Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Solar Enertech, Ltd. - Exhibit 4.1

Lease Agreement 

Party A: Shanghai Jin Qiao Technology Park, Ltd.

Address: No. 28, New Jinqiao Road New Jinqiao Road, Pudong, Shanghai,
201206 
Legal Representative: Yu Biao

Party B: Solar EnerTech, Ltd.
Address: 1201 Gui Qiao
Road, No. 2 South Builidng Pudong, Shanghai 201206 
Legal Representative: Leo
Shi Young

WHEREAS Party A is the legal owner of the Factory for lease (as
defined below) and intends to let the Factory for lease to Party B and Party B
intends to rent the Factory for lease as well as the management accesement
service from Party A; 

NOW in accordance with the <Contract Law of the People’s
Republic of China>, <Law of the People’s Republic of China on Urban Real
Estate Management>, <Measures on the Lease of Urban Properties>,
<Operational Details of (Measures on the Lease of Properties) Implemented in
Shanghai>, <Regulations of Property Leasing in Shanghai> and other
relevant stipulations and with reference to current practices in China and in
the various development districts in Shanghai, both parties reach the following
unanimously with regard to the leasing of the Factory: 

	1. 	
      Definition

	 	 	 
		1.1 	
      Factory for lease: refers to the 1st and
      2nd storey of the general-purpose factory at the
      general-purpose factory block No. 52 [*general-purpose factory lot No. 2
      (T52-2)] (No. 1201, Chuanqiao Road) located at Plot 52, Jinqiao Export
      Processing District, Shanghai that Party A leases out to Party B and Party
      B rents from Party A. It has a total building area of 4,236.47 square
      metres. Its geographical location and structure are indicated in Appendix
      I <Manual of Technical Indices on the Construction of General-purpose
      Factory Buildings>.

	 	 	 
		1.2 	
      Property Management Company: In this Agreement, it refers
      to the property management company that has signed a property management
      contract with the owner(s) of the factory district where the factory for
      lease is located, which shall be responsible for the property management
      of the said factory district.

	 	 	 
		1.3 	
      Supporting facilities: Unless otherwise stated, the
      following two areas shall be included in this Agreement. (See appendix
      2).

	 	 	 
		1.4 	
      1.4 Places for private use: In this Agreement, these
      refer to places inside the factory building for lease such as the
      production workshop, power distribution room, toilets, pantry, auxiliary
      room and wall spaces.

	 	1.5 	
      Places for common use: In this Agreement, these refer to
      places inside a general-purpose factory building that are shared and used
      by the owners and tenants of the entire block of factory building. They
      include the lobby, the staircase, lifts, engine room for lifts, meter
      room, water pump room, corridors, loading and unloading platforms, outdoor
      wall spaces and roofing. Party B shall not occupy places for common use
      for itself.

	 	 	 
	 	1.6 	
      Periodic Year: In this Agreement, it refers to 1st
      April of the preceding year to 31st March of the
      following year.

2. The legal status of both parties

2.1 Based on the duplicate copy of the Business Licence
of Party A in Appendix III of this Agreement provided by Party A, Party A is an
economic entity approved by the state, responsible for the development and
management of Shanghai Jinqiao Export Processing District. It is incorporated in
China.

2.2 
Based on the duplicate copy of the Certificate of
Incorporation of Party B in Appendix IV of this Agreement provided by Party B,
Party B is a Wholy Owed Foreign Enterprise registered in Shanghai, engaging in
the development and production of solar cells.

3. Use of Factory for Lease

3.1 Party A has provided Party B with a copy of “Licence
for Planning of Construction Project”(Reference Number Hu Fang DI PU (2002) No.
031224) of the Factory for Lease as Appendix VI of this Agreement; the Factory
for Lease is used as a production site.

3.2 Party B undertakes that the Factory for Lease shall be used
as Party B’s production site; its scope of operation includes but not limited to
activities such as semi-donductor components, photovoltic solar cell development
and production, sales of its own products, etc. Party A confirms that Party B
could use the Factory for Lease for 24 hours a day, 365 days a year continuously
in a proper manner.

3.3 During the lease period, without prior written consent of
Party A and the approval of the relevant departments according to stipulations,
Party B shall not change the usage of the Factory for Lease.

4. The Lease Period

4.1 Party B shall rent the Factory for Lease for a
period of three years from 20th Feburary 2006 (hereinafter referred to as “the
Date of Commencement of Lease”) to 19th Feburary 2009 (hereinafter
referred to as “the Expiry Date”).

4.2 During the ease period, the right of use of the factory lot
for lease shall belong to Party B. Its lawful rights and interests shall be
protected by state laws.

5. Rent for the factory lot, property management fee and the
mode of payment

5.1 Rent for the factory lot shall be 1.05 yuan (RMB 1.05) per square metre floor area per day. It amounts to one hundred thirty five and three hundredand two yuan and twentysix cents (RMB 135,302.26) per month. The property management fee
shall be eith thousand four hundred senty-two yuan and ninty four cents (RMB 8,472.94) per month.

5.2 Within 10 days upon signing of this Agreement, Party B shall pay a deposit equivalent to two months’ rent to Party A which amounts to two hundred sentyand six hundred and four yuan and fifty two cents (RMB 270,604.52) . From the day Party A
hands over the factory lot for lease to Party B, the above-mentioned deposit paid shall be converted to security deposit for renting the factory lot. 

5.3 The rent shall be paid every three months. The payment time shall be on or before 15th of every 2nd month, i.c. on or before every year’s Feburary 15th, May 15th, August 15th, and
November 15th. Subsequently, Party B shall remit the payment to the account of the bank of deposit designated by Party A (see the last page of this Agreement

5.4 The rent of the factory lot for lease shall not be adjusted for the first three periodic years from the Date of Commencement of Lease; from the fourth periodic year, the rent could be adjusted (upwards or downwards) every three periodic years,
the adjustment shall not be exceed 5% of the total rent of the previous periodic year.

5.5 The property management fee for the factory lot for lease shall be paid from the date of hand over of the factory lot. The property management fee from the date of hand over of the factory lot to the end of that month shall be paid directly to
the property management company on the day of hand over of the factory lot. Subsequently, Party B shall pay the property management fee directly to the property management company on or before before 20th of every month. The bank account
of the property management company is as follows: Shanghai Jin Qiao Pte Ltd Bank of Deposit: Jinqiao Agricultural Bank General Business Department Account No.: 033432-10801021367

Party A: Shanghai Jin Qiao Pte Ltd. Signature and seal applied

Mailing Address: No. 27, Building 1, New Jinqiao Road, Pudong, Shanghai City, 201206 

Party B: InfoTech (Shanghai) New EnerTech, Ltd. Signature and seal applied

Mailing Address: 1201 Gui Qiao Road, No. 2 South Builidng Pudong, Shanghai 201206Filed by Automated Filing Services Inc. (604) 609-0244 - Linux Gold Corp. - Exhibit 4.1

Exhibit 4.1

  SECURITIES PURCHASE AGREEMENT

          This
  SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of May 8,
  2006 among LINUX GOLD, CORP., a British Columbia corporation (the "Company"),
  and each purchaser identified on the signature pages hereto (each, including
  its successors and assigns, a "Purchaser" and collectively the "Purchasers").

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

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

ARTICLE 1

DEFINITIONS

          1.1
  Definitions. In addition to the terms defined elsewhere in this
  Agreement:

                              (a)
  capitalized terms that are not otherwise defined herein have the meanings given
  to such terms in the Notes (as defined herein), and 

                              (b)
  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) .

          "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 a 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 such Purchaser.

          "Closing
  Dates" means, collectively, the dates of the First Closing and
  Second Closing.

          "Closings"
  means collectively, the closings of the purchase and sale of the Securities
  pursuant to Section 2.1, and any reference to "Closing" or "Closings" shall
  be construed to include the First Closing and the Second Closing unless a specific
  Closing is expressly referred to.

          "Closing
  Date" means, collectively, the dates of the First Closing and
  the Second Closing.

          "Commission"
  means the Securities and Exchange Commission.

4

          "Common
  Stock" means the common stock of the Company, without par value
  per share, and any other class of securities into which such securities may
  hereafter have been reclassified or changed into.

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

          "Company
  Counsel" means the Otto Law Group LLC with offices located at
  601 Union Street, Suite 4500, Seattle, Washington, 98101.

          "Conversion
  Price" shall have the meaning ascribed to such term in the Notes.

          "Disclosure
  Schedules" 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.

          "Escrow
  Agreement" shall mean the Escrow Agreement in substantially the form
  of Exhibit F hereto executed and delivered contemporaneously with this Agreement.

          "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) options to employees, officers
  or directors of the Company pursuant to any existing incentive 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 so long as such future options are granted
  with exercise prices at least equal to the closing price of a share of Common
  Stock on a Trading Market on such date, (b) securities upon the exercise or
  exchange of or conversion 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
  have not been amended since the date of this Agreement to increase the number
  of such securities or to decrease the exercise, exchange or conversion price
  of 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.

          "First
  Closing" shall have the meaning ascribed to such term in Section
  2.1 hereof.

          "First
  Closing Date" means the date of the First Closing.

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

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

5

          "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.

          "Notes"
  means, the Senior Secured Convertible Discount Notes due, subject to the terms
  therein, eighteen (18) months from their date of issuance, issued by the Company
  to the Purchasers hereunder, in substantially the form of Exhibit A.

          "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.

          "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 substantially the
  form of Exhibit B attached hereto.

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

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

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

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

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

6

          "Second
  Closing" shall have the meaning ascribed to such term in Section
  2.1 hereof.

          "Second
  Closing Date" means the date of the Second Closing.

          "Security
  Agreement" means the Security Agreement, dated the date hereof,
  among the Company, its Subsidiaries and the Purchasers, in substantially the
  form of Exhibit C attached hereto.

          "Security
  Documents" means the Security Agreement and any other documents
  and filings contemplated thereunder, in order to grant the Purchasers a first
  priority security interest in the assets of the Company as provided in the Security
  Agreement, including all UCC-1 financing statements.

          "Securities"
  means the Notes, the Warrants, the Warrant Shares and the Underlying Shares.

          "Securities
  Act" means the Securities Act of 1933, as amended.

          "Series
  A Warrants" means collectively the Common Stock purchase warrants,
  in the form of Exhibit D delivered to the Purchasers at the Closings in accordance
  with Section 2.2(a)(iv) hereof, which Warrants shall be exercisable immediately
  and have a term of exercise equal to five (5) years. 

          "Series
  B Warrants" means collectively the Common Stock purchase warrants,
  in the form of Exhibit E delivered to the Purchasers at the Closings in accordance
  with Section 2.2(a)(v) hereof, which Warrants shall be exercisable immediately
  and have a term of exercise equal to the lesser of one (1) year following the
  Effective Date and ten (10) years.

          "SCEG"
  means Sills Cummis Epstein & Gross P.C. with offices at One Riverfront
  Plaza, Newark, New Jersey 07102.

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

          "Subscription
  Amount" means, as to each Purchaser, the aggregate amount to
  be paid for Notes and Warrants purchased hereunder as specified below such Purchaser's
  name on the signature page of this Agreement and next to the heading "First
  Closing Subscription Amount" and "Second Closing Subscription Amount", 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.

          "Trading
  Market" means any of the following markets or exchanges on which
  the Common Stock is listed or quoted for trading on the date in question: the
  Nasdaq Smallcap Market, the American Stock Exchange, the New York Stock Exchange,
  the Nasdaq National Market, or the OTC Bulletin Board.

          "Transaction
  Documents" means this Agreement, the Notes, the Warrants, the
  Security Agreement, the Registration Rights Agreement, the Escrow Agreement
  and any other documents or agreements executed in connection with the transactions
  contemplated hereunder.

7

          "Underlying
  Shares" means the shares of Common Stock issued and issuable
  upon conversion or redemption of the Notes and upon exercise of the Warrants.

          "VWAP"
  means, for any date, the price determined by the first of the following clauses
  that applies: (a) if the Common Stock is then listed or quoted on a Trading
  Market, the daily volume weighted average price of the Common Stock for such
  date (or the nearest preceding date) on the Trading Market on which the Common
  Stock is then listed or quoted as reported by Bloomberg 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 Trading Market 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 Series A Warrants and Series B Warrants.

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

ARTICLE 2

PURCHASE AND SALE

          2.1
  Closings. Upon the terms and conditions contained herein, the
  Company agrees to sell, and each Purchaser agrees to purchase in the aggregate,
  severally and not jointly, $2,105,250 of principal amount of Notes and Warrants.
  The Closings shall take place in two tranches as set forth below (respectively,
  the "First Closing", and the "Second Closing"). Upon satisfaction of the conditions
  set forth in Section 2.2, each Closing shall occur at the offices of SCEG, or
  such other location as the parties shall mutually agree.

                              (a)
  First Closing. The First Closing shall be for an aggregate Subscription
  Amount of $1,500,000, and shall occur on the date hereof.

                              (b)
  Second Closing. The Second Closing shall be for an aggregate Subscription
  Amount of $500,000, and shall occur within 5 Trading Days following the filing
  of the Registration Statement.

          2.2
  Deliveries.

                              (a)
  At or prior to each Closing, unless otherwise indicated, the Company shall deliver
  or cause to be delivered to each Purchaser the following: 

                                        (i)
  as to the First Closing only, this Agreement duly executed by the Company;

                                        (ii)
  as to the First Closing only, a legal opinion of Company Counsel, in a form
  reasonably acceptable to the Purchasers, regarding the legality of the transaction;

8

                                        (iii)
  a Note with a principal amount equal to such Purchaser's Subscription Amount
  multiplied by 1.052625 registered in the name of such Purchaser;

                                        (iv)
  a Series A Warrant registered in the name of such Purchaser to purchase up to
  a number of shares of Common Stock equal to 100% of such Purchaser's Subscription
  Amount divided by $0.40, with an exercise price equal to $0.50, subject to adjustment
  as provided therein;

                                        (v)
  a Series B Warrant registered in the name of such Purchaser to purchase up to
  a number of shares of Common Stock equal to 50% of such Purchaser’s Subscription
  Amount divided by $0.40, with an exercise price equal to $0.52, subject to adjustment
  as provided therein;

                                        (vi)
  as to the First Closing only, the Escrow Agreement duly executed by the Company;

                                        (vii)
  as to the First Closing only, the Registration Rights Agreement duly executed
  by the Company; and

                                        (viii)
  as to the First Closing only, the Security Agreement, duly executed by the Company
  along with all other Security Documents; and 

                                        (ix)
  as to the First Closing only, lock-up agreements, substantially in the form
  attached hereto as Exhibit G, duly executed by the Company and the directors
  and officers of the Company set forth on Schedule 2.2(a) .

                              (b)
  At or prior to each Closing, unless otherwise indicated below, each Purchaser
  shall deliver or cause to be delivered to the Company the following:

                                        (i)
  as to the First Closing only, this Agreement duly executed by such Purchaser;

                                        (ii)
  as to the First Closing only, the Security Agreement duly executed by such Purchaser;

                                        (iii)
  as to the First Closing only, the Escrow Agreement duly executed by such Purchaser;

                                        (iv)
  such Purchaser's Subscription Amount by wire transfer to the account as specified
  in writing by the Company; and

                                        (v)
  as to the First Closing only, the Registration Rights Agreement duly executed
  by such Purchaser.

          2.3
  Closing Conditions.

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

                                        (i)
  the accuracy when made and on the Closing Date of the representations and warranties
  of the Purchasers contained herein;

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

9

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

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

                                        (i)
  the accuracy on such 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 such 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 such Closing Date, trading in the Common Stock shall
  not have been suspended by the Commission (except for any suspension of trading
  of limited duration agreed to by the Company, which suspension shall be terminated
  prior to the Closing), and, at any time prior to the Closing Date, trading in
  securities generally as reported by Bloomberg 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 outbreak or
  escalation of hostilities or other national or international calamity of such
  magnitude in its effect on, or any material adverse change in, any financial
  market which, in each case, in the reasonable judgment of each Purchaser, makes
  it impracticable or inadvisable to purchase the Notes at the Closing.

                              (c)
  As to the Second Closing only, the Company shall have filed with the Commission
  the Registration Statement registering all of the Underlying Shares.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company.
  Except as set forth under the corresponding section of the disclosure schedules
  delivered to the Purchasers concurrently herewith (the "Disclosure Schedules")
  which Disclosure Schedules shall be deemed a part hereof, the Company hereby
  represents and warrants to each Purchaser as of the date hereof and as of each
  applicable Closing Date as follows. 

                              (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.
  If the Company has no subsidiaries, then references in the Transaction Documents
  to the Subsidiaries will be disregarded.

10

                              (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 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, could not have or reasonably be expected to result in (i) a Material
  Adverse Effect on the legality, validity or enforceability of any Transaction
  Document, (ii) a Material Adverse Effect on the results of operations, assets,
  business, prospects or condition (financial or otherwise) of the Company and
  the Subsidiaries, taken as a whole, or (iii) a Material Adverse Effect on the
  Company's ability to perform a timely basis its obligations under any Transaction
  Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no Proceeding
  has been instituted in any such jurisdiction revoking, limiting or curtailing
  or seeking to revoke, limit or curtail such power and authority or qualification.

                              (c)
  Authorization; Enforcement. The Company has the requisite corporate power
  and authority to enter into and to consummate the transactions contemplated
  by each of the Transaction Documents and otherwise to carry out its obligations
  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 action on the part of the Company
  and no further action is required by the Company, its board of directors or
  its stockholders 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 applicable bankruptcy, insolvency, reorganization, moratorium
  and other laws of general application affecting enforcement of creditors' rights
  generally and (ii) as limited by laws relating to the availability of specific
  performance, injunctive relief or other equitable remedies.

                              (d)
  No Conflicts. The execution, delivery and performance of the Transaction
  Documents by the Company and the consummation by the Company of the transactions
  contemplated 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 could not have
  or reasonably be expected to result in a Material Adverse Effect.

                              (e)
  Filings, Consents and Approvals. The Company is not required to obtain
  any consent, waiver, authorization or order of, give any notice to, or make
  any filing or registration with, any court or other federal, state, local or
  other governmental authority or other Person in connection with the 

11

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 Notes and Warrants and the listing of the Underlying Shares for trading
  thereon in the time and manner required thereby, and (iv) the filing of Form
  D with the Commission and such filings as are required to be made under applicable
  foreign or state securities laws (collectively, the "Required Approvals").

                              (f)
  Issuance of the Securities. The Securities have been duly authorized
  and, when issued and paid for in accordance with the Transaction Documents,
  will be duly and validly issued, fully paid and nonassessable, free and clear
  of all Liens. The Company has reserved from its duly authorized capital stock
  a number of shares of Common Stock for issuance of the Underlying Shares at
  least equal to the Required Minimum calculated as of the date hereof.

                              (g)
  Capitalization. The number of shares and type of all authorized, issued
  and outstanding capital stock of the Company, and all shares of Common Stock
  reserved for issuance pursuant to convertible, exercisable or exchangeable securities
  of the Company or under the Company’s various option and incentive plans,
  is specified in Schedule 3.1(g) . The Company has not issued any capital stock
  since its most recently filed annual 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, immediately
  or with the passage of time, 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 stockholder, the Board of Directors of the Company or
  others is required for the issuance and sale of the Securities. There are no
  stockholders agreements, voting agreements or other similar agreements with
  respect to the Company's capital stock to which the Company is a party or, to
  the knowledge of the Company, between or among any of the Company's stockholders.

                              (h)
  SEC Reports; Financial Statements; Press Releases. 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, 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 

12

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 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 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. The press releases disseminated
  by the Company during the twelve (12) months preceding the date of this Agreement
  do not contain any untrue statement of a material fact or omit to state a material
  fact required to be stated therein or necessary in order to make the statements
  therein, in light of the circumstances under which they were made and when made,
  not misleading.

                              (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, accrued expenses and other liabilities 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 or identity of its auditors,
  (iv) the Company has not declared or made any dividend or distribution of cash
  or other property to its stockholders or purchased, redeemed or made any agreements
  to purchase or redeem any shares of its capital stock and (v) the Company has
  not issued any equity securities to any officer, director or Affiliate, except
  pursuant to existing Company stock option plans and other compensation arrangements.
  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.

                              (k)
  Labor Relations. No labor dispute exists or, to the knowledge of the
  Company, is imminent with respect to any of the employees of the Company.

                              (l)
  Compliance. Neither the Company nor any Subsidiary (i) is in default
  under or in violation of (and no event has occurred that has not been waived
  that, with notice or lapse of time or both, would result in a default by the
  Company or any Subsidiary under), nor has the Company or any Subsidiary received
  notice of a claim that it is in default under or that it is in violation of,
  any indenture, loan or credit agreement or any other agreement or instrument
  to which it is a party or by which it or any 

13

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 could not 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
  could not have or reasonably be expected to result in a Material Adverse Effect
  ("Material Permits"), and neither the Company nor any Subsidiary has received
  any notice of proceedings relating to the revocation or modification of any
  Material Permit.

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

                              (o)
  Patents and Trademarks. The Company and the Subsidiaries have, or have
  rights to use, all patents, patent applications, trademarks, trademark applications,
  service marks, trade names, copyrights, licenses and other similar rights that
  are 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,
  or reasonably be expected to 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 others.

                              (p)
  Insurance. The Company and the Subsidiaries are insured by insurers of
  recognized financial responsibility against such losses and risks and in such
  amounts as are prudent and customary in the businesses in which the Company
  and the Subsidiaries are engaged, including, but not limited to, directors and
  officers liability insurance coverage at least equal to the aggregate Subscription
  Amount. To the knowledge of the Company, such insurance contracts and policies
  are 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, 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.

14

                              (r)
  Sarbanes-Oxley; Internal Accounting Controls. The Company is in compliance
  with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to
  it as of the Closing Date. The Company and the Subsidiaries maintain a system
  of internal accounting controls sufficient to provide reasonable assurance that
  (i) transactions are executed in accordance with management's general or specific
  authorizations, (ii) transactions are recorded as necessary to permit preparation
  of financial statements in conformity with GAAP and to maintain asset accountability,
  (iii) access to assets is permitted only in accordance with management's general
  or specific authorization, and (iv) the recorded accountability for assets is
  compared with the existing assets at reasonable intervals and appropriate action
  is taken with respect to any differences. The Company has established disclosure
  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
  for the Company and designed such disclosure controls and procedures to ensure
  that 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 disclosure
  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. Since the Evaluation Date, there have been no significant changes
  in the Company's internal controls over financial reporting (as such term is
  defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act or
  that has affected, or is reasonably likely to affect, the Company’s internal
  control over financial reporting.

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

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

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

                              (v)
  Registration Rights. Other than each of the Purchasers, no Person has
  any right to cause the Company to effect the registration of its securities
  (including pursuant to piggy-back registration rights) 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 two years preceding
  the date hereof, received notice from any Trading Market to the effect that
  the Company is not in compliance with 

15

the listing or maintenance requirements of such Trading Market.
  The Company is, and has no reason to believe that it will not in the foreseeable
  future continue to be, in compliance with all such listing and maintenance requirements.

                              (x)
  Application of Takeover Protections. The Company and 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 Certificate of Incorporation (or similar charter documents)
  or the laws of its state of incorporation that is or could become applicable
  to the Purchasers as a result of the Purchasers and the Company fulfilling their
  obligations or exercising their rights under the Transaction Documents, including
  without limitation as a result of the Company's issuance of the Securities and
  the Purchasers' ownership of the Securities.

                              (y)
  Disclosure. The Company confirms that neither it nor any Person acting
  on its behalf has provided any of the Purchasers or their agents or counsel
  with any information that constitutes or might constitute material, nonpublic
  information, except insofar as the existence and terms of the proposed transactions
  hereunder may constitute such information. The Company understands and confirms
  that the Purchasers 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 Schedules to this Agreement, furnished by or
  on behalf of the Company (including the representations and warranties made
  herein) are true and correct 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 no Purchaser makes or has
  made any representations or warranties with respect to the transactions contemplated
  hereby other than those specifically set forth in Section 3.2 hereof.

                              (z)
  No Integrated Offering. Assuming the accuracy of the Purchasers' representations
  and warranties set forth in Section 3.2, neither the Company, nor any of its
  affiliates, nor any Person acting on its or their behalf has, directly or indirectly,
  made any offers or sales of any security or solicited any offers to buy any
  security, under circumstances that would cause this offering of the Securities
  to be integrated with prior offerings by the Company for purposes of 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
  outstanding secured and unsecured Indebtedness of the 

16

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.

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

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

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

                              (ee)
  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 any provision of the Foreign
  Corrupt Practices Act of 1977, as amended.

                              (ff)
  Accountants. The Company's accountants are set forth on Schedule 3.1(ff)
  of the Disclosure Schedule. To the 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 20-F for the
  year ended February 28, 2006 are a registered public accounting firm as required
  by the Securities Act.

                              (gg)
  Absence of Any Undisclosed Liabilities. There are no liabilities of the
  Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
  absolute, determined, determinable or otherwise, and there is no existing condition,
  situation or set of circumstances which could reasonably be expected to result
  in such a liability, other than (i) those liabilities provided for in the Company’s
  financial statements and (ii) other undisclosed liabilities which, individually
  or in the aggregate, could not have, or reasonably be expected to result in,
  a Material Adverse Effect.

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

17

                              (ii)
  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.

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

                              (kk)
  Acknowledgement Regarding Purchasers' Trading Activity. Anything in this
  Agreement or elsewhere herein to the contrary notwithstanding (except for Section
  4.16 hereof), it is understood and agreed by the Company (i) that none of the
  Purchasers have been asked to agree, nor has any Purchaser agreed, to desist
  from purchasing or selling, long and/or short, securities of the Company, or
  "derivative" securities based on securities issued by the Company or to hold
  the Securities for any specified term; (ii) that past or future open market
  or other transactions by any 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
  any Purchaser, and counter parties in "derivative" transactions to which any
  such Purchaser is a party, directly or indirectly, presently may have a "short"
  position in the Common Stock, and (iv) that each Purchaser shall not be deemed
  to have any affiliation with or control over any arm's length counter-party
  in any "derivative" transaction. The Company further understands and acknowledges
  that (a) one or more Purchasers may engage in hedging activities at various
  times during the period that the Securities are outstanding, including, without
  limitation, during the periods that the value of the Underlying Shares deliverable
  with respect to Securities are being determined and (b) such hedging activities
  (if any) could reduce the value of the existing stockholders' equity interests
  in the Company at and after the time that the hedging activities are being conducted.
  The Company acknowledges that such aforementioned hedging activities do not
  constitute a breach of any of the Transaction Documents.

                              (ll)
  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.

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

                              (a)
  Organization; Authority. Such Purchaser is an entity duly organized,
  validly existing and in good standing under the laws of the jurisdiction of
  its organization with the requisite right, corporate or partnership power and
  authority to enter into and to consummate the transactions 

18

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

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

                              (c)
  Purchaser Status. At the time such 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 converts any Notes it will be either: (i) an "accredited investor"
  as defined in Rule 501(a) under the Securities Act or (ii) a "qualified institutional
  buyer" as defined in Rule 144A(a) under the Securities Act. Such Purchaser is
  not required to be registered as a broker-dealer under Section 15 of the Exchange
  Act.

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

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

                              (f)
  Short Sales and Confidentiality Prior To The Date Hereof. Other than
  the transaction contemplated hereunder, such Purchaser has not directly or indirectly,
  nor has any Person acting on behalf of or pursuant to any understanding with
  such Purchaser, executed any disposition, including Short Sales (but not including
  the location and/or reservation of borrowable shares of Common Stock), in the
  securities of the Company during the period commencing from the time that such
  Purchaser first received a term sheet from the Company or any other Person setting
  forth the material terms of the transactions contemplated hereunder until the
  date hereof ("Discussion Time"). Notwithstanding the foregoing, in the case
  of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
  managers manage separate portions of such Purchaser's assets and the portfolio
  managers have 

19

no direct knowledge of the investment decisions made by the portfolio
  managers managing other portions of such Purchaser's assets, the representation
  set forth above shall only apply with respect to the portion of assets managed
  by the portfolio manager that made the investment decision to purchase the Securities
  covered by this Agreement. Other than to other Persons party to this Agreement,
  such Purchaser has maintained the confidentiality of all disclosures made to
  it in connection with this transaction (including the existence and terms of
  this transaction).

          The
  Company acknowledges and agrees that no Purchaser has made or makes any representations
  or warranties with respect to the transactions contemplated hereby other than
  those specifically set forth in this Section 3.2.

ARTICLE 4

OTHER AGREEMENTS OF THE PARTIES

          4.1
  Transfer Restrictions.

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

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

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

          The
  Company acknowledges and agrees that a Purchaser may from time to time pledge
  pursuant to a bona fide margin agreement in connection with a bona fide margin
  account 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 

20

501(a) under the Securities Act and who agrees to be bound by
  the provisions of this Agreement and the Registration Rights Agreement and,
  if required under the terms of such arrangement, such Purchaser may transfer
  pledged or secured Securities to the pledgees or secured parties. Such a pledge
  or transfer would not be subject to approval of the Company and no legal opinion
  of legal counsel of the pledgee, secured party or pledgor shall be required
  in connection therewith. Further, no notice shall be required of such pledge.
  At the appropriate Purchaser's expense, the Company will execute and deliver
  such reasonable documentation as a pledgee or secured party of Securities may
  reasonably request in connection with a pledge or transfer of the Securities,
  including, if the Securities are subject to registration pursuant to the Registration
  Rights Agreement, the preparation and filing of any required prospectus supplement
  under Rule 424(b)(3) under the Securities Act or other applicable provision
  of the Securities Act to appropriately amend the list of Selling Stockholders
  thereunder.

                              (c)
  Certificates evidencing the Underlying Shares shall not contain any legend (including
  the legend set forth in Section 4.1(b) hereof):

                                        (i)
  while a registration statement (including the Registration Statement) covering
  the resale of such security is effective under the Securities Act, or

                                        (ii)
  following any sale of such Underlying Shares pursuant to Rule 144, or 

                                        (iii)
  if such Underlying Shares are eligible for sale under Rule 144(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). The Company shall cause its counsel to issue a legal opinion
  to the Company's transfer agent promptly after the Effective Date if required
  by the Company's transfer agent to effect the removal of the legend hereunder.

          If
  all or any portion of a Note or Warrant is converted or exercised (as applicable)
  at a time when there is an effective registration statement to cover the resale
  of the Underlying Shares, or if such Underlying Shares may be sold under Rule
  144(k) or if such legend is not otherwise required under applicable requirements
  of the Securities Act (including judicial interpretations thereof) then such
  Underlying Shares shall be issued free of all legends. The Company agrees that
  following the Effective Date or at such time as such legend is no longer required
  under this Section 4.1(c), it will, no later than four (4) Trading Days following
  the delivery by a Purchaser to the Company or the Company's transfer agent of
  a certificate representing Underlying Shares, as applicable, issued with a restrictive
  legend (such third Trading Day, the "Legend Removal Date"), deliver or cause
  to be delivered to such Purchaser a certificate representing such shares that
  is free from all restrictive and other legends. The Company may not make any
  notation on its records or give instructions to 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 Purchasers by crediting the account of
  the Purchaser's prime broker with the Depository Trust Company System.

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

21

Documents, and such Purchaser shall have the right to pursue
  all remedies available to it at law or in equity including, without limitation,
  a decree of specific performance and/or injunctive relief. 

                              (e)
  Each Purchaser, severally and not jointly with the other Purchasers, agrees
  that 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.

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

          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.
  Additionally, the Company acknowledges that a Purchaser’s trading activity
  prior to, or during, any conversion of its Note could result in a substantial
  decrease in the market price of the Common Stock at the time of the conversion
  resulting in the issuance by the Company of a greater number of shares of Common
  Stock to the Purchaser pursuant to such conversion, causing further dilution
  of the outstanding shares of Common Stock. The Company further acknowledges
  that its obligations under the Transaction Documents, including, without limitation,
  its obligation to issue the Underlying Shares pursuant to the Transaction Documents,
  are unconditional and absolute and not subject to any right of set off, counterclaim,
  delay or reduction, regardless of the effect of any such dilution or any claim
  the Company may have against any Purchaser and regardless of the dilutive effect
  that such issuance may have on the ownership of the other stockholders of the
  Company.

          4.3
  Furnishing of Information. As long as any Purchaser owns Securities,
  the Company covenants to timely file (or obtain extensions in respect thereof
  and file within the applicable grace period) all reports required to be filed
  by the Company after the date hereof pursuant to the Exchange Act. As long as
  any Purchaser owns Securities, if the Company is not required to file reports
  pursuant to the Exchange Act, it will prepare and furnish to the Purchasers
  and make publicly available in accordance with Rule 144(c) such information
  as is required for the Purchasers to sell the Securities under Rule 144. The
  Company further covenants that it will take such further action as any holder
  of Securities may reasonably request, all to the extent required from time to
  time to enable such Person 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 Purchasers or that would
  be integrated with the offer or sale of the Securities for purposes of the rules
  and regulations of any Trading Market. If the Company sells, offers for sale
  or solicits offers to buy or otherwise negotiate in respect of any security
  (as defined in Section 2 of the Securities Act) prior to the 180th
  day following the Closing Date, the Company will obtain a ruling from NASDAQ
  that such transaction will not be integrated with the offer or sale of the Securities
  hereunder for purposes of the rules and regulations of any Trading Market, to
  the extent the Company is then listed on a Trading Market.

          4.5
  Conversion and Exercise Procedures. The form of Notice of Exercise
  included in the Warrants and the form of Notice of Conversion included in the
  Notes set forth the totality of the procedures required of the Purchasers in
  order to exercise the Warrants or convert the Notes. No 

22

additional legal opinion or other information or instructions
  shall be required of the Purchasers to exercise their Warrants or convert their
  Notes. The Company shall honor exercises of the Warrants and conversions of
  the Notes and shall deliver Underlying Shares in accordance with the terms,
  conditions and time periods set forth in the Transaction Documents.

          4.6
  Securities Laws Disclosure; Publicity. The Company shall, by 8:30
  a.m. Eastern time on the Trading Day following the date hereof, issue a press
  release reasonably acceptable to each Purchaser disclosing the material terms
  of the transactions contemplated hereby, and shall within 4 days hereof file
  a Report on Form 6-K attaching the Transaction Documents thereto. The Company
  and each Purchaser shall consult with each other in issuing any press releases
  with respect to the transactions contemplated hereby, and neither the Company
  nor any 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 any Purchaser, or without the prior consent of each Purchaser,
  with respect to any press release of the Company, which consent shall not unreasonably
  be withheld, except if such disclosure is required by law, in which case the
  disclosing party shall promptly provide the other party with prior notice of
  such public statement or communication. Notwithstanding the foregoing, the Company
  shall not publicly disclose the name of any Purchaser, or include the name of
  any Purchaser in any filing with the Commission or any regulatory agency or
  Trading Market, without the prior written consent of such Purchaser, except
  (i) as required by federal securities law in connection with the registration
  statement contemplated by the Registration Rights Agreement and (ii) to the
  extent such disclosure is required by law or Trading Market regulations, in
  which case the Company shall provide the Purchasers with prior notice of such
  disclosure permitted under subclause (i) or (ii).

          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. 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 with respect to an investment of up to
  $250,000 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 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 any Common Stock or Common Stock Equivalents,
  to settle any outstanding litigation or make any loan or advance to any Person.

          4.10
  Reimbursement. If any Purchaser becomes involved in any capacity
  in any Proceeding by or against any Person who is a stockholder of the Company
  (except as a result of sales, pledges, margin sales and similar transactions
  by such Purchaser to or with any current stockholder), solely as a result of
  such Purchaser's acquisition of the Securities under this Agreement, the Company
  will reimburse such Purchaser for its reasonable legal and other expenses (including
  the cost of any investigation preparation and travel in connection therewith)
  incurred in connection therewith, as such expenses are 

23

incurred. The reimbursement obligations of the Company under
  this paragraph shall be in addition to any liability which the Company may otherwise
  have, shall extend upon the same terms and conditions to any Affiliates of the
  Purchasers who are actually named in such action, proceeding or investigation,
  and partners, directors, agents, employees and controlling persons (if any),
  as the case may be, of the Purchasers and any such Affiliate, and shall be binding
  upon and inure to the benefit of any successors, assigns, heirs and personal
  representatives of the Company, the Purchasers and any such Affiliate and any
  such Person. The Company also agrees that neither the Purchasers nor any such
  Affiliates, partners, directors, agents, employees or controlling persons shall
  have any liability to the Company or any Person asserting claims on behalf of
  or in right of the Company solely as a result of acquiring the Securities under
  this Agreement.

          4.11
  Indemnification of Purchasers. 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,
  or any of them or their respective Affiliates, by any stockholder of the Company
  who is not an Affiliate of such Purchaser, with respect to any of the transactions
  contemplated by the Transaction Documents (unless such action is based upon
  a breach of such Purchaser's representations, warranties or covenants under
  the Transaction Documents or any agreements or understandings such Purchaser
  may have with any such stockholder or any violations by the Purchaser of state
  or federal securities laws or any conduct by such Purchaser which constitutes
  fraud, gross negligence, willful misconduct or malfeasance). If any action shall
  be brought against any Purchaser Party in respect of which indemnity may be
  sought pursuant to this Agreement, such Purchaser Party shall promptly notify
  the Company in writing, and the Company shall have the right to assume the defense
  thereof with counsel of its own choosing. 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 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.

          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 the Required Minimum on such date, 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
  Required Minimum at such time, as soon as possible and in any event not later
  than the 75th day after such date.

24

          4.13
  Future Financing.

                              (a)
  From the date hereof until the date that is the twelve (12) month anniversary
  of the Effective 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 100% of the Subsequent Financing (the "Participation Maximum").

                              (b)
  At least ten (10) 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
  or Persons with whom such Subsequent Financing is proposed to be effected, and
  attached to which shall be a term sheet or similar document relating thereto.

                              (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 a Purchaser is willing to participate in the Subsequent Financing, the
  amount of the Purchaser's participation, and that the Purchaser has such funds
  ready, willing, and available for investment on the terms set forth in the Subsequent
  Financing Notice. If the Company receives no notice from a Purchaser as of such
  fifth (5th) Trading Day, such Purchaser shall be deemed to have notified
  the Company that it does not elect to participate.

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

                              (e)
  If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day
  after all of the Purchasers have received the Pre-Notice, the Company receives
  responses to a Subsequent Financing Notice from Purchasers seeking to purchase
  more than the aggregate amount of the Participation Maximum, each such Purchaser
  shall have the right to purchase 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 sixty (60) Trading Days after the date
  of the initial Subsequent Financing Notice.

25

                              (g)
  Notwithstanding the foregoing, this Section 4.13 shall not apply in respect
  of an Exempt Issuance or an issuance pursuant to a registration statement filed
  under the Securities Act, provided, that in the case of an issuance pursuant
  to a registration statement under the Securities Act, the Company shall offer
  such securities to the Purchaser on the same terms and at the same time as such
  securities are being offered to others, to the extent lawful to do so.

                              (h)
  So long as the Purchasers collectively hold at least 50% of any class or series
  of securities of the Company, if the Company effects a Subsequent Financing
  each Purchaser may elect, in its sole discretion, to exchange all or some of
  the Debentures then held by such Purchaser for any securities issued in a Subsequent
  Financing based on the effective price at which such securities were sold in
  such Subsequent Financing. 

          4.14
  Subsequent Equity Sales.

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

                              (b)
  From the date hereof until such time as Purchasers hereunder no longer hold,
  in the aggregate, 40% or more of any class or series of securities of the Company,
  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)
  Any Purchaser shall be entitled to obtain injunctive relief against the Company
  to preclude any such issuance, which remedy shall be in addition to any right
  to collect damages.

                              (d)
  Notwithstanding the foregoing, this Section 4.14 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. Further,
  the Company shall not make any payment of principal or interest on the Notes
  in amounts which are disproportionate to the respective principal amounts outstanding
  on the Notes at any applicable time. For clarification purposes, this provision
  constitutes a separate right granted to each Purchaser by the Company and negotiated
  separately by each Purchaser, and is intended for the Company to treat the Purchasers
  as a class and shall not in any way be construed as the Purchasers acting in
  concert or as a group with respect to the purchase, disposition or voting of
  Securities or otherwise.

26

          4.16
  Short Sales and Confidentiality after the Date Hereof. Each Purchaser,
  severally and not jointly with the other Purchasers, covenants that neither
  it nor any affiliates acting on its behalf or pursuant to any understanding
  with it will execute any Short Sales during the period after the Discussion
  Time and ending at the time that the transactions contemplated by this Agreement
  are first publicly announced as described in Section 4.6. Each Purchaser, severally
  and not jointly with the other Purchasers, covenants that until such time as
  the transactions contemplated by this Agreement are publicly disclosed by the
  Company as described in Section 4.6, such Purchaser will maintain, the confidentiality
  of all disclosures made to it in connection with this transaction (including
  the existence and terms of this transaction). No Purchaser makes any representation,
  warranty or covenant hereby that it will not engage in Short Sales in the securities
  of the Company after the time that the transactions contemplated by this Agreement
  are first publicly announced as described in Section 4.6. Notwithstanding the
  foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
  whereby separate portfolio managers manage separate portions of such Purchaser's
  assets and the portfolio managers have no direct knowledge of the investment
  decisions made by the portfolio managers managing other portions of such Purchaser's
  assets, the covenant set forth above shall only apply with respect to the portion
  of assets managed by the portfolio manager that made the investment decision
  to purchase the Securities covered by this Agreement.

          4.17
  Form D; Blue Sky; Foreign Filings. The Company agrees to timely
  file a Form D with respect to the Securities as required under Regulation D
  and to provide a copy thereof, promptly upon request of any Purchaser. The Company
  shall take such action as the Company shall reasonably determine is necessary
  in order to obtain an exemption for, or to qualify the Securities for, sale
  to the Purchasers at the Closing under applicable foreign securities laws or
  securities or "Blue Sky" laws of the states of the United States, and shall
  provide evidence of such actions promptly upon request of any Purchaser.

ARTICLE 5

MISCELLANEOUS

          5.1
  Termination. This Agreement may be terminated by any Purchaser,
  as to such Purchaser's obligations hereunder only and without any effect whatsoever
  on the obligations between the Company and the other Purchasers, by written
  notice to the other parties, if the Closing has not been consummated on or before
  May 8, 2006; provided, however, that no such termination will affect the right
  of any party to sue for any breach by the other party (or parties).

          5.2
  Fees and Expenses. At the Closing, the Company has agreed to reimburse
  the non-accountable sum of $25,000, for its actual, reasonable, out-of-pocket
  legal fees and expenses, $10,000 which shall have been paid prior to the Closing.
  Except as expressly set forth in the Transaction Documents to the contrary,
  each party shall pay the fees and expenses of its advisers, counsel, accountants
  and other experts, if any, and all other expenses incurred by such party incident
  to the negotiation, preparation, execution, delivery and performance of this
  Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
  taxes and duties levied in connection with the delivery of any Securities.

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

27

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

          5.5
  Amendments; Waivers. No provision of this Agreement may be waived
  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.

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

          5.7
  Successors and Assigns. This Agreement shall be binding upon and
  inure to the benefit of the parties and their successors and permitted assigns.
  The Company may not assign this Agreement or any rights or obligations hereunder
  without the prior written consent of each Purchaser. 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".

          5.8
  No Third-Party Beneficiaries. This Agreement is intended for the
  benefit of the parties hereto and their respective successors and permitted
  assigns and is not for the benefit of, nor may any provision hereof be enforced
  by, any other Person, except as otherwise set forth in Section 4.11.

          5.9
  Governing Law. All questions concerning the construction, validity,
  enforcement and interpretation of the Transaction Documents shall be governed
  by and construed and enforced in accordance with the internal laws of the State
  of New York, without regard to the principles of conflicts of law thereof. Each
  party agrees that all legal proceedings concerning the interpretations, enforcement
  and defense of the transactions contemplated by this Agreement and any other
  Transaction Documents (whether brought against a party hereto or its respective
  affiliates, directors, officers, shareholders, employees or agents) shall be
  commenced exclusively in the state and federal courts sitting in the City of
  New York. Each party hereby irrevocably submits to the exclusive jurisdiction
  of the state and federal courts sitting in the City of New York, borough of
  Manhattan for the adjudication of any dispute hereunder or in connection herewith
  or with any transaction contemplated hereby or discussed herein (including with
  respect to the enforcement of any of the Transaction Documents), and hereby
  irrevocably waives, and agrees not to assert in any suit, action or proceeding,
  any claim that it is not personally subject to the jurisdiction of any such
  court, that such suit, action or proceeding is improper or 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 

28

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.

          5.10
  Survival. The representations and warranties contained herein
  shall survive the Closing and the delivery, exercise and/or conversion of the
  Securities, as applicable for the applicable statue of limitations.

          5.11
  Execution. This Agreement may be executed in two or more counterparts,
  all of which when taken together shall be considered one and the same agreement
  and shall become effective when counterparts have been signed by each party
  and delivered to the other party, it being understood that both parties need
  not sign the same counterpart. In the event that any signature is delivered
  by facsimile transmission, 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.

          5.12
  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.

          5.13
  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 a conversion of a Note or exercise of a Warrant, the Purchaser
  shall be required to return any shares of Common Stock subject to any such rescinded
  conversion or exercise notice.

          5.14
  Replacement of Securities. If any certificate or instrument evidencing
  any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
  or cause to be issued in exchange and substitution for and upon cancellation
  thereof, 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.

          5.15
  Remedies. In addition to being entitled to exercise all rights
  provided herein or granted by law, including recovery of damages, each of the
  Purchasers and the Company will be entitled to specific performance under the
  Transaction Documents. The parties agree that monetary damages may not be adequate
  compensation for any loss incurred by reason of any breach of obligations 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.

29

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

          5.17
  Usury. To the extent it may lawfully do so, the Company hereby
  agrees not to insist upon or plead or in any manner whatsoever claim, and will
  resist any and all efforts to be compelled to take the benefit or advantage
  of, usury laws wherever enacted, now or at any time 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 SCEG. SCEG does not represent all of the Purchasers
  but only Platinum Partners Value Arbitrage Fund L.P. The Company has elected
  to provide all Purchasers with the same terms and Transaction Documents for
  the convenience of the Company and not because it was required or requested
  to do so by the Purchasers.

          5.18
  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 

30

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.

(Signature Pages Follow)

31

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.

 

	 	 	LINUX GOLD, CORP.
	 	 	 
	 	By: 	  
	 	Name: 	John Robertson 
	 	Title: 	President 

	 	Address for Notice: 	1103-11871 Horseshoe Way, 
	 	  	Richmond, British Columbia 
	 	  	V7A 5H5 
	 	  	Canada 
	 	 	 
	 	with a copy to (which shall not constitute
      notice) 

 

SIGNATURE PAGE FOR PURCHASER FOLLOWS

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

32

PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

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

Name of Purchaser:

  Signature of Authorized Signatory of Purchaser: 

  Name of Authorized Signatory: 

  Title of Authorized Signatory: 

  Email Address of Purchaser: 

  Address for Notice of Purchaser:

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

First Closing Subscription Amount:

  First Closing Principal Amount (1.052625 times the First Closing Subscription
  Amount): 

  First Closing Series A Warrant Shares: 

  First Closing Series B Warrant Shares:

Second Closing Subscription Amount:

  Second Closing Principal Amount (1.052625 times the Second Closing Subscription
  Amount): 

  Second Closing Series A Warrant Shares: 

  Second Closing Series B Warrant Shares:

EIN Number: 

SIGNATURE PAGES CONTINUE

2

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