Document:

exv10w3

 

Exhibit 10.3

MODIFICATION AGREEMENT

     This MODIFICATION AGREEMENT dated as of September 29, 2006 is by and between COMSYS IT
Partners, Inc., a Delaware corporation (the “Company”), and Larry L. Enterline (the “Participant”).

Recitals

     A. The Company and the Participant are parties to that certain 2006 Stock Issuance Agreement
dated as of July 27, 2006 (the “Issuance Agreement”) pursuant to which the Company issued 150,000
shares (the “Shares”) of its common stock, par value $0.01 per share (the “Common Stock”), to the
Participant. Capitalized terms used but not defined in this Modification Agreement have the
meanings ascribed to them in the Issuance Agreement.

     B. The Shares are subject to certain vesting restrictions as set forth in the Issuance
Agreement.

     C. In an effort to retain the services of the Participant and incent the Participant to
contribute to the Company’s long-term success, the Company believes it is in its best interest and
the best interest of the Company’s stockholders to modify the vesting schedule with respect to a
portion of the Shares, all on the terms set forth in this Modification Agreement.

     In consideration of the foregoing premises and the mutual covenants, conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Participant, each intending to be legally bound,
agree as set forth below:

ARTICLE I

Section 1. Vesting of Shares. The vesting schedule for the 50,000 Shares referred to in
Section 1(b)(i) of the Issuance Agreement, which were originally scheduled to vest on July 27,
2006, is hereby modified to provide that these Shares will vest on the earlier of (i) January 1,
2009 or (ii) the termination of Mr. Enterline’s employment for any reason that would entitle him to
severance benefits under Section 6 of his employment agreement with the Company dated as of July
27, 2006 (as amended from time to time).

Section 2. Full Force and Effect. Except as modified by this Modification Agreement, the
Issuance Agreement will remain in full force and effect in accordance with its terms.

Section 3. Governing Law. This Modification Agreement will be governed by the laws of the
State of Delaware without giving effect to any choice or conflict of law provisions.

Section 4. Successor and Assigns. The provisions of this Modification Agreement will inure
to the benefit of, and be binding upon, the Company and its successors and assigns, and upon the
Participant, the Participant’s assigns and the legal representatives, heirs and legatees of the
Participant’s estate, whether or not any such person shall have become a party to this Modification
Agreement and have agreed in writing to join herein and be bound by the terms hereof.

1

 

     IN WITNESS WHEREOF, the parties have executed this Modification Agreement on the day and year
first indicated above.

COMSYS IT PARTNERS, INC.

By:\s\KEN R. BRAMLETT, JR.

Name: Ken R. Bramlett, Jr.

Title: Senior Vice President and General Counsel

PARTICIPANT

\s\LARRY L. ENTERLINE

Name: Larry L. EnterlineSecurities Purchase Agreement

    Exhibit
      10.1

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of November 28, 2006, between Surge Global Energy, Inc., a Delaware
      corporation (the “Company”),
      and
      Gemini Master Fund Limited (including its successors and assigns, the
“Purchaser”
or
      “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 the
      Purchaser, and the Purchaser, 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 the Purchaser agree as
      follows:

     

     

    ARTICLE
      I

    DEFINITIONS

     

    1.1    Definitions.
      In
      addition to the terms defined elsewhere in this Agreement: the following terms
      have the meanings indicated in this Section 1.1:

     

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

     

    “Actual
      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 Warrant Shares issuable upon exercise in full of all
      Warrants and Greenshoe Warrants, ignoring any exercise limits set forth
      therein.

     

    “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 144 under the Securities Act. With
      respect to the Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of the Purchaser.

     

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

     

    “Closing
      Date”
means
      the date of the Closing.

     

    “Commission”
means
      the 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 have been reclassified
      or
      changed into.

     

    
      
        
        

      

      
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    “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
      Greenberg Traurig L.L.P.

     

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

     

    “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
      by a
      majority of the non-employee members of the Board of Directors of the Company
      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 any Securities
      issued hereunder and/or 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 are not amended subsequent to
      the
      date of this Agreement to increase the number of such securities or to decrease
      the exercise, exchange or conversion price of any such securities, and (c)
      securities issued pursuant to acquisitions or strategic transactions, provided
      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.

    

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

    

    “Greenshoe
      Warrants”
shall
      mean, collectively, the Common Stock purchase warrants in the form of
Exhibit
      C
      delivered to the Purchaser at the Closing in accordance with Section 2.2(a)(v)
      hereof, which Greenshoe Warrants shall be exercisable immediately and have
      a
      term of exercise of one year.

    

    
      
        
        

      

      
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    “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.

    

    “New
      Issuance Price”
shall
      have the meaning ascribed to such term in Section 4.14.

    

    “Participation
      Maximum”
shall
      have the meaning ascribed to such term in Section 4.13. 

    

    “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.

    

    “Pre-Notice”
shall
      have the meaning ascribed to such term in Section 4.13. 

    

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

    

    “Purchase
      Price”
shall
      have the meaning ascribed to such term in Section 2.1.

    

    “Purchaser
      Counsel”
means
      Loeb & Loeb LLP with offices located at 345 Park Avenue, New York, New York
      10154-0037.

    

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.11.

    

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

    

    
      
        
        

      

      
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    “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).

    

    “Revised
      Subscription Amount”
shall
      have the meaning ascribed to such term in Section 4.14.

    

    “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 Common Stock, the Warrants, the Greenshoe Warrants and the Warrant Shares
      issued or issuable to the Purchasers under any of the Transaction Documents.
      

    

    “Securities
      Act”
means
      the Securities Act of 1933, as amended. 

    

    “Shares”
      shall
      have the meaning ascribed to such term in Section 2.1.

    

    “Short
      Sales”
shall
      include all “short sales” as defined in Rule 200 of Regulation SHO under the
      Exchange Act.

    

    “Subscription
      Amount”
shall
      mean, $900,000 (calculated by multiplying the number of Shares purchased by
      the
      Purchaser by the Purchase Price) in United States Dollars and in immediately
      available funds.

    

    “Subsequent
      Financing”
shall
      have the meaning ascribed to such term in Section 4.13.

    

    “Subsequent
      Financing Notice”
shall
      have the meaning ascribed to such term in Section 4.13.

    

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a).

    

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

    

    
      
        
        

      

      
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    “Trading
      Market”
means
      the markets or exchanges on which the Common Stock is listed or quoted for
      trading on the date in question.

    

    “Transaction
      Documents”
means
      this Agreement, the Warrants, the Greenshoe Warrants, the Registration Rights
      Agreement and any other documents or agreements executed in connection with
      the
      transactions contemplated hereunder.

    

    “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 national
      securities exchange, the daily volume weighted average price of the Common
      Stock
      for such date (or the nearest preceding date) on the national securities
      exchange on which the Common Stock is then listed or quoted as reported by
      Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time
      to
      4:02 p.m. Eastern Time); (b)  if the Common Stock is not then listed or
      quoted on a national securities exchange and if prices for the Common Stock
      are
      then quoted on the OTC Bulletin Board, 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 on the OTC Bulletin
      Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the 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 and reasonably acceptable
      to
      the Company.

     

    “Warrants”
means
      collectively the Common Stock purchase warrants, in the form of Exhibit B
      delivered to the Purchaser at the Closing in accordance with Section 2.2(a)(iv)
      hereof, which Warrants shall be exercisable immediately and have a term of
      exercise of seven years.

     

    “Warrant
      Shares”
means,
      collectively, the shares of Common Stock issuable upon exercise of the Warrants
      and the Greenshoe Warrants.

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1    Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      concurrent with the execution and delivery of this Agreement by the parties
      hereto, the Company agrees to sell to the Purchaser, 2,000,000 shares of Common
      Stock (the “Shares”)
      for a
      purchase price per Share of $0.45 (the “Purchase
      Price”),
      and
      the Purchaser agrees to purchase the Shares for an aggregate purchase price
      equal to the Purchaser’s Subscription Amount together with Warrants and
      Greenshoe Warrants as determined by pursuant to Section 2.2(a). The Purchaser
      shall deliver to the Company via wire transfer of immediately available funds,
      $900,000 and the Company shall deliver to the Purchaser the Shares, together
      with 2,000,000 Warrants and 2,000,000 Greenshoe Warrants and the other items
      set
      forth in Section 2.2 to be delivered 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 Purchaser’s Counsel, or such other location as the parties shall
      mutually agree.

     

    
      
        
        

      

      
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    2.2    Deliveries.

     

    a)    At
      the
      Closing, the Company shall deliver or cause to be delivered to the Purchaser
      the
      following:

     

    (i)    this
      Agreement duly executed by the Company;

     

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

     

    (iii)   a
      certificate registered in the name of the Purchaser evidencing the Shares
      ;

     

    (iv)   a
      Warrant
      registered in the name of the Purchaser to purchase 2,000,000 shares of Common
      Stock, with a per share exercise price equal to $0.60, subject to adjustment
      therein;

     

    (v)    a
      Greenshoe Warrant registered in the name of the Purchaser to purchase 2,000,000
      shares of Common Stock, with a per share exercise price equal to $0.50, subject
      to adjustment therein;

     

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

     

    b)    At
      the
      Closing, the Purchaser shall deliver or cause to be delivered to the Company
      the
      following:

     

    (i)    this
      Agreement duly executed by the Purchaser;

     

    (ii)    $900,000
      by wire transfer of immediately available funds to the account as specified
      in
      writing by the Company; and

     

    (iii)    the
      Registration Rights Agreement duly executed by the 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 when made and on the Closing Date of the
      representations and warranties of the Purchaser contained herein;

     

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

     

    
      
        
        

      

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

     

    b)    The
      obligations of the Purchaser 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)    the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement;

     

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

     

    (v)    
from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission, and, at any time prior to the Closing Date, trading
      in securities generally as reported by Bloomberg Financial Markets 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 the Purchaser, makes it impracticable or inadvisable to purchase
      the
      Common Stock at the Closing.

     

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1    Representations
      and Warranties of the Company.
      Except
      as set forth under the corresponding section of the disclosure schedule
      delivered to the Purchaser concurrently herewith (the “Disclosure
      Schedule”)
      which
      Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
      the
      representations and warranties set forth below to the Purchaser.

     

    (a)    Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all 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. 

     

    
      
        
        

      

      
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    (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 (as applicable), with the
      requisite corporate or other entity 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 or 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, would not 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
      the Company has not received any written notice of a Proceeding that 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 thereby have been duly
      authorized by all necessary corporate action on the part of the Company and
      no
      further corporate action is required by the Company, its board of directors
      or
      its shareholders in connection therewith other than in connection with the
      Required Approvals. Each Transaction Document has been (or upon delivery will
      have been) duly executed by the Company and, when delivered in accordance with
      the terms hereof and thereof, will constitute the valid and binding obligation
      of the Company enforceable against the Company in accordance with its terms
      except (i) as limited by general equitable principles and applicable bankruptcy,
      insolvency, reorganization, moratorium and other laws of general application
      affecting enforcement of creditors’ rights generally, (ii) as limited by laws
      relating to the availability of specific performance, injunctive relief or
      other
      equitable remedies and (iii) insofar as indemnification and contribution
      provisions may be limited by applicable law.

     

    (d)    No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company 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, or (iii) subject to the Required Approvals, conflict with
      or
      result in a violation of any law, rule, regulation, order, judgment, injunction,
      decree or other restriction of any court or governmental authority to which
      the
      Company or a Subsidiary is subject (including federal and state securities
      laws
      and regulations), or by which any property or asset of the Company or a
      Subsidiary is bound or affected; except in the case of each of clauses (ii)
      and
      (iii), such as would not reasonably be expected to result in a Material Adverse
      Effect.

     

    
      
        
        

      

      
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    (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) 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 Common Stock, the Warrants and the Greenshoe Warrants and the
      listing of the Common Stock and Warrant Shares for trading thereon in the time
      and manner required thereby, and (iv) the filing of a Form D with the Commission
      and such filings as are required to be made under applicable state securities
      laws (collectively, the “Required
      Approvals”).

     

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

     

    (g)    Capitalization.
      The
      capitalization of the Company is as set forth on Schedule
      3.1(g).
      Except
      as set forth on Schedule
      3.1(g),
      the
      Company has not issued any capital stock since its most
      recently filed periodic report under the Exchange Act,
      other
      than pursuant to the exercise of employee stock options under the Company’s
      stock option plans, the issuance of shares of Common Stock to employees pursuant
      to the Company’s employee stock purchase plan and pursuant to the conversion or
      exercise of outstanding Common Stock Equivalents. No Person has any right of
      first refusal, preemptive right, right of participation, or any similar right
      to
      participate in the transactions contemplated by the Transaction Documents.
      Except as a result of the purchase and sale of the Securities, there are no
      outstanding options, warrants, script 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 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 shareholder, the Board of Directors of the Company or
      others is required for the issuance and sale of the Securities. There are no
      shareholders 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
      shareholders.

     

    
      
        
        

      

      
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    (h)    SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it 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 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 and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed or amended, 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 the SEC Reports, (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 required to be 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 shareholders 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
      as
      set forth on Schedule
      3.1(i).
      The
      Company does not have pending before the Commission any request for confidential
      treatment of information.

     

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

     

    
      
        
        

      

      
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    (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.

     

    (l)    Compliance.
      Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, could reasonably be expected to 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 except in each case as would not reasonably be
      expected to have a Material Adverse Effect. 

     

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

     

    (n)    Title
      to Assets.
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to the business of the Company
      and
      the Subsidiaries 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, Liens for the payment of federal, state or other taxes, the
      payment of which is neither delinquent nor subject to penalties and/or Liens
      set
      forth in Schedule
      3(n)
      of this
      Agreement. Any real property and facilities held under lease by the Company
      and
      the Subsidiaries are held by them under valid, subsisting and enforceable leases
      of which the Company and the Subsidiaries are in compliance in all material
      respects.

     

    (o)    Patents
      and Trademarks.
      Except
      as set forth in Schedule 3(o) of this Agreement, the Company and the
      Subsidiaries have, or have rights to use in all material respects, all patents,
      patent applications, trademarks, trademark applications, service marks, trade
      names, copyrights, licenses and other similar rights necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Reports 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 written notice that 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 of
      the
      Company.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    (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
      customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the aggregate Subscription Amount. Schedule
      3(p)
      contains
      a list of each of the Company’s insurance contracts and policies. To the best
      knowledge of the Company, the list of Company insurance contracts and policies
      set forth on Schedule
      3.1(p)
      is
      accurate and complete. Neither the Company nor any Subsidiary has any reason
      to
      believe that it will not be able to renew its existing insurance coverage as
      and
      when such coverage expires or to obtain similar coverage from similar insurers
      as may be necessary to continue its business without a significant increase
      in
      cost.

     

    (q)    Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports and on Schedule
      3.1(q),
      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 $60,000 other than (i) for payment of salary or consulting
      fees for services rendered, (ii) reimbursement for expenses incurred on behalf
      of the Company and (iii) for 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. Except as set forth
      in the Company’s most recent SEC Reports, 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 material information relating to the Company, including its
      Subsidiaries, is made known to the certifying officers by others within those
      entities, particularly during the period in which the Company’s most recently
      filed periodic report under the Exchange Act, as the case may be, is being
      prepared. The Company’s certifying officers have evaluated the effectiveness of
      the Company’s controls and procedures as of the date prior to the filing date of
      the 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. Except as set forth in the Company’s most recent SEC Reports,
      there have been no significant changes in the Company’s internal controls (as
      such term is defined in Item 307(b) of Regulation S-K under the Exchange Act)
      or, to the
      best
      knowledge of the Company,
      in
      other factors that could significantly affect the Company’s internal
      controls.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

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

     

    (t)    Private
      Placement.
      Assuming the accuracy of the Purchaser’s 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.

     

    (v)    Registration
      Rights.
      Except
      as set forth on Schedule
      3.1(v),
      other
      than the Purchaser, 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
      Company’s Common Stock is registered pursuant to Section 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, as applicable.

     

    
      
        
        

      

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

     

    (y)    Disclosure.
      Except
      for the material terms and conditions of the transactions contemplated by this
      Agreement and the other Transaction Documents, the Company confirms that neither
      it nor any other Person acting on its behalf has provided the Purchaser or
      its
      agents or counsel with any information that constitutes nonpublic information.
      The Company understands and confirms that the Purchaser will rely on the
      foregoing representations and covenants in effecting transactions in securities
      of the Company. All disclosure provided to the Purchasers regarding the Company,
      its business and the transactions contemplated hereby, including the Disclosure
      Schedule to this Agreement, furnished by or on behalf of the Company with
      respect to the representations and warranties made herein are true and correct
      with respect to such representations and warranties and do 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 Company acknowledges and agrees
      that the Purchaser is not making and has not 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 Purchaser’s 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 the Securities Act or any
      applicable shareholder approval provisions, including, without limitation,
      under
      the rules and regulations of any Trading Market on which any of the securities
      of the Company are listed or designated. 

     

    (aa)    Solvency.
      Based
      on the 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 Company’s fair saleable value of its 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 for the current fiscal
      year
      as now conducted and as proposed to be conducted including its capital needs
      taking into account the particular capital requirements of the business
      conducted by the Company, and projected capital requirements and capital
      availability thereof; and (iii) the current cash flow of the Company, together
      with the proceeds the Company would receive, were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would be
      sufficient to pay all amounts on or in respect of its debt 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. The SEC Reports
      set forth as of the dates thereof all material 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”
shall
      mean (a) 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),
      (b) 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 (c) 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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    (bb)   Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, 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 (or created
      reasonable reserves), 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
      Purchaser 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 accountants are set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedule. To the best knowledge of the Company, such accountants,
      who
      the Company expects will express their opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-K for the
      year ending December 31, 2006 are a registered public accounting firm as
      required by the Securities Act.

     

    (ff)      
      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 accountants and lawyers formerly or
      presently employed by the Company and the Company is current with respect to
      any
      fees owed to its accountants and lawyers.

     

      
      (gg)      Acknowledgment
      Regarding Purchasers’ Purchase of Securities.
      The
      Company acknowledges and agrees that the Purchaser is acting solely in the
      capacity of an arm’s length purchaser with respect to the Transaction Documents
      and the transactions contemplated hereby. The Company further acknowledges
      that
      the Purchaser is not acting as a financial advisor or fiduciary of the Company
      (or in any similar capacity) with respect to this Agreement and the transactions
      contemplated hereby and any advice given by the Purchaser or any of its
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is merely incidental to the Purchaser’s purchase of the
      Securities. The Company further represents to the Purchaser that the Company’s
      decision to enter into this Agreement has been based solely on the independent
      evaluation of the transactions contemplated hereby by the Company and its
      representatives.

    
       

      
        
          
          

        

        
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    (hh)    Acknowledgement
      Regarding Purchasers’ Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
      it is understood and acknowledged by the Company (i) that the Purchaser has
      not
      been asked to agree, nor has the 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) that past or future open market or other
      transactions by the Purchaser, including Short Sales, and 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) that the Purchaser, and counter parties in “derivative” transactions to
      which the Purchaser is a party, directly or indirectly, presently may have
      a
“short” position in the Common Stock, and (iv) that the 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 (a) the Purchaser 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 (b) such hedging activities (if any) could reduce the value
      of
      the existing shareholders’ 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.

     

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

     

    3.2    Representations
      and Warranties of the Purchaser.
      The
      Purchaser hereby, represents and warrants as of the date hereof and as of the
      Closing Date to the Company as follows:

     

    (a)    Organization;
      Authority.
      The
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with full right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations hereunder and thereunder. The execution, delivery and
      performance by the Purchaser of the transactions contemplated by this Agreement
      have been duly authorized by all necessary corporate or similar action on the
      part of the Purchaser. Each Transaction Document to which it is a party has
      been
      duly executed by the Purchaser, and when delivered by the Purchaser in
      accordance with the terms hereof, will constitute the valid and legally binding
      obligation of the Purchaser, enforceable against the Purchaser 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.
      The
      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 for
      investment purposes only and not with a view to distributing or reselling such
      Securities, has no present intention of distributing or reselling any of such
      Securities and has no arrangement or understanding with any other persons
      regarding the distribution of any such Securities (this representation and
      warranty not limiting the Purchaser’s right to sell any Securities pursuant to
      the Registration Statement or otherwise in compliance with applicable federal
      and state securities laws). Notwithstanding the foregoing, the Purchaser shall
      not be deemed to have agreed to hold the Securities for any specified period
      of
      time. 

     

    
      
        
        

      

      
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    (c)    Rule
      144.
      The
      Purchaser understands that the Securities must be held indefinitely unless
      such
      Securities are registered under the Securities Act or an exemption from
      registration is available. The Purchaser acknowledges that it is familiar with
      Rule 144, and that the Purchaser has been advised that Rule 144 permits resales
      only under certain circumstances. The Purchaser understands that to the extent
      that Rule 144 is not available, the Purchaser will be unable to sell any
      Securities without either registration under the Securities Act or the existence
      of another exemption from such registration requirement.

     

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

     

    (e)    Experience
      of Such Purchaser.
      The
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      The 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.

     

    (f)    General.
      The
      Purchaser understands that the Securities are being offered and sold in reliance
      on a transactional exemption from the registration requirements of federal
      and
      state securities laws and the Company is relying upon the truth and accuracy
      of
      the representations, warranties, agreements, acknowledgments and understandings
      of the Purchaser set forth herein in order to determine the applicability of
      such exemptions and the suitability of the Purchaser to acquire the Securities.
      Purchaser understands that no United States federal or state agency or any
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Securities. 

     

    (g)    General
      Solicitation.
      The
      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.

     

    (h)    Short
      Sales and Confidentiality Prior To The Date Hereof.
      During
      the last thirty (30) days prior to the date hereof, neither the Purchaser nor
      any Affiliate of the Purchaser, foreign or domestic, has, directly or
      indirectly, effected or agreed to effect any Short Sale, whether or not against
      the box, established any "put equivalent position" (as defined in Rule 16a-1(h)
      under the 1934 Act) with respect to the Common Stock, borrowed or pre-borrowed
      any shares of Common Stock, or granted any other right (including, without
      limitation, any put or call option) with respect to the Common Stock or with
      respect to any security that includes, relates to or derived any significant
      part of its value from the Common Stock or otherwise sought to hedge its
      position in the Securities.

     

    
      
        
        

      

      
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    (i)    Receipt
      of Information by Purchaser.
      The
      Purchaser has had access to and has reviewed the SEC Reports. 

     

    (j)    Section
      16 and Other Commission Filings.
      The
      Purchaser acknowledges and agrees that it shall be solely responsible for timely
      making any required filings with the Commission, including without limitation
      any Section 16 filings or filings on Schedule 13D or 13G, on behalf of itself
      or
      its Affiliates and acknowledges and agrees that the Company shall have no
      responsibility or obligations to the Purchaser or its Affiliates in connection
      therewith. 

     

    (k)    Questionnaire.
      The
      information contained in the selling stockholder questionnaire in the form
      of
Exhibit
      A
      attached
      hereto delivered by Purchaser in connection with this Agreement is complete
      and
      accurate in all respects.

    

    (l)    Not
      Form S-3 Eligible.
      The
      Purchaser understands and acknowledges that the Company is not eligible, and
      may
      never be eligible, to register the resale of the Shares and the Warrant Shares
      for resale by the Purchaser on Form S-3 promulgated under the Securities
      Act.

    

    The
      Company acknowledges and agrees that the Purchaser does not make or has not
      made
      any representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.2.

     

    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 (i) an effective registration statement (ii) Rule 144, (iii) to
      the
      Company or (iv) to an Affiliate of the Purchaser or (v) in connection with
      a
      pledge as contemplated in Section 4.1(b), the Company may require the transferor
      thereof to provide to the Company an opinion of counsel selected by the
      transferor and reasonably acceptable to the Company, the form and substance
      of
      which opinion shall be reasonably satisfactory to the Company, to the effect
      that such transfer does not require registration of such transferred Securities
      under the Securities Act. As a condition of transfer, any such transferee shall
      agree in writing to be bound by the terms of this Agreement and the Company
      agrees that such transferee shall have the rights of a Purchaser under this
      Agreement and the Registration Rights Agreement.

     

    
      
        
        

      

      
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    (b)    Each
      Purchaser agrees 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 (as the case may
      be):

     

    [NEITHER]
      THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
      [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. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH
      A
      REGISTERED BROKER-DEALER OR OTHER LOAN SECURED BY SUCH SECURITIES WITH A
      FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
      OF REGULATION D UNDER THE SECURITIES ACT.

     

    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 Shareholders thereunder.

     

    
      
        
        

      

      
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    (c)    Certificates
      evidencing the Shares and the Warrant Shares shall not contain any legend
      (including the legend set forth in Section 4.1(b) hereof): (i) following a
      sale of such Shares and Warrant Shares pursuant to an effective registration
      statement (including the Registration Statement), or (ii) following any sale
      of
      such Warrant Shares pursuant to Rule 144, or (iii) if such Shares and Warrant
      Shares are eligible for sale under Rule 144(k), 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);
      provided,
      however,
      that in
      each of instances (ii) and (iii) above, (A) Purchaser shall have provided
      representations that Purchaser is permitted to dispose of such Shares and
      Warrant Shares without limitation as to amount or manner of sale pursuant to
      Rule 144 under the Securities Act and (B) such certificates evidencing the
      Shares and Warrant Shares shall have been surrendered along with a notice
      requesting removal of any legend and requesting the issuance of new certificates
      free of the legend to replace those surrendered. The Company shall cause its
      counsel to issue a legal opinion to or otherwise instruct the Company’s transfer
      agent promptly after receipt of a request for legend removal in accordance
      with
      this Section 4.1(c) if required by the Company’s transfer agent to effect the
      removal of the legend hereunder. The Company agrees that at such time as such
      legend is no longer required under this Section 4.1(c), it will, no later than
      five (5) Trading Days following the receipt by the Company or the Company’s
      transfer agent from Purchaser of a certificate representing Shares or Warrant
      Shares, as applicable, issued with a restrictive legend (such third Trading
      Day,
      the “Legend
      Removal Date”),
      deliver or cause to be delivered to 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 any transfer agent
      of
      the Company that enlarge the restrictions on transfer set forth in this Section.
      Certificates for Securities subject to legend removal hereunder shall be
      transmitted by the transfer agent of the Company to the Purchaser by crediting
      the account of the Purchaser’s prime broker with the Depository Trust Company
      System.

    

    (d)    In
      addition to the 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 Shares and Warrant Shares (based on the VWAP of the Common Stock
      on
      the date such Securities are submitted to and received by the Company’s transfer
      agent) delivered and received 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 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 any other Purchaser, agrees 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 that the
      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.

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    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 Warrant 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
      shareholders of the Company.

     

    4.3    Furnishing
      of Information.
      For a
      period commencing on the date hereof and ending on the date which is the second
      anniversary of the Effective Date, the Company covenants to (a) use commercially
      reasonable efforts 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, (b) use commercially
      reasonable efforts to comply with the requirements of Rule 144(c) under the
      Securities Act with respect to current public information about the Company
      (but
      only during such time as the Company is not required to file reports pursuant
      to
      the Exchange Act) and (c) furnish such other reports and documents of the
      Company as any holder of Securities may reasonably request to enable such holder
      to sell such Securities without registration under the Securities Act within
      the
      limitation of the exemptions provided by Rule 144.

     

    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 in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchaser 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    Exercise
      Procedures.
      The
      respective forms of Notice of Exercise included in each of the Warrants and
      the
      Greenshoe Warrants set forth the totality of the procedures required of the
      Purchaser in order to exercise the Warrants and the Greenshoe Warrants,
      respectively. No additional legal opinion or other information or instructions
      shall be required of any Purchasers to exercise such Purchaser’s Warrants or
      Greenshoe Warrants. The Company shall honor exercises of the Warrants and the
      Greenshoe Warrants and shall deliver Warrant 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, (A) by 8:30 a.m. Eastern time on the Trading Day following the
      date hereof, issue a press release, reasonably acceptable to the Purchaser
      disclosing the material terms of the transactions contemplated hereby, and
      (B)
      no later than four (4) days following the date hereof, issue a Current Report
      on
      Form 8-K, disclosing the material terms of the transactions contemplated hereby,
      and shall attach the Transaction Documents thereto. The Company and the
      Purchaser shall consult with each other in issuing any other press releases
      with
      respect to the transactions contemplated hereby and which name the Purchaser,
      and neither the Company nor Purchaser shall issue any such press release or
      otherwise make any such public statement without the prior consent of the
      Company, with respect to any press release of Purchaser, or without the prior
      consent of the Purchaser, with respect to any press release of the Company,
      which consent shall not unreasonably be withheld, 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 the Purchaser, or include the name of the Purchaser in any filing with the
      Commission or any regulatory agency or Trading Market, without the prior written
      consent of the Purchaser, except (i) as required by federal securities law
      in
      connection with (A) the Registration Statement and (B) the final Agreement
      and
      Transaction Documents (including signature pages hereto and thereto with the
      Commission and (ii) to the extent such disclosure is required by law or Trading
      Market regulations, in which case the Company shall provide the Purchaser with
      prior notice of such disclosure permitted under this subclause
      (ii).

     

    
      
        
        

      

      
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    4.7    Shareholder
      Rights Plan.
      No
      claim will be made or enforced by the Company or, to the knowledge of the
      Company, any other Person that any Purchaser is an “Acquiring Person” under any
      shareholder rights plan or similar 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. The Company shall conduct its business in a manner so that
      it will not become subject to the Investment Company Act.

     

    4.8    Non-Public
      Information.
      Except
      with respect to the material terms and conditions of the transactions
      contemplated by this Agreement and the other 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 representations
      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/or to acquire additional assets
      for
      the Company (including, without limitation, by means of merger or acquisition
      of
      additional entities) and not for 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), to redeem Common Stock or Common
      Stock Equivalents or to settle any outstanding litigation. 

     

    4.10   Sales
      by Purchasers.
      No
      Purchaser will make any sale, transfer or other disposition of the Securities
      in
      violation of federal or state securities laws.

     

    4.11   Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 4.11, the Company will indemnify and hold
      the
      Purchasers and their directors, officers, shareholders, members, partners,
      employees and agents (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 Party,
      or
      such Purchaser Party’s respective Affiliates, by any shareholder of the Company
      who is not an Affiliate of such Purchaser Party, with respect to any of the
      transactions contemplated by the Transaction Documents (unless such action
      is
      based upon a breach of the Purchaser’s representations, warranties or covenants
      under the Transaction Documents or any agreements or understandings the
      Purchaser may have with any such shareholder 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. 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. The Company will not be liable to any Purchaser Party under this
      Agreement (i) for any settlement by a Purchaser Party effected without the
      Company’s prior written consent, which shall not be unreasonably withheld or
      delayed; or (ii) 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 the Purchasers
      in this Agreement or in the other Transaction Documents.

     

    
      
        
        

      

      
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    4.12    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 be
      required to fulfill its obligations in full under the Transaction Documents.
      

     

    (b)    If,
      on
      any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than 120% of (i) the Actual Minimum on such
      date, minus (ii) the number of shares of Common Stock previously issued pursuant
      to the Transaction Documents, then the Board of Directors of the Company 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 Actual Minimum at such time (minus the
      number of shares of Common Stock previously issued pursuant to the Transaction
      Documents), as soon as possible and in any event not later than the 75th day
      after such date; provided that the Company will not be required at any time
      to
      authorize a number of shares of Common Stock greater than the maximum remaining
      number of shares of Common Stock that could possibly be issued after such time
      pursuant to the Transaction Documents.

     

    (c)    The
      Company shall, if applicable, use commercially reasonable efforts to:
      (i) in the time and manner required by the 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 Actual Minimum on the
      date of such application, (ii) take all commercially reasonable steps
      necessary to cause such shares of Common Stock to be approved for listing on
      the
      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 Actual Minimum on such date
      on
      such Trading Market or another Trading Market.

     

    4.13    Participation
      in Future Financing.
      

     

    (a)    From
      the
      date hereof until the second anniversary of the Closing Date, upon any financing
      by the Company or any of its Subsidiaries of Common Stock or Common Stock
      Equivalents (a “Subsequent
      Financing”),
      each
      Purchaser shall have the right to participate in up to an amount of the
      Subsequent Financing equal to the lesser of (i) the amount of the Subsequent
      Financing and (ii) such Purchaser’s portion of the Subscription Amount (the
“Participation
      Maximum”).

    

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

     

    
      
        
        

      

      
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    (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 Company may effect the
      remaining portion of such Subsequent Financing on the terms and to the Persons
      set forth in the Subsequent Financing Notice. 

    

    (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 the greater of (a) their Pro Rata
      Portion (as defined below) of the Participation Maximum and (b) the difference
      between the Participation Maximum and the aggregate amount of participation
      by
      all other Purchasers. “Pro
      Rata Portion”
is
      the
      ratio of (x) the Subscription Amount of Securities purchased on the Closing
      Date
      by a Purchaser participating under this Section 4.13 and (y) the sum of the
      aggregate Subscription Amounts of Securities purchased on the Closing Date
      by
      all Purchasers participating under this Section 4.13.

    

    (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 4.13, 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 60 Trading Days after the date of the
      initial Subsequent Financing Notice. 

    

    (g)    Notwithstanding
      the foregoing, this Section 4.13 shall not apply in respect of an Exempt
      Issuance and an underwritten public offering of the Company’s
      securities.

    

    4.14    Subsequent
      Equity Sales.
      

    

    (a)    From
      the
      date hereof until 180 days after the Effective Date, if the Company shall issue
      shares of Common Stock or Common Stock Equivalents for a per share purchase
      price (the “New
      Issuance Price”),
      which
      is less than the Purchase Price, then the Purchase Price will be deemed to
      be
      readjusted to such New Issuance Price and the Company shall promptly refund
      to
      each Purchaser, by wire transfer of immediately available funds, the difference
      between the number of Shares then held by such Purchaser multiplied by the
      Purchase Price and such Purchaser’s Revised Subscription Amount. For purposes of
      this Agreement, the term “Revised
      Subscription Amount”
shall
      mean the number of Shares then held by such Purchaser multiplied by the New
      Issuance Price.

    

    
      
        
        

      

      
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    (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”. The
      term “Variable
      Rate Transaction”
shall
      mean 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, exercise 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.
      

    

    (c)    Notwithstanding
      the foregoing, this Section 4.14 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance.

    

    4.15    Equal
      Treatment of Purchasers.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      unless the same consideration is also offered to all of the parties to the
      Transaction Documents. 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.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1     
      Fees
      and Expenses.
      At the
      Closing, the Company shall reimburse the Purchaser for all legal and other
      expenses incurred in connection with the transactions contemplated by this
      Agreement up to a maximum of $35,000. The Company shall pay all transfer agent
      fees, stamp taxes and other taxes and duties levied in connection with the
      delivery of any Securities. Except as set forth above or as otherwise expressly
      provided in the Transaction Documents, 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.

     

    5.2      
      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.

     

    
      
        
        

      

      
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    5.3    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. (California 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. (California time) on any Trading Day, (c) the 2nd
      Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as set forth on the signature pages attached hereto.

     

    5.4    Amendments;
      Waivers.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by the Company and each
      Purchaser or, in the case of a waiver, by the party against whom enforcement
      of
      any such waiver 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 either party to exercise any right hereunder in any manner
      impair the exercise of any such right.

     

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

     

    5.6    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. 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 such transferee agrees in writing to be bound, with
      respect to the transferred Securities, by the provisions hereof that apply
      to
      the “Purchasers”.

     

    5.7    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 4.11.

     

    5.8    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 county of New York. Each party
      hereby irrevocably submits to the exclusive jurisdiction of the state and
      federal courts sitting in the county of New York 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 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 manner permitted by law.
      The parties hereby waive all rights to a trial by jury. 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 attorneys’ fees and other costs and
      expenses incurred with the investigation, preparation and prosecution of such
      action or proceeding.

    
       

    

    
      
        
        

      

      
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    5.9    
Survival.
      The
      representations and warranties contained herein shall survive the Closing and
      the delivery and exercise of the Securities, as applicable for the applicable
      statue of limitations.

     

    5.10    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, 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 signature page were an original
      thereof.

     

    5.11    Severability.
      If any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    5.12    Rescission
      and Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the 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,
      in the
      case of a rescission of an exercise of a Warrant or a Greenshoe Warrant, the
      Purchaser shall be required to return any Warrant Shares subject to any such
      rescinded exercise notice.

     

    5.13    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, 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 and
      customary and reasonable indemnity, if requested. The applicants for a new
      certificate or instrument under such circumstances shall also pay any reasonable
      third-party costs associated with the issuance of such replacement
      Securities.

     

    
      
        
        

      

      
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    5.14    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 described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

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

     

    5.16    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.

     

    5.17    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 of the obligations of any other
      Purchaser under any Transaction Document. Nothing contained herein or in any
      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 Purchaser’s Counsel. Purchaser’s
      Counsel does not represent all of the Purchasers but only Gemini Strategies
      LLC.
      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.

     

    
      
        
        

      

      
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    5.18    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.

     

    5.19    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.

     

    5.20    Disclosure
      Schedule.
      

     

    (a)    Disclosure
      of any matter in the Disclosure Schedule shall not constitute an expression
      of a
      view that such matter is material or is required to be disclosed pursuant to
      this Agreement.

     

    (b)    To
      the
      extent that any representation or warranty set forth in this Agreement is
      qualified by the materiality of the matter(s) to which the representation or
      warranty relates, the inclusion of any matter in the Disclosure Schedule does
      not constitute a determination by the Company that any such matter is material.
      The disclosure of any matter in the Disclosure Schedule does not imply that
      any
      other, undisclosed matter that has a greater significance or value is
      material.

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
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    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.

     

    

    
      	
              SURGE
                GLOBAL ENERGY, INC.

            	
              Address
                for Notice:

            
	
              By:__________________________________________

              Name:
                

              Title:
                

            	
              Surge
                Global Energy, Inc.

              12220
                El Camino Real

              Suite
                410

              San
                Diego, California 92130

              Facsimile
                number: 

               

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

            	 

    

    

    

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
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    [PURCHASER
      SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT WITH SURGE GLOBAL ENERGY,
      INC.]

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement
      to be duly executed by its authorized signatory as of the date first indicated
      above.

     

    Name
      of
      Purchaser: Gemini Master Fund Limited

    Signature
      of Authorized Signatory of Purchaser:
      _____________________________________

    Name
      of
      Authorized Signatory: _________________________________

    Title
      of
      Authorized Signatory: __________________________________

    Email
      Address of Purchaser:___________________________________________

    

    Address
      for Notice of Purchaser:

    Gemini
      Master Fund Limited

    12220
      El
      Camino Real Suite 400

    San
      Diego, CA 92130

    

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

    

    
 

    Subscription
      Amount: $900,000

    Shares
      of
      Common Stock: 2,000,000

    Warrants:
      2,000,000

    Greenshoe
      Warrants: 2,000,000

    EIN
      Number: [PROVIDE
      THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
      PAGES CONTINUE] 

    

    
 

    
      
        
        

      

      
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    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of November 28, 2006, between Surge Global Energy, Inc., a Delaware
      corporation (the “Company”),
      and Mark C. Fritz (including its successors and assigns, the
“Purchaser”
or
      “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 the
      Purchaser, and the Purchaser, 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 the Purchaser agree as
      follows:

     

     

    ARTICLE
      I

    DEFINITIONS

     

    1.1    Definitions.
      In
      addition to the terms defined elsewhere in this Agreement: the following terms
      have the meanings indicated in this Section 1.1:

     

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

     

    “Actual
      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 Warrant Shares issuable upon exercise in full of all
      Warrants and Greenshoe Warrants, ignoring any exercise limits set forth
      therein.

     

    “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 144 under the Securities Act. With
      respect to the Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of the Purchaser.

     

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

     

    “Closing
      Date”
means
      the date of the Closing.

     

    “Commission”
means
      the 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 have been reclassified
      or
      changed into.

     

    
      
        
        

      

      
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    “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
      Greenberg Traurig L.L.P.

     

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

     

    “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
      by a
      majority of the non-employee members of the Board of Directors of the Company
      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 any Securities
      issued hereunder and/or 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 are not amended subsequent to
      the
      date of this Agreement to increase the number of such securities or to decrease
      the exercise, exchange or conversion price of any such securities, and (c)
      securities issued pursuant to acquisitions or strategic transactions, provided
      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.

    

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

    

    “Greenshoe
      Warrants”
shall
      mean, collectively, the Common Stock purchase warrants in the form of
Exhibit
      C
      delivered to the Purchaser at the Closing in accordance with Section 2.2(a)(v)
      hereof, which Greenshoe Warrants shall be exercisable immediately and have
      a
      term of exercise of one year.

    

    
      
        
        

      

      
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    “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.

    

    “New
      Issuance Price”
shall
      have the meaning ascribed to such term in Section 4.14.

    

    “Participation
      Maximum”
shall
      have the meaning ascribed to such term in Section 4.13. 

    

    “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.

    

    “Pre-Notice”
shall
      have the meaning ascribed to such term in Section 4.13. 

    

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

    

    “Purchase
      Price”
shall
      have the meaning ascribed to such term in Section 2.1.

     

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.11.

    

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

    

    
      
        
        

      

      
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    “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).

    

    “Revised
      Subscription Amount”
shall
      have the meaning ascribed to such term in Section 4.14.

    

    “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 Common Stock, the Warrants, the Greenshoe Warrants and the Warrant Shares
      issued or issuable to the Purchasers under any of the Transaction Documents.
      

    

    “Securities
      Act”
means
      the Securities Act of 1933, as amended. 

    

    “Shares”
      shall
      have the meaning ascribed to such term in Section 2.1.

    

    “Short
      Sales”
shall
      include all “short sales” as defined in Rule 200 of Regulation SHO under the
      Exchange Act.

    

    “Subscription
      Amount”
shall
      mean, $450,000 (calculated by multiplying the number of Shares purchased by
      the
      Purchaser by the Purchase Price) in United States Dollars and in immediately
      available funds.

    

    “Subsequent
      Financing”
shall
      have the meaning ascribed to such term in Section 4.13.

    

    “Subsequent
      Financing Notice”
shall
      have the meaning ascribed to such term in Section 4.13.

    

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a).

    

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    “Trading
      Market”
means
      the markets or exchanges on which the Common Stock is listed or quoted for
      trading on the date in question.

    

    “Transaction
      Documents”
means
      this Agreement, the Warrants, the Greenshoe Warrants, the Registration Rights
      Agreement and any other documents or agreements executed in connection with
      the
      transactions contemplated hereunder.

    

    “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 national
      securities exchange, the daily volume weighted average price of the Common
      Stock
      for such date (or the nearest preceding date) on the national securities
      exchange on which the Common Stock is then listed or quoted as reported by
      Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time
      to
      4:02 p.m. Eastern Time); (b)  if the Common Stock is not then listed or
      quoted on a national securities exchange and if prices for the Common Stock
      are
      then quoted on the OTC Bulletin Board, 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 on the OTC Bulletin
      Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the 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 and reasonably acceptable
      to
      the Company.

     

    “Warrants”
means
      collectively the Common Stock purchase warrants, in the form of Exhibit B
      delivered to the Purchaser at the Closing in accordance with Section 2.2(a)(iv)
      hereof, which Warrants shall be exercisable immediately and have a term of
      exercise of seven years.

     

    “Warrant
      Shares”
means,
      collectively, the shares of Common Stock issuable upon exercise of the Warrants
      and the Greenshoe Warrants.

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1    Closing.
      On the
      Closing Date, upon the terms and subject to the conditions set forth herein,
      concurrent with the execution and delivery of this Agreement by the parties
      hereto, the Company agrees to sell to the Purchaser, 1,000,000 shares of Common
      Stock (the “Shares”)
      for a
      purchase price per Share of $0.45 (the “Purchase
      Price”),
      and
      the Purchaser agrees to purchase the Shares for an aggregate purchase price
      equal to the Purchaser’s Subscription Amount together with Warrants and
      Greenshoe Warrants as determined by pursuant to Section 2.2(a). The Purchaser
      shall deliver to the Company via wire transfer of immediately available funds,
      $450,000 and the Company shall deliver to the Purchaser the Shares, together
      with 1,000,000 Warrants and 1,000,000 Greenshoe Warrants and the other items
      set
      forth in Section 2.2 to be delivered 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 Purchaser’s Counsel, or such other location as the parties shall
      mutually agree.

     

    
      
        
        

      

      
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    2.2    Deliveries.

     

    a)    At
      the
      Closing, the Company shall deliver or cause to be delivered to the Purchaser
      the
      following:

     

    (i)    this
      Agreement duly executed by the Company;

     

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

     

    (iii)   a
      certificate registered in the name of the Purchaser evidencing the Shares
      ;

     

    (iv)   a
      Warrant
      registered in the name of the Purchaser to purchase 1,000,000 shares of Common
      Stock, with a per share exercise price equal to $0.60, subject to adjustment
      therein;

     

    (v)    a
      Greenshoe Warrant registered in the name of the Purchaser to purchase 1,000,000
      shares of Common Stock, with a per share exercise price equal to $0.50, subject
      to adjustment therein;

     

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

     

    b)    At
      the
      Closing, the Purchaser shall deliver or cause to be delivered to the Company
      the
      following:

     

    (i)    this
      Agreement duly executed by the Purchaser;

     

    (ii)    $450,000
      by wire transfer or check of immediately available funds to the account as
      specified in writing by the Company; and

     

    (iii)    the
      Registration Rights Agreement duly executed by the 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 when made and on the Closing Date of the
      representations and warranties of the Purchaser contained herein;

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

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

     

    b)    The
      obligations of the Purchaser 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)    the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement;

     

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

     

    (v)    
from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission, and, at any time prior to the Closing Date, trading
      in securities generally as reported by Bloomberg Financial Markets 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 the Purchaser, makes it impracticable or inadvisable to purchase
      the
      Common Stock at the Closing.

     

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1    Representations
      and Warranties of the Company.
      Except
      as set forth under the corresponding section of the disclosure schedule
      delivered to the Purchaser concurrently herewith (the “Disclosure
      Schedule”)
      which
      Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
      the
      representations and warranties set forth below to the Purchaser.

     

    (a)    Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all 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. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    (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 (as applicable), with the
      requisite corporate or other entity 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 or 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, would not 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
      the Company has not received any written notice of a Proceeding that 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 thereby have been duly
      authorized by all necessary corporate action on the part of the Company and
      no
      further corporate action is required by the Company, its board of directors
      or
      its shareholders in connection therewith other than in connection with the
      Required Approvals. Each Transaction Document has been (or upon delivery will
      have been) duly executed by the Company and, when delivered in accordance with
      the terms hereof and thereof, will constitute the valid and binding obligation
      of the Company enforceable against the Company in accordance with its terms
      except (i) as limited by general equitable principles and applicable bankruptcy,
      insolvency, reorganization, moratorium and other laws of general application
      affecting enforcement of creditors’ rights generally, (ii) as limited by laws
      relating to the availability of specific performance, injunctive relief or
      other
      equitable remedies and (iii) insofar as indemnification and contribution
      provisions may be limited by applicable law.

     

    (d)    No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company 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, or (iii) subject to the Required Approvals, conflict with
      or
      result in a violation of any law, rule, regulation, order, judgment, injunction,
      decree or other restriction of any court or governmental authority to which
      the
      Company or a Subsidiary is subject (including federal and state securities
      laws
      and regulations), or by which any property or asset of the Company or a
      Subsidiary is bound or affected; except in the case of each of clauses (ii)
      and
      (iii), such as would not reasonably be expected to result in a Material Adverse
      Effect.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    (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) 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 Common Stock, the Warrants and the Greenshoe Warrants and the
      listing of the Common Stock and Warrant Shares for trading thereon in the time
      and manner required thereby, and (iv) the filing of a Form D with the Commission
      and such filings as are required to be made under applicable state securities
      laws (collectively, the “Required
      Approvals”).

     

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

     

    (g)    Capitalization.
      The
      capitalization of the Company is as set forth on Schedule
      3.1(g).
      Except
      as set forth on Schedule
      3.1(g),
      the
      Company has not issued any capital stock since its most
      recently filed periodic report under the Exchange Act,
      other
      than pursuant to the exercise of employee stock options under the Company’s
      stock option plans, the issuance of shares of Common Stock to employees pursuant
      to the Company’s employee stock purchase plan and pursuant to the conversion or
      exercise of outstanding Common Stock Equivalents. No Person has any right of
      first refusal, preemptive right, right of participation, or any similar right
      to
      participate in the transactions contemplated by the Transaction Documents.
      Except as a result of the purchase and sale of the Securities, there are no
      outstanding options, warrants, script 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 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 shareholder, the Board of Directors of the Company or
      others is required for the issuance and sale of the Securities. There are no
      shareholders 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
      shareholders.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    (h)    SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by it 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 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 and the rules and
      regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed or amended, 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 the SEC Reports, (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 required to be 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 shareholders 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
      as
      set forth on Schedule
      3.1(i).
      The
      Company does not have pending before the Commission any request for confidential
      treatment of information.

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    (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.

     

    (l)    Compliance.
      Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, could reasonably be expected to 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 except in each case as would not reasonably be
      expected to have a Material Adverse Effect. 

     

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

     

    (n)    Title
      to Assets.
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them that is material to the business of the Company
      and
      the Subsidiaries 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, Liens for the payment of federal, state or other taxes, the
      payment of which is neither delinquent nor subject to penalties and/or Liens
      set
      forth in Schedule
      3(n)
      of this
      Agreement. Any real property and facilities held under lease by the Company
      and
      the Subsidiaries are held by them under valid, subsisting and enforceable leases
      of which the Company and the Subsidiaries are in compliance in all material
      respects.

     

    (o)    Patents
      and Trademarks.
      Except
      as set forth in Schedule 3(o) of this Agreement, the Company and the
      Subsidiaries have, or have rights to use in all material respects, all patents,
      patent applications, trademarks, trademark applications, service marks, trade
      names, copyrights, licenses and other similar rights necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Reports 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 written notice that 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 of
      the
      Company.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    (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
      customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the aggregate Subscription Amount. Schedule
      3(p)
      contains
      a list of each of the Company’s insurance contracts and policies. To the best
      knowledge of the Company, the list of Company insurance contracts and policies
      set forth on Schedule
      3.1(p)
      is
      accurate and complete. Neither the Company nor any Subsidiary has any reason
      to
      believe that it will not be able to renew its existing insurance coverage as
      and
      when such coverage expires or to obtain similar coverage from similar insurers
      as may be necessary to continue its business without a significant increase
      in
      cost.

     

    (q)    Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports and on Schedule
      3.1(q),
      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 $60,000 other than (i) for payment of salary or consulting
      fees for services rendered, (ii) reimbursement for expenses incurred on behalf
      of the Company and (iii) for 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. Except as set forth
      in the Company’s most recent SEC Reports, 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 material information relating to the Company, including its
      Subsidiaries, is made known to the certifying officers by others within those
      entities, particularly during the period in which the Company’s most recently
      filed periodic report under the Exchange Act, as the case may be, is being
      prepared. The Company’s certifying officers have evaluated the effectiveness of
      the Company’s controls and procedures as of the date prior to the filing date of
      the 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. Except as set forth in the Company’s most recent SEC Reports,
      there have been no significant changes in the Company’s internal controls (as
      such term is defined in Item 307(b) of Regulation S-K under the Exchange Act)
      or, to the
      best
      knowledge of the Company,
      in
      other factors that could significantly affect the Company’s internal
      controls.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

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

     

    (t)    Private
      Placement.
      Assuming the accuracy of the Purchaser’s 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.

     

    (v)    Registration
      Rights.
      Except
      as set forth on Schedule
      3.1(v),
      other
      than the Purchaser, 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
      Company’s Common Stock is registered pursuant to Section 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, as applicable.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

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

     

    (y)    Disclosure.
      Except
      for the material terms and conditions of the transactions contemplated by this
      Agreement and the other Transaction Documents, the Company confirms that neither
      it nor any other Person acting on its behalf has provided the Purchaser or
      its
      agents or counsel with any information that constitutes nonpublic information.
      The Company understands and confirms that the Purchaser will rely on the
      foregoing representations and covenants in effecting transactions in securities
      of the Company. All disclosure provided to the Purchasers regarding the Company,
      its business and the transactions contemplated hereby, including the Disclosure
      Schedule to this Agreement, furnished by or on behalf of the Company with
      respect to the representations and warranties made herein are true and correct
      with respect to such representations and warranties and do 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 Company acknowledges and agrees
      that the Purchaser is not making and has not 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 Purchaser’s 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 the Securities Act or any
      applicable shareholder approval provisions, including, without limitation,
      under
      the rules and regulations of any Trading Market on which any of the securities
      of the Company are listed or designated. 

     

    (aa)    Solvency.
      Based
      on the 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 Company’s fair saleable value of its 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 for the current fiscal
      year
      as now conducted and as proposed to be conducted including its capital needs
      taking into account the particular capital requirements of the business
      conducted by the Company, and projected capital requirements and capital
      availability thereof; and (iii) the current cash flow of the Company, together
      with the proceeds the Company would receive, were it to liquidate all of its
      assets, after taking into account all anticipated uses of the cash, would be
      sufficient to pay all amounts on or in respect of its debt 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. The SEC Reports
      set forth as of the dates thereof all material 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”
shall
      mean (a) 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),
      (b) 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 (c) 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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    (bb)   Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, 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 (or created
      reasonable reserves), 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
      Purchaser 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 accountants are set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedule. To the best knowledge of the Company, such accountants,
      who
      the Company expects will express their opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-K for the
      year ending December 31, 2006 are a registered public accounting firm as
      required by the Securities Act.

     

    (ff)      
      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 accountants and lawyers formerly or
      presently employed by the Company and the Company is current with respect to
      any
      fees owed to its accountants and lawyers.

     

      
      (gg)      Acknowledgment
      Regarding Purchasers’ Purchase of Securities.
      The
      Company acknowledges and agrees that the Purchaser is acting solely in the
      capacity of an arm’s length purchaser with respect to the Transaction Documents
      and the transactions contemplated hereby. The Company further acknowledges
      that
      the Purchaser is not acting as a financial advisor or fiduciary of the Company
      (or in any similar capacity) with respect to this Agreement and the transactions
      contemplated hereby and any advice given by the Purchaser or any of its
      representatives or agents in connection with this Agreement and the transactions
      contemplated hereby is merely incidental to the Purchaser’s purchase of the
      Securities. The Company further represents to the Purchaser that the Company’s
      decision to enter into this Agreement has been based solely on the independent
      evaluation of the transactions contemplated hereby by the Company and its
      representatives.

    
       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

         

      

    

    (hh)    Acknowledgement
      Regarding Purchasers’ Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
      it is understood and acknowledged by the Company (i) that the Purchaser has
      not
      been asked to agree, nor has the 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) that past or future open market or other
      transactions by the Purchaser, including Short Sales, and 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) that the Purchaser, and counter parties in “derivative” transactions to
      which the Purchaser is a party, directly or indirectly, presently may have
      a
“short” position in the Common Stock, and (iv) that the 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 (a) the Purchaser 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 (b) such hedging activities (if any) could reduce the value
      of
      the existing shareholders’ 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.

     

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

     

    3.2    Representations
      and Warranties of the Purchaser.
      The
      Purchaser hereby, represents and warrants as of the date hereof and as of the
      Closing Date to the Company as follows:

     

    (a)    Organization;
      Authority.
      The
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with full right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations hereunder and thereunder. The execution, delivery and
      performance by the Purchaser of the transactions contemplated by this Agreement
      have been duly authorized by all necessary corporate or similar action on the
      part of the Purchaser. Each Transaction Document to which it is a party has
      been
      duly executed by the Purchaser, and when delivered by the Purchaser in
      accordance with the terms hereof, will constitute the valid and legally binding
      obligation of the Purchaser, enforceable against the Purchaser 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.
      The
      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 for
      investment purposes only and not with a view to distributing or reselling such
      Securities, has no present intention of distributing or reselling any of such
      Securities and has no arrangement or understanding with any other persons
      regarding the distribution of any such Securities (this representation and
      warranty not limiting the Purchaser’s right to sell any Securities pursuant to
      the Registration Statement or otherwise in compliance with applicable federal
      and state securities laws). Notwithstanding the foregoing, the Purchaser shall
      not be deemed to have agreed to hold the Securities for any specified period
      of
      time. 

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    (c)    Rule
      144.
      The
      Purchaser understands that the Securities must be held indefinitely unless
      such
      Securities are registered under the Securities Act or an exemption from
      registration is available. The Purchaser acknowledges that it is familiar with
      Rule 144, and that the Purchaser has been advised that Rule 144 permits resales
      only under certain circumstances. The Purchaser understands that to the extent
      that Rule 144 is not available, the Purchaser will be unable to sell any
      Securities without either registration under the Securities Act or the existence
      of another exemption from such registration requirement.

     

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

     

    (e)    Experience
      of Such Purchaser.
      The
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      The 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.

     

    (f)    General.
      The
      Purchaser understands that the Securities are being offered and sold in reliance
      on a transactional exemption from the registration requirements of federal
      and
      state securities laws and the Company is relying upon the truth and accuracy
      of
      the representations, warranties, agreements, acknowledgments and understandings
      of the Purchaser set forth herein in order to determine the applicability of
      such exemptions and the suitability of the Purchaser to acquire the Securities.
      Purchaser understands that no United States federal or state agency or any
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Securities. 

     

    (g)    General
      Solicitation.
      The
      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.

     

    (h)    Short
      Sales and Confidentiality Prior To The Date Hereof.
      During
      the last thirty (30) days prior to the date hereof, neither the Purchaser nor
      any Affiliate of the Purchaser, foreign or domestic, has, directly or
      indirectly, effected or agreed to effect any Short Sale, whether or not against
      the box, established any "put equivalent position" (as defined in Rule 16a-1(h)
      under the 1934 Act) with respect to the Common Stock, borrowed or pre-borrowed
      any shares of Common Stock, or granted any other right (including, without
      limitation, any put or call option) with respect to the Common Stock or with
      respect to any security that includes, relates to or derived any significant
      part of its value from the Common Stock or otherwise sought to hedge its
      position in the Securities.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    (i)    Receipt
      of Information by Purchaser.
      The
      Purchaser has had access to and has reviewed the SEC Reports. 

     

    (j)    Section
      16 and Other Commission Filings.
      The
      Purchaser acknowledges and agrees that it shall be solely responsible for timely
      making any required filings with the Commission, including without limitation
      any Section 16 filings or filings on Schedule 13D or 13G, on behalf of itself
      or
      its Affiliates and acknowledges and agrees that the Company shall have no
      responsibility or obligations to the Purchaser or its Affiliates in connection
      therewith. 

     

    (k)    Questionnaire.
      The
      information contained in the selling stockholder questionnaire in the form
      of
Exhibit
      A
      attached
      hereto delivered by Purchaser in connection with this Agreement is complete
      and
      accurate in all respects.

    

    (l)    Not
      Form S-3 Eligible.
      The
      Purchaser understands and acknowledges that the Company is not eligible, and
      may
      never be eligible, to register the resale of the Shares and the Warrant Shares
      for resale by the Purchaser on Form S-3 promulgated under the Securities
      Act.

    

    The
      Company acknowledges and agrees that the Purchaser does not make or has not
      made
      any representations or warranties with respect to the transactions contemplated
      hereby other than those specifically set forth in this Section 3.2.

     

    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 (i) an effective registration statement (ii) Rule 144, (iii) to
      the
      Company or (iv) to an Affiliate of the Purchaser or (v) in connection with
      a
      pledge as contemplated in Section 4.1(b), the Company may require the transferor
      thereof to provide to the Company an opinion of counsel selected by the
      transferor and reasonably acceptable to the Company, the form and substance
      of
      which opinion shall be reasonably satisfactory to the Company, to the effect
      that such transfer does not require registration of such transferred Securities
      under the Securities Act. As a condition of transfer, any such transferee shall
      agree in writing to be bound by the terms of this Agreement and the Company
      agrees that such transferee shall have the rights of a Purchaser under this
      Agreement and the Registration Rights Agreement.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

       

    

    (b)    Each
      Purchaser agrees 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 (as the case may
      be):

     

    [NEITHER]
      THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
      [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. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH
      A
      REGISTERED BROKER-DEALER OR OTHER LOAN SECURED BY SUCH SECURITIES WITH A
      FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
      OF REGULATION D UNDER THE SECURITIES ACT.

     

    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 Shareholders thereunder.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

    (c)    Certificates
      evidencing the Shares and the Warrant Shares shall not contain any legend
      (including the legend set forth in Section 4.1(b) hereof): (i) following a
      sale of such Shares and Warrant Shares pursuant to an effective registration
      statement (including the Registration Statement), or (ii) following any sale
      of
      such Warrant Shares pursuant to Rule 144, or (iii) if such Shares and Warrant
      Shares are eligible for sale under Rule 144(k), 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);
      provided,
      however,
      that in
      each of instances (ii) and (iii) above, (A) Purchaser shall have provided
      representations that Purchaser is permitted to dispose of such Shares and
      Warrant Shares without limitation as to amount or manner of sale pursuant to
      Rule 144 under the Securities Act and (B) such certificates evidencing the
      Shares and Warrant Shares shall have been surrendered along with a notice
      requesting removal of any legend and requesting the issuance of new certificates
      free of the legend to replace those surrendered. The Company shall cause its
      counsel to issue a legal opinion to or otherwise instruct the Company’s transfer
      agent promptly after receipt of a request for legend removal in accordance
      with
      this Section 4.1(c) if required by the Company’s transfer agent to effect the
      removal of the legend hereunder. The Company agrees that at such time as such
      legend is no longer required under this Section 4.1(c), it will, no later than
      five (5) Trading Days following the receipt by the Company or the Company’s
      transfer agent from Purchaser of a certificate representing Shares or Warrant
      Shares, as applicable, issued with a restrictive legend (such third Trading
      Day,
      the “Legend
      Removal Date”),
      deliver or cause to be delivered to 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 any transfer agent
      of
      the Company that enlarge the restrictions on transfer set forth in this Section.
      Certificates for Securities subject to legend removal hereunder shall be
      transmitted by the transfer agent of the Company to the Purchaser by crediting
      the account of the Purchaser’s prime broker with the Depository Trust Company
      System.

    

    (d)    In
      addition to the 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 Shares and Warrant Shares (based on the VWAP of the Common Stock
      on
      the date such Securities are submitted to and received by the Company’s transfer
      agent) delivered and received 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 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 any other Purchaser, agrees 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 that the
      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.

    

    
      
        
        

      

      
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    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 Warrant 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
      shareholders of the Company.

     

    4.3    Furnishing
      of Information.
      For a
      period commencing on the date hereof and ending on the date which is the second
      anniversary of the Effective Date, the Company covenants to (a) use commercially
      reasonable efforts 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, (b) use commercially
      reasonable efforts to comply with the requirements of Rule 144(c) under the
      Securities Act with respect to current public information about the Company
      (but
      only during such time as the Company is not required to file reports pursuant
      to
      the Exchange Act) and (c) furnish such other reports and documents of the
      Company as any holder of Securities may reasonably request to enable such holder
      to sell such Securities without registration under the Securities Act within
      the
      limitation of the exemptions provided by Rule 144.

     

    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 in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchaser 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    Exercise
      Procedures.
      The
      respective forms of Notice of Exercise included in each of the Warrants and
      the
      Greenshoe Warrants set forth the totality of the procedures required of the
      Purchaser in order to exercise the Warrants and the Greenshoe Warrants,
      respectively. No additional legal opinion or other information or instructions
      shall be required of any Purchasers to exercise such Purchaser’s Warrants or
      Greenshoe Warrants. The Company shall honor exercises of the Warrants and the
      Greenshoe Warrants and shall deliver Warrant 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, (A) by 8:30 a.m. Eastern time on the Trading Day following the
      date hereof, issue a press release, reasonably acceptable to the Purchaser
      disclosing the material terms of the transactions contemplated hereby, and
      (B)
      no later than four (4) days following the date hereof, issue a Current Report
      on
      Form 8-K, disclosing the material terms of the transactions contemplated hereby,
      and shall attach the Transaction Documents thereto. The Company and the
      Purchaser shall consult with each other in issuing any other press releases
      with
      respect to the transactions contemplated hereby and which name the Purchaser,
      and neither the Company nor Purchaser shall issue any such press release or
      otherwise make any such public statement without the prior consent of the
      Company, with respect to any press release of Purchaser, or without the prior
      consent of the Purchaser, with respect to any press release of the Company,
      which consent shall not unreasonably be withheld, 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 the Purchaser, or include the name of the Purchaser in any filing with the
      Commission or any regulatory agency or Trading Market, without the prior written
      consent of the Purchaser, except (i) as required by federal securities law
      in
      connection with (A) the Registration Statement and (B) the final Agreement
      and
      Transaction Documents (including signature pages hereto and thereto with the
      Commission and (ii) to the extent such disclosure is required by law or Trading
      Market regulations, in which case the Company shall provide the Purchaser with
      prior notice of such disclosure permitted under this subclause
      (ii).

     

    
      
        
        

      

      
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    4.7    Shareholder
      Rights Plan.
      No
      claim will be made or enforced by the Company or, to the knowledge of the
      Company, any other Person that any Purchaser is an “Acquiring Person” under any
      shareholder rights plan or similar 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. The Company shall conduct its business in a manner so that
      it will not become subject to the Investment Company Act.

     

    4.8    Non-Public
      Information.
      Except
      with respect to the material terms and conditions of the transactions
      contemplated by this Agreement and the other 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 representations
      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/or to acquire additional assets
      for
      the Company (including, without limitation, by means of merger or acquisition
      of
      additional entities) and not for 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), to redeem Common Stock or Common
      Stock Equivalents or to settle any outstanding litigation. 

     

    4.10   Sales
      by Purchasers.
      No
      Purchaser will make any sale, transfer or other disposition of the Securities
      in
      violation of federal or state securities laws.

     

    4.11   Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 4.11, the Company will indemnify and hold
      the
      Purchasers and their directors, officers, shareholders, members, partners,
      employees and agents (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 Party,
      or
      such Purchaser Party’s respective Affiliates, by any shareholder of the Company
      who is not an Affiliate of such Purchaser Party, with respect to any of the
      transactions contemplated by the Transaction Documents (unless such action
      is
      based upon a breach of the Purchaser’s representations, warranties or covenants
      under the Transaction Documents or any agreements or understandings the
      Purchaser may have with any such shareholder 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. 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. The Company will not be liable to any Purchaser Party under this
      Agreement (i) for any settlement by a Purchaser Party effected without the
      Company’s prior written consent, which shall not be unreasonably withheld or
      delayed; or (ii) 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 the Purchasers
      in this Agreement or in the other Transaction Documents.

     

    
      
        
        

      

      
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    4.12    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 be
      required to fulfill its obligations in full under the Transaction Documents.
      

     

    (b)    If,
      on
      any date, the number of authorized but unissued (and otherwise unreserved)
      shares of Common Stock is less than 120% of (i) the Actual Minimum on such
      date, minus (ii) the number of shares of Common Stock previously issued pursuant
      to the Transaction Documents, then the Board of Directors of the Company 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 Actual Minimum at such time (minus the
      number of shares of Common Stock previously issued pursuant to the Transaction
      Documents), as soon as possible and in any event not later than the 75th day
      after such date; provided that the Company will not be required at any time
      to
      authorize a number of shares of Common Stock greater than the maximum remaining
      number of shares of Common Stock that could possibly be issued after such time
      pursuant to the Transaction Documents.

     

    (c)    The
      Company shall, if applicable, use commercially reasonable efforts to:
      (i) in the time and manner required by the 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 Actual Minimum on the
      date of such application, (ii) take all commercially reasonable steps
      necessary to cause such shares of Common Stock to be approved for listing on
      the
      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 Actual Minimum on such date
      on
      such Trading Market or another Trading Market.

     

    4.13    Participation
      in Future Financing.
      

     

    (a)    From
      the
      date hereof until the second anniversary of the Closing Date, upon any financing
      by the Company or any of its Subsidiaries of Common Stock or Common Stock
      Equivalents (a “Subsequent
      Financing”),
      each
      Purchaser shall have the right to participate in up to an amount of the
      Subsequent Financing equal to the lesser of (i) the amount of the Subsequent
      Financing and (ii) such Purchaser’s portion of the Subscription Amount (the
“Participation
      Maximum”).

    

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

     

    
      
        
        

      

      
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    (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 Company may effect the
      remaining portion of such Subsequent Financing on the terms and to the Persons
      set forth in the Subsequent Financing Notice. 

    

    (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 the greater of (a) their Pro Rata
      Portion (as defined below) of the Participation Maximum and (b) the difference
      between the Participation Maximum and the aggregate amount of participation
      by
      all other Purchasers. “Pro
      Rata Portion”
is
      the
      ratio of (x) the Subscription Amount of Securities purchased on the Closing
      Date
      by a Purchaser participating under this Section 4.13 and (y) the sum of the
      aggregate Subscription Amounts of Securities purchased on the Closing Date
      by
      all Purchasers participating under this Section 4.13.

    

    (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 4.13, 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 60 Trading Days after the date of the
      initial Subsequent Financing Notice. 

    

    (g)    Notwithstanding
      the foregoing, this Section 4.13 shall not apply in respect of an Exempt
      Issuance and an underwritten public offering of the Company’s
      securities.

    

    4.14    Subsequent
      Equity Sales.
      

    

    (a)    From
      the
      date hereof until 180 days after the Effective Date, if the Company shall issue
      shares of Common Stock or Common Stock Equivalents for a per share purchase
      price (the “New
      Issuance Price”),
      which
      is less than the Purchase Price, then the Purchase Price will be deemed to
      be
      readjusted to such New Issuance Price and the Company shall promptly refund
      to
      each Purchaser, by wire transfer of immediately available funds, the difference
      between the number of Shares then held by such Purchaser multiplied by the
      Purchase Price and such Purchaser’s Revised Subscription Amount. For purposes of
      this Agreement, the term “Revised
      Subscription Amount”
shall
      mean the number of Shares then held by such Purchaser multiplied by the New
      Issuance Price.

    

    
      
        
        

      

      
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    (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”. The
      term “Variable
      Rate Transaction”
shall
      mean 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, exercise 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.
      

    

    (c)    Notwithstanding
      the foregoing, this Section 4.14 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance.

    

    4.15    Equal
      Treatment of Purchasers.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      unless the same consideration is also offered to all of the parties to the
      Transaction Documents. 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.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1     
      Fees
      and Expenses.
      At the
      Closing, the Company shall reimburse the Purchaser for all legal and other
      expenses incurred in connection with the transactions contemplated by this
      Agreement up to a maximum of $1,000. The Company shall pay all transfer agent
      fees, stamp taxes and other taxes and duties levied in connection with the
      delivery of any Securities. Except as set forth above or as otherwise expressly
      provided in the Transaction Documents, 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.

     

    5.2      
      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.

     

    
      
        
        

      

      
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    5.3    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. (California 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. (California time) on any Trading Day, (c) the 2nd
      Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as set forth on the signature pages attached hereto.

     

    5.4    Amendments;
      Waivers.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by the Company and each
      Purchaser or, in the case of a waiver, by the party against whom enforcement
      of
      any such waiver 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 either party to exercise any right hereunder in any manner
      impair the exercise of any such right.

     

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

     

    5.6    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. 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 such transferee agrees in writing to be bound, with
      respect to the transferred Securities, by the provisions hereof that apply
      to
      the “Purchasers”.

     

    5.7    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 4.11.

     

    5.8    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 county of New York. Each party
      hereby irrevocably submits to the exclusive jurisdiction of the state and
      federal courts sitting in the county of New York 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 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 manner permitted by law.
      The parties hereby waive all rights to a trial by jury. 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 attorneys’ fees and other costs and
      expenses incurred with the investigation, preparation and prosecution of such
      action or proceeding.

    
       

    

    
      
        
        

      

      
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    5.9    
Survival.
      The
      representations and warranties contained herein shall survive the Closing and
      the delivery and exercise of the Securities, as applicable for the applicable
      statue of limitations.

     

    5.10    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, 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 signature page were an original
      thereof.

     

    5.11    Severability.
      If any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    5.12    Rescission
      and Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the 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,
      in the
      case of a rescission of an exercise of a Warrant or a Greenshoe Warrant, the
      Purchaser shall be required to return any Warrant Shares subject to any such
      rescinded exercise notice.

     

    5.13    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, 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 and
      customary and reasonable indemnity, if requested. The applicants for a new
      certificate or instrument under such circumstances shall also pay any reasonable
      third-party costs associated with the issuance of such replacement
      Securities.

     

    
      
        
        

      

      
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    5.14    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 described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

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

     

    5.16    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.

     

    5.17    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 of the obligations of any other
      Purchaser under any Transaction Document. Nothing contained herein or in any
      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. 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.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

       

    

    5.18    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.

     

    5.19    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.

     

    5.20    Disclosure
      Schedule.
      

     

    (a)    Disclosure
      of any matter in the Disclosure Schedule shall not constitute an expression
      of a
      view that such matter is material or is required to be disclosed pursuant to
      this Agreement.

     

    (b)    To
      the
      extent that any representation or warranty set forth in this Agreement is
      qualified by the materiality of the matter(s) to which the representation or
      warranty relates, the inclusion of any matter in the Disclosure Schedule does
      not constitute a determination by the Company that any such matter is material.
      The disclosure of any matter in the Disclosure Schedule does not imply that
      any
      other, undisclosed matter that has a greater significance or value is
      material.

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    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.

     

    

    
      	
              SURGE
                GLOBAL ENERGY, INC.

            	
              Address
                for Notice:

            
	
              By:__________________________________________

              Name:
                

              Title:
                

            	
              Surge
                Global Energy, Inc.

              12220
                El Camino Real

              Suite
                410

              San
                Diego, California 92130

              Facsimile
                number: 

               

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

            	 

    

    

    

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    [PURCHASER
      SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT WITH SURGE GLOBAL ENERGY,
      INC.]

    

    IN
      WITNESS WHEREOF, the undersigned has caused this Securities Purchase Agreement
      to be duly executed by its authorized signatory as of the date first indicated
      above.

     

    Name
      of
      Purchaser: Mark C. Fritz

    Signature
      of Authorized Signatory of Purchaser:
      _____________________________________

    Name
      of
      Authorized Signatory: _________________________________

    Title
      of
      Authorized Signatory: __________________________________

    Email
      Address of Purchaser:___________________________________________

    

    Address
      for Notice of Purchaser:

    Mark
      C. Fritz

    1632
      Ben Fulton Road

    North
      Laurence, OH 44666

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

    

    
 

    Subscription
      Amount: $450,000

    Shares
      of
      Common Stock: 1,000,000

    Warrants:
      1,000,000

    Greenshoe
      Warrants: 1,000,000

    EIN
      Number: [PROVIDE
      THIS UNDER SEPARATE COVER]

    

    [SIGNATURE
      PAGES CONTINUE] 

    

    
31

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