Document:

ex4-6.htm

    
      

    

    EXHIBIT
      4.6

    

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”) is dated as of November
      29, 2007 between Visual Management Systems, Inc., a Nevada corporation (the
      “Company”), and each purchaser identified on the signature pages hereto
      (each, including its successors and assigns, a “Purchaser” and
      collectively the “Purchasers”).

     

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

     

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

     

    ARTICLE
      I.

    DEFINITIONS

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    “Commission”
      means the Securities and Exchange Commission.

     

    “Common
      Stock” means the common stock of the Company, par value $.001 per share, and
      any other class of securities into which such securities may hereafter be
      reclassified or changed into.

     

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

     

    “Company
      Counsel” means Giordano, Halleran & Ciesla, P.C., with offices located
      at 125 Half Mile Road, Red Bank, New Jersey 07701.

     

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

     

    “Debentures”
      means the 5% Senior Secured Original Issue Discount Convertible Debentures
      due,
      subject to the terms therein, 30 months from their date of issuance, issued
      by
      the Company to the Purchasers hereunder, in the form of Exhibit A
      attached hereto.

     

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

     

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

     

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

     

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

    

    “Exempt
      Issuance” means the issuance of (a) shares of Common Stock or options to
      employees, officers or directors of the Company pursuant to any stock or option
      plan duly adopted for such purpose by a majority of the non-employee members
      of
      the Board of Directors or a majority of the members of a committee of
      non-employee directors established for such purpose, (b) securities issuable
      pursuant to, or upon the exercise or exchange of or conversion of, any
      Securities issued hereunder, (c) securities pursuant to other securities or
      agreements outstanding or in effect on or prior to the date hereof that require
      the issuance of, or are  exercisable or exchangeable for or
      convertible into, shares of Common Stock, provided that such securities or
      agreements have not been amended since the date of this Agreement to increase
      the number of such securities issuable thereunder or to decrease the exercise,
      exchange or conversion price of such securities issuable thereunder, and (c)
      securities issued pursuant to acquisitions or strategic transactions approved
      by
      a majority of the disinterested directors of the Company, provided that any
      such
      issuance shall only be to a Person which is, itself or through its subsidiaries,
      an operating company in a business synergistic with the business of the Company
      and in which the Company receives benefits in addition to the investment of
      funds, but shall not include a transaction in which the Company is issuing
      securities primarily for the purpose of raising capital or to an entity whose
      primary business is investing in securities.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “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 4.12.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Principal
      Amount” shall mean, as to each Purchaser, the amounts set forth below such
      Purchaser’s signature block on the signature pages hereto and next to the
      heading “Principal Amount,” in United States Dollars, which shall equal such
      Purchaser’s Subscription Amount multiplied by 1.25.

     

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

     

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

     

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

     

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

     

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

     

    “Required
      Minimum” means, as of any date, the maximum aggregate number of shares of
      Common Stock then issued or potentially issuable in the future pursuant to
      the
      Transaction Documents, including any Underlying Shares issuable upon exercise
      or
      conversion in full of all Warrants and Debentures (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).

     

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

     

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

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Transfer
      Agent” means Corporate Stock Transfer, the current transfer agent of the
      Company with a mailing address of 3200 Cherry Creek Drive South, Suite 430,
      Denver, Colorado 80209 and a facsimile number of (303) 282-5800, and any
      successor transfer agent of the Company.

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    “Warrants”
      means, collectively, the Common Stock purchase warrants delivered to the
      Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
      Warrants shall be exercisable immediately and have a term of exercise equal
      to 7
      years, in the form of Exhibit C attached hereto.

     

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

     

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1  Closing.  On
      the Closing Date, upon the terms and subject to the conditions set forth herein,
      substantially concurrent with the execution and delivery of this Agreement
      by
      the parties hereto, the Company agrees to sell, and the Purchasers, severally
      and not jointly, agree to purchase, up to an aggregate of $3,750,000 in
      Principal Amount of the Debentures (for an aggregate cash Subscription Amount
      of
      up to $3,000,000).  Each Purchaser shall deliver to the Company, via
      wire transfer, immediately available funds equal to its Subscription Amount
      and
      the Company shall deliver to each Purchaser its respective Debenture and a
      Warrant, as determined pursuant to Section 2.2(a), and the Company and each
      Purchaser shall deliver the other items set forth in Section 2.2 deliverable
      at
      the Closing.  Upon satisfaction of the conditions set forth in
      Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS or such
      other location as the parties shall mutually agree.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    2.2  Deliveries

     

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

     

                (i)     
this
      Agreement duly executed by the Company;

     

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

     

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

     

                (iv)    a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 150% of such Purchaser’s Principal Amount divided by the
      Conversion Price, with an exercise price equal to $1.15, subject to adjustment
      therein;

     

                (v)    
the
      Security Agreement, duly executed by the Company and each Subsidiary, along
      with
      all of the Security Documents, including the Subsidiary Guarantee, duly executed
      by the parties thereto;

     

                (vi)    lock-up
      agreements, in the form of Exhibit G attached hereto, duly executed by
      each officer, director and 10% stockholder of the Company and each Subsidiary;
      and

     

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

     

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

     

                (i)     
this
      Agreement duly executed by such Purchaser;

     

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

     

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

     

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

     

    2.3  Closing
      Conditions.

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

                (iii)    the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement;

     

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

     

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

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

        (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 of the issued and outstanding shares of capital stock
      of
      each Subsidiary are validly issued and are fully paid, non-assessable and free
      of preemptive and similar rights to subscribe for or purchase
      securities.  If the Company has no subsidiaries, all other references
      to the Subsidiaries or any of them in the Transaction Documents shall be
      disregarded.

     

        (b)    Organization
      and Qualification.  The Company and each of the Subsidiaries is an
      entity duly incorporated or otherwise organized, validly existing and in good
      standing under the laws of the jurisdiction of its incorporation or organization
      (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 in any material respect on a timely basis its
      obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any
      such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
      or curtail such power and authority or qualification.

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

        (g)    Capitalization.  The
      capitalization of the Company is as set forth on Schedule 3.1(g), which
Schedule 3.1(g) shall also include the number of shares of Common Stock
      owned beneficially, and of record, by Affiliates of the Company as of the date
      hereof. The Company has not issued any capital stock since its most recently
      filed periodic report under the Exchange Act, other than pursuant to the
      exercise of employee stock options under the Company’s stock option plans, the
      issuance of shares of Common Stock to employees pursuant to the Company’s
      employee stock purchase plans and pursuant to the conversion or exercise of
      Common Stock Equivalents outstanding as of the date of the most recently filed
      periodic report under the Exchange Act.  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 and as set forth on Schedule 3.1(g), there are no outstanding
      options, warrants, scrip rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities, rights or obligations
      convertible into or exercisable or exchangeable for, or giving any Person any
      right to subscribe for or acquire, any shares of Common Stock, or contracts,
      commitments, understandings or arrangements by which the Company or any
      Subsidiary is or may become bound to issue additional shares of Common Stock
      or
      Common Stock Equivalents. The issuance and sale of the Securities will not
      obligate the Company to issue shares of Common Stock or other securities to
      any
      Person (other than the Purchasers) and, except as set forth on Schedule
      3.1(g), will not result in a right of any holder of Company securities to
      adjust the exercise, conversion, exchange or reset price under any of such
      securities. All of the outstanding shares of capital stock of the Company are
      validly issued, fully paid and nonassessable, have been issued in compliance
      with all federal and state securities laws, and none of such outstanding shares
      was issued in violation of any preemptive rights or similar rights to subscribe
      for or purchase securities.  No further approval or authorization of
      any stockholder, the Board of Directors or others is required for the issuance
      and sale of the Securities.  Except as set forth on Schedule
      3.1(g), 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.  The Company has filed all reports,
      schedules, forms, statements and other documents required to be filed by the
      Company under the Securities Act and the Exchange Act, including pursuant to
      Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
      (or
      such shorter period as the Company was required by law or regulation to file
      such material) (the foregoing materials, including the exhibits thereto and
      documents incorporated by reference therein, being collectively referred to
      herein as the “SEC Reports”).  As of their respective dates,
      the SEC Reports complied in all material respects with the requirements of
      the
      Securities Act and the Exchange Act, as applicable, and none of the SEC Reports,
      when filed, contained any untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary in order to
      make the statements therein, in the light of the circumstances under which
      they
      were made, not misleading.  The financial statements of the Company
      included in the SEC Reports comply in all material respects with applicable
      accounting requirements and the rules and regulations of the Commission with
      respect thereto as in effect at the time of filing.  Except as set
      forth on Schedule 3.1(h) attached hereto, such financial statements have been
      prepared in accordance with United States generally accepted accounting
      principles applied on a consistent basis during the periods involved
      (“GAAP”), except as may be otherwise specified in such financial
      statements or the notes thereto and except that unaudited financial statements
      may not contain all footnotes required by GAAP, and fairly present in all
      material respects the financial position of the Company and its consolidated
      Subsidiaries as of and for the dates thereof and the results of operations
      and
      cash flows for the periods then ended, subject, in the case of unaudited
      statements, to normal, immaterial, year-end audit adjustments.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

        (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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

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

     

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

     

        (p)    Insurance.  The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the aggregate Subscription Amount.  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 for (i) payment of salary or consulting
      fees for services rendered, (ii) reimbursement for expenses incurred on behalf
      of the Company and (iii) other employee benefits, including stock option
      agreements under any stock option plan of the Company.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

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

     

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

     

        (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.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

     

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

     

        (w)    Listing
      and Maintenance Requirements.  The Company has not, in the 12
      months preceding the date hereof, received notice from any Trading Market on
      which the Common Stock is or has been listed or quoted to the effect that the
      Company is not in compliance with the listing or maintenance requirements of
      such Trading Market. The Company is, and has no reason to believe that it will
      not in the foreseeable future continue to be, in compliance with all such
      listing and maintenance requirements.

     

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

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

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

     

        (aa)    Solvency.  Based
      on the consolidated financial condition of the Company as of the Closing Date
      after giving effect to the receipt by the Company of the proceeds from the
      sale
      of the Securities hereunder, (i) the fair saleable value of the Company’s assets
      exceeds the amount that will be required to be paid on or in respect of the
      Company’s existing debts and other liabilities (including known contingent
      liabilities) as they mature, (ii) the Company’s assets do not constitute
      unreasonably small capital to carry on its business as now conducted and as
      proposed to be conducted including its capital needs taking into account the
      particular capital requirements of the business conducted by the Company, and
      projected capital requirements and capital availability thereof, and (iii)
      the
      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 liabilities when such amounts are required to be
      paid.  The Company does not intend to incur debts beyond its ability
      to pay such debts as they mature (taking into account the timing and amounts
      of
      cash to be payable on or in respect of its debt).  The Company has no
      knowledge of any facts or circumstances which lead it to believe that it will
      file for reorganization or liquidation under the bankruptcy or reorganization
      laws of any jurisdiction within one year from the Closing
      Date.  Schedule 3.1(aa) sets forth as of the date hereof all
      outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
      or for which the Company or any Subsidiary has commitments.  For the
      purposes of this Agreement, “Indebtedness” means (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)   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.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

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

     

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

     

        (ee)    Accountants.  The
      Company’s accounting firm is set forth on Schedule 3.1(ee) of the
      Disclosure Schedule.  To the knowledge and belief of the Company, such
      accounting firm (i) is a registered public accounting firm as required by the
      Exchange Act and (ii) shall express its opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-K (or
      10-KSB) for the year ending December 31, 2007.

     

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

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

        (ii)    Acknowledgment
      Regarding Purchasers’ Trading Activity.  Notwithstanding anything
      in this Agreement or elsewhere herein to the contrary (except for
      Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by the
      Company that (i) none of the Purchasers has been asked to agree by the Company,
      nor has any Purchaser agreed, to desist from purchasing or selling, long and/or
      short, securities of the Company, or “derivative” securities based on securities
      issued by the Company or to hold the Securities for any specified term, (ii)
      past or future open market or other transactions by any Purchaser, specifically
      including, without limitation, Short Sales or “derivative” transactions, before
      or after the closing of this or future private placement transactions, may
      negatively impact the market price of the Company’s publicly-traded securities,
      (iii) any Purchaser, and counter-parties in “derivative” transactions to which
      any such Purchaser is a party, directly or indirectly, may presently have a
      “short” position in the Common Stock, and (iv) each Purchaser shall not be
      deemed to have any affiliation with or control over any arm’s length
      counter-party in any “derivative” transaction.  The Company further
      understands and acknowledges that (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.

     

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

     

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

     

        (a)    Organization;
      Authority.  Such Purchaser is an entity duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization with full right, corporate or partnership power and authority
      to
      enter into and to consummate the transactions contemplated by the Transaction
      Documents and otherwise to carry out its obligations hereunder and thereunder.
      The execution and delivery of the Transaction Documents and performance by
      such
      Purchaser of the transactions contemplated by the Transaction Documents have
      been duly authorized by all necessary corporate or similar action on the part
      of
      such Purchaser.  Each Transaction Document to which 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.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

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

     

        (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 Debentures it will be either: (i) an “accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
      the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
      144A(a) under the Securities Act.  Such Purchaser is not required to
      be registered as a broker-dealer under Section 15 of the Exchange
      Act.

     

        (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. Such Purchaser has been
      given the opportunity to ask questions of the officers and directors of the
      Company and the opportunity to review all of the filings made by the Company
      with the Commission.

     

        (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.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

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

     

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions.

     

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

     

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

     

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

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

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

     

        (c)  Certificates
      evidencing the Underlying Shares shall not contain any legend (including the
      legend set forth in Section 4.1(b) hereof): (i) while a registration statement
      (including the Registration Statement) covering the resale of such security
      is
      effective under the Securities Act, or (ii) following any sale of such
      Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
      are
      eligible for sale under Rule 144(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 Transfer Agent
      promptly after the Effective Date if required by the Transfer Agent to effect
      the removal of the legend hereunder.  If all or any portion of a
      Debenture 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 and pronouncements issued
      by
      the staff of the Commission) then such Underlying Shares shall be issued free
      of
      all legends.  The Company agrees that following the Effective Date or
      at such time as such legend is no longer required under this Section 4.1(c),
      it
      will, no later than three Trading Days following the delivery by a Purchaser
      to
      the Company or the Transfer Agent of a certificate representing Underlying
      Shares, as applicable, issued with a restrictive legend (such third Trading
      Day,
      the “Legend Removal Date”), deliver or cause to be delivered to such
      Purchaser a certificate representing such shares that is free from all
      restrictive and other legends.  The Company may not make any notation
      on its records or give instructions to the Transfer Agent that enlarge the
      restrictions on transfer set forth in this Section.  Certificates for
      Underlying Shares subject to legend removal hereunder shall be transmitted
      by
      the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
      prime broker with the Depository Trust Company System as directed by such
      Purchaser.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    
 

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

     

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

     

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

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    4.3  Furnishing
      of Information.  On or before February 28, 2008, the Common Stock
      shall have become registered pursuant to Section 12(g) of the Exchange
      Act.  Until the earliest of the time that no 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 even if the Company is not then subject to the reporting
      requirements of the Exchange Act.    As long as any
      Purchaser owns Securities, if the Company is not required to file reports
      pursuant to the Exchange Act, it will prepare and furnish to the Purchasers
      and
      make publicly available in accordance with Rule 144(c) such information as
      is
      required for the Purchasers to sell the Securities under Rule
      144.  The Company further covenants that it will take such further
      action as any holder of Securities may reasonably request, to the extent
      required from time to time to enable such Person to sell such Securities without
      registration under the Securities Act within the requirements of the exemption
      provided by Rule 144.

     

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

     

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

     

    4.6  Securities
      Laws Disclosure; Publicity.  The Company shall, by 9:00 a.m. (New
      York City time) on the Trading Day following the date hereof, issue a press
      release disclosing the material terms of the transactions contemplated hereby
      and within 2 Trading Days of the date hereof issue a Current Report on Form
      8-K
      disclosing the material terms of the transactions contemplated hereby and
      attaching the Transaction Documents as exhibits thereto.  The Company
      and each Purchaser shall consult with each other in issuing any other press
      releases with respect to the transactions contemplated hereby, and neither
      the
      Company nor any Purchaser shall issue any such press release 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 or delayed, except if such disclosure is required
      by law, in which case the disclosing party shall promptly provide the other
      party with prior notice of such public statement or
      communication.  Notwithstanding the foregoing, the Company shall not
      publicly disclose the name of any Purchaser, or include the name of any
      Purchaser in any filing with the Commission or any regulatory agency or Trading
      Market, without the prior written consent of such Purchaser, except (i) as
      required by federal securities law in connection with (A) any registration
      statement contemplated by the Registration Rights Agreement and (B) the filing
      of final Transaction Documents (including signature pages thereto) with the
      Commission and (ii) to the extent such disclosure is required by law or Trading
      Market regulations, in which case the Company shall provide the Purchasers
      with
      prior notice of such disclosure permitted under this clause (ii).

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    4.10  Indemnification
      of Purchasers.   Subject to the provisions of this Section
      4.10, the Company will indemnify and hold each Purchaser and its directors,
      officers, shareholders, members, partners, employees and agents (and any other
      Persons with a functionally equivalent role of a Person holding such titles
      notwithstanding a lack of such title or any other title), each Person who
      controls such Purchaser (within the meaning of Section 15 of the Securities
      Act
      and Section 20 of the Exchange Act), and the directors, officers, shareholders,
      agents, members, partners or employees (and any other Persons with a
      functionally equivalent role of a Person holding such titles notwithstanding
      a
      lack of such title or any other title) of such controlling person (each, a
      “Purchaser Party”) harmless from any and all losses, liabilities,
      obligations, claims, contingencies, damages, costs and expenses, including
      all
      judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation that any such Purchaser Party may suffer or
      incur as a result of or relating to (a) any breach of any of the
      representations, warranties, covenants or agreements made by the Company in
      this
      Agreement or in the other Transaction Documents or (b) any action instituted
      against a Purchaser in any capacity, or any of them or their respective
      Affiliates, by any stockholder of the Company who is not an Affiliate of such
      Purchaser, with respect to any of the transactions contemplated by
      the

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    Transaction
      Documents (unless such action is based
      upon a breach of such Purchaser’s representations, warranties or covenants under
      the Transaction Documents or any agreements or understandings such Purchaser
      may
      have with any such stockholder or any violations by the Purchaser of state
      or
      federal securities laws or any conduct by such Purchaser which constitutes
      fraud, gross negligence, willful misconduct or malfeasance).  If any
      action shall be brought against any Purchaser Party in respect of which
      indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
      promptly notify the Company in writing, and the Company shall have the right
      to
      assume the defense thereof with counsel of its own choosing reasonably
      acceptable to the Purchaser Party.  Any Purchaser Party shall have the
      right to employ separate counsel in any such action and participate in the
      defense thereof, but the fees and expenses of such counsel shall be at the
      expense of such Purchaser Party except to the extent that (i) the employment
      thereof has been specifically authorized by the Company in writing, (ii) the
      Company has failed after a reasonable period of time to assume such defense
      and
      to employ counsel or (iii) in such action there is, in the reasonable opinion
      of
      such separate counsel, a material conflict on any material issue between the
      position of the Company and the position of such Purchaser Party, in which
      case
      the Company shall be responsible for the reasonable fees and expenses of no
      more
      than one such separate counsel.  The Company will not be liable to any
      Purchaser Party under this Agreement (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 such Purchaser Party in this Agreement or in the other Transaction
      Documents.
       

    

    4.11   
      Reservation
      and Listing of Securities.

     

        (a)    The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may 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 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.

     

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

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    4.12   
      Participation
      in Future Financing.

     

        (a)    From
      the
      date hereof until the date that is the 12 month anniversary of the Effective
      Date, upon any issuance 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”) on the same terms, conditions and price provided
      for in the Subsequent Financing.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

        (f)    The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice.

     

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

     

    4.13   
      Subsequent
      Equity Sales.

     

        (a)    From
      the
      date hereof until 45 days after the Effective Date, neither the Company nor
      any
      Subsidiary shall issue (or enter into any agreement, discussions or letter
      of
      intent to issue) shares of Common Stock or Common Stock Equivalents;
provided, however, the 45 day period set forth in this Section
      4.13 shall be extended for the number of Trading Days during such period in
      which (i) trading in the Common Stock is suspended by any Trading Market, or
      (ii) following the Effective Date, the Registration Statement is not effective
      or the prospectus included in the Registration Statement may not be used by
      the
      Purchasers for the resale of the Underlying Shares.

     

        (b)    From
      the
      date hereof until the earlier of (x) the date the Debentures are no longer
      outstanding or (y) the 12 month anniversary of the Effective Date, the Company
      shall be prohibited from effecting or entering into an agreement to effect
      any
      Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
      Transaction” means a transaction in which the Company issues or sells (i)
      any debt or equity securities that are convertible into, exchangeable or
      exercisable for, or include the right to receive additional shares of Common
      Stock either (A) at a conversion, 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, other than customary anti-dilution provisions or (ii) enters
      into any agreement, including, but not limited to, an equity line of credit,
      whereby the Company may sell securities at a future determined
      price.

     

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

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

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

     

    4.15   
      Short
      Sales and Confidentiality After The Date Hereof.  Each Purchaser,
      severally and not jointly with the other Purchasers, covenants that neither
      it
      nor any Affiliate acting on its behalf or pursuant to any understanding with
      it
      will execute any Short Sales during the period commencing at 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 the existence and terms of this transaction and the
      information included in the Disclosure Schedules.  Each Purchaser severally
      and not jointly with any other Purchaser acknowledges the positions of the
      Commission as set forth in Item 65, Section A, of the Manual of Publicly
      Available Telephone Interpretations, dated July 1997, compiled by the Office
      of
      Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing,
      no Purchaser makes any representation, warranty or covenant hereby that it
      will
      not engage in Short Sales in the securities of the Company after the time that
      the transactions contemplated by this Agreement are first publicly announced
      as
      described in Section 4.6; provided, however, each Purchaser agrees, severally
      and not jointly with any other Purchasers, that they will not enter into any
      Net
      Short Sales (as hereinafter defined) from the period commencing on the Closing
      Date and ending on the date that is the earlier of (x) the 30 month anniversary
      of the Closing Date or (y) the date that such Purchaser no longer holds any
      Debentures.  For purposes of this Section 4.15, a “Net Short
      Sale” by any Purchaser shall mean a sale of Common Stock by such Purchaser
      that is marked as a short sale and that is made at a time when there is no
      equivalent offsetting long position in Common Stock held by such
      Purchaser.  For purposes of determining whether there is an equivalent
      offsetting long position in Common Stock held by the Purchaser, Underlying
      Shares that have not yet been converted pursuant to the Debentures and Warrant
      Shares that have not yet been exercised pursuant to the Warrants shall be deemed
      to be held long by the Purchaser, and the amount of shares of Common Stock
      held
      in a long position shall be all unconverted Underlying
      Shares and unexercised Warrant Shares (ignoring any
      exercise limitations included therein) issuable to such Purchaser on such date,
      plus any shares of Common Stock or Common Stock Equivalents otherwise then
      held
      by such Purchaser.  Notwithstanding the foregoing, in the case of a
      Purchaser that is a multi-managed investment vehicle whereby separate portfolio
      managers manage separate portions of such Purchaser’s assets and the portfolio
      managers have no direct knowledge of the investment decisions made by the
      portfolio managers managing other portions of such Purchaser’s assets, the
      covenant set forth above shall only apply with respect to the portion of assets
      managed by the portfolio manager that made the investment decision to purchase
      the Securities covered by this Agreement.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

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

     

    4.17   
      Capital
      Changes.  Until such time that the Debentures are no longer
      outstanding, 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 67% of the principal amount outstanding of the
      Debentures.

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1  Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before December 7, 2007;
      provided, however, that such termination will not 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
      Enable Capital Management, LLC (“Enable”) the non-accountable sum of
      $40,000, $20,000 of which has been paid prior to Closing, for its legal fees
      and
      expenses.  The balance owed shall be paid directly  directly
      out of the closing proceeds.  The Company shall deliver to each
      Purchaser, prior to the Closing, a completed and executed copy of the Closing
      Statement attached hereto as Annex A.  Except as expressly set
      forth in the Transaction Documents to the contrary, each party shall pay the
      fees and expenses of its advisers, counsel, accountants and other experts,
      if
      any, and all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this
      Agreement.  The Company shall pay all transfer agent fees, stamp taxes
      and other taxes and duties levied in connection with the delivery of any
      Securities to the Purchasers.

     

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

     

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

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    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.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    5.22  
      Waiver
      of Jury Trial.  In any action, suit or proceeding in any
      jurisdiction brought by any party against any other party, the parties each
      knowingly and intentionally, to the greatest extent permitted by applicable
      law,
      hereby absolutely, unconditionally, irrevocably and expressly waives forever
      trial by jury.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    

     

    (Signature
      Pages Follow)

     

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      	VISUAL
              MANAGEMENT SYSTEMS, INC.	 	
              Address
                for Notice:

            
	 	 	 	 
	 	 	 	 
	By: 	 	 	
              Fax:

            
	 	
              Name:

            	 	 
	 	
              Title:

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

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    [PURCHASER
      SIGNATURE PAGES TO VMSY 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:   Enable Opportunity Partners
      LP                                                                                     

     

    Signature
      of Authorized Signatory of Purchaser:
      _______________________________________

     

    Name
      of
      Authorized Signatory:  Adam
      Epstein                                                                                                 

     

    Title
      of
      Authorized
      Signatory:  Principal                                                                                                             

     

    Email
      Address of
      Purchaser:  aepstein@enablecapital.com                                                                            

     

    Facsimile
      Number of
      Purchaser:  415-677-1580                                                                                                  

    

    Address
      for Notice of Purchaser:

    

    One
      Ferry
      Building

    Suite
      255

    San
      Francisco, CA  94111

    

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

    
 

    Subscription
      Amount: $292,800.00

    

    Principal
      Amount:  $366,000.00(Subscription Amount x 1.25)

    

    Warrant
      Shares:  1,098,000

    

    

    

    

    EIN
      Number:  [PROVIDE THIS UNDER SEPARATE
      COVER]

    

    [SIGNATURE
      PAGES CONTINUE]

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

    

    [PURCHASER
      SIGNATURE PAGES TO VMSY 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:   Enable Growth Partners
      LP                                                                                                

     

    Signature
      of Authorized Signatory of Purchaser:
      _______________________________________

     

    Name
      of
      Authorized Signatory:  Adam
      Epstein                                                                                                 

     

    Title
      of
      Authorized
      Signatory:  Principal                                                                                                            
 

     

    Email
      Address of
      Purchaser:  aepstein@enablecapital.com                                                                             

     

    Facsimile
      Number of
      Purchaser:  415-677-1580                                                                                                   

    

    Address
      for Notice of Purchaser:

    

    One
      Ferry
      Building

    Suite
      255

    San
      Francisco, CA  94111

    

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

     

    

    Subscription
      Amount: $2,635,200.00

    

    Principal
      Amount:  $3,294,000.00 (Subscription Amount x 1.25)

    

    Warrant
      Shares:  9,882,000

    

    

    

    EIN
      Number:  [PROVIDE THIS UNDER SEPARATE
      COVER]

    

    [SIGNATURE
      PAGES CONTINUE]

    

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

       

    

    [PURCHASER
      SIGNATURE PAGES TO VMSY 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:   Pierce Diversified Master Fund LLC,
      ena                                                                       

     

    Signature
      of Authorized Signatory of Purchaser:
      _______________________________________

     

    Name
      of
      Authorized Signatory:  Adam
      Epstein                                                                                                  

     

    Title
      of
      Authorized
      Signatory:  Principal                                                                                                             

     

    Email
      Address of
      Purchaser:  aepstein@enablecapital.com                                                                             

     

    Facsimile
      Number of
      Purchaser:  415-677-1580                                                                                                    

    

    Address
      for Notice of Purchaser:

     

    One
      Ferry
      Building

    Suite
      255

    San
      Francisco, CA  94111

    

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

    

    

    Subscription
      Amount: $72,000

    

    Principal
      Amount:  $90,000.00 (Subscription Amount x 1.25)

    

    Warrant
      Shares:  270,000

    

    

    

    EIN
      Number:  [PROVIDE THIS UNDER SEPARATE
      COVER]

    

    [SIGNATURE
      PAGES CONTINUE]

    

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    

    Annex
      A

    

    CLOSING
      STATEMENT

    

    Pursuant
      to the attached Securities Purchase Agreement, dated as of the date hereto,
      the
      purchasers shall purchase up to $3,000,000 of Debentures and Warrants from
      Visual Management Systems, Inc. (the “Company”).  All funds
      will be wired into an account maintained by the Company.  All funds
      will be disbursed in accordance with this Closing Statement.

    

    Disbursement
      Date:November
      ___, 2007

    
      
        

      

    
      	
              I.   PURCHASE
                PRICE

            	 	 
	 	 	 
	
            	
              Gross
                Proceeds to be Received

            	
              $

            
	 	 	 
	
              II. DISBURSEMENTS

            	 	 
	  	 	
              $

            
	 	 	 
	
            	
              Enable
                Capital

            	
              $

            
	  	 	
              $

            
	  	 	
              $

            
	  	 	
              $

            
	 	 	 
	
              Total
                Amount Disbursed:

            	 	
              $

            
	 	 	 
	 	 	 
	 	 	 
	
              WIRE
                INSTRUCTIONS:

            	 	 
	 	 	 
	
              To:
                

            	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
              To:

            	 	 

    

     

     

     

     

    40ex4-7.htm

    
      

    

                                                                                                                                              EXHIBIT
      4.7

    

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

    

    Original
      Issue Date: November 30, 2007

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

    

    $_______________

    

    

    ORIGINAL
      ISSUE DISCOUNT

    5%
      SENIOR SECURED CONVERTIBLE DEBENTURE

    DUE
      MAY 30, 2010

    

    THIS
      DEBENTURE is one of a series of duly authorized and validly issued Original
      Issue Discount 5% Senior Secured Convertible Debentures of Visual Management
      Systems, Inc., a Nevada corporation, (the “Company”), having its
      principal place of business at _____________________________, designated as
      its
      Original Issue Discount 5% Senior Secured Convertible Debenture due May 30,
      2010
      (this debenture, the “Debenture” and, collectively with the other
      debentures of such series, the “Debentures”).

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to ________________________ or its
      registered assigns (the “Holder”), or shall have paid pursuant to the
      terms hereunder, the principal sum of $_______________ on May 30, 2010 (the
      “Maturity Date”) or such earlier date as this Debenture is required or
      permitted to be repaid as provided hereunder, and to pay interest to the Holder
      on the aggregate unconverted and then outstanding principal amount of this
      Debenture in accordance with the provisions hereof.  This Debenture is
      subject to the following additional provisions:

    

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

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
 

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

    

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

    

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

    

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

    

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

    

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    “Equity
      Conditions” means, during the period in question, (i) the Company shall have
      duly honored all conversions and redemptions scheduled to occur or occurring
      by
      virtue of one or more Notices of Conversion of the Holder, if any, (ii) the
      Company shall have paid all liquidated damages and other amounts owing to the
      Holder in respect of this Debenture, (iii) there is an effective
      Registration Statement pursuant to which the Holder is permitted to utilize
      the
      prospectus thereunder to resell all of the shares issuable pursuant to the
      Transaction Documents (and the Company believes, in good faith, that such
      effectiveness will continue uninterrupted for the foreseeable future), (iv)
      the
      Common Stock is trading on a Trading Market and all of the shares issuable
      pursuant to the Transaction Documents are listed or quoted for trading on such
      Trading Market (and the Company believes, in good faith, that trading of the
      Common Stock on a Trading Market will continue uninterrupted for the foreseeable
      future), (v) there is a sufficient number of authorized but unissued and
      otherwise unreserved shares of Common Stock for the issuance of all of the
      shares issuable pursuant to the Transaction Documents, (vi) there is no existing
      Event of Default or no existing event which, with the passage of time or the
      giving of notice, would constitute an Event of Default, (vii) the issuance
      of
      the shares in question (or, in the case of an Optional or Monthly Redemption,
      the shares issuable upon conversion in full of the Optional or Monthly
      Redemption Amount) to
      the Holder would not violate the limitations set forth in Section 4(c) herein,
      (viii) there has been no public announcement of a pending or proposed
      Fundamental Transaction or Change of Control Transaction that has not been
      consummated, (ix) the Holder is not in possession of any information provided
      by
      the Company that constitutes, or may constitute, material non-public information
      and (x) the average daily trading volume for a period of 20 consecutive Trading
      Days prior to the applicable date in question for the Common Stock on the
      principal Trading Market exceeds $100,000 per Trading Day.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
 

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

    

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

    

    “Forced
      Conversion Date” shall
      have the meaning set forth in Section 6(d).

    

    “Forced
      Conversion Notice” shall have the meaning set forth in Section
      6(d).

    

    “Forced
      Conversion Notice Date” shall have the meaning set forth in Section
      6(d).

    

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

    

    “Interest
      Conversion Rate” means the lesser of (a) the Conversion Price or (b) 85% of
      the lesser of (i) the average of the VWAPs for the 20 consecutive Trading Days
      ending on the Trading Day that is immediately prior to the applicable Interest
      Payment Date or (ii) the average of the VWAPs for the 20 consecutive Trading
      Days ending on the Trading Day that is immediately prior to the date the
      applicable Interest Conversion Shares are issued and delivered if such delivery
      is after the Interest Payment Date.

    

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

    

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

    

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

    

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

    

    “Mandatory
      Default Amount”  means the sum of (i) the greater of (A) 130% of
      the outstanding principal amount of this Debenture, plus 100% of accrued and
      unpaid interest hereon, or (B) the outstanding principal amount of this
      Debenture, plus all accrued and unpaid interest hereon, divided by the
      Conversion Price on the date the Mandatory Default Amount is either (a) demanded
      (if demand or notice is required to create an Event of Default) or otherwise
      due
      or (b) paid in full, whichever has a lower Conversion Price, multiplied by
      the
      VWAP on the date the Mandatory Default Amount is either (x) demanded or
      otherwise due or (y) paid in full, whichever has a higher VWAP, and (ii) all
      other amounts, costs, expenses and liquidated damages due in respect of this
      Debenture.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    “Monthly
      Conversion Period” shall have the meaning set forth in Section 6(b)
      hereof.

    

    “Monthly
      Conversion Price” shall have the meaning set forth in Section 6(b)
      hereof.

    

    “Monthly
      Redemption” means the redemption of this Debenture pursuant to Section 6(b)
      hereof.

    

    “Monthly
      Redemption Amount” means, as to a Monthly Redemption, $[______1, plus accrued but unpaid interest,
      liquidated
      damages and any other amounts then owing to the Holder in respect of this
      Debenture.

    

    “Monthly
      Redemption Date” means December 1, 2008, and the 1st calendar day
      of each month thereafter, and terminating upon the full redemption of this
      Debenture.

    

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

    

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

    

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

    

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

    

    “Optional
      Redemption Amount” means the sum of (i) 120% of the then outstanding
      principal amount of the Debenture, (ii) accrued but unpaid interest and (iii)
      all liquidated damages and other amounts due in respect of the
      Debenture.

    

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

    

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

    

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

    

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

    

    “Permitted
      Indebtedness” means (a) the indebtedness evidenced by the Debentures and (b)
      up to, in the aggregate, $7,000,000 of non-equity linked indebtedness under
      a
      revolving line of credit or accounts receivable or inventory lines of credit
      with a federal or state regulated bank or commercial lending institution whose
      primary business is not investing in securities and (c) indebtedness that (i)
      is
      expressly subordinate to the Debentures pursuant to a written subordination
      agreement with the Purchasers that is acceptable to each Purchaser in its sole
      and absolute discretion and (ii) matures at a date later than the 91st day following
      the
      Maturity Date.  Notwithstanding anything herein to the contrary, other
      than with respect to clause (a) above, in no event shall any indebtedness be
      “Permitted Indebtedness” if such incurrence causes the Current Ratio (as used
      under GAAP) of the Company and its Subsidiaries on a consolidated bases to
      be
      less than 1.0.

     

     
      
        

      

    

    
      1           1/18th
        of the original
        Principal Amount of this Debenture

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
 

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

     

    “Purchase
      Agreement” means the Securities Purchase Agreement, dated as of November 29,
      2007 among the Company and the original Holders, as amended, modified or
      supplemented from time to time in accordance with its terms.

    

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

    

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

    

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

    

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
 

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

    

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

    

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

    

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

    

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

    

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

    

    Section
      2.     
Interest.

    

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
 

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

    

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
 

          d)     
      Late
      Fee.  All overdue accrued and unpaid interest to be paid hereunder
      shall entail a late fee at an interest rate equal to the lesser of 18% per
      annum
      or the maximum rate permitted by applicable law (“Late Fees”) which shall
      accrue daily from the date such interest is due hereunder through and including
      the date of actual payment in full.

    

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

    

      
      Section 3.      
Registration
      of Transfers and Exchanges.

    

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

    

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

    

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

    

      
      Section 4.      
Conversion.

     

          
      a)    Voluntary
      Conversion. At any time after the Original Issue Date until this Debenture
      is no longer outstanding, this Debenture shall be convertible, in whole or
      in
      part, into shares of Common Stock at the option of the Holder, at any time
      and
      from time to time (subject to the conversion limitations set forth in
      Section 4(c) hereof).  The Holder shall effect conversions by
      delivering to the Company a Notice of Conversion, the form of which is attached
      hereto as Annex A (a “Notice of Conversion”), specifying therein
      the principal amount of this Debenture to be converted and the date on which
      such conversion shall be effected (such date, the “Conversion
      Date”).  If no Conversion Date is specified in a Notice of
      Conversion, the Conversion Date shall be the date that such Notice of Conversion
      is deemed delivered hereunder.  To effect conversions hereunder, the
      Holder shall not be required to physically surrender this Debenture to the
      Company unless the entire principal amount of this Debenture, plus all accrued
      and unpaid interest thereon, has been so converted. Conversions hereunder shall
      have the effect of lowering the outstanding principal amount of this Debenture
      in an amount equal to the applicable conversion.  The Holder and the
      Company shall maintain records showing the principal amount(s) converted and
      the
      date of such conversion(s).  The Company may deliver an objection to
      any Notice of Conversion within 1 Business Day of delivery of such Notice of
      Conversion.  In the event of any dispute or discrepancy, the records
      of the Holder shall be controlling and determinative in the absence of manifest
      error. The Holder, and any assignee by acceptance of this Debenture,
      acknowledge and agree that, by reason of the provisions of this paragraph,
      following conversion of a portion of this Debenture, the unpaid and unconverted
      principal amount of this Debenture may be less than the amount stated on the
      face hereof.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

    

          
      c)    
Conversion
      Limitations.  The Company shall not effect any conversion of this
      Debenture, and a Holder shall not have the right to convert any portion of
      this
      Debenture, to the extent that after giving effect to the conversion set forth
      on
      the applicable Notice of Conversion, the Holder (together with the Holder’s
      Affiliates, and any other person or entity acting as a group together with
      the
      Holder or any of the Holder’s Affiliates) would beneficially own in excess of
      the Beneficial Ownership Limitation (as defined below).  For purposes of
      the foregoing sentence, the number of shares of Common Stock beneficially owned
      by the Holder and its Affiliates shall include the number of shares of Common
      Stock issuable upon conversion of this Debenture with respect to which such
      determination is being made, but shall exclude the number of shares of Common
      Stock which are issuable upon (A) conversion of the remaining, unconverted
      principal amount of this Debenture beneficially owned by the Holder or any
      of
      its Affiliates and (B) exercise or conversion of the unexercised or unconverted
      portion of any other securities of the Company  subject to a
      limitation on conversion or exercise analogous to the limitation contained
      herein (including, without limitation, any other Debentures or the Warrants)
      beneficially owned by the Holder or any of its Affiliates.  Except as set
      forth in the preceding sentence, for purposes of this Section 4(c), beneficial
      ownership shall be calculated in accordance with Section 13(d) of the Exchange
      Act and the rules and regulations promulgated thereunder.  To the
      extent that the limitation contained in this Section 4(c) applies, the
      determination of whether this Debenture is convertible (in relation to other
      securities owned by the Holder together with any Affiliates) and of which
      principal amount of this Debenture is convertible shall be in the sole
      discretion of the Holder, and the submission of a Notice of Conversion shall
      be
      deemed to be the Holder’s determination of whether this Debenture may be
      converted (in relation to other securities owned by the Holder together with
      any
      Affiliates) and which principal amount of this Debenture is convertible, in
      each
      case subject to the Beneficial Ownership Limitation. To ensure compliance with
      this restriction, the Holder will be deemed to represent to the Company each
      time it delivers a Notice of Conversion that such Notice of Conversion has
      not
      violated the restrictions set forth in this paragraph and the Company shall have
      no obligation to verify or confirm the accuracy of such
      determination.  In addition, a determination as to any group status as
      contemplated above shall be determined in accordance with Section 13(d) of
      the
      Exchange Act and the rules and regulations promulgated
      thereunder.   For purposes of this Section 4(c), in determining
      the number of outstanding shares of Common Stock, the Holder may rely on the
      number of outstanding shares of Common Stock as stated in the most recent of
      the
      following: (A) the Company’s most recent Form 10-Q (or 10-QSB) or Form 10-K (or
      10-KSB), as the case may be; (B) a more recent public announcement by the
      Company; or (C) a more recent notice by the Company or the Company’s transfer
      agent setting forth the number of shares of Common Stock outstanding.  Upon
      the written or oral request of a Holder, the Company shall within two Trading
      Days confirm orally and in writing to the Holder the number of shares of Common
      Stock then outstanding.  In any case, the number of outstanding shares of
      Common Stock shall be determined after giving effect to the conversion or
      exercise of securities of the Company, including this Debenture, by the Holder
      or its Affiliates since the date as of which such number of outstanding shares
      of Common Stock was reported. The “Beneficial Ownership Limitation” shall
      be 9.99% of the number of shares of the Common Stock outstanding immediately
      after giving effect to the issuance of shares of Common Stock issuable upon
      conversion of this Debenture held by the Holder.  The provisions of
      this paragraph shall be construed and implemented in a manner otherwise than
      in
      strict conformity with the terms of this Section 4(c) to correct this paragraph
      (or any portion hereof) which may be defective or inconsistent with the intended
      Beneficial Ownership Limitation herein contained or to make changes or
      supplements necessary or desirable to properly give effect to such limitation.
      The limitations contained in this paragraph shall apply to a successor holder
      of
      this Debenture.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
 

                d)    Mechanics
      of Conversion.

     

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

    

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
 

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

    

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
 

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

    

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

    

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

    

       Section
      5.      
Certain Adjustments.

    

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

    

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

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

    

    g)    Notice
      to the Holder.

    

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

    

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    
 

      
      Section 6.      
Redemption
      and Forced Conversion.

    

    a)    Optional
      Redemption at Election of Company.  Subject to the provisions of
      this Section 6, at any time after the Effective Date, the Company may deliver
      a
      notice to the Holder (an “Optional Redemption Notice” and the date such
      notice is deemed delivered hereunder, the “Optional Redemption Notice
      Date”) of its irrevocable election to redeem some or all of the then
      outstanding principal amount of this Debenture for cash in an amount equal
      to
      the Optional Redemption Amount on the 30th Trading
      Day
      following the Optional Redemption Notice Date (such date, the “Optional
      Redemption Date” and such redemption, the “Optional
      Redemption”).  The Optional Redemption Amount is payable in full
      on the Optional Redemption Date.  The Company may only effect an
      Optional Redemption if each of the Equity Conditions shall have been met (unless
      waived in writing by the Holder) on each Trading Day during the period
      commencing on the Optional Redemption Notice Date through to the Optional
      Redemption Date and through and including the date payment of the Optional
      Redemption Amount is actually made in full.  If any of the Equity
      Conditions shall cease to be satisfied at any time during the 30 Trading Day
      period, then the Holder may elect to nullify the Optional Redemption Notice
      by
      notice to the Company within 3 Trading Days after the first day on which any
      such Equity Condition has not been met (provided that if, by a provision of
      the
      Transaction Documents, the Company is obligated to notify the Holder of the
      non-existence of an Equity Condition, such notice period shall be extended
      to
      the third Trading Day after proper notice from the Company) in which case the
      Optional Redemption Notice shall be null and void,
ab initio.  The Company covenants and agrees that
      it will honor all Notices of Conversion tendered from the time of delivery
      of
      the Optional Redemption Notice through the date all amounts owing thereon are
      due and paid in full. The Company’s determination to effect an Optional
      Redemption shall be applied ratably among the Holders of
      Debentures.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    b)    Monthly
      Redemption.  On each Monthly Redemption Date, the Company shall
      redeem the Monthly Redemption Amount (the “Monthly Redemption”). The
      Monthly Redemption Amount payable on each Monthly Redemption Date shall be
      paid
      in cash; provided, however, as to any Monthly Redemption and upon
      at least 10 Trading Days’ prior written irrevocable notice (the “Monthly
      Redemption Notice”), in lieu of a cash redemption payment the Company may
      elect to pay all or part of a Monthly Redemption Amount in Conversion Shares
      based on a conversion price equal to the lesser of (i) the then Conversion
      Price
      and (ii) 85% of the average of the VWAPs for the 10 consecutive Trading Days
      ending on the Trading Day that is immediately prior to the applicable Monthly
      Redemption Date (subject to adjustment for any stock dividend, stock split,
      stock combination or other similar event affecting the Common Stock during
      such
      10 Trading Day period) (the price calculated during the 10 Trading Day period
      immediately prior to the Monthly Redemption Date, the “Monthly Conversion
      Price” and such 10 Trading Day period, the “Monthly Conversion
      Period”); provided, further, that the Company may not pay the
      Monthly Redemption Amount in Conversion Shares unless (y) from the date the
      Holder receives the duly delivered Monthly Redemption Notice through and until
      the date such Monthly Redemption is paid in full, the Equity Conditions have
      been satisfied, unless waived in writing by the Holder, and (z) as to such
      Monthly Redemption, prior to such Monthly Conversion Period (but not more than
      5
      Trading Days prior to the commencement of the Monthly Conversion Period), the
      Company shall have delivered to the Holder’s account with The Depository Trust
      Company a number of shares of Common Stock to be applied against such Monthly
      Redemption Amount equal to the quotient of (x) the applicable Monthly Redemption
      Amount divided by (y) the lesser of (A) the Conversion Price and (B) 85% of
      the
      average of the  VWAPs during the 10 Trading Day period ending on the
      3rd Trading
      Day
      immediately prior to the date of the Monthly Redemption Notice (the
“Pre-Redemption Conversion Shares”).  The Holder may convert,
      pursuant to Section 4(a), any principal amount of this Debenture subject to
      a
      Monthly Redemption at any time prior to the date that the Monthly Redemption
      Amount, plus accrued but unpaid interest, liquidated damages and any other
      amounts then owing to the Holder are due and paid in full.  Unless
      otherwise indicated by the Holder in the applicable Notice of Conversion, any
      principal amount of this Debenture converted during the applicable Monthly
      Conversion Period until the date the Monthly Redemption Amount is paid in full
      shall be first applied to the principal amount subject to the Monthly Redemption
      Amount payable in cash and then to the Monthly Redemption Amount payable in
      Conversion Shares.  Any principal amount of this Debenture converted
      during the applicable Monthly Conversion Period in excess of the Monthly
      Redemption Amount shall be applied against the last principal amount of this
      Debenture scheduled to be redeemed hereunder, in reverse time order from the
      Maturity Date; provided, however, if any such conversion is
      applied against such Monthly Redemption Amount, the Pre-Redemption Conversion
      Shares, if any were issued in connection with such Monthly Redemption or were
      not already applied to such conversions, shall be first applied against such
      conversion.  The Company covenants and agrees that it will honor all
      Notice of Conversions tendered up until such amounts are paid in
      full.  The Company’s determination to pay a Monthly Redemption in
      cash, shares of Common Stock or a combination thereof shall be applied ratably
      to all of the holders of the then outstanding Debentures based on their (or
      their predecessor’s) initial purchases of Debentures pursuant to the Purchase
      Agreement.  At any time the Company delivers a notice to the Holder of
      its election to pay the Monthly Redemption Amount in shares of Common Stock,
      the
      Company shall file a prospectus supplement pursuant to Rule 424 disclosing
      such
      election.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    c)    Redemption
      Procedure.  The payment of cash or issuance of Common Stock, as
      applicable, pursuant to an Optional and Monthly Redemption shall be payable
      on
      the Optional Redemption Date and Monthly Redemption Date, as
      applicable.  If any portion of the payment pursuant to an Optional or
      Monthly Redemption shall not be paid by the Company by the applicable due date,
      interest shall accrue thereon at an interest rate equal to the lesser of 18%
      per
      annum or the maximum rate permitted by applicable law until such amount is
      paid
      in full.  Notwithstanding anything herein contained to the contrary,
      if any portion of the Optional or Monthly Redemption Amount remains unpaid
      after
      such date, the Holder may elect, by written notice to the Company given at
      any
      time thereafter, to invalidate such Optional or Monthly Redemption,
abinitio, and, with respect to the Company’s failure to honor the
      Optional Redemption, the Company shall have no further right to exercise such
      Optional Redemption.  Notwithstanding anything to the contrary in this
      Section 6, the Company’s determination to redeem in cash or its elections under
      Section 6(b) shall be applied ratably among the Holders of Debentures. The
      Holder may elect to convert the outstanding principal amount of the Debenture
      pursuant to Section 4 prior to actual payment in cash for any redemption under
      this Section 6 by the delivery of a Notice of Conversion to the
      Company.

    

    d)    Forced
      Conversion. Notwithstanding anything herein to the contrary, if after the
      Effective Date, the VWAP for 20 out of any 30 consecutive Trading Days, which
      period shall have commenced only after the Effective Date (such period the
      “Threshold Period”), exceeds $2.88 (subject to
      adjustment for reverse and forward stock splits, stock dividends, stock
      combinations and other similar transactions of the Common Stock that occur
      after
      the Original Issue Date), the Company may, within 2 Trading Days after the
      end
      of any such Threshold Period, deliver a written notice to the Holder (a
“Forced Conversion Notice” and the date such notice is delivered to the
      Holder, the “Forced Conversion Notice Date”) to cause the Holder to
      convert all or part of the then outstanding principal amount of this Debenture
      plus, if so specified in the Forced Conversion Notice, accrued but unpaid
      interest, liquidated damages and other amounts owing to the Holder under this
      Debenture, it being agreed that the “Conversion Date” for purposes of Section 4
      shall be deemed to occur on the third Trading Day following the Forced
      Conversion Notice Date (such third Trading Day, the “Forced Conversion
      Date”).  The Company may not deliver a Forced Conversion Notice,
      and any Forced Conversion Notice delivered by the Company shall not be
      effective, unless all of the Equity Conditions are met (unless waived in writing
      by the Holder) on each Trading Day occurring during the applicable Threshold
      Period through and including the later of the Forced Conversion Date and the
      Trading Day after the date such Conversion Shares pursuant to such conversion
      are delivered to the Holder.  Any Forced Conversion shall be applied
      ratably to all Holders based on their initial purchases of Debentures pursuant
      to the Purchase Agreement, provided that any voluntary conversions by a Holder
      shall be applied against the Holder’s pro rata allocation, thereby decreasing
      the aggregate amount forcibly converted hereunder if only a portion of this
      Debenture is forcibly converted.  For purposes of clarification, a
      Forced Conversion shall be subject to all of the provisions of Section 4,
      including, without limitation, the provision requiring payment of liquidated
      damages and limitations on conversions.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
 

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

    

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

    

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

    

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

    

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

    

        e)       
      repay,
      repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness,
      other than the Debentures if on a pro-rata basis, other than regularly scheduled
      principal and interest payments as such terms are in effect as of the Original
      Issue Date;

    

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

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

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

    

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

    

      
Section
      8.      
Events of Default.

    

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

    

           
      i.    any
      default in the payment of (A) the principal amount of any Debenture or (B)
      interest, liquidated damages and other amounts owing to a Holder on any
      Debenture, as and when the same shall become due and payable (whether on a
      Conversion Date or the Maturity Date or by acceleration or otherwise) which
      default, solely in the case of an interest payment or other default under clause
      (B) above, is not cured within 3 Trading Days;

     

           
      ii.    the
      Company shall fail to observe or perform any other covenant or agreement
      contained in the Debentures (other than a breach by the Company of its
      obligations to deliver shares of Common Stock to the Holder upon conversion,
      which breach is addressed in clause (xi) below) which failure is not cured,
      if
      possible to cure, within the earlier to occur of (A) 5 Trading Days after notice
      of such failure sent by the Holder or by any other Holder and (B) 10 Trading
      Days after the Company has become or should have become aware of such
      failure;

    

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

    

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

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

        v.    the
      Company or any Significant Subsidiary shall be subject to a Bankruptcy
      Event;

    

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

    

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

    

        viii.        
      the
      Company shall be a party to any Change of Control Transaction or Fundamental
      Transaction or shall agree to sell or dispose of all or in excess of 33% of
      its
      assets in one transaction or a series of related transactions (whether or not
      such sale would constitute a Change of Control Transaction);

    

        ix.    the
      Initial Registration Statement (as defined in the Registration Rights Agreement)
      shall not have been declared effective by the Commission on or prior to the
      180th calendar
      day
      after the Closing Date;

    

        x.    if,
      during the Effectiveness Period (as defined in the Registration Rights
      Agreement), either (a) the effectiveness of the Registration Statement lapses
      for any reason or (b) the Holder shall not be permitted to resell Registrable
      Securities (as defined in the Registration Rights Agreement) under the
      Registration Statement for a period of more than 20 consecutive Trading Days
      or
      45 non-consecutive Trading Days (or, in the event that that the Company suspends
      effectiveness of the Registration Statement in connection with a corporate
      development that, in the good faith judgment of the board of directors of the
      Company requires suspension under the Securities Act, 75 non-consecutive days)
      during any 12 month period; provided, however, that if the Company
      is negotiating a merger, consolidation, acquisition or sale of all or
      substantially all of its assets or a similar transaction and, in the written
      opinion of counsel to the Company, the Registration Statement would be required
      to be amended to include information concerning such pending transaction(s)
      or
      the parties thereto which information is not available or may not be publicly
      disclosed at the time, the Company shall be permitted an additional 10
      consecutive Trading Days during any 12 month period pursuant to this Section
      8(a)(x);

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

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

    

        xii.   any
      Person shall breach any agreement delivered to the initial Holders pursuant
      to
      Section 2.2(a)(vi) of the Purchase Agreement;

    

        xiii.         
      On
      or
      before February 28, 2008, the Common Stock shall not have become registered
      pursuant to Section 12(g) of the Exchange Act; or

    

        xiv.         any
      monetary judgment, writ or similar final process shall be entered or filed
      against the Company, any subsidiary or any of their respective property or
      other
      assets for more than $200,000, and such judgment, writ or similar final process
      shall remain unvacated, unbonded or unstayed for a period of 45 calendar
      days.

    

        b)    Remedies
      Upon Event of Default. If any Event of Default occurs, the outstanding
      principal amount of this Debenture, plus accrued but unpaid interest, liquidated
      damages and other amounts owing in respect thereof through the date of
      acceleration, shall become, at the Holder’s election, immediately due and
      payable in cash at the Mandatory Default Amount.  Commencing 5 days
      after the occurrence of any Event of Default that results in the eventual
      acceleration of this Debenture, the interest rate on this Debenture shall accrue
      at an interest rate equal to the lesser of 18% per annum or the maximum rate
      permitted under applicable law.  Upon the payment in full of the
      Mandatory Default Amount, the Holder shall promptly surrender this Debenture
      to
      or as directed by the Company.  In connection with such acceleration
      described herein, the Holder need not provide, and the Company hereby waives,
      any presentment, demand, protest or other notice of any kind, and the Holder
      may
      immediately and without expiration of any grace period enforce any and all
      of
      its rights and remedies hereunder and all other remedies available to it under
      applicable law.  Such acceleration may be rescinded and annulled by
      Holder at any time prior to payment hereunder and the Holder shall have all
      rights as a holder of the Debenture until such time, if any, as the Holder
      receives full payment pursuant to this Section 8(b).  No such
      rescission or annulment shall affect any subsequent Event of Default or impair
      any right consequent thereon.

    

      
Section
      9.      
Miscellaneous.

    

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

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

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

    

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

    

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

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

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

    

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

    

        j)       
Secured
      Obligation.  The obligations of the Company under this Debenture
      are secured by all assets of the Company and each Subsidiary pursuant to the
      Security Agreement, dated as of November 30, 2007 between the Company, the
      Subsidiaries of the Company and the Secured Parties (as defined
      therein).

    

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

     

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

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

      `

       

      
        	 	VISUAL
                MANAGEMENT SYSTEMS, INC.	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	 	
                Name:

              	 
	 	 	
                Title:

              	 
	 	
                Facsimile
                  No. for delivery of Notices: _______________  

              

      

    

     

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

       

    

    ANNEX
      A

    

    NOTICE
      OF CONVERSION

    

    

    The
      undersigned hereby elects to convert principal under the Original Issue Discount
      5% Secured Convertible Debenture due May 30, 2010 of Visual Management Systems,
      Inc., a Nevada corporation (the “Company”), into shares of common stock
      (the “Common Stock”), of the Company according to the conditions hereof,
      as of the date written below.  If shares of Common Stock are to be
      issued in the name of a person other than the undersigned, the undersigned
      will
      pay all transfer taxes payable with respect thereto and is delivering herewith
      such certificates and opinions as reasonably requested by the Company in
      accordance therewith.  No fee will be charged to the holder for any
      conversion, except for such transfer taxes, if any.

    

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

    

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

     

    
 

    
      	
              Conversion
                calculations:

            	 	 
	 	
              Date
                to Effect Conversion: 

            
	 	 	 
	 	
              Principal
                Amount of Debenture to be Converted: 

            
	 	 	 
	 	
              Payment
                of Interest in Common Stock __ yes  __ no 

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

            
	 	 	 
	 	
              Number
                of shares of Common Stock to be issued: 

            
	 	 	 
	 	
              Signature: 

            
	 	 	 
	 	
              Name: 

            
	 	 	 
	 	
              Address
                for Delivery of Common Stock Certificates: 

            
	 	 	 
	 	
              Or 

            
	 	 	 
	 	
              DWAC
                Instructions: 

            
	 	 	 
	 	
              Broker
                No:     _______________

            
	 	
              Account
                No:  _______________ 

            

    

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

    Schedule
      1

    

    CONVERSION
      SCHEDULE

    

    The
      Original Issue Discount 5% Secured Convertible Debentures due on May 30, 2010
      in
      the aggregate principal amount of $____________ are issued by Visual Management
      Systems, Inc.  This Conversion Schedule reflects conversions made
      under Section 4 of the above referenced Debenture.

     

    
      	 	 	
              Dated:

            	 

    

    

    

    
      	
              Date
                of Conversion

              (or
                for first entry,

              Original
                Issue Date)

            	
              Amount
                of

              Conversion

            	
              Aggregate

              Principal

              Amount

              Remaining

              Subsequent
                to

              Conversion

              (or
                original

              Principal
                Amount)

            	
              Company
                Attest

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

    

    
30

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]