Document:

FORM OF SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (as the same may be supplemented,
modified, amended, restated or replaced from time to time in the manner provided
herein, this "Agreement") is dated as of February 9, 2007 among Star Energy
Corporation, a Nevada corporation (the "Company"), and each purchaser identified
on the signature pages hereto (each, including its successors and assigns, a
"Purchaser" and collectively the "Purchasers", and together with the Company,
each a "party"" and collectively the "parties").

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

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

                                   ARTICLE I.
                                   DEFINITIONS

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

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

            "Affiliate" means any Person that, directly or indirectly through
      one or more intermediaries, controls or is controlled by or is under
      common control with a Person, as such terms are used in and construed
      under Rule 144 under the Securities Act. With respect to a Purchaser, any
      investment fund or managed account that is managed on a discretionary
      basis by the same investment manager as such Purchaser will be deemed to
      be an Affiliate of such Purchaser.

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

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

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

            "Commission" means the Securities and Exchange Commission.

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

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

            "Company Counsel" means David Lubin & Associates, PLLC, with offices
      located at 26 East Hawthorne Avenue, Valley Stream, NY 11580.

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

            "Debentures" means the 8% Secured Convertible Debentures due,
      subject to the terms therein, 3 years from their date of issuance, issued
      by the Company to the Purchasers hereunder, in the form of Exhibit A
      attached hereto, as the same may be supplemented, modified, amended,
      restated or replaced from time to time in the manner provided therein.

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

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

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

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

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<PAGE>

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

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

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

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

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

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

            "Liens" means a lien, charge, security interest, encumbrance, right
      of first refusal, preemptive right or transfer restriction.

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

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

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

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

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

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<PAGE>

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

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

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

            "Registration Rights Agreement" means the Registration Rights
      Agreement with respect to the Underlying Shares, dated the date hereof,
      among the Company and the Purchasers, in the form of Exhibit B attached
      hereto.

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

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

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

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

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

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

            "Securities Act" means the Securities Act of 1933, as amended, and
      the rules and regulations promulgated hereunder.

            "Security Agreement" means the Security Agreement, dated the date
      hereof, among the Company and the Purchasers, in the form of Exhibit E
      attached hereto, as the same may be supplemented, modified, amended,
      restated or replace from time to time in the manor provided therein.

                                        4
<PAGE>

            "Security Documents" shall mean the Security Agreement, the
      Subsidiary Guarantees and any other documents and filing required
      thereunder in order to grant the Purchasers a security interest in the
      personal assets and properties of the Company and the U.S. Subsidiaries as
      provided in the Security Agreement, including all UCC-1 filing receipts,
      as the same may be supplemented, modified, amended, restated or replace
      from time to time in the manor provided therein.

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

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

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

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

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

            "Subsidiary Guarantee" means the Subsidiary Guarantee, dated the
      date hereof, by each Subsidiary in favor of the Purchasers, in the form of
      Exhibit F attached hereto, as the same may be supplemented, modified,
      amended, restated or replace from time to time in the manor provided
      therein.

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

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

            "Transaction Documents" means this Agreement, the Debentures, the
      Warrants, the Registration Rights Agreement, the Security Agreement, the
      Subsidiary Guarantee, all exhibits and schedules hereto and thereto and
      any other documents or agreements executed in connection with the
      transactions contemplated hereunder, as the same may be supplemented,
      modified, amended, restated or replace from time to time in the manor
      provided therein.

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<PAGE>

            "Transfer Agent" means Interwest Transfer Company, with a mailing
      address of 191 East Murray Holladay Road, Suite 100, Salt Lake City, Utah
      84117 and a facsimile number of 801-277-3147, and any successor transfer
      agent of the Company.

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

            "Variable Rate Transaction" shall have the meaning ascribed to such
      term in Section 4.14(b).

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

            "Warrants" means collectively the Common Stock purchase warrants
      delivered to the Purchasers at the Closing in accordance with Section
      2.2(a) hereof, which Warrants shall be exercisable immediately and have a
      term of exercise equal to five years, in the form of Exhibit C attached
      hereto, as the same may be supplemented, modified, amended, restated or
      replace from time to time in the manor provided therein.

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

                                   ARTICLE II.
                                PURCHASE AND SALE

      2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and each Purchaser, severally and not jointly, agrees to purchase no less than
an aggregate of $10,000,000 and up to an aggregate of $15,000,000 in principal
amount of the Debentures. Each Purchaser shall deliver to the Company, via wire
transfer or a certified check, immediately available funds equal to its
Subscription Amount and the Company shall deliver to each Purchaser its
respective Debenture and a Warrant, as determined pursuant to Section 2.2(a),
and the Company and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS or
such other location as the parties shall mutually agree.

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<PAGE>

      2.2 Deliveries.

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

                  (i) this Agreement duly executed by the Company;

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

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

                  (iv) a Warrant registered in the name of such Purchaser to
            purchase up to a number of shares of Common Stock equal to 65% of
            such Purchaser's Subscription Amount divided by the initial
            Conversion Price, with an exercise price equal to $___(1), subject
            to adjustment therein;

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

                  (vi) a lock up agreement, in the form of Exhibit G, attached
            hereto, duly executed by all officers, directors and 10%
            stockholders of the Company; and

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

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

                  (i) this Agreement duly executed by such Purchaser;

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

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

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

         2.3      Closing Conditions.

_______________________
(1) 110% of the closing price of the Common Stock on the Trading Day immediately
prior to the date hereof.

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<PAGE>

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

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

                  (ii) the minimum aggregate Subscription Amount hereunder shall
            be at least $10,000,000;

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

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

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

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

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

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

                  (iv) the minimum aggregate Subscription Amount hereunder shall
            be at least $10,000,000;

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

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

                                        8
<PAGE>

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

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

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company are set forth on Schedule 3.1(a). The Company owns, directly or
      indirectly, all of the capital stock or other equity interests of each
      Subsidiary free and clear of any Liens, and all of the issued and
      outstanding shares of capital stock of each Subsidiary are validly issued
      and are fully paid, non-assessable and free of preemptive and similar
      rights to subscribe for or purchase securities.

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

                                        9
<PAGE>

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

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

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

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<PAGE>

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

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

                                       11
<PAGE>

            (h) SEC Reports; Financial Statements. Except as set forth on
      Schedule 3.1(h), the Company has filed all reports, schedules, forms,
      statements and other documents required to be filed by the Company under
      the Securities Act and the Exchange Act, including pursuant to Section
      13(a) or 15(d) thereof, for the two years preceding the date hereof (or
      such shorter period as the Company was required by law or regulation to
      file such material) (the foregoing materials, including the exhibits
      thereto and documents incorporated by reference therein, being
      collectively referred to herein as the "SEC Reports") on a timely basis or
      has received a valid extension of such time of filing and has filed any
      such SEC Reports prior to the expiration of any such extension, other than
      any non-timely filing that would not preclude the Company's use of a S-3
      registration statement. As of their respective dates, the SEC Reports
      complied in all material respects with the requirements of the Securities
      Act and the Exchange Act, as applicable, and none of the SEC Reports, when
      filed, contained any untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary in order
      to make the statements therein, in the light of the circumstances under
      which they were made, not misleading, other than to the extent correct in
      a subsequent SEC Report. The financial statements of the Company included
      in the SEC Reports comply in all material respects with applicable
      accounting requirements and the rules and regulations of the Commission
      with respect thereto as in effect at the time of filing. Such financial
      statements have been prepared in accordance with United States generally
      accepted accounting principles applied on a consistent basis during the
      periods involved ("GAAP"), except as may be otherwise specified in such
      financial statements or the notes thereto, except for changes in GAAP, and
      except that unaudited financial statements may not contain all footnotes
      required by GAAP, and such financial statements fairly present in all
      material respects the financial position of the Company and its
      consolidated Subsidiaries as of and for the dates thereof and the results
      of operations and cash flows for the periods then ended, subject, in the
      case of unaudited statements, to normal, immaterial, year-end audit
      adjustments.

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

                                       12
<PAGE>

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

            (k) Labor Relations. No material labor dispute exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company which could reasonably be expected to result in a Material
      Adverse Effect. None of the Company's or its Subsidiaries' employees is a
      member of a union that relates to such employee's relationship with the
      Company, and neither the Company or any of its Subsidiaries is a party to
      a collective bargaining agreement, and the Company and its Subsidiaries
      believe that their relationships with their employees are good. No
      executive officer, to the knowledge of the Company, is, or is now expected
      to be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement with the Company or any of its Subsidiaries, or
      any similar contract, agreement or restrictive covenant with any
      predecessor employer, and the continued employment of each such executive
      officer does not subject the Company or any of its Subsidiaries to any
      liability with respect to any of the foregoing matters. The Company and
      its Subsidiaries are in compliance with all U.S. federal, state, local and
      foreign laws and regulations relating to employment and employment
      practices, terms and conditions of employment and wages and hours, except
      where the failure to be in compliance could not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse Effect.

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

                                       13
<PAGE>

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

            (n) Title to Assets. The Company and the Subsidiaries have good and
      marketable title in fee simple to all real property owned by them 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 (i) such 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, (ii) Liens for the payment of federal, state or other taxes,
      the payment of which is neither delinquent nor subject to penalties, (iii)
      Permitted Liens as defined in the Debentures. Any real property and
      facilities held under lease by the Company and the Subsidiaries are held
      by them under valid, subsisting and enforceable leases under which the
      Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks. The Company and the Subsidiaries have,
      or have rights to use, all patents, patent applications, trademarks,
      trademark applications, service marks, trade names, trade secrets,
      inventions, copyrights, licenses and other intellectual property rights
      and similar rights necessary or material for use in connection with their
      respective businesses as described in the SEC Reports and where the
      failure to so have such rights could reasonably be expected to have a
      Material Adverse Effect (collectively, the "Intellectual Property
      Rights"). Neither the Company nor any Subsidiary has received a notice
      (written or otherwise) 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. The Company and its
      Subsidiaries have taken reasonable security measures to protect the
      secrecy, confidentiality and value of all of their Intellectual Property
      Rights, except where failure to do so could not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse Effect.

            (p) Insurance. Except as set forth on Schedule 3.1(p), the Company
      and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are
      prudent and customary in the businesses in which the Company and the
      Subsidiaries are engaged, including, but not limited to, directors and
      officers insurance coverage at least equal to the aggregate Subscription
      Amount. Neither the Company nor any Subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and
      when such coverage expires or to obtain similar coverage from similar
      insurers as may be necessary to continue its business without a
      significant increase in cost.

                                       14
<PAGE>

            (q) Transactions with Affiliates and Employees. Except as set forth
      in the SEC Reports, none of the officers or directors of the Company and,
      to the knowledge of the Company, none of the employees of the Company is
      presently a party to any transaction with the Company or any Subsidiary
      (other than for services as employees, officers and directors), including
      any contract, agreement or other arrangement providing for the furnishing
      of services to or by, providing for rental of real or personal property to
      or from, or otherwise requiring payments to or from any officer, director
      or such employee or, to the knowledge of the Company, any entity in which
      any officer, director, or any such employee has a substantial interest or
      is an officer, director, trustee or partner, in each case in excess of
      $60,000 other than for (i) payment of salary or consulting fees for
      services rendered, (ii) reimbursement for expenses incurred on behalf of
      the Company and (iii) other employee benefits, including stock option
      agreements under any stock option plan of the Company.

            (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
      material compliance with all provisions of the Sarbanes-Oxley Act of 2002
      that are applicable to it as of the Closing Date. To the extent required
      to do so as of the Closing Date under the Sarbanes-Oxley Act of 2002: (A)
      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; (B) the Company has established disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)) for the Company and designed such disclosure controls and
      procedures to ensure that information required to be disclosed by the
      Company in the reports it files or submits under the Exchange Act is
      recorded, processed, summarized and reported, within the time periods
      specified in the Commission's rules and forms; (C) the Company's
      certifying officers have evaluated the effectiveness of the Company's
      disclosure controls and procedures as of the end of the period covered by
      the Company's most recently filed periodic report under the Exchange Act
      (such date, the "Evaluation Date"); and (D) the Company presented in its
      most recently filed periodic report under the Exchange Act the conclusions
      of the certifying officers about the effectiveness of the disclosure
      controls and procedures based on their evaluations as of the Evaluation
      Date. Since the Evaluation Date, there have been no changes in the
      Company's internal control over financial reporting (as such term is
      defined in the Exchange Act) that has materially affected, or is
      reasonably likely to materially affect, the Company's internal control
      over financial reporting except for changes required by the Sarbanes-Oxley
      Act of 2002.

                                       15
<PAGE>

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

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

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

            (v) Registration Rights. Other than each of the Purchasers or as set
      forth on Schedule 3.1(v), no Person has any right to cause the Company to
      effect the registration under the Securities Act of any securities of the
      Company.

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

            (x) Application of Takeover Protections. The Company and 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 reasonably be expected to become applicable
      to the Purchasers as a result of the Purchasers and the Company fulfilling
      their obligations or exercising their rights under the Transaction
      Documents, including without limitation as a result of the Company's
      issuance of the Securities and the Purchasers' ownership of the
      Securities.

                                       16
<PAGE>

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

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

            (aa) Solvency. Based on the consolidated financial condition of the
      Company as of the Closing Date after giving effect to the receipt by the
      Company of the proceeds from the sale of the Securities hereunder, (i) the
      fair saleable value of the assets of the Company and its subsidiaries
      taken as a whole exceeds the amount that will be required to be paid on or
      in respect of the Company's existing debts and other liabilities of the
      Company and its subsidiaries taken as a whole (including the likely amount
      of known contingent liabilities) as they mature; (ii) the assets of the
      Company and its subsidiaries taken as a whole do not constitute
      unreasonably small capital to carry on their business as now conducted and
      as proposed to be conducted including its capital needs taking into
      account the particular capital requirements of the business conducted by
      the Company and its subsidiaries taken as a whole, and the projected
      capital requirements and capital availability thereof; and (iii) the
      current cash flow of the Company and its subsidiaries taken as a whole,
      together with the proceeds they would receive, were they to liquidate all
      of their assets, after taking into account all anticipated uses of the
      cash, would be sufficient to pay all amounts on or in respect of their
      liabilities when such amounts are required to be paid. The Company does
      not intend to incur debts beyond its ability to pay such debts as they
      mature (taking into account the timing and amounts of cash to be payable
      on or in respect of its debt). The Company has no knowledge of any facts
      or circumstances which lead it to believe that it will file for
      reorganization or liquidation under the bankruptcy or reorganization laws

                                       17
<PAGE>

      of any jurisdiction within one year from the Closing Date. Schedule
      3.1(aa) sets 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. For the purposes of this
      Agreement, "Indebtedness" means (a) any liabilities for borrowed money or
      similar amounts owed in excess of $50,000 (other than trade accounts
      payable incurred in the ordinary course of business and inter-company
      advances among the Company and its subsidiaries), (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 for (i) guaranties
      by endorsement of negotiable instruments for deposit or collection or
      similar transactions in the ordinary course of business and (ii)
      guaranties of the Indebtedness or other obligations of the Company or any
      Subsidiary by any other Subsidiary or the Company; and (c) the present
      value of any lease payments in excess of $50,000 due under leases required
      to be capitalized in accordance with GAAP. Neither the Company nor any
      Subsidiary is in any payment or other material default with respect to any
      Indebtedness.

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

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

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

                                       18
<PAGE>

            (ee) Accountants. The Company's accounting firm is set forth on
      Schedule 3.1(ee) of the Disclosure Schedule. To the knowledge and belief
      of the Company, such accounting firm (i) is a registered public accounting
      firm as required by the Exchange Act and (ii) shall express its opinion
      with respect to the financial statements to be included in the Company's
      Annual Report on Form 10-KSB for the year ended December 31, 2006.

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

            (gg) No Disagreements with Accountants and Lawyers. There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company and the Company is current
      with respect to any fees owed to its accountants and lawyers.

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

            (ii) Acknowledgment Regarding Purchasers' Trading Activity. Anything
      in this Agreement or elsewhere herein to the contrary notwithstanding
      (except for Sections 3.2(f) and 4.16 hereof), it is understood and
      acknowledged by the Company (i) that none of the Purchasers have been
      asked to agree, nor has any Purchaser agreed, to desist from purchasing or
      selling, long and/or short, securities of the Company, or "derivative"
      securities based on securities issued by the Company or to hold the
      Securities for any specified term; (ii) that past or future open market or
      other transactions by any Purchaser, including Short Sales, and
      specifically including, without limitation, Short Sales or "derivative"
      transactions, before or after the closing of this or future private
      placement transactions, may negatively impact the market price of the
      Company's publicly-traded securities; (iii) that any Purchaser, and
      counter-parties in "derivative" transactions to which any such Purchaser
      is a party, directly or indirectly, presently may have a "short" position
      in the Common Stock, and (iv) that each Purchaser shall not be deemed to
      have any affiliation with or control over any arm's length counter-party
      in any "derivative" transaction. The Company further understands and
      acknowledges that (a) one or more Purchasers may engage in hedging
      activities not involving physical delivery of any of the Securities (other
      than in accordance with the Transaction Documents and applicable law) at
      various times during the period that the Securities are outstanding,
      including, without limitation, during the periods that the value of the
      Underlying Shares deliverable with respect to Securities are being
      determined and (b) such hedging activities (if any) could reasonably be
      expected to reduce the value of the existing stockholders' equity
      interests in the Company at and after the time that the hedging activities
      are being conducted. The Company acknowledges that such aforementioned
      hedging activities do not constitute a breach of any of the Transaction
      Documents.

                                       19
<PAGE>

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

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

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

                                       20
<PAGE>

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

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

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

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

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

                                       21
<PAGE>

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

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

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

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

      THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF
      THIS SECURITY ARE SUBJECT TO THE TRANSFER RESTRICTIONS AND OTHER
      PROVISIONS OF THE SECURITIES PURCHASE AGREEMENT WITH THE COMPANY DATED AS
      OF ______________, 2007, AND THE OTHER TRANSACTION DOCUMENTS (AS DEFINED
      THEREIN).

                                       22
<PAGE>

            The Company acknowledges and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin agreement with a registered
      broker-dealer or grant a security interest in some or all of the
      Securities to a financial institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration Rights Agreement
      and, if required under the terms of such arrangement, such Purchaser may
      collaterally assign and physically deliver pledged or secured Securities
      to the pledgees or secured parties. Such a pledge or transfer would not be
      subject to approval of the Company. Unless and until the pledge or secured
      party elects to foreclose or otherwise realize upon any of the Securities,
      (i) no notice shall be required of such pledge, and (ii) no legal opinion
      of legal counsel of the pledgee, secured party or pledgor shall be
      required in connection therewith. At the appropriate Purchaser's expense,
      the Company will execute and deliver such reasonable documentation as a
      pledgee or secured party of Securities may reasonably request in
      connection with a pledge or transfer of the Securities, including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement, the preparation and filing of any required prospectus
      supplement under Rule 424(b)(3) under the Securities Act or other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder, provided the Company shall not be
      required in such documentation to make any additional representations or
      warranties, incur ant additional liability or obligation or confirm or
      grant to such pledge or secured party any additional rights beyond those
      provided in the Transaction Documents.

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

                                       23
<PAGE>

            (d) In addition to such Purchaser's other available remedies, the
      Company shall pay to a Purchaser, in cash, as partial liquidated damages
      and not as a penalty, for each $1,000 of Underlying Shares (based on the
      VWAP of the Common Stock on the date such Securities are submitted to the
      Transfer Agent) delivered for removal of the restrictive legend and
      subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per
      Trading Day 15 Trading Days after such damages have begun to accrue) for
      each Trading Day after the second Trading Day following the Legend Removal
      Date until such certificate is delivered without a legend. Nothing herein
      shall limit such Purchaser's right to pursue actual damages for the
      Company's failure to deliver certificates representing any Securities as
      required by the Transaction Documents, and such Purchaser shall have the
      right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.

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

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

      4.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule 144.

                                       24
<PAGE>

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

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

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

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

                                       25
<PAGE>

      4.8 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, and each
Purchaser severally covenants and agrees that it will not request any such
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

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

      4.10 [RESERVED]

      4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a
"Purchaser Party", and collectively the "Purchaser parties") harmless from any
and all losses, liabilities, obligations, claims, contingencies, damages, costs
and expenses, including all judgments, amounts paid in settlements, court costs
and reasonable attorneys' fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach
of any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents or (b) any
action instituted against a Purchaser, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser or its Purchaser parties, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon any
sales, pledges, margin sales and similar transactions by such Purchaser to or
with any other stockholder, any breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder, any violations
by the Purchaser or its representatives of state or federal securities laws or
other applicable law, or any act, omission or other conduct by such Purchaser or
its representatives that constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company

                                       26
<PAGE>

shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party (or the majority of them
if more than one is involved in such action). Any Purchaser Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel for all Purchaser parties involved in such
action. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent, that a loss, claim,
damage or liability is attributable to any sales, pledge, margin sales and
similar transactions by such Purchaser to or with any other stockholder, any
breach of such Purchaser's representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder, any violations by the Purchaser or its
representatives of state or federal securities laws or other applicable law, or
any act, omission or other conduct by such Purchaser or its representatives that
constitutes fraud, gross negligence, willful misconduct or malfeasance.

      4.12 Reservation and Listing of Securities.

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

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

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

                                       27
<PAGE>

      4.13 Participation in Future Financing.

            (a) From the date hereof until the date that is the 12 month
      anniversary of the Effective Date, upon any issuance by the Company or any
      of its Subsidiaries of Common Stock or Common Stock Equivalents (a
      "Subsequent Financing"), each Purchaser shall have the right to
      participate in up to an amount of the Subsequent Financing equal to 50% of
      the Subsequent Financing (the "Participation Maximum") on the same terms,
      conditions and price provided for in the Subsequent Financing.

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

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

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

                                       28
<PAGE>

            (e) If by 5:30 p.m. (New York City time) on the 5th Trading Day
      after all of the Purchasers have received the Pre-Notice, the Company
      receives responses to a Subsequent Financing Notice from Purchasers
      seeking to purchase more than the aggregate amount of the Participation
      Maximum, each such Purchaser shall have the right to purchase its Pro Rata
      Portion (as defined below) of the Participation Maximum. "Pro Rata
      Portion" means the ratio of (x) the Subscription Amount of Securities
      purchased on the Closing Date by a Purchaser participating under this
      Section 4.13 and (y) the sum of the aggregate Subscription Amounts of
      Securities purchased on the Closing Date by all Purchasers participating
      under this Section 4.13.

            (f) The Company must provide the Purchasers with a second Subsequent
      Financing Notice, and the Purchasers will again have the right of
      participation set forth above in this Section 4.13, if the Subsequent
      Financing subject to the initial Subsequent Financing Notice is not
      consummated for any reason on the terms set forth in such Subsequent
      Financing Notice within 60 Trading Days after the date of the initial
      Subsequent Financing Notice.

            (g) Notwithstanding the foregoing, this Section 4.13 shall not apply
      in respect of (i) an Exempt Issuance or (ii) an underwritten public
      offering of Common Stock.

      4.14 Subsequent Equity Sales.

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

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

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

                                       29
<PAGE>

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

      4.16 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending at the time that the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.6. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.6, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" prior to the
Effective Date of the Registration Statement with the Securities is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section A, of the
Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance.
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced as described in Section 4.6. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser's assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.

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

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

                                       30
<PAGE>

      4.19 Most Favored Nation Provision. If the Company effects a Subsequent
Financing at any time while the Debentures are outstanding, each Purchaser may
elect, in its sole discretion, to exchange all or some of the Debentures then
held by such Purchaser for additional securities of the same class issued in a
Subsequent Financing (such exchange to be made at the same time as the closing
of such Subsequent Financing) based on the principal amount of such Debenture
then outstanding being exchanged plus accrued, but unpaid interest thereon and
the effective price at which such securities were sold in such Subsequent
Financing. The Company shall provide each Purchaser notice of any such
Subsequent Financing in the manner provided in Section 4.13.

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
February 28, 2007; provided, however, that such termination will not affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Enable Capital Management, LLC ("Enable") the non-accountable sum of $10,000,
for its legal fees and expenses, $________ of which has been paid prior to the
Closing. The Company shall deliver to each Purchaser, prior to the Closing, a
completed and executed copy of the Closing Statement attached hereto as Annex A.
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its 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
this Agreement. The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities
to the Purchasers.

      5.3 Entire Agreement. No party has (directly or indirectly) offered, made,
accepted or acknowledged any representation, warranty, promise, assurance or
other agreement or understanding (whether written, oral, express, implied or
otherwise) to, with or for the benefit of any other party any of their
respective Affiliates or representatives respecting any of the matters contained
in this Agreement and the other Transaction Documents except for those expressly
set forth in this Agreement and the other Transaction Documents. The Transaction
Documents, together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior representations, warranties, promises, assurances and other
agreements and understandings (whether written, oral, express, implied or
otherwise), with respect to such matters, which the parties acknowledge have
been merged into such documents, exhibits and schedules.

                                       31
<PAGE>

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

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

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

      5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
"Purchasers." Notwithstanding anything to the contrary in this Agreement or any
other Transaction Document, no Person who purchases from a Purchaser any
Underlying Securities pursuant to an effective registration statement or Rule
144 shall in any way be, or be deemed or construed to be, with respect to such
Securities, (a) a "Purchaser" or its successor or assignee under this Agreement
or any other Transaction Document, or (b) entitled to any of the rights, powers,
privileges, remedies or interests of a "Purchaser" under this Agreement or any
other Transaction Document.

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

                                       32
<PAGE>

      5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall, to the
greatest extent permitted by applicable law, be governed by and construed and
enforced in accordance with the internal laws of the State of New York and the
federal laws of the United States of America,, without regard to any principles
of conflicts of law thereof that would defer to the substantive laws of any
other jurisdiction. 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, borough of Manhattan. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. The preceeding consents to New York governing law and jurisdiction
and venue in New York State's Supreme Court have been made by the parties in
reliance (at least in part) on Section 5-1401 and 5-1402 of the General
Obligations Law of the State of New York, as amended (as and to the extent
applicable), and other applicable law. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys' fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

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

      5.11 Execution. This Agreement and the other Transaction Documents may be
executed in two or more counterparts of the entire document or of the signature
pages hereto, any of which may be delivered by telecopy, email or other
electronic means, and 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, e-mail delivery of a ".pdf" or similar
format data file or other electronic means, 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, ".pdf"
electronically transmitted signature page were an original thereof.

                                       33
<PAGE>

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

      5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any party exercises a right, election,
demand or option under a Transaction Document and the other applicable party (or
parties) fails to timely perform its or their related obligations within the
periods therein provided, then such first party may rescind or withdraw, in its
sole discretion from time to time upon written notice to the other applicable
party (or parties), any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, in the
case of a rescission of a conversion of a Debenture or exercise of a Warrant,
the Purchaser shall be required to return any shares of Common Stock delivered
in connection with any such rescinded conversion or exercise notice.

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

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

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

                                       34
<PAGE>

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

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

                                       35
<PAGE>

      5.19 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing to the Purchasers 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 in accordance with the terms of the Transaction Documents
notwithstanding the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable shall have been
canceled.

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

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

                            (Signature Pages Follow)

                                       36
<PAGE>

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

STAR ENERGY CORPORATION                                    Address for Notice:
                                                           -------------------

By:________________________________________________        317 Madison Avenue
   Name:                                                   21st Floor
   Title:                                                  New York, NY 10017

With a copy to (which shall not constitute notice):
David Lubin & Associates, PLLC
26 E. Hawthorne Avenue
Valley Stream, NY 11580

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       37
<PAGE>

        [PURCHASER SIGNATURE PAGES TO SERG SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:______________________________________________________________
Signature of Authorized Signatory of Purchaser:_________________________________
Name of Authorized Signatory:___________________________________________________
Title of Authorized Signatory:__________________________________________________
Email Address of Purchaser:_____________________________________________________
Facsimile Number of Purchaser:__________________________________________________

Address for Notice of Purchaser:

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

Subscription Amount:_____________

Warrant Shares:__________________

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       38
<PAGE>

                                                                         Annex A

                                CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $15,000,000 of Debentures and
Warrants from Star Energy Corporation (the "Company"). All funds will be wired
into a trust account maintained by ____________, counsel to the Company. All
funds will be disbursed in accordance with this Closing Statement.

Disbursement Date: February ___, 2007
--------------------------------------------------------------------------------

I.    PURCHASE PRICE

                             Gross Proceeds Received                          $

II.   DISBURSEMENTS

                                                                              $
                                                                              $
                                                                              $
                                                                              $
                                                                              $

Total Amount Disbursed:                                                       $

WIRE INSTRUCTIONS:

To: _____________________________________

To: _____________________________________

                                       39FORM OF REGISTRATION RIGHTS AGREEMENT

      This Registration Rights Agreement (this "Agreement") is made and entered
into as of February 9, 2007, among Star Energy Corporation, a Nevada corporation
(the "Company") and the several purchasers signatory hereto (each such
purchaser, a "Purchaser" and, collectively, the "Purchasers").

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

      The Company and each Purchaser hereby agrees as follows:

      1. Definitions

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

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

            "Effectiveness Date" means, with respect to the initial Registration
      Statement required to be filed hereunder, the 30th calendar day following
      the required Filing Date of such initial Registration Statement (or the
      90th calendar day following such required Filing Date in the event of a
      "full review" of the initial Registration Statement by the Commission)
      and, with respect to any additional Registration Statements which may be
      required pursuant to Section 3(c), the 60th calendar day following the
      date on which the Company first knows, or reasonably should have known,
      that such additional Registration Statement is required hereunder;
      provided, however, that in the event the Company is notified by the
      Commission that one of the above Registration Statements will not be
      reviewed or is no longer subject to further review and comments, the
      Effectiveness Date as to such Registration Statement shall be the fifth
      Trading Day following the date on which the Company is so notified if such
      date precedes the dates required above.

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

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

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

            "Filing Date" means, with respect to the initial Registration
      Statement required hereunder, the earlier of April 15, 2007 or the 15th
      calendar day following the date the Company files its Form 10-KSB for the
      year ended December 31, 2006 and, with respect to any additional
      Registration Statements which may be required pursuant to Section 3(c),
      the 30th calendar day following the date on which the Company first knows,
      or reasonably should have known, that such additional Registration
      Statement is required hereunder.

<PAGE>

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

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

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

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

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

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

            "Registrable Securities" means (i) all of the shares of Common Stock
      issuable upon conversion in full of the Debentures, (ii) all shares of
      Common Stock issuable as interest on the Debentures assuming all
      permissible interest payments are made in shares of Common Stock and the
      Debentures are held until maturity, (iii) all Warrant Shares, (iv) any
      additional shares of Common Stock issuable in connection with any
      anti-dilution provisions in the Debentures or the Warrants (in each case,
      without giving effect to any limitations on conversion set forth in the
      Debenture or limitations on exercise set forth in the Warrant) and (v) any
      securities issued or issuable upon any stock split, dividend or other
      distribution, recapitalization or similar event with respect to the
      foregoing.

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

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

                                        2
<PAGE>

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

            "Selling Shareholder Questionnaire" shall have the meaning set forth
      in Section 3(a).

      2. Shelf Registration

            (a) On or prior to each Filing Date, the Company shall prepare and
      file with the Commission a Registration Statement covering the resale of
      all of the Registrable Securities on such Filing Date for an offering to
      be made on a continuous basis pursuant to Rule 415. The Registration
      Statement shall be on Form S-3 (except if the Company is not then eligible
      to register for resale the Registrable Securities on Form S-3, in which
      case such registration shall be on another appropriate form in accordance
      herewith) and shall contain (unless otherwise directed by at least an 85%
      majority in interest of the Holders) substantially the "Plan of
      Distribution" attached hereto as Annex A. Subject to the terms of this
      Agreement, the Company shall use its best efforts to cause a Registration
      Statement to be declared effective under the Securities Act as promptly as
      possible after the filing thereof, but in any event prior to the
      applicable Effectiveness Date, and shall use its best efforts to keep such
      Registration Statement continuously effective under the Securities Act
      until all Registrable Securities covered by such Registration Statement
      have been sold, or may be sold without volume restrictions pursuant to
      Rule 144(k), as determined by the counsel to the Company pursuant to a
      written opinion letter to such effect, addressed and acceptable to the
      Company's transfer agent and the affected Holders (the "Effectiveness
      Period"). The Company shall telephonically request effectiveness of a
      Registration Statement as of 5:00 p.m. New York City time on a Trading
      Day. The Company shall immediately notify the Holders via facsimile of the
      effectiveness of a Registration Statement on the same Trading Day that the
      Company telephonically confirms effectiveness with the Commission, which
      shall be the date requested for effectiveness of a Registration Statement.
      The Company shall, by 9:30 a.m. New York City time on the Trading Day
      after the Effective Date (as defined in the Purchase Agreement), file a
      final Prospectus with the Commission as required by Rule 424. Failure to
      so notify the Holder within 1 Trading Day of such notification of
      effectiveness or failure to file a final Prospectus as foresaid shall be
      deemed an Event under Section 2(b).

            (b) If: (i) a Registration Statement is not filed on or prior to its
      Filing Date (if the Company files a Registration Statement without
      affording the Holders the opportunity to review and comment on the same as
      required by Section 3(a) herein, the Company shall be deemed to have not
      satisfied this clause (i)), or (ii) the Company fails to file with the
      Commission a request for acceleration in accordance with Rule 461
      promulgated under the Securities Act, within five Trading Days of the date
      that the Company is notified (orally or in writing, whichever is earlier)
      by the Commission that a Registration Statement will not be "reviewed," or
      not subject to further review, or (iii) prior to its Effectiveness Date,
      the Company fails to file a pre-effective amendment and otherwise respond
      in writing to comments made by the Commission in respect of such
      Registration Statement within 10 calendar days after the receipt of
      comments by or notice from the Commission that such amendment is required
      in order for a Registration Statement to be declared effective, or (iv) a

                                        3
<PAGE>

      Registration Statement filed or required to be filed hereunder is not
      declared effective by the Commission by its Effectiveness Date, or (v)
      after the Effectiveness Date, a Registration Statement ceases for any
      reason to remain continuously effective as to all Registrable Securities
      for which it is required to be effective, or the Holders are otherwise not
      permitted to utilize the Prospectus therein to resell such Registrable
      Securities (a) because the Company is negotiating a merger, consolidation,
      acquisition or sale of all or substantially all of its assets or a similar
      transaction which, in the good faith judgment of the Company's board of
      directors, requires the Registration Statement to be amended to include
      information in connection with such pending transaction (including the
      parties thereto) and such information is not yet available or publicly
      disclosable, for more than an aggregate of 30 non-consecutive calendar
      days during any 12 month period or (b) for any other reason, more than an
      aggregate of 60 non-consecutive calendar days during any 12 month period
      (any such failure or breach being referred to as an "Event," and for
      purposes of clause (i) or (iv) the date on which such Event occurs, or for
      purposes of clause (ii) the date on which such five Trading Day period is
      exceeded, or for purposes of clause (iii) the date which such 10 calendar
      day period is exceeded or for purposes of clause (v) the date on which
      such 30 or 60 calendar day period, as applicable, is exceeded being
      referred to as "Event Date"), then, in addition to any other rights the
      Holders may have hereunder or under applicable law, on each such Event
      Date and on each monthly anniversary of each such Event Date (if the
      applicable Event shall not have been cured by such date) until the
      applicable Event is cured, the Company shall pay to each Holder an amount
      in cash, as partial liquidated damages and not as a penalty, equal to 1.5%
      of the aggregate purchase price paid by such Holder pursuant to the
      Purchase Agreement for any Registrable Securities then held by such Holder
      (calculated as if all convertible securities had been fully converted).
      The parties agree that (1) the Company shall not be liable for liquidated
      damages under this Agreement with respect to any Warrants or Warrant
      Shares and (2) in no event shall the Company be liable for liquidated
      damages under this Agreement in excess of 1.5% of the aggregate
      Subscription Amount of the Holders in any 30-day period. If the Company
      fails to pay any partial liquidated damages pursuant to this Section in
      full within seven days after the date payable, the Company will pay
      interest thereon at a rate of 18% per annum (or such lesser maximum amount
      that is permitted to be paid by applicable law) to the Holder, accruing
      daily from the date such partial liquidated damages are due until such
      amounts, plus all such interest thereon, are paid in full. The partial
      liquidated damages pursuant to the terms hereof shall apply on a daily
      pro-rata basis for any portion of a month prior to the cure of an Event.

      3. Registration Procedures.

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

                                        4
<PAGE>

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

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

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

                                        5
<PAGE>

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

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

                                        6
<PAGE>

            (f) Furnish to each Holder, without charge, at least one conformed
      copy of each such Registration Statement and each amendment thereto,
      including financial statements and schedules, all documents incorporated
      or deemed to be incorporated therein by reference to the extent requested
      by such Person, and all exhibits to the extent requested by such Person
      (including those previously furnished or incorporated by reference)
      promptly after the filing of such documents with the Commission.

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

            (h) The Company shall effect a filing with respect to the public
      offering contemplated by the Registration Statement (an "Issuer Filing")
      with the National Association of Securities Dealers, Inc. ("NASD")
      Corporate Financing Department pursuant to NASD Rule 2710(b)(10)(A)(i)
      within one Trading Day of the date that the Registration Statement is
      first filed with the Commission and pay the filing fee required by such
      Issuer Filing. The Company shall use commercially reasonable efforts to
      pursue the Issuer Filing until the NASD issues a letter confirming that it
      does not object to the terms of the offering contemplated by the
      Registration Statement. A copy of the Issuer Filing and all related
      correspondence with respect thereto shall be provided to FWS.

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

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

                                        7
<PAGE>

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

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

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

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

                                        8
<PAGE>

      5. Indemnification.

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

                                        9
<PAGE>

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

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

                                       10
<PAGE>

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

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

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

                                       11
<PAGE>

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

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

      6. Miscellaneous.

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

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

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

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

                                       12
<PAGE>

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

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

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

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

                                       13
<PAGE>

            (i) No Inconsistent Agreements. Neither the Company nor any of its
      Subsidiaries has entered, as of the date hereof, nor shall the Company or
      any of its Subsidiaries, on or after the date of this Agreement, enter
      into any agreement with respect to its securities, that would have the
      effect of impairing the rights granted to the Holders in this Agreement or
      otherwise conflicts with the provisions hereof. Except as set forth on
      Schedule 6(i), neither the Company nor any of its subsidiaries has
      previously entered into any agreement granting any registration rights
      with respect to any of its securities to any Person that have not been
      satisfied in full.

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

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

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

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

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

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

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

                                       14
<PAGE>

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

                                                        STAR ENERGY CORPORATION

                                                        By:____________________
                                                           Name:
                                                           Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       15
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO SERG RRA]

Name of Holder:________________________________________________________________

Signature of Authorized Signatory of Holder:___________________________________

Name of Authorized Signatory:__________________________________________________

Title of Authorized Signatory:_________________________________________________

                           [SIGNATURE PAGES CONTINUE]

                                       16
<PAGE>

                                                                         Annex A

                              Plan of Distribution

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

      o     ordinary brokerage transactions and transactions in which the
            broker-dealer solicits purchasers;

      o     block trades in which the broker-dealer will attempt to sell the
            shares as agent but may position and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases by a broker-dealer as principal and resale by the
            broker-dealer for its account;

      o     an exchange distribution in accordance with the rules of the
            applicable exchange;

      o     privately negotiated transactions;

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

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

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

      o     a combination of any such methods of sale; or

      o     any other method permitted pursuant to applicable law.

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

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

                                       17
<PAGE>

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

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

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

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

                                       18
<PAGE>

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

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

                                       19
<PAGE>

                                                                         Annex B

                             STAR ENERGY CORPORATION

                 Selling Securityholder Notice and Questionnaire

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

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

                                     NOTICE

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

                                       20
<PAGE>

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

                                  QUESTIONNAIRE

1.    Name.

      (a)   Full Legal Name of Selling Securityholder

            ____________________________________________________________________

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

            ____________________________________________________________________

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

            ____________________________________________________________________

2.    Address for Notices to Selling Securityholder:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

Telephone:______________________________________________________________________
Fax:____________________________________________________________________________
Contact Person:_________________________________________________________________

3.    Broker-Dealer Status:

      (a)   Are you a broker-dealer?

                                 Yes |_| No |_|

      (b)   If "yes" to Section 3(a), did you receive your Registrable
            Securities as compensation for investment banking services to the
            Company.

                                 Yes |_| No |_|

      Note: If no, the Commission's staff has indicated that you should be
            identified as an underwriter in the Registration Statement.

                                       21
<PAGE>

      (c)   Are you an affiliate of a broker-dealer?

                                 Yes |_| No |_|

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

                                 Yes |_| No |_|

      Note: If no, the Commission's staff has indicated that you should be
            identified as an underwriter in the Registration Statement.

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

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

      (a)   Type and Amount of other securities beneficially owned by the
            Selling Securityholder:

            ____________________________________________________________________
            ____________________________________________________________________

                                       22
<PAGE>

5.    Relationships with the Company:

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

      State any exceptions here:

      __________________________________________________________________________
      __________________________________________________________________________

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

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

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

Dated:_______________________                        Beneficial Owner:__________

                                                     By:________________________
                                                        Name:
                                                        Title:

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

                                       23

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