Document:

Unassociated Document

    EXIBIT
      10.10

    

    Form
      of
      Securities Purchase and Loan Agreement dated September 24, 2007

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    Execution
      Copy

     

    SECURITIES
      PURCHASE AND
      LOAN AGREEMENT

    

    THIS
      SECURITIES PURCHASE AND LOAN AGREEMENT, dated as of September 24, 2007 (this
      “Agreement”),
      is by
      and between MANARIS CORPORATION, a Nevada corporation (the “Company”),
      and
      IMPERIUM MASTER FUND, LTD., a Cayman Islands company (“Imperium”).
      

    

    A. The
      Company wishes to sell to Imperium, and Imperium wishes to purchase from the
      Company, upon
      the
      terms and subject to the conditions set forth in this Agreement, (i) a 6%
      Original Issue Discount Senior Secured Convertible Note in the form attached
      hereto as Exhibit
      A
      (the
“Convertible
      Note”)
      and
      (ii) a Warrant in the form of Exhibit
      B
      hereto
      (the “Warrant”).
      The
      Convertible Note will be convertible into shares of the Company’s common stock,
      par value $0.00001 per share (the “Common
      Stock”).
      The
      shares of Common Stock into which the Convertible Note is convertible are
      referred to herein as the “Conversion
      Shares”
and
      the
      shares of Common Stock into which the Warrant is exercisable are referred to
      herein as the “Warrant
      Shares”.
      

    

    B. The
      Company has agreed to effect the registration of the Conversion Shares and
      the
      Warrant Shares for resale by the holders thereof under the Securities Act of
      1933, as amended (the “Securities
      Act”),
      pursuant to a Registration Rights Agreement in the form attached hereto as
      Exhibit
      C
      (the
“Registration
      Rights Agreement”).
      

    

    C. The
      sale
      of the Convertible Notes and the Warrants by the Company to Imperium will be
      effected in reliance upon the exemption from securities registration afforded
      by
      the provisions of Regulation D (“Regulation
      D”),
      as
      promulgated by the Securities and Exchange Commission (the “Commission”)
      under
      the Securities Act.

    

    D. The
      Company has requested from Imperium, and Imperium has agreed to provide to
      the
      Company, a working capital drawdown facility in the aggregate amount of up
      to
      $2,500,000 (the “Working
      Capital Facility”),
      and
      each loan made under such facility shall be reflected by a Promissory Note
      in
      the
      form attached hereto as Exhibit
      D
      (each, a
“Working
      Capital Note”).

    

    E. The
      Company’s obligations under this Agreement, and all of the other agreements,
      instruments and other documents contemplated hereby, are to be
      (i)
      guaranteed by each of the Company’s material subsidiaries, and (ii)
      secured
      by the assets of the Company’s material subsidiaries.

    

    In
      consideration of the mutual promises made herein and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      Company and Imperium hereby agree as follows:

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

    1. TERMINOLOGY
      AND USAGE.

    

    1.1
       Definitions.
      When
      used herein, the terms below shall have the respective meanings
      indicated: 

    

    “Accounts
      and Inventory Threshold”
means
      $4,000,000.

    

    “Accounts
      Receivable”
means,
      as to any Person at any time of determination, all accounts receivable of such
      Person (i) not including prepaid deposits, deferred revenue and offsets, and
      (ii) excluding (1) all receivables that remain unpaid for over ninety (90)
      days
      from the respective invoice dates thereof, (2) if twenty-five percent (25%)
      or
      more of all receivables of such Person is payable by any one debtor and its
      Affiliates, then all receivables payable by such debtor and its Affiliates
      in
      excess of twenty-five percent (25%) of the total amount of all receivables
      of
      such Person; (3) all receivables payable by any Affiliate of such Person; (4)
      all receivables generated as a result of pre-billing, progress billing,
      retention billing, bill and hold accounts, ship in place accounts, contra
      revenue accounts or cross-aged balances; (5) all receivables of a debtor and
      its
      Affiliates if twenty-five percent (25%) or more of all receivables payable
      by
      such debtor and its Affiliates remain unpaid for over ninety (90) days from
      the
      respective invoice dates thereof; and (6) all receivables payable by debtors
      whose principal place of business is located outside of the United States,
      Canada and the member nations of the European Union.

    

    “Acquisition”
has
      the
      meaning specified in Section
      3.2.3
      of this
      Agreement.

    

    “Acquisition
      Note”
means
      a
      Working Capital Note issued in order to finance an Acquisition.

    

    “Advisory
      Fee Warrant”
means
      the warrant to purchase Common Stock issued to Imperium, dated as of August
      22,
      2007.

    

    “Advisory
      Fee Warrant Shares”
means
      the
      shares
      of Common Stock into which the Advisory Fee Warrant is exercisable.

    

    “Affiliate”
means,
      as to any Person (the “subject
      Person”),
      any
      other Person (a) that directly or indirectly through one or more
      intermediaries controls or is controlled by, or is under direct or indirect
      common control with, the subject Person, (b) that directly or indirectly
      beneficially owns or holds ten percent (10%) or more of any class of voting
      equity of the subject Person, or (c) ten percent (10%) or more of the
      voting equity of which is directly or indirectly beneficially owned or held
      by
      the subject Person. For the purposes of this definition, “control”
when
      used with respect to any Person means the power to direct the management and
      policies of such Person, directly or indirectly, whether through the ownership
      of voting securities, through representation on such Person’s board of directors
      or other management committee or group, by contract or otherwise.

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    “Bank
      of Montreal Facility”
means
      the revolving line of credit provided by the Bank of Montreal to Avensys Inc.
      pursuant to the “Convention se rapportant aux prêts et avances et aux garanties
      qui les couvrent", dated as of January 11, 2007; provided,
      that
      the parties hereto acknowledge that the maximum amount borrowable under such
      facility shall not exceed $1,450,000.

    

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

    

    “Business
      Day”
means
      any
      day
      other than a Saturday, a Sunday or a day on which the Principal Market is closed
      or on which banks in the City of New York are required or authorized by law
      to
      be closed.

    

    “Closing”
and
      “Closing
      Date”
have
      the respective meanings specified in Section
      2.1
      of this
      Agreement.

    

    “Commission”
has
      the
      meaning specified in the recitals to this Agreement. 

    

    “Common
      Stock”
has
      the
      meaning specified in the recitals to this Agreement. 

    

    “Company
      Subsidiary”
means
      a
      Person that is a Subsidiary of the Company.

    

    “Consolidated
      Accounts and Inventory”
means,
      at any time of determination, the total Accounts Receivable plus the total
      Inventory of the Company and Wholly Owned Subsidiaries less the total Debt
      outstanding under the Bank of Montreal Facility.

     

    “Consolidated
      Tangible Assets”
means,
      at any time of determination, the total Tangible Assets of the Company and
      the
      Wholly Owned Subsidiaries at such time, without duplication.

    

    “Conversion
      Shares”
has
      the
      meaning specified in the recitals of this Agreement. 

     

    “Convertible
      Note” has
      the
      meaning specified in the recitals to this Agreement. 

    

    “Debt”
means,
      as to any Person at any time: (a) all indebtedness, liabilities and obligations
      of such Person for borrowed money; (b) all indebtedness, liabilities and
      obligations of such Person to pay the deferred purchase price of Property or
      services, except trade accounts payable of such Person arising in the ordinary
      course of business that are not past due by more than 90 days; (c) all capital
      lease obligations of such Person; (d) all Debt of others guaranteed by such
      Person; (e) all indebtedness, liabilities and obligations secured by a Lien
      (other than a Permitted Lien) existing on Property owned by such Person, whether
      or not the indebtedness, liabilities or obligations secured thereby have been
      assumed by such Person or are non-recourse to such Person; (f) all reimbursement
      obligations of such Person (whether contingent or otherwise) in respect of
      letters of credit, bankers’ acceptances, surety or other bonds and similar
      instruments; and (g) all liabilities and obligations of such Person to redeem
      or
      retire shares of capital stock of such Person (other than the Company’s
      obligation to redeem the Securities or Working Capital Notes under the
      circumstances specified therein).

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    “Demand
      Notes”
has
      the
      meaning specified in Section
      2.3.5
      of this
      Agreement.

    

    “Disclosure
      Documents”
means
      all SEC Documents filed with the Commission at least three (3) Business Days
      prior to the Execution Date.

    

    “Dollars”
or
      “$”
means
      U.S. Dollars.

     

    “Effective
      Date”
has
      the
      meaning specified in the Registration Rights Agreement.

    

    “Embargoed
      Person”
has
      the
      meaning specified in Section
      5.27
      of this
      Agreement.

    

    “Environmental
      Law”
means
      any federal, state, provincial, local or foreign law, statute, code or
      ordinance, principle of common law, rule or regulation, as well as any Permit,
      order, decree, judgment or injunction issued, promulgated, approved or entered
      thereunder, relating to pollution or the protection, cleanup or restoration
      of
      the environment or natural resources, or to the public health or safety, or
      otherwise governing the generation, use, handling, collection, treatment,
      storage, transportation, recovery, recycling, discharge or disposal of hazardous
      materials.

    

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended, and the
      regulations and published interpretations thereunder.

    

    “Event
      of Default”
means
      any event, occurrence or circumstance that constitutes an “Event of Default”
under any of the Notes.

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended (or any successor act), and
      the
      rules and regulations thereunder (or respective successors
      thereto).

    

    “Excluded
      Securities”
means
      (i) any securities issued upon the conversion or exercise of any options,
      warrants, convertible securities or any other agreements outstanding as of
      the
      Closing Date to the extent disclosed on Schedule
      5.5(c)
      and
      issued at the exercise or conversion price as set forth on Schedule
      5.5(c);
      (ii)
      shares of Common Stock issuable or issued to employees,
      officers, directors of,
      and
      consultants to, the Company and/or any Company Subsidiary, from time to time
      upon the exercise of options granted or to be granted in the discretion of
      the
      Board of Directors pursuant to one or more employee stock option plans or stock
      plans duly adopted by the Board of Directors; (iii) shares of Common Stock
      issued in connection with any stock split, stock dividend or recapitalization
      of
      the Company; or (iv) securities issued pursuant to any acquisition transaction,
      licensing agreement or other strategic transaction, provided
      that no
      issuances shall be made to a Person that is itself, or has any affiliates that
      are, in the business of providing loans or making equity
      investments.

     

    “Execution
      Date”
means
      the date of this Agreement. 

    

    “GAAP”
means
      generally accepted accounting principles, applied on a consistent basis, as
      set
      forth in (i) opinions of the Accounting Principles Board of the American
      Institute of Certified Public Accountants, (ii) statements of the Financial
      Accounting Standards Board and (iii) interpretations of the Commission and
      the
      staff of the Commission. Accounting principles are applied on a “consistent
      basis” when the accounting principles applied in a current period are comparable
      in all material respects to those accounting principles applied in a preceding
      period.

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    “Governmental
      Authority”
means
      any nation or government, any state, provincial or political subdivision thereof
      and any entity exercising executive, legislative, judicial, regulatory or
      administrative functions of or pertaining to government, including, without
      limitation, any stock exchange, securities market or self-regulatory
      organization.

    

    “Governmental
      Requirement”
means
      any law, statute, code, ordinance, order, rule, regulation, judgment, decree,
      injunction, franchise, license or other directive or requirement of any federal,
      state, county, municipal, parish, provincial or other Governmental Authority
      or
      any department, commission, board, court, agency or any other instrumentality
      of
      any of them.

    

    “Holder”
shall
      initially mean Imperium, provided
      that
      any
      Person that subsequently holds any Securities or Working Capital Notes shall
      also be deemed a Holder. 

    

    “Holder
      Party”
has
      the
      meaning specified in Section
      6.9
      of this
      Agreement.

    

    “Intellectual
      Property”
means
      any U.S. or foreign patents, patent rights, patent applications, trademarks,
      trade names, service marks, brand names, logos and other trade designations
      (including unregistered names and marks), trademark and service mark
      registrations and applications, copyrights and copyright registrations and
      applications, inventions, invention disclosures, protected formulae,
      formulations, processes, methods, trade secrets, computer software, computer
      programs and source codes, manufacturing research and similar technical
      information, engineering know-how, customer and supplier information, assembly
      and test data drawings or royalty rights.

    

    “Inventory”
means,
      as to any Person at any time of determination, all inventory of such Person,
      valued at cost and multiplied by 0.90 and excluding the portion of all work
      in
      process inventory that is in excess of twenty percent (20%) of the total
      inventory of such Person.

    

    “Investment
      Company Act”
has
      the
      meaning specified in Section
      5.24
      of this
      Agreement.

    

    “Key
      Employee”
has
      the
      meaning specified in Section
      5.16
      of this
      Agreement.

    

    “Liabilities”
means,
      as to any Person at any time of determination, all Debt (including Permitted
      Debt) of such Person, provided
      that
      with respect to any revolving credit line facility of such Person, only (x)
      that
      portion of such facility that has actually been drawn under such facility at
      such time plus
      (y)
      any
      additional amount that such Person is obligated to draw pursuant to the terms
      of
      such facility at any time on or after such time, shall be included as a
      Liability of such Person.

    

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    “Lien”
means,
      with respect to any Property, any mortgage, pledge, hypothecation, assignment,
      deposit arrangement, security interest, tax lien, financing statement, pledge,
      charge, or other lien, charge, easement, encumbrance, preference, priority
      or
      other security agreement or preferential arrangement of any kind or nature
      whatsoever on or with respect to such Property (including, without limitation,
      any conditional sale or other title retention agreement having substantially
      the
      same economic effect as any of the foregoing).

    

    “Material
      Adverse Effect”
means
      an effect that is material and adverse to
      (i) the
      consolidated business, properties, assets, operations, results of operations,
      financial condition, credit worthiness or prospects of the Company and the
      Company Subsidiaries taken as a whole, (ii) the ability of the Company or any
      material Company Subsidiary to perform its obligations under this Agreement
      or
      the other Transaction Documents or (iii) the rights and benefits to which a
      Holder is entitled under this Agreement, the Notes and the other Transaction
      Documents.

     

    “Material
      Contracts”
means,
      as to the Company and the Company Subsidiaries, any agreement
      required pursuant to Item 601 of Regulation S-B or Item 601 of Regulation S-K,
      as applicable, promulgated under the Securities Act to be filed as an exhibit
      to
      any report,
      schedule, registration statement or definitive proxy statement filed or required
      to be filed by the Company with the Commission under
      the
      Exchange Act or any rule or regulation promulgated thereunder,
      and any
      and all amendments, modifications, supplements, renewals or restatements
      thereof.

    

    “NASD”
means
      the National Association of Securities Dealers, Inc.

      

    “Notes”
means
      the Convertible Notes and the Working Capital Notes.

    

    “Pension
      Plan”
means
      an employee benefit plan (as defined in ERISA) maintained by the Company for
      employees of the Company or any of its Affiliates.

    

    “Permitted
      Debt”
means
      the following: 

    

    (a) the
      Notes;

    

    (b) Debt
      outstanding on the Execution Date to the extent disclosed on Schedule
      5.5(d)
      hereto;

    

    (c) Debt
      consisting of capitalized lease obligations and purchase money indebtedness
      incurred in connection with acquisition of capital assets and obligations under
      sale-leaseback or similar arrangements provided in each case that such
      obligations are not secured by Liens on any assets of the Company or the Company
      Subsidiaries other than the assets so leased; and

    

    (d) Debt
      consisting of monies borrowed from the Bank of Montreal Facility; provided,
      however,
      that
      the aggregate amount of such Debt, including any amount outstanding as of the
      date hereof, shall not exceed $1,450,000.

    

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    “Permitted
      Liens”
means
      each of the following: 

    

    (a) Liens
      in
      existence on the Execution Date to the extent disclosed on Schedule
      5.22
      hereto;

    

    (b) encumbrances
      consisting of easements, rights-of-way, zoning restrictions or other
      restrictions on the use of real Property or imperfections to title that do
      not
      (individually or in the aggregate) materially impair the ability of the Company
      or any Company Subsidiary to use such Property in its businesses, and none
      of
      which is violated in any material respect by existing or proposed structures
      or
      land use;

    

    (c) Liens
      for
      taxes, assessments or other governmental charges (including without limitation
      in connection with workers’ compensation and unemployment insurance) that are
      not delinquent or which are being contested in good faith by appropriate
      proceedings, which proceedings have the effect of preventing the forfeiture
      or
      sale of the Property subject to such Liens, and for which adequate reserves
      (as
      determined in accordance with GAAP) have been established; and

    

    (d) Liens
      of
      mechanics, materialmen, warehousemen, carriers, landlords or other similar
      statutory Liens securing obligations that are not yet due and are incurred
      in
      the ordinary course of business or which are being contested in good faith
      by
      appropriate proceedings, which proceedings have the effect of preventing the
      forfeiture or sale of the Property subject to such Liens, for which adequate
      reserves (as determined in accordance with GAAP) have been
      established.

    

    “Person”
means
      any individual, corporation, trust, association, company, partnership, joint
      venture, limited liability company, joint stock company, Governmental Authority
      or other entity. 

    

    “Principal
      Market”
means
      the principal exchange, market or quotation system on which the Common Stock
      is
      listed, traded or quoted.

    

    “Property”
means
      property and/or assets of all kinds, whether real, personal or mixed, tangible
      or intangible (including, without limitation, all rights relating
      thereto).

    

    “Pro
      Rata Share”
means,
      with respect to a Holder, the ratio determined by dividing (x) the principal
      amount of the Notes held by such Holder by (y) the aggregate principal amount
      of
      the Notes held by all of the Holders.

    

    “Purchase
      Price”
has
      the
      meaning specified in Section
      2.1.

    

    “Registrable
      Securities”
has
      the
      meaning specified in the Registration Rights Agreement.

    

    “Registration
      Rights Agreement”
has
      the
      meaning specified in the recitals to this Agreement.

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    “Registration
      Statement”
has
      the
      meaning specified in the Registration Rights Agreement.

    

    “Regulation
      D”
has
      the
      meaning specified in the recitals to this Agreement.

    

    “Reserved
      Amount”
has
      the
      meaning specified in Section
      6.6
      of this
      Agreement.

    

    “Restricted
      Payment”
means
      (a) any dividend or other distribution (whether in cash, Property or
      obligations), direct or indirect, on account of (or the setting apart of money
      for a sinking or other analogous fund for the benefit of) any shares of any
      class of capital stock of the Company or the Company Subsidiaries now or
      hereafter outstanding, except a dividend payable solely in shares of that class
      of stock to all of the holders of that class; (b) any redemption, exchange,
      retirement, sinking fund or similar payment, purchase or other acquisition
      for
      value, direct or indirect, of any shares of any class of capital stock of the
      Company or any of its Affiliates now or hereafter outstanding, except the
      Securities; (c) any prepayment of principal of, premium, if any, or
      interest on, or any redemption, conversion, exchange, purchase, retirement,
      sinking fund or defeasance of, any Debt (whether upon acceleration of such
      Debt
      or otherwise) other than the Securities or Working Capital Notes; and
      (d) any loan, advance or payment to any officer, director or stockholder of
      the Company or any of its Affiliates, exclusive of reasonable compensation
      and
      reimbursements paid to officers or directors in the ordinary course of
      business.

     

    “Rule
      144”
means
      Rule 144 under the Securities Act or any successor provision.

     

    “SEC
      Documents”
means
      all reports, schedules, registration statements and definitive proxy statements
      filed by the Company with the Commission.

    

    “Securities”
      means
      the Convertible Notes, the Conversion Shares, the Warrants and the Warrant
      Shares.  

     

    “Securities
      Act”
has
      the
      meaning specified in the recitals of this Agreement.

    

    “Security
      Documents”
means
      all agreements, instruments and other documents executed and delivered in
      connection with or in furtherance of (i) the guarantee by each of the Company
      Subsidiaries of the Company’s
      obligations under the Transaction Documents, and/or (ii) the grant of a security
      interest by the Company and the Company
      Subsidiaries in their respective assets to secure the Company’s
      obligations under the Transaction Documents.

    

    “Subsequent
      Placement”
means
      any issuance, sale or exchange by the Company or any Company Subsidiary at
      any
      time after the Closing Date, or any agreement or obligation of the Company
      or
      any Company Subsidiary to issue, sell or exchange, at any time after the Closing
      Date, (i) any shares of common stock of the Company or any Company Subsidiary,
      (ii) any other equity security, including, without limitation, preferred stock,
      (iii) any other security of the Company or any Company Subsidiary which by
      its
      terms is convertible into or exchangeable or exercisable for any equity security
      of the Company or any Company Subsidiary, (iv) any option, warrant or other
      right to subscribe for, purchase or otherwise acquire any such security
      described in the foregoing clauses
      (i)
      through
(iii),
      or (v)
      any debt instruments or securities, including promissory notes and convertible
      debt instruments; provided,
      however,
      that
      the term “Subsequent
      Placement”
shall
      not be deemed to include any issuance, sale or exchange of Excluded
      Securities.

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    “Subsidiary”
means,
      with respect to any Person, any corporation or other entity of which at least
      a
      majority of the outstanding shares of stock or other ownership interests having
      by the terms thereof ordinary voting power to elect a majority of the board
      of
      directors (or Persons performing similar functions) of such corporation or
      entity (regardless of whether or not at the time, in the case of a corporation,
      stock of any other class or classes of such corporation shall have or might
      have
      voting power by reason of the happening of any contingency) is at the time
      directly or indirectly owned or controlled by such Person or one or more of
      its
      Subsidiaries or by such Person and one or more of its Subsidiaries.

    

    “Tangible
      Assets”
means,
      as to any Person at any time of determination, the aggregate value of (i) all
      cash and cash equivalents of such Person, (ii) all Accounts Receivable of such
      Person, (iii) all Inventory of such Person, and (iv) all real and personal
      property and equipment of such Person net of depreciation.

    

    “Tangible
      Asset Threshold”
means,
      at any time of determination, an amount equal to one hundred fifty percent
      (150%) of the aggregate principal amount of all of the Notes (other than
      Acquisition Notes) then outstanding, plus all accrued interest thereon.

    

    “Termination
      Date”
means
      the first date on which there are no Notes outstanding and none of the Holders
      has any further obligation to loan any amount to the Company under the Working
      Capital Facility.

     

    “Trading
      Day”
means
      any day on which shares of Common Stock are purchased and sold on the Principal
      Market.

    

    “Transaction
      Documents”
means
      (i) this Agreement, (ii) the Notes, (iii) the Warrant and the Advisory Fee
      Warrant, (iv) the Registration Rights Agreement, (v) the Security Documents
      and
      (vi) all other agreements, documents and other instruments executed and
      delivered by or on behalf of the Company, the Company Subsidiaries or any of
      their respective officers at the Closing, on any Working Capital Drawdown Date
      or otherwise in connection with this Agreement.

    

    “Transfer
      Agent”
has
      the
      meaning specified in Section
      4.5
      of this
      Agreement.

    

    “Variable
      Rate Security”
means
      any Option or Convertible Security that is convertible into, exchangeable for
      or
      that requires the Company to issue shares of Common Stock at a conversion,
      exercise or exchange ratio
      or
      price
that
      varies with
      the
      market price of the Common Stock.

    

    “Warrant”
has
      the
      meaning specified in the recitals to this Agreement.

    

    “Warrant
      Shares”
has
      the
      meaning specified in the recitals to this Agreement.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    “Wholly
      Owned Subsidiary”
means
      a
      Company Subsidiary that is (i) wholly owned by the Company or another Wholly
      Owned Subsidiary, and (ii) is a party to the Security Documents.

    

    “Working
      Capital Drawdown”
has
      the
      meaning specified in Section
      3.2
      of this
      Agreement.

    

    “Working
      Capital Drawdown Amount”
has
      the
      meaning specified in Section
      3.2.1
      of this
      Agreement.

    

    “Working
      Capital Drawdown Date”
has
      the
      meaning specified in Section
      3.2
      of this
      Agreement.

    

    “Working
      Capital Drawdown Notice”
has
      the
      meaning specified in Section
      3.2
      of this
      Agreement.

    

    “Working
      Capital Facility”
has
      the
      meaning specified in the recitals to this Agreement.

    

    “Working
      Capital Note”
has
      the
      meaning specified in the recitals to this Agreement.

    

    1.2 Other
      Definitional Provisions.
      All
      definitions contained in this Agreement are equally applicable to the singular
      and plural forms of the terms defined. The words “hereof”, “herein” and
“hereunder” and words of similar import contained in this Agreement refer to
      this Agreement as a whole and not to any particular provision of this
      Agreement.

    

    2. PURCHASE
      AND SALE OF CONVERTIBLE NOTE AND WARRANT.
      

    

    2.1 Purchase
      Price; Closing.
      Upon
      the terms and subject to the satisfaction or waiver of the conditions set forth
      in Sections
      2.2 and
      2.3,
      the
      Company agrees to sell and Imperium agrees to purchase (i) a Convertible Note
      with the stated principal amount equal to the amount set forth below Imperium’s
      name on the signature page hereof and (ii) a Warrant exercisable into the number
      of shares of Common Stock set forth below Imperium’s name on the signature page
      hereof. The purchase price for the Convertible Note and Warrant shall be
      $4,000,0001 
      (the
“Purchase
      Price”).
      The
      date on which the closing of such purchase and sale occurs (the “Closing”)
      is
      hereinafter referred to as the “Closing
      Date”.
      The
      Closing will be deemed to occur at the offices of Mazzeo Song LLP, 708 Third
      Avenue, 19th
      Floor,
      New York, New York 10017 when each of the conditions to the Closing described
      in
Sections
      2.2
      and
2.3
      has been
      satisfied or waived as specified therein. 

     

    
      
        

      

      
        	1	
                Purchase
                  Price equals the sum of:

              

      

       

      
        
          	
                  (A)    Aggregate
                    Principal Amount of Demand Notes: 

                	 	$	2,940,421.56	 
	
                  (B)    Payment
                    to Alpha to purchase Series B Notes: 

                	 	 	
                  500,000.00

                	 
	
                  (C)    Accrued
                    Interest on Items (A) and (B):

                	 	 	
                  43,368.29

                	 
	
                  (D)    Additional
                    Principal: 

                	 	 	
                  448,710.15

                	 
	
                  (E)    Legal
                    Fees:

                	 	 	
                  67,500.00

                	 
	 	 	
                  $

                	
                  4,000,000.00

                	 

        

      

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

       

    

    2.2 Conditions
      to Imperium’s Obligations at the Closing.
      Imperium’s obligations to effect the Closing, including, without limitation, its
      obligation to purchase the Convertible Note and Warrant at the Closing, are
      conditioned upon the fulfillment (or waiver by Imperium in its sole and absolute
      discretion) of each of the following events as of the Closing Date, and the
      Company shall use commercially reasonable efforts to cause each of such
      conditions to be satisfied:

    

    
      	 	 	
              2.2.1

            	 	
              the
                representations and warranties of the Company set forth in this Agreement
                and in the other Transaction Documents shall be true and correct
                in all
                material respects as of such date as if made on such date (except
                that to
                the extent that any such representation or warranty relates to a
                particular date, such representation or warranty shall be true and
                correct
                in all material respects as of that particular date);
                

            

    

    

    
      	 	 	
              2.2.2

            	 	
              the
                Company shall have complied with or performed in all material respects
                all
                of the agreements, obligations and conditions set forth in this Agreement
                and in the other Transaction Documents that are required to be complied
                with or performed by the Company on or before the Closing;
                

            

      

      
        	 	 	
                2.2.3

              	 	
                the
                  Company shall have delivered to Imperium a certificate, signed
                  by the
                  Chief Executive Officer and Chief Financial Officer of the Company,
                  certifying that the conditions specified in this Section
                  2.2
                  have been fulfilled as of the Closing, it being understood that
                  such
                  Holder may rely on such certificate as though it were a representation
                  and
                  warranty of the Company made
                  herein;

              

      

       

    

    
      	 	 	
              2.2.4

            	 	
              the
                Company shall have delivered to Imperium opinions of U.S. and Canadian
                counsel for the Company, dated as of the Closing Date, in the form
                and
                substance satisfactory to Imperium;

            

    

    

    
      	 	 	
              2.2.5

            	 	
              the
                Company shall have executed and delivered to Imperium the Convertible
                Note
                and the Warrant being purchased by Imperium, and each of the other
                Transaction Documents to which the Company and/or a Company Subsidiary
                is
                a party;

            

    

    

    
      	 	 	
              2.2.6

            	 	
              the
                Company shall have delivered to Imperium a certificate, signed by
                the
                Secretary or an Assistant Secretary of the Company, attaching (i)
                the
                articles and by-laws of the Company and (ii) resolutions passed by
                the
                board of directors of the Company and each Company Subsidiary party
                to a
                Transaction Document, in each case, authorizing the transactions
                contemplated by the Transaction Documents to which such entity is
                a
                party;

            

    

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    
      	 	 	
              2.2.7

            	 	
              there
                shall have occurred no material adverse change in the Company’s
                consolidated business or financial condition since the date of the
                Company’s most recent financial statements contained in the Disclosure
                Documents; 

            

    

    

    
      	 	 	
              2.2.8
                

            	 	
              the
                Company shall have authorized and reserved for issuance upon conversion
                of
                the Convertible Note and exercise of the Warrant two hundred percent
                (200%) of the aggregate number of shares of Common Stock issuable
                upon
                conversion of the Convertible Note and exercise of the Warrant and
                the
                Advisory Fee Warrant in full at the Closing (such number to be determined
                without regard to any restriction on such conversion or exercise);
                

            

    

    

    
      	 	 	
              2.2.9

            	 	
              there
                shall be no injunction, restraining order or decree of any nature
                of any
                court or Governmental Authority of competent jurisdiction that is
                in
                effect that restrains or prohibits the consummation of the transactions
                contemplated hereby and by the other Transaction Documents;
                and

            

    

    

    
      	 	 	
              2.2.10

            	 	
              the
                Company shall have paid the expenses described in Section
                7.10
                of
                this Agreement.

            

    

    

    2.3 Conditions
      to Company’s Obligations at the Closing.
      The
      Company’s obligations to effect the Closing with Imperium are conditioned upon
      the fulfillment (or waiver by the Company in its sole and absolute discretion)
      of each of the following events as of the Closing Date:

    

    
      	 	 	
              2.3.1

            	 	
              the
                representations and warranties of Imperium set forth in this Agreement
                and
                in the other Transaction Documents to which it is a party shall be
                true
                and correct in all material respects as of such date as if made on
                such
                date (except that to the extent that any such representation or warranty
                relates to a particular date, such representation or warranty shall
                be
                true and correct in all material respects as of that
                date);

            

    

    

    
      	 	 	
              2.3.2

            	 	
              Imperium
                shall have complied with or performed all of the agreements, obligations
                and conditions set forth in this Agreement that are required to be
                complied with or performed by Imperium
                on
                or before the Closing; 

            

    

    

    
      	 	 	
              2.3.3

            	 	
              there
                shall be no injunction, restraining order or decree of any nature
                of any
                court or Governmental Authority of competent jurisdiction that is
                in
                effect that restrains or prohibits the consummation of the transactions
                contemplated hereby and by the other Transaction Documents;
                

            

    

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    
      

      
        	 	 	
                2.3.4

              	 	
                Imperium
                  shall have executed each Transaction Document to which it is a
                  party and
                  shall have delivered the same to the Company;
                  and

              

      

       

      
        
          
            	 	 	
                    2.3.5

                  	 	
                    Imperium
                      shall have tendered to the Company the Purchase Price as follows:
                      (i)
                      Imperium shall have confirmed by email that it has sent the
                      original of
                      each Demand Note (as defined below) to the Company for cancellation,
                      and
                      (ii) Imperium shall have wire transferred to the Company’s account, in
                      immediately available funds, an amount equal $448,710.15.
                      In addition to the foregoing, the Company acknowledges and
                      agrees that
                      Imperium has purchased, and caused to be delivered to the Company,
                      certain
                      of the Company’s Series B Convertible Notes for $500,000. As used herein,
                      the term “Demand
                      Notes”
                      means (1) the Demand Note, dated as of July 24, 2007, issued
                      by the
                      Company to Imperium and having a principal face amount of $2,274,053,
                      (2)
                      the Demand Note, dated as of July 27, 2007, issued by the Company
                      to
                      Imperium and having a principal face amount of $237,028, (3)
                      the Demand
                      Note, dated as of August 3, 2007, issued by the Company to
                      Imperium and
                      having a principal face amount of $385,000, and (4) the Demand
                      Note, dated
                      as of August 29, 2007, issued by the Company to Imperium and
                      having a
                      principal face amount of $44,340.56. The Company and Imperium
                      acknowledge
                      and agree that (i) the aggregate amount of outstanding principal
                      and
                      accrued and unpaid interest on the Demand Notes and the Series
                      B Notes
                      purchased by Imperium as of the date hereof is $43,368.29.

                  

          

           

        

      

    

    3. WORKING
      CAPITAL FACILITY.

    

    3.1 Loan
      Facility and Commitment.
      The
      Company may desire to borrow additional funds from the Holders to finance its
      working capital requirements and certain acquisitions. In furtherance of the
      foregoing, the Company has agreed to sell, and the Holders have agreed to
      purchase, Working Capital Notes, which shall be offered for sale by the Company
      in accordance with this Section
      3.
      The
      purchase price for each Working Capital Note shall be equal to the stated
      principal amount of such note. From and after the Execution Date until the
      two-year anniversary of the Execution Date, each Holder shall purchase its
      Pro
      Rata Share of Working Capital Notes as and when offered by the Company, subject
      to the satisfaction of the conditions set forth in Section
      3.3.
      With
      respect to each offering of Working Capital Notes, the Pro Rata Share of a
      Holder shall be determined as of the date on which the Working Capital Drawdown
      Notice for such offering is delivered to such Holder. The aggregate principal
      amount of all Working Capital Notes outstanding at any time shall not exceed
      $2,500,000. The interest rate, maturity date and other repayment terms,
      including, without limitation, amortization
      schedule (if any), of
      each
      Working Capital Note shall be subject to mutual agreement between the Company
      and the Holders on or prior to the applicable Working Capital Drawdown
      Date.

    

    3.2 Drawdown
      Request by the Company.
      If the
      Company wishes to offer Working Capital Notes (a “Working
      Capital Drawdown”),
      the
      Company shall notify each Holder in writing (a “Working
      Capital Drawdown Notice”)
      no
      later than ten (10) Business Days (or such shorter period as the Holders may
      agree in their sole discretion) prior to the date on which the Company wishes
      to
      effectuate a sale of Working Capital Notes (the “Working
      Capital Drawdown Date”).
      The
      Working Capital Drawdown Notice shall specify in reasonable detail the following
      information along with any other information that the Company deems
      relevant:

    

    
      	 	
              3.2.1

            	 	
              the
                aggregate principal amount of Working Capital Notes that the Company
                desires to sell to the Holders (the “Working
                Capital Drawdown Amount”);
                

            

    

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    
      	 	
              3.2.2

            	 	
              the
                date on which the Company desires to close such Working Capital Drawdown;
                and

            

    

    

    
      	 	
              3.2.3

            	 	
              either
                (i) confirmation that such Working Capital Drawdown Amount will be
                used
                for general working capital purposes or (ii) if such Working Capital
                Drawdown Amount is to be used to acquire the assets, operations or
                business of another Person, whether by way of asset or stock purchase,
                merger, exchange offer or other business combination or similar
                transaction (any such transaction, an “Acquisition”),
                the Company shall provide each Holder the information specified on
                Schedule
                3.2.3.

            

    

    

    3.3 Conditions
      to Each Holder’s Obligation to Purchase Working Capital Notes.
      Each
      Holder’s obligation to purchase a Working Capital Note is conditioned upon the
      fulfillment (or waiver by such Holder in its sole and absolute discretion)
      of
      each of the following events as of the applicable Working Capital Drawdown
      Date:

    

    
      	 	 	
              3.3.1

            	 	
              the
                representations and warranties of the Company set forth in this Agreement
                and in the other Transaction Documents shall be true and correct
                in all
                material respects as of such Working Capital Drawdown Date as if
                made on
                such date (except that to the extent that any such representation
                or
                warranty relates to a particular date, such representation or warranty
                shall be true and correct in all material respects as of that particular
                date); 

            

    

    

    
      	 	 	
              3.3.2

            	 	
              the
                Company shall have complied with or performed in all material respects
                all
                of the agreements, obligations and conditions set forth in this Agreement
                and in the other Transaction Documents that are required to be complied
                with or performed by the Company on or before such Working Capital
                Drawdown Date;

            

    

     

    
      	 	 	
              3.3.3

            	 	
              no
                Event of Default shall have occurred, unless such Event of Default
                was
                cured not less than ten Business Days prior to such Working Capital
                Drawdown Date;

            

    

    

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    
      
        	 	 	
                3.3.4

              	 	
                the
                  Company shall have delivered to such Holder a certificate, signed
                  by the
                  Chief Executive Officer and Chief Financial Officer of the Company,
                  certifying that the conditions specified in this Section
                  3.3
                  have been fulfilled as of such date, it being understood that such
                  Holder
                  may rely on such certificate as though it were a representation
                  and
                  warranty of the Company made
                  herein;

              

      

    

    

    
      	 	 	
              3.3.5

            	 	
              the
                Company shall have executed and delivered to such Holder the Working
                Capital Note being purchased by such
                Holder;

            

    

    

    
      	 	 	
              3.3.6

            	 	
              there
                shall have occurred no material adverse change in the Company’s
                consolidated business or financial condition since the later of (i)
                the
                Closing Date and (ii) the most recent prior Working Capital Drawdown
                Date;
                

            

    

    

    
      	 	 	
              3.3.7

            	 	
              there
                shall be no injunction, restraining order or decree of any nature
                of any
                court or Governmental Authority of competent jurisdiction that is
                in
                effect that restrains or prohibits the consummation of such offer
                and sale
                of a Working Capital Note; 

            

    

    

    
      	 	 	
              3.3.8

            	 	
              the
                Company and the Holders shall have agreed upon the interest rate,
                maturity
                date and other repayment terms applicable to the Working Capital
                Notes
                being sold on such Working Capital Drawdown Date;
                and

            

    

    

    
      	 	 	
              3.3.9

            	 	
              in
                the event that the proceeds of the Working Capital Note being purchased
                by
                such Holder is to be used in connection with an Acquisition, such
                Holder
                shall
                have completed its review of the information provided to such Holder
                pursuant to Section
                3.2.3
                and otherwise with respect to such Acquisition, and such Holder shall
                be
                satisfied with its review of all such information in its sole and
                absolute
                discretion.

            

    

    

    3.4 Conditions
      to Company’s Obligation to Sell Working Capital Notes.
      The
      Company’s obligation to sell a Working Capital Note to a Holder is conditioned
      upon the fulfillment (or waiver by the Company in its sole and absolute
      discretion) of each of the following events as of the applicable Working Capital
      Drawdown Date:

    

    
      	 	 	
              3.4.1

            	 	
              the
                representations and warranties of such Holder set forth in this Agreement
                and in the other Transaction Documents to which it is a party shall
                be
                true and correct in all material respects as of such Working Capital
                Drawdown Date as if made on such date (except that to the extent
                that any
                such representation or warranty relates to a particular date, such
                representation or warranty shall be true and correct in all material
                respects as of that date);

            

    

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    
      	 	 	
              3.4.2

            	 	
              such
                Holder shall have complied with or performed all of the agreements,
                obligations and conditions set forth in this Agreement that are required
                to be complied with or performed by such
                Holder
                on
                or before such Working Capital Drawdown
                Date;

            

    

    

    
      	 	 	
              3.4.3

            	 	
              there
                shall be no injunction, restraining order or decree of any nature
                of any
                court or Governmental Authority of competent jurisdiction that is
                in
                effect that restrains or prohibits the consummation of such sale
                of a
                Working Capital Note; 

            

      

      
        	 	 	
                3.4.4

              	 	
                
                  the
                    Company and the Holders shall have agreed upon the interest rate,
                    maturity
                    date and other repayment terms applicable to the Working Capital
                    Notes
                    being sold on such Working Capital Drawdown Date;
                    and

                

              

      

       

      
        
          	 	 	
                  3.4.5

                	 	
                  
                    
                      such
                        Holder shall have wire transferred to the Company’s account, in
                        immediately available funds, an amount equal to the stated
                        principal
                        amount of the Working Capital Note being purchased by such
                        Holder.

                    

                  

                

        

         

      

    

    4. REPRESENTATIONS
      AND WARRANTIES OF IMPERIUM.

    

    Imperium
      hereby represents and warrants to the Company and agrees with the Company that,
      as of the Execution Date:

    

    4.1 Authorization;
      Enforceability.
      Imperium is duly and validly organized, validly existing and in good standing
      under the laws of the Cayman Islands with the requisite corporate power and
      authority to purchase the Notes and Warrants to be purchased by it hereunder
      and
      to execute and deliver this Agreement and the other Transaction Documents to
      which it is a party. This Agreement constitutes, and upon execution and delivery
      thereof, each other Transaction Document to which Imperium is a party will
      constitute, Imperium’s valid and legally binding obligation, enforceable in
      accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
      fraudulent transfer, reorganization, moratorium or other similar laws of general
      application relating to or affecting the enforcement of creditors’ rights
      generally and (ii) general principles of equity.

    

    4.2 Accredited
      Investor.
      Imperium (i) is an “accredited investor” as that term is defined in Rule 501 of
      Regulation D, (ii)
      was
      not
      formed or organized for the specific purpose of making an investment in the
      Company, and (iii)
      is
      acquiring the Securities solely for its own account and not with a present
      view
      to the public resale or distribution of all or any part thereof, except pursuant
      to sales that are registered under, or exempt from the registration requirements
      of, the Securities Act and/or sales registered under the Securities Act;
provided,
      however,
      that in
      making such representation, Imperium does not agree to hold the Securities
      for
      any minimum or specific term and reserves the right to sell, transfer or
      otherwise dispose of the Securities at any time in accordance with the
      provisions of this Agreement and with Federal and state securities laws
      applicable to such sale, transfer or disposition. Imperium
      can bear
      the economic risk of a total loss of its investment in the Securities and has
      such knowledge and experience in business and financial matters so as to enable
      it to understand the risks of and form an investment decision with respect
      to
      its investment in the Securities.

    

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    4.3 Information.
      The
      Company has, prior to the Execution Date, provided Imperium with information
      regarding the business, operations and financial condition of the
      Company and
      has,
      prior to the Execution Date, granted to Imperium the opportunity to ask
      questions of and receive answers from representatives of the Company, its
      officers, directors, employees and agents concerning the Company in order for
      Imperium to make an informed decision with respect to its investment in the
      Securities. Neither such information nor any other investigation conducted
      by
      Imperium or any of its representatives shall modify, amend or otherwise affect
      Imperium’s right to rely on the Company’s representations and warranties
      contained in this Agreement.

    

    4.4 Limitations
      on Disposition.
      Imperium acknowledges that, except as provided in the Registration Rights
      Agreement, the Securities have not been and are not being registered under
      the
      Securities Act and may not be transferred or resold without registration under
      the Securities Act or unless pursuant to an exemption therefrom. 

     

    4.5 Legend.
      Imperium understands that the certificates representing the Securities may
      bear
      at issuance a restrictive legend in substantially the following
      form:

    

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended (the “Securities Act”), or any state
      securities laws, and may not be offered for sale or sold unless a registration
      statement under the Securities Act and applicable state securities laws shall
      have become effective with respect thereto, or an exemption from registration
      under the Securities Act and applicable state securities laws is available
      in
      connection with such offer or sale. These securities and the securities issuable
      upon conversion or exercise hereof (i) may be pledged or hypothecated in
      connection with a bona fide margin account or other financing secured by such
      securities or (ii) may be transferred or assigned to an affiliate of the holder
      hereof without the necessity of an opinion of counsel or the consent of the
      issuer hereof.”

    

    Notwithstanding
      the foregoing, it is agreed that, as long as (A) the resale or transfer
      (including, without limitation, a pledge) of any of the Securities is registered
      pursuant to an effective registration statement, (B) such Securities have been
      sold pursuant to Rule 144, subject to receipt by the Company of customary
      documentation reasonably acceptable to the Company in connection therewith,
      or
      (C) such Securities are eligible for resale under Rule 144(k) or any successor
      provision, such Securities shall be issued without any legend or other
      restrictive language and, with respect to Securities upon which such legend
      is
      stamped, the Company shall issue new certificates without such legend to the
      holder upon request. The Company shall execute and deliver written instructions
      to the transfer agent for its Common Stock (the “Transfer
      Agent”)
      as may
      be necessary to satisfy any request by a Holder for removal of such legends
      no
      later than the close of business on the third (3rd)
      Business Day following the receipt of the request from a Holder to the extent
      such legends may be removed in accordance with this Section
      4.5.
      

    

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    4.6 Reliance
      on Exemptions.
      Imperium
      understands that the Securities are being offered and sold to it in reliance
      upon specific exemptions from the registration requirements of U.S. federal
      and
      state securities laws and that the Company is relying upon the truth and
      accuracy of the representations and warranties of Imperium
      set
      forth in this Section
      4
      in order
      to determine the availability of such exemptions and the eligibility of
Imperium
      to
      acquire the Securities. Imperium
      acknowledges that it did not purchase the Securities based upon any
      advertisement in any publication of general circulation. Imperium
      is
      relying on the representations, acknowledgements and agreements made by the
      Company in Section
      5
      and
      elsewhere in this Agreement in making investing, trading and/or other decisions
      concerning the Company’s securities.

     

    4.7 Non-Affiliate
      Status; Common Stock Ownership.
      Imperium
      is not
      an Affiliate of the Company and is not acting in association or concert with
      any
      other Person in regard to its purchase of the Securities or otherwise in respect
      of the Company. Imperium’s
      investment in the Securities is not for the purpose of acquiring, directly
      or
      indirectly, control of, and it has no intent to acquire or exercise control
      of,
      the Company or to influence the decisions or policies of the Board of Directors.
      

    

    4.8
       Fees.
      Imperium has not agreed to pay any compensation or other fee, cost or related
      expenditure to any underwriter, broker, agent or other representative in
      connection with the transactions contemplated hereby. 

     

    4.9
      No
      Conflicts. The execution and performance of this Agreement and the other
      Transaction Documents to which Imperium
      is a
      party do not conflict in any material respect with any agreement to which
Imperium
      is a
      party or is bound, any court order or judgment applicable to Imperium,
      or the
      constituent documents of Imperium.

     

    4.10 No
      Governmental Review. Imperium
      understands that no U.S. federal or state agency or any other Governmental
      Authority has passed on or made any recommendation or endorsement of the
      Securities or the fairness or suitability of an investment in the Securities
      nor
      have such authorities passed upon the
      accuracy of any information provided to Imperium
      or made
      any findings or determinations as to the merits of the offering of the
      Securities. 

     

    5. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      The
      Company hereby represents and warrants to Imperium and agrees with Imperium
      that, as of the Execution Date:

    

    5.1 Organization,
      Good Standing and Qualification.
      Each of
      the Company and each Company Subsidiary is
      duly
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization and has all requisite power
      and authority to carry on its business as now conducted. The Company and each
      Company Subsidiary is duly qualified to transact business and is in good
      standing in each jurisdiction in which it conducts business except where the
      failure so to qualify has not had or would not reasonably be expected to have
      a
      Material Adverse Effect.

    

    5.2 Authorization;
      Consents.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents, to issue and sell
      the
      Notes and the Warrants to Imperium in accordance with the terms hereof and
      thereof, and to issue the Conversion Shares upon conversion of the Convertible
      Notes and the Warrant Shares upon exercise of the Warrants. All
      corporate action on the part of the Company by its officers, directors and
      shareholders necessary for the authorization, execution and delivery of, and
      the
      performance by the Company of its obligations under, the Transaction Documents
      has been taken, and no further consent or authorization of the Company, the
      Board of Directors, shareholders, any Governmental Authority (other than such
      approval as may be required under the Securities Act and applicable state laws
      in respect of the Registration Rights Agreement) or any other Person is required
      (pursuant to any rule of the Principal Market or otherwise). The
      Board
      of Directors has determined that the sale and issuance of the Convertible Notes
      and Warrants, and contemplated sale and issuance of the Working Capital Notes,
      and the consummation of the transactions contemplated hereby and by the other
      Transaction Documents, are in the best interests of the Company.

    

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    5.3  Enforcement.
      This
      Agreement has been and, at or prior to the Closing, each other Transaction
      Document required to be delivered by the terms hereof at the Closing will be,
      duly executed and delivered by the Company. This Agreement constitutes and,
      upon
      the execution and delivery thereof by the Company, each other Transaction
      Document will constitute the valid and legally binding obligation of the
      Company, enforceable against the Company in accordance with their respective
      terms, subject to (i) applicable bankruptcy, insolvency, fraudulent transfer,
      moratorium, reorganization or other similar laws of general application relating
      to or affecting the enforcement of creditors’ rights generally and (ii) general
      principles of equity. 

    

    5.4 Disclosure
      Documents; Agreements; Financial Statements; Other Information.
      The
      Company is subject to the reporting requirements of the Exchange Act and, except
      as described on Schedule
      5.4,
      the
      Company has filed with the Commission all SEC Documents that the Company was
      required to file with the Commission on or after December 31, 2005. The Company
      is not aware of any event occurring or expected to occur on or prior to the
      Closing Date (other than the transactions effected hereby) that would require
      the filing of, or with respect to which the Company intends to file, a Form
      8-K
      after the Closing. Each SEC Document filed on or after December 31, 2005, as
      of
      the date of the filing thereof with the Commission (or if amended or superseded
      by a filing prior to the Execution Date, then on the date of such amending
      or
      superseding filing), complied in all material respects with the requirements
      of
      the Securities Act or Exchange Act, as applicable, and the rules and regulations
      promulgated thereunder and, as of the date of such filing (or if amended or
      superseded by a filing prior to the Execution Date, then on the date of such
      filing), such SEC Document (including all exhibits and schedules thereto and
      documents incorporated by reference therein) did not contain an untrue statement
      of 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. All documents required to be filed as
      exhibits to the SEC Documents filed on or after December 31, 2005 have been
      filed as required. Except as set forth in the Disclosure Documents, the Company
      has no liabilities, contingent or otherwise, other than liabilities incurred
      in
      the ordinary course of business which, under GAAP, are not required to be
      reflected in the financial statements included in the Disclosure Documents
      and
      which, individually or in the aggregate, are not material to the consolidated
      business or financial condition of the Company. As of their respective dates,
      the financial statements of the Company included in the SEC Documents complied
      as to form in all material respects with applicable accounting requirements
      and
      the published rules and regulations of the Commission with respect thereto.
      Such
      financial statements have been prepared in accordance with GAAP consistently
      applied at the times and during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or (ii)
      in the case of unaudited interim statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year-end adjustments).
      The Company will prepare the financial statements to be included in any reports,
      schedules, registration statements and definitive proxy statements that the
      Company is required to file or files with the Commission after the date hereof
      in accordance with GAAP (except in the case of unaudited interim statements,
      to
      the extent they may exclude footnotes or may be condensed or summary
      statements).

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    5.5 Capitalization;
      Subsidiaries; Outstanding Debt.
      

    

    (a) The
      capitalization of the Company, including its authorized capital stock, the
      number of shares issued and outstanding, the number of shares issuable and
      reserved for issuance pursuant to the Company’s stock option plans and
      agreements, the number of shares issuable and reserved for issuance pursuant
      to
      securities (other than the Convertible Note and Warrant) exercisable for, or
      convertible into or exchangeable for any shares of Common Stock and the number
      of shares initially to be reserved for issuance upon conversion of the
      Convertible Note and exercise of the Warrant, is set forth on Schedule
      5.5(a).
      All
      outstanding shares of capital stock of the Company have been, or upon issuance
      will be, validly issued, fully paid and non-assessable. 

    

    (b) All
      of
      the Company Subsidiaries are disclosed on Schedule
      5.5(b).
      None of
      the Company Subsidiaries other than C-Chip Technologies Corporation (North
      America) and Avensys Inc. has any assets or operations. Except as disclosed
      on
      Schedule 5.5(b),
      the
      Company or a wholly-owned Company Subsidiary owns all of the capital stock
      of
      each Company Subsidiary, which capital stock is validly issued, fully paid
      and
      non-assessable, and no shares of the capital stock of the Company or any Company
      Subsidiary are subject to preemptive rights or any other similar rights of
      the
      shareholders of the Company or any such Company Subsidiary or any Liens created
      by or through the Company or any such Company Subsidiary. 

    

    (c) Except
      as
      disclosed on Schedule
      5.5(c)
      or as
      contemplated herein, there are no outstanding options, warrants, scrip, rights
      to subscribe to, calls or commitments of any character whatsoever relating
      to,
      or securities or rights convertible into or exercisable or exchangeable for,
      any
      shares of capital stock of the Company or any Company Subsidiary, or
      arrangements by which the Company or any Company Subsidiary is or may become
      bound to issue additional shares of capital stock of the Company or any Company
      Subsidiary (whether
      pursuant to anti-dilution, “reset” or other similar provisions).
      

    

    (d) Schedule
      5.5(d)
      identifies all Debt of the Company and/or any Company Subsidiary currently
      outstanding in excess of $75,000 as of the date hereof.

    

    5.6 Due
      Authorization; Valid Issuance.
      The
      Notes are duly authorized and, when issued, sold and delivered in accordance
      with the terms of this Agreement, will be duly and validly issued, free and
      clear of any Liens imposed by or through the Company. The Warrants are duly
      authorized and, when issued, sold and delivered in accordance with the terms
      of
      this Agreement, will be duly and validly issued, free and clear of any Liens
      imposed by or through the Company. The Conversion Shares issuable under the
      Convertible Note and the Warrant Shares issuable under the Warrant are duly
      authorized and reserved for issuance and, when issued and delivered in
      accordance with the terms of the Convertible Note or the Warrant, as the case
      may be, will be duly and validly issued, fully paid and nonassessable, free
      and
      clear of any Liens imposed by or through the Company. Assuming the accuracy
      of
      Imperium’s representations contained herein, the issuance and sale of the
      Convertible Note and Warrant under this Agreement will be effected in compliance
      with all applicable Federal and state securities laws.

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    5.7 Form
      SB-2.
      The
      Company is eligible to register the Conversion Shares and Warrant Shares for
      resale in a secondary offering by each Holder on a registration statement on
      Form SB-2 under the Securities Act.
      To the
      Company’s knowledge, as
      of the
      date hereof and as of the Closing Date, there
      exist no facts or circumstances (including without limitation any required
      approvals or waivers of any circumstances that may delay or prevent the
      obtaining of accountant’s consents) that could reasonably be expected to
      prohibit or delay the preparation, filing or effectiveness of such registration
      statement on Form SB-2.

    

    5.8 No
      Conflict.
      Neither
      the Company nor any Company Subsidiary is in violation of any provisions of
      its
      charter, bylaws or any other governing document. Neither the Company nor any
      Company Subsidiary is in violation of or in default (and no event has occurred
      which, with notice or lapse of time or both, would constitute a default) under
      any provision of any instrument or contract to which it is a party or by which
      it or any of its Property is bound, or in violation of any provision of any
      Governmental Requirement applicable to the Company or any Company Subsidiary,
      except for any violation or default that has not had or would not reasonably
      be
      expected to have a Material Adverse Effect. The
      (i)
      execution, delivery and performance of this Agreement and the other Transaction
      Documents and (ii) consummation of the transactions contemplated hereby and
      thereby will not result in any violation of any provisions of the Company’s or
      any Company Subsidiary’s charter, bylaws or any other governing document or in a
      default under any provision of any instrument or contract to which the Company
      or any Company Subsidiary is a party or by which it or any of its Property
      is
      bound, or in violation of any provision of any Governmental Requirement
      applicable to the Company or any Company Subsidiary or be in conflict with
      or
      constitute, with or without the passage of time and giving of notice, a default
      under any such provision, instrument or contract or the triggering of any
      preemptive or anti-dilution rights (including
      without limitation pursuant to any “reset” or similar provisions) or
      rights
      of first refusal or first offer,
      or
      any
      other rights that would allow or permit the holders of the Company’s securities
      or any other Person to purchase shares of Common Stock or other securities
      of
      the Company or any Company Subsidiary (whether
      pursuant to a shareholder rights plan provision or otherwise).

    

    5.9 Financial
      Condition; Taxes; Litigation.

    

    5.9.1 The
      financial condition of the Company and each Company Subsidiary is, in all
      material respects, as described in the Disclosure Documents, except for changes
      in the ordinary course of business and normal year-end adjustments that are
      not,
      in the aggregate, materially adverse to the consolidated business or financial
      condition of the Company. There has been no (i) material adverse change to
      the
      business, operations, properties, financial condition, prospects or results
      of
      operations of the Company and any Company Subsidiary since the date of the
      Company’s most recent financial statements contained in the Disclosure
      Documents or
      (ii)
      change by the Company in its accounting principles, policies and methods except
      as required by changes in GAAP.

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    5.9.2 The
      Company and each Company Subsidiary has prepared in good faith and duly and
      timely filed all tax returns required to be filed by it and such returns are
      complete and accurate in all material respects and the Company and each Company
      Subsidiary has paid all taxes required to have been paid by it, except for
      taxes
      which it reasonably disputes in good faith or the failure of which to pay has
      not had or would not reasonably be expected to have a Material Adverse Effect.
      Neither the Company nor any Company Subsidiary has any liability with respect
      to
      taxes that accrued on or before the date of the most recent balance sheet of
      the
      Company included in the Disclosure Documents in excess of the amounts accrued
      with respect thereto that are reflected on such balance sheet. 

    

    5.9.3 Except
      for sales tax audits undertaken by state taxing authorities in the ordinary
      course of business, neither the Company nor any Company Subsidiary is the
      subject of any pending or, to the Company’s knowledge, threatened inquiry,
      investigation or administrative or legal proceeding by the Internal Revenue
      Service, the taxing authorities of any state or local jurisdiction, the
      Commission, the NASD, any state securities commission or other Governmental
      Authority. 

    

    5.9.4
      Other
      than as set forth on Schedule
      5.9.4,
      there
      is no material claim, litigation or administrative proceeding pending, or,
      to
      the Company’s knowledge, threatened or contemplated, against the Company or any
      Company Subsidiary, or against any officer, director or employee of the Company
      or any such Company Subsidiary in connection with such Person’s employment
      therewith. Neither the Company nor any Company Subsidiary is a party to or
      subject to the provisions of, any order, writ, injunction, judgment or decree
      of
      any court or Governmental Authority which has had or would reasonably be
      expected to have a Material Adverse Effect.

    

    5.10
       Acknowledgement
      of Dilution.
      The
      Company acknowledges that the issuance of Conversion Shares upon conversion
      of
      the Convertible Note and issuance of the Warrant Shares upon exercise of the
      Warrant 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 obligation to issue Conversion Shares upon conversion
      of
      the Convertible Note in accordance with the terms of the Convertible Note,
      and
      to issue Warrant Shares upon exercise of the Warrant in accordance with the
      terms of the Warrant, is unconditional (other than with respect to the
      conditions set forth in the Convertible Note and the Warrant, respectively)
      regardless of the effect of any such dilution. The Company further acknowledges
      that, to the extent not otherwise prohibited by applicable law, each Holder
      may
      enter into hedging transactions with respect to the Common Stock.

    

    5.11 Intellectual
      Property.

    

    (a) The
      Company and each Company Subsidiary own, free and clear of claims or rights
      or
      any other Person, with full right to use, sell, license, sublicense, dispose
      of,
      and bring actions for infringement of, or, to the knowledge of the Company,
      has
      acquired licenses or other rights to use, all Intellectual Property necessary
      for the conduct of its business as presently conducted (other than with respect
      to software which is generally commercially available and not used or
      incorporated into the Company’s or such Company Subsidiary’s products and open
      source software which may be subject to one or more “general public” licenses).
      All works that are used or incorporated into the Company’s or any Company
      Subsidiary’s services, products or services or products actively under
      development and which is proprietary to the Company or such Company Subsidiary
      was developed by or for the Company or a Company Subsidiary by the current
      or
      former employees, consultants or independent contractors of the Company or
      a
      Company Subsidiary or purchased or licensed by the Company or a Company
      Subsidiary. 

    

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    (b) The
      business of the Company and each Company Subsidiary as presently conducted
      and
      the production, marketing, licensing, use and servicing of any products or
      services of the Company and each Company Subsidiary do not, to the knowledge
      of
      the Company, infringe or conflict with any patent, trademark, copyright, or
      trade secret rights of any third parties or any other Intellectual Property
      of
      any third parties in any material respect. Neither the Company nor any Company
      Subsidiary has received written notice from any third party asserting that
      any
      Intellectual Property owned or licensed by the Company or a Company Subsidiary,
      or which the Company or any Company Subsidiary otherwise has the right to use,
      is invalid or unenforceable by the Company or such Company Subsidiary and,
      to
      the Company’s knowledge, there is no valid basis for any such claim (whether or
      not pending or threatened).

    

    (c) Other
      than as set forth on Schedule
      5.11(c),
      no
      claim is pending or, to the Company’s knowledge, threatened against the Company
      or any Company Subsidiary nor has the Company or any Company Subsidiary received
      any written notice or other written claim from any Person asserting that the
      Company’s or any Company Subsidiary’s present or contemplated activities
      infringe or may infringe in any material respect any Intellectual Property
      of
      such Person, and the Company is not aware of any infringement by any other
      Person of any material rights of the Company or any Company Subsidiary under
      any
      Intellectual Property Rights.

    

    (d) All
      licenses or other agreements under which the Company or any Company Subsidiary
      is granted Intellectual Property (excluding licenses to use software utilized
      in
      the Company’s or such Company Subsidiary’s internal operations and which is
      generally commercially available) are in full force and effect and, to the
      Company’s knowledge, there is no material default by any party thereto. The
      Company has no reason to believe that the licensors under such licenses and
      other agreements do not have and did not have all requisite power and authority
      to grant the rights to the Intellectual Property purported to be granted
      thereby.

    

    (e) All
      licenses or other agreements under which the Company or any Company Subsidiary
      has granted rights to Intellectual Property to others (including all end-user
      agreements) are in full force and effect, there has been no material default
      by
      the Company or any Company Subsidiary thereunder and, to the Company’s
      knowledge, there is no material default of any provision thereof relating to
      Intellectual Property by any other party thereto.

    

    (f) The
      Company and each Company Subsidiary have taken all steps required in accordance
      with commercially reasonable business practice to establish and preserve their
      ownership in their owned Intellectual Property and to keep confidential all
      material technical information developed by or belonging to the Company or
      such
      Company Subsidiary which has not been patented or copyrighted. To the Company’s
      knowledge, neither the Company nor any Company Subsidiary is making any unlawful
      use of any Intellectual Property of any other Person, including, without
      limitation, any former employer of any past or present employees of the Company
      or any Company Subsidiary. To the Company’s knowledge, neither the Company, any
      Company Subsidiary nor any of their respective employees has any agreements
      or
      arrangements with former employers of such employees relating to any
      Intellectual Property of such employers, which materially interfere or conflict
      with the performance of such employee’s duties for the Company or any Company
      Subsidiary or result in any former employers of such employees having any rights
      in, or claims on, the Company’s or any Company Subsidiary’s Intellectual
      Property. Each current employee of the Company and each Company Subsidiary
      has
      executed agreements regarding confidentiality, proprietary information and
      assignment of inventions and copyrights to the Company or such Company
      Subsidiary, as the case may be, each independent contractor or consultant of
      the
      Company and each Company Subsidiary has executed agreements regarding
      confidentiality and proprietary information, and neither the Company nor any
      Company Subsidiary has received written notice that any employee, consultant
      or
      independent contractor is in violation of any agreement or in breach of any
      agreement or arrangement with former or present employers relating to
      proprietary information or assignment of inventions. Without limiting the
      foregoing: (i) the Company and each Company Subsidiary has taken reasonable
      security measures to guard against unauthorized disclosure or use of any of
      its
      Intellectual Property that is confidential or proprietary; and (ii) the Company
      has no reason to believe that any Person (including, without limitation, any
      former employee or consultant of the Company or any Company Subsidiary) has
      unauthorized possession of any of its Intellectual Property, or any part
      thereof, or that any Person has obtained unauthorized access to any of its
      Intellectual Property. The Company and each Company Subsidiary has complied
      in
      all material respects with its respective obligations pursuant to all agreements
      relating to Intellectual Property rights that are the subject of licenses
      granted by third parties, except for any non-compliance that has not had or
      would not reasonably be expected to have a Material Adverse Effect.

    

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    5.12 Registration
      Rights; Rights of Participation.
      Except
      as set forth on Schedule
      5.12,
      the
      Company has not granted or agreed to grant to any person or entity any rights
      (including “piggy-back” registration rights) to have any securities of the
      Company registered with the Commission or any other Governmental Authority
      which
      has not been satisfied in full or waived on or prior to the date hereof and
      no
      person or entity, including, but not limited to, current or former shareholders
      of the Company, underwriters, brokers, agents or other third parties, has any
      right of first refusal, preemptive right, right of participation, anti-dilutive
      right or any similar right to participate in, or to receive securities or other
      assets of the Company solely as a result of the transactions contemplated by
      this Agreement or the other Transaction Documents.

    

    5.13 Solicitation;
      Other Issuances of Securities.
      Neither
      the Company nor any of its Affiliates, nor any Person acting on its or their
      behalf, (i) has engaged in any form of general solicitation or general
      advertising (within the meaning of Regulation D) in connection with the offer
      or
      sale of the Securities, or (ii) has, directly or indirectly, made any offers
      or
      sales of any security or the right to purchase any security, or solicited any
      offers to buy any security or any such right, under circumstances that would
      require registration of the Securities under the Securities Act.

    

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    5.14 Fees.
      Except
      as set forth on Schedule
      5.14,
      the
      Company is not obligated to pay any brokers, finders or financial advisory
      fees
      or commissions to any underwriter, broker, agent or other representative in
      connection with the transactions contemplated hereby. The Company will indemnify
      and hold harmless each Holder from and against any claim by any Person alleging
      that such Holder is obligated to pay any such compensation, fee, cost or related
      expenditure in connection with the transactions contemplated
      hereby.

    

    5.15 Foreign
      Corrupt Practices.
      Neither
      the Company, any Company Subsidiary nor, to the knowledge of the Company, any
      director, officer, agent, employee or other Person acting on behalf of the
      Company or any Company Subsidiary, has (i) used any corporate funds for any
      unlawful contribution, gift, entertainment or other unlawful expenses relating
      to political activity, (ii) made any direct or indirect unlawful payment to
      any
      foreign or domestic government official or employee, or (iii) violated any
      provision of the Foreign Corrupt Practices Act of 1977, as amended, or made
      any
      bribe, rebate, payoff, influence payment, kickback or other unlawful payment
      to
      any foreign or domestic government official or employee.

    

    5.16 Key
      Employees.
      The
      Company’s and each Company Subsidiary’s executive officers (as defined in Rule
      501(f) of the Securities Act) (each, a “Key
      Employee”)
      is
      currently serving in the capacity described in the Disclosure Documents. The
      Company has no knowledge of any fact or circumstance (including, without
      limitation, (i) the terms of any agreement to which such person is a party
      or
      any litigation in which such person is or may become involved and (ii) any
      illness or medical condition that could reasonably be expected to result in
      the
      disability or incapacity of such person) that would limit or prevent any such
      person from serving in such capacity on a full-time basis in the foreseeable
      future, or of any intention on the part of any such person to limit or terminate
      his or her employment with the Company or any Company Subsidiary. No Key
      Employee has borrowed money pursuant to a currently outstanding loan that is
      secured by Common Stock or any right or option to receive Common Stock.

    

    5.17 Labor
      Matters.
      There
      is no strike, labor dispute or union organization activities pending or, to
      the
      knowledge of the Company, threatened between the Company or any Company
      Subsidiary and their respective employees. No employees of the Company or any
      Company Subsidiary belong to any union or collective bargaining unit. The
      Company and each Company Subsidiary has complied in all material respects with
      all applicable federal and state equal opportunity and other laws related to
      employment.

    

    5.18 Environment.
      Neither
      the Company nor any Company Subsidiary has any liabilities under any
      Environmental Law, nor, to the Company's knowledge, do any factors exist that
      are reasonably likely to give rise to any such liability, affecting any of
      the
      properties owned or leased by the Company or any Company Subsidiary. Neither
      the
      Company nor any Company Subsidiary has violated any Environmental Law applicable
      to it now or previously in effect, other than minor violations or infringements
      that are immaterial in nature.

     

    5.19 ERISA.
      The
      Company does not maintain or contribute to, or have any obligation under, any
      Pension Plan. The Company is in compliance in all material respects with the
      presently applicable provisions of ERISA and the United States Internal Revenue
      Code of 1986, as amended, with respect to each Pension Plan except in any such
      case for any such matters that, individually or in the aggregate, have not
      had,
      and would not reasonably be expected to have, a Material Adverse
      Effect.

    

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

    5.20 Disclosure.
      The
      representations, warranties and written statements contained in this Agreement
      and the other Transaction Documents and in the certificates, exhibits and
      schedules delivered to Imperium pursuant to this Agreement and the other
      Transaction Documents and in connection with Imperium’s due diligence
      investigation of the Company, do not contain any untrue statement of a material
      fact, and do not omit to state a material fact required to be stated therein
      or
      necessary in order to make such representations, warranties or statements not
      misleading in light of the circumstances under which they were made. Neither
      the
      Company nor any Person acting on its behalf or at its direction has provided
      Imperium with material non-public information other than the terms of the
      transactions contemplated hereby. Following the issuance of a press release
      in
      accordance with Section
      6.1(c),
      to the
      Company’s knowledge, Imperium will not possess any material non-public
      information concerning the Company that was provided to Imperium by the Company
      or its agents or representatives. The Company acknowledges that Imperium is
      relying on the representations, acknowledgments and agreements made by the
      Company in this Section
      5.20
      and
      elsewhere in this Agreement in making trading and other decisions concerning
      the
      Company’s securities.

    

    5.21 Insurance.
      The
      Company maintains insurance for itself and each material Company Subsidiary
      in
      such amounts and covering such losses and risks as are reasonably sufficient
      and
      customary in the businesses in which the Company and each such Company
      Subsidiary are engaged. As
      of the
      date hereof and as of the Closing Date, no
      notice
      of cancellation has been received for any of such policies and the Company
      is in
      compliance in all material respects with all of the terms and conditions
      thereof. The Company has no 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 to
      conduct its business as currently conducted without a significant increase
      in
      cost. Without limiting the generality of the foregoing, the Company maintains
      Director’s and Officer’s insurance in an amount not less than $5 million for
      each covered occurrence.

    

    5.22
       Property.
      The
      Company and each Company Subsidiary have good and marketable title to all real
      and personal Property owned by them, in each case free and clear of all Liens,
      other than the Liens set forth on Schedule
      5.22
      and the
      Permitted Liens specified in clauses
      (b)
      through
(d)
      in the
      definition thereof. Any Property held under lease by the Company or a Company
      Subsidiary is held by them under valid, subsisting and enforceable leases with
      such exceptions as are not material and do not interfere with the use made
      or
      proposed to be made of such Property by the Company or such Company Subsidiary.
      

     

    5.23
       Regulatory
      Permits. The Company and each Company Subsidiary possess all certificates,
      authorizations and permits issued by the appropriate federal, state or foreign
      regulatory authorities necessary to conduct their respective
      businesses,
      except
      where the failure to have any such certificate,
      authorization
      or permit would not have a Material Adverse Effect,
      and
      neither the Company nor any Company Subsidiary has received any notice of
      proceedings relating to the revocation or modification of any such certificate,
      authorization or permit.

    

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

    5.24 Investment
      Company Status.
      The
      Company is not, and immediately after the Closing will not be, an “investment
      company”
or
      an
      entity “controlled”
by
      an
“investment
      company”
within
      the meaning of the Investment Company Act of 1940, as amended (the “Investment
      Company Act”),
      and
      shall conduct its business in a manner so that it will not become subject to
      the
      Investment Company Act.

    

    5.25 Transfer
      Taxes.
      No
      stock transfer or other taxes (other than income taxes) are required to be
      paid
      in connection with the issuance and sale of any of the Securities or Working
      Capital Notes, other than such taxes for which the Company has established
      appropriate reserves and intends to pay in full on or before the
      Closing.

    

    5.26 Sarbanes-Oxley
      Act; Internal Controls and Procedures.
      The
      Company is in material compliance with any and all applicable requirements
      of
      the Sarbanes-Oxley Act of 2002, as amended, and any and all applicable rules
      and
      regulations promulgated by the Commission thereunder that are effective as
      of
      the date hereof. The Company maintains internal accounting controls, policies
      and procedures, and such books and records as are reasonably designed to provide
      reasonable assurance that (i)
      all
      transactions to which the Company or any Company Subsidiary is a party or by
      which its properties are bound are effected by a duly authorized employee or
      agent of the Company, supervised by and acting within the scope of the authority
      granted by the Company’s senior management; (ii)
      the
      recorded accounting of the Company’s consolidated assets is compared with
      existing assets at regular intervals; and
      (iii) all
      transactions to which the Company or any Company Subsidiary is a party, or
      by
      which its properties are bound, are recorded (and such records maintained)
      in
      accordance with all Governmental Requirements and as may be necessary or
      appropriate to ensure that the financial statements of the Company are prepared
      in accordance with GAAP.

    

    5.27 Embargoed
      Person.
      None of
      the funds or other assets of the Company or any Company Subsidiary shall
      constitute property of, or shall be beneficially owned, directly or indirectly,
      by any Person subject to trade restrictions under United States law, including,
      but not limited to, the International Emergency Economic Powers Act,
      50 U.S.C. § 1701 et seq.,
      the
      Trading with the Enemy Act, 50 U.S.C. App. 1 et seq.,
      and any
      Executive Orders or regulations promulgated under any such United States laws
      (each, an “Embargoed
      Person”),
      with
      the result that the investments evidenced by the Securities or Working Capital
      Notes are or would be in violation of any Governmental Requirements. No
      Embargoed Person shall have any interest of any nature whatsoever in the Company
      or any Company Subsidiary with the result that the investments evidenced by
      the
      Securities or Working Capital Notes are or would be in violation of any
      Governmental Requirements. None of the funds or other assets of the Company
      or
      any Company Subsidiary shall be derived from any unlawful activity with the
      result that the investments evidenced by the Securities or Working Capital
      Notes
      are or would be in violation of any Governmental Requirements.

    

    5.28 Transactions
      with Interested Persons.
      No
      officer, director or employee of the Company or any Company Subsidiary is or
      has
      made any arrangements with the Company or any Company Subsidiary to become
      a
      party to any transaction with the Company or any Company 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.

    

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

    5.29 Customers
      and Suppliers.
      The
      relationships of the Company and each Company Subsidiary with their respective
      customers and suppliers are maintained on commercially reasonable terms. To
      the
      Company’s knowledge, no customer or supplier of the Company or any Company
      Subsidiary has any plan or intention to terminate its agreement with the Company
      or any Company Subsidiary, which termination would reasonably be expected to
      have a Material Adverse Effect.

    

    5.30 Accountants.
      The
      Company’s accountants, who
      the
      Company expects will render their opinion with respect to the financial
      statements to be included in the Company’s Annual Report on Form 10-KSB for the
      year ended June 30, 2007, are, to the Company’s knowledge, independent
      accountants as required by the Securities Act.

    

    5.31 Solvency.
      (i) The
      fair saleable value of the Company’s assets exceeds the amount that will be
      required to be paid on or in respect of the Company’s existing Debt; and (ii)
      the expected cash flows of the Company for future periods, together with the
      proceeds the Company would receive upon liquidation of its assets and the
      proceeds from expected debt or equity offerings, after taking into account
      all
      anticipated uses of such amounts, would be sufficient to pay all Debt when
      such
      Debt is required to be paid. The Company has no knowledge of any facts or
      circumstances which led it to believe that it will be required to file for
      reorganization or liquidation under bankruptcy or reorganization laws of any
      jurisdiction, and has no present intention to so file.

    

    5.32 Tangible
      Assets; Inventory; Accounts Receivable.
      (i) The
      Consolidated Tangible Assets are equal to or greater than the Tangible Asset
      Threshold and (ii) the Consolidated Accounts and Inventory are equal to or
      greater than the Accounts and Inventory Threshold.

    

    6. COVENANTS
      AND AGREEMENTS.

    

    6.1 Filings
      and Public Disclosure by the Company.
      The
      Company shall:

     

    (a) file
      a
      Form D with respect to the Securities issued at the Closing as and when required
      under Regulation D and provide a copy thereof to Imperium promptly after such
      filing; 

     

    (b) at
      or
      prior to the Closing, take such action as the Company reasonably determines
      upon
      the advice of counsel is necessary to qualify the Securities for sale under
      applicable state or “blue-sky” laws or obtain an exemption therefrom, and shall
      promptly provide evidence of any such action to Imperium at Imperium’s request;
      and

     

    (c) (i)
      on or
      prior to 8:30 a.m. (eastern time) on the fourth Business Day
      following the Execution Date,
      issue a
      press release disclosing the material terms of this Agreement and the other
      Transaction Documents and the transactions contemplated hereby and thereby,
      and
      (ii) on or prior to 5:00 p.m. (eastern time) on the fourth Business Day
      following the Execution Date,
      file
      with the Commission a Current Report on Form 8-K disclosing the material terms
      of and including as exhibits this Agreement and the other Transaction Documents
      and the transactions contemplated hereby and thereby; provided,
      however,
      that
      each Holder shall have a reasonable opportunity to review and comment on any
      such press release or Form 8-K prior to the issuance or filing thereof; and
      provided,
      further,
      that if
      the Company fails to issue a press release disclosing the material terms of
      this
      Agreement and the other Transaction Documents within the time frames described
      herein, any Holder may issue a press release disclosing such information without
      any notice to or consent by the Company. Thereafter, the Company shall timely
      file any filings and notices required by the Commission or applicable law with
      respect to the transactions contemplated hereby.

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

    6.2 Use
      of
      Proceeds.
      The
      Company shall use the proceeds from the sale of the Convertible Notes and
      Warrant for working capital and general corporate purposes.

     

    6.3 Certain
      Affirmative Covenants of the Company.
      The
      Company agrees that, during the period beginning on the Execution Date and
      ending on the Termination Date, the Company shall, and shall cause each Company
      Subsidiary to:

     

    (a) maintain
      its corporate existence in good standing;

    

    (b) comply
      with all Governmental Requirements applicable to the operation of its business,
      except for instances of noncompliance that would not reasonably be expected
      to
      have, individually or in the aggregate, a Material Adverse Effect;

    

    (c) comply
      with all agreements, documents and instruments binding on it or affecting its
      Properties or business, including, without limitation, all Material Contracts,
      except for instances of noncompliance that would not reasonably be expected
      to
      have, individually or in the aggregate, a Material Adverse Effect;

    

    (d) provide
      each Holder with copies of all materials sent to its shareholders at the same
      time as such materials are delivered to such shareholders; 

     

    (e) timely
      file with the Commission all reports required to be filed pursuant to the
      Exchange Act and refrain from terminating its status as an issuer required
      by
      the Exchange Act to file reports thereunder even if the Exchange Act or the
      rules or regulations thereunder would permit such termination; 

     

    (f) ensure
      that the Common Stock is at all times
      listed
      or quoted on the OTC Bulletin Board, the New York Stock Exchange, the NASDAQ
      Capital Market, the American Stock Exchange, or such other exchange or quotation
      service reasonably satisfactory to the Holders; and

    

    (g) maintain
      commercially reasonable insurance coverage (including D&O insurance) for the
      Company and each Company Subsidiary.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

    6.4 Certain
      Negative Covenants of the Company.
      The
      Company agrees that, during the period beginning on the Execution Date and
      ending on the Termination Date, the Company shall not, and shall cause each
      Company Subsidiary not to:

    

    (a) enter
      into any transaction or arrangement with any Affiliate, employee, officer,
      director or shareholder of the Company or Company Subsidiary, unless such
      transaction is effectuated on an arms’ length basis and approved by the
      independent directors of the Company or such Company Subsidiary, as the case
      may
      be;

    

    (b) incur
      (or
      permit to exist) any Debt other than Permitted Debt;

    

    (c) grant,
      establish or maintain any Lien on any of its Property other than Permitted
      Liens;

    

    (d) make
      any
      Restricted Payments other than Restricted Payments made by a Company Subsidiary
      to the Company;

    

    (e) dispose
      of all or any part of its Property unless (i) such disposition is in the
      ordinary course of business and for fair market value, and (ii) such Property
      is
      not material to the Company’s or any Company Subsidiary’s business, operations
      or financial condition or performance;

    

    (f) consent
      to or implement any termination, amendment, modification, supplement or waiver
      of the certificate or articles of incorporation, articles of organization,
      bylaws, regulations or other constituent documents of the Company or any Company
      Subsidiary which could reasonably be expected to adversely affect the rights
      of
      the Holders under the Transaction Documents; and

    

    (g) effectuate
      a Subsequent Placement of (x) any Variable Rate Security or (y) any securities
      of a Company Subsidiary.

    

    6.5 Use
      of
      Holder’s Name.
      Except
      as may be required by applicable law and/or this Agreement, the Company shall
      not use, directly or indirectly, any Holder’s name or the name of any of its
      Affiliates in any advertisement, announcement, press release or other similar
      communication unless it has received the prior written consent of such Holder
      for the specific use contemplated or as otherwise required by applicable law
      or
      regulation.

    

    6.6 Reservation
      of Common Stock.
      The
      Company shall, on the Closing Date, have authorized and reserved for issuance
      to
      the Holders free from any preemptive rights, and shall keep available at all
      times during which any Convertible Notes, Warrants, or Advisory Fee Warrants
      are
      outstanding, a number of shares of Common Stock (the “Reserved
      Amount”)
      that,
      on the Closing Date, is not less than two hundred percent (200%) of (i) the
      number of Conversion Shares issuable upon conversion of the Convertible Note
      to
      be issued at the Closing in full plus
      (ii) the
      number of Warrant Shares issuable upon exercise of the Warrant to be issued
      at
      the Closing in full plus
      (iii)
      the number of Advisory Fee Warrant Shares issuable upon exercise of the Advisory
      Fee Warrant, in each case without regard to any limitation or restriction on
      such conversion or exercise that may be set forth in the Convertible Note,
      Warrant, or the Advisory Fee Warrant. The Reserved Amount shall be allocated
      among the Holders in accordance with each Holder’s pro
      rata
      share of
      the outstanding Convertible Notes, Warrants and Advisory Fee Warrants. In the
      event that a Holder shall sell or otherwise transfer any of such Holder’s
      Convertible Notes, Warrants or Advisory Fee Warrants, each transferee shall
      be
      allocated a pro
      rata
      portion
      of such transferor’s Reserved Amount. Any portion of the Reserved Amount
      allocated to any Holder or other Person which no longer holds any Convertible
      Notes, Warrants, or Advisory Fee Warrants shall be reallocated to the remaining
      Holders pro
      rata
      based on
      the number of the Registrable Securities held by such Holders at such time.
      In
      the event that the Reserved Amount is insufficient at any time to cover one
      hundred twenty five percent (125%) of the Registrable Securities issuable upon
      the conversion of the Convertible Notes and exercise of the Warrants and
      Advisory Fee Warrants (without regard to any restriction on such conversion
      or
      exercise), the Company shall take such action (including, without limitation,
      holding a meeting of its shareholders) to increase the Reserved Amount to cover
      two hundred percent (200%) of such Registrable Securities, such increase to
      be
      effective not later than the thirtieth (30th) day (or sixtieth (60th) day,
      in
      the event shareholder approval is required for such increase) following the
      date
      on which the Reserved Amount became insufficient hereunder. While any
      Convertible Notes, Warrants or Advisory Fee Warrants are outstanding, the
      Company shall not reduce the Reserved Amount without obtaining the prior written
      consent of each Holder then holding a Convertible Note, Warrant or Advisory
      Fee
      Warrant.

    

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

    6.7 Disclosure
      of Non-Public Information.
      The
      Company agrees that it will not at any time following the Execution Date
      disclose material non-public information to any Holder without first obtaining
      such Holder’s prior written consent confirming that such Holder is willing to
      receive material non-public information at such time.

    

    6.8 Guarantee
      by Company Subsidiaries. During the period beginning on the date hereof and
      ending on the Termination Date, if the Company creates or acquires any new
      Company Subsidiary that has, or any existing Company Subsidiary develops or
      acquires, any business operations or owns any material assets, then the Company
      shall cause such new or existing Company Subsidiary to, contemporaneously with
      such creation, acquisition or development, become party to the Security
      Documents.

    

    6.9 Indemnification
      of Holders.
      The
      Company will indemnify and hold each Holder and its directors, managers,
      officers, shareholders, members, partners, employees and agents (each, a
“Holder
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Holder 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 by the Company or any
      Company Subsidiary in the other Transaction Documents or (b) any action
      instituted against a Holder, or any of its Affiliates, by any shareholder of
      the
      Company who is not an Affiliate of such Holder, with respect to any of the
      transactions contemplated by the Transaction Documents (unless such action
      is
      based upon a breach of such Holder’s representation, warranties or covenants
      under the Transaction Documents or any agreements or understandings such Holder
      may have with any such shareholder or any violations by such Holder of state
      or
      federal securities laws or any conduct by such Holder which constitutes fraud,
      gross negligence, willful misconduct or malfeasance). If any action shall be
      brought against any Holder Party in respect of which indemnity may be sought
      pursuant to this Agreement, such Holder Party shall promptly notify the Company
      in writing, and the Company shall have the right to assume the defense thereof
      with counsel of its own choosing. Any Holder 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 Holder 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 following such Holder Party’s written request
      that it do so, 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 Holder Party. The Company will not be liable to any Holder
      Party under this Agreement (i) for any settlement by a Holder 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 such Holder Party’s wrongful
      actions or omissions, or gross negligence or to such Holder Party’s breach of
      any of the representations, warranties, covenants or agreements made by such
      Holder in this Agreement or in the other Transaction Documents.

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

    6.10 Limitations
      on Disposition.
      No
      Holder shall sell, transfer, assign or dispose of any Securities,
      unless:

     

    (a) there
      is
      then in effect an effective registration statement under the Securities Act
      covering such proposed disposition and such disposition is made in accordance
      with such registration statement; or

    

    (b) such
      Holder has notified the Company in writing of any such disposition, and
      furnished the Company with an opinion of counsel, reasonably satisfactory to
      the
      Company, that such disposition will not require registration of such Securities
      under the Securities Act; provided,
      however,
      that no
      such opinion of counsel will be required (A) if the sale, transfer,
      assignment or disposition is made to an Affiliate of such Holder, (B) if the
      sale, transfer, assignment or disposition is made pursuant to Rule 144 and
      such Holder provides the Company with evidence reasonably satisfactory to the
      Company that the proposed transaction satisfies the requirements of Rule 144,
      (C) if such
      Securities are eligible for resale under Rule 144(k) or any successor
      provision
      or
      (D) if in connection with a bona
      fide
      pledge
      or hypothecation of any Securities under a margin arrangement with a
      broker-dealer or other financial institution or the sale of any such Securities
      by such broker-dealer or other financial institution following such Holder’s
      default under such margin arrangement.

    

    6.11 Consolidated
      Tangible Assets.  During
      the period beginning on the date hereof and ending on the Termination Date,
      the
      Consolidated Tangible Assets shall on the last Business Day of each calendar
      month be equal to or exceed the Tangible Asset Threshold. If, at any time or
      from time to time during the period beginning on the date hereof and ending
      on
      the Termination Date, the Consolidated Tangible Assets on the last Business
      Day
      of a calendar month are less than the Tangible Asset Threshold on such Business
      Day, the Holder shall have the option to notify the Company in writing demanding
      the Company prepay the Notes then outstanding by an amount equal to such
      shortfall on a pro
      rata basis
      in
      proportion to the outstanding principal of each such Note. In furtherance of
      the
      foregoing financial covenant, the Company shall, on or prior to the thirtieth
      (30th)
      day
      following each calendar month following the date hereof, deliver to Imperium
      a
      certificate certified by the Chief Financial Officer of the Company certifying
      (i) that the Company is in compliance with the foregoing financial covenant
      as
      of the last Business Day of such calendar month; or (ii) if the Company is
      not
      in compliance with the foregoing financial covenant, the amount of such
      shortfall.

    

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

    6.12 Consolidated
      Accounts and Inventory.
      During
      the period beginning on the date hereof and ending on the Termination Date,
      the
      Consolidated Accounts and Inventory shall on the last Business Day of each
      calendar month be equal to or exceed the Accounts and Inventory Threshold.
      If,
      at any time or from time to time during the period beginning on the date hereof
      and ending on the Termination Date, the Consolidated Accounts and Inventory,
      on
      the last Business Day of a calendar month are less than the Accounts and
      Inventory Threshold, the Holder shall have the option to notify the Company
      in
      writing demanding the Company prepay the Notes then outstanding by an amount
      equal to such shortfall on a pro
      rata basis
      in
      proportion to the outstanding principal of each such Note. In furtherance of
      the
      foregoing financial covenant, the Company shall, on or prior to the thirtieth
      (30th)
      day
      following each calendar month following the date hereof, deliver to Imperium
      a
      certificate certified by the Chief Financial Officer of the Company certifying
      (i) that the Company is in compliance with the foregoing financial covenant
      as
      of the last Business Day of such calendar month; or (ii) if the Company is
      not
      in compliance with the foregoing financial covenant, the amount of such
      shortfall.

    

    7. MISCELLANEOUS.

    

    7.1 Survival;
      Severability.
      The
      representations, warranties, covenants and indemnities made by the parties
      herein and in the other Transaction Documents shall survive the Closing
      notwithstanding any due diligence investigation made by or on behalf of the
      party seeking to rely thereon. In the event that any provision of this Agreement
      becomes or is declared by a court of competent jurisdiction to be illegal,
      unenforceable or void, this Agreement shall continue in full force and effect
      without said provision; provided
      that in
      such case the parties shall negotiate in good faith to replace such provision
      with a new provision which is not illegal, unenforceable or void, as long as
      such new provision does not materially change the economic benefits of this
      Agreement to the parties.

    

    7.2 Successors
      and Assigns.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective successors and permitted assigns of the parties.
      Nothing in this Agreement, express or implied, is intended to confer upon any
      party other than the parties hereto or their respective successors and permitted
      assigns any rights, remedies, obligations or liabilities under or by reason
      of
      this Agreement, except as expressly provided in this Agreement. A Holder may
      assign its rights and obligations hereunder in connection with any private
      sale
      or transfer of the Securities or any Working Capital Note, as long as, as a
      condition precedent to such transfer, the transferee executes an acknowledgment
      agreeing to be bound by the applicable provisions of this Agreement, in which
      case the term “Holder” shall be deemed to refer to such transferee as though
      such transferee were an original signatory hereto, and such assignment complies
      with applicable Governmental Requirements. The Company may not assign its rights
      or obligations under this Agreement.

    

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

    

      7.3 No
        Reliance.
        Each
        party acknowledges that (i) it has such knowledge in business and financial
        matters as to be fully capable of evaluating this Agreement, the other
        Transaction Documents and the transactions contemplated hereby and thereby,
        (ii)
        it is not relying on any advice or representation of any other party in
        connection with entering into this Agreement, the other Transaction Documents
        or
        such transactions (other than the representations made in this Agreement
        or the
        other Transaction Documents), (iii) it has not received from any other party
        any
        assurance or guarantee as to the merits (whether legal, regulatory, tax,
        financial or otherwise) of entering into this Agreement or the other Transaction
        Documents or the performance of its obligations hereunder and thereunder,
        and
        (iv) it has consulted with its own legal, regulatory, tax, business, investment,
        financial and accounting advisors to the extent that it has deemed necessary,
        and has entered into this Agreement and the other Transaction Documents based
        on
        its own independent judgment and, if applicable, on the advice of such advisors,
        and not on any view (whether written or oral) expressed by any other
        party.

      

      7.4
         Independent
        Nature of Holders’ Obligations and Rights.
        The
        obligations of each Holder hereunder are several and not joint with the
        obligations of the other Holders hereunder, and no Holder shall be responsible
        in any way for the performance of the obligations of any other Holder hereunder.
        The Company acknowledges and agrees that nothing contained herein or in any
        other Transaction Document, 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 a “group” as
        described in Section 13(d) of the Exchange Act, 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 has been represented
        by
        its own separate counsel in connection with the transactions contemplated
        hereby, shall be entitled to protect and enforce its rights, including, without
        limitation, rights arising out of this Agreement or the other Transaction
        Documents, individually, and shall not be required to join any other Holder
        as
        an additional party in any proceeding for such purpose.

      

      7.5 Injunctive
        Relief.
        The
        Company acknowledges and agrees that a breach by it of its obligations hereunder
        will cause irreparable harm to each Holder and that the remedy or remedies
        at
        law for any such breach will be inadequate and agrees, in the event of any
        such
        breach, in addition to all other available remedies, such Holder shall be
        entitled to an injunction restraining any breach and requiring immediate
        and
        specific performance of such obligations without the necessity of showing
        economic loss or the posting of any bond.

      

      7.6 Governing
        Law; Jurisdiction; Waiver of Jury Trial.
        

      

      (a) This
        Agreement shall be governed by and construed under the laws of the State
        of New
        York applicable to contracts made and to be performed entirely within the
        State
        of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
        of the state and federal courts sitting in the City and County of New York
        for
        the adjudication of any dispute hereunder or any other Transaction Document
        or
        in connection herewith or therewith or with any transaction contemplated
        hereby
        or thereby, 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 brought
        in an inconvenient forum or that the venue of such suit, action or proceeding
        is
        improper. 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 to such party at the address in effect for notices
        to it
        under this Agreement and agrees that such service shall constitute good and
        sufficient service of process and notice thereof. Nothing contained herein
        shall
        be deemed to limit in any way any right to serve process in any manner permitted
        by law.

      

      
        
          
          

        

        
          -35-

          
            

          

        

        
          
          

        

      

      (b) EACH
        PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR CONTROVERSY
        THAT MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS
        LIKELY
        TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY
        IRREVOCABLY
        AND
        UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
        RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
        TO
        THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT
        OR THE
        OTHER TRANSACTION DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
        EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (I) NO
        REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
        OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
        SEEK
        TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS
        CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS
        WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO
        THIS
        AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
        THIS
SECTION
        7.6(b).

      

      7.7 Counterparts.
        This
        Agreement may be executed in any number of counterparts, each of which shall
        be
        deemed an original, and all of which together shall constitute one and the
        same
        instrument. This Agreement may be executed and delivered by facsimile
        transmission.

      

      7.8 Headings.
        The
        headings used in this Agreement are used for convenience only and are not
        to be
        considered in construing or interpreting this Agreement. 

      

      7.9 Notices.
        Any
        notice, demand or request required or permitted to be given by the Company
        or
        the Holder pursuant to the terms of this Agreement shall be in writing and
        shall
        be deemed delivered (i) when delivered personally or by verifiable facsimile
        transmission, unless such delivery is made on a day that is not a Business
        Day,
        in which case such delivery will be deemed to be made on the next succeeding
        Business Day, (ii) on the next Business Day after timely delivery to an
        overnight courier and (iii) on the Business Day actually received if deposited
        in the U.S. mail (certified or registered mail, return receipt requested,
        postage prepaid), addressed as follows:

      

      If
        to
        the Company:

      

      Manaris
        Corporation

      400
        boul.
        Montpellier

      Montreal,
        Quebec

      Canada
        H4N 2G7

      Attn:
        John Fraser, Chief Executive Officer

      Tel:
        514-904-6030

      Fax:
        514-744-2080

       

      
        
          
          

        

        
          -36-

          
            

          

        

        
          
          

        

      

    

     

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

    

    Sichenzia
      Ross Friedman Ference LLP

    61
      Broadway, 32nd
      Floor

    New
      York,
      New York 10006

    Attn: Darrin
      Ocasio, Esq.

    Tel: 212-930-9700

    Fax: 212-930-9725

    

    and
      if to
      any Holder, to such address for such Holder as shall appear on such Holder’s
      signature page hereto, or as shall be designated by such Holder in writing
      to
      the Company in accordance with this Section
      7.9. 

    

    7.10 Expenses.
      The
      Company and each Holder shall pay all costs and expenses that it incurs in
      connection with the negotiation, execution, delivery and performance of this
      Agreement or the other Transaction Documents; provided,
      however,
      that
      the Company shall, at the Closing, pay to Imperium’s counsel the amount of
      $67,500 in immediately available funds as reimbursement for its out-of-pocket
      expenses (including, without limitation, legal fees and expenses) incurred
      or to
      be incurred by it in connection with its due diligence investigation of the
      Company and the negotiation, preparation, execution, delivery and performance
      of
      this Agreement and the other Transaction Documents.
      At the
      Closing, the amount due for such fees and expenses may be netted out of the
      Purchase Price payable by Imperium.

    

    7.11 Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents constitute the entire agreement
      between the parties with regard to the subject matter hereof and thereof,
      superseding all prior agreements or understandings, whether written or oral,
      between or among the parties. Except as expressly provided herein, neither
      this
      Agreement nor any term hereof may be amended except pursuant to a written
      instrument executed by the Company and (i) prior to the Termination Date, by
      the
      holders of a majority of the aggregate principal of the Notes then outstanding,
      and (ii) on and after the Termination Date, by the holders of a majority of
      the
      aggregate number of the Warrant Shares into which the Warrants then outstanding
      are exercisable (without
      regard to any limitation on the exercise of the Warrants). Any
      waiver or consent shall be effective only in the specific instance and for
      the
      specific purpose for which given.

    

    

    [Signature
      Pages to Follow]

     

    
      
        
        

      

      
        -37-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
      first-above written.

     

    MANARIS
      CORPORATION

    

    

    By: 

    
      

    

    Name:

    Title:

    

    

    IMPERIUM
      MASTER FUND, LTD.

    

    

    
      By: 

      
        

      

      Maurice
        Hryshko, Esq.

      General
        Counsel

    

    

    
      
        	
                Stated
                  Principal Amount of Convertible Note Purchased at Closing: 

              	 	$	4,708,900	 
	
                Number
                  of Shares into which Warrant Exercisable:   

              	 	 	20,276,190	 

      

    

     

    ADDRESS:

    

    c/o
      Imperium Advisers, LLC 

    153
      East
      53rd
      Street-
      29th
      Floor

    New
      York,
      NY 10022 

    Attn: Maurice
      Hryshko, Esq.

    Tel:
      (212) 433-1360 

    Fax:
      (212) 433-1361

     

    
      
        
        

      

      
        -38-

        
          

        

      

      
        
        

      

    

     

    Schedule
      3.2.3

    

    Acquisition
      Information

    

    In
      addition to any other information requested by the Holders, the following
      information shall be provided to the Holders in respect of each proposed
      Acquisition:

    

    
      	 	
              1.

            	
              the
                purchase price and all other anticipated transaction costs of such
                Acquisition;

            

    

    

    
      	 	
              2.

            	
              a
                description of the assets, business or operations being acquired
                (including the name of the Acquisition target, if
                applicable);

            

    

    

    
      	 	
              3.

            	
              the
                total Debt and other liabilities of such Acquisition target, including
                a
                breakdown of the liabilities that will be assumed by the Company
                versus
                the liabilities that will be paid off at closing (along with copies
                of all
                applicable payoff letters);

            

    

    

    
      	 	
              4.

            	
              a
                list of all Liens encumbering such Acquisition target or its
                assets;

            

    

    

    
      	 	
              5.

            	
              the
                Acquisition target’s existing insurance
                protection;

            

    

    

    
      	 	
              6.

            	
              the
                annual revenues of such Acquisition
                target;

            

    

    

    
      	 	
              7.

            	
              the
                anticipated annual revenues per dollar of the purchase price of such
                Acquisition;

            

    

    

    
      	 	
              8.

            	
              the
                book value of the assets being
                purchased;

            

    

    

    
      	 	
              9.

            	
              the
                market value of the assets being
                purchased;

            

    

    

    
      	 	
              10.

            	
              the
                net value of the assts being purchased (i.e. the book value of the
                assets
                being purchased less the liabilities being
                assumed);

            

    

    

    
      	 	
              11.

            	
              the
                net assets per dollar of the purchase price of such Acquisition;
                and

            

    

    

    
      	 	
              12.

            	
              the
                annual revenues plus net assets per dollar of the purchase price
                of such
                Acquisition.

            

    

     

    
      
        
        

      

      
        -39-Unassociated Document

    

    EXIBIT
      10.20

    

      Form
        of the 6 % Original Issue Discount Senior Secured Note 

      dated
        September 24, 2007

       

    

    
    

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    Execution
      Copy

    

    THIS
      6%
      ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE NOTE (THIS
“NOTE”) AND
      THE
      SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
      NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
      OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS
      A
      REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
      SHALL
      BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER
      THE
      SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
      WITH SUCH OFFER OR SALE. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION
      HEREOF
      (I) MAY BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN LOAN
      OR
      OTHER FINANCING SECURED BY SUCH SECURITIES OR (II) MAY BE TRANSFERRED OR
      ASSIGNED TO AN AFFILIATE OF THE HOLDER HEREOF WITHOUT THE NECESSITY OF AN
      OPINION OF COUNSEL OR THE CONSENT OF THE ISSUER HEREOF.

    

    THE
      OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE
      MAY
      BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW BECAUSE (I) THE PRINCIPAL AMOUNT
      OF THIS NOTE WILL ACCRETE IN VALUE FROM THE DATE HEREOF, AND (II) THIS NOTE
      DOES
      NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL PAYMENT,
      REDEMPTION OR CONVERSION HEREOF.

     

    MANARIS
      CORPORATION

     

    6%
      ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE NOTE

     

    
      	Issue
              Date: September 24,
              2007	 	$	$4,708,900	 

    

    

    FOR
      VALUE RECEIVED, MANARIS
      CORPORATION, a
      Nevada
      corporation (the
      “Company”),
      hereby promises to pay to the order of IMPERIUM MASTER FUND, LTD. or its
      permitted successors or assigns (the “Holder”)
      the
      sum of up to FOUR MILLION SEVEN HUNDRED EIGHT THOUSAND NINE HUNDRED AND 00/100
      DOLLARS ($4,708,900) in same day funds, on or before September 1, 2012 (the
      “Maturity
      Date”).
      The
      Holder may convert the principal of this Note into shares (“Conversion
      Shares”)
      of the
      Company’s common stock, par value $0.00001 per share (the “Common
      Stock”),
      on
      the terms set forth herein.

    

    Except
      as
      specifically provided by the terms of Section
      5,
      and the
      Scheduled Principal Payments contemplated in Section
      2(a),
      the
      Company shall not have the right to prepay any principal of this
      Note.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    The
      Company’s obligations under this Note, including, without limitation, its
      obligation to make payments of principal and interest, are guaranteed by the
      Company’s subsidiaries and secured by the assets and properties of the Company
      and its subsidiaries.

    

    The
      Company has issued this Note pursuant to a Securities Purchase and Loan
      Agreement, dated as of the Issue Date (the “Loan
      Agreement”),
      between the Company and the original purchaser of this Note. If this Note is
      partially assigned and divided into two or more notes, such additional notes
      along with the remainder of this Note are collectively referred to herein as
      the
“Notes”.
      

    

    1. DEFINITIONS.

    

    (a) Defined
      Terms.
      The
      following terms shall apply to this Note:

     

    “Assumed
      Variable Market Price” has
      the
      meaning set forth in Section
      4(e)(ii)(B)
      of this
      Note.

     

    “Cap
      Amount”
means
      $4,000,000.

    

    “Change
      of Control”
means
      the existence, occurrence or public announcement of, or entering into an
      agreement contemplating, any of the following: (a) the sale, conveyance or
      disposition of more than twenty-five percent (25%) of the assets of the Company,
      (b) the effectuation of a transaction or series of transactions in which more
      than fifty percent (50%) of the voting power of the Company is transferred
      or
      otherwise disposed of; (c) the effectuation of a transaction or series of
      transactions in which any of the voting power of any Company Subsidiary is
      transferred or otherwise disposed to a Person other than the Company or another
      Company Subsidiary; (d) the consolidation, merger or other business combination
      of the Company with or into any other entity, immediately following which the
      prior stockholders of the Company fail to own, directly or indirectly, at least
      seventy-five percent (75%) of the surviving entity; (e) the consolidation,
      merger or other business combination of any Company Subsidiary with or into
      any
      other entity other than the Company or another Company Subsidiary; (f) a
      transaction or series of transactions in which any Person or group acquires
      more
      than fifty percent (50%) of the voting equity of the Company; (g) a transaction
      or series of transactions in which any Person or group (other than the Company
      or a Company Subsidiary) acquires any of the voting equity of a Company
      Subsidiary; and (h) the Continuing Directors do not at any time constitute
      at
      least a majority of the Board of Directors.

    

    “Common
      Stock”
has
      the
      meaning set forth in the preamble
      to this
      Note.

    

    “Company”
has
      the
      meaning set forth in the preamble
      to this
      Note.

    

    “Continuing
      Director”
means,
      at any date, a member of the Company’s Board of Directors (i) who was a member
      of such board on the Issue Date or (ii) who was nominated or elected by at
      least
      a majority of the directors who were Continuing Directors at the time of such
      nomination or election or whose election to the Company’s Board of Directors was
      recommended or endorsed by at least a majority of the directors who were
      Continuing Directors at the time of such nomination or election or such lesser
      number comprising a majority of a nominating committee if authority for such
      nominations or elections has been delegated to a nominating committee whose
      authority and composition have been approved by at least a majority of the
      directors who were Continuing Directors at the time such committee was
      formed.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    “Conversion”
has
      the
      meaning set forth in Section
      3(a)
      of this
      Note.

     

    “Conversion
      Date”
has
      the
      meaning set forth in Section
      3(b)
      of this
      Note.

     

    “Conversion
      Default”
has
      the
      meaning set forth in Section
      3(e)
      of this
      Note.

     

    “Conversion
      Notice”
has
      the
      meaning set forth in Section
      3(b)
      of this
      Note.

     

    “Conversion
      Price”
      means $0.11,
      subject to adjustment as provided herein.

     

    “Convertible
      Securities” means
      any
      stock or securities (other than Options) of the Company convertible into or
      exercisable or exchangeable for Common Stock.

     

    “Default
      Interest Rate”
means
      the lower of eighteen percent (18%) and the maximum rate permitted by applicable
      law or by the applicable rules or regulations of any governmental agency or
      of
      any stock exchange or other self-regulatory organization having jurisdiction
      over the Company or the trading of its securities.

    

    “Delivery
      Date”
has
      the
      meaning set forth in Section
      3(d)
      of this
      Note.

    

    “Determination
      Date”
has
      the
      meaning set forth in Section
      4(c)
      of this
      Note.

    

    “Dilutive
      Issuance”
has
      the
      meaning set forth in Section
      4(e)(i)
      of this
      Note.

    

    “Dispute
      Procedure”
has
      the
      meaning set forth in Section
      3(b)
      of this
      Note.

    

    “Distribution,”
      “Distribution
      Date”
and
      “Distribution
      Notice”
have
      the respective meanings set forth in Section
      4(c)
      of this
      Note.

    

    “DTC”
has
      the
      meaning set forth in Section
      3(d)
      of this
      Note.

    

    “Event
      of Default”
means
      the occurrence of any of the following events: 

     

    (i) a
      Liquidation Event occurs or is publicly announced;

     

    (ii) the
      Company fails to make any payment of principal or interest on this Note in
      full
      as and when such payment is due, and such payment remains unpaid for two (2)
      Business Days; 

     

    (iii)
       other
      than a breach described in clause
      (ii)
      above,
      the Company breaches or provides notice of its intent to breach any material
      covenant, agreement or condition of this Note, the Loan Agreement, the Security
      Documents, the Warrant or the Registration Rights Agreement (including, without
      limitation, the occurrence of a Conversion Default, an Exercise Default (as
      defined in the Warrants) or a Registration Default (as defined in the
      Registration Rights Agreement); and such breach continues for a period of five
      (5) Business Days following written notice thereof from the Holder;

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    (iv) any
      representation or warranty made by the Company in this Note, the Loan Agreement,
      the Warrant or the Registration Rights Agreement was inaccurate or misleading
      in
      any material respect as of the date such representation or warranty was made;
      or

     

    (v) a
      default
      occurs or is declared, or any amounts are accelerated, under or with respect
      to
      any instrument that evidences Debt of the Company or any of its Subsidiaries
      in
      a principal amount exceeding $100,000 (including, without limitation, any of
      the
      other Notes).

     

    “FAST”
has
      the
      meaning set forth in Section
      3(d)
      of this
      Note.

    

    “Holder”
has
      the
      meaning set forth in the preamble
      to this
      Note.

     

    “Interest”
has
      the
      meaning set forth in Section
      2(b)
      of this
      Note.

    

    “Issue
      Date”
means
      the “Issue Date” stated on the front page of this Note.

    

    “Liquidation
      Event”
means
      where (i) the Company or any Company Subsidiary shall make a general assignment
      for the benefit of creditors or consent to the appointment of a receiver,
      liquidator, custodian, or similar official of all or substantially all of its
      properties, or any such official is placed in control of such properties, or
      the
      Company or any Company Subsidiary shall commence any action or proceeding or
      take advantage of or file under any federal or state insolvency statute,
      including, without limitation, the United States Bankruptcy Code, seeking to
      have an order for relief entered with respect to it or seeking adjudication
      as a
      bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
      liquidation, dissolution, administration, a voluntary arrangement, or other
      relief with respect to it or its debts; or (ii) there shall be commenced against
      the Company or any Company Subsidiary any action or proceeding of the nature
      referred to in clause
      (i)
      above or
      seeking issuance of a warrant of attachment, execution, distraint, or similar
      process against all or any substantial part of its property, which results
      in
      the entry of an order for relief which remains undismissed, undischarged or
      unbonded for a period of sixty (60) days; or (iii) there is initiated the
      dissolution or other winding up of the Company or
      any
      material Company Subsidiary,
      whether
      voluntary or involuntary and whether or not involving insolvency or bankruptcy
      proceedings; or (iv) there is initiated any assignment for the benefit of
      creditors or any marshalling of the material assets or material liabilities
      of
      the Company
      or any
      Company Subsidiary.

    

    “Major
      Transaction”
means
      the existence, occurrence or public announcement of, or entering into an
      agreement contemplating, a merger, consolidation, business combination, tender
      offer, exchange of shares, recapitalization, reorganization, redemption or
      other
      similar event, as a result of which shares of Common Stock shall be changed
      into, or exchanged or tendered for, the same or a different number of shares
      of
      the same or another class or classes of stock or securities or other assets
      of
      the Company or another entity.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    “Mandatory
      Redemption,”
      “Mandatory
      Redemption Date”
and
      “Mandatory
      Redemption Notice”
have
      the respective meanings set forth in Section
      5(a)
      of this
      Note.

    

    “Mandatory
      Redemption Price”
means,
      with respect to a Mandatory Redemption, the greater of:

    

    (A)
      the
      sum of (x) one hundred twenty percent (120%) of the unpaid principal amount
      of
      this Note being redeemed if such Mandatory Redemption is being effectuated
      in
      connection with an Event of Default or Major Transaction (or one hundred ten
      percent (110%) of the unpaid principal amount of this Note being redeemed if
      such Mandatory Redemption is being effectuated in connection with a Change
      of
      Control) plus
      (y) all
      accrued and unpaid Interest (including default interest) thereon; and

    

    (B)
      the
      product of (x) the quotient of (i) the unpaid principal amount of this Note
      being redeemed plus
      all
      accrued and unpaid Interest (including default interest) thereon divided
      by (ii)
      the
      Conversion Price in effect on the applicable Mandatory Redemption Date
multiplied
      by
      (y) the
      greater of (i) the Market Price calculated as of the date on which the
      applicable Mandatory Redemption Notice is delivered and (ii) the
      VWAP
      for the Trading Day occurring immediately prior to the Mandatory Redemption
      Date.

    

    “Market
      Price”
means,
      as of a particular date, the highest daily VWAP during the period of twenty
      (20)
      consecutive Trading Days occurring immediately prior to (but not including)
      such
      date.

    

    “Maturity
      Date”
has
      the
      meaning set forth in the preamble
      to this
      Note.

    

    “Options”
means
      any rights, warrants or options to subscribe for, purchase or receive Common
      Stock or Convertible Securities.

    

    “Purchase
      Rights”
means
      any options, warrants or other rights to purchase or subscribe for Common Stock
      or Convertible Securities.

    

    “Record
      Date”
has
      the
      meaning set forth in Section
      4(c)
      of this
      Note.

    

    “Scheduled
      Monthly Payment Date”
means
      October 1, 2009 and the first day of each calendar month thereafter,
provided,
      that if
      any of such days in any year is not a Business Day, then the Scheduled Monthly
      Payment Date shall be the Business Day immediately following such date.

    

    “VWAP”
on
      a
      Trading Day means the volume weighted average price of the Common Stock for
      such
      Trading Day on the Principal Market as reported by Bloomberg Financial Markets
      or, if Bloomberg Financial Markets is not then reporting such prices, by a
      comparable reporting service of national reputation selected by the Holders
      and
      reasonably satisfactory to the Company. 

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    (b) Terms
      Defined in the Loan Agreement.
      Any
      capitalized term used but not defined herein has the meaning specified in the
      Loan Agreement.

    

    (c) Usage. 
      All
      definitions contained in this Note are equally applicable to the singular and
      plural forms of the terms defined. The words “hereof”, “herein” and “hereunder”
and words of similar import refer to this Note as a whole and not to any
      particular provision of this Note.

    

    2. PRINCIPAL;
      INTEREST; SCHEDULED PAYMENTS.
      

    

    (a) Accretion
      of Principal.
      During
      the period commencing on the Issue Date and ending on the two year anniversary
      of the Issue Date (the “Accretion
      Period”),
      the
      outstanding principal of this Note shall accrete in value at an annual rate
      equal to eight and one-half percent (8.5%), computed on the basis of a 360-day
      year and calculated using the actual number of days elapsed since the Issue
      Date. Assuming no principal of this Note is converted or prepaid prior to the
      expiration of the Accretion Period, the outstanding principal of this Note
      shall
      accrete in accordance with the following schedule:

    

    
      	
              September
                24, 2007

            	 	
              $

            	
              4,000,000.00

            	 
	
              October
                24, 2007

            	 	 	
              4,028,333.33

            	 
	
              November
                24, 2007

            	 	 	
              4,056,666.67

            	 
	
              December
                24, 2007

            	 	 	
              4,085,000.00

            	 
	
              January
                24, 2008

            	 	 	
              4,113,333.33

            	 
	
              February
                24, 2008

            	 	 	
              4,141,666.66

            	 
	
              March
                24, 2008

            	 	 	
              4,169,999.99

            	 
	
              April
                24, 2008

            	 	 	
              4,198,333.32

            	 
	
              May
                24, 2008

            	 	 	
              4,226,666.65

            	 
	
              June
                24, 2008

            	 	 	
              4,254,999.98

            	 
	
              July
                24, 2008

            	 	 	
              4,283,333.31

            	 
	
              August
                24, 2008

            	 	 	
              4,311,666.64

            	 
	
              September
                24, 2008

            	 	 	
              4,340,000.00

            	 
	
              October
                24, 2008

            	 	 	
              4,370,741.67

            	 
	
              November
                24, 2008

            	 	 	
              4,401,483.34

            	 
	
              December
                24, 2008

            	 	 	
              4,432,225.01

            	 
	
              January
                24, 2009

            	 	 	
              4,462,966.68

            	 
	
              February
                24, 2009

            	 	 	
              4,493,708.35

            	 
	
              March
                24, 2009

            	 	 	
              4,524,450.02

            	 
	
              April
                24, 2009

            	 	 	
              4,555,191.69

            	 
	
              May
                24, 2009

            	 	 	
              4,585,933.36

            	 
	
              June
                24, 2009

            	 	 	
              4,616,675.03

            	 
	
              July
                24, 2009

            	 	 	
              4,647,416.80

            	 
	
              August
                24, 2009

            	 	 	
              4,678,158.37

            	 
	
              September
                24, 2009

            	 	 	
              4,708,900.00

            	 

    

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    (b) Interest.
      Commencing immediately upon the expiration of the Accretion Period, this Note
      shall bear interest on the unpaid principal amount hereof (“Interest”)
      at an
      annual rate equal to six percent (6%), computed on the basis of a 360-day year
      and calculated using the actual number of days elapsed since and including
      the
      day immediately following the expiration of the Accretion Period or the date
      on
      which Interest was most recently paid, as the case may be, and if not timely
      paid as provided herein, compounded monthly. 

    

    (c) Scheduled
      Monthly Payments; Payment of Interest.
      The
      Company shall pay to the Holder, in cash, on each Scheduled Monthly Payment
      Date, an amount equal to the sum of (i) the lesser of (x)
      $130,802.78 and
      (y)
      the then total remaining unpaid principal of this Note plus
      (ii)
      all
      accrued and unpaid Interest. In addition to the Scheduled Monthly Payment Dates,
      the Company shall pay accrued and unpaid Interest (x) on the Maturity Date
      and
      (y) on any other date on which all or any portion of the principal amount of
      this Note is payable (whether through conversion or otherwise).

    

    (d) Method
      of Payments.
      The
      Company shall make all cash payments required under this Note by
      wire
      transfer of immediately available funds. 

    

    (e) Default
      Interest.
      All
      amortization payments, payments of Interest and any other payments required
      under this Note that are not paid as and when due in accordance with this Note
      shall bear interest until paid at the Default Interest Rate.

    

    3. CONVERSION.
      

     

    (a) Right
      to Convert.
      The
      Holder shall have the right, subject to the limitations described in
Section
      3(f),
      at any
      time and from time to time, to convert all or any part of the outstanding and
      unpaid principal amount of this Note into such number of fully paid and
      non-assessable Conversion Shares as is determined in accordance with the terms
      hereof (a “Conversion”).
      The
      Company may not refuse any conversion request by the Holder for any reason
      or no
      reason unless and until the Company obtains an injunction and posts bond with
      respect thereto.

     

    (b)
       Conversion
      Notice.
      In
      order to convert principal of this Note, the Holder shall send by facsimile
      transmission (followed by a telephonic or email confirmation that such facsimile
      was sent), at any time prior to 5:00 p.m., New York City time, on the Business
      Day on which the Holder wishes to effect such Conversion (the “Conversion
      Date”),
      a
      properly completed notice of conversion to the Company, in the form set forth
      on
Annex
      I
      hereto,
      stating the amount of principal to be converted and a calculation of the number
      of shares of Common Stock issuable upon such Conversion (a “Conversion
      Notice”).
      Subject
      to Section
      6(d),
      the
      Conversion Notice shall also state the name or names (with address) in which
      the
      shares of Common Stock that are issuable on such Conversion shall be issued.
      The
      Holder shall not be required to physically surrender this Note to the Company
      in
      order to effect a Conversion. The Company shall maintain a record showing,
      at
      any given time, the unpaid principal amount of this Note and the date of each
      Conversion or other payment of principal hereof. In the case of a dispute as
      to
      the number of Conversion Shares issuable upon a Conversion (including, without
      limitation, as a result of adjustments to the Conversion Price made in
      accordance with Section
      4
      below),
      the Company shall promptly issue to the Holder the number of Conversion Shares
      that are not disputed, the Company and the Holder shall provide each other
      with
      their respective calculations, and the Company shall submit the disputed
      calculations to a certified public accounting firm of national recognition
      (other than the Company’s independent accountants) within two (2) Business Days
      following the later of the date on which the Holder delivers its calculations
      to
      the Company and the receipt of the Holder’s Conversion Notice. The Company shall
      use its best efforts to cause such accountants to calculate the Conversion
      Price
      as provided herein and to notify the Company and the Holder of the results
      in
      writing no later than two (2) Business Days following the day on which such
      accountant received the disputed calculations (the “Dispute
      Procedure”).
      Such
      accountant’s calculation shall be deemed conclusive absent manifest error. The
      fees of any such accountant shall be borne by the party whose calculations
      are
      most at variance with those of such accountant.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (c) Number
      of Conversion Shares; Reduction of Principal.
      The
      number of Conversion Shares to be delivered by the Company pursuant to a
      Conversion shall be equal to the principal amount of this Note being
      converted divided
      by
      the
      Conversion Price in effect on the Conversion Date.
      Upon the
      valid delivery of the Conversion Shares by the Company, the amounts subject
      to
      such Conversion shall be credited towards the principal amount of this
      Note, provided
      that all
      amounts credited towards future payments of principal shall be credited in
      the
      order that such principal payments are to become due and payable. 

     

    (d) Delivery
      of Common Stock Upon Conversion.
      The
      Company shall, no later than the close of business on the third (3rd) Business
      Day following the Conversion Date (the “Delivery
      Date”),
      issue
      and deliver or cause to be delivered to the Holder the number of Conversion
      Shares determined pursuant to Section
      3(c)
      above;
provided,
      however,
      that
      any Conversion Shares that are the subject of a Dispute Procedure shall be
      delivered no later than the close of business on the third (3rd) Business Day
      following the resolution of such dispute in accordance with this Note.
The
      Company shall effect delivery of Conversion Shares to the Holder, as long as
      the
      Transfer Agent participates in the Depository Trust Company (“DTC”)
      Fast
      Automated Securities Transfer program (“FAST”),
      by
      crediting the account of the Holder or its nominee at DTC (as specified in
      the
      applicable Conversion Notice) with the number of Conversion Shares required
      to
      be delivered, no later than the close of business on such Delivery Date. In
      the
      event that the Transfer Agent is not a participant in FAST or if the Holder
      so
      specifies in a Conversion Notice or otherwise in writing on or before the
      Conversion Date, the Company shall effect delivery of Conversion Shares by
      delivering to the Holder or its nominee physical certificates representing
      such
      Conversion Shares, no later than the close of business on such Delivery Date.
      If
      any
      Conversion would create a fractional Conversion Share, such fractional
      Conversion Share shall be disregarded and the number of Conversion Shares
      issuable upon such Conversion, in the aggregate, shall be the nearest whole
      number of Conversion Shares. Conversion Shares delivered to the Holder shall
      not
      contain any restrictive legend unless such legend is required pursuant to the
      terms of the Loan Agreement.

     

    (e) Failure
      to Deliver Conversion Shares.
      If the
      Company fails for any reason to (x) deliver to the Holder the number of
      Conversion Shares specified in a Conversion Notice (without any restrictive
      legend if so required under the Loan Agreement) on or before the Delivery Date
      therefor, or (y) remove any restrictive legend from outstanding Conversion
      Shares at the request of the Holder in accordance with the Loan Agreement on
      or
      before the third (3rd) Business Day following such request (each of the defaults
      described in the preceding clauses
      (x)
      and
(y),
      a
“Conversion
      Default”),
      the
      Holder shall have the right to receive from the Company an amount equal to
      (A)
      (N/365) multiplied
      by
      (B) the
      principal amount of this Note represented by the Conversion Shares which remain
      the subject of such Conversion Default multiplied
      by
      (C) the
      Default Interest Rate, where “N” equals the number of days elapsed between the
      date on which such Conversion Shares were to be delivered (or date on which
      the
      restrictive legend was to be removed from such Conversion Shares) and the date
      on which such Conversion Default has been cured. Amounts
      payable pursuant to the preceding sentence shall
      be
      paid to the Holder in immediately available funds on or before the second (2nd)
      Business Day following written notice from the Holder to the Company specifying
      the amount owed to it by the Company.
      In the
      event that shares of Common Stock are purchased by or on behalf of the Holder
      in
      order to
      make
      delivery on a sale effected in anticipation of receiving Conversion Shares
      upon
      a Conversion (or having the restrictive legend removed from outstanding
      Conversion Shares), and there is a Conversion Default with respect thereto,
      the
      Holder shall have the right to receive from the Company, in addition to the
      foregoing amounts, (1) the aggregate amount paid by or on behalf of the Holder
      for such shares of Common Stock minus
      (2) the
      aggregate amount of net proceeds, if any, received by the Holder from the sale
      of such Conversion Shares as and when such shares are delivered by the Company
      to the Holder. In addition to the foregoing rights, the Holder shall have the
      right to pursue all other remedies available to it at law or in equity
      (including, without limitation, a decree of specific performance and/or
      injunctive relief). 

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    (f) Limitations
      on Right to Convert.
      

    

    (i) In
      no
      event shall the Holder be permitted to convert principal of this Note if, upon
      such conversion, (x) the number of Conversion Shares to be issued pursuant
      to
      such Conversion plus
      (y) the
      number of shares of Common Stock beneficially owned by the Holder (other than
      Common Stock which may be deemed beneficially owned except for being subject
      to
      a limitation on conversion or exercise analogous to the limitation contained
      in
      this Section
      3(f)(i))
      would
      exceed 9.9% of the number of shares of Common Stock then issued and outstanding,
      it being the intent of the Company and the Holder that the Holder not be deemed
      at any time to have the power to vote or dispose of greater than 9.9% of the
      number of shares of Common Stock issued and outstanding at any time. Nothing
      contained herein shall be deemed to restrict the right of the Holder to convert
      such excess principal amount at such time as such Conversion does not violate
      the provisions of this Section
      3(f)(i).
      As
      used
      herein, beneficial ownership shall be determined in accordance with Section
      13(d) of the Exchange Act. The holders of Common Stock are to be deemed
      third-party beneficiaries of the limitation imposed hereby and, accordingly,
      this Section
      3(f)(i)
      may not
      be amended without the consent of the holders of a majority of the shares of
      Common Stock then outstanding; provided,
      however,
      that
      the Holder shall have the right, upon sixty (60) days’ prior written notice to
      the Company, to waive the provisions of this Section
      3(f)(i)
      without
      obtaining such consent.

    

    (ii) The
      Holder acknowledges and agrees that the aggregate amount of principal of this
      Note that may be converted into Common Stock may not exceed the Cap Amount.
      In
      the event that the Holder shall sell or otherwise transfer any portion of this
      Note, the then remaining portion of the Cap Amount shall be allocated between
      the Holder and its transferee pro
      rata
      in
      proportion to the aggregate number of Conversion Shares issuable under the
      portion of this Note so transferred and retained.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    4. ADJUSTMENTS
      TO CONVERSION PRICE.

    

    (a) Stock
      Splits, Stock Interests, Etc.
      If, at
      any time on or after the Issue Date, the number of outstanding shares of Common
      Stock is increased by a stock split, stock dividend, reclassification or other
      similar event, the Conversion Price shall be proportionately reduced, or if
      the
      number of outstanding shares of Common Stock is decreased by a reverse stock
      split, combination, reclassification or other similar event, the Conversion
      Price shall be proportionately increased. 

     

    (b) Major
      Transactions.
      If, at
      any time after the Issue Date, any Major Transaction shall occur, then the
      Holder shall thereafter have the right to receive upon Conversion, in lieu
      of
      the shares of Common Stock otherwise issuable, such shares of stock, securities
      and/or other property as would have been issued or payable upon such Major
      Transaction with respect to or in exchange for the number of shares of Common
      Stock which would have been issuable upon Conversion had such Major Transaction
      not taken place (without giving effect to any limitations on such Conversion
      contained in this Note or the Loan Agreement). The Company shall not effect
      any
      Major Transaction unless (i) subsequent
      to the public disclosure by the Company of such Major Transaction, the
Holder
      has been given written notice of such transaction by the earlier of (x) the
      date
      that is thirty (30) days (sixty one (61) days if, without giving effect to
      the
      limitation on conversion contained in Section
      3(f)(i),
      the
      Holder would beneficially owns more than 9.9% of the Common Stock then
      outstanding) prior to the date on which such transaction is consummated, and
      (y)
      the date that is fifteen (15) days prior to the record date for the
      determination of the Company’s stockholders entitled to vote with respect to
      such transaction, and (ii) the resulting successor or acquiring entity (if
      not
      the Company) assumes by written instrument (in form and substance reasonably
      satisfactory to the Holder) the obligations of the Company under this Note
      (including, without limitation, the obligation to make payments of principal
      and
      Interest accrued but unpaid through the date of such consolidation, merger
      or
      sale and accruing thereafter). The above provisions shall apply regardless
      of
      whether or not there would have been a sufficient number of shares of Common
      Stock authorized and available for issuance upon conversion of this Note as
      of
      the date of such transaction, and shall similarly apply to successive Major
      Transactions. Notwithstanding the foregoing, the Holder may, in lieu of
      exercising its rights under this Section
      4(b),
      exercise its rights under Section
      5
      of this
      Note.

     

    (c) Distributions.
      If, at
      any time after the Issue Date, the Company declares or makes any distribution
      of
      cash or any other assets (or rights to acquire such assets) to holders of Common
      Stock, including without limitation any dividend or distribution to the
      Company’s stockholders in shares (or rights to acquire shares) of capital stock
      of a subsidiary) (a “Distribution”),
      the
      Company shall deliver written notice of such Distribution (a “Distribution
      Notice”)
      to the
      Holder at least fifteen (15) days prior to the earlier to occur of (i) the
      record date for determining stockholders entitled to such Distribution (the
      “Record
      Date”)
      and
      (ii) the date on which such Distribution is made (the “Distribution
      Date”)
      (the
      earlier of such dates being referred to as the “Determination
      Date”).
      Upon
      receipt of the Distribution Notice, the Holder shall promptly (but in no event
      later than three (3) Business Days) notify the Company whether it has elected
      (A) to receive the same amount and type of assets (including, without
      limitation, cash) being distributed as though the Holder were, on the
      Determination Date, a holder of a number of shares of Common Stock into which
      this Note is convertible as of such Determination Date (such number of shares
      to
      be determined without giving effect to any limitations on such conversion)
      or
      (B) upon any exercise of this Note on or after the Distribution Date, to reduce
      the Conversion Price in effect on the Business Day immediately preceding the
      Record Date by an amount equal to the fair market value of the assets to be
      distributed divided
      by
      the
      number of shares of Common Stock as to which such Distribution is to be made,
      such fair market value to be reasonably determined in good faith by the Board
      of
      Directors and reasonably acceptable to the Holder. Upon receipt of such election
      notice from the Holder, the Company shall timely effectuate the transaction
      or
      adjustment contemplated in the foregoing clause
      (A) or
      (B),
      as
      applicable. 
      If the
      Holder does not notify the Company of its election pursuant to the preceding
      sentence on or prior to the Determination Date, the Holder shall be deemed
      to
      have elected clause
      (A)
      of the
      preceding sentence.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    (d) Convertible
      Securities; Options.
      If, at
      any time after the Issue Date, the Company issues Convertible Securities or
      Options to the record holders of the Common Stock, whether or not such
      Convertible Securities or Options are immediately convertible, exercisable
      or
      exchangeable, then the Holders shall be entitled, upon any Conversion of this
      Note after the date of record for determining stockholders entitled to receive
      such Convertible Securities or Options (or if no such record is taken, the
      date
      on which such Convertible Securities or Options are issued), to receive the
      aggregate number of Convertible Securities or Options which the Holder would
      have received with respect to the shares of Common Stock issuable upon such
      conversion (without giving effect to any limitations on such Conversion
      contained in this Note or the Loan Agreement) had the Holder been the holder
      of
      such shares of Common Stock on the record date for the determination of
      stockholders entitled to receive such Convertible Securities or Options (or
      if
      no such record is taken, the date on which such Convertible Securities or
      Options were issued). 

     

    (e) Dilutive
      Issuances.

     

    (i) Adjustment
      Upon Dilutive Issuance.
      If the
      Company issues or sells, or in accordance with Section
      4(e)(ii)
      of this
      Note is deemed to have issued or sold, any shares of Common Stock for no
      consideration or for a consideration per share less than the Conversion Price
      in
      effect on the date of such issuance or sale (or deemed issuance or sale) (a
      “Dilutive
      Issuance”),
      then
      effective immediately upon such Dilutive Issuance, the Conversion Price shall
      be
      adjusted so as to equal the consideration received or receivable by the Company
      (on a per share basis) for the additional shares of Common Stock so issued,
      sold
      or deemed issued or sold in such Dilutive Issuance (which, in the case of a
      deemed issuance or sale, shall be calculated in accordance with Section
      4(e)(ii)
      of this
      Note). Notwithstanding the foregoing, no adjustment shall be made pursuant
      hereto if such adjustment would result in an increase in the Conversion
      Price.

     

    (ii) Effect
      On Conversion Price Of Certain Events.
      For
      purposes of determining the adjusted Conversion Price under Section
      4(e)(i) of
      this
      Note, the following will be applicable:

     

    (A) Issuance
      Of Options.
      If the
      Company issues or sells any Options, whether or not immediately exercisable,
      and
      the price per share for which Common Stock is issuable upon the exercise of
      such
      Options (and the price of any conversion of Convertible Securities, if
      applicable) is less than the Conversion Price in effect on the date of issuance
      or sale of such Options, then the maximum total number of shares of Common
      Stock
      issuable upon the exercise of all such Options (assuming full conversion,
      exercise or exchange of Convertible Securities, if applicable) shall, as of
      the
      date of the issuance or sale of such Options, be deemed to be outstanding and
      to
      have been issued and sold by the Company for such price per share. For purposes
      of the preceding sentence, the “price per share for which Common Stock is
      issuable upon the exercise of such Options” shall be determined by dividing
      (x) the
      total amount, if any, received or receivable by the Company as consideration
      for
      the issuance or sale of all such Options, plus
      the
      minimum aggregate amount of additional consideration, if any, payable to the
      Company upon the exercise of all such Options, plus,
      in the
      case of Convertible Securities issuable upon the exercise of such Options,
      the
      minimum aggregate amount of additional consideration payable upon the
      conversion, exercise or exchange thereof (determined in accordance with the
      calculation method set forth in Section
      4(e)(ii)(B)
      below)
      at the time such Convertible Securities first become convertible, exercisable
      or
      exchangeable, by (y) the maximum total number of shares of Common Stock issuable
      upon the exercise of all such Options (assuming full conversion, exercise or
      exchange of Convertible Securities, if applicable). No further adjustment to
      the
      Conversion Price shall be made upon the actual issuance of such Common Stock
      upon the exercise of such Options or upon the conversion, exercise or exchange
      of Convertible Securities issuable upon exercise of such Options.
      To the
      extent that shares of Common Stock or Convertible Securities are not delivered
      pursuant to such Options, upon the expiration or termination of such Options,
      the Conversion Price shall be readjusted to the Conversion Price that would
      then
      be in effect had the adjustments made upon the issuance of such Options been
      made on the basis of delivery of only the number of shares of Common Stock
      actually delivered.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    (B) Issuance
      Of Convertible Securities.
      If the
      Company issues or sells any Convertible Securities, whether or not immediately
      convertible, exercisable or exchangeable, and the price per share for which
      Common Stock is issuable upon such conversion, exercise or exchange is less
      than
      the Conversion Price in effect on the date of issuance or sale of such
      Convertible Securities, then the maximum total number of shares of Common Stock
      issuable upon the conversion, exercise or exchange of all such Convertible
      Securities shall, as of the date of the issuance or sale of such Convertible
      Securities, be deemed to be outstanding and to have been issued and sold by
      the
      Company for such price per share. If the Convertible Securities so issued or
      sold do not have a fluctuating conversion or exercise price or exchange ratio,
      then for the purposes of the immediately preceding sentence, the “price per
      share for which Common Stock is issuable upon such conversion, exercise or
      exchange” shall be determined by dividing
      (A) the
      total amount, if any, received or receivable by the Company as consideration
      for
      the issuance or sale of all such Convertible Securities,
      plus
      the
      minimum aggregate amount of additional consideration, if any, payable to the
      Company upon the conversion, exercise or exchange thereof (determined in
      accordance with the calculation method set forth in this Section
      4(e)(ii)(B))
      at the
      time such Convertible Securities first become convertible, exercisable or
      exchangeable, by (B) the maximum total number of shares of Common Stock issuable
      upon the exercise, conversion or exchange of all such Convertible
      Securities.
      If the
      Convertible Securities so issued or sold constitutes a Variable Rate Security,
      then for purposes of the first sentence of this Section
      4(e)(ii)(B),
      the
“price per share for which Common Stock is issuable upon such conversion,
      exercise or exchange” shall be deemed to be the lowest price per share which
      would be applicable (assuming all holding period and other conditions to any
      discounts contained in such Variable Rate Security have been satisfied) if
      the
      conversion price of such Variable Rate Security on the date of issuance or
      sale
      thereof were equal to the actual conversion price on such date (or such higher
      minimum conversion price if such Variable Rate Security is subject to a minimum
      conversion price) (the “Assumed
      Variable Market Price”),
      and,
      further, if the conversion price of such Variable Rate Security at any time
      or
      times thereafter is less than or equal to the Assumed Variable Market Price
      last
      used for making any adjustment under this Section
      4(e)
      with
      respect to any Variable Rate Security, the Conversion Price in effect at such
      time shall be readjusted to equal the Conversion Price which would have resulted
      if the Assumed Variable Market Price at the time of issuance of the Variable
      Rate Security had been equal to the actual conversion price of such Variable
      Rate Security existing at the time of the adjustment required by this sentence;
      provided,
      however,
      that if
      the conversion or exercise price or exchange ratio of a Convertible Security
      may
      fluctuate solely as a result of provisions designed to protect against dilution,
      such Convertible Security shall not be deemed to be a Variable Rate Security.
      No
      further adjustment to the Conversion Price shall be made upon the actual
      issuance of such Common Stock upon conversion, exercise or exchange of such
      Convertible Securities.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    (C) Change
      In Option Price Or Conversion Rate.
      If
      there is a change at any time (including, without limitation, a change with
      respect to any Options or Convertible Securities outstanding as of the Issue
      Date) in (x) the amount of additional consideration payable to the Company
      upon
      the exercise of any Options; (y) the amount of additional consideration, if
      any,
      payable to the Company upon the conversion, exercise or exchange of any
      Convertible Securities; or (z) the rate at which any Convertible Securities
      are
      convertible into or exercisable or exchangeable for Common Stock, the Conversion
      Price in effect at the time of such change shall be readjusted to the Conversion
      Price which would have been in effect at such time had such Options or
      Convertible Securities still outstanding provided for such changed additional
      consideration or changed conversion, exercise or exchange rate, as the case
      may
      be, at the time initially issued or sold.

     

    (D) Calculation
      Of Consideration Received.
      If any
      Common Stock, Options or Convertible Securities are issued or sold for cash,
      the
      consideration received therefor will be the amount received by the Company
      therefor. In case any Common Stock, Options or Convertible Securities are issued
      or sold for a consideration part or all of which shall be other than cash,
      the
      amount of the consideration other than cash received by the Company shall be
      the
      fair market value of such consideration. In case any Common Stock, Options
      or
      Convertible Securities are issued in connection with any merger or consolidation
      in which the Company is the surviving corporation, the amount of consideration
      therefor will be deemed to be the fair market value of such portion of the
      net
      assets and business of the non-surviving corporation as is attributable to
      such
      Common Stock, Options or Convertible Securities, as the case may be. The
      independent members of the Company’s Board of Directors shall calculate
      reasonably and in good faith, using standard commercial valuation methods
      appropriate for valuing such assets, the fair market value of any
      consideration.

    

    (iii) Exceptions
      To Adjustment Of Conversion Price.
      Notwithstanding the foregoing, no adjustment to the Conversion Price shall
      be
      made pursuant to this Section
      4(e)
      upon the
      issuance of any Excluded Securities. 

    

    (f) Notice
      Of Adjustments.
      Upon
      the occurrence of each adjustment or readjustment of the Conversion Price
      pursuant to this Section
      4
      resulting in a change in the Conversion Price by more than one percent (1%),
      or
      any change in the number or type of stock, securities and/or other property
      issuable upon Conversion of this Note, the Company, at its expense, shall
      promptly compute such adjustment, readjustment or change and prepare and furnish
      to the Holder a certificate setting forth such adjustment, readjustment or
      change and showing in detail the facts upon which such adjustment, readjustment
      or change is based. The Company shall, upon the written request at any time
      of
      the Holder, furnish to the Holder a like certificate setting forth (i) such
      adjustment, readjustment or change, (ii) the Conversion Price at the time in
      effect and (iii) the number of shares of Common Stock and the amount, if any,
      of
      other securities or property which at the time would be received upon Conversion
      of this Note.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (g) Adjustments;
      Additional Shares, Securities or Assets.
      In the
      event that at any time, as a result of an adjustment made pursuant to this
      Section
      4,
      the
      Holder of this Note shall, upon conversion of this Note, become entitled to
      receive securities or assets (other than Common Stock) then, wherever
      appropriate, all references herein to shares of Common Stock shall be deemed
      to
      refer to and include such shares and/or other securities or assets; and
      thereafter the number of such shares and/or other securities or assets shall
      be
      subject to adjustment from time to time in a manner and upon terms as nearly
      equivalent as practicable to the provisions of this Section
      4.
      

     

    5. EVENTS
      OF DEFAULT; MANDATORY REDEMPTION.

     

    (a) Mandatory
      Redemption.
      In the
      event that an Event of Default, a Change of Control or Major Transaction occurs,
      the Holder shall have the right, upon written notice to the Company (a
“Mandatory
      Redemption Notice”),
      to
      have all or any portion of the unpaid principal amount of this Note,
plus
      all
      accrued and unpaid Interest (including default interest (if any)), redeemed
      by
      the Company (a “Mandatory
      Redemption”)
      at the
      Mandatory Redemption Price in same day funds. The Mandatory Redemption Notice
      shall specify (i) the Mandatory Redemption Price and (ii) the date on which
      such
      Mandatory Redemption Price must be paid to the Holder (the “Mandatory
      Redemption Date”),
      which
      date must be at least four (4) Business Days following the Business Day on
      which
      the Mandatory Redemption Notice is delivered to the Company. In order to effect
      a Mandatory Redemption hereunder, the Holder must deliver a Mandatory Redemption
      Notice no later than, in the case of an Event of Default, the close of business
      on the third (3rd)
      Business Day following the date on which an Event of Default is no longer
      continuing and, with respect to a Change of Control or Major Transaction, the
      close of business on the third (3rd)
      Business Day following the date on which the Change of Control or Major
      Transaction is completed.

     

    (b) Payment
      of Mandatory Redemption Price.

     

    (i) The
      Company shall pay the Mandatory Redemption Price to the Holder on the Mandatory
      Redemption Date. In the event that the Company redeems the entire remaining
      unpaid principal amount of this Note, all accrued and unpaid Interest and any
      other amounts due hereunder, and pays such amount to the Holder in cash, the
      Holder shall return this Note to the Company for cancellation.

     

    (ii) If
      the
      Company fails to pay the Mandatory Redemption Price to the Holder on Mandatory
      Redemption Date, the Holder shall be entitled to interest thereon at the Default
      Interest Rate from the Mandatory Redemption Date until the date on which
      Mandatory Redemption Price has been paid in full.

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    6. MISCELLANEOUS.

     

    (a) Failure
      to Exercise Rights not Waiver.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude any other
      or
      further exercise thereof. All rights and remedies of the Holder hereunder are
      cumulative and not exclusive of any rights or remedies otherwise available.
      In
      the event that the Company does not pay any amount under this Note when such
      amount becomes due, the Company shall bear all costs incurred by the Holder
      in
      collecting such amount, including, without limitation, reasonable legal fees
      and
      expenses. 

     

    (b) Notices.
      Any
      notice, demand or request required or permitted to be given by the Company
      or
      the Holder pursuant to the terms of this Note shall be in writing and shall
      be
      deemed delivered (i) when delivered personally or by verifiable facsimile
      transmission, unless such delivery is made on a day that is not a Business
      Day,
      in which case such delivery will be deemed to be made on the next succeeding
      Business Day, (ii) on the next Business Day after timely delivery to an
      overnight courier and (iii) on the Business Day actually received if deposited
      in the U.S. mail (certified or registered mail, return receipt requested,
      postage prepaid), addressed as follows:

    

    If
      to
      the Company:

    

    Manaris
      Corporation

    400
      boul.
      Montpellier

    Montreal,
      Quebec

    Canada
      H4N 2G7

    Attn:
       John
      Fraser, Chief Executive Officer

    Tel:
       514-904-6030

    Fax:
       514-744-2080

    

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

    

    Sichenzia
      Ross Friedman Ference LLP

    61
      Broadway, 32nd
      Floor

    New
      York,
      New York 10006

    Attn: Darrin
      Ocasio, Esq.

    Tel: 212-930-9700

    Fax: 212-930-9725

    

    and
      if to
      the Holder, to such address for the Holder as provided by such Holder under
      the
      Loan Agreement, or as shall be designated by the Holder in writing to the other
      parties hereto in accordance with this Section
      6(b).

    

    (c)
       Amendments
      and Waivers.
      No
      amendment, modification or other change to, or waiver of any provision of,
      this
      Note or any other Note may be made unless such amendment, modification or
      change, or request for waiver, is (A) set forth in writing and is signed by
      the
      Company, (B) consented to in writing by the holders of at least sixty-six
      percent (66%) of the unpaid principal amount of the Notes, and (C) applied
      to
      all of the Notes. Upon the satisfaction of the conditions described in (A),
      (B)
      and (C) above, this Note shall be deemed to incorporate the amendment,
      modification, change or waiver effected thereby as of the effective date
      thereof, even if the Holder did not consent to such amendment, modification,
      change or waiver. Notwithstanding
      the foregoing, the limitation on beneficial ownership set forth in Section
      3(f)(i)
      may not
      be amended without the consent of the holders of a majority of the shares of
      Common Stock then outstanding; provided,
      however,
      that
      such limitation may be waived by the Holder upon sixty (60) days’ prior written
      notice to the Company, and such waiver shall be valid and shall not require
      the
      consent of the Company or any other holder of Common Stock or
      Notes.

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    (d)
       Transfer
      of Note.
      The
      Holder may sell, transfer or otherwise dispose of all or any part of this Note
      (including, without limitation, pursuant to a pledge) to any Person as long
      as
      such sale, transfer or disposition is the subject of an effective registration
      statement under the Securities Act of 1933, as amended, and applicable state
      securities laws, or is exempt from registration thereunder, and is otherwise
      made in accordance with the applicable provisions of the Loan Agreement. From
      and after the date of any such sale, transfer or disposition, the transferee
      hereof shall be deemed to be the holder of a Note in the principal amount
      acquired by such transferee, and the Company shall, as promptly as practicable
      (but in no event later than three Business Days from the date it receives notice
      thereof), issue and deliver to such transferee a new Note identical in all
      respects to this Note, in the name of such transferee. The Company shall be
      entitled to treat the original Holder as the holder of this entire Note unless
      and until it receives written notice of the sale, transfer or disposition
      hereof.

     

    (e) Lost
      or Stolen Note.
      Upon
      receipt by the Company of evidence of the loss, theft, destruction or mutilation
      of this Note, and (in the case of loss, theft or destruction) of indemnity
      or
      security reasonably satisfactory to the Company, and upon surrender and
      cancellation of the Note, if mutilated, the Company shall execute and deliver
      to
      the Holder a new Note identical in all respects to this Note.

     

    (f)
       Governing
      Law; Jurisdiction; Waiver of Jury Trial.
      

    

    (i) This
      Note
      shall be governed by and construed under the laws of the State of New York
      applicable to contracts made and to be performed entirely within the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in the City and County of New York for
      the
      adjudication of any dispute hereunder or any other Transaction Document or
      in
      connection herewith or therewith or with any transaction contemplated hereby
      or
      thereby, 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 brought
      in an inconvenient forum or that the venue of such suit, action or proceeding
      is
      improper. The Holder and the Company 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 to such Person at the address in effect
      for
      notices to it under this Note and agrees that such service shall constitute
      good
      and sufficient service of process and notice thereof. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law.

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    (ii) THE
      HOLDER AND THE COMPANY EACH ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR
      CONTROVERSY THAT MAY ARISE UNDER THIS NOTE OR THE OTHER TRANSACTION DOCUMENTS
      IS
      LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PERSON
      HEREBY IRREVOCABLY
      AND
      UNCONDITIONALLY WAIVES ANY RIGHT SUCH PERSON MAY HAVE TO A TRIAL BY JURY IN
      RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
      TO
      THIS NOTE, OR THE BREACH, TERMINATION OR VALIDITY OF THIS NOTE OR THE OTHER
      TRANSACTION DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
      THE
      HOLDER AND THE COMPANY EACH CERTIFIES AND ACKNOWLEDGES THAT (I) NO
      REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
      OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION,
      SEEK
      TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PERSON UNDERSTANDS AND HAS
      CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PERSON MAKES THIS
      WAIVER VOLUNTARILY, AND (IV) EACH SUCH PERSON HAS BEEN INDUCED TO UNDERTAKE
      THE
      OBLIGATIONS SET FORTH IN THIS NOTE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
      AND CERTIFICATIONS IN THIS SECTION
      6(f)(ii).

    

    (g) Successors
      and Assigns.
      The
      terms and conditions of this Note
      shall
      inure to the benefit of and be binding upon the respective successors (whether
      by merger or otherwise) and permitted assigns of the Company and the Holder.
      The
      Company may not assign its rights or obligations under this Note
      except
      as specifically required or permitted pursuant to the terms hereof.

     

    (h) Usury.
      This
      Note
      is subject to the express condition that at no time shall the Company be
      obligated or required to pay interest hereunder at a rate which could subject
      the Holder to either civil or criminal liability as a result of being in excess
      of the maximum interest rate which the Company is permitted by applicable law
      to
      contract or agree to pay.  If by the terms of this Note, the Company is at
      any time required or obligated to pay interest hereunder at a rate in excess
      of
      such maximum rate, the rate of interest under this Note shall be deemed to
      be
      immediately reduced to such maximum rate and the interest payable shall be
      computed at such maximum rate and all prior interest payments in excess of
      such
      maximum rate shall be applied and shall be deemed to have been payments in
      reduction of the principal balance of this Note.  

    

    (i) Taxes .
      Any and
      all payments of any kind whatsoever by the Company under or in connection with
      this Note or any other Transaction Document shall be made free and clear of
      and
      without deduction for any and all present or future taxes, levies, imposts,
      deductions, charges or withholdings, and all liabilities of any kind whatsoever
      with respect thereto, excluding taxes imposed on the net income of the Holder
      (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings
      and liabilities, collectively or individually, the “Taxes”).
      If
      the Company shall be required to deduct or if Holder shall be required to pay
      any Taxes from or in respect of any sum payable under or in connection with
      any
      of this Note or any other Transaction Document to the Holder, (i) the sum
      payable shall be increased by the amount necessary so that after making all
      required deductions (including deductions applicable to additional sums payable
      under or in connection with this Section
      6(i))
      the
      Holder shall receive an amount equal to the sum it would have received had
      no
      such deductions been made, (ii) the Company shall make such deductions if so
      required and (iii) the Company shall pay the full amount deducted to or that
      is
      otherwise required to be paid by the Holder and file any required tax and
      information return with the relevant Governmental Authority in accordance with
      applicable law.

     

    [Signature
      Page to Follow]

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Note to be signed in its name
      by
      its duly authorized officer on the date first above written.

     

    MANARIS
      CORPORATION

    

    

    By: 

    
      
        

      

    

    Name:

    Title:

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    

    ANNEX
      I

    

    

    NOTICE
      OF CONVERSION

    

    The
      undersigned hereby elects to convert principal of the 6% Original Issue Discount
      Senior Secured Convertible Note (the “Note”)
      issued
      by MANARIS CORPORATION (the “Company”)
      into
      shares of common stock (“Common
      Stock”)
      of the
      Company according to the terms and conditions of the Note. Capitalized terms
      used herein and not otherwise defined shall have the respective meanings set
      forth in the Note. 

    

    

    
      	 	
              Date
                of Conversion:
                ____________________________________________

            
	 	 
	 	
              Principal
                Amount of 
                Note
                  to be Converted:
                  ____________________________________________

              

            
	 	 
	 	
              Number
                of Shares of 
                Common
                  Stock to be
                  Issued: ______________________________________

              

            
	 	 
	 	
              Name
                of Holder: 
                ________________________________________________

            
	 	 
	 	
              Address:
                ______________________________________________________

            
	 	 
	 	              ______________________________________________
	 	 
	 	             
              ______________________________________________
	 	 
	 	
              Signature: 

              
                

              

            
	 	
              Name:

            
	 	
              Title:

            

    

     

    Holder
      Requests Delivery to be made:
      (check
      one)

    

    
      	
              ྐྵ

            	
              By
                Delivery of Physical Certificates to the Above
                Address

            

    

    

    
      	
              ྐྵ

            	
              Through
                Depository Trust Corporation

            

    

    (Account
       _____________________)

     

    
      
        
        

      

      
        -20-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00130-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00130-of-00352.parquet"}]]