied upon by the
          Company
          in connection with the preparation or amendment of the Registration Statement
          and the related prospectus.

         

        IN
          WITNESS WHEREOF the undersigned, by authority duly given, has caused this
          Notice
          and Questionnaire to be executed and delivered either in person or by its
          duly
          authorized agent.

        

          
            	
                    Date:                        

                  	
                    Beneficial
                      Owner:                        
                      

                  
	 	 
	 	
                    By:                                

                  
	 	
                         
                      Name:

                  
	 	
                         
                      Title:

                  

          

        

        

        PLEASE
          FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
          RETURN
          THE ORIGINAL BY OVERNIGHT MAIL, TO:

        

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

      

    

    

      EXHIBIT
        C

       

      NEITHER
        THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
        BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
        MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
        STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
        FROM,
        OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
        SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
        EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
        THE
        SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
        AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
        IN
        CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
        SECURITIES.

      

      COMMON
        STOCK PURCHASE WARRANT

      

      CAPITAL
        GROWTH SYSTEMS, INC.

      

        
          	
                  Warrant
                    Shares: _______

                	
                  Initial
                    Exercise Date: March ___, 2008    

                

        

      

       

      THIS
        COMMON STOCK PURCHASE WARRANT (the “Warrant”)
        certifies that, for value received, _____________ (the “Holder”)
        is
        entitled, upon the terms and subject to the limitations on exercise and the
        conditions hereinafter set forth, at any time on or after the date hereof
        (the
“Initial
        Exercise Date”)
        and on
        or prior to the close of business on the five year anniversary of the Initial
        Exercise Date (the “Termination
        Date”)
        but
        not thereafter, to subscribe for and purchase from Capital Growth Systems,
        Inc.,
        a Florida corporation (the “Company”),
        up to
        ______ shares (the “Warrant
        Shares”)
        of
        Common Stock. The purchase price of one share of Common Stock under this
        Warrant
        shall be equal to the Exercise Price, as defined in Section 2(b). 

       

      Section
        1. Definitions.
        Capitalized terms used and not otherwise defined herein shall have the meanings
        set forth in that certain Securities Purchase Agreement (the “Purchase
        Agreement”),
        dated
        March 11, 2008, among the Company and the purchasers signatory
        thereto.

       

      Section
        2. Exercise.

       

      a)  Exercise
        of Warrant.
        Exercise of the purchase rights represented by this Warrant may be made,
        in
        whole or in part, at any time or times on or after the Initial Exercise Date
        and
        on or before the Termination Date by delivery to the Company (or such other
        office or agency of the Company as it may designate by notice in writing
        to the
        registered Holder at the address of the Holder appearing on the books of
        the
        Company) of a duly executed facsimile copy of the Notice of Exercise Form
        annexed hereto; and, within 3 Trading Days of the date said Notice of Exercise
        is delivered to the Company, the Company shall have received payment of the
        aggregate Exercise Price of the shares thereby purchased by wire transfer
        or
        cashier’s check drawn on a United States bank. Notwithstanding anything herein
        to the contrary, the Holder shall not be required to physically surrender
        this
        Warrant to the Company until the Holder has purchased all of the Warrant
        Shares
        available hereunder and the Warrant has been exercised in full, in which
        case,
        the Holder shall surrender this Warrant to the Company for cancellation within
        3
        Trading Days of the date the final Notice of Exercise is delivered to the
        Company. Partial exercises of this Warrant resulting in purchases of a portion
        of the total number of Warrant Shares available hereunder shall have the
        effect
        of lowering the outstanding number of Warrant Shares purchasable hereunder
        in an
        amount equal to the applicable number of Warrant Shares purchased. The Holder
        and the Company shall maintain records showing the number of Warrant Shares
        purchased and the date of such purchases. The Company shall deliver any
        objection to any Notice of Exercise Form within 2 Business Days of receipt
        of
        such notice. In the event of any dispute or discrepancy, the records of the
        Holder shall be controlling and determinative in the absence of manifest
        error.
The
        Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
        that, by reason of the provisions of this paragraph, following the purchase
        of a
        portion of the Warrant Shares hereunder, the number of Warrant Shares available
        for purchase hereunder at any given time may be less than the amount stated
        on
        the face hereof.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      b)  Exercise
        Price.
        The
        exercise price per share of the Common Stock under this Warrant shall be
        $0.73,
        subject
        to adjustment hereunder (the “Exercise
        Price”).

       

      c)  Cashless
        Exercise.
        If at
        any time after the earlier of (i) the six month anniversary of the date of
        the
        Purchase Agreement and (ii) the completion of the then-applicable holding
        period
        required by Rule 144, or any successor provision then in effect, there is
        no
        effective Registration Statement registering, or no current prospectus available
        for, the resale of the Warrant Shares by the Holder, then this Warrant may
        also
        be exercised at such time by means of a “cashless exercise” in which the Holder
        shall be entitled to receive a certificate for the number of Warrant Shares
        equal to the quotient obtained by dividing [(A-B) (X)] by (A),
        where:

       

      (A)
        = the
        VWAP on the Trading Day immediately preceding the date of such
        election;

      

      (B)
        = the
        Exercise Price of this Warrant, as adjusted; and 

      

      (X)
        = the
        number of Warrant Shares issuable upon exercise of this Warrant in accordance
        with the terms of this Warrant by means of a cash exercise rather than a
        cashless exercise.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      Notwithstanding
        anything herein to the contrary, on the Termination Date, this Warrant shall
        be
        automatically exercised via cashless exercise pursuant to this Section
        2(c).

      

      d)  Exercise
        Limitations.
        The
        Company shall not effect any exercise of this Warrant, and a Holder shall
        not
        have the right to exercise any portion of this Warrant, pursuant to Section
        2 or
        otherwise, to the extent that after giving effect to such issuance after
        exercise as set forth on the applicable Notice of Exercise, the Holder (together
        with the Holder’s Affiliates, and any other person or entity acting as a group
        together with the Holder or any of the Holder’s Affiliates), would beneficially
        own in excess of the Beneficial Ownership Limitation (as defined below). 
For purposes of the foregoing sentence, the number of shares of Common Stock
        beneficially owned by the Holder and its Affiliates shall include the number
        of
        shares of Common Stock issuable upon exercise of this Warrant with respect
        to
        which such determination is being made, but shall exclude the number of shares
        of Common Stock which would be issuable upon (A) exercise of the remaining,
        nonexercised portion of this Warrant beneficially owned by the Holder or
        any of
        its Affiliates and (B) exercise or conversion of the unexercised or nonconverted
        portion of any other securities of the Company (including, without limitation,
        any other Common Stock Equivalents) subject to a limitation on conversion
        or
        exercise analogous to the limitation contained herein beneficially owned
        by the
        Holder or any of its affiliates.  Except as set forth in the preceding
        sentence, for purposes of this Section 2(d), beneficial ownership shall be
        calculated in accordance with Section 13(d) of the Exchange Act and the rules
        and regulations promulgated thereunder, it being acknowledged by the Holder
        that
        the Company is not representing to the Holder that such calculation is in
        compliance with Section 13(d) of the Exchange Act and the Holder is solely
        responsible for any schedules required to be filed in accordance therewith.
        To
        the extent that the limitation contained in this Section 2(d) applies, the
        determination of whether this Warrant is exercisable (in relation to other
        securities owned by the Holder together with any Affiliates) and of which
        portion of this Warrant is exercisable shall be in the sole discretion of
        the
        Holder, and the submission of a Notice of Exercise shall be deemed to be
        the
        Holder’s determination of whether this Warrant is exercisable (in relation to
        other securities owned by the Holder together with any Affiliates) and of
        which
        portion of this Warrant is exercisable, in each case subject to the Beneficial
        Ownership Limitation, and the Company shall have no obligation to verify
        or
        confirm the accuracy of such determination. In addition, a determination
        as to
        any group status as contemplated above shall be determined in accordance
        with
        Section 13(d) of the Exchange Act and the rules and regulations promulgated
        thereunder. For purposes of this Section 2(d), in determining the number
        of
        outstanding shares of Common Stock, a Holder may rely on the number of
        outstanding shares of Common Stock as reflected in (A) the Company’s most recent
        periodic or annual report, as the case may be, (B) a more recent public
        announcement by the Company or (C) any other notice by the Company or the
        Company’s Transfer Agent setting forth the number of shares of Common Stock
        outstanding.  Upon the written or oral request of a Holder, the Company
        shall within two Trading Days confirm orally and in writing to the Holder
        the
        number of shares of Common Stock then outstanding.  In any case, the number
        of outstanding shares of Common Stock shall be determined after giving effect
        to
        the conversion or exercise of securities of the Company, including this Warrant,
        by the Holder or its Affiliates since the date as of which such number of
        outstanding shares of Common Stock was reported. The “Beneficial
        Ownership Limitation”
shall
        be 4.99% of the number of shares of the Common Stock outstanding immediately
        after giving effect to the issuance of shares of Common Stock issuable upon
        exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice
        to the Company, may increase or decrease the Beneficial Ownership Limitation
        provisions of this Section 2(d), provided that the Beneficial Ownership
        Limitation in no event exceeds 9.99% of the number of shares of the Common
        Stock
        outstanding immediately after giving effect to the issuance of shares of
        Common
        Stock upon exercise of this Warrant held by the Holder and the provisions
        of
        this Section 2(d) shall continue to apply. Any such increase or decrease
        will
        not be effective until the 61st
        day
        after such notice is delivered to the Company. The provisions of this paragraph
        shall be construed and implemented in a manner otherwise than in strict
        conformity with the terms of this Section 2(d) to correct this paragraph
        (or any
        portion hereof) which may be defective or inconsistent with the intended
        Beneficial Ownership Limitation herein contained or to make changes or
        supplements necessary or desirable to properly give effect to such limitation.
        The limitations contained in this paragraph shall apply to a successor holder
        of
        this Warrant.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      e)  Mechanics
        of Exercise.
        

       

      i.  Delivery
        of Certificates Upon Exercise.
        Certificates for shares purchased hereunder shall be transmitted by the transfer
        agent of the Company to the Holder by crediting the account of the Holder’s
        prime broker with the Depository Trust Company through its Deposit Withdrawal
        Agent Commission (“DWAC”)
        system
        if the Company is then a participant in such system and either (A) there
        is an
        effective Registration Statement permitting the resale of the Warrant Shares
        by
        the Holder or (B) the shares are eligible for resale without volume or
        manner-of-sale limitations pursuant to Rule 144, and otherwise by physical
        delivery to the address specified by the Holder in the Notice of Exercise
        within
        3 Trading Days from the delivery to the Company of the Notice of Exercise
        Form,
        surrender of this Warrant (if required) and payment of the aggregate Exercise
        Price as set forth above (the “Warrant
        Share Delivery Date”).
        This
        Warrant shall be deemed to have been exercised on the date the Exercise Price
        is
        received by the Company. The Warrant Shares shall be deemed to have been
        issued,
        and Holder or any other person so designated to be named therein shall be
        deemed
        to have become a holder of record of such shares for all purposes, as of
        the
        date the Warrant has been exercised by payment to the Company of the Exercise
        Price (or by cashless exercise, if permitted) and all taxes required to be
        paid
        by the Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance
        of
        such shares, have been paid. If the Company fails for any reason to deliver
        to
        the Holder certificates evidencing the Warrant Shares subject to a Notice
        of
        Exercise by the Warrant Share Delivery Date, the Company shall pay to the
        Holder, in cash, as liquidated damages and not as a penalty, for each $1,000
        of
        Warrant Shares subject to such exercise (based on the VWAP of the Common
        Stock
        on the date of the applicable Notice of Exercise), $10 per Trading Day
        (increasing to $20 per Trading Day on the seventh Trading Day after such
        liquidated damages begin to accrue) for each Trading Day after such Warrant
        Share Delivery Date until such certificates are delivered. 

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      ii.  Delivery
        of New Warrants Upon Exercise.
        If this
        Warrant shall have been exercised in part, the Company shall, at the request
        of
        a Holder and upon surrender of this Warrant certificate, at the time of delivery
        of the certificate or certificates representing Warrant Shares, deliver to
        Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
        Warrant Shares called for by this Warrant, which new Warrant shall in all
        other
        respects be identical with this Warrant.

       

      iii.  Rescission
        Rights.
        If the
        Company fails to cause its transfer agent to transmit to the Holder a
        certificate or the certificates representing the Warrant Shares pursuant
        to
        Section 2(e)(i) by the Warrant Share Delivery Date, then, the Holder will
        have
        the right to rescind such exercise.

       

      iv.  Compensation
        for Buy-In on Failure to Timely Deliver Certificates Upon
        Exercise.
        In
        addition to any other rights available to the Holder, if the Company fails
        to
        cause the Transfer Agent to transmit to the Holder a certificate or the
        certificates representing the Warrant Shares pursuant to an exercise on or
        before the Warrant Share Delivery Date, and if after such date the Holder
        is
        required by its broker to purchase (in an open market transaction or otherwise)
        or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to
        deliver in satisfaction of a sale by the Holder of the Warrant Shares which
        the
        Holder anticipated receiving upon such exercise (a “Buy-In”),
        then
        the Company shall (A) pay in cash to the Holder the amount by which (x) the
        Holder’s total purchase price (including brokerage commissions, if any) for the
        shares of Common Stock so purchased exceeds (y) the amount obtained by
        multiplying (1) the number of Warrant Shares that the Company was required
        to
        deliver to the Holder in connection with the exercise at issue times (2)
        the
        price at which the sell order giving rise to such purchase obligation was
        executed, and (B) at the option of the Holder, either reinstate the portion
        of
        the Warrant and equivalent number of Warrant Shares for which such exercise
        was
        not honored or deliver to the Holder the number of shares of Common Stock
        that
        would have been issued had the Company timely complied with its exercise
        and
        delivery obligations hereunder. For example, if the Holder purchases Common
        Stock having a total purchase price of $11,000 to cover a Buy-In with respect
        to
        an attempted exercise of shares of Common Stock with an aggregate sale price
        giving rise to such purchase obligation of $10,000, under clause (A) of the
        immediately preceding sentence the Company shall be required to pay the Holder
        $1,000. The Holder shall provide the Company written notice indicating the
        amounts payable to the Holder in respect of the Buy-In and, upon request
        of the
        Company, evidence of the amount of such loss. Nothing herein shall limit
        a
        Holder’s right to pursue any other remedies available to it hereunder, at law or
        in equity including, without limitation, a decree of specific performance
        and/or
        injunctive relief with respect to the Company’s failure to timely deliver
        certificates representing shares of Common Stock upon exercise of the Warrant
        as
        required pursuant to the terms hereof.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      v.  No
        Fractional Shares or Scrip.
        No
        fractional shares or scrip representing fractional shares shall be issued
        upon
        the exercise of this Warrant. As to any fraction of a share which Holder
        would
        otherwise be entitled to purchase upon such exercise, the Company shall,
        at its
        election, either pay a cash adjustment in respect of such final fraction
        in an
        amount equal to such fraction multiplied by the Exercise Price or round up
        to
        the next whole share.

       

      vi.  Charges,
        Taxes and Expenses.
        Issuance of certificates for Warrant Shares shall be made without charge
        to the
        Holder for any issue or transfer tax or other incidental expense in respect
        of
        the issuance of such certificate, all of which taxes and expenses shall be
        paid
        by the Company, and such certificates shall be issued in the name of the
        Holder
        or in such name or names as may be directed by the Holder; provided,
        however,
        that in
        the event certificates for Warrant Shares are to be issued in a name other
        than
        the name of the Holder, this Warrant when surrendered for exercise shall
        be
        accompanied by the Assignment Form attached hereto duly executed by the Holder
        and the Company may require, as a condition thereto, the payment of a sum
        sufficient to reimburse it for any transfer tax incidental thereto.

       

      vii.  Closing
        of Books.
        The
        Company will not close its stockholder books or records in any manner which
        prevents the timely exercise of this Warrant, pursuant to the terms
        hereof.

       

      Section
        3. Certain
        Adjustments.

       

      a)  Stock
        Dividends and Splits.
        If the
        Company, at any time while this Warrant is outstanding: (i) pays a stock
        dividend or otherwise make a distribution or distributions on shares of its
        Common Stock or any other equity or equity equivalent securities payable
        in
        shares of Common Stock (which, for avoidance of doubt, shall not include
        any
        shares of Common Stock issued by the Company upon exercise of this Warrant),
        (ii) subdivides outstanding shares of Common Stock into a larger number of
        shares, (iii) combines (including by way of reverse stock split) outstanding
        shares of Common Stock into a smaller number of shares or (iv) issues by
        reclassification of shares of the Common Stock any shares of capital stock
        of
        the Company, then in each case the Exercise Price shall be multiplied by
        a
        fraction of which the numerator shall be the number of shares of Common Stock
        (excluding treasury shares, if any) outstanding immediately before such event
        and of which the denominator shall be the number of shares of Common Stock
        outstanding immediately after such event and the number of shares issuable
        upon
        exercise of this Warrant shall be proportionately adjusted such that the
        aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment
        made pursuant to this Section 3(a) shall become effective immediately after
        the
        record date for the determination of stockholders entitled to receive such
        dividend or distribution and shall become effective immediately after the
        effective date in the case of a subdivision, combination or
        re-classification.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      b)  Subsequent
        Equity Sales.
        If the
        Company or any Subsidiary thereof, as applicable, at any time while this
        Warrant
        is outstanding, shall sell or grant any option to purchase, or sell or grant
        any
        right to reprice, or otherwise dispose of or issue (or announce any offer,
        sale,
        grant or any option to purchase or other disposition) any Common Stock or
        Common
        Stock Equivalents entitling any Person to acquire shares of Common Stock,
        at an
        effective price per share less than the then Exercise Price (such lower price,
        the “Base
        Share Price”
and
        such issuances collectively, a “Dilutive
        Issuance”)
        (if
        the holder of the Common Stock or Common Stock Equivalents so issued shall
        at
        any time, whether by operation of purchase price adjustments, reset provisions,
        floating conversion, exercise or exchange prices or otherwise, or due to
        warrants, options or rights per share which are issued in connection with
        such
        issuance, be entitled to receive shares of Common Stock at an effective price
        per share which is less than the Exercise Price, such issuance shall be deemed
        to have occurred for less than the Exercise Price on such date of the Dilutive
        Issuance), then, the Exercise Price shall be reduced and only reduced to
        equal
        the Base Share Price and the number of Warrant Shares issuable hereunder
        shall
        be increased such that the aggregate Exercise Price payable hereunder, after
        taking into account the decrease in the Exercise Price, shall be equal to
        the
        aggregate Exercise Price prior to such adjustment. Such adjustment shall
        be made
        whenever such Common Stock or Common Stock Equivalents are issued.
        Notwithstanding the foregoing, no adjustments shall be made, paid or issued
        under this Section 3(b) in respect of an Exempt Issuance. The Company shall
        notify the Holder, in writing, no later than the Trading Day following the
        issuance of any Common Stock or Common Stock Equivalents subject to this
        Section
        3(b), indicating therein the applicable issuance price, or applicable reset
        price, exchange price, conversion price and other pricing terms (such notice,
        the “Dilutive
        Issuance Notice”).
        For
        purposes of clarification, whether or not the Company provides a Dilutive
        Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
        Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
        entitled to receive a number of Warrant Shares based upon the Base Share
        Price
        regardless of whether the Holder accurately refers to the Base Share Price
        in
        the Notice of Exercise.

       

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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      d)  Pro
        Rata Distributions.
        If the
        Company, at any time while this Warrant is outstanding, shall distribute
        to all
        holders of Common Stock (and not to Holders of the Warrants) evidences of
        its
        indebtedness or assets (including cash and cash dividends) or rights or warrants
        to subscribe for or purchase any security other than the Common Stock (which
        shall be subject to Section 3(b)), then in each such case the Exercise Price
        shall be adjusted by multiplying the Exercise Price in effect immediately
        prior
        to the record date fixed for determination of stockholders entitled to receive
        such distribution by a fraction of which the denominator shall be the VWAP
        determined as of the record date mentioned above, and of which the numerator
        shall be such VWAP on such record date less the then per share fair market
        value
        at such record date of the portion of such assets or evidence of indebtedness
        so
        distributed applicable to one outstanding share of the Common Stock as
        determined by the Board of Directors in good faith. In either case the
        adjustments shall be described in a statement provided to the Holder of the
        portion of assets or evidences of indebtedness so distributed or such
        subscription rights applicable to one share of Common Stock. Such adjustment
        shall be made whenever any such distribution is made and shall become effective
        immediately after the record date mentioned above.

       

      e)  Fundamental
        Transaction.
        If, at
        any time while this Warrant is outstanding, (i) the Company effects any merger
        or consolidation of the Company with or into another Person, (ii) the Company
        effects any sale of all or substantially all of its assets in one or a series
        of
        related transactions, (iii) any tender offer or exchange offer (whether by
        the
        Company or another Person) is completed pursuant to which holders of Common
        Stock are permitted to tender or exchange their shares for other securities,
        cash or property or (iv) the Company effects any reclassification of the
        Common
        Stock or any compulsory share exchange pursuant to which the Common Stock
        is
        effectively converted into or exchanged for other securities, cash or property
        (each “Fundamental
        Transaction”),
        then,
        upon any subsequent exercise of this Warrant, the Holder shall have the right
        to
        receive, for each Warrant Share that would have been issuable upon such exercise
        immediately prior to the occurrence of such Fundamental Transaction, the
        number
        of shares of Common Stock of the successor or acquiring corporation or of
        the
        Company, if it is the surviving corporation, and any additional consideration
        (the “Alternate
        Consideration”)
        receivable as a result of such merger, consolidation or disposition of assets
        by
        a holder of the number of shares of Common Stock for which this Warrant is
        exercisable immediately prior to such event. For purposes of any such exercise,
        the determination of the Exercise Price shall be appropriately adjusted to
        apply
        to such Alternate Consideration based on the amount of Alternate Consideration
        issuable in respect of one share of Common Stock in such Fundamental
        Transaction, and the Company shall apportion the Exercise Price among the
        Alternate Consideration in a reasonable manner reflecting the relative value
        of
        any different components of the Alternate Consideration. If holders of Common
        Stock are given any choice as to the securities, cash or property to be received
        in a Fundamental Transaction, then the Holder shall be given the same choice
        as
        to the Alternate Consideration it receives upon any exercise of this Warrant
        following such Fundamental Transaction. To the extent necessary to effectuate
        the foregoing provisions, any successor to the Company or surviving entity
        in
        such Fundamental Transaction shall issue to the Holder a new warrant consistent
        with the foregoing provisions and evidencing the Holder’s right to exercise such
        warrant into Alternate Consideration. The terms of any agreement pursuant
        to
        which a Fundamental Transaction is effected shall include terms requiring
        any
        such successor or surviving entity to comply with the provisions of this
        Section
        3(e) and insuring that this Warrant (or any such replacement security) will
        be
        similarly adjusted upon any subsequent transaction analogous to a Fundamental
        Transaction. Notwithstanding anything to the contrary, in the event of a
        Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
        transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
        as amended, or (3) a Fundamental Transaction involving a person or entity
        not
        traded on a national securities exchange, the Nasdaq Global Select Market,
        the
        Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor
        entity shall pay at the Holder’s option, exercisable at any time concurrently
        with or within 30 days after the consummation of the Fundamental Transaction,
        an
        amount of cash equal to the value of this Warrant as determined in accordance
        with the Black Scholes Option Pricing Model obtained from the “OV” function on
        Bloomberg L.P. using (A) a price per share of Common Stock equal to the VWAP
        of
        the Common Stock for the Trading Day immediately preceding the date of
        consummation of the applicable Fundamental Transaction, (B) a risk-free interest
        rate corresponding to the U.S. Treasury rate for a 30 day period immediately
        prior to the consummation of the applicable Fundamental Transaction, (C)
        an
        expected volatility equal to the 100 day volatility obtained from the “HVT”
function on Bloomberg L.P. determined as of the Trading Day immediately
        following the public announcement of the applicable Fundamental Transaction
        and
        (D) a remaining option time equal to the time between the date of the public
        announcement of such transaction and the Termination Date. 

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      f)  Calculations.
        All
        calculations under this Section 3 shall be made to the nearest cent or the
        nearest 1/100th of a share, as the case may be. For purposes of this Section
        3,
        the number of shares of Common Stock deemed to be issued and outstanding
        as of a
        given date shall be the sum of the number of shares of Common Stock (excluding
        treasury shares, if any) issued and outstanding.

       

      g)  Notice
        to Holder.
        

      
         

        i.  Adjustment
          to Exercise Price.
          Whenever the Exercise Price is adjusted pursuant to any provision of this
          Section 3, the Company shall promptly mail to the Holder a notice setting
          forth
          the Exercise Price after such adjustment and setting forth a brief statement
          of
          the facts requiring such adjustment. If the Company enters into a Variable
          Rate
          Transaction, despite the prohibition thereon in the Purchase Agreement, the
          Company shall be deemed to have issued Common Stock or Common Stock Equivalents
          at the lowest possible conversion or exercise price at which such securities
          may
          be converted or exercised. 

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        ii.  Notice
          to Allow Exercise by Holder.
          If (A)
          the Company shall declare a dividend (or any other distribution in whatever
          form) on the Common Stock, (B) the Company shall declare a special nonrecurring
          cash dividend on or a redemption of the Common Stock, (C) the Company shall
          authorize the granting to all holders of the Common Stock rights or warrants
          to
          subscribe for or purchase any shares of capital stock of any class or of
          any
          rights, (D) the approval of any stockholders of the Company shall be required
          in
          connection with any reclassification of the Common Stock, any consolidation
          or
          merger to which the Company is a party, any sale or transfer of all or
          substantially all of the assets of the Company, of any compulsory share
          exchange
          whereby the Common Stock is converted into other securities, cash or property,
          or (E) the Company shall authorize the voluntary or involuntary dissolution,
          liquidation or winding up of the affairs of the Company, then, in each
          case, the
          Company shall cause to be mailed to the Holder at its last address as it
          shall
          appear upon the Warrant Register of the Company, at least 20 calendar days
          prior
          to the applicable record or effective date hereinafter specified, a notice
          stating (x) the date on which a record is to be taken for the purpose of
          such
          dividend, distribution, redemption, rights or warrants, or if a record
          is not to
          be taken, the date as of which the holders of the Common Stock of record
          to be
          entitled to such dividend, distributions, redemption, rights or warrants
          are to
          be determined or (y) the date on which such reclassification, consolidation,
          merger, sale, transfer or share exchange is expected to become effective
          or
          close, and the date as of which it is expected that holders of the Common
          Stock
          of record shall be entitled to exchange their shares of the Common Stock
          for
          securities, cash or other property deliverable upon such reclassification,
          consolidation, merger, sale, transfer or share exchange; provided that
          the
          failure to mail such notice or any defect therein or in the mailing thereof
          shall not affect the validity of the corporate action required to be specified
          in such notice. The Holder is entitled to exercise this Warrant during
          the
          period commencing on the date of such notice to the effective date of the
          event
          triggering such notice.

      

       

      Section
        4. Transfer
        of Warrant.

       

      a)  Transferability.
        Subject
        to compliance with any applicable securities laws and the conditions set
        forth
        in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
        Agreement, this Warrant and all rights hereunder (including, without limitation,
        any registration rights) are transferable, in whole or in part, upon surrender
        of this Warrant at the principal office of the Company or its designated
        agent,
        together with a written assignment of this Warrant substantially in the form
        attached hereto duly executed by the Holder or its agent or attorney and
        funds
        sufficient to pay any transfer taxes payable upon the making of such transfer.
        Upon such surrender and, if required, such payment, the Company shall execute
        and deliver a new Warrant or Warrants in the name of the assignee or assignees,
        as applicable, and in the denomination or denominations specified in such
        instrument of assignment, and shall issue to the assignor a new Warrant
        evidencing the portion of this Warrant not so assigned, and this Warrant
        shall
        promptly be cancelled. The Warrant, if properly assigned, may be exercised
        by a
        new holder for the purchase of Warrant Shares without having a new Warrant
        issued. 

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      b)  New
        Warrants.
        This
        Warrant may be divided or combined with other Warrants upon presentation
        hereof
        at the aforesaid office of the Company, together with a written notice
        specifying the names and denominations in which new Warrants are to be issued,
        signed by the Holder or its agent or attorney. Subject to compliance with
        Section 4(a), as to any transfer which may be involved in such division or
        combination, the Company shall execute and deliver a new Warrant or Warrants
        in
        exchange for the Warrant or Warrants to be divided or combined in accordance
        with such notice. All Warrants issued on transfers or exchanges shall be
        dated
        the original Initial Exercise Date and shall be identical with this Warrant
        except as to the number of Warrant Shares issuable pursuant thereto.

       

      c)  Warrant
        Register.
        The
        Company shall register this Warrant, upon records to be maintained by the
        Company for that purpose (the “Warrant
        Register”),
        in
        the name of the record Holder hereof from time to time. The Company may deem
        and
        treat the registered Holder of this Warrant as the absolute owner hereof
        for the
        purpose of any exercise hereof or any distribution to the Holder, and for
        all
        other purposes, absent actual notice to the contrary.

       

      d)  Transfer
        Restrictions.
        If,
        at the
time
        of
        the surrender of this Warrant in connection with any transfer of this Warrant,
        the transfer of this Warrant shall not be either (i) registered pursuant
        to an
        effective registration
        statement under the Securities Act
        and
under
        applicable state securities or blue sky laws or (ii) eligible for resale
        without
        volume or manner-of-sale restrictions pursuant to Rule 144, the Company may
        require, as a condition of allowing such transfer, that the Holder or transferee
        of this Warrant, as the case may be, comply
        with the provisions of Section 5.7 of the Purchase Agreement.

       

      Section
        5. Miscellaneous.

       

      a)  No
        Rights as Stockholder Until Exercise.
        This
        Warrant does not entitle the Holder to any voting rights or other rights
        as a
        stockholder of the Company prior to the exercise hereof as set forth in Section
        2(e)(i). 

       

      b)  Loss,
        Theft, Destruction or Mutilation of Warrant.
        The
        Company covenants that upon receipt by the Company of evidence reasonably
        satisfactory to it of the loss, theft, destruction or mutilation of this
        Warrant
        or any stock certificate relating to the Warrant Shares, and in case of loss,
        theft or destruction, of indemnity or security reasonably satisfactory to
        it
        (which, in the case of the Warrant, shall not include the posting of any
        bond),
        and upon surrender and cancellation of such Warrant or stock certificate,
        if
        mutilated, the Company will make and deliver a new Warrant or stock certificate
        of like tenor and dated as of such cancellation, in lieu of such Warrant
        or
        stock certificate.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

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

       

      d)  Authorized
        Shares.
        

       

      The
        Company covenants that, during the period the Warrant is outstanding, it
        will
        reserve from its authorized and unissued Common Stock a sufficient number
        of
        shares to provide for the issuance of the Warrant Shares upon the exercise
        of
        any purchase rights under this Warrant. The Company further covenants that
        its
        issuance of this Warrant shall constitute full authority to its officers
        who are
        charged with the duty of executing stock certificates to execute and issue
        the
        necessary certificates for the Warrant Shares upon the exercise of the purchase
        rights under this Warrant. The Company will take all such reasonable action
        as
        may be necessary to assure that such Warrant Shares may be issued as provided
        herein without violation of any applicable law or regulation, or of any
        requirements of the Trading Market upon which the Common Stock may be listed.
        The Company covenants that all Warrant Shares which may be issued upon the
        exercise of the purchase rights represented by this Warrant will, upon exercise
        of the purchase rights represented by this Warrant, be duly authorized, validly
        issued, fully paid and nonassessable and free from all taxes, liens and charges
        created by the Company in respect of the issue thereof (other than taxes
        in
        respect of any transfer occurring contemporaneously with such issue).

       

      Except
        and to the extent as waived or consented to by the Holder, the Company shall
        not
        by any action, including, without limitation, amending its certificate of
        incorporation or through any reorganization, transfer of assets, consolidation,
        merger, dissolution, issue or sale of securities or any other voluntary action,
        avoid or seek to avoid the observance or performance of any of the terms
        of this
        Warrant, but will at all times in good faith assist in the carrying out of
        all
        such terms and in the taking of all such actions as may be necessary or
        appropriate to protect the rights of Holder as set forth in this Warrant
        against
        impairment. Without limiting the generality of the foregoing, the Company
        will
        (i) not increase the par value of any Warrant Shares above the amount payable
        therefor upon such exercise immediately prior to such increase in par value,
        (ii) take all such action as may be necessary or appropriate in order that
        the
        Company may validly and legally issue fully paid and nonassessable Warrant
        Shares upon the exercise of this Warrant and (iii) use commercially reasonable
        efforts to obtain all such authorizations, exemptions or consents from any
        public regulatory body having jurisdiction thereof, as may be, necessary
        to
        enable the Company to perform its obligations under this Warrant.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Before
        taking any action which would result in an adjustment in the number of Warrant
        Shares for which this Warrant is exercisable or in the Exercise Price, the
        Company shall obtain all such authorizations or exemptions thereof, or consents
        thereto, as may be necessary from any public regulatory body or bodies having
        jurisdiction thereof.

       

      e)  Jurisdiction.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Warrant shall be determined in accordance with the provisions of
        the
        Purchase Agreement.

       

      f)  Restrictions.
        The
        Holder acknowledges that the Warrant Shares acquired upon the exercise of
        this
        Warrant, if not registered, will have restrictions upon resale imposed by
        state
        and federal securities laws.

       

      g)  Nonwaiver
        and Expenses.
        No
        course of dealing or any delay or failure to exercise any right hereunder
        on the
        part of Holder shall operate as a waiver of such right or otherwise prejudice
        Holder’s rights, powers or remedies, notwithstanding the fact that all rights
        hereunder terminate on the Termination Date. If the Company willfully and
        knowingly fails to comply with any provision of this Warrant, which results
        in
        any material damages to the Holder, the Company shall pay to Holder such
        amounts
        as shall be sufficient to cover any costs and expenses including, but not
        limited to, reasonable attorneys’ fees, including those of appellate
        proceedings, incurred by Holder in collecting any amounts due pursuant hereto
        or
        in otherwise enforcing any of its rights, powers or remedies
        hereunder.

       

      h)  Notices.
        Any
        notice, request or other document required or permitted to be given or delivered
        to the Holder by the Company shall be delivered in accordance with the notice
        provisions of the Purchase Agreement.

       

      i)  Limitation
        of Liability.
        No
        provision hereof, in the absence of any affirmative action by Holder to exercise
        this Warrant to purchase Warrant Shares, and no enumeration herein of the
        rights
        or privileges of Holder, shall give rise to any liability of Holder for the
        purchase price of any Common Stock or as a stockholder of the Company, whether
        such liability is asserted by the Company or by creditors of the
        Company.

       

      j)  Remedies.
        The
        Holder, in addition to being entitled to exercise all rights granted by law,
        including recovery of damages, will be entitled to specific performance of
        its
        rights under this Warrant. The Company agrees that monetary damages would
        not be
        adequate compensation for any loss incurred by reason of a breach by it of
        the
        provisions of this Warrant and hereby agrees to waive and not to assert the
        defense in any action for specific performance that a remedy at law would
        be
        adequate.

       

      k)  Successors
        and Assigns.
        Subject
        to applicable securities laws, this Warrant and the rights and obligations
        evidenced hereby shall inure to the benefit of and be binding upon the
        successors of the Company and the successors and permitted assigns of Holder.
        The provisions of this Warrant are intended to be for the benefit of all
        Holders
        from time to time of this Warrant and shall be enforceable by the Holder
        or
        holder of Warrant Shares.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      l)  Amendment.
        This
        Warrant may be modified or amended or the provisions hereof waived with the
        written consent of the Company and Holders holding Warrants at least equal
        to
        67% of the Warrant Shares issuable upon exercise of all then outstanding
        Warrants.

       

      m)  Severability.
        Wherever possible, each provision of this Warrant shall be interpreted in
        such
        manner as to be effective and valid under applicable law, but if any provision
        of this Warrant shall be prohibited by or invalid under applicable law, such
        provision shall be ineffective to the extent of such prohibition or invalidity,
        without invalidating the remainder of such provisions or the remaining
        provisions of this Warrant.

       

      n)  Headings.
        The
        headings used in this Warrant are for the convenience of reference only and
        shall not, for any purpose, be deemed a part of this Warrant.

       

      

      ********************

      

      

      (Signature
        Pages Follow)

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
        officer thereunto duly authorized as of the date first above
        indicated.

       

      

       

      
        	
                CAPITAL
                  GROWTH SYSTEMS, INC.

                 

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              

      

      

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      NOTICE
        OF EXERCISE

      

      TO: CAPITAL
        GROWTH SYSTEMS, INC.

      

      (1)  The
        undersigned hereby elects to purchase ________ Warrant Shares of the Company
        pursuant to the terms of the attached Warrant (only if exercised in full),
        and
        tenders herewith payment of the exercise price in full, together with all
        applicable transfer taxes, if any.

       

      (2)  Payment
        shall take the form of (check applicable box):

       

      [
        ] in
        lawful money of the United States; or

       

      [
        ] [if
        permitted] the cancellation of such number of Warrant Shares as is necessary,
        in
        accordance with the formula set forth in subsection 2(c), to exercise this
        Warrant with respect to the maximum number of Warrant Shares purchasable
        pursuant to the cashless exercise procedure set forth in subsection
        2(c).

       

      (3)  Please
        issue a certificate or certificates representing said Warrant Shares in the
        name
        of the undersigned or in such other name as is specified below:

       

      _______________________________

       

      

      The
        Warrant Shares shall be delivered to the following DWAC Account Number or
        by
        physical delivery of a certificate to:

      

      _______________________________

       

      _______________________________

       

      _______________________________

      

      (4)
        Accredited
        Investor.
        The
        undersigned is an “accredited investor” as defined in Regulation D promulgated
        under the Securities Act of 1933, as amended.

      

      [SIGNATURE
        OF HOLDER]

       

      Name
        of
        Investing Entity:
        ________________________________________________________________________

      Signature
        of Authorized Signatory of Investing Entity:
        _________________________________________________

      Name
        of
        Authorized Signatory:
        ___________________________________________________________________

      Title
        of
        Authorized Signatory:
        ____________________________________________________________________

      Date:
        ________________________________________________________________________________________

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ASSIGNMENT
        FORM

      

      (To
        assign the foregoing warrant, execute

      this
        form
        and supply required information. 

      Do
        not
        use this form to exercise the warrant.)

      

      

      

      FOR
        VALUE
        RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and
        all
        rights evidenced thereby are hereby assigned to

       

      

      _______________________________________________
        whose address is

      

      _______________________________________________________________.

      

      

      

      _______________________________________________________________

      

      Dated:
        ______________, _______

      

      

      Holder’s
        Signature: _____________________________

      

      Holder’s
        Address: _____________________________

       

                        _____________________________

      

      

      

      Signature
        Guaranteed: ___________________________________________

      

      

      NOTE:
        The
        signature to this Assignment Form must correspond with the name as it appears
        on
        the face of the Warrant, without alteration or enlargement or any change
        whatsoever, and must be guaranteed by a bank or trust company. Officers of
        corporations and those acting in a fiduciary or other representative capacity
        should file proper evidence of authority to assign the foregoing
        Warrant.

      

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    

      EXHIBIT
        E

      

      SECURITY
        AGREEMENT

      

      This
        SECURITY AGREEMENT, dated as of March 11, 2008 (this “Agreement”),
        is
        among Capital
        Growth Systems, Inc., a Florida corporation (the
        “Company”),
        all
        of the Subsidiaries of the Company
        (such
        subsidiaries,
        the
“Guarantors”
        and
        together with the Company,
        the
“Debtors”)
        and
        the holders of the Company’s Variable Rate Senior Secured Convertible Debentures
        due five years following their initial issuance, in the original aggregate
        principal amount of up to $19,000,000 (collectively, the “Debentures”)
        signatory hereto, their endorsees, transferees and assigns (collectively,
        the
“Secured
        Parties”).

      

      W
        I T N E S S E T H:

      

      WHEREAS,
        pursuant to the Purchase Agreement (as defined in the Debentures), the Secured
        Parties have severally agreed to extend the loans to the Company evidenced
        by
        the Debentures; 

      

      WHEREAS,
        pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the
        “Guarantee”),
        the
        Guarantors
        have
        jointly and severally agreed to guarantee and act as surety for payment of
        such
        Debentures; and

      

      WHEREAS,
        in order to induce the Secured Parties to extend the loans evidenced by the
        Debentures, each Debtor has agreed to execute and deliver to the Secured
        Parties
        this Agreement and to grant the Secured Parties, pari passu
        with
        each other Secured Party and through the Agent (as defined in Section 18
        hereof), a security interest in certain property of such Debtor to secure
        the
        prompt payment, performance and discharge in full of all of the Company’s
        obligations under the Debentures and the Guarantors’ obligations under the
        Guarantee.

      

      NOW,
        THEREFORE, in consideration of the agreements herein contained and for other
        good and valuable consideration, the receipt and sufficiency of which is
        hereby
        acknowledged, the parties hereto hereby agree as follows:

      

      1.
         Certain
        Definitions.
        As used
        in this Agreement, the following terms shall have the meanings set forth
        in this
        Section 1. Terms used but not otherwise defined in this Agreement that are
        defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial
        tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general
        intangibles”, “goods”, “instruments”, “inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have
        the respective meanings given such terms in Article 9 of the UCC.

      

      (a)
         “Collateral”
means
        the collateral in which the Secured Parties are granted a security interest
        by
        this Agreement and which shall include the following personal property of
        the
        Debtors, whether presently owned or existing or hereafter acquired or coming
        into existence, wherever situated, and all additions and accessions thereto
        and
        all substitutions and replacements thereof, and all proceeds, products and
        accounts thereof, including, without limitation, all proceeds from the sale
        or
        transfer of the Collateral and of insurance covering the same and of any
        tort
        claims in connection therewith,
        and all
        dividends, interest, cash, notes, securities, equity interest or other property
        at any time and from time to time acquired, receivable or otherwise distributed
        in respect of, or in exchange for, any or all of the Pledged Securities (as
        defined below):

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (i)
        All
        goods, including, without limitation, (A) all machinery, equipment, computers,
        motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special
        and
        general tools, fixtures, test and quality control devices and other equipment
        of
        every kind and nature and wherever situated, together with all documents
        of
        title and documents representing the same, all additions and accessions thereto,
        replacements therefor, all parts therefor, and all substitutes for any of
        the
        foregoing and all other items used and useful in connection with any Debtor’s
        businesses and all improvements thereto; and (B) all inventory;

      

      (ii)
         All
        contract rights and other general intangibles, including, without limitation,
        all partnership interests, membership interests, stock or other securities,
        rights
        under any of the Organizational Documents, agreements related to the Pledged
        Securities, licenses,
        distribution and other agreements, computer software (whether “off-the-shelf”,
        licensed from any third party or developed by any Debtor), computer software
        development rights, leases, franchises, customer lists, quality control
        procedures, grants and rights, goodwill, trademarks, service marks, trade
        styles, trade names, patents, patent applications, copyrights, and income
        tax
        refunds; 

       

      (iii)
         All
        accounts, together with all instruments, all documents of title representing
        any
        of the foregoing, all rights in any merchandising, goods, equipment, motor
        vehicles and trucks which any of the same may represent, and all right, title,
        security and guaranties with respect to each account, including any right
        of
        stoppage in transit; 

      

      (iv)
         All
        documents, letter-of-credit rights, instruments and chattel paper;

      

      (v) All
        commercial tort claims;

      

      (vi) All
        deposit accounts and all cash (whether or not deposited in such deposit
        accounts);

      

      (vii) All
        investment property;

      

       (viii) All
        supporting obligations; and

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (ix) All
        files, records, books of account, business papers, and computer programs;
        and

      

      (x) the
        products and proceeds of all of the foregoing Collateral set forth in clauses
        (i)-(ix) above.

      

      Without
        limiting the generality of the foregoing, the “Collateral”
shall
        include all investment property and general intangibles respecting ownership
        and/or other equity interests in each Guarantor, including, without limitation,
        the shares of capital stock and the other equity interests listed on
Schedule
        H
        hereto
        (as the same may be modified from time to time pursuant to the terms hereof),
        and any other shares of capital stock and/or other equity interests of any
        other
        direct or indirect subsidiary of any Debtor obtained in the future, and,
        in each
        case, all certificates representing such shares and/or equity interests and,
        in
        each case, all rights, options, warrants, stock, other securities and/or
        equity
        interests that may hereafter be received, receivable or distributed in respect
        of, or exchanged for, any of the foregoing and all rights arising under or
        in
        connection with the Pledged Securities, including, but not limited to, all
        dividends, interest and cash.
        Notwithstanding anything to the contrary contained herein, upon the sale
        or
        licensing by Nexvu Technologies, LLC (“Nexvu”),
        of
        any of its, assets, personal, real or intellectual property on terms and
        conditions unanimously approved by the Board of Directors in good faith,
        the
        Secured Parties agree to release their Lien on the Collateral owned directly
        by
        Nexvu on the date hereof from its security interest herein to the extent
        subject
        to such sale or licensing.

       

      Notwithstanding
        the foregoing, nothing herein shall be deemed to constitute an assignment
        of any
        asset which, in the event of an assignment, becomes void by operation of
        applicable law or the assignment of which is otherwise prohibited by applicable
        law (in each case to the extent that such applicable law is not overridden
        by
        Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable
        law);
provided,
        however,
        that to
        the extent permitted by applicable law, this Agreement shall create a valid
        security interest in such asset and, to the extent permitted by applicable
        law,
        this Agreement shall create a valid security interest in the proceeds of
        such
        asset.

      

      (b)
         “Intellectual
        Property”
means
        the collective reference to all rights, priorities and privileges relating
        to
        intellectual property, whether arising under United States, multinational
        or
        foreign laws or otherwise, including, without limitation, (i) all copyrights
        arising under the laws of the United States, any other country or any political
        subdivision thereof, whether registered or unregistered and whether published
        or
        unpublished, all registrations and recordings thereof, and all applications
        in
        connection therewith, including, without limitation, all registrations,
        recordings and applications in the United States Copyright Office, (ii) all
        letters patent of the United States, any other country or any political
        subdivision thereof, all reissues and extensions thereof, and all applications
        for letters patent of the United States or any other country and all divisions,
        continuations and continuations-in-part thereof, (iii) all trademarks, trade
        names, corporate names, company names, business names, fictitious business
        names, trade dress, service marks, logos, domain names and other source or
        business identifiers, and all goodwill associated therewith, now existing
        or
        hereafter adopted or acquired, all registrations and recordings thereof,
        and all
        applications in connection therewith, whether in the United States Patent
        and
        Trademark Office or in any similar office or agency of the United States,
        any
        State thereof or any other country or any political subdivision thereof,
        or
        otherwise, and all common law rights related thereto, (iv) all trade secrets
        arising under the laws of the United States, any other country or any political
        subdivision thereof, (v) all rights to obtain any reissues, renewals or
        extensions of the foregoing, (vi) all licenses for any of the foregoing,
        and
        (vii) all causes of action for infringement of the foregoing.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (c) “Majority
        in Interest”
means,
        at any time of determination, a 67% or more majority in interest (based on
        then-outstanding principal amounts of Debentures at the time of such
        determination) of the Secured Parties.

      

      (d) “Necessary
        Endorsement”
means
        undated stock powers endorsed in blank or other proper instruments of assignment
        duly executed and such other instruments or documents as the Agent (as that
        term
        is defined below) may reasonably request.

      

      (e)
         “Obligations”
means
        all of the liabilities
        and obligations (primary, secondary, direct, contingent, sole, joint or several)
        due or to become due, or that are now or may be hereafter contracted or
        acquired, or owing to, of any Debtor to the Secured Parties, including, without
        limitation, all
        obligations under this Agreement, the Debentures, the Guarantee and any other
        instruments, agreements or other documents executed and/or delivered in
        connection herewith or therewith, in each case, whether now or hereafter
        existing, voluntary or involuntary, direct or indirect, absolute or contingent,
        liquidated or unliquidated, whether or not jointly owed with others, and
        whether
        or not from time to time decreased or extinguished and later increased, created
        or incurred, and all or any portion of such obligations or liabilities that
        are
        paid, to the extent all or any part of such payment is avoided or recovered
        directly or indirectly from any of the Secured Parties as a preference,
        fraudulent transfer or otherwise as such obligations may be amended,
        supplemented, converted, extended or modified from time to time. Without
        limiting the generality of the foregoing, the term “Obligations” shall include,
        without limitation: (i) principal of, and interest on the Debentures and
        the
        loans extended pursuant thereto; (ii) any and all other fees, indemnities,
        costs, obligations and liabilities of the Debtors from time to time under
        or in
        connection with this Agreement, the Debentures, the Guarantee and any other
        instruments, agreements or other documents executed and/or delivered in
        connection herewith or therewith; and (iii) all amounts (including but not
        limited to post-petition interest) in respect of the foregoing that would
        be
        payable but for the fact that the obligations to pay such amounts are
        unenforceable or not allowable due to the existence of a bankruptcy,
        reorganization or similar proceeding involving any Debtor.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (f)
         “Organizational
        Documents”
means
        with respect to any Debtor, the documents by which such Debtor was organized
        (such as a certificate of incorporation, certificate of limited partnership
        or
        articles of organization, and including, without limitation, any certificates
        of
        designation for preferred stock or other forms of preferred equity) and which
        relate to the internal governance of such Debtor (such as bylaws, a partnership
        agreement or an operating, limited liability or members agreement).

      

      (g)
         “Pledged
        Interests”
shall
        have the meaning ascribed to such term in Section 4(j).

      

      (h)
         “Pledged
        Securities”
shall
        have the meaning ascribed to such term in Section 4(i).

      

      (i) “UCC”
means
        the Uniform Commercial Code of the State of New York and or any other applicable
        law of any state or states which has jurisdiction with respect to all, or
        any
        portion of, the Collateral or this Agreement, from time to time. It is the
        intent of the parties that defined terms in the UCC should be construed in
        their
        broadest sense so that the term “Collateral” will be construed in its broadest
        sense. Accordingly if there are, from time to time, changes to defined terms
        in
        the UCC that broaden the definitions, they are incorporated herein and if
        existing definitions in the UCC are broader than the amended definitions,
        the
        existing ones shall be controlling. 

      

      2.
         Grant
        of Security Interest in Collateral.
        As an
        inducement for the Secured Parties to extend the loans as evidenced by the
        Debentures and to secure the complete and timely payment, performance and
        discharge in full, as the case may be, of all of the Obligations, each Debtor
        hereby unconditionally and irrevocably pledges, grants and hypothecates to
        the
        Secured Parties a security interest in and to, a lien upon and a right of
        set-off against all of their respective right, title and interest of whatsoever
        kind and nature in and to, the Collateral (a “Security
        Interest”
and,
        collectively, the “Security
        Interests”).

      

      3. Delivery
        of Certain Collateral.
        Contemporaneously or prior to the execution of this Agreement, each Debtor
        shall
        deliver or cause to be delivered to the Agent (a) any and all certificates
        and
        other instruments representing or evidencing the Pledged Securities, and
        (b) any
        and all certificates and other instruments or documents representing any
        of the
        other Collateral, in each case, together with all Necessary Endorsements.
        The
        Debtors are, contemporaneously with the execution hereof, delivering to Agent,
        or have previously delivered to Agent, a true and correct copy of each
        Organizational Document governing any of the Pledged Securities.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      4.  Representations,
        Warranties, Covenants and Agreements of the Debtors.
        Except
        as set forth under the corresponding section of the disclosure schedules
        delivered to the Secured Parties concurrently herewith (the “Disclosure
        Schedules”),
        which
        Disclosure Schedules shall be deemed a part hereof, each Debtor represents
        and
        warrants to, and covenants and agrees with, the Secured Parties as
        follows:

      

      (a)
        Each
        Debtor has the requisite corporate, partnership, limited liability company
        or
        other power and authority to enter into this Agreement and otherwise to carry
        out its obligations hereunder. The execution, delivery and performance by
        each
        Debtor of this Agreement and the filings contemplated therein have been duly
        authorized by all necessary action on the part of such Debtor and no further
        action is required by such Debtor. This Agreement has been duly executed
        by each
        Debtor. This Agreement constitutes the legal, valid and binding obligation
        of
        each Debtor, enforceable against each Debtor in accordance with its terms
        except
        as such enforceability may be limited by applicable bankruptcy, insolvency,
        reorganization and similar laws of general application relating to or affecting
        the rights and remedies of creditors and by general principles of
        equity.

      

      (b)
         The
        Debtors have no place of business or offices where their respective books
        of
        account and records are kept (other than temporarily at the offices of its
        attorneys or accountants) or places where Collateral is stored or located,
        except as set forth on Schedule
        A
        attached
        hereto. No Debtor owns any real property. Except as disclosed on Schedule
        A,
        none of
        such Collateral is in the possession of any consignee, bailee, warehouseman,
        agent or processor.

      

      (c)
         Except
        for Permitted Liens (as defined in the Debentures) and except as set forth
        on
Schedule
        B
        attached
        hereto, the Debtors are the sole owner of the Collateral (except for
        non-exclusive licenses granted by any Debtor in the ordinary course of
        business), free and clear of any liens, security interests, encumbrances,
        rights
        or claims, and are fully authorized to grant the Security Interests. Except
        as
        set forth on Schedule
        C
        attached
        hereto, there is not on file in any governmental or regulatory authority,
        agency
        or recording office an effective financing statement, security agreement,
        license or transfer or any notice of any of the foregoing (other than those
        that
        will be filed in favor of the Secured Parties pursuant to this Agreement)
        covering or affecting any of the Collateral. Except as set forth on Schedule
        C
        attached
        hereto and except pursuant to this Agreement, as long as this Agreement shall
        be
        in effect, the Debtors shall not execute and shall not knowingly permit to
        be on
        file in any such office or agency any other financing statement or other
        document or instrument (except to the extent filed or recorded in favor of
        the
        Secured Parties pursuant to the terms of this Agreement or as permitted in
        connection with any permitted purchase money security interests or capital
        leases that are permitted under the Debentures).

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (d)
         No
        written claim has been received that any Collateral or any Debtor's use of
        any
        Collateral violates the rights of any third party. There has been no adverse
        decision to any Debtor's claim of ownership rights in or exclusive rights
        to use
        the Collateral in any jurisdiction or to any Debtor's right to keep and maintain
        such Collateral in full force and effect, and there is no proceeding involving
        said rights pending or, to the best knowledge of any Debtor, threatened before
        any court, judicial body, administrative or regulatory agency, arbitrator
        or
        other governmental authority.

      

      (e)
         Each
        Debtor shall at all times maintain its books of account and records relating
        to
        the Collateral at its principal place of business and its Collateral at the
        locations set forth on Schedule
        A
        attached
        hereto and may not relocate such books of account and records or tangible
        Collateral unless it delivers to the Secured Parties at least 30 days prior
        to
        such relocation (i) written notice of such relocation and the new location
        thereof (which must be within the United States) and (ii) evidence that
        appropriate financing statements under the UCC and other necessary documents
        have been filed and recorded and other steps have been taken to perfect the
        Security Interests to create in favor of the Secured Parties a valid, perfected
        and continuing perfected first priority lien in the Collateral.

      

      (f)
         This
        Agreement creates in favor of the Secured Parties a valid security interest
        in
        the Collateral, subject only to Permitted Liens (as defined in the Debentures)
        securing the payment and performance of the Obligations. Upon making the
        filings
        described in the immediately following paragraph, all security interests
        created
        hereunder in any Collateral which may be perfected by filing Uniform Commercial
        Code financing statements shall have been duly perfected. Except for the
        filing
        of the Uniform Commercial Code financing statements referred to in the
        immediately following paragraph, the recordation of the Intellectual Property
        Security Agreement (as defined in Section 4(p) hereof) with respect to
        copyrights and copyright applications in the United States Copyright Office
        referred to in paragraph (m), with respect to patents and trademarks filed
        with
        the US Patent and Trademark Office with respect to federally registered patents
        and trademarks and pending applications for federal registration of patents
        and
        trademarks, the
        execution and delivery of deposit account control agreements satisfying the
        requirements of Section 9-104(a)(2) of the UCC with respect to each deposit
        account of the Debtors,
        and the
        delivery of the certificates and other instruments provided in Section
        3,
        no
        action is necessary to create, perfect or protect the security interests
        created
        hereunder. Without limiting the generality of the foregoing, except for the
        filing of said financing statements, the recordation of said Intellectual
        Property Security Agreement, and the execution and delivery of said deposit
        account control agreements, no consent of any third parties and no
        authorization, approval or other action by, and no notice to or filing with,
        any
        governmental authority or regulatory body is required for (i) the execution,
        delivery and performance of this Agreement, (ii) the creation or perfection
        of
        the Security Interests created hereunder in the Collateral or (iii) the
        enforcement of the rights of the Agent and the Secured Parties
        hereunder.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (g)
         Each
        Debtor hereby authorizes the Agent to file one or more financing statements
        under the UCC, with respect to the Security Interests, with the proper filing
        and recording agencies in any jurisdiction deemed proper by it.

      

       (h)
         The
        execution, delivery and performance of this Agreement by the Debtors does
        not
        (i) violate any of the provisions of any Organizational Documents of any
        Debtor
        or any judgment, decree, order or award of any court, governmental body or
        arbitrator or any applicable law, rule or regulation applicable to any Debtor
        or
        (ii) conflict with, or constitute a default (or an event that 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 (with or without
        notice, lapse of time or both) of, any agreement, credit facility, debt or
        other
        instrument (evidencing any Debtor's debt or otherwise) or other understanding
        to
        which any Debtor is a party or by which any property or asset of any Debtor
        is
        bound or affected. If any, all required consents (including, without limitation,
        from stockholders or creditors of any Debtor) necessary for any Debtor to
        enter
        into and perform its obligations hereunder have been obtained.

      

       (i)
         The
        capital stock and other equity interests listed on Schedule
        H
        hereto
        (the “Pledged
        Securities”)
        represent all of the capital stock and other equity interests of the Guarantors,
        and represent all capital stock and other equity interests owned, directly
        or
        indirectly, by the Company. All of the Pledged Securities are validly issued,
        fully paid and nonassessable, and the Company is the legal and beneficial
        owner
        of the Pledged Securities, free and clear of any lien, security interest
        or
        other encumbrance except for the security interests created by this Agreement
        and other Permitted Liens (as defined in the Debentures). 

      

      (j)
         The
        ownership and other equity interests in partnerships and limited liability
        companies (if any)
        included
        in the Collateral
        (the
“Pledged
        Interests”)
        by
        their express terms do not provide that they are securities governed by Article
        8 of the UCC and are not held in a securities account or by any financial
        intermediary.

      

      (k)
         Except
        for Permitted Liens (as defined in the Debentures), each Debtor shall at
        all
        times maintain the liens and Security Interests provided for hereunder as
        valid
        and perfected first priority liens and security interests in the Collateral
        in
        favor of the Secured Parties until this Agreement and the Security Interest
        hereunder shall be terminated pursuant to Section 14 hereof. Each Debtor
        hereby
        agrees to defend the same against the claims of any and all persons and
        entities. Each Debtor shall safeguard and protect all Collateral for the
        account
        of the Secured Parties. At the request of the Agent, each Debtor will sign
        and
        deliver to the Agent on behalf of the Secured Parties at any time or from
        time
        to time one or more financing statements pursuant to the UCC in form reasonably
        satisfactory to the Agent and will pay the cost of filing the same in all
        public
        offices wherever filing is, or is deemed by the Agent to be, necessary or
        desirable to effect the rights and obligations provided for herein. Without
        limiting the generality of the foregoing, each Debtor shall pay all fees,
        taxes
        and other amounts necessary to maintain the Collateral and the Security
        Interests hereunder, and each Debtor shall obtain and furnish to the Agent
        from
        time to time, upon demand, such releases and/or subordinations of claims
        and
        liens which may be required to maintain the priority of the Security Interests
        hereunder.

       

      
        
          
          

        

        
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      (l)
         Except
        as
        expressly permitted in Section 1 with respect to licenses and transfers by
        Nexvu, no Debtor will transfer, pledge, hypothecate, encumber, license, sell
        or
        otherwise dispose of any of the Collateral (except for non-exclusive licenses
        granted by a Debtor in its ordinary course of business and sales of inventory
        by
        a Debtor in its ordinary course of business) without the prior written consent
        of a Majority
        in Interest.

      

      (m) Each
        Debtor shall keep and preserve its equipment, inventory and other tangible
        Collateral in good condition, repair and order and shall not operate or locate
        any such Collateral (or cause to be operated or located) in any area excluded
        from insurance coverage.

      

      (n) Each
        Debtor shall maintain with financially sound and reputable insurers, insurance
        with respect to the Collateral, including Collateral hereafter acquired,
        against
        loss or damage of the kinds and in the amounts customarily insured against
        by
        entities of established reputation having similar properties similarly situated
        and in such amounts as are customarily carried under similar circumstances
        by
        other such entities and otherwise as is prudent for entities engaged in similar
        businesses but in any event sufficient to cover the full replacement cost
        thereof. Each Debtor shall cause each insurance policy issued in connection
        herewith to provide, and the insurer issuing such policy to certify to the
        Agent, that (a) the Agent will be named as lender loss payee and additional
        insured under each such insurance policy; (b) if such insurance be proposed
        to
        be cancelled or materially changed for any reason whatsoever, such insurer
        will
        promptly notify the Agent and such cancellation or change shall not be effective
        as to the Agent for at least thirty (30) days after receipt by the Agent
        of such
        notice, unless the effect of such change is to extend or increase coverage
        under
        the policy; and (c) the Agent will have the right (but no obligation) at
        its
        election to remedy any default in the payment of premiums within thirty (30)
        days of notice from the insurer of such default. If no Event of Default (as
        defined in the Debentures) exists and if the proceeds arising out of any
        claim
        or series of related claims do not exceed $100,000, loss payments in each
        instance will be applied by the applicable Debtor to the repair and/or
        replacement of property with respect to which the loss was incurred to the
        extent reasonably feasible, and any loss payments or the balance thereof
        remaining, to the extent not so applied, shall be payable to the applicable
        Debtor; provided,
        however,
        and
        except as set forth below, that payments received by any Debtor after an
        Event
        of Default occurs and is continuing or in excess of $100,000 for any occurrence
        or series of related occurrences shall be paid to the Agent on behalf of
        the
        Secured Parties and, if received by such Debtor, shall be held in trust for
        the
        Secured Parties and immediately paid over to the Agent unless otherwise directed
        in writing by the Agent. Notwithstanding anything to the contrary contained
        herein, so long as no Event of Default (as defined in the Debentures) exists,
        Company may apply payments in excess of $100,000 to repair or replace switching
        or routing equipment, for the purpose of restoring or establishing new customary
        circuits to address the casualty loss related to such equipment. Copies of
        such
        policies or the related certificates, in each case, naming the Agent as lender
        loss payee and additional insured shall be delivered to the Agent at least
        annually and at the time any new policy of insurance is issued.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (o)
         Each
        Debtor shall, within ten (10) days of obtaining knowledge thereof, advise
        the
        Secured Parties promptly, in sufficient detail, of any material adverse change
        in the Collateral, and of the occurrence of any event which would have a
        material adverse effect on the value of the Collateral or on the Secured
        Parties’ security interest, through the Agent, therein.

      

      (p)
         Each
        Debtor shall promptly execute and deliver to the Agent such further deeds,
        mortgages, assignments, security agreements, financing statements or other
        instruments, documents, certificates and assurances and take such further
        action
        as the Agent may from time to time request and may in its sole discretion
        deem
        necessary to perfect, protect or enforce the Secured Parties’ security interest
        in the Collateral including, without limitation, if applicable, the execution
        and delivery of a separate security agreement with respect to each Debtor’s
        Intellectual Property (“Intellectual
        Property Security Agreement”)
        in
        which the Secured Parties have been granted a security interest hereunder,
        substantially in a form reasonably acceptable to the Agent, which Intellectual
        Property Security Agreement, other than as stated therein, shall be subject
        to
        all of the terms and conditions hereof.

      

      (q)
         Each
        Debtor shall permit the Agent and its representatives and agents to inspect
        the
        Collateral during normal business hours and upon reasonable prior notice,
        and to
        make copies of records pertaining to the Collateral as may be reasonably
        requested by the Agent from time to time.

      

      (r)
         Each
        Debtor shall take all steps reasonably necessary to diligently pursue and
        seek
        to preserve, enforce and collect any rights, claims, causes of action and
        accounts receivable in respect of the Collateral.

      

      (s)
         Each
        Debtor shall promptly notify the Secured Parties in sufficient detail upon
        becoming aware of any attachment, garnishment, execution or other legal process
        levied against any Collateral and of any other information received by such
        Debtor that may materially affect the value of the Collateral, the Security
        Interest or the rights and remedies of the Secured Parties
        hereunder.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (t)
         All
        information heretofore, herein or hereafter supplied to the Secured Parties
        by
        or on behalf of any Debtor with respect to the Collateral is accurate and
        complete in all material respects as of the date furnished.

      

      (u)
         The
        Debtors shall at all times preserve and keep in full force and effect their
        respective valid existence and good standing and any rights and franchises
        material to its business.

      

      (v)
         No
        Debtor
        will change its name, type of organization, jurisdiction of organization,
        organizational identification number (if it has one), legal or corporate
        structure, or identity, or add any new fictitious name unless it provides
        at
        least 30 days prior written notice to the Secured Parties of such change
        and, at
        the time of such written notification, such Debtor provides any financing
        statements or fixture filings necessary to perfect and continue the perfection
        of the Security Interests granted and evidenced by this Agreement.

      

      (w) Except
        in
        the ordinary course of business, no Debtor may consign any of its inventory
        or
        sell any of its inventory on bill and hold, sale or return, sale on approval,
        or
        other conditional terms of sale without the consent of the
        Agent
        which shall not be unreasonably withheld.

      

      (x)
         No
        Debtor
        may relocate its chief executive office to a new location without providing
        30
        days prior written notification thereof to the Secured Parties and so long
        as,
        at the time of such written notification, such Debtor provides any financing
        statements or fixture filings necessary to perfect and continue the perfection
        of the Security Interests granted and evidenced by this Agreement.

      

      (y) Each
        Debtor was organized and remains organized solely under the laws of the state
        set forth next to such Debtor’s name in Schedule
        D
        attached
        hereto, which Schedule
        D
        sets
        forth each Debtor’s organizational identification number or, if any Debtor does
        not have one, states that one does not exist.

      

      (z) 
        (i) The
        actual name of each Debtor is the name set forth in Schedule
        D
        attached
        hereto; (ii) no Debtor has any trade names except as set forth on Schedule
        E
        attached
        hereto; (iii) no Debtor has used any name other than that stated in the preamble
        hereto or as set forth on Schedule
        E
        for the
        preceding five years; and (iv) no entity has merged into any Debtor or been
        acquired by any Debtor within the past five years except as set forth on
        Schedule
        E.

      

      (aa) At
        any
        time and from time to time that any Collateral consists of instruments,
        certificated securities or other items that require or permit possession
        by the
        secured party to perfect the security interest created hereby, the applicable
        Debtor shall deliver such Collateral to the Agent.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (bb)
         Each
        Debtor, in its capacity as issuer, hereby agrees to comply with any and all
        orders and instructions of Agent regarding the Pledged Interests consistent
        with
        the terms of this Agreement without the further consent of any Debtor as
        contemplated by Section 8-106 (or any successor section) of the UCC. Further,
        each Debtor agrees that it shall not enter into a similar agreement (or one
        that
        would confer “control” within the meaning of Article 8 of the UCC) with any
        other person or entity.

       

      (cc) Each
        Debtor shall cause all tangible chattel paper constituting Collateral to
        be
        delivered to the Agent, or, if such delivery is not possible, then to cause
        such
        tangible chattel paper to contain a legend noting that it is subject to the
        security interest created by this Agreement. To the extent that any Collateral
        consists of electronic chattel paper, the applicable Debtor shall cause the
        underlying chattel paper to be “marked” within the meaning of Section 9-105 of
        the UCC (or successor section thereto).

      

      (dd) If
        there
        is any investment property or deposit account included as Collateral that
        can be
        perfected by “control” through an account control agreement, the applicable
        Debtor shall cause such an account control agreement, in form and substance
        in
        each case satisfactory to the Agent, to be entered into and delivered to
        the
        Agent for the benefit of the Secured Parties.

      

      (ee)
         To
        the
        extent that any Collateral consists of letter-of-credit rights, the applicable
        Debtor shall cause the issuer of each underlying letter of credit to consent
        to
        an assignment of the proceeds thereof to the Secured Parties.

      

      (ff)
         To
        the
        extent that any Collateral is in the possession of any third party, the
        applicable Debtor shall join with the Agent in notifying such third party
        of the
        Secured Parties’ security interest in such Collateral and shall use its best
        efforts to obtain an acknowledgement and agreement from such third party
        with
        respect to the Collateral, in form and substance reasonably satisfactory
        to the
        Agent.

      

      (gg) If
        any
        Debtor shall at any time hold or acquire a commercial tort claim, such Debtor
        shall promptly notify the Secured Parties in a writing signed by such Debtor
        of
        the particulars thereof and grant to the Secured Parties in such writing
        a
        security interest therein and in the proceeds thereof, all upon the terms
        of
        this Agreement, with such writing to be in form and substance satisfactory
        to
        the Agent.

      

      (hh) Each
        Debtor shall immediately provide written notice to the Secured Parties of
        any
        and all accounts which arise out of contracts with any governmental authority
        and, to the extent necessary to perfect or continue the perfected status
        of the
        Security Interests in such accounts and proceeds thereof, shall execute and
        deliver to the Agent an assignment of claims for such accounts and cooperate
        with the Agent in taking any other steps required, in its judgment, under
        the
        Federal Assignment of Claims Act or any similar federal, state or local statute
        or rule to perfect or continue the perfected status of the Security Interests
        in
        such accounts and proceeds thereof.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (ii) Each
        Debtor shall cause each subsidiary
        of such
        Debtor to immediately become a party hereto (an “Additional Debtor”), by
        executing and delivering an Additional Debtor Joinder in substantially the
        form
        of Annex
        A
        attached
        hereto and comply with the provisions hereof applicable to the Debtors.
        Concurrent therewith, the Additional Debtor shall deliver replacement schedules
        for, or supplements to all other Schedules to (or referred to in) this
        Agreement, as applicable, which replacement schedules shall supersede, or
        supplements shall modify, the Schedules then in effect. The Additional Debtor
        shall also deliver such opinions of counsel, authorizing resolutions, good
        standing certificates, incumbency certificates, organizational documents,
        financing statements and other information and documentation as the Agent
        may
        reasonably request. Upon delivery of the foregoing to the Agent, the Additional
        Debtor shall be and become a party to this Agreement with the same rights
        and
        obligations as the Debtors, for all purposes hereof as fully and to the same
        extent as if it were an original signatory hereto and shall be deemed to
        have
        made the representations, warranties and covenants set forth herein as of
        the
        date of execution and delivery of such Additional Debtor Joinder, and all
        references herein to the “Debtors” shall be deemed to include each Additional
        Debtor.

      

      (jj)
         Each
        Debtor shall vote the Pledged Securities to comply with the covenants and
        agreements set forth herein and in the Debentures.

      

      (kk) Each
        Debtor shall register the pledge of the applicable Pledged Securities on
        the
        books of such Debtor. Each Debtor shall notify each issuer of Pledged Securities
        to register the pledge of the applicable Pledged Securities in the name of
        the
        Secured Parties on the books of such issuer. Further, except with respect
        to
        certificated securities delivered to the Agent, the applicable Debtor shall
        deliver to Agent an acknowledgement of pledge (which, where appropriate,
        shall
        comply with the requirements of the relevant UCC with respect to perfection
        by
        registration) signed by the issuer of the applicable Pledged Securities,
        which
        acknowledgement shall confirm that: (a) it has registered the pledge on its
        books and records; and (b) at any time directed by Agent during the continuation
        of an Event of Default, such issuer will transfer the record ownership of
        such
        Pledged Securities into the name of any designee of Agent, will take such
        steps
        as may be necessary to effect the transfer, and will comply with all other
        instructions of Agent regarding such Pledged Securities without the further
        consent of the applicable Debtor.

      

      (ll)
        In
        the
        event that, upon an occurrence of an Event of Default, Agent shall sell all
        or
        any of the Pledged Securities to another party or parties (herein called
        the
“Transferee”)
        or
        shall purchase or retain all or any of the Pledged Securities, each Debtor
        shall, to the extent applicable: (i) deliver to Agent or the Transferee,
        as the
        case may be, the articles of incorporation, bylaws, minute books, stock
        certificate books, corporate seals, deeds, leases, indentures, agreements,
        evidences of indebtedness, books of account, financial records and all other
        Organizational Documents and records of the Debtors and their direct and
        indirect subsidiaries; (ii) use its best efforts to obtain resignations of
        the
        persons then serving as officers and directors of the Debtors and their direct
        and indirect subsidiaries, if so requested; and (iii) use its best efforts
        to
        obtain any approvals that are required by any governmental or regulatory
        body in
        order to permit the sale of the Pledged Securities to the Transferee or the
        purchase or retention of the Pledged Securities by Agent and allow the
        Transferee or Agent to continue the business of the Debtors and their direct
        and
        indirect subsidiaries.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (mm) Without
        limiting the generality of the other obligations of the Debtors hereunder,
        each
        Debtor shall promptly (i) cause to be registered at the United States Copyright
        Office all of its material copyrights, (ii) cause the security interest
        contemplated hereby with respect to all Intellectual Property registered
        at the
        United States Copyright Office or United States Patent and Trademark Office
        to
        be duly recorded at the applicable office, and (iii) give the Agent notice
        whenever it acquires (whether absolutely or by license) or creates any
        additional material Intellectual Property.

      

      (nn) Each
        Debtor will from time to time, at the joint and several expense of the Debtors,
        promptly execute and deliver all such further instruments and documents,
        and
        take all such further action as may be necessary or desirable, or as the
        Agent
        may reasonably request, in order to perfect and protect any security interest
        granted or purported to be granted hereby or to enable the Secured Parties
        to
        exercise and enforce their rights and remedies hereunder and with respect
        to any
        Collateral or to otherwise carry out the purposes of this
        Agreement.

      

      (oo) Schedule
        F
        attached
        hereto lists all of the patents, patent applications, trademarks, trademark
        applications, registered copyrights, and domain names owned by any of the
        Debtors as of the date hereof. Schedule
        F
        lists
        all material licenses in favor of any Debtor for the use of any patents,
        trademarks, copyrights and domain names as of the date hereof. All material
        patents and trademarks of the Debtors have been duly recorded at the United
        States Patent and Trademark Office and all material copyrights of the Debtors
        have been duly recorded at the United States Copyright Office.

      

      (pp) Except
        as
        set forth on Schedule
        G
        attached
        hereto, none of the account debtors or other persons or entities obligated
        on
        any of the Collateral is a governmental authority covered by the Federal
        Assignment of Claims Act or any similar federal, state or local statute or
        rule
        in respect of such Collateral.

      

      5. Effect
        of Pledge on Certain Rights. If
        any of
        the Collateral subject to this Agreement consists of nonvoting equity or
        ownership interests (regardless of class, designation, preference or rights)
        that may be converted into voting equity or ownership interests upon the
        occurrence of certain events (including, without limitation, upon the transfer
        of all or any of the other stock or assets of the issuer), it is agreed that
        the
        pledge of such equity or ownership interests pursuant to this Agreement or
        the
        enforcement of any of Agent’s rights hereunder shall not be deemed to be the
        type of event which would trigger such conversion rights notwithstanding
        any
        provisions in the Organizational Documents or agreements to which any Debtor
        is
        subject or to which any Debtor is party.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      6.
         Defaults.
        The
        following events shall be “Events
        of Default”:

      

      (a)
        The
        occurrence of an Event of Default (as defined in the Debentures) under the
        Debentures;

      

      (b)
        Any
        representation or warranty of any Debtor in this Agreement shall prove to
        have
        been incorrect in any material respect when made;

      

      (c)
        The
        failure by any Debtor to observe or perform any of its obligations hereunder
        for
        five Business Days after delivery to such Debtor of notice of such failure
        by or
        on behalf of a Secured Party unless such default is capable of cure but cannot
        be cured within such time frame and such Debtor is using best efforts to
        cure
        same in a timely fashion; or

      

      (d)
        If
        any provision of this Agreement shall at any time for any reason be declared
        to
        be null and void, or the validity or enforceability thereof shall be contested
        by any Debtor, or a proceeding shall be commenced by any Debtor, or by any
        governmental authority having jurisdiction over any Debtor, seeking to establish
        the invalidity or unenforceability thereof, or any Debtor shall deny that
        any
        Debtor has any liability or obligation purported to be created under this
        Agreement.

      

       7.  Duty
        To Hold In Trust.
        

      

      (a) Upon
        the
        occurrence of any Event of Default and at any time thereafter, each Debtor
        shall, upon receipt of any revenue, income,
        dividend, interest
        or other
        sums subject to the Security Interests, whether payable pursuant to the
        Debentures or otherwise, or of any check, draft, note, trade acceptance or
        other
        instrument evidencing an obligation to pay any such sum, hold the same in
        trust
        for the Secured Parties and shall forthwith endorse and transfer any such
        sums
        or instruments, or both, to the Secured Parties, pro-rata in proportion to
        their
        respective then-currently outstanding principal amount of Debentures for
        application to the satisfaction of the Obligations (and if any Debenture
        is not
        outstanding, pro-rata in proportion to the initial purchases of the remaining
        Debentures). 

      

      (b) If
        any
        Debtor shall become entitled to receive or shall receive any securities or
        other
        property (including, without limitation, shares of Pledged Securities or
        instruments representing Pledged Securities acquired after the date hereof,
        or
        any options, warrants, rights or other similar property or certificates
        representing a dividend, or any distribution in connection with any
        recapitalization, reclassification or increase or reduction of capital, or
        issued in connection with any reorganization of such Debtor or any of its
        direct
        or indirect subsidiaries) in respect of the Pledged Securities (whether as
        an
        addition to, in substitution of, or in exchange for, such Pledged Securities
        or
        otherwise), such Debtor agrees to (i) accept the same as the agent of the
        Secured Parties; (ii) hold the same in trust on behalf of and for the benefit
        of
        the Secured Parties; and (iii) to deliver any and all certificates or
        instruments evidencing the same to Agent on or before the close of business
        on
        the fifth business day following the receipt thereof by such Debtor, in the
        exact form received together with the Necessary Endorsements, to be held
        by
        Agent subject to the terms of this Agreement as Collateral.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

       8.  Rights
        and Remedies Upon Default.
        

      

      (a) Upon
        the
        occurrence of any Event of Default and at any time thereafter, the Secured
        Parties, acting through the Agent, shall have the right to exercise all of
        the
        remedies conferred hereunder and under the Debentures, and the Secured Parties
        shall have all the rights and remedies of a secured party under the UCC.
        Without
        limitation, the Agent, for the benefit of the Secured Parties, shall have
        the
        following rights and powers:

      

      (i)
        The
        Agent shall have the right to take possession of the Collateral and, for
        that
        purpose, enter, with the aid and assistance of any person, any premises where
        the Collateral, or any part thereof, is or may be placed and remove the same,
        and each Debtor shall assemble the Collateral and make it available to the
        Agent
        at places which the Agent shall reasonably select, whether at such Debtor's
        premises or elsewhere, and make available to the Agent, without rent, all
        of
        such Debtor’s respective premises and facilities for the purpose of the Agent
        taking possession of, removing or putting the Collateral in saleable or
        disposable form.

      

      (ii) Upon
        notice to the Debtors by Agent, all rights of each Debtor to exercise the
        voting
        and other consensual rights which it would otherwise be entitled to exercise
        and
        all rights of each Debtor to receive the dividends and interest which it
        would
        otherwise be authorized to receive and retain, shall cease. Upon such notice,
        Agent shall have the right to receive, for the benefit of the Secured Parties,
        any interest, cash dividends or other payments on the Collateral and, at
        the
        option of Agent, to exercise in such Agent’s discretion all voting rights
        pertaining thereto. Without limiting the generality of the foregoing, Agent
        shall have the right (but not the obligation) to exercise all rights with
        respect to the Collateral as it were the sole and absolute owner thereof,
        including, without limitation, to vote and/or to exchange, at its sole
        discretion, any or all of the Collateral in connection with a merger,
        reorganization, consolidation, recapitalization or other readjustment concerning
        or involving the Collateral or any Debtor or any of its direct or indirect
        subsidiaries.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (iii)
        The
        Agent shall have the right to operate the business of each Debtor using the
        Collateral and shall have the right to assign, sell, lease or otherwise dispose
        of and deliver all or any part of the Collateral, at public or private sale
        or
        otherwise, either with or without special conditions or stipulations, for
        cash
        or on credit or for future delivery, in such parcel or parcels and at such
        time
        or times and at such place or places, and upon such terms and conditions
        as the
        Agent may deem commercially reasonable, all without (except as shall be required
        by applicable statute and cannot be waived) advertisement or demand upon
        or
        notice to any Debtor or right of redemption of a Debtor, which are hereby
        expressly waived. Upon each such sale, lease, assignment or other transfer
        of
        Collateral, the Agent, for the benefit of the Secured Parties, may, unless
        prohibited by applicable law which cannot be waived, purchase all or any
        part of
        the Collateral being sold, free from and discharged of all trusts, claims,
        right
        of redemption and equities of any Debtor, which are hereby waived and
        released.

      

      (iv) The
        Agent
        shall have the right (but not the obligation) to notify any account debtors
        and
        any obligors under instruments or accounts to make payments directly to the
        Agent, on behalf of the Secured Parties, and to enforce the Debtors’ rights
        against such account debtors and obligors.

      

      (v) The
        Agent, for the benefit of the Secured Parties, may (but is not obligated
        to)
        direct any financial intermediary or any other person or entity holding any
        investment property to transfer the same to the Agent, on behalf of the Secured
        Parties, or its designee.

      

      (vi) The
        Agent
        may (but is not obligated to) transfer any or all Intellectual Property
        registered in the name of any Debtor at the United States Patent and Trademark
        Office and/or Copyright Office into the name of the Secured Parties or any
        designee or any purchaser of any Collateral.

      

      (b) The
        Agent
        shall comply with any applicable law in connection with a disposition of
        Collateral and such compliance will not be considered adversely to affect
        the
        commercial reasonableness of any sale of the Collateral. The Agent may sell
        the
        Collateral without giving any warranties and may specifically disclaim such
        warranties. If the Agent sells any of the Collateral on credit, the Debtors
        will
        only be credited with payments actually made by the purchaser. In addition,
        each
        Debtor waives any and all rights that it may have to a judicial hearing in
        advance of the enforcement of any of the Agent’s rights and remedies hereunder,
        including, without limitation, its right following an Event of Default to
        take
        immediate possession of the Collateral and to exercise its rights and remedies
        with respect thereto.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      (c) For
        the
        purpose of enabling the Agent to further exercise rights and remedies under
        this
        Section 8 or elsewhere provided by agreement or applicable law, each Debtor
        hereby grants to the Agent, for the benefit of the Agent and the Secured
        Parties, an irrevocable, nonexclusive license (exercisable without payment
        of
        royalty or other compensation to such Debtor) to use, license or sublicense
        following an Event of Default, any Intellectual Property now owned or hereafter
        acquired by such Debtor, and wherever the same may be located, and including
        in
        such license access to all media in which any of the licensed items may be
        recorded or stored and to all computer software and programs used for the
        compilation or printout thereof.

      

      9.  Applications
        of Proceeds.
        The
        proceeds of any such sale, lease or other disposition of the Collateral
        hereunder or from payments made on account of any insurance policy insuring
        any
        portion of the Collateral shall be applied first, to the expenses of retaking,
        holding, storing, processing and preparing for sale, selling, and the like
        (including, without limitation, any taxes, fees and other costs incurred
        in
        connection therewith) of the Collateral, to the reasonable attorneys’ fees and
        expenses incurred by the Agent in enforcing the Secured Parties’ rights
        hereunder and in connection with collecting, storing and disposing of the
        Collateral, and then to satisfaction of the Obligations pro rata among the
        Secured Parties (based on then-outstanding principal amounts of Debentures
        at
        the time of any such determination), and to the payment of any other amounts
        required by applicable law, after which the Secured Parties shall pay to
        the
        applicable Debtor any surplus proceeds. If, upon the sale, license or other
        disposition of the Collateral, the proceeds thereof are insufficient to pay
        all
        amounts to which the Secured Parties are legally entitled, the Debtors will
        be
        liable for the deficiency, together with interest thereon, at the rate of
        16%
        per annum or the lesser amount permitted by applicable law (the “Default
        Rate”),
        and
        the reasonable fees of any attorneys employed by the Secured Parties to collect
        such deficiency. To the extent permitted by applicable law, each Debtor waives
        all claims, damages and demands against the Secured Parties arising out of
        the
        repossession, removal, retention or sale of the Collateral, unless due solely
        to
        the gross negligence or willful misconduct of the Secured Parties as determined
        by a final judgment (not subject to further appeal) of a court of competent
        jurisdiction.

      

      10. Securities
        Law Provision.
        Each
        Debtor recognizes that Agent may be limited in its ability to effect a sale
        to
        the public of all or part of the Pledged Securities by reason of certain
        prohibitions in the Securities Act of 1933, as amended, or other federal
        or
        state securities laws (collectively, the “Securities
        Laws”),
        and
        may be compelled to resort to one or more sales to a restricted group of
        purchasers who may be required to agree to acquire the Pledged Securities
        for
        their own account, for investment and not with a view to the distribution
        or
        resale thereof. Each Debtor agrees that sales so made may be at prices and
        on
        terms less favorable than if the Pledged Securities were sold to the public,
        and
        that Agent has no obligation to delay the sale of any Pledged Securities
        for the
        period of time necessary to register the Pledged Securities for sale to the
        public under the Securities Laws. Each Debtor shall cooperate with Agent
        in its
        attempt to satisfy any requirements under the Securities Laws (including,
        without limitation, registration thereunder if requested by Agent) applicable
        to
        the sale of the Pledged Securities by Agent.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      11.  Costs
        and Expenses.
        Each
        Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses
        incurred in connection with any filing required hereunder, including without
        limitation, any financing statements pursuant to the UCC, continuation
        statements, partial releases and/or termination statements related thereto
        or
        any expenses of any searches reasonably required by the Agent. The Debtors
        shall
        also pay all other claims and charges which in the reasonable opinion of
        the
        Agent is reasonably likely to prejudice, imperil or otherwise affect the
        Collateral or the Security Interests therein. The Debtors will also, upon
        demand, pay to the Agent the amount of any and all reasonable expenses,
        including the reasonable fees and expenses of its counsel and of any experts
        and
        agents, which the Agent, for the benefit of the Secured Parties, may incur
        in
        connection with the creation, perfection, protection, satisfaction, foreclosure,
        collection or enforcement of the Security Interest and the preparation,
        administration, continuance, amendment or enforcement of this Agreement and
        pay
        to the Agent the amount of any and all reasonable expenses, including the
        reasonable fees and expenses of its counsel and of any experts and agents,
        which
        the Agent, for the benefit of the Secured Parties, and the Secured Parties
        may
        incur in connection with (i) the enforcement of this Agreement, (ii) the
        custody
        or preservation of, or the sale of, collection from, or other realization
        upon,
        any of the Collateral, or (iii) the exercise or enforcement of any of the
        rights
        of the Secured Parties under the Debentures. Until so paid, any fees payable
        hereunder shall be added to the principal amount of the Debentures and shall
        bear interest at the Default Rate.

      

      12.  Responsibility
        for Collateral.
        The
        Debtors assume all liabilities and responsibility in connection with all
        Collateral, and the Obligations shall in no way be affected or diminished
        by
        reason of the loss, destruction, damage or theft of any of the Collateral
        or its
        unavailability for any reason. Without limiting the generality of the foregoing,
        (a) neither the Agent nor any Secured Party (i) has any duty (either before
        or
        after an Event of Default) to collect any amounts in respect of the Collateral
        or to preserve any rights relating to the Collateral, or (ii) has any obligation
        to clean-up or otherwise prepare the Collateral for sale, and (b) each Debtor
        shall remain obligated and liable under each contract or agreement included
        in
        the Collateral to be observed or performed by such Debtor thereunder. Neither
        the Agent nor any Secured Party shall have any obligation or liability under
        any
        such contract or agreement by reason of or arising out of this Agreement
        or the
        receipt by the Agent or any Secured Party of any payment relating to any
        of the
        Collateral, nor shall the Agent or any Secured Party be obligated in any
        manner
        to perform any of the obligations of any Debtor under or pursuant to any
        such
        contract or agreement, to make inquiry as to the nature or sufficiency of
        any
        payment received by the Agent or any Secured Party in respect of the Collateral
        or as to the sufficiency of any performance by any party under any such contract
        or agreement, to present or file any claim, to take any action to enforce
        any
        performance or to collect the payment of any amounts which may have been
        assigned to the Agent or to which the Agent or any Secured Party may be entitled
        at any time or times.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      13.  Security
        Interests Absolute.
        All
        rights of the Secured Parties and all obligations of the Debtors hereunder,
        shall be absolute and unconditional, irrespective of: (a) any lack of validity
        or enforceability of this Agreement, the Debentures or any agreement entered
        into in connection with the foregoing, or any portion hereof or thereof;
        (b) any
        change in the time, manner or place of payment or performance of, or in any
        other term of, all or any of the Obligations, or any other amendment or waiver
        of or any consent to any departure from the Debentures or any other agreement
        entered into in connection with the foregoing; (c) any exchange, release
        or
        nonperfection of any of the Collateral, or any release or amendment or waiver
        of
        or consent to departure from any other collateral for, or any guarantee,
        or any
        other security, for all or any of the Obligations; (d) any action by the
        Secured
        Parties to obtain, adjust, settle and cancel in its sole discretion any
        insurance claims or matters made or arising in connection with the Collateral;
        or (e) any other circumstance which might otherwise constitute any legal
        or
        equitable defense available to a Debtor, or a discharge of all or any part
        of
        the Security Interests granted hereby. Until the Obligations shall have been
        paid and performed in full, the rights of the Secured Parties shall continue
        even if the Obligations are barred for any reason, including, without
        limitation, the running of the statute of limitations or bankruptcy. Each
        Debtor
        expressly waives presentment, protest, notice of protest, demand, notice
        of
        nonpayment and demand for performance. In the event that at any time any
        transfer of any Collateral or any payment received by the Secured Parties
        hereunder shall be deemed by final order of a court of competent jurisdiction
        to
        have been a voidable preference or fraudulent conveyance under the bankruptcy
        or
        insolvency laws of the United States, or shall be deemed to be otherwise
        due to
        any party other than the Secured Parties, then, in any such event, each Debtor’s
        obligations hereunder shall survive cancellation of this Agreement, and shall
        not be discharged or satisfied by any prior payment thereof and/or cancellation
        of this Agreement, but shall remain a valid and binding obligation enforceable
        in accordance with the terms and provisions hereof. Each Debtor waives all
        right
        to require the Secured Parties to proceed against any other person or
entity
        or
to
        apply
        any Collateral which the Secured Parties may hold at any time, or to marshal
        assets, or to pursue any other remedy. Each Debtor waives any defense arising
        by
        reason of the application of the statute of limitations to any obligation
        secured hereby.

      

      14.
         Term
        of Agreement.
        This
        Agreement and the Security Interests shall terminate on the date on which
        all
        payments under the Debentures have been indefeasibly paid in full and all
        other
        Obligations have been paid or discharged; provided, however, that all
        indemnities of the Debtors contained in this Agreement (including, without
        limitation, Annex B hereto) shall survive and remain operative and in full
        force
        and effect regardless of the termination of this Agreement.

      

      15.
         Power
        of Attorney; Further Assurances.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (a)
         Each
        Debtor authorizes the Agent, and does hereby make, constitute and appoint
        the
        Agent and its officers, agents, successors or assigns with full power of
        substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
        the name of the Agent or such Debtor, to, after the occurrence and during
        the
        continuance of an Event of Default, (i) endorse any note, checks, drafts,
        money
        orders or other instruments of payment (including payments payable under
        or in
        respect of any policy of insurance) in respect of the Collateral that may
        come
        into possession of the Agent; (ii) to sign and endorse any financing statement
        pursuant to the UCC or any invoice, freight or express bill, bill of lading,
        storage or warehouse receipts, drafts against debtors, assignments,
        verifications and notices in connection with accounts, and other documents
        relating to the Collateral; (iii) to pay or discharge taxes, liens, security
        interests or other encumbrances at any time levied or placed on or threatened
        against the Collateral; (iv) to demand, collect, receipt for, compromise,
        settle
        and sue for monies due in respect of the Collateral; (v) to transfer any
        Intellectual Property or provide licenses respecting any Intellectual Property;
        and (vi) generally, at the option of the Agent, and at the expense of the
        Debtors, at any time, or from time to time, to execute and deliver any and
        all
        documents and instruments and to do all acts and things which the Agent deems
        necessary to protect, preserve and realize upon the Collateral and the Security
        Interests granted therein in order to effect the intent of this Agreement
        and
        the Debentures all as fully and effectually as the Debtors might or could
        do;
        and each Debtor hereby ratifies all that said attorney shall lawfully do
        or
        cause to be done by virtue hereof. This power of attorney is coupled with
        an
        interest and shall be irrevocable for the term of this Agreement and thereafter
        as long as any of the Obligations shall be outstanding. The
        designation set forth herein shall be deemed to amend and supersede any
        inconsistent provision in the Organizational Documents or other documents
        or
        agreements to which any Debtor is subject or to which any Debtor is a party.
        Without
        limiting the generality of the foregoing, after the occurrence and during
        the
        continuance of an Event of Default, each Secured Party is specifically
        authorized to execute and file any applications for or instruments of transfer
        and assignment of any patents, trademarks, copyrights or other Intellectual
        Property with the United States Patent and Trademark Office and the United
        States Copyright Office.

      

      (b)
         On
        a
        continuing basis, each Debtor will make, execute, acknowledge, deliver, file
        and
        record, as the case may be, with the proper filing and recording agencies
        in any
        jurisdiction, including, without limitation, the jurisdictions indicated
        on
Schedule
        C
        attached
        hereto, all such instruments, and take all such action as may reasonably
        be
        deemed necessary or advisable, or as reasonably requested by the Agent, to
        perfect the Security Interests granted hereunder and otherwise to carry out
        the
        intent and purposes of this Agreement, or for assuring and confirming to
        the
        Agent the grant or perfection of a perfected security interest in all the
        Collateral under the UCC.

      

      (c)
         Each
        Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact,
        with full authority in the place and instead of such Debtor and in the name
        of
        such Debtor, from time to time in the Agent’s discretion, to take any action and
        to execute any instrument which the Agent may deem necessary or advisable
        to
        accomplish the purposes of this Agreement, including the filing, in its sole
        discretion, of one or more financing or continuation statements and amendments
        thereto, relative to any of the Collateral without the signature of such
        Debtor
        where permitted by law, which financing statements may (but need not) describe
        the Collateral as “all assets” or “all personal property” or words of like
        import, and ratifies all such actions taken by the Agent. This power of attorney
        is coupled with an interest and shall be irrevocable for the term of this
        Agreement and thereafter as long as any of the Obligations shall be
        outstanding.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      16.  Notices.
        All
        notices, requests, demands and other communications hereunder shall be subject
        to the notice provision of the Purchase Agreement (as such term is defined
        in
        the Debentures).

      

      17.  Other
        Security.
        To the
        extent that the Obligations are now or hereafter secured by property other
        than
        the Collateral or by the guarantee, endorsement or property of any other
        person,
        firm, corporation or other entity, then the Agent shall have the right, in
        its
        sole discretion, to pursue, relinquish, subordinate, modify or take any other
        action with respect thereto, without in any way modifying or affecting any
        of
        the Secured Parties’ rights and remedies hereunder.

      

      18.  Appointment
        of Agent.
        The
        Secured Parties hereby appoint Enable Growth Partners, LP to act as their
        agent
        (“Enable”
or
        “Agent”)
        for
        purposes of exercising any and all rights and remedies of the Secured Parties
        hereunder. Such appointment shall continue until revoked in writing by a
        Majority
        in Interest, at which time a Majority in Interest
        shall
        appoint a new Agent, provided that Enable may not be removed as Agent unless
        Enable shall then hold less than $250,000 in principal amount of
        Debentures;
        provided,
        further,
        that
        such removal may occur only if each of the other Secured Parties shall then
        hold
        not less than an aggregate of $500,000 in principal amount of Debentures.
        The
        Agent
        shall have the rights, responsibilities and immunities set forth in Annex
        B
        hereto.

       

      19.  Miscellaneous.

      

      (a)
         No
        course
        of dealing between the Debtors and the Secured Parties, nor any failure to
        exercise, nor any delay in exercising, on the part of the Secured Parties,
        any
        right, power or privilege hereunder or under the Debentures shall operate
        as a
        waiver thereof; nor shall any single or partial exercise of any right, power
        or
        privilege hereunder or thereunder preclude any other or further exercise
        thereof
        or the exercise of any other right, power or privilege.

      

      (b)
         All
        of
        the rights and remedies of the Secured Parties with respect to the Collateral,
        whether established hereby or by the Debentures or by any other agreements,
        instruments or documents or by law shall be cumulative and may be exercised
        singly or concurrently.

      

      (c)
         This
        Agreement,
        together with the exhibits and schedules hereto, contain the entire
        understanding of the parties with respect to the subject matter hereof and
        supersede all prior agreements and understandings, oral or written, with
        respect
        to such matters, which the parties acknowledge have been merged into this
        Agreement and the exhibits and schedules hereto.
        No
        provision of this Agreement may be waived, modified, supplemented or amended
        except in a written instrument signed, in the case of an amendment, by the
        Debtors and the Secured Parties holding 67% or more of the principal amount
        of
        the Debentures then outstanding or, in the case of a waiver, by the party
        against whom enforcement of any such waived provision is sought. 

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      (d)
         If
        any
        term, provision, covenant or restriction of this Agreement is held by a court
        of
        competent jurisdiction to be invalid, illegal, void or unenforceable, the
        remainder of the terms, provisions, covenants and restrictions set forth
        herein
        shall remain in full force and effect and shall in no way be affected, impaired
        or invalidated, and the parties hereto shall use their commercially reasonable
        efforts to find and employ an alternative means to achieve the same or
        substantially the same result as that contemplated by such term, provision,
        covenant or restriction. It is hereby stipulated and declared to be the
        intention of the parties that they would have executed the remaining terms,
        provisions, covenants and restrictions without including any of such that
        may be
        hereafter declared invalid, illegal, void or unenforceable.

      

      (e)
         No
        waiver
        of any default with respect to any provision, condition or requirement of
        this
        Agreement shall be deemed to be a continuing waiver in the future or a waiver
        of
        any subsequent default or a waiver of any other provision, condition or
        requirement hereof, nor shall any delay or omission of any party to exercise
        any
        right hereunder in any manner impair the exercise of any such
        right.

      

      (f)
         This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their successors and permitted assigns. The Company and the Guarantors may
        not
        assign this Agreement or any rights or obligations hereunder without the
        prior
        written consent of each Secured Party (other than by merger). Any Secured
        Party
        may assign any or all of its rights under this Agreement to any Person (as
        defined in the Purchase Agreement) to whom such Secured Party assigns or
        transfers any Obligations, provided such transferee agrees in writing to
        be
        bound, with respect to the transferred Obligations, by the provisions of
        this
        Agreement that apply to the “Secured Parties.”

      

      (g)
         Each
        party shall take such further action and execute and deliver such further
        documents as may be necessary or appropriate in order to carry out the
        provisions and purposes of this Agreement.

      

      (h)
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Agreement shall be governed by and construed and enforced in accordance
        with the internal laws of the State of New York, without regard to the
        principles of conflicts of law thereof. Each Debtor agrees that all proceedings
        concerning the interpretations, enforcement and defense of the transactions
        contemplated by this Agreement and the Debentures (whether brought against
        a
        party hereto or its respective affiliates, directors, officers, shareholders,
        partners, members, employees or agents) shall be commenced exclusively in
        the
        state and federal courts sitting in the City of New York, Borough of Manhattan.
        Each Debtor 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 proceeding, any claim that it is
        not
        personally subject to the jurisdiction of any such court, that such proceeding
        is improper. Each party hereto hereby irrevocably waives personal service
        of
        process and consents to process being served in any such proceeding by mailing
        a
        copy thereof via registered or certified mail or overnight delivery (with
        evidence of delivery) to such party at the address in effect for notices
        to it
        under this Agreement and agrees that such service shall constitute good and
        sufficient service of process and notice thereof. Nothing contained herein
        shall
        be deemed to limit in any way any right to serve process in any manner permitted
        by law. Each party hereto hereby irrevocably waives, to the fullest extent
        permitted by applicable law, any and all right to trial by jury in any legal
        proceeding arising out of or relating to this Agreement or the transactions
        contemplated hereby. 

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      (i)
         This
        Agreement may be executed in any number of counterparts, each of which when
        so
        executed shall be deemed to be an original and, all of which taken together
        shall constitute one and the same Agreement. In the event that any signature
        is
        delivered by facsimile transmission, such signature shall create a valid
        binding
        obligation of the party executing (or on whose behalf such signature is
        executed) the same with the same force and effect as if such facsimile signature
        were the original thereof.

      

      (j) All
        Debtors shall jointly and severally be liable for the obligations of each
        Debtor
        to the Secured Parties hereunder.

      

      (k) Each
        Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured
        Parties and their respective partners, members, shareholders, officers,
        directors, employees and agents (and any other persons with other titles
        that
        have similar functions) (collectively, “Indemnitees”)
        from
        and against any and all losses, claims, liabilities, damages, penalties,
        suits,
        costs and expenses, of any kind or nature, (including fees relating to the
        cost
        of investigating and defending any of the foregoing) imposed on, incurred
        by or
        asserted against such Indemnitee in any way related to or arising from or
        alleged to arise from this Agreement or the Collateral, except any such losses,
        claims, liabilities, damages, penalties, suits, costs and expenses which
        result
        from the gross negligence or willful misconduct of the Indemnitee as determined
        by a final, nonappealable decision of a court of competent jurisdiction.
        This
        indemnification provision is in addition to, and not in limitation of, any
        other
        indemnification provision in the Debentures, the Purchase Agreement (as such
        term is defined in the Debentures) or any other agreement, instrument or
        other
        document executed or delivered in connection herewith or therewith.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      (l) Nothing
        in this Agreement shall be construed to subject Agent or any Secured Party
        to
        liability as a partner in any Debtor or any if its direct or indirect
        subsidiaries that is a partnership or as a member in any Debtor or any of
        its
        direct or indirect subsidiaries that is a limited liability company, nor
        shall
        Agent or any Secured Party be deemed to have assumed any obligations under
        any
        partnership agreement or limited liability company agreement, as applicable,
        of
        any such Debtor or any if its direct or indirect subsidiaries or otherwise,
        unless and until any such Secured Party exercises its right to be substituted
        for such Debtor as a partner or member, as applicable, pursuant
        hereto.

      

      (m)
         To
        the
        extent that the grant of the security interest in the Collateral and the
        enforcement of the terms hereof require the consent, approval or action of
        any
        partner or member, as applicable, of any Debtor or any direct or indirect
        subsidiary of any Debtor or compliance with any provisions of any of the
        Organizational Documents, the Debtors hereby grant such consent and approval
        and
        waive any such noncompliance with the terms of said documents.

      

      [SIGNATURE
        PAGES FOLLOW]

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this Security
        Agreement to be duly executed on the day and year first above
        written.

      

      
        	
                CAPITAL
                  GROWTH SYSTEMS, INC.

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              
	 
	
                FNS
                  2007, INC.

                 

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              
	 
	
                NEXVU
                  TECHNOLOGIES, LLC

                 

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              
	 
	
                20/20
                  TECHNOLOGIES, INC.

                 

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              
	 
	
                20/20
                  TECHNOLOGIES I, LLC

                 

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              

      

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      
        	 
	
                CENTREPATH,
                  INC.

                 

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              
	 
	
                MAGENTA
                  NETLOGIC, LIMITED

                 

              
	
                By:__________________________________________

                     
                  Name:

                     
                  Title:

              

      

      

       

      

      

      [SIGNATURE
        PAGE OF HOLDERS FOLLOWS]

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      [SIGNATURE
        PAGE OF HOLDERS TO CGSY SA]

       

      Name
        of
        Investing Entity: __________________________

       

      Signature
        of Authorized Signatory of Investing entity:
        _________________________

       

      Name
        of
        Authorized Signatory: _________________________

       

      Title
        of
        Authorized Signatory: __________________________

       

       

      [SIGNATURE
        PAGE OF HOLDERS FOLLOWS]

      

      

      

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      

      ANNEX
        A

      to

      SECURITY

      AGREEMENT

      

      FORM
        OF ADDITIONAL DEBTOR JOINDER

      

      Security
        Agreement dated as of March ___, 2008 made by

      Capital
        Growth Systems, Inc.

      and
        its
        subsidiaries party thereto from time to time, as Debtors

      to
        and in
        favor of

      the
        Secured Parties identified therein (the “Security
        Agreement”)

      

      Reference
        is made to the Security Agreement as defined above; capitalized terms used
        herein and not otherwise defined herein shall have the meanings given to
        such
        terms in, or by reference in, the Security Agreement.

      

      The
        undersigned hereby agrees that upon delivery of this Additional Debtor Joinder
        to the Secured Parties referred to above, the undersigned shall (a) be an
        Additional Debtor under the Security Agreement, (b) have all the rights and
        obligations of the Debtors under the Security Agreement as fully and to the
        same
        extent as if the undersigned was an original signatory thereto and (c) be
        deemed
        to have made the representations and warranties set forth therein as of the
        date
        of execution and delivery of this Additional Debtor Joinder. WITHOUT LIMITING
        THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE
        SECURED PARTIES A SECURITY INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
        IN
        THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY
        TRIAL
        PROVISIONS SET FORTH THEREIN.

      

      Attached
        hereto are supplemental and/or replacement Schedules to the Security Agreement,
        as applicable.

      

      An
        executed copy of this Joinder shall be delivered to the Secured Parties,
        and the
        Secured Parties may rely on the matters set forth herein on or after the
        date
        hereof. This Joinder shall not be modified, amended or terminated without
        the
        prior written consent of the Secured Parties.

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in
        the
        name and on behalf of the undersigned.

      

        
          	 	
                  [Name
                    of Additional Debtor]

                
	 	 
	 	
                  By:

                
	 	 
	 	
                  Name:

                
	 	
                  Title:

                
	 	 
	 	
                  Address:

                
	 	 
	 	 
	 	 
	 	 
	 	 
	
                  Dated:

                	 

        

      

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      ANNEX
        B

      to

      SECURITY

      AGREEMENT

      

      THE
        AGENT

      

      1.
        Appointment. The
        Secured Parties (all capitalized terms used herein and not otherwise defined
        shall have the respective meanings provided in the Security Agreement to
        which
        this Annex B is attached (the "Agreement")),
        by
        their acceptance of the benefits of the Agreement, hereby designate Enable
        Growth Partners, LP (“Enable”
or
        “Agent”)
        as the
        Agent to act as specified herein and in the Agreement. Each Secured Party
        shall
        be deemed irrevocably to authorize the Agent to take such action on its behalf
        under the provisions of the Agreement and any other Transaction Document
        (as
        such term is defined in the Purchase Agreement) and to exercise such powers
        and
        to perform such duties hereunder and thereunder as are specifically delegated
        to
        or required of the Agent by the terms hereof and thereof and such other powers
        as are reasonably incidental thereto. The Agent may perform any of its duties
        hereunder by or through its agents or employees.

      

      2.
        Nature
        of Duties.
        The
        Agent shall have no duties or responsibilities except those expressly set
        forth
        in the Agreement. Neither the Agent nor any of its partners, members,
        shareholders, officers, directors, employees or agents shall be liable for
        any
        action taken or omitted by it as such under the Agreement or hereunder or
        in
        connection herewith or therewith, be responsible for the consequence of any
        oversight or error of judgment or answerable for any loss, unless caused
        solely
        by its or their gross negligence or willful misconduct as determined by a
        final
        judgment (not subject to further appeal) of a court of competent jurisdiction.
        The duties of the Agent shall be mechanical and administrative in nature;
        the
        Agent shall not have by reason of the Agreement or any other Transaction
        Document a fiduciary relationship in respect of any Debtor or any Secured
        Party;
        and nothing in the Agreement or any other Transaction Document, expressed
        or
        implied, is intended to or shall be so construed as to impose upon the Agent
        any
        obligations in respect of the Agreement or any other Transaction Document
        except
        as expressly set forth herein and therein.

      

      3.
        Lack
        of Reliance on the Agent.
        Independently and without reliance upon the Agent, each Secured Party, to
        the
        extent it deems appropriate, has made and shall continue to make (i) its
        own
        independent investigation of the financial condition and affairs of the Company
        and its subsidiaries in connection with such Secured Party’s investment in the
        Debtors, the creation and continuance of the Obligations, the transactions
        contemplated by the Transaction Documents, and the taking or not taking of
        any
        action in connection therewith, and (ii) its own appraisal of the
        creditworthiness of the Company and its subsidiaries, and of the value of
        the
        Collateral from time to time, and the Agent shall have no duty or
        responsibility, either initially or on a continuing basis, to provide any
        Secured Party with any credit, market or other information with respect thereto,
        whether coming into its possession before any Obligations are incurred or
        at any
        time or times thereafter. The Agent shall not be responsible to the Debtors
        or
        any Secured Party for any recitals, statements, information, representations
        or
        warranties herein or in any document, certificate or other writing delivered
        in
        connection herewith, or for the execution, effectiveness, genuineness, validity,
        enforceability, perfection, collectibility, priority or sufficiency of the
        Agreement or any other Transaction Document, or for the financial condition
        of
        the Debtors or the value of any of the Collateral, or be required to make
        any
        inquiry concerning either the performance or observance of any of the terms,
        provisions or conditions of the Agreement or any other Transaction Document,
        or
        the financial condition of the Debtors, or the value of any of the Collateral,
        or the existence or possible existence of any default or Event of Default
        under
        the Agreement, the Debentures or any of the other Transaction
        Documents.

       

      
        
          
          

        

        
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      4.
        Certain
        Rights of the Agent.
        The
        Agent shall have the right to take any action with respect to the Collateral,
        on
        behalf of all of the Secured Parties. To the extent practical, the Agent
        shall
        request instructions from the Secured Parties with respect to any material
        act
        or action (including failure to act) in connection with the Agreement or
        any
        other Transaction Document, and shall be entitled to act or refrain from
        acting
        in accordance with the instructions of a Majority in Interest; if such
        instructions are not provided despite the Agent’s request therefor, the Agent
        shall be entitled to refrain from such act or taking such action, and if
        such
        action is taken, shall be entitled to appropriate indemnification from the
        Secured Parties in respect of actions to be taken by the Agent; and the Agent
        shall not incur liability to any person or entity by reason of so refraining.
        Without limiting the foregoing, (a) no Secured Party shall have any right
        of
        action whatsoever against the Agent as a result of the Agent acting or
        refraining from acting hereunder in accordance with the terms of the Agreement
        or any other Transaction Document, and the Debtors shall have no right to
        question or challenge the authority of, or the instructions given to, the
        Agent
        pursuant to the foregoing and (b) the Agent shall not be required to take
        any
        action which the Agent believes (i) could reasonably be expected to expose
        it to
        personal liability or (ii) is contrary to this Agreement, the Transaction
        Documents or applicable law.

      

      5.
        Reliance.
        The
        Agent shall be entitled to rely, and shall be fully protected in relying,
        upon
        any writing, resolution, notice, statement, certificate, telex, teletype
        or
        telecopier message, cablegram, radiogram, order or other document or telephone
        message signed, sent or made by the proper person or entity, and, with respect
        to all legal matters pertaining to the Agreement and the other Transaction
        Documents and its duties thereunder, upon advice of counsel selected by it
        and
        upon all other matters pertaining to this Agreement and the other Transaction
        Documents and its duties thereunder, upon advice of other experts selected
        by
        it. Anything to the contrary notwithstanding, the Agent shall have no obligation
        whatsoever to any Secured Party to assure that the Collateral exists or is
        owned
        by the Debtors or is cared for, protected or insured or that the liens granted
        pursuant to the Agreement have been properly or sufficiently or lawfully
        created, perfected, or enforced or are entitled to any particular
        priority.

       

      
        
          
          

        

        
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      6.
        Indemnification.
        To the
        extent that the Agent is not reimbursed and indemnified by the Debtors, the
        Secured Parties will jointly and severally reimburse and indemnify the Agent,
        in
        proportion to their initially purchased respective principal amounts of
        Debentures, from and against any and all liabilities, obligations, losses,
        damages, penalties, actions, judgments, suits, costs, expenses or disbursements
        of any kind or nature whatsoever which may be imposed on, incurred by or
        asserted against the Agent in performing its duties hereunder or under the
        Agreement or any other Transaction Document, or in any way relating to or
        arising out of the Agreement or any other Transaction Document except for
        those
        determined by a final judgment (not subject to further appeal) of a court
        of
        competent jurisdiction to have resulted solely from the Agent's own gross
        negligence or willful misconduct. Prior to taking any action hereunder as
        Agent,
        the Agent may require each Secured Party to deposit with it sufficient sums
        as
        it determines in good faith is necessary to protect the Agent for costs and
        expenses associated with taking such action.

      

      7.
        Resignation
        by the Agent. 

       

      (a)
        The
        Agent may resign from the performance of all its functions and duties under
        the
        Agreement and the other Transaction Documents at any time by giving 30 days'
        prior written notice (as provided in the Agreement) to the Debtors and the
        Secured Parties. Such resignation shall take effect upon the appointment
        of a
        successor Agent pursuant to clauses (b) and (c) below.

      

      (b)
        Upon
        any such notice of resignation, the Secured Parties, acting by a Majority
        in Interest,
        shall
        appoint a successor Agent hereunder.

      

      (c)
        If a
        successor Agent shall not have been so appointed within said 30-day period,
        the
        Agent shall then appoint a successor Agent who shall serve as Agent until
        such
        time, if any, as the Secured Parties appoint a successor Agent as provided
        above. If a successor Agent has not been appointed within such 30-day period,
        the Agent may petition any court of competent jurisdiction or may interplead
        the
        Debtors and the Secured Parties in a proceeding for the appointment of a
        successor Agent, and all fees, including, but not limited to, extraordinary
        fees
        associated with the filing of interpleader and expenses associated therewith,
        shall be payable by the Debtors on demand.

      

      8.
        Rights
        with respect to Collateral.
        Each
        Secured Party agrees with all other Secured Parties and the Agent (i) that
        it
        shall not, and shall not attempt to, exercise any rights with respect to
        its
        security interest in the Collateral, whether pursuant to any other agreement
        or
        otherwise (other than pursuant to this Agreement), or take or institute any
        action against the Agent or any of the other Secured Parties in respect of
        the
        Collateral or its rights hereunder (other than any such action arising from
        the
        breach of this Agreement) and (ii) that such Secured Party has no other rights
        with respect to the Collateral other than as set forth in this Agreement
        and the
        other Transaction Documents. Upon the acceptance of any appointment as Agent
        hereunder by a successor Agent, such successor Agent shall thereupon succeed
        to
        and become vested with all the rights, powers, privileges and duties of the
        retiring Agent and the retiring Agent shall be discharged from its duties
        and
        obligations under the Agreement.  After any retiring Agent’s resignation or
        removal hereunder as Agent, the provisions of the Agreement including this
        Annex
        B shall inure to its benefit as to any actions taken or omitted to be taken
        by
        it while it was Agent.

      

      
        
          
          

        

        
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      EXHIBIT
        F

       

      SUBSIDIARY
        GUARANTEE

       

      SUBSIDIARY
        GUARANTEE, dated as of March 11, 2008 (this “Guarantee”), made by each of the
        signatories hereto (together with any other entity that may become a party
        hereto as provided herein, the “Guarantors”), in favor of the purchasers
        signatory (together with their permitted assigns, the “Purchasers”) to that
        certain Securities Purchase Agreement, dated as of the date hereof, between
        Capital
        Growth Systems, Inc.,
        a
        Florida corporation (the “Company”) and the Purchasers. 

       

      WITNESSETH:

       

      WHEREAS,
        pursuant to that certain Securities Purchase Agreement, dated as of the date
        hereof, by and between the Company and the Purchasers (the “Purchase
        Agreement”), the Company has agreed to sell and issue to the Purchasers, and the
        Purchasers have agreed to purchase from the Company the Company’s Variable
        Rate Senior
        Secured Convertible Debentures, due five years following their issuance (the
        “Debentures”), subject to the terms and conditions set forth therein;
        and

       

      WHEREAS,
        each Guarantor will directly benefit from the extension of credit to the
        Company
        represented by the issuance of the Debentures; and 

       

      NOW,
        THEREFORE, in consideration of the premises and to induce the Purchasers
        to
        enter into the Purchase Agreement and to carry out the transactions contemplated
        thereby, each Guarantor hereby agrees with the Purchasers as
        follows:

       

      1.  Definitions.
        Unless
        otherwise defined herein, terms defined in the Purchase Agreement and used
        herein shall have the meanings given to them in the Purchase Agreement. The
        words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import
        when used in this Guarantee shall refer to this Guarantee as a whole and
        not to
        any particular provision of this Guarantee, and Section and Schedule references
        are to this Guarantee unless otherwise specified. The meanings given to terms
        defined herein shall be equally applicable to both the singular and plural
        forms
        of such terms. The following terms shall have the following
        meanings:

       

      “Guarantee”
        means this Subsidiary Guarantee, as the same may be amended, supplemented
        or
        otherwise modified from time to time.

       

      “Obligations”
        means, in addition to all other costs and expenses of collection incurred
        by
        Purchasers in enforcing any of such Obligations and/or this Guarantee, all
        of
        the liabilities and obligations (primary, secondary, direct, contingent,
        sole,
        joint or several) due or to become due, or that are now or may be hereafter
        contracted or acquired, or owing to, of the Company or any Guarantor to the
        Purchasers, including, without limitation, all obligations under this Guarantee,
        the Debentures and any other instruments, agreements or other documents executed
        and/or delivered in connection herewith or therewith, in each case, whether
        now
        or hereafter existing, voluntary or involuntary, direct or indirect, absolute
        or
        contingent, liquidated or unliquidated, whether or not jointly owed with
        others,
        and whether or not from time to time decreased or extinguished and later
        increased, created or incurred, and all or any portion of such obligations
        or
        liabilities that are paid, to the extent all or any part of such payment
        is
        avoided or recovered directly or indirectly from any of the Purchasers as
        a
        preference, fraudulent transfer or otherwise as such obligations may be amended,
        supplemented, converted, extended or modified from time to time. Without
        limiting the generality of the foregoing, the term “Obligations” shall include,
        without limitation: (i) principal of, and interest on the Debentures and
        the
        loans extended pursuant thereto; (ii) any and all other fees, indemnities,
        costs, obligations and liabilities of the Company or any Guarantor from time
        to
        time under or in connection with this Guarantee, the Debentures and any other
        instruments, agreements or other documents executed and/or delivered in
        connection herewith or therewith; and (iii) all amounts (including but not
        limited to post-petition interest) in respect of the foregoing that would
        be
        payable but for the fact that the obligations to pay such amounts are
        unenforceable or not allowable due to the existence of a bankruptcy,
        reorganization or similar proceeding involving the Company or any Guarantor.
        

       

      
        
          
          

        

        
          S1-1

          
            

          

        

        
          
          

        

      

       

      2.  Guarantee.

       

      (a)  Guarantee.

       

      (i)  The
        Guarantors hereby, jointly and severally, unconditionally and irrevocably,
        guarantee to the Purchasers and their respective successors, indorsees,
        transferees and assigns, the prompt and complete payment and performance
        when
        due (whether at the stated maturity, by acceleration or otherwise) of the
        Obligations. 

       

      (ii)  Anything
        herein or in any other Transaction Document to the contrary notwithstanding,
        the
        maximum liability of each Guarantor hereunder and under the other Transaction
        Documents shall in no event exceed the amount which can be guaranteed by
        such
        Guarantor under applicable federal and state laws, including laws relating
        to
        the insolvency of debtors, fraudulent conveyance or transfer or laws affecting
        the rights of creditors generally (after giving effect to the right of
        contribution established in Section
        2(b)).
        

       

      (iii)  Each
        Guarantor agrees that the Obligations may at any time and from time to time
        exceed the amount of the liability of such Guarantor hereunder without impairing
        the guarantee contained in this Section
        2
        or
        affecting the rights and remedies of the Purchasers hereunder.

       

      (iv)  The
        guarantee contained in this Section
        2
        shall
        remain in full force and effect until all the Obligations and the obligations
        of
        each Guarantor under the guarantee contained in this Section
        2
        shall
        have been satisfied by indefeasible payment in full. 

       

      (v)  No
        payment made by the Company, any of the Guarantors, any other guarantor or
        any
        other Person or received or collected by the Purchasers from the Company,
        any of
        the Guarantors, any other guarantor or any other Person by virtue of any
        action
        or proceeding or any set-off or appropriation or application at any time
        or from
        time to time in reduction of or in payment of the Obligations shall be deemed
        to
        modify, reduce, release or otherwise affect the liability of any Guarantor
        hereunder which shall, notwithstanding any such payment (other than any payment
        made by such Guarantor in respect of the Obligations or any payment received
        or
        collected from such Guarantor in respect of the Obligations), remain liable
        for
        the Obligations up to the maximum liability of such Guarantor hereunder until
        the Obligations are indefeasibly paid in full.

       

      (vi)  Notwithstanding
        anything to the contrary in this Guarantee, with respect to any defaulted
        non-monetary Obligations the specific performance of which by the Guarantors
        is
        not reasonably possible (e.g. the issuance of the Company's Common Stock),
        the
        Guarantors shall only be liable for making the Purchasers whole on a monetary
        basis for the Company's failure to perform such Obligations in accordance
        with
        the Transaction Documents. 

       

      (b)  Right
        of Contribution.
        Subject
        to Section
        2(c),
        each
        Guarantor hereby agrees that to the extent that a Guarantor shall have paid
        more
        than its proportionate share of any payment made hereunder, such Guarantor
        shall
        be entitled to seek and receive contribution from and against any other
        Guarantor hereunder which has not paid its proportionate share of such payment.
        Each Guarantor's right of contribution shall be subject to the terms and
        conditions of Section
        2(c).
        The
        provisions of this Section
        2(b)
        shall in
        no respect limit the obligations and liabilities of any Guarantor to the
        Purchasers and each Guarantor shall remain liable to the Purchasers for the
        full
        amount guaranteed by such Guarantor hereunder.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (c)  No
        Subrogation.
        Notwithstanding any payment made by any Guarantor hereunder or any set-off
        or
        application of funds of any Guarantor by the Purchasers, no Guarantor shall
        be
        entitled to be subrogated to any of the rights of the Purchasers against
        the
        Company or any other Guarantor or any collateral security or guarantee or
        right
        of offset held by the Purchasers for the payment of the Obligations, nor
        shall
        any Guarantor seek or be entitled to seek any contribution or reimbursement
        from
        the Company or any other Guarantor in respect of payments made by such Guarantor
        hereunder, until all amounts owing to the Purchasers by the Company on account
        of the Obligations are indefeasibly paid in full. If any amount shall be
        paid to
        any Guarantor on account of such subrogation rights at any time when all
        of the
        Obligations shall not have been paid in full, such amount shall be held by
        such
        Guarantor in trust for the Purchasers, segregated from other funds of such
        Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned
        over
        to the Purchasers in the exact form received by such Guarantor (duly indorsed
        by
        such Guarantor to the Purchasers, if required), to be applied against the
        Obligations, whether matured or unmatured, in such order as the Purchasers
        may
        determine.

       

      (d)  Amendments,
        Etc. With Respect to the Obligations.
        Each
        Guarantor shall remain obligated hereunder notwithstanding that, without
        any
        reservation of rights against any Guarantor and without notice to or further
        assent by any Guarantor, any demand for payment of any of the Obligations
        made
        by the Purchasers may be rescinded by the Purchasers and any of the Obligations
        continued, and the Obligations, or the liability of any other Person upon
        or for
        any part thereof, or any collateral security or guarantee therefor or right
        of
        offset with respect thereto, may, from time to time, in whole or in part,
        be
        renewed, extended, amended, modified, accelerated, compromised, waived,
        surrendered or released by the Purchasers, and the Purchase Agreement and
        the
        other Transaction Documents and any other documents executed and delivered
        in
        connection therewith may be amended, modified, supplemented or terminated,
        in
        whole or in part, as the Purchasers may deem advisable from time to time,
        and
        any collateral security, guarantee or right of offset at any time held by
        the
        Purchasers for the payment of the Obligations may be sold, exchanged, waived,
        surrendered or released. The Purchasers shall have no obligation to protect,
        secure, perfect or insure any Lien at any time held by them as security for
        the
        Obligations or for the guarantee contained in this Section
        2
        or any
        property subject thereto. 

       

      (e)  Guarantee
        Absolute and Unconditional.
        Each
        Guarantor waives any and all notice of the creation, renewal, extension or
        accrual of any of the Obligations and notice of or proof of reliance by the
        Purchasers upon the guarantee contained in this Section
        2
        or
        acceptance of the guarantee contained in this Section
        2;
        the
        Obligations, and any of them, shall conclusively be deemed to have been created,
        contracted or incurred, or renewed, extended, amended or waived, in reliance
        upon the guarantee contained in this Section
        2;
        and all
        dealings between the Company and any of the Guarantors, on the one hand,
        and the
        Purchasers, on the other hand, likewise shall be conclusively presumed to
        have
        been had or consummated in reliance upon the guarantee contained in this
        Section
        2.
        Each
        Guarantor waives to the extent permitted by law diligence, presentment, protest,
        demand for payment and notice of default or nonpayment to or upon the Company
        or
        any of the Guarantors with respect to the Obligations. Each Guarantor
        understands and agrees that the guarantee contained in this Section
        2
        shall be
        construed as a continuing, absolute and unconditional guarantee of payment
        and
        performance without regard to (a) the validity or enforceability of the Purchase
        Agreement or any other Transaction Document, any of the Obligations or any
        other
        collateral security therefor or guarantee or right of offset with respect
        thereto at any time or from time to time held by the Purchasers, (b) any
        defense, set-off or counterclaim (other than a defense of payment or performance
        or fraud by Purchasers) which may at any time be available to or be asserted
        by
        the Company or any other Person against the Purchasers, or (c) any other
        circumstance whatsoever (with or without notice to or knowledge of the Company
        or such Guarantor) which constitutes, or might be construed to constitute,
        an
        equitable or legal discharge of the Company for the Obligations, or of such
        Guarantor under the guarantee contained in this Section
        2,
        in
        bankruptcy or in any other instance. When making any demand hereunder or
        otherwise pursuing its rights and remedies hereunder against any Guarantor,
        the
        Purchasers may, but shall be under no obligation to, make a similar demand
        on or
        otherwise pursue such rights and remedies as they may have against the Company,
        any other Guarantor or any other Person or against any collateral security
        or
        guarantee for the Obligations or any right of offset with respect thereto,
        and
        any failure by the Purchasers to make any such demand, to pursue such other
        rights or remedies or to collect any payments from the Company, any other
        Guarantor or any other Person or to realize upon any such collateral security
        or
        guarantee or to exercise any such right of offset, or any release of the
        Company, any other Guarantor or any other Person or any such collateral
        security, guarantee or right of offset, shall not relieve any Guarantor of
        any
        obligation or liability hereunder, and shall not impair or affect the rights
        and
        remedies, whether express, implied or available as a matter of law, of the
        Purchasers against any Guarantor. For the purposes hereof, “demand” shall
        include the commencement and continuance of any legal proceedings.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (f)  Reinstatement.
        The
        guarantee contained in this Section
        2
        shall
        continue to be effective, or be reinstated, as the case may be, if at any
        time
        payment, or any part thereof, of any of the Obligations is rescinded or must
        otherwise be restored or returned by the Purchasers upon the insolvency,
        bankruptcy, dissolution, liquidation or reorganization of the Company or
        any
        Guarantor, or upon or as a result of the appointment of a receiver, intervenor
        or conservator of, or trustee or similar officer for, the Company or any
        Guarantor or any substantial part of its property, or otherwise, all as though
        such payments had not been made.

       

      (g)  Payments.
        Each
        Guarantor hereby guarantees that payments hereunder will be paid to the
        Purchasers without set-off or counterclaim in U.S. dollars at the address
        set
        forth or referred to in the Signature Pages to the Purchase
        Agreement.

       

      3.  Representations
        and Warranties.
        Each
        Guarantor hereby makes the following representations and warranties to
        Purchasers as of the date hereof:

       

      (a)  Organization
        and Qualification.
        The
        Guarantor is a corporation
        or
        limited liability company,
        duly
        incorporated or organized, validly existing and in good standing under the
        laws
        of the applicable jurisdiction set forth on Schedule
        1,
        with
        the requisite corporate power and authority to own and use its properties
        and
        assets and to carry on its business as currently conducted. The Guarantor
        has no
        subsidiaries other than those identified as such on the Disclosure Schedules
        to
        the Purchase Agreement. The Guarantor is duly qualified to do business and
        is in
        good standing as a foreign corporation in each jurisdiction in which the
        nature
        of the business conducted or property owned by it makes such qualification
        necessary, except where the failure to be so qualified or in good standing,
        as
        the case may be, could not, individually or in the aggregate, (x) adversely
        affect the legality, validity or enforceability of any of this Guaranty in
        any
        material respect, (y) have a material adverse effect on the results of
        operations, assets, prospects, or financial condition of the Guarantor or
        (z)
        adversely impair in any material respect the Guarantor's ability to perform
        fully on a timely basis its obligations under this Guaranty (a “Material Adverse
        Effect”).

       

      (b)  Authorization;
        Enforcement.
        The
        Guarantor has the requisite corporate or limited liability company power
        and
        authority to enter into and to consummate the transactions contemplated by
        this
        Guaranty, and otherwise to carry out its obligations hereunder. The execution
        and delivery of this Guaranty by the Guarantor and the consummation by it
        of the
        transactions contemplated hereby have been duly authorized by all requisite
        corporate or limited liability company action on the part of the Guarantor.
        This
        Guaranty has been duly executed and delivered by the Guarantor and constitutes
        the valid and binding obligation of the Guarantor enforceable against the
        Guarantor in accordance with its terms, except as such enforceability may
        be
        limited by applicable bankruptcy, insolvency, reorganization, moratorium,
        liquidation or similar laws relating to, or affecting generally the enforcement
        of, creditors' rights and remedies or by other equitable principles of general
        application.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (c)  No
        Conflicts.
        The
        execution, delivery and performance of this Guaranty by the Guarantor and
        the
        consummation by the Guarantor of the transactions contemplated thereby do
        not
        and will not (i) conflict with or violate any provision of its Certificate
        of
        Incorporation, By-laws or other organizational documents or (ii) conflict
        with,
        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 Guarantor is a party, or (iii) result in a violation
        of
        any law, rule, regulation, order, judgment, injunction, decree or other
        restriction of any court or governmental authority to which the Guarantor
        is
        subject (including Federal and State securities laws and regulations), or
        by
        which any material property or asset of the Guarantor is bound or affected,
        except in the case of each of clauses (ii) and (iii), such conflicts, defaults,
        terminations, amendments, accelerations, cancellations and violations as
        could
        not, individually or in the aggregate, have or result in a Material Adverse
        Effect. The business of the Guarantor is not being conducted in violation
        of any
        law, ordinance or regulation of any governmental authority, except for
        violations which, individually or in the aggregate, do not have a Material
        Adverse Effect.

       

      (d)  Consents
        and Approvals.
        The
        Guarantor is not required to obtain any consent, waiver, authorization or
        order
        of, or make any filing or registration with, any court or other federal,
        state,
        local, foreign or other governmental authority or other person in connection
        with the execution, delivery and performance by the Guarantor of this
        Guaranty.

       

      (e)  Purchase
        Agreement.
        The
        representations and warranties of the Company set forth in the Purchase
        Agreement as they relate to such Guarantor, each of which is hereby incorporated
        herein by reference, are true and correct as of each time such representations
        are deemed to be made pursuant to such Purchase Agreement, and the Purchasers
        shall be entitled to rely on each of them as if they were fully set forth
        herein, provided that each reference in each such representation and warranty
        to
        the Company's knowledge shall, for the purposes of this Section
        3,
        be
        deemed to be a reference to such Guarantor's knowledge. 

       

      (f)  Foreign
        Law.
        Each
        Guarantor has consulted with appropriate foreign legal counsel with respect
        to
        any of the above representations for which non-U.S. law is applicable. Such
        foreign counsel have advised each applicable Guarantor that such counsel
        knows
        of no reason why any of the above representations would not be true and
        accurate. Such foreign counsel were provided with copies of this Subsidiary
        Guarantee and the Transaction Documents prior to rendering their advice.
        

       

      4.  Covenants.
        

       

      (a)  Each
        Guarantor covenants and agrees with the Purchasers that, from and after the
        date
        of this Guarantee until the Obligations shall have been indefeasibly paid
        in
        full, such Guarantor shall take, and/or shall refrain from taking, as the
        case
        may be, each commercially reasonable action that is necessary to be taken
        or not
        taken, as the case may be, so that no Event of Default (as defined in the
        Debentures) is caused by the failure to take such action or to refrain from
        taking such action by such Guarantor. 

       

      (b)  So
        long
        as any of the Obligations are outstanding, unless Purchasers holding at least
        67%
        of
        the aggregate principal amount of the then outstanding Debentures shall
        otherwise consent in writing, each Guarantor will not directly or indirectly
        on
        or after the date of this Guarantee:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (i)  other
        than Permitted Indebtedness, enter into, create, incur, assume or suffer
        to
        exist any indebtedness for borrowed money of any kind, including but not
        limited
        to, a guarantee, on or with respect to any of its property or assets now
        owned
        or hereafter acquired or any interest therein or any income or profits
        therefrom;

       

      (ii)  other
        than Permitted Liens, enter into, create, incur, assume or suffer to exist
        any
        liens of any kind, on or with respect to any of its property or assets now
        owned
        or hereafter acquired or any interest therein or any income or profits
        therefrom;

       

      (iii)  amend
        its
        certificate of incorporation, bylaws or other charter documents so as to
        adversely affect any rights of any Purchaser;

       

      (iv)  repay,
        repurchase or offer to repay, repurchase or otherwise acquire more than a
        de
        minimis number of shares of its securities or debt obligations; 

       

      (v)  pay
        cash
        dividends on any equity securities of the Company,
        provided that nothing contained herein shall prohibit the payment of
        intracompany dividends in the ordinary course of business consistent with
        past
        practice to any parent owning 100% of the equity securities of the
        Guarantor;

       

      (vi)  enter
        into any transaction with any Affiliate of the Guarantor which would be required
        to be disclosed in any public filing of the Company with the Commission,
        unless
        such transaction is made on an arm’s-length basis and expressly approved by a
        majority of the disinterested directors of the Company (even if less than
        a
        quorum otherwise required for board approval); or

       

      (vii)  enter
        into any agreement with respect to any of the foregoing.

       

      5.  Miscellaneous.

       

      (a)  Amendments
        in Writing.
        None of
        the terms or provisions of this Guarantee may be waived, amended, supplemented
        or otherwise modified except in writing by the Purchasers holding 67% or
        more in
        principal amount of the Debentures then outstanding.

       

      (b)  Notices.
        All
        notices, requests and demands to or upon the Purchasers or any Guarantor
        hereunder shall be effected in the manner provided for in the Purchase
        Agreement, provided that any such notice, request or demand to or upon any
        Guarantor shall be addressed to such Guarantor at its notice address set
        forth
        on Schedule
        5(b).

       

      (c)  No
        Waiver By Course Of Conduct; Cumulative Remedies.
        The
        Purchasers shall not by any act (except by a written instrument pursuant
        to
Section
        5(a)),
        delay,
        indulgence, omission or otherwise be deemed to have waived any right or remedy
        hereunder or to have acquiesced in any default under the Transaction Documents
        or Event of Default. No failure to exercise, nor any delay in exercising,
        on the
        part of the Purchasers, any right, power or privilege hereunder shall operate
        as
        a waiver thereof. No single or partial exercise of any right, power or privilege
        hereunder shall preclude any other or further exercise thereof or the exercise
        of any other right, power or privilege. A waiver by the Purchasers of any
        right
        or remedy hereunder on any one occasion shall not be construed as a bar to
        any
        right or remedy which the Purchasers would otherwise have on any future
        occasion. The rights and remedies herein provided are cumulative, may be
        exercised singly or concurrently and are not exclusive of any other rights
        or
        remedies provided by law.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (d)  Enforcement
        Expenses; Indemnification.

       

      (i)  Each
        Guarantor agrees to pay, or reimburse the Purchasers for, all its costs and
        expenses incurred in collecting against such Guarantor under the guarantee
        contained in Section
        2
        or
        otherwise enforcing or preserving any rights under this Guarantee and the
        other
        Transaction Documents to which such Guarantor is a party, including, without
        limitation, the reasonable fees and disbursements of counsel to the
        Purchasers.

       

      (ii)  Each
        Guarantor agrees to pay, and to save the Purchasers harmless from, any and
        all
        liabilities with respect to, or resulting from any delay in paying, any and
        all
        stamp, excise, sales or other taxes which may be payable or determined to
        be
        payable in connection with any of the transactions contemplated by this
        Guarantee.

       

      (iii)  Each
        Guarantor agrees to pay, and to save the Purchasers harmless from, any and
        all
        liabilities, obligations, losses, damages, penalties, actions, judgments,
        suits,
        costs, expenses or disbursements of any kind or nature whatsoever with respect
        to the execution, delivery, enforcement, performance and administration of
        this
        Guarantee to the extent the Company would be required to do so pursuant to
        the
        Purchase Agreement.

       

      (iv)  The
        agreements in this Section shall survive repayment of the Obligations and
        all
        other amounts payable under the Purchase Agreement and the other Transaction
        Documents. 

       

      (e)  Successor
        and Assigns.
        This
        Guarantee shall be binding upon the successors and assigns of each Guarantor
        and
        shall inure to the benefit of the Purchasers and their respective successors
        and
        assigns; provided that no Guarantor may assign, transfer or delegate any
        of its
        rights or obligations under this Guarantee without the prior written consent
        of
        the Purchasers.

       

      (f)  Set-Off.
        Each
        Guarantor hereby irrevocably authorizes the Purchasers at any time and from
        time
        to time while an Event of Default under any of the Transaction Documents
        shall
        have occurred and be continuing, without notice to such Guarantor or any
        other
        Guarantor, any such notice being expressly waived by each Guarantor, to set-off
        and appropriate and apply any and all deposits, credits, indebtedness or
        claims,
        in any currency, in each case whether direct or indirect, absolute or
        contingent, matured or unmatured, at any time held or owing by the Purchasers
        to
        or for the credit or the account of such Guarantor, or any part thereof in
        such
        amounts as the Purchasers may elect, against and on account of the obligations
        and liabilities of such Guarantor to the Purchasers hereunder and claims
        of
        every nature and description of the Purchasers against such Guarantor, in
        any
        currency, whether arising hereunder, under the Purchase Agreement, any other
        Transaction Document or otherwise, as the Purchasers may elect, whether or
        not
        the Purchasers have made any demand for payment and although such obligations,
        liabilities and claims may be contingent or unmatured. The Purchasers shall
        notify such Guarantor promptly of any such set-off and the application made
        by
        the Purchasers of the proceeds thereof, provided that the failure to give
        such
        notice shall not affect the validity of such set-off and application. The
        rights
        of the Purchasers under this Section are in addition to other rights and
        remedies (including, without limitation, other rights of set-off) which the
        Purchasers may have.

       

      (g)  Counterparts.
        This
        Guarantee may be executed by one or more of the parties to this Guarantee
        on any
        number of separate counterparts (including by telecopy), and all of said
        counterparts taken together shall be deemed to constitute one and the same
        instrument. 

       

      (h)  Severability.
        Any
        provision of this Guarantee which is prohibited or unenforceable in any
        jurisdiction shall, as to such jurisdiction, be ineffective to the extent
        of
        such prohibition or unenforceability without invalidating the remaining
        provisions hereof, and any such prohibition or unenforceability in any
        jurisdiction shall not invalidate or render unenforceable such provision
        in any
        other jurisdiction. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (i)  Section
        Headings.
        The
        Section headings used in this Guarantee are for convenience of reference
        only
        and are not to affect the construction hereof or be taken into consideration
        in
        the interpretation hereof.

       

      (j)  Integration.
        This
        Guarantee and the other Transaction Documents represent the agreement of
        the
        Guarantors and the Purchasers with respect to the subject matter hereof and
        thereof, and there are no promises, undertakings, representations or warranties
        by the Purchasers relative to subject matter hereof and thereof not expressly
        set forth or referred to herein or in the other Transaction
        Documents.

       

      (k)  Governing
        Laws.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Guarantee shall be governed by and construed and enforced in accordance
        with the internal laws of the State of New York, without regard to the
        principles of conflicts of law thereof. Each of the Company and the Guarantors
        agree that all proceedings concerning the interpretations, enforcement and
        defense of the transactions contemplated by this Guarantee (whether brought
        against a party hereto or its respective affiliates, directors, officers,
        shareholders, partners, members, employees or agents) shall be commenced
        exclusively in the state and federal courts sitting in the City of New York,
        Borough of Manhattan. Each of the Company and the Guarantors 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 proceeding, any claim that it is not personally subject to the jurisdiction
        of any such court, that such proceeding is improper. Each party hereto hereby
        irrevocably waives personal service of process and consents to process being
        served in any such proceeding by mailing a copy thereof via registered or
        certified mail or overnight delivery (with evidence of delivery) to such
        party
        at the address in effect for notices to it under this Guarantee 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 hereto hereby
        irrevocably waives, to the fullest extent permitted by applicable law, any
        and
        all right to trial by jury in any legal proceeding arising out of or relating
        to
        this Guarantee or the transactions contemplated hereby.

       

      (l)  Acknowledgements.
        Each
        Guarantor hereby acknowledges that:

       

      (i)  it
        has
        been advised by counsel in the negotiation, execution and delivery of this
        Guarantee and the other Transaction Documents to which it is a party;

       

      (ii)  the
        Purchasers have no fiduciary relationship with or duty to any Guarantor arising
        out of or in connection with this Guarantee or any of the other Transaction
        Documents, and the relationship between the Guarantors, on the one hand,
        and the
        Purchasers, on the other hand, in connection herewith or therewith is solely
        that of debtor and creditor; and 

       

      (iii)  no
        joint
        venture is created hereby or by the other Transaction Documents or otherwise
        exists by virtue of the transactions contemplated hereby among the Guarantors
        and the Purchasers. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (m)  Additional
        Guarantors.
        The
        Company shall cause each of its subsidiaries formed or acquired on or subsequent
        to the date hereof to become a Guarantor for all purposes of this Guarantee
        by
        executing and delivering an Assumption Agreement in the form of Annex
        1
        hereto.

       

      (n)  Release
        of Guarantors.
        Each
        Guarantor will be released from all liability hereunder concurrently with
        the
        indefeasible repayment in full of all amounts owed under the Purchase Agreement,
        the Debentures and the other Transaction Documents. 

       

      (o)  Seniority.
        The
        Obligations of each of the Guarantors hereunder rank senior in priority to
        any
        other Indebtedness (as defined in the Purchase Agreement) of such
        Guarantor.
        

       

      (p)  Waiver
        of Jury Trial.
        EACH
        GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE PURCHASERS, HEREBY
        IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
        PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM
        THEREIN.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be
        duly
        executed and delivered as of the date first above written.

      

        
          	
                  20/20
                    Technologies, Inc.

                	 	
                  Magenta
                    netLogic, Limited

                
	 	 	 
	 	 	 
	
                  By:

                	 	 	
                  By:

                	 
	
                  Name:

                	 	 	
                  Name:

                	 
	
                  Title:

                	 	 	
                  Title:

                	 
	 	 	 	 	 
	 	 	 	 	 
	
                  Global
                    Capacity Group, Inc.

                	 	
                  CentrePath,
                    Inc.

                
	 	 	 	 	 
	 	 	 	 	 
	
                  By:

                	 	 	
                  By:

                	 
	
                  Name:

                	 	 	
                  Name:

                	 
	
                  Title:

                	 	 	
                  Title:

                	 
	 	 	 	 	 
	 	 	 	 	 
	
                  Nexvu
                    Technologies, LLC

                	 	
                  FNS
                    2007, INC.

                
	 	 	 	 	 
	 	 	 	 	 
	
                  By:

                	 	 	
                  By:

                	 
	
                  Name:

                	 	 	
                  Name:

                	 
	
                  Title:

                	 	 	
                  Title:

                	 
	 	 	 	 	 
	 	 	 	 	 
	
                  20/20
                    TECHNOLOGIES I, LLC

                	 	 
	 	 	 
	 	 	 
	
                  By:

                	 	 	
                   

                	 
	
                  Name:

                	 	 	
                   

                	 
	
                  Title:

                	 	 	
                   

                	 

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      GUARANTORS

       

      The
        following are the names, notice addresses and jurisdiction of organization
        of
        each Guarantor.

       

      
        	
                 

                 

                Guarantor
                  Name/Notice Address

              	 	
                 

                Jurisdiction
                  of Organization

              	 	
                Company
                  Owned by Percentage

              
	 	 	 	 	 
	
                20/20
                  Technologies, Inc.

                500
                  W. Madison #2060

                Chicago,
                  Illinois 60661

              	 	
                Delaware

              	 	
                100%

              
	 	 	 	 	 
	
                20/20
                  Technologies I, LLC

                500
                  W. Madison #2060

                Chicago,
                  Illinois 60661

              	 	
                Delaware

              	 	
                100%(1)

              
	 	 	 	 	 
	
                Magenta
                  netLogic, Limited

                Lissadel
                  Street

                Salford

                Greater
                  Manchester, UK M6 6AP

              	 	
                UK

              	 	
                100%(2)

              
	 	 	 	 	 
	
                Global
                  Capacity Group, Inc.

                730
                  N. Post Oak Road

                Houston,
                  Texas 77024

              	 	
                Texas

              	 	
                100%

              
	 	 	 	 	 
	
                CentrePath,
                  Inc.

                265
                  Winter Street

                Waltham,
                  Mass. 02451

              	 	
                Delaware

              	 	
                100%

              
	 	 	 	 	 
	
                FNS
                  2000, Inc.

                 

              	 	
                Delaware

              	 	
                100%

              
	 	 	 	 	 
	
                Nexvu
                  Technologies, LLC

                500
                  W. Madison #2060

                Chicago,
                  Illinois 60661

              	 	
                Delaware

              	 	
                100%

              

      

       

      
        	
                (1)
                  Owned 100% by 20/20 Technologies, Inc.

                (2)
                  Owned 100% by 20/20 Technologies I, LLC

              	 	
                __________

              	 	
                __________

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      ANNEX
        1 TO SUBSIDIARY GUARANTEE

       

      ASSUMPTION
        AGREEMENT, dated as of ______________________, made by
        ______________________________, a ______________ corporation (the “Additional
        Guarantor”), in favor of the Purchasers pursuant to the Purchase Agreement
        referred to below. All capitalized terms not defined herein shall have the
        meaning ascribed to them in such Purchase Agreement. 

       

      WITNESSETH:

       

      WHEREAS,
        Capital Growth Systems, Inc., a Florida corporation (the “Company”) and the
        Purchasers have entered into a Securities Purchase Agreement, dated as of
        March
        11, 2008 (as amended, supplemented or otherwise modified from time to time,
        the
“Purchase Agreement”); 

       

      WHEREAS,
        in connection with the Purchase Agreement, the Subsidiaries of the Company
        (other than the Additional Guarantor) have entered into the Subsidiary
        Guarantee, dated as of March 11, 2008 (as amended, supplemented or otherwise
        modified from time to time, the “Guarantee”) in favor of the Purchasers;

       

      WHEREAS,
        the Purchase Agreement requires the Additional Guarantor to become a party
        to
        the Guarantee; and

       

      WHEREAS,
        the Additional Guarantor has agreed to execute and deliver this Assumption
        Agreement in order to become a party to the Guarantee;

       

      NOW,
        THEREFORE, IT IS AGREED:

       

      1. Guarantee.
        By
        executing and delivering this Assumption Agreement, the Additional Guarantor,
        as
        provided in Section
        5(m)
        of the
        Guarantee, hereby becomes a party to the Guarantee as a Guarantor thereunder
        with the same force and effect as if originally named therein as a Guarantor
        and, without limiting the generality of the foregoing, hereby expressly assumes
        all obligations and liabilities of a Guarantor thereunder. The information
        set
        forth in Annex
        1
        hereto
        is hereby added to the information set forth in Schedule
        1
        to the
        Guarantee. The Additional Guarantor hereby represents and warrants that each
        of
        the representations and warranties contained in Section
        3
        of the
        Guarantee is true and correct on and as the date hereof as to such Additional
        Guarantor (after giving effect to this Assumption Agreement) as if made on
        and
        as of such date.

       

      2. Governing
        Law.
        THIS
        ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
        IN
        ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

       

      IN
        WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
        be duly
        executed and delivered as of the date first above written.

       

      
        	 	 	
                [ADDITIONAL
                  GUARANTOR]

              
	 	 	 
	 	 	 
	 	 	
                By:

              	 
	 	 	
                Name:

              	 
	 	 	
                Title:

              	 

      

      

       

      1075582_4

    

     

    
      
        
        

      

      
        A1-1

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