Document:

Exhibit
10.1

    STOCK PURCHASE
AGREEMENT

     

    This
Stock Purchase Agreement (“Agreement”) is entered into and effective as of
January 18, 2010 (“Effective Date”), by and among Neah Power Systems, Inc., a
Nevada corporation (“Company”), and First Equity Trust, Inc., a
New York corporation (including its designees, successors and assigns,
“Investor”).

     

    RECITALS

     

    A.           The
parties desire that, upon the terms and subject to the conditions contained
herein, Company shall issue to Investor, and Investor shall purchase from the
Company, from time to time as provided herein, up to $5,000,000.00 of shares of
its Common Stock; and

     

    B.           The
offer and sale of the Securities provided for herein are being made without
registration under the Act, in reliance upon the provisions of Section 4(2) of
the Act, Regulation D promulgated under the Act, and such other exemptions from
the registration requirements of the Act as may be available with respect to any
or all of the purchases of Securities to be made hereunder.

     

    AGREEMENT

     

    In
consideration of the premises, the mutual provisions of this Agreement, and
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, Company and Investor agree as follows:

     

    1.  DEFINITIONS

     

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

     

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

     

    “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Act.  With respect to Investor, without limitation, any Person owning,
owned by, or under common ownership with Investor, and any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as Investor will be deemed to be an Affiliate.

     

    “Agreement”
means this Stock Purchase Agreement.

     

    “Automatic
Termination” has the meaning set forth in Section
3.1.

     

    “Change
in Control” has the meaning set forth within the definition of Fundamental
Transaction, below.

     

    
      
         

      

      
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    “Closing”
means any one of (i) the Commitment Closing and (ii) each Tranche
Closing.

     

    “Commitment
Closing” has the meaning set forth in Section
2.2(a).

     

    “Financing
Fee” means a fee equal to 20% of the Tranche Amount to be paid in shares of
Common Stock at a price based upon the closing bid price of such Common Stock on
the business day immediately preceding the Tranche Notice.

     

    “Common
Shares” means shares of Common Stock issued pursuant to a Tranche
Notice.

     

    “Common
Stock” means the common stock, par value $0.001 per share, of the Company, and
any replacement or substitute thereof, or any share capital into which such
Common Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.

     

    “Company
Termination” has the meaning set forth in Section
3.2.

     

    “Delisting
Event” means any time during the term of this Agreement, that the Common Stock
is not listed for and actively trading on a Trading Market, or is suspended or
delisted with respect to the trading of shares of Common Stock on a Trading
Market.

     

    “Disclosure
Schedules” means the disclosure schedules of the Company delivered concurrently
herewith and attached hereto and all disclosures contained in the SEC
Reports.

     

    “DTC”
means The Depository Trust Company, or any successor performing substantially
the same function for Company.

     

    “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

     

    “Fundamental
Transaction” means and shall be deemed to have occurred at such time upon any of
the following events:

     

    (i)          a
consolidation, merger or other business combination or event or transaction
following which the holders of Common Stock immediately preceding such
consolidation, merger, combination or event either (i) no longer hold a majority
of the shares of Common Stock or (ii) no longer have the ability to elect a
majority the board of directors of the Company (a “Change in
Control”);

     

    (ii)         the
sale or transfer of all or substantially all of the Company’s assets, other than
in the ordinary course of business; or

     

    (iii)        a
purchase, tender or exchange offer made to the holders of the outstanding shares
of Common Stock.

     

    “GAAP”
means United States generally accepted accounting principles applied on a
consistent basis during the periods involved.

     

    
      
         

      

      
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    “Indebtedness”
means (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (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 $100,000 due under leases required to
be capitalized in accordance with GAAP.

     

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

     

    “Material
Adverse Effect” includes any material adverse effect on (i) the legality,
validity or enforceability of any Transaction Document, (ii) the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a the Company’s ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document.

     

    “Material
Agreement” includes any loan agreement, financing agreement, equity investment
agreement or securities instrument to which Company is a party, any agreement or
instrument to which Company and Investor or any Affiliate of Investor is a
party, and any other material agreement listed, or required to be listed, on any
of Company’s reports filed or required to be filed with the SEC, including
without limitation Forms 10-K, 10-Q or 8-K.

     

    “Maximum
Placement” means $5,000,000.00.

     

    “Maximum
Tranche Amount” means, subject to any other applicable limitations set forth in
this Agreement, the Maximum Placement less the amount of any previously noticed
and funded Tranches.

     

    “Officer’s
Closing Certificate” means a certificate in customary form reasonably acceptable
to the Investor, executed by an authorized officer of the Company.

     

    “Opinion”
means an opinion from Company’s independent legal counsel, in the form attached
as Exhibit A, to be delivered in connection with the Commitment
Closing.

     

    “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.

     

    “Prospectus”
includes each prospectus (within the meaning of the Act) related to the sale or
offering of any Common Shares.

     

    “Regulation
D” means Regulation D promulgated under the Act.

     

    “Required
Approval” means any approval of the Trading Market or the Company’s stockholders
required to be obtained by Company prior to issuing the Securities pursuant to
any applicable rules of the Trading Market.

     

    
      
         

      

      
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    “Required
Tranche Documents” has the meaning set forth in Section
2.3(e).

     

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

     

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

     

    “SEC
Reports” includes all reports required to be filed by the Company under the Act
and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the Effective Date (or such shorter period as the
Company was required by law to file such material).

     

    “Securities”
includes the Common Stock issuable pursuant to this Agreement.

     

    “Subsidiary”
means any Person the Company owns or controls, or in which the Company, directly
or indirectly, owns a majority of the capital stock or similar interest that
would be disclosable pursuant to Regulation S-K, Item 601(b)(21).

     

    “Success
Fee” means a fee payable by the Company to Investor at each Tranche Closing
equal to 2% of the net Tranche Amount.

     

    “Termination
Date” means the earlier of (i) the date that is one year after the Effective
Date, or (ii) the Tranche Closing Date on which the sum of the aggregate Tranche
Purchase Price for all Tranche Shares equals the Maximum Placement.

     

    “Termination
Notice” has the meaning as set forth in Section
3.2.

     

    “Trading
Day” means any day on which the Common Stock is traded on the Trading Market;
provided that it shall not include any day on which the Common Stock is (a)
scheduled to trade for less than 5 hours, or (b) suspended from
trading.

     

    “Trading
Market” means the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ
Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock, but does not include the Pink Sheets inter-dealer
electronic quotation and trading system.

     

    “Tranche”
has the meaning set forth in Section
2.3.

     

    “Tranche
Amount” means the amount of any individual put purchase, as specified by the
Company, and shall not exceed the Maximum Tranche Amount.

     

    “Tranche
Closing” has the meaning set forth in Section
2.3(e).

     

    “Tranche
Closing Date” has the meaning set forth in Section
2.3(e).

     

    “Tranche
Notice” has the meaning set forth in Section
2.3(b).

     

    
      
         

      

      
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    “Tranche
Notice Date” has the meaning set forth in Section
2.3(b).

     

    “Tranche
Purchase Price” means shares equal in dollar amount to 100% of the Tranche
Amount at a price equal to the closing bid price of the Company’s Common Stock
on the date immediately preceding the Tranche Notice Date.

     

    “Tranche
Shares” means the shares of Common Stock that are purchased by Investor pursuant
to a Tranche.

     

    “Transaction
Documents” include this Agreement and the Exhibits hereto and
thereto.

     

    “Transfer
Agent” means Corporate Stock Transfer, Inc., or any successor transfer agent for
the Common Stock.

     

    2.  PURCHASE AND
SALE

     

    2.1          Agreement to
Purchase.  Subject to the terms and conditions herein and the
satisfaction of the conditions to closing set forth in this ARTICLE
2:

     

    (a)           Investor
hereby agrees to purchase such amounts of shares of Common Stock as the Company
may, in its sole and absolute discretion, from time to time elect to issue and
sell to Investor according to one or more Tranches pursuant to Section 2.3 below;
and

     

    (b)           The
Company agrees to issue the Financing Fee to Investor as provided
below.

     

    2.2          Investment
Commitment

     

    (a)           Investment
Commitment. The closing of this Agreement (the “Commitment Closing”) shall be
deemed to occur when this Agreement has been duly executed by both Investor and
the Company, and the other Conditions to the Commitment Closing set forth in
Section 2.2.(b) have been met.

     

    (b)           Conditions
to Investment Commitment. As a condition precedent to the Commitment Closing,
all of the following (the “Conditions to Commitment Closing”) shall have been
satisfied prior to or concurrently with the Company’s execution and delivery of
this Agreement:

     

    (i)           the
following documents shall have been delivered to Investor:  (A) this
Agreement, executed by the Company; (B) a Secretary’s Certificate as to (x) the
resolutions of the Company’s board of directors authorizing this Agreement and
the Transaction Documents, and the transactions contemplated hereby and thereby,
(y) a copy of the Company’s current Articles of Incorporation, and (z) a copy of
the Company’s current Bylaws; (C) the Opinion; and (D) a copy of the press
release announcing the transactions contemplated by this Agreement and Current
Report on Form 8-K describing the transaction contemplated by, and attaching a
complete copy of, the Transaction Documents;

     

    
      
         

      

      
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    (ii)           other
than for losses incurred in the ordinary course of business, there have been no
material adverse changes in the Company’s business prospects or financial
condition since the date of the last SEC Report filed by the Company, including
but not limited to incurring material liabilities;

     

    (iii)          the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects and the Company shall have delivered an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;

     

    (iv)          any
Required Approval has been obtained.

     

    (c)           Investor’s
Obligation to Purchase. Subject to the prior satisfaction of all conditions set
forth in this Agreement, following the Investor’s receipt of a validly delivered
Tranche Notice, the Investor shall be required to purchase from the Company a
number of Tranche Shares equal to the permitted Tranche Share Amount, in the
manner described below.

     

    2.3          Tranches
to Investor

     

    (a)           Procedure
to Elect a Tranche. Subject to the Maximum Tranche Amount, the Maximum Placement
and the other conditions and limitations set forth in this Agreement, at any
time beginning on the Effective Date, the Company may, in its sole and absolute
discretion, elect to exercise one or more tranches of puts (each a “Tranche”)
according to the following procedure, provided that each subsequent Tranche
Notice Date (defined below) after the first Tranche Notice Date shall be no
sooner than 5 Trading Days following the preceding Tranche Notice
Date.

     

    (b)           Delivery
of Tranche Notice.  The Company shall deliver an irrevocable written
notice (the “Tranche Notice”), the form of which is attached hereto as Exhibit
B, to Investor stating that the Company shall exercise a Tranche and stating the
number of Common Shares which the Company will sell to Investor at the Tranche
Purchase Price, and the aggregate purchase price for such Tranche.  A
Tranche Notice must be delivered by the Company to Investor by 4:30 p.m. New
York Time on any Trading Day via facsimile or electronic mail, with confirming
copy by overnight carrier, and shall be deemed delivered on the next Trading Day
(the “Tranche Notice Date”).

     

    (c)           Conditions
Precedent to Right to Deliver a Tranche Notice.  The right of the
Company to deliver a Tranche Notice is subject to the satisfaction, on the date
of delivery of such Tranche Notice, of each of the following
conditions:

     

    (i)           the
Common Stock shall be listed for and actively trading on the Trading Market, and
to the Company’s knowledge there is no notice of any suspension or delisting
with respect the trading of the shares of Common Stock on such market or
exchange;

     

    
      
         

      

      
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    (ii)          the
representations and warranties of the Company set forth in this Agreement are
true and correct in all material respects as if made on such date (provided,
however, that any information disclosed by the Company in a filing with the SEC
after the Effective Date but prior to the date of the Tranche Notice shall be
deemed to update the Disclosure Schedules), and no default shall have occurred
under this Agreement, or any other agreement with Investor, any Affiliate of
Investor, or any other Material Agreement, and the Company shall deliver an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;

     

    (iii)         other
than losses incurred in the ordinary course of business, there have been no
material adverse changes in the Company’s business prospects or financial
condition since the Commitment Closing, including but not limited to incurring
material liabilities;

     

    (iv)         the
Company is not, and will not be as a result of the applicable Tranche, in
default of any Material Agreement;

     

    (v)         there
is not then in effect any law, rule or regulation prohibiting or restricting the
transactions contemplated by any of the Transaction Documents, or requiring any
consent or approval which shall not have been obtained, nor is there any pending
or threatened proceeding or investigation which may have the effect of
prohibiting or adversely affecting any of the transactions contemplated by this
Agreement; no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or adopted by any court
or governmental authority of competent jurisdiction that prohibits the
transactions contemplated by this Agreement, and no actions, suits or
proceedings shall be in progress, pending or, to the Company’s knowledge
threatened, by any person (other than Investor or any Affiliate of Investor),
that seek to enjoin or prohibit the transactions contemplated by this
Agreement;

     

    (vi)         Company
is in compliance with all requirements to maintain listing on the Trading
Market; and

     

    (vii)        Company
has a sufficient number of duly authorized shares of Common Stock reserved for
issuance in such amount as may be required to fulfill its obligations pursuant
to the Transaction Documents and any outstanding agreements with Investor and
any Affiliate of Investor;

     

    (d)           Documents
to be Delivered at Tranche Closing. The Closing of any Tranche and Investor’s
obligations hereunder shall additionally be conditioned upon the delivery to
Investor of each of the following (the “Required Tranche Documents”) on or
before the applicable Tranche Closing Date:

     

    (i)           the
Financing Fee;

     

    (ii)          the
Success Fee:

     

     (iii)        all
documents, instruments and other writings required to be delivered by the
Company to Investor on or before the Tranche Closing Date pursuant to any
provision of this Agreement or in order to implement and effect the transactions
contemplated herein; and

     

    
      
         

      

      
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    (iv)         payment
of a non-refundable administrative fee to Investor’s counsel of not more than
$2,000.00, ,
for the first Tranche closing only, by offset against the Tranche Amount,
or wire transfer of immediately available funds.

     

    (e)           Mechanics
of Tranche Closing.  Each of the Company and Investor shall deliver
all documents, instruments and writings required to be delivered by either of
them pursuant to Section 2.3(e) of
this Agreement at or prior to each Tranche Closing. Subject to such delivery and
the satisfaction of the conditions set forth in Section 2.3(d) as of
the Tranche Closing Date, the closing of the purchase by Investor of shares of
Common Stock shall occur by 5:00 p.m. Eastern time, on the date which is 10
Trading Days following the Tranche Notice Date (each a “Tranche Closing Date”)
at the offices of Investor.  On or before each Tranche Closing Date,
Investor shall deliver to the Company the Tranche Purchase Price to be paid for
such Tranche Shares.  The closing (each a “Tranche Closing”) for each
Tranche shall occur on the date that both (i) the Company has delivered to
Investor all Required Tranche Documents, and (ii) Investor has delivered to the
Company the Tranche Purchase Price.

     

    2.4           Maximum
Placement.  Investor shall not be obligated to purchase any
additional Tranche Shares once the aggregate Tranche Purchase Price paid by
Investor equals the Maximum Placement.  In the event that the closing
price of the Company’s common stock during the nine business day after the
Tranche Notice Date falls below 75% of the closing bid price on the day prior to
the Tranche Notice Date, Investor will have the option of not proceeding with
the funding for that Tranche.

     

    2.5           Bridge
Financing.  Nothwithstanding any of the other provisions of
this Agreement, to provide some initial capital to the Company the Investor
agrees to wire to the Company $250,000 by January 26, 2010 in return for which
the Company shall issue 250,000 shares of Common Stock to the Investor at a
price of $1.00 per share. The
Company agrees to authorize the issuance of such shares of Common Stock within
24 hours of receipt of the $250,000 equity investment.

     

    3.  TERMINATION

     

    3.1          Automatic
Termination.  This Agreement and the Company’s right to
initiate subsequent Tranches to Investor under this Agreement shall terminate
permanently (each, an “Automatic Termination”) upon the occurrence of any of the
following:

     

    (a)           if,
at any time, either the Company or any director or executive officer of the
Company has engaged in a transaction or conduct related to the Company that has
resulted in (i) a SEC enforcement action, or (ii) a civil judgment or criminal
conviction for fraud or misrepresentation, or for any other offense that, if
prosecuted criminally, would constitute a felony under applicable
law;

     

    (b)           on
any date after a Delisting Event that lasts for an aggregate of 20 Trading Days
during any calendar year;

     

    (c)           if
at any time the Company has filed for and/or is subject to any bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the relief of debtors instituted
by or against the Company or any subsidiary of the Company;

     

    
      
         

      

      
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    (d)          the
Company is in breach or default of any Material Agreement, which default could
have a Material Adverse Effect;

     

    (e)          the
Company is in breach or default of this Agreement, any Transaction Document, or
any agreement with Investor or any Affiliate of Investor;

     

    (f)           upon
the occurrence of a Fundamental Transaction; and

     

    (g)          on
the Termination Date.

     

    3.2          Company
Termination.  The Company may at any time in its sole
discretion terminate (a “Company Termination”) this Agreement and its right to
initiate future Tranches by providing 30 days advanced written notice
(“Termination Notice”) to Investor.

     

    3.3          Effect of
Termination.  The termination of this Agreement will have no
effect on any Common Shares previously issued, delivered or credited, or on any
rights of any holder thereof.  Notwithstanding any other provision,
all fees paid to Investor or its counsel are non-refundable.

     

    4.  REPRESENTATIONS
AND WARRANTIES

     

    4.1          Representations and Warranties of the
Company.  Except as set forth under the corresponding section
of the Disclosure Schedules, which shall be deemed a part hereof, the Company
hereby represents and warrants to, and as applicable covenants with, Investor as
of each Closing:

     

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

     

    (b)           Organization
and Qualification.  Each of the Company and 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 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.

     

    
      
         

      

      
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    (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 or thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than the filing of the Certificate of
Designations.  Each of the Transaction Documents has been, or upon
delivery will be, duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights and remedies.  Neither the Company
nor any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents except where such violation could not, individually or in the
aggregate, constitute a Material Adverse Effect.

     

    (d)           No
Conflicts.  The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities and the
consummation by the Company of the other transactions contemplated thereby do
not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) 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, or (iv)
conflict with or violate the terms of any agreement by which the Company or any
Subsidiary is bound or to which any property or asset of the Company or any
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.  Neither the Company nor any Subsidiary is
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 the filing of the Certificate of Designations and required
federal and state securities filings, each of which has been, or (if not yet
required to be filed) shall be, timely filed.

    
      
         

      

      
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      (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.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Securities at least
equal to the number of Securities which could be issued pursuant to the terms of
the Transaction Documents.

       

      (g)          Capitalization.  The
capitalization of the Company is as described in the Company’s most recently
filed SEC Report.  The Company has not issued any capital stock since
such filing.  No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.  Except as a
result of the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or 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 securities
convertible into or exercisable for shares of Common Stock.  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 Investor)
and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange, or reset price under such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the shares of the Securities.  There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

       

      (h)          SEC
Reports; Financial Statements.  The Company has filed all required SEC
Reports for the two years preceding the Effective Date (or such shorter period
as the Company was required by law to file such material) on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Act and the Exchange Act and the rules and regulations of
the SEC promulgated thereunder, 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 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 SEC with respect thereto as in
effect at the time of filing.  Such financial statements have been
prepared in accordance with 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 the SEC
Reports, (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC, (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 equity incentive
plans.  The Company does not have pending before the SEC any request
for confidential treatment of information.

       

      (j)           Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”), which
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities, or (ii) could, if there were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor to the
knowledge of the Company 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 SEC involving the
Company or any current or former director or officer of the
Company.  The SEC 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 Act.

       

      (k)           Labor
Relations.  No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company,
which could reasonably be expected to result in a Material Adverse
Effect.

       

      (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 similar agreement or instrument to which it is a party or
by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
except in each case as could not have a Material Adverse
Effect.

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      (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, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.

       

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

       

      (o)          Patents
and Trademarks.  The Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights that
are necessary or material for use in connection with their respective businesses
as described in the SEC Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights of the Company or the Subsidiaries.

       

      (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 Maximum Placement.  To the best of Company’s
knowledge, such insurance contracts and policies are accurate and
complete.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

       

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

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      (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 date of the Commitment Closing.  The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures as of the date prior to the filing date of the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date,
there have been no significant changes in the Company’s internal controls or, to
the Company’s knowledge, in other factors that could materially affect the
Company’s internal controls.

       

      (s)          Certain
Fees.  Investor 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 4.1(s) that
may be due in connection with the transactions contemplated by this Agreement,
except for any placement agent fees payable to licensed broker/dealers
representing the Company or any fees contemplated by the Transaction
Documents.

       

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

       

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

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      (v)          Registration
Rights.  No Person has any right to cause the Company to effect the
registration under the Act of any securities of the Company.

       

      (w)          Listing
and Maintenance Requirements.  The Common Stock is registered pursuant
to Section 12 of the Exchange Act, and the Company has taken no action designed
to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration.  The Company has not, in the 12 months preceding the
Effective Date, 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 its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti takeover provision under the
Company’s Certificate of Incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become applicable to
Investor as a result of Investor and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Securities and Investor’s ownership of
the Securities.

       

      (y)          Disclosure.  Except
with respect to the information that will be, and to the extent that it actually
is timely publicly disclosed by the Company pursuant to Section 2.2(b)(i)E,
the Company confirms that, neither the Company nor any other Person acting on
its behalf has provided Investor or its agents or counsel with any information
that constitutes or might constitute material, non-public information, including
without limitation this Agreement and the Exhibits and Schedules
hereto.  The Company understands and confirms that Investor will rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company.  All disclosure provided to Investor
regarding the Company, its business and the transactions contemplated hereby,
furnished by or on behalf of the Company with respect to the representations and
warranties made herein are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.

       

      (z)           No
Integrated Offering. Neither the Company, nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Act or which
could violate any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Trading
Market.

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      (aa)        Financial
Condition.  Based on the financial condition of the Company as of the
date of the Commitment Closing: (i) the fair saleable market 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 for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances, which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the date of the
Commitment Closing.  The SEC Reports set forth as of the dates thereof
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments.  Neither the Company nor any Subsidiary is in default
with respect to any Indebtedness.

       

      (bb)        Tax
Status.  The Company and each of its Subsidiaries has made or filed
all federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.  The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, statue or
local tax.  None of the Company’s tax returns is presently being
audited by any taxing authority.

       

      (cc)        No
General Solicitation or Advertising.  Neither the Company nor, to the
knowledge of the Company, any of its directors or officers (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Securities,
or (ii) made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Securities under the Act or made any “directed selling efforts” as defined in
Rule 902 of Regulation S.

       

      (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 corrupt 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.

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

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

       

      (ff)    
     Accountants.  The Company’s accountants
are set forth in the SEC Reports.  To the Company’s knowledge, such
accountants are an independent registered public accounting firm as required by
the Act.

       

      (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 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.

       

      4.2           Representations and Warranties of
Investor. Investor hereby represents and warrants as of the Effective
Date as follows:

       

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

       

      (b)          Investor
Status.  At the time Investor was offered the Securities, each
Investor was, and at the Effective Date it is:  (i) an “accredited
investor” as defined in Rule 501(a) under the Act.

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      (c)          Experience
of Investor.  Each Investor, 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.  Each Investor 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.

       

      (d)          General
Solicitation.  Investor 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.

       

      The
Company acknowledges and agrees that each Investor does not make or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
4.2.

      

      5.  OTHER AGREEMENTS
OF THE PARTIES

       

      5.1           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 (i) pursuant to  Rule 144, (ii) to the Company, (iii) to an
Affiliate of Investor, or (iv) in connection with a pledge as contemplated in
Section
5.1(b),  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, to the effect that such transfer does not require
registration of such transferred Securities under the Act.

       

      (b)          Investor
agrees to the imprinting, so long as is required by this Section 5.1, of the
following legend, or substantially similar legend, on any certificate evidencing
Securities other than DWAC Shares:

       

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

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

      Company
agrees to cause such legend to be removed immediately upon effectiveness of a
registration statement, or when any Common Shares are eligible for sale under
Rule 144.  Company further acknowledges and agrees that Investor 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 Act and who agrees to be bound by the
provisions of this Agreement and, if required under the terms of such
arrangement, Investor 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 Investor’s reasonable expense, the Company will execute
and deliver such documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities.

       

      5.2           Furnishing of
Information.  As long as each Investor 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 Effective Date pursuant to the Exchange Act.  Upon
the request of Investor, the Company shall deliver to Investor a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as each Investor owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to Investor and make publicly available in accordance with Rule 144(c)
such information as is required for Investor to sell the Securities under Rule
144.  The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Act within the limitation of the exemptions provided by
Rule 144.

       

      5.3           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 Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Act of the sale of the Securities to
Investor or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market such that it
would require stockholder approval prior to the closing of such other
transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.

       

      5.4           Securities Laws Disclosure;
Publicity.  Company shall issue a press release or if required
file a Current Report on Form 8-K, in each case reasonably acceptable to
Investor, disclosing the material terms of the transactions contemplated
hereby.  Company and Investor shall consult with each other in issuing
any press releases with respect to the transactions contemplated hereby, and
neither Company nor Investor shall issue any such press release or otherwise
make any such public statement without the prior consent of Company, with
respect to any such press release of Investor, or without the prior consent of
Investor, with respect to any such press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law or Trading Market regulations, in which case the disclosing
party shall promptly provide the other party with prior notice of such public
statement or communication.

      
        
           

        

        
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      5.5           Shareholders Rights
Plan.  No claim will be made or enforced by the Company or, to
the knowledge of the Company, any other Person that each Investor is an
“Acquiring Person” under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that Investor
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 Investor. The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act of 1040, as amended.

       

      5.6           Non-Public
Information.  The Company represents and warrants that neither
it nor any Person acting on its behalf has, and covenants and agrees that
neither it nor any other Person acting on its behalf will, provide Investor or
its agents or counsel with any information that the Company believes or
reasonably should believe constitutes material non-public information, unless
prior thereto Investor shall have executed a written agreement regarding the
confidentiality and use of such information.  On and after the
Effective Date, neither Investor nor any Affiliate Investor shall have any duty
of trust or confidence that is owed directly, indirectly, or derivatively, to
the Company or the shareholders of the Company, or to any other Person who is
the source of material nonpublic information regarding the
Company.  The Company understands and confirms that Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

       

      5.7           Reimbursement.  If
Investor become involved in any capacity in any proceeding by or against any
Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by Investor to or with any
current stockholder), solely as a result of Investor’s acquisition of the
Securities under this Agreement, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred, or will assume the defense of Investor
in such matter.  The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of Investor who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such Affiliate and
any such Person.  The Company also agrees that neither Investor nor
any such Affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

    

     

    5.8           Indemnification of
Investor.  Subject to the provisions of this section, the
Company will indemnify and hold Investor, its Affiliates and attorneys, and its
directors, officers, shareholders, partners, employees, agents, and any person
who controls Investor within the meaning of Section 15 of the Act or Section 20
of the Exchange Act (collectively, the “Investor Parties” and each an “Investor
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 (collectively, “Losses”) that any Investor 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, (b) any action instituted
against any Investor Party, or any of them or their respective Affiliates, by
any stockholder of the Company who is not an Affiliate of an Investor Party,
with respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of Investor’s
representation, warranties or covenants under the Transaction Documents or any
agreements or understandings Investor may have with any such stockholder or any
violations by Investor of state or federal securities laws or any conduct by
Investor which constitutes fraud, gross negligence, willful misconduct or
malfeasance), (c)  any untrue statement or alleged untrue statement of
a material fact contained in a registration statement (or in a registration
statement as amended by any post-effective amendment thereof by the Company) or
arising out of or based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and/or (d) any untrue statement or alleged untrue
statement of a material fact included in any Prospectus ( or any amendments or
supplements to any Prospectus ), in any free writing prospectus, in any “issuer
information” (as defined in Rule 433 under the Act) of the Company, or in any
Prospectus together with any combination of one or more of the  free
writing prospectuses, if any, or arising out of or based upon any omission or
alleged omission to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

     

    If any
action shall be brought against an Investor Party in respect of which indemnity
may be sought pursuant to this Agreement, such Investor 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.  The Investor
Parties 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 the Investor Parties 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 with respect to
the dispute in question on any material issue between the position of the
Company and the position of the Investor Parties such that it would be
inappropriate for one counsel to represent the Company and the Investor
Parties.  The Company will not be liable to the Investor Parties under
this Agreement (i) for any settlement by an Investor 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 either attributable to Investor’s breach of any of the
representations, warranties, covenants or agreements made by Investor in this
Agreement or in the other Transaction Documents.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    Reservation of
Securities.  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.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    5.9           Required
Approval.  No transactions contemplated under this Agreement or
the Transaction Documents shall be consummated for an amount that would require
approval by any Trading Market or Company stockholders under any approval
provisions, rules or regulations of any Trading Market applicable to the
Company, unless and until such approval is obtained.  Company shall
use best efforts to obtain any required approval as soon as
possible.

     

    6.  MISCELLANEOUS

     

    6.1           Fees and
Expenses.  A non-refundable document preparation fee shall be
paid by the Company to counsel for Investor, in the amount at the time of the
first Tranche Closing Date of not more than $2,000.00 in cash or by wire
transfer to an account designated by such counsel.  Except for the
non-refundable document preparation fee payable to counsel for Investor at the
initial Tranche closing, or as may be otherwise provided in this Agreement, each
party shall pay the fees and expenses of its own 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
the Transaction Documents.  The Company shall pay all stamp and other
taxes and duties levied in connection with the sale of the Securities, if
any.

     

    6.2           Notices.  Unless a
different time of day or method of delivery is set forth in the Transaction
Documents, 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 after the day of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page hereto prior to 5:30 p.m. (New York City time on
a Trading Day and an electronic confirmation of delivery is received by the
sender, (b) two Trading Days after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section 6.2 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) three Trading Days 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 addresses for such notices and communications are those
set forth following the signature page hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such
Person.

     

    6.3           Amendments;
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Investor or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.  No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

     

    6.4           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 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
Investor.  Investor may assign any or all of its rights under this
Agreement to any Affiliate or to any Person to whom Investor assigns or
transfers any Securities.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    6.5           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
5.8.

     

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

     

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

     

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

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    6.12           Payment Set
Aside.  To the extent that the Company makes a payment or
payments to Investor pursuant to any Transaction Document or Investor 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.

     

    6.13           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.

     

    6.14           Time of the
Essence.  Time is of the essence with respect to all provisions
of this Agreement that specify a time for performance.

     

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

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    6.16           Entire
Agreement.  This Agreement, together with the exhibits hereto,
contains the entire agreement and understanding of the parties, and supersedes
all prior and contemporaneous agreements, term sheets, letters, discussions,
communications and understandings, both oral and written, which the parties
acknowledge have been merged into this Agreement.  No party,
representative, attorney or agent has relied upon any collateral contract,
agreement, assurance, promise, understanding or representation not expressly set
forth hereinabove.  The parties hereby expressly waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any Person’s reliance on any
such assurance.

     

    [Signature Page
Follows]

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

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

     

    
      
        
          
            	
                    NEAH POWER SYSTEMS, INC.

                  
	 
      	 
      
	
                    By:

                  	
                     /s/ Gerard C.
  D’Couto

                  
	
                    Name:
      Gerard C. D’Couto

                  
	
                    Title:
      President and CEO

                  
	 
      
	
                    FIRST
      EQUITY TRUST, INC.

                  
	 
      
	
                    By:

                  	
                     /s/ Robert Roever

                  
	
                    Name:
      Robert Roever

                    Title:
      President

                  

          

        

      

    

     

    [Signature Page to First Equity
Trust, Inc. Stock Purchase Agreement]

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    Addresses for
Notice

     

    To
Company:

     

    Neah
Power Systems, Inc.

    22118
20th
Avenue SW, Suite 142

    Bothell,
Washington 98021

    Fax
No.:  (425) 483-8454

    Email:
cdcouto@neahpower.com

     

    with a
copy to:

     

    Seyfarth
Shaw LLP

    975 F
Street, N.W.

    Washington,
D.C. 20004

    Attention:
Ernest M. Stern, Esq.

    Fax
No.:  (202) 641-9260

    Email:  estern@seyfarth.com

     

    
      To
Investor:

    

     

    First
Equity Trust, Inc.

    570
Lexington Ave., 22nd Floor

    New York,
NY 10022

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    Exhibit
A

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    
       

    

    Exhibit
B

    
      
         

      

      
        30Exhibit 10.2

    STOCK
PURCHASE AGREEMENT

     

    This
Stock Purchase Agreement (“Agreement”) is entered into and effective as of
January 18, 2010 (“Effective Date”), by and among Neah Power Systems, Inc., a
Nevada corporation (“Company”), and Amber Capital Corporation, a
Delaware corporation (including its designees, successors and assigns,
“Investor”).

     

    RECITALS

     

    A.           The
parties desire that, upon the terms and subject to the conditions contained
herein, Company shall issue to Investor, and Investor shall purchase from the
Company, from time to time as provided herein, up to $5,000,000.00 of shares of
its Common Stock; and

     

    B.           The
offer and sale of the Securities provided for herein are being made without
registration under the Act, in reliance upon the provisions of Section 4(2) of
the Act, Regulation D promulgated under the Act, and such other exemptions from
the registration requirements of the Act as may be available with respect to any
or all of the purchases of Securities to be made hereunder.

     

    AGREEMENT

     

    In
consideration of the premises, the mutual provisions of this Agreement, and
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, Company and Investor agree as follows:

     

    1.  DEFINITIONS

     

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

     

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

     

    “Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Act.  With respect to Investor, without limitation, any Person owning,
owned by, or under common ownership with Investor, and any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as Investor will be deemed to be an Affiliate.

     

    “Agreement”
means this Stock Purchase Agreement.

     

    “Automatic
Termination” has the meaning set forth in Section
3.1.

     

    “Change
in Control” has the meaning set forth within the definition of Fundamental
Transaction, below.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “Closing”
means any one of (i) the Commitment Closing and (ii) each Tranche
Closing.

     

    “Commitment
Closing” has the meaning set forth in Section
2.2(a).

     

    “Financing
Fee” means a fee equal to 20% of the Tranche Amount to be paid in shares of
Common Stock at a price based upon the closing bid price of such Common Stock on
the business day immediately preceding the Tranche Notice.

     

    “Common
Shares” means shares of Common Stock issued pursuant to a Tranche
Notice.

     

    “Common
Stock” means the common stock, par value $0.001 per share, of the Company, and
any replacement or substitute thereof, or any share capital into which such
Common Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.

     

    “Company
Termination” has the meaning set forth in Section
3.2.

     

    “Delisting
Event” means any time during the term of this Agreement, that the Common Stock
is not listed for and actively trading on a Trading Market, or is suspended or
delisted with respect to the trading of shares of Common Stock on a Trading
Market.

     

    “Disclosure
Schedules” means the disclosure schedules of the Company delivered concurrently
herewith and attached hereto and all disclosures contained in the SEC
Reports.

     

    “DTC”
means The Depository Trust Company, or any successor performing substantially
the same function for Company.

     

    “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

     

    “Fundamental
Transaction” means and shall be deemed to have occurred at such time upon any of
the following events:

     

    (i)           a
consolidation, merger or other business combination or event or transaction
following which the holders of Common Stock immediately preceding such
consolidation, merger, combination or event either (i) no longer hold a majority
of the shares of Common Stock or (ii) no longer have the ability to elect a
majority the board of directors of the Company (a “Change in
Control”);

     

    (ii)          the
sale or transfer of all or substantially all of the Company’s assets, other than
in the ordinary course of business; or

     

    (iii)        a
purchase, tender or exchange offer made to the holders of the outstanding shares
of Common Stock.

     

    “GAAP”
means United States generally accepted accounting principles applied on a
consistent basis during the periods involved.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Indebtedness”
means (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (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 $100,000 due under leases required to
be capitalized in accordance with GAAP.

     

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

     

    “Material
Adverse Effect” includes any material adverse effect on (i) the legality,
validity or enforceability of any Transaction Document, (ii) the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a the Company’s ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document.

     

    “Material
Agreement” includes any loan agreement, financing agreement, equity investment
agreement or securities instrument to which Company is a party, any agreement or
instrument to which Company and Investor or any Affiliate of Investor is a
party, and any other material agreement listed, or required to be listed, on any
of Company’s reports filed or required to be filed with the SEC, including
without limitation Forms 10-K, 10-Q or 8-K.

     

    “Maximum
Placement” means $5,000,000.00.

     

    “Maximum
Tranche Amount” means, subject to any other applicable limitations set forth in
this Agreement, the Maximum Placement less the amount of any previously noticed
and funded Tranches.

     

    “Officer’s
Closing Certificate” means a certificate in customary form reasonably acceptable
to the Investor, executed by an authorized officer of the Company.

     

    “Opinion”
means an opinion from Company’s independent legal counsel, in the form attached
as Exhibit A, to be delivered in connection with the Commitment
Closing.

     

    “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.

     

    “Prospectus”
includes each prospectus (within the meaning of the Act) related to the sale or
offering of any Common Shares.

     

    “Regulation
D” means Regulation D promulgated under the Act.

     

    “Required
Approval” means any approval of the Trading Market or the Company’s stockholders
required to be obtained by Company prior to issuing the Securities pursuant to
any applicable rules of the Trading Market.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “Required
Tranche Documents” has the meaning set forth in Section
2.3(e).

     

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

     

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

     

    “SEC
Reports” includes all reports required to be filed by the Company under the Act
and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the Effective Date (or such shorter period as the
Company was required by law to file such material).

     

    “Securities”
includes the Common Stock issuable pursuant to this Agreement.

     

    “Subsidiary”
means any Person the Company owns or controls, or in which the Company, directly
or indirectly, owns a majority of the capital stock or similar interest that
would be disclosable pursuant to Regulation S-K, Item 601(b)(21).

     

    “Success
Fee” means a fee payable by the Company to Investor at each Tranche Closing
equal to 2% of the net Tranche Amount.

     

    “Termination
Date” means the earlier of (i) the date that is one year after the Effective
Date, or (ii) the Tranche Closing Date on which the sum of the aggregate Tranche
Purchase Price for all Tranche Shares equals the Maximum Placement.

     

    “Termination
Notice” has the meaning as set forth in Section
3.2.

     

    “Trading
Day” means any day on which the Common Stock is traded on the Trading Market;
provided that it shall not include any day on which the Common Stock is (a)
scheduled to trade for less than 5 hours, or (b) suspended from
trading.

     

    “Trading
Market” means the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ
Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock, but does not include the Pink Sheets inter-dealer
electronic quotation and trading system.

     

    “Tranche”
has the meaning set forth in Section
2.3.

     

    “Tranche
Amount” means the amount of any individual put purchase, as specified by the
Company, and shall not exceed the Maximum Tranche Amount.

     

    “Tranche
Closing” has the meaning set forth in Section
2.3(e).

     

    “Tranche
Closing Date” has the meaning set forth in Section
2.3(e).

     

    “Tranche
Notice” has the meaning set forth in Section
2.3(b).

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    “Tranche
Notice Date” has the meaning set forth in Section
2.3(b).

     

    “Tranche
Purchase Price” means shares equal in dollar amount to 100% of the Tranche
Amount at a price equal to the closing bid price of the Company’s Common Stock
on the date immediately preceding the Tranche Notice Date.

     

    “Tranche
Shares” means the shares of Common Stock that are purchased by Investor pursuant
to a Tranche.

     

    “Transaction
Documents” include this Agreement and the Exhibits hereto and
thereto.

     

    “Transfer
Agent” means Corporate Stock Transfer, Inc., or any successor transfer agent for
the Common Stock.

     

    2.  PURCHASE AND
SALE

     

    2.1          Agreement to
Purchase.  Subject to the terms and conditions herein and the
satisfaction of the conditions to closing set forth in this ARTICLE
2:

     

    (a)           Investor
hereby agrees to purchase such amounts of shares of Common Stock as the Company
may, in its sole and absolute discretion, from time to time elect to issue and
sell to Investor according to one or more Tranches pursuant to Section 2.3 below;
and

     

    (b)           The
Company agrees to issue the Financing Fee to Investor as provided
below.

     

    2.2          Investment
Commitment

     

    (a)           Investment
Commitment. The closing of this Agreement (the “Commitment Closing”) shall be
deemed to occur when this Agreement has been duly executed by both Investor and
the Company, and the other Conditions to the Commitment Closing set forth in
Section 2.2.(b) have been met.

     

    (b)           Conditions
to Investment Commitment. As a condition precedent to the Commitment Closing,
all of the following (the “Conditions to Commitment Closing”) shall have been
satisfied prior to or concurrently with the Company’s execution and delivery of
this Agreement:

     

    (i)           the
following documents shall have been delivered to Investor:  (A) this
Agreement, executed by the Company; (B) a Secretary’s Certificate as to (x) the
resolutions of the Company’s board of directors authorizing this Agreement and
the Transaction Documents, and the transactions contemplated hereby and thereby,
(y) a copy of the Company’s current Articles of Incorporation, and (z) a copy of
the Company’s current Bylaws; (C) the Opinion; and (D) a copy of the press
release announcing the transactions contemplated by this Agreement and Current
Report on Form 8-K describing the transaction contemplated by, and attaching a
complete copy of, the Transaction Documents;

    
      
         

      

      
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    (ii)          other
than for losses incurred in the ordinary course of business, there have been no
material adverse changes in the Company’s business prospects or financial
condition since the date of the last SEC Report filed by the Company, including
but not limited to incurring material liabilities;

     

    (iii)          the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects and the Company shall have delivered an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;

     

    (iv)          any
Required Approval has been obtained.

     

    (c)     
      Investor’s Obligation to Purchase. Subject
to the prior satisfaction of all conditions set forth in this Agreement,
following the Investor’s receipt of a validly delivered Tranche Notice, the
Investor shall be required to purchase from the Company a number of Tranche
Shares equal to the permitted Tranche Share Amount, in the manner described
below.

     

    2.3          Tranches
to Investor

     

    (a)           Procedure
to Elect a Tranche. Subject to the Maximum Tranche Amount, the Maximum Placement
and the other conditions and limitations set forth in this Agreement, at any
time beginning on the Effective Date, the Company may, in its sole and absolute
discretion, elect to exercise one or more tranches of puts (each a “Tranche”)
according to the following procedure, provided that each subsequent Tranche
Notice Date (defined below) after the first Tranche Notice Date shall be no
sooner than 5 Trading Days following the preceding Tranche Notice
Date.

     

    (b)           Delivery
of Tranche Notice.  The Company shall deliver an irrevocable written
notice (the “Tranche Notice”), the form of which is attached hereto as Exhibit
B, to Investor stating that the Company shall exercise a Tranche and stating the
number of Common Shares which the Company will sell to Investor at the Tranche
Purchase Price, and the aggregate purchase price for such Tranche.  A
Tranche Notice must be delivered by the Company to Investor by 4:30 p.m. New
York Time on any Trading Day via facsimile or electronic mail, with confirming
copy by overnight carrier, and shall be deemed delivered on the next Trading Day
(the “Tranche Notice Date”).

     

    (c)           Conditions
Precedent to Right to Deliver a Tranche Notice.  The right of the
Company to deliver a Tranche Notice is subject to the satisfaction, on the date
of delivery of such Tranche Notice, of each of the following
conditions:

     

    (i)           the
Common Stock shall be listed for and actively trading on the Trading Market, and
to the Company’s knowledge there is no notice of any suspension or delisting
with respect the trading of the shares of Common Stock on such market or
exchange;

    
      
         

      

      
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    (ii)           the
representations and warranties of the Company set forth in this Agreement are
true and correct in all material respects as if made on such date (provided,
however, that any information disclosed by the Company in a filing with the SEC
after the Effective Date but prior to the date of the Tranche Notice shall be
deemed to update the Disclosure Schedules), and no default shall have occurred
under this Agreement, or any other agreement with Investor, any Affiliate of
Investor, or any other Material Agreement, and the Company shall deliver an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;

     

    (iii)          other
than losses incurred in the ordinary course of business, there have been no
material adverse changes in the Company’s business prospects or financial
condition since the Commitment Closing, including but not limited to incurring
material liabilities;

     

    (iv)          the
Company is not, and will not be as a result of the applicable Tranche, in
default of any Material Agreement;

     

    (v)           there
is not then in effect any law, rule or regulation prohibiting or restricting the
transactions contemplated by any of the Transaction Documents, or requiring any
consent or approval which shall not have been obtained, nor is there any pending
or threatened proceeding or investigation which may have the effect of
prohibiting or adversely affecting any of the transactions contemplated by this
Agreement; no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or adopted by any court
or governmental authority of competent jurisdiction that prohibits the
transactions contemplated by this Agreement, and no actions, suits or
proceedings shall be in progress, pending or, to the Company’s knowledge
threatened, by any person (other than Investor or any Affiliate of Investor),
that seek to enjoin or prohibit the transactions contemplated by this
Agreement;

     

    (vi)          Company
is in compliance with all requirements to maintain listing on the Trading
Market; and

     

    (vii)         Company
has a sufficient number of duly authorized shares of Common Stock reserved for
issuance in such amount as may be required to fulfill its obligations pursuant
to the Transaction Documents and any outstanding agreements with Investor and
any Affiliate of Investor;

     

    (d)          Documents
to be Delivered at Tranche Closing. The Closing of any Tranche and Investor’s
obligations hereunder shall additionally be conditioned upon the delivery to
Investor of each of the following (the “Required Tranche Documents”) on or
before the applicable Tranche Closing Date:

     

    (i)           the
Financing Fee;

     

    (ii)          the
Success Fee:

     

    (iii)         all
documents, instruments and other writings required to be delivered by the
Company to Investor on or before the Tranche Closing Date pursuant to any
provision of this Agreement or in order to implement and effect the transactions
contemplated herein; and

    
      
         

      

      
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    (iv)          payment
of a non-refundable administrative fee to Investor’s counsel of not more than
$2,000.00, ,
for the first Tranche closing only, by offset against the Tranche Amount,
or wire transfer of immediately available funds.

     

    (e)           Mechanics
of Tranche Closing.  Each of the Company and Investor shall deliver
all documents, instruments and writings required to be delivered by either of
them pursuant to Section 2.3(e) of
this Agreement at or prior to each Tranche Closing. Subject to such delivery and
the satisfaction of the conditions set forth in Section 2.3(d) as of
the Tranche Closing Date, the closing of the purchase by Investor of shares of
Common Stock shall occur by 5:00 p.m. Eastern time, on the date which is 10
Trading Days following the Tranche Notice Date (each a “Tranche Closing Date”)
at the offices of Investor.  On or before each Tranche Closing Date,
Investor shall deliver to the Company the Tranche Purchase Price to be paid for
such Tranche Shares.  The closing (each a “Tranche Closing”) for each
Tranche shall occur on the date that both (i) the Company has delivered to
Investor all Required Tranche Documents, and (ii) Investor has delivered to the
Company the Tranche Purchase Price.

     

    2.4          Maximum
Placement.  Investor shall not be obligated to purchase any
additional Tranche Shares once the aggregate Tranche Purchase Price paid by
Investor equals the Maximum Placement.  In the event that the closing
price of the Company’s common stock during the nine business day after the
Tranche Notice Date falls below 75% of the closing bid price on the day prior to
the Tranche Notice Date, Investor will have the option of not proceeding with
the funding for that Tranche.

     

    2.5          Bridge
Financing.  Nothwithstanding any of the other provisions of
this Agreement, to provide some initial capital to the Company the Investor
agrees to wire to the Company $250,000 by January 26, 2010 in return for which
the Company shall issue 250,000 shares of Common Stock to the Investor at a
price of $1.00 per share. The
Company agrees to authorize the issuance of such shares of Common Stock within
24 hours of receipt of the $250,000 equity investment.

     

    3.  TERMINATION

     

    3.1          Automatic
Termination.  This Agreement and the Company’s right to
initiate subsequent Tranches to Investor under this Agreement shall terminate
permanently (each, an “Automatic Termination”) upon the occurrence of any of the
following:

     

    (a)           if,
at any time, either the Company or any director or executive officer of the
Company has engaged in a transaction or conduct related to the Company that has
resulted in (i) a SEC enforcement action, or (ii) a civil judgment or criminal
conviction for fraud or misrepresentation, or for any other offense that, if
prosecuted criminally, would constitute a felony under applicable
law;

     

    (b)           on
any date after a Delisting Event that lasts for an aggregate of 20 Trading Days
during any calendar year;

     

    (c)           if
at any time the Company has filed for and/or is subject to any bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the relief of debtors instituted
by or against the Company or any subsidiary of the Company;

    
      
         

      

      
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    (d)           the
Company is in breach or default of any Material Agreement, which default could
have a Material Adverse Effect;

     

    (e)           the
Company is in breach or default of this Agreement, any Transaction Document, or
any agreement with Investor or any Affiliate of Investor;

     

    (f)           upon
the occurrence of a Fundamental Transaction; and

     

    (g)          on
the Termination Date.

     

    3.2         Company
Termination.  The Company may at any time in its sole
discretion terminate (a “Company Termination”) this Agreement and its right to
initiate future Tranches by providing 30 days advanced written notice
(“Termination Notice”) to Investor.

     

    3.3         Effect of
Termination.  The termination of this Agreement will have no
effect on any Common Shares previously issued, delivered or credited, or on any
rights of any holder thereof.  Notwithstanding any other provision,
all fees paid to Investor or its counsel are non-refundable.

     

    4.  REPRESENTATIONS
AND WARRANTIES

     

    4.1         Representations and Warranties of the
Company.  Except as set forth under the corresponding section
of the Disclosure Schedules, which shall be deemed a part hereof, the Company
hereby represents and warrants to, and as applicable covenants with, Investor as
of each Closing:

     

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

     

    (b)           Organization
and Qualification.  Each of the Company and 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 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.

    
      
         

      

      
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    (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 or thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than the filing of the Certificate of
Designations.  Each of the Transaction Documents has been, or upon
delivery will be, duly executed by the Company and, when delivered in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights and remedies.  Neither the Company
nor any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents except where such violation could not, individually or in the
aggregate, constitute a Material Adverse Effect.

     

    (d)           No
Conflicts.  The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities and the
consummation by the Company of the other transactions contemplated thereby do
not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) 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, or (iv)
conflict with or violate the terms of any agreement by which the Company or any
Subsidiary is bound or to which any property or asset of the Company or any
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.  Neither the Company nor any Subsidiary is
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 the filing of the Certificate of Designations and required
federal and state securities filings, each of which has been, or (if not yet
required to be filed) shall be, timely filed.

    
      
         

      

      
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    (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.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Securities at least
equal to the number of Securities which could be issued pursuant to the terms of
the Transaction Documents.

     

    (g)           Capitalization.  The
capitalization of the Company is as described in the Company’s most recently
filed SEC Report.  The Company has not issued any capital stock since
such filing.  No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.  Except as a
result of the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or 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 securities
convertible into or exercisable for shares of Common Stock.  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 Investor)
and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange, or reset price under such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the shares of the Securities.  There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

     

    (h)           SEC
Reports; Financial Statements.  The Company has filed all required SEC
Reports for the two years preceding the Effective Date (or such shorter period
as the Company was required by law to file such material) on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Act and the Exchange Act and the rules and regulations of
the SEC promulgated thereunder, 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 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 SEC with respect thereto as in
effect at the time of filing.  Such financial statements have been
prepared in accordance with 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.

     

    
      
        
        

      

      
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    (i)           Material
Changes.  Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC, (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 equity incentive
plans.  The Company does not have pending before the SEC any request
for confidential treatment of information.

     

    (j)           Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”), which
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities, or (ii) could, if there were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor to the
knowledge of the Company 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 SEC involving the
Company or any current or former director or officer of the
Company.  The SEC 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 Act.

     

    (k)           Labor
Relations.  No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company,
which could reasonably be expected to result in a Material Adverse
Effect.

     

    (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 similar agreement or instrument to which it is a party or
by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
except in each case as could not have a Material Adverse Effect.

     

    
      
        
        

      

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

     

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

     

    (o)           Patents
and Trademarks.  The Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights that
are necessary or material for use in connection with their respective businesses
as described in the SEC Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights of the Company or the Subsidiaries.

     

    (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 Maximum Placement.  To the best of Company’s
knowledge, such insurance contracts and policies are accurate and
complete.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

     

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

     

    
      
        
        

      

      
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    (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 date of the Commitment Closing.  The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures as of the date prior to the filing date of the most recently filed
periodic report under the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date,
there have been no significant changes in the Company’s internal controls or, to
the Company’s knowledge, in other factors that could materially affect the
Company’s internal controls.

     

    (s)           Certain
Fees.  Investor 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 4.1(s) that
may be due in connection with the transactions contemplated by this Agreement,
except for any placement agent fees payable to licensed broker/dealers
representing the Company or any fees contemplated by the Transaction
Documents.

     

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

     

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

     

    
      
        
        

      

      
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    (v)           Registration
Rights.  No Person has any right to cause the Company to effect the
registration under the Act of any securities of the Company.

     

    (w)           Listing
and Maintenance Requirements.  The Common Stock is registered pursuant
to Section 12 of the Exchange Act, and the Company has taken no action designed
to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration.  The Company has not, in the 12 months preceding the
Effective Date, 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 its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti takeover provision under the
Company’s Certificate of Incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become applicable to
Investor as a result of Investor and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Securities and Investor’s ownership of
the Securities.

     

    (y)           Disclosure.  Except
with respect to the information that will be, and to the extent that it actually
is timely publicly disclosed by the Company pursuant to Section 2.2(b)(i)E,
the Company confirms that, neither the Company nor any other Person acting on
its behalf has provided Investor or its agents or counsel with any information
that constitutes or might constitute material, non-public information, including
without limitation this Agreement and the Exhibits and Schedules
hereto.  The Company understands and confirms that Investor will rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company.  All disclosure provided to Investor
regarding the Company, its business and the transactions contemplated hereby,
furnished by or on behalf of the Company with respect to the representations and
warranties made herein are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.

     

    (z)           No
Integrated Offering. Neither the Company, nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Act or which
could violate any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Trading Market.

     

    
      
        
        

      

      
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    (aa)         Financial
Condition.  Based on the financial condition of the Company as of the
date of the Commitment Closing: (i) the fair saleable market 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 for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances, which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the date of the
Commitment Closing.  The SEC Reports set forth as of the dates thereof
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments.  Neither the Company nor any Subsidiary is in default
with respect to any Indebtedness.

     

    (bb)         Tax
Status.  The Company and each of its Subsidiaries has made or filed
all federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.  The
Company has not executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal, statue or
local tax.  None of the Company’s tax returns is presently being
audited by any taxing authority.

     

    (cc)         No
General Solicitation or Advertising.  Neither the Company nor, to the
knowledge of the Company, any of its directors or officers (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Securities,
or (ii) made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Securities under the Act or made any “directed selling efforts” as defined in
Rule 902 of Regulation S.

     

    (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 corrupt 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.

     

    
      
        
        

      

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

     

    (ff)          Accountants.  The
Company’s accountants are set forth in the SEC Reports.  To the
Company’s knowledge, such accountants are an independent registered public
accounting firm as required by the Act.

     

    (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 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.

     

    4.2           Representations and Warranties of
Investor. Investor hereby represents and warrants as of the Effective
Date as follows:

     

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

     

    (b)           Investor
Status.  At the time Investor was offered the Securities, each
Investor was, and at the Effective Date it is:  (i) an “accredited
investor” as defined in Rule 501(a) under the Act.

     

    
      
        
        

      

      
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    (c)           Experience
of Investor.  Each Investor, 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.  Each Investor 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.

     

    (d)           General
Solicitation.  Investor 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.

     

    The
Company acknowledges and agrees that each Investor does not make or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
4.2.

    

    5.  OTHER AGREEMENTS
OF THE PARTIES

     

    5.1           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 (i) pursuant to  Rule 144, (ii) to the Company, (iii) to an
Affiliate of Investor, or (iv) in connection with a pledge as contemplated in
Section
5.1(b),  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, to the effect that such transfer does not require
registration of such transferred Securities under the Act.

     

    (b)           Investor
agrees to the imprinting, so long as is required by this Section 5.1, of the
following legend, or substantially similar legend, on any certificate evidencing
Securities other than DWAC Shares:

     

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

     

    
      
        
        

      

      
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    Company
agrees to cause such legend to be removed immediately upon effectiveness of a
registration statement, or when any Common Shares are eligible for sale under
Rule 144.  Company further acknowledges and agrees that Investor 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 Act and who agrees to be bound by the
provisions of this Agreement and, if required under the terms of such
arrangement, Investor 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 Investor’s reasonable expense, the Company will execute
and deliver such documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities.

     

    5.2           Furnishing of
Information.  As long as each Investor 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 Effective Date pursuant to the Exchange Act.  Upon
the request of Investor, the Company shall deliver to Investor a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as each Investor owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to Investor and make publicly available in accordance with Rule 144(c)
such information as is required for Investor to sell the Securities under Rule
144.  The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Act within the limitation of the exemptions provided by
Rule 144.

     

    5.3           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 Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Act of the sale of the Securities to
Investor or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market such that it
would require stockholder approval prior to the closing of such other
transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.

     

    5.4           Securities Laws Disclosure;
Publicity.  Company shall issue a press release or if required
file a Current Report on Form 8-K, in each case reasonably acceptable to
Investor, disclosing the material terms of the transactions contemplated
hereby.  Company and Investor shall consult with each other in issuing
any press releases with respect to the transactions contemplated hereby, and
neither Company nor Investor shall issue any such press release or otherwise
make any such public statement without the prior consent of Company, with
respect to any such press release of Investor, or without the prior consent of
Investor, with respect to any such press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law or Trading Market regulations, in which case the disclosing
party shall promptly provide the other party with prior notice of such public
statement or communication.

     

    
      
        
        

      

      
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    5.5           Shareholders Rights
Plan.  No claim will be made or enforced by the Company or, to
the knowledge of the Company, any other Person that each Investor is an
“Acquiring Person” under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that Investor
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 Investor. The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act of 1040, as amended.

     

    5.6           Non-Public
Information.  The Company represents and warrants that neither
it nor any Person acting on its behalf has, and covenants and agrees that
neither it nor any other Person acting on its behalf will, provide Investor or
its agents or counsel with any information that the Company believes or
reasonably should believe constitutes material non-public information, unless
prior thereto Investor shall have executed a written agreement regarding the
confidentiality and use of such information.  On and after the
Effective Date, neither Investor nor any Affiliate Investor shall have any duty
of trust or confidence that is owed directly, indirectly, or derivatively, to
the Company or the shareholders of the Company, or to any other Person who is
the source of material nonpublic information regarding the
Company.  The Company understands and confirms that Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

     

    5.7           Reimbursement.  If
Investor become involved in any capacity in any proceeding by or against any
Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by Investor to or with any
current stockholder), solely as a result of Investor’s acquisition of the
Securities under this Agreement, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred, or will assume the defense of Investor
in such matter.  The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of Investor who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such Affiliate and
any such Person.  The Company also agrees that neither Investor nor
any such Affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.

    
      
         

      

      
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    5.8           Indemnification of
Investor.  Subject to the provisions of this section, the
Company will indemnify and hold Investor, its Affiliates and attorneys, and its
directors, officers, shareholders, partners, employees, agents, and any person
who controls Investor within the meaning of Section 15 of the Act or Section 20
of the Exchange Act (collectively, the “Investor Parties” and each an “Investor
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 (collectively, “Losses”) that any Investor 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, (b) any action instituted
against any Investor Party, or any of them or their respective Affiliates, by
any stockholder of the Company who is not an Affiliate of an Investor Party,
with respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of Investor’s
representation, warranties or covenants under the Transaction Documents or any
agreements or understandings Investor may have with any such stockholder or any
violations by Investor of state or federal securities laws or any conduct by
Investor which constitutes fraud, gross negligence, willful misconduct or
malfeasance), (c)  any untrue statement or alleged untrue statement of
a material fact contained in a registration statement (or in a registration
statement as amended by any post-effective amendment thereof by the Company) or
arising out of or based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and/or (d) any untrue statement or alleged untrue
statement of a material fact included in any Prospectus ( or any amendments or
supplements to any Prospectus ), in any free writing prospectus, in any “issuer
information” (as defined in Rule 433 under the Act) of the Company, or in any
Prospectus together with any combination of one or more of the  free
writing prospectuses, if any, or arising out of or based upon any omission or
alleged omission to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

     

    If any
action shall be brought against an Investor Party in respect of which indemnity
may be sought pursuant to this Agreement, such Investor 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.  The Investor
Parties 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 the Investor Parties 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 with respect to
the dispute in question on any material issue between the position of the
Company and the position of the Investor Parties such that it would be
inappropriate for one counsel to represent the Company and the Investor
Parties.  The Company will not be liable to the Investor Parties under
this Agreement (i) for any settlement by an Investor 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 either attributable to Investor’s breach of any of the
representations, warranties, covenants or agreements made by Investor in this
Agreement or in the other Transaction Documents.

    
      
         

      

      
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    Reservation of
Securities.  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.

    
      
         

      

      
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    5.9           Required
Approval.  No transactions contemplated under this Agreement or
the Transaction Documents shall be consummated for an amount that would require
approval by any Trading Market or Company stockholders under any approval
provisions, rules or regulations of any Trading Market applicable to the
Company, unless and until such approval is obtained.  Company shall
use best efforts to obtain any required approval as soon as
possible.

     

    6.  MISCELLANEOUS

     

    6.1           Fees and
Expenses.  A non-refundable document preparation fee shall be
paid by the Company to counsel for Investor, in the amount at the time of the
first Tranche Closing Date of not more than $2,000.00 in cash or by wire
transfer to an account designated by such counsel.  Except for the
non-refundable document preparation fee payable to counsel for Investor at the
initial Tranche closing, or as may be otherwise provided in this Agreement, each
party shall pay the fees and expenses of its own 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
the Transaction Documents.  The Company shall pay all stamp and other
taxes and duties levied in connection with the sale of the Securities, if
any.

     

    6.2           Notices.  Unless a
different time of day or method of delivery is set forth in the Transaction
Documents, 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 after the day of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page hereto prior to 5:30 p.m. (New York City time on
a Trading Day and an electronic confirmation of delivery is received by the
sender, (b) two Trading Days after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section 6.2 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) three Trading Days 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 addresses for such notices and communications are those
set forth following the signature page hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such
Person.

     

    6.3           Amendments;
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Investor or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.  No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

     

    6.4           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 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
Investor.  Investor may assign any or all of its rights under this
Agreement to any Affiliate or to any Person to whom Investor assigns or
transfers any Securities.

     

    
      
        
        

      

      
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    6.5           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
5.8.

     

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

     

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

     

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

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

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

     

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

     

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

     

    6.12         Payment Set
Aside.  To the extent that the Company makes a payment or
payments to Investor pursuant to any Transaction Document or Investor 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.

     

    6.13         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.

     

    6.14         Time of the
Essence.  Time is of the essence with respect to all provisions
of this Agreement that specify a time for performance.

     

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

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    6.16         Entire
Agreement.  This Agreement, together with the exhibits hereto,
contains the entire agreement and understanding of the parties, and supersedes
all prior and contemporaneous agreements, term sheets, letters, discussions,
communications and understandings, both oral and written, which the parties
acknowledge have been merged into this Agreement.  No party,
representative, attorney or agent has relied upon any collateral contract,
agreement, assurance, promise, understanding or representation not expressly set
forth hereinabove.  The parties hereby expressly waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any Person’s reliance on any
such assurance.

     

    [Signature Page
Follows]

     

    
      
        
           

        

        
          26

          
            

          

        

        
           

        

      

    

    

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

     

    
      
        
          
            
              
                
                  
                    
                      
                        	 	NEAH
      POWER SYSTEMS, INC.
	 	 
      	 
      
	 	
                                By:

                              	
                                /s/ Gerard C. D’Couto

                              
	 	Name:
      Gerard C. D’Couto
	 	Title:
      President and CEO
	 	 
	 	AMBER
      CAPITAL CORPORATION
	 	 
      	 
      
	 	
                                By:

                              	
                                /s/ Joseph Overcash

                              
	 	Name:
      Joseph Overcash
	 	Title:
      President

                      

                    

                  

                

              

            

          

        

      

    

    

    [Signature Page to Amber Capital
Corporation Stock Purchase Agreement]

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    Addresses for
Notice

     

    To
Company:

     

    Neah
Power Systems, Inc.

    22118
20th
Avenue SW, Suite 142

    Bothell,
Washington 98021

    Fax
No.:  (425) 483-8454

    Email:
cdcouto@neahpower.com

     

    with a
copy to:

     

    Seyfarth
Shaw LLP

    975 F
Street, N.W.

    Washington,
D.C. 20004

    Attention:
Ernest M. Stern, Esq.

    Fax
No.:  (202) 641-9260

    Email:  estern@seyfarth.com

     

    
      To
Investor:

    

     

    Amber
Capital Corporation

    932 Burke
Street

    Winston
Salem, NC 27101

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

    
      Exhibit
A

       

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

       

      
        Exhibit
B

         

        
          
             

          

          
            30

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