Document:

Securities Purchase Agreement

                                                                                            Exhibit
      10.1

     

     

    

    SECURITIES
      PURCHASE AGREEMENT

     

    SECURITIES
      PURCHASE AGREEMENT
      (the
      "Agreement"),
      dated
      as of February 15, 2007, by and among Millennium Cell Inc., a Delaware
      corporation, with headquarters located at One Industrial Way West, Eatontown,
      New Jersey 07724 (the "Company"),
      and
      the investors listed on the Schedule of Buyers attached hereto (individually,
      a
      "Buyer"
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A.  The
      Company and each Buyer is executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by Section 4(2) of
      the
      Securities Act of 1933, as amended (the "1933
      Act"),
      and
      Rule 506 of Regulation D ("Regulation D")
      as
      promulgated by the United States Securities and Exchange Commission (the
      "SEC")
      under
      the 1933 Act.

     

    B.  The
      Company has authorized a new series of convertible debentures of the Company,
      in
      the form attached hereto as Exhibit
      A
      (the
      "Debentures"),
      which
      Debentures shall be convertible into the Company's common stock, par value
      $0.001 per share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares"),
      in
      accordance with the terms of the Debentures.

     

    C.  Each
      Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, (i) that aggregate principal amount of
      the
      Debentures set forth opposite such Buyer's name in column (3) on the Schedule
      of
      Buyers (which aggregate principal amount for all Buyers shall be $6,000,000)
      and
      (ii) a warrant, in substantially the form attached hereto as Exhibit
      B
      (collectively, the "Warrants"),
      to
      acquire that number of shares of Common Stock set forth opposite such Buyer's
      name in column (4) on the Schedule of Buyers (as exercised, collectively, the
      "Warrant
      Shares").

     

    D.  The
      Debentures bear interest, which at the option of the Company, subject to certain
      conditions, may be paid in shares of Common Stock (the "Interest
      Shares").

     

    E.  Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, substantially in
      the
      form attached hereto as Exhibit
      C
      (the
      "Registration
      Rights Agreement"),
      pursuant to which the Company will agree to provide certain registration rights
      with respect to the Registrable Securities (as defined in the Registration
      Rights Agreement) under the 1933 Act and the rules and regulations promulgated
      thereunder, and applicable state securities laws.

     

    F.  The
      Debentures, the Conversion Shares, the Interest Shares, the Warrants and the
      Warrant Shares collectively are referred to herein as the "Securities".

     

    G.  The
      Debentures will rank senior to all outstanding and future indebtedness of the
      Company except for (x) the Company's Unsecured Convertible Debentures Due 2007
      (the "Parri
      Passu Debentures")
      and
      (y) the Permitted Pari Passu Indebtedness (as defined in the Debentures), which
      will rank pari
      passu
      with the
      Debentures.

     

    NOW,
      THEREFORE,
      the
      Company and each Buyer hereby agree as follows:

     

    1.  PURCHASE
      AND SALE OF DEBENTURES AND WARRANTS.

     

    (a)  Purchase
      of Debentures and Warrants.

     

    (i)  Debentures
      and Warrants. Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 6 and
      7
      below, the Company shall issue and sell to each Buyer, and each Buyer severally,
      but not jointly, agrees to purchase from the Company on the Closing Date (as
      defined below), a principal amount of Debentures as is set forth opposite such
      Buyer's name in column (3) on the Schedule of Buyers, along
      with Warrants to acquire that number of Warrant Shares set forth opposite such
      Buyer's name in column (4) on the Schedule of Buyers (the "Closing").

     

    (ii)  Closing.
      The
      date and time of the Closing (the "Closing
      Date")
      shall
      be 10:00 a.m., New York City time, on the date hereof (or such later date as
      is
      mutually agreed to by the Company and each Buyer) after notification of
      satisfaction (or waiver) of the conditions to the Closing set forth in Sections
      6 and 7 below at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue,
      New York, New York 10022, subject to notification of satisfaction (or waiver)
      of
      the conditions to the Closing set forth in Sections 6 and 7 below.

     

    (iii)  Purchase
      Price.
      The
      aggregate purchase price for the Debentures and the Warrants to be purchased
      by
      each such Buyer at the Closing (the "Purchase
      Price")
      shall
      be the amount set forth opposite each Buyer's name in column (5) of the Schedule
      of Buyers. Each Buyer shall pay $1,000 for each $1,000 of principal amount
      of
      Debenture and related Warrants to be purchased by such Buyer at the
      Closing.

     

    (b)  Form
      of Payment.
      On the
      Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for
      the
      Debentures and the Warrants to be issued and sold to such Buyer at the Closing,
      by wire transfer of immediately available funds in accordance with the Company's
      written wire instructions, and (ii) the Company shall deliver to each Buyer
      the Debentures (allocated in the principal amounts as such Buyer shall request)
      which such Buyer is then purchasing hereunder along with the Warrants (allocated
      in the amounts as such Buyer shall request) such Buyer is purchasing, duly
      executed on behalf of the Company and registered in the name of such Buyer
      or
      its designee. 

     

    2.  BUYER'S
      REPRESENTATIONS AND WARRANTIES.
      Each
      Buyer represents and warrants with respect to only itself that: 

     

    (a)  No
      Sale or Distribution.
      Such
      Buyer is acquiring the Debentures and the Warrants, and upon conversion of
      the
      Debentures and exercise of the Warrants (other than pursuant to a Cashless
      Exercise (as defined in the Warrants)) will acquire the Conversion Shares
      issuable upon conversion of the Debentures and the Warrant Shares issuable
      upon
      exercise of the Warrants, for its own account and not with a view towards,
      or
      for resale in connection with, the sale or distribution thereof, except pursuant
      to sales registered or exempted under the 1933 Act; provided, however, that
      by
      making the representations herein, such Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act and pursuant to the
      applicable terms of the Transaction Documents (as defined in Section 3(b)).
      Such Buyer is acquiring the Securities hereunder in the ordinary course of
      its
      business. Such Buyer does not presently have any agreement or understanding,
      directly or indirectly, with any Person to distribute any of the
      Securities.

     

    (b)  Accredited
      Investor Status.
      Such
      Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
      Regulation D.

     

    (c)  Reliance
      on Exemptions.
      Such
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and such Buyer's compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Buyer set forth herein in order to determine the availability of such
      exemptions and the eligibility of such Buyer to acquire the
      Securities.

     

    (d)  Information.
      Such
      Buyer and its advisors, if any, have been furnished with all materials relating
      to the business, finances and operations of the Company and materials relating
      to the offer and sale of the Securities that have been requested by such Buyer.
      Such Buyer and its advisors, if any, have been afforded the opportunity to
      ask
      questions of the Company. Neither such inquiries nor any other due diligence
      investigations conducted by such Buyer or its advisors, if any, or its
      representatives shall modify, amend or affect such Buyer's right to rely on
      the
      Company's representations and warranties contained herein. Such Buyer
      understands that its investment in the Securities involves a high degree of
      risk
      and is able to afford a complete loss of such investment. Such Buyer has sought
      such accounting, legal and tax advice as it has considered necessary to make
      an
      informed investment decision with respect to its acquisition of the
      Securities.

     

    (e)  No
      Governmental Review.
      Such
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities.

     

    (f)  Transfer
      or Resale.
      Such
      Buyer understands that except as provided in the Registration Rights Agreement:
      (i) the Securities have not been and are not being registered under the 1933
      Act
      or any state securities laws, and may not be offered for sale, sold, assigned
      or
      transferred unless (A) registered thereunder, (B) such Buyer shall have
      delivered to the Company an opinion of counsel, in a form and from a law firm
      reasonably acceptable to the Company and its legal counsel (with Schulte Roth
      & Zabel LLP being deemed acceptable), to the effect that such Securities to
      be sold, assigned or transferred may be sold, assigned or transferred pursuant
      to an exemption from such registration, or (C) such Buyer provides the Company
      with reasonable assurance that such Securities can be sold, assigned or
      transferred pursuant to Rule 144(k) promulgated under the 1933 Act, as amended,
      (or a successor rule thereto); (ii) any sale of the Securities made in reliance
      on Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a
      successor rule thereto) (collectively, "Rule
      144")
      may be
      made only in accordance with the terms of Rule 144 and further, if Rule 144
      is
      not applicable, any resale of the Securities under circumstances in which the
      seller (or the Person (as defined in Section 3(s)) through whom the sale is
      made) may be deemed to be an underwriter (as that term is defined in the 1933
      Act) may require compliance with some other exemption under the 1933 Act or
      the
      rules and regulations of the SEC thereunder; and (iii) neither the Company
      nor
      any other Person is under any obligation to register the Securities under the
      1933 Act or any state securities laws or to comply with the terms and conditions
      of any exemption thereunder.

     

    (g)  Legends.
      Such
      Buyer understands that the certificates or other instruments representing the
      Debentures and the Warrants and, until such time as the resale of the Conversion
      Shares and the Warrant Shares have been registered under the 1933 Act as
      contemplated by the Registration Rights Agreement, the stock certificates
      representing the Conversion Shares and the Warrant Shares, except as set forth
      below, shall bear any legend as required by the "blue sky" laws of any state
      and
      a restrictive legend in substantially the following form (and a stop-transfer
      order may be placed against transfer of such stock certificates):

     

    [NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
      BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY AND ITS LEGAL COUNSEL, THAT
      REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
      RULE
      144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
      IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
      ARRANGEMENT SECURED BY THE SECURITIES.

     

    The
      legend set forth above shall be removed and the Company shall issue a
      certificate without such legend to the holder of the Securities upon which
      it is
      stamped, if, unless otherwise required by state securities laws, (i) such
      Securities are registered for resale under the 1933 Act, (ii) in connection
      with
      a sale, assignment or other transfer, such holder provides the Company with
      an
      opinion of a law firm reasonably acceptable to the Company (with Schulte Roth
      & Zabel LLP being deemed acceptable), in a generally acceptable form, to the
      effect that such sale, assignment or transfer of the Securities may be made
      without registration under the applicable requirements of the 1933 Act, or
      (iii)
      such holder provides the Company with reasonable assurance that the Securities
      can be sold, assigned or transferred pursuant to Rule 144.

     

    (h)  Authorization;
      Validity; Enforcement.
      This
      Agreement and the Registration Rights Agreement have been duly and validly
      authorized, executed and delivered on behalf of such Buyer and shall constitute
      the legal, valid and binding obligations of such Buyer enforceable against
      such
      Buyer in accordance with their respective terms, except as such enforceability
      may be limited by general principles of equity or to applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation and other similar laws
      relating to, or affecting generally, the enforcement of applicable creditors'
      rights and remedies. 

     

    (i)  No
      Conflicts.
      The
      execution, delivery and performance by such Buyer of this Agreement and the
      Registration Rights Agreement to which such Buyer is a party and the
      consummation by such Buyer of the transactions contemplated hereby and thereby
      will not (i) result in a violation of the organizational documents of such
      Buyer
      or (ii) conflict with, or constitute a default (or an event which with notice
      or
      lapse of time or both would become a default) under, or give to others any
      rights of termination, amendment, acceleration or cancellation of, any
      agreement, indenture or instrument to which such Buyer is a party, or (iii)
      result in a violation of any law, rule, regulation, order, judgment or decree
      (including federal and state securities laws) applicable to such Buyer, except
      in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
      rights or violations which would not, individually or in the aggregate,
      reasonably be expected to have a material adverse effect on the ability of
      such
      Buyer to perform its obligations hereunder.

     

    (j)  Residency.
      Such
      Buyer is a resident of that jurisdiction specified below its address on the
      Schedule of Buyers. Such Buyer is duly organized and validly existing and,
      to
      the extent legally applicable, in good standing under the laws of the
      jurisdiction in which it was formed.

     

    (k)  Broker-Dealer.
      Such
      Buyer is not registered with the SEC as a broker-dealer.

     

    (l)  Series
      C and 2005 Warrant Anti-Dilution.
      Each of
      the Buyers that hold any of the outstanding shares of Series C2 Preferred Stock
      of the Company and/or any of the warrants (the "Original
      Warrants")
      of the
      Company issued pursuant to that certain Securities Purchase Agreement, dated
      as
      of April 20, 2005, by and among the Company and the buyers party thereto, hereby
      waive, effective as of the Closing, (x) the anti-dilution rights arising under
      Section 2(f) of the Certificate of Designations, Preferences and Rights of
      Series C2 Convertible Preferred Stock of Millennium Cell Inc. filed with the
      Secretary of State of the State of Delaware on June 30, 2005 as a result of
      the
      issuance of the Securities and (y) the anti-dilution rights arising under
      Section 2 of the Original Warrants as a result of the issuance of the
      Securities, as applicable.

     

    3.  REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.
      The
      Company represents and warrants to each of the Buyers that, as of the date
      hereof and as of the Closing:

     

    (a)  Organization
      and Qualification.
      The
      Company and its "Subsidiaries"
      (which
      for purposes of this Agreement means any entity in which the Company, directly
      or indirectly, owns at least a majority of the capital stock or holds an equity
      or similar interest) are entities duly organized and validly existing and,
      to
      the extent legally applicable, in good standing under the laws of the
      jurisdiction in which they are formed, and have the requisite power and
      authorization to own their properties and to carry on their business as now
      being conducted. Each of the Company and its Subsidiaries is duly qualified
      as a
      foreign entity to do business and to the extent legally applicable, is in good
      standing in every jurisdiction in which its ownership of property or the nature
      of the business conducted by it makes such qualification necessary, except
      to
      the extent that the failure to be so qualified or be in good standing would
      not
      have a Material Adverse Effect. As used in this Agreement, "Material
      Adverse Effect"
      means
      any material adverse effect on the business, properties, assets, operations,
      results of operations or financial condition of the Company and its
      Subsidiaries, taken as a whole, or on the transactions contemplated hereby
      or by
      the agreements and instruments to be entered into in connection herewith or
      therewith, or on the authority or ability of the Company to perform its
      obligations under the Transaction Documents. The Company does not hold any
      equity or similar interest in any entity except as set forth on Schedule
      3(a).

     

    (b)  Authorization;
      Enforcement; Validity.
      The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under this Agreement, the Debentures, the Registration
      Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
      Section 5(b)), the Voting Agreements, the Warrants and each of the other
      agreements entered into by the parties hereto in connection with the
      transactions contemplated by this Agreement (collectively, the "Transaction
      Documents")
      and to
      issue the Securities in accordance with the terms hereof and thereof. The
      execution and delivery of the Transaction Documents by the Company and the
      consummation by the Company of the transactions contemplated hereby and thereby,
      including, without limitation, (i) the issuance of the Debentures and the
      Warrants, (ii)  the reservation for issuance, and the issuance, of the
      Conversion Shares issuable
      upon conversion of the Debentures, and (iii) the reservation for issuance,
      and the issuance, of Warrant Shares issuable upon exercise of the Warrants,
      have
      been duly authorized by the Company's Board of Directors and other than as
      set
      forth in Section 3(e), no further filing, consent or authorization is required
      by the Company, its Board of Directors or its stockholders. This Agreement
      and
      the other Transaction Documents of even date herewith have been duly executed
      and delivered by the Company, and constitute the legal, valid and binding
      obligations of the Company enforceable against the Company in accordance with
      their respective terms, except as such enforceability may be limited by general
      principles of equity or applicable bankruptcy, insolvency, reorganization,
      moratorium, liquidation or similar laws relating to, or affecting generally,
      the
      enforcement of applicable creditors' rights and remedies.

     

    (c)  Issuance
      of Securities.
      The
      issuance of the Debentures and the Warrants are duly authorized, and upon
      issuance in accordance with the terms hereof, shall be validly issued and free
      from all taxes, liens and charges with respect to the issue thereof (other
      than
      transfer restrictions imposed by the 1933 Act). As of the Closing, a number
      of
      shares of Common Stock shall have been duly authorized and reserved for issuance
      which equals or exceeds (i) 140% of the aggregate of the maximum number of
      shares of Common Stock issuable upon conversion of the Debentures (assuming
      for
      purposes hereof, that the Debentures are convertible at an Initial Conversion
      Price (as defined in the Debentures) equal to the arithmetic average of the
      VWAP
      (as defined in the Debentures) of the Common Stock over the thirty (30)
      consecutive Trading Days (as defined in the Debentures) ending on the Trading
      Day immediately preceding the Closing Date and without taking into account
      any
      limitations on the conversion of the Debentures set forth in the Debentures),
      (ii) 100% of the maximum number of Interest Shares issuable pursuant to the
      terms of the Debentures and (iii) 100% of the maximum number of shares of Common
      Stock issuable upon exercise of the Warrants (without taking into account any
      limitations on the exercise of the Warrants set forth in the Warrants). Upon
      issuance, conversion or exercise in accordance with the Debentures or the
      Warrants, as the case may be, the Conversion Shares, the Interest Shares and
      the
      Warrant Shares, respectively, will be validly issued, fully paid and
      nonassessable and free from all preemptive or similar rights, taxes, liens
      and
      charges with respect to the issue thereof (other than transfer restrictions
      imposed by the 1933 Act), with the holders being entitled to all rights accorded
      to a holder of Common Stock. Assuming the accuracy of each of the
      representations and warranties set forth in Section 2 of this Agreement, the
      offer and issuance by the Company of the Securities is exempt from registration
      under the 1933 Act.

     

    (d)  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby (including, without limitation, the issuance of the Debentures and
      Warrants and reservation for issuance and issuance of the Conversion Shares,
      Interest Shares and the Warrant Shares) will not (i) result in a violation
      of
      any certificate of incorporation, certificate of formation, certificate of
      designations, bylaws or other constituent documents of the Company or any of
      is
      Subsidiaries, (ii) conflict with, or constitute a default (or an event which
      with notice or lapse of time or both would become a default) in any material
      respect under, or give to others any rights of termination, amendment,
      acceleration or cancellation of, any material agreement, indenture or instrument
      to which the Company or any of its Subsidiaries is a party, or (iii) result
      in a
      violation of any law, rule, regulation, order, judgment or decree (including
      federal and state securities laws and regulations and the rules and regulations
      of The NASDAQ Capital Market (the "Principal
      Market"))
      applicable to the Company or any of its Subsidiaries or by which any property
      or
      asset of the Company or any of its Subsidiaries is bound or affected, except,
      in
      the case of clauses (ii) or (iii), for such violations as would not be
      reasonably expected to have a Material Adverse Effect.

     

    (e)  Consents.
      The
      Company is not required to obtain any consent, authorization or order of, or
      make any filing or registration with, any court, governmental agency or any
      regulatory or self-regulatory agency or any other Person in order for it to
      execute, deliver or perform any of its obligations under or contemplated by
      the
      Transaction Documents, in each case in accordance with the terms hereof or
      thereof, except for the following consents, authorizations, orders, filings
      and
      registrations (none of which is required to be filed or obtained before the
      Closing): (i) the filing with the SEC of one or more Registration Statements
      in
      accordance with the requirements of the Registration Rights Agreement, (ii)
      the
      filing of a listing application for the listing of the Conversion Shares, the
      Interest Shares and the Warrant Shares with the Principal Market, which shall
      be
      done pursuant to the rules of the Principal Market, (iii) appropriate blue
      sky filings with necessary state regulatory authorities and (iv) a Form D
      under Regulation D of the 1933 Act. The Company and its Subsidiaries are unaware
      of any facts or circumstances that are reasonably likely to prevent the Company
      from obtaining or effecting any of the registration, application or filings
      pursuant to the preceding sentence. 

     

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

     

    (g)  No
      General Solicitation; Placement Agent's Fees.
      Neither
      the Company, nor any of its affiliates, nor any Person acting on its or their
      behalf, 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.

     

    (h)  No
      Integrated Offering.
      None of
      the Company, its Subsidiaries, any of their affiliates, and any Person acting
      on
      their behalf has, directly or indirectly, made any offers or sales of any
      security or solicited any offers to buy any security, under circumstances that
      would require registration of any of the Securities under the 1933 Act or cause
      this offering of the Securities to be integrated with prior offerings by the
      Company for purposes of the 1933 Act or any applicable stockholder approval
      provisions, including, without limitation, under the rules and regulations
      of
      any exchange or automated quotation system on which any of the securities of
      the
      Company are listed or designated. None of the Company, its Subsidiaries, their
      affiliates and any Person acting on their behalf will take any action or steps
      referred to in the preceding sentence that would require registration of any
      of
      the Securities under the 1933 Act or cause the offering of the Securities to
      be
      integrated with other offerings.

     

    (i)  Dilutive
      Effect.
      The
      Company understands and acknowledges that the number of Conversion Shares
      issuable upon conversion of the Debentures and the Warrant Shares issuable
      upon
      exercise of the Warrants will increase in certain circumstances in accordance
      with the respective terms of the Debentures and the Warrants. The Company
      further acknowledges that, its obligation to issue Conversion Shares upon
      conversion of the Debentures in accordance with this Agreement and the
      Debentures and
      its
      obligation to issue the Warrant Shares upon exercise of the Warrants in
      accordance with this Agreement and the Warrants is, in each case, except as
      provided in the Debentures and the Warrant, respectively, absolute and
      unconditional regardless of the dilutive effect that such issuance may have
      on
      the ownership interests of other stockholders of the Company.

     

    (j)  Application
      of Takeover Protections; Rights Agreement.
      The
      Company and its board of directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Certificate of Incorporation
      (as defined in Section 3(q)) or the laws of the state of its incorporation
      which
      is or could become applicable to any Buyer as a result of the transactions
      contemplated by this Agreement, including, without limitation, the Company's
      issuance of the Securities and any Buyer's ownership of the Securities.

     

    (k)  SEC
      Documents; Financial Statements.
      During
      the three (3) years prior to the date hereof, the Company has filed all reports,
      schedules, forms, statements and other filings required to be filed by it with
      the SEC pursuant to the reporting requirements of the Securities Exchange Act
      of
      1934, as amended (the "1934
      Act")
      (all
      of the foregoing filed prior to the date hereof and all exhibits included
      therein and financial statements and schedules thereto and documents
      incorporated by reference therein being hereinafter referred to as the
      "SEC
      Documents").
      The
      Company has delivered to each Buyer or their respective designees true, correct
      and complete copies of the SEC Documents not available on the EDGAR system.
      As
      of their respective dates, the SEC Documents complied in all material respects
      with the requirements of the 1934 Act and the rules and regulations of the
      SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they were made, not misleading. 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 SEC
      with
      respect thereto as in effect at the time of filing. Such financial statements
      have been prepared in accordance with generally accepted accounting principles,
      consistently applied, 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 audit
      adjustments). 

     

    (l)  Absence
      of Certain Changes.
      Since
      the date of the last audited financial statements included in the SEC Documents,
      except as disclosed in Schedule
      3(l),
      (i)
      there has been no change or development that has had a Material Adverse Effect,
      and (ii) the Company has not (A) declared or paid any dividends, (B) sold any
      assets, individually or in the aggregate, in excess of $250,000 outside of
      the
      ordinary course of business or (C) had capital expenditures, individually or
      in
      the aggregate, in excess of $250,000. The Company has not filed a petition
      or
      commencement of a proceeding under any bankruptcy law and, to the Company’s
      knowledge, none of the Company’s creditors have initiated involuntary bankruptcy
      proceedings against the Company and the Company does not have actual knowledge
      of any fact that would reasonably lead a creditor to do so. The Company is
      not
      as of the date hereof, and after giving effect to the transactions contemplated
      hereby to occur at the Closing, will not be Insolvent (as defined below). For
      purposes of this Section 3(l), "Insolvent"
      means,
      with respect to any Person (as defined in Section 3(s)), (i) the present fair
      saleable value of such Person's assets is less than the amount required to
      pay
      such Person's total Indebtedness (as defined in Section 3(s)), (ii) the Company
      is unable to pay its debts and liabilities, subordinated, contingent or
      otherwise, as such debts and liabilities become absolute and matured, (iii)
      such
      Person intends to incur or believes that it will incur debts that would be
      beyond its ability to pay as such debts mature or (iv) such Person has
      unreasonably small capital with which to conduct the business in which it is
      engaged as such business is now conducted and is proposed to be
      conducted.

     

    (m)  Patriot
      Act.
      To the
      extent applicable, both the Company and its Subsidiaries are in compliance,
      in
      all material respects, with the (i) Trading with the Enemy Act, as amended,
      and
      each of the foreign assets control regulations of the United States Treasury
      Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
      legislation or executive order relating thereto, and (ii) Uniting and
      Strengthening America by Providing Appropriate Tools Required to Intercept
      and
      Obstruct Terrorism (USA Patriot Act of 2001). 

     

    (n)  Conduct
      of Business; Regulatory Permits.
      Neither
      the Company nor its Subsidiaries is in violation of any term of or in default
      under its Certificate of Incorporation, any certificate of designations of
      any
      outstanding series of preferred stock of the Company or Bylaws or their
      organizational charter or bylaws, respectively. Neither the Company nor any
      of
      its Subsidiaries is in violation of any judgment, decree or order or any
      statute, ordinance, rule or regulation applicable to the Company or its
      Subsidiaries, except for possible violations which could not, individually
      or in
      the aggregate, reasonably be expected to have a Material Adverse Effect. Without
      limiting the generality of the foregoing, the Company is not in violation of
      any
      of the applicable rules, regulations or requirements of the Principal Market
      and
      has no knowledge of any facts or circumstances which would reasonably lead
      to
      delisting or suspension of the Common Stock by the Principal Market in the
      next
      twelve months, except for any violations that would not have, individually
      or in
      the aggregate, a Material Adverse Effect. Except as disclosed on Schedule
      3(n),
      since
      December 31, 2005, (i) the Common Stock has been designated for quotation on
      the
      Principal Market, (ii) trading in the Common Stock has not been suspended by
      the
      SEC or the Principal Market and (iii) other than in connection with the events
      leading to the movement of the listing of the Common Stock from the Nasdaq
      National Market to the Principal Market, the Company has received no
      communication, written or oral, from the SEC or the Principal Market to the
      effect that the Company is not in compliance with the listing or maintenance
      requirements of the Principal Market regarding the suspension or delisting
      of
      the Common Stock from the Principal Market. The Company and its Subsidiaries
      possess all certificates, authorizations and permits issued by the appropriate
      regulatory authorities necessary to conduct their respective businesses, except
      where the failure to possess such certificates, authorizations or permits would
      not have, individually or in the aggregate, a Material Adverse Effect, and
      neither the Company nor any such Subsidiary has received any notice of
      proceedings relating to the revocation or modification of any such certificate,
      authorization or permit.

     

    (o)  Foreign
      Corrupt Practices.
      Neither
      the Company, nor any of its Subsidiaries, nor to the Company's knowledge, any
      director, officer, agent, employee or other Person acting on behalf of the
      Company or any of its Subsidiaries has, in the course of its actions for, or
      on
      behalf of, the Company (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 from corporate funds; (iii)
      violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
      payoff, influence payment, kickback or other unlawful payment to any foreign
      or
      domestic government official or employee.

     

    (p)  Sarbanes-Oxley
      Act.
      The
      Company is in compliance with any and all applicable requirements of the
      Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
      and
      all applicable rules and regulations promulgated by the SEC thereunder that
      are
      effective as of the date hereof, except where such noncompliance would not
      have,
      individually or in the aggregate, a Material Adverse Effect.

     

    (q)  Transactions
      With Affiliates.
      Except
      as set forth in the SEC Documents filed at least two days prior to the date
      hereof and other than the grant of stock options disclosed on Schedule
      3(q),
      none of
      the officers, directors or employees of the Company is presently a party to
      any
      transaction with the Company or any of its Subsidiaries (other than for ordinary
      course services as employees, officers or 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 such officer, director or employee or, to
      the
      knowledge of the Company, any corporation, partnership, trust or other entity
      in
      which any such officer, director, or employee has a substantial interest or
      is
      an officer, director, trustee or partner.

     

    (r)  Equity
      Capitalization.
      As of
      February 13, 2007, the authorized capital stock of the Company consists of
      (x)
      120,000,000 shares of Common Stock, of which 52,602,775 are issued and
      outstanding, 5,544,436 shares are reserved for issuance pursuant to the
      Company’s stock option and purchase plans and 16,864,040 shares are reserved for
      issuance pursuant to securities (other than the aforementioned options and
      the
      Debentures and the Warrants) exercisable or exchangeable for, or convertible
      into, shares of Common Stock, and (y) 5,000,000 of preferred stock of the
      Company, of which (1) 155,724 have been designated as Series A2-0 Convertible
      Preferred Stock, par value $0.001 per share (“Series
      A2-0 Preferred Stock”)
      and
      155,724 shares of Series A2-0 Preferred Stock are issued and outstanding, (2)
      300,000 shares have been designated as Series A2-1 Convertible Preferred Stock,
      par value $0.001 per share (“Series
      A2-1 Preferred Stock”)
      and
      138,150 shares of Series A2-1 Preferred Stock are issued and outstanding, (3)
      225,000 shares have been designated as Series A2-2 Convertible Preferred Stock,
      par value $0.001 per share (“Series
      A2-2 Preferred Stock”)
      and no
      shares of Series A2-2 Preferred Stock are issued and outstanding, (3) 475,000
      shares have been designated as Series A2-3 Convertible Preferred Stock, par
      value $0.001 per share (“Series
      A2-3 Preferred Stock”)
      and no
      shares of Series A2-3 Preferred Stock are issued and outstanding, (4) 539,000
      shares have been designated as Series A2-4 Convertible Preferred Stock, par
      value $0.001 per share (“Series
      A2-4 Preferred Stock”
and,
      together with the Series A2-0 Preferred Stock, the Series A2-1 Preferred Stock,
      the Series A2-2 Preferred Stock and Series A2-3 Preferred Stock, the
“Series
      A2 Preferred Stock”),
      and
      no shares of Series A2-4 Preferred Stock are issued and outstanding, (5) 300,000
      have been designated as Series B-1 Convertible Preferred Stock, par value $0.001
      per share (“Series
      B-1 Preferred Stock”)
      and
      71,429 shares of Series B-1 Preferred Stock are issued and outstanding, (6)
      225,000 shares have been designated as Series B-2 Convertible Preferred Stock,
      par value $0.001 per share (“Series
      B-2 Preferred Stock”)
      and no
      shares of Series B-2 Preferred Stock are issued and outstanding, (7) 475,000
      shares have been designated as Series B-3 Convertible Preferred Stock, par
      value
      $0.001 per share (“Series
      B-3 Preferred Stock”)
      and no
      shares of Series B-3 Preferred Stock are issued and outstanding, (8) 539,000
      shares have been designated as Series B-4 Convertible Preferred Stock, par
      value
      $0.001 per share (“Series
      B-4 Preferred Stock”
and,
      together with the Series B-1 Preferred Stock, the Series B-2 Preferred Stock
      and
      Series B-3 Preferred Stock, the “Series
      B Preferred Stock”))
      and
      no shares of Series B-4 Preferred Stock are issued and outstanding, and (9)
      10,000 shares have been designated as Series C2 Convertible Preferred Stock,
      par
      value $0.001 per share (“Series
      C-2 Preferred Stock”
and
      3,918 shares of Series C2 Preferred Stock are issued and outstanding. All of
      such outstanding shares have been, or upon issuance will be, validly issued
      and
      are fully paid and nonassessable. Except as disclosed in Schedule
      3(r):
      (i)
      none of the Company's shares of capital stock are subject to preemptive rights
      or any other similar rights or any liens or encumbrances suffered or permitted
      by the Company (other than any liens or encumbrances created pursuant to the
      Transaction Documents); (ii) 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 of its
      Subsidiaries, or contracts, commitments, understandings or arrangements by
      which
      the Company or any of its Subsidiaries is or may become bound to issue
      additional shares of capital stock of the Company or any of its Subsidiaries
      or
      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 of its Subsidiaries; (iii) there are no outstanding debt securities, notes,
      credit agreements, credit facilities or other agreements, documents or
      instruments evidencing Indebtedness (as defined in Section 3(s)) of the Company
      or any of its Subsidiaries or by which the Company or any of its Subsidiaries
      is
      or may become bound; (iv) there are no financing statements securing obligations
      in any material amounts, either singly or in the aggregate, filed in connection
      with the Company; (v) there are no agreements or arrangements under which the
      Company or any of its Subsidiaries is obligated to register the sale of any
      of
      their securities under the 1933 Act (except the Registration Rights Agreement);
      (vi) there are no outstanding securities or instruments of the Company or any
      of
      its Subsidiaries which contain any redemption or similar provisions, and there
      are no contracts, commitments, understandings or arrangements by which the
      Company or any of its Subsidiaries is or may become bound to redeem a security
      of the Company or any of its Subsidiaries; (vii) there are no securities or
      instruments containing anti-dilution or similar provisions that will be
      triggered by the issuance of the Securities; (viii) the Company does not have
      any stock appreciation rights or "phantom stock" plans or agreements or any
      similar plan or agreement; and (ix) the Company and its Subsidiaries have no
      liabilities or obligations required to be disclosed in the SEC Documents but
      not
      so disclosed in the SEC Documents, other than those incurred in the ordinary
      course of the Company's or its Subsidiaries' respective businesses and which,
      individually or in the aggregate, do not or would not have a Material Adverse
      Effect. The Company has made available to the Buyer true, correct and complete
      copies of the Company's Amended and Restated Certificate of Incorporation,
      as
      amended and as in effect on the date hereof (the "Certificate
      of Incorporation"),
      and
      the Company's Bylaws, as amended and as in effect on the date hereof (the
      "Bylaws"),
      and
      the terms of all securities convertible into, or exercisable or exchangeable
      for, shares of Common Stock and the material rights of the holders thereof
      in
      respect thereto.

     

    (s)  Indebtedness
      and Other Contracts.
      Except
      as disclosed in Schedule
      3(s),
      neither
      the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
      (as
      defined below), (ii) is a party to any contract, agreement or instrument, the
      violation of which, or default under which, by the other party(ies) to such
      contract, agreement or instrument, could reasonably be expected to result in
      a
      Material Adverse Effect, (iii) is in violation of any term of or in default
      under any contract, agreement or instrument relating to any Indebtedness, except
      where such violations and defaults would not result, individually or in the
      aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
      agreement or instrument relating to any Indebtedness, the performance of which,
      in the judgment of the Company's officers, has or is expected to have a Material
      Adverse Effect. For purposes of this Agreement: (x) "Indebtedness"
      of any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations issued, undertaken or assumed as the deferred purchase price
      of
      property or services, including (without limitation) "capital leases" in
      accordance with generally accepted accounting principals (other than trade
      payables entered into in the ordinary course of business), (C) all reimbursement
      or payment obligations with respect to letters of credit, surety bonds and
      other
      similar instruments, (D) all obligations evidenced by notes, bonds, debentures
      or similar instruments, including obligations so evidenced incurred in
      connection with the acquisition of property, assets or businesses, (E) all
      indebtedness created or arising under any conditional sale or other title
      retention agreement, or incurred as financing, in either case with respect
      to
      any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (F)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (G) all
      indebtedness referred to in clauses (A) through (F) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
      or obligations of others of the kinds referred to in clauses (A) through (G)
      above; (y) "Contingent
      Obligation"
      means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto; and (z) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    (t)  Absence
      of Litigation.
      Except
      as set forth in Schedule
      3(t),
      there
      is no action, suit, proceeding, inquiry or investigation before or by the
      Principal Market, any court, public board, government agency, self-regulatory
      organization or body pending or, to the knowledge of the Company, threatened
      against the Company or any of the Company's Subsidiaries or any of the Company's
      or the Company's Subsidiaries' officers or directors in their capacities as
      such, which action, suit, proceeding, inquiry or investigation, if determined
      adversely to the Company, its Subsidiary or their respective officer or
      director, as the case may be, would have a Material Adverse Effect.

     

    (u)  Insurance.
      The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such Subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not have a Material
      Adverse Effect. 

     

    (v)  Employee
      Relations.
      (i)
      Neither
      the Company nor any of its Subsidiaries is a party to any collective bargaining
      agreement or employs any member of a union. No current executive officer of
      the
      Company (as defined in Rule 501(f) of the 1933 Act) has notified the Company
      that such officer intends to leave the Company or otherwise terminate such
      officer's employment with the Company. To the Company’s knowledge, no executive
      officer of the Company, is in violation of any material term of any employment
      contract, confidentiality, disclosure or proprietary information agreement,
      non-competition agreement or any other similar contract or agreement, or any
      restrictive covenant pertaining to the subject matter of any such contract
      or
      agreement, and the continued employment of each such executive officer does
      not
      subject the Company or any of its Subsidiaries to any liability with respect
      to
      any of the foregoing matters.

     

    (ii)  The
      Company and its Subsidiaries are in compliance with all applicable federal,
      state, local and foreign laws and regulations respecting labor, employment
      and
      employment practices and benefits, terms and conditions of employment and wages
      and hours, except where failure to be in compliance would not, either
      individually or in the aggregate, reasonably be expected to result in a Material
      Adverse Effect.

     

    (w)  Title.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them and good and marketable title to all personal
      property owned by them which is material to the business of the Company and
      its
      Subsidiaries, in each case free and clear of all liens, encumbrances and defects
      except (i) as described in Schedule
      3(w)
      or (ii)
      which do not materially affect the value of such property and do not interfere
      with the use made and proposed to be made of such property by the Company and
      any of its Subsidiaries. Any real property and facilities held under lease
      by
      the Company and any of its Subsidiaries are held by them under valid, subsisting
      and enforceable leases with such exceptions as are not material and do not
      interfere with the use made and proposed to be made of such property and
      buildings by the Company and its Subsidiaries.

     

    (x)  Intellectual
      Property Rights.
      The
      Company and its Subsidiaries own or possess adequate rights or licenses to
      use
      all trademarks, service marks and all applications and registrations therefor,
      trade names, patents, patent rights, copyrights, original works of authorship,
      inventions, trade secrets and other intellectual property rights ("Intellectual
      Property Rights")
      necessary to conduct their respective businesses as now conducted. Except as
      disclosed on Schedule 3(x),
      none of
      the Company's registered Intellectual Property Rights have expired or terminated
      or have been abandoned, or by their terms shall expire within three (3) years
      from the date of this Agreement. The Company has not received a written notice
      that the
      Intellectual Property Rights of
      the
      Company and its Subsidiaries infringes upon the Intellectual Property Rights
      of
      any other Person. There is no claim, action or proceeding pending or, to the
      knowledge of the Company, threatened in writing, against the Company or its
      Subsidiaries regarding its Intellectual Property Rights. The Company and its
      Subsidiaries have taken reasonable security measures to protect the secrecy,
      confidentiality and value of all of their Intellectual Property
      Rights.

     

    (y)  Environmental
      Laws.
      The
      Company and its Subsidiaries (i) are in compliance with any and all
      Environmental Laws (as hereinafter defined), (ii) have received all permits,
      licenses or other approvals required of them under applicable Environmental
      Laws
      to conduct their respective businesses and (iii) are in compliance with all
      terms and conditions of any such permit, license or approval where, in each
      of
      the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect. The term "Environmental
      Laws"
      means
      all federal, state, local or foreign laws applicable to the Company relating
      to
      pollution or protection of human health or the environment (including, without
      limitation, ambient air, surface water, groundwater, land surface or subsurface
      strata), including, without limitation, laws relating to emissions, discharges,
      releases or threatened releases of chemicals, pollutants, contaminants, or
      toxic
      or hazardous substances or wastes (collectively, "Hazardous
      Materials") into
      the
      environment, or otherwise relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of Hazardous Materials,
      as well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, notices or notice letters, orders, plans or regulations
      issued, entered, promulgated or enforced by any governmental authority
      thereunder.

     

    (z)  Subsidiary
      Rights.
      The
      Company or one of its Subsidiaries has the unrestricted right to vote, and
      (subject to limitations imposed by applicable law) to receive dividends and
      distributions on, all capital securities of its Subsidiaries as owned by the
      Company or such Subsidiary.

     

    (aa)  Tax
      Status.
      The
      Company and each of its Subsidiaries (i) has made or filed all foreign, federal
      and state income and all other tax returns, reports and declarations required
      to
      be made or filed by it by any jurisdiction to which it is subject, (ii) has
      paid
      all taxes and other governmental assessments and charges that are material
      in
      amount, shown or determined to be due on such returns, reports and declarations,
      except those being contested in good faith and (iii) has set aside on its books
      provision reasonably adequate for the payment of all taxes for periods
      subsequent to the periods to which such returns, reports or declarations apply.
      There are no unpaid taxes in any material amount claimed to be due by the taxing
      authority of any jurisdiction, and the officers of the Company know of no basis
      for any such claim.

     

    (bb)  Internal
      Accounting and Disclosure Controls.
      The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient to provide reasonable assurance that (i) transactions are
      executed in accordance with management's general or specific authorizations,
      (ii) transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles and
      to
      maintain asset and liability accountability, (iii) access to assets or
      incurrence of liabilities is permitted only in accordance with management's
      general or specific authorization and (iv) the recorded accountability for
      assets and liabilities is compared with the existing assets and liabilities
      at
      reasonable intervals and appropriate action is taken with respect to any
      difference. The Company maintains disclosure controls and procedures (as such
      term is defined in Rule 13a-14 under the 1934 Act) that are effective in
      ensuring that information required to be disclosed by the Company in the reports
      that it files or submits under the 1934 Act is recorded, processed, summarized
      and reported, within the time periods specified in the rules and forms of the
      SEC, including, without limitation, controls and procedures designed in to
      ensure that information required to be disclosed by the Company in the reports
      that it files or submits under the 1934 Act is accumulated and communicated
      to
      the Company's management, including its principal executive officer or officers
      and its principal financial officer or officers, as appropriate, to allow timely
      decisions regarding required disclosure. During the twelve months prior to
      the
      date hereof neither the Company nor any of its Subsidiaries have received any
      notice or correspondence from any accountant relating to any potential material
      weakness in any part of the system of internal accounting controls of the
      Company or any of its Subsidiaries.

     

    (cc)  Off
      Balance Sheet Arrangements.
      There
      is no transaction, arrangement, or other relationship between the Company and
      an
      unconsolidated or other off balance sheet entity that is required to be
      disclosed by the Company in its Exchange Act filings and is not so disclosed
      or
      that otherwise would be reasonably likely to have a Material Adverse
      Effect.

     

    (dd)  Investment
      Company Status.
      The
      Company is not, and upon consummation of the sale of the Securities will not
      be,
      an "investment company," a company controlled by an "investment company" or
      an
      "affiliated person" of, or "promoter" or "principal underwriter" for, an
      "investment company" as such terms are defined in the Investment Company Act
      of
      1940, as amended.

     

    (ee)  Form
      S-3 Eligibility.
      The
      Company is eligible to register the Conversion Shares, Interest Shares and
      the
      Warrant Shares for resale by the Buyers using Form S-3 promulgated under the
      1933 Act.

     

    (ff)  Transfer
      Taxes.
      On the
      Closing Date, all stock transfer or other taxes (other than income or similar
      taxes) which are required to be paid in connection with the sale and transfer
      of
      the Securities to be sold to each Buyer hereunder will be, or will have been,
      fully paid or provided for by the Company, and all laws imposing such taxes
      will
      be or will have been complied with.

     

    (gg)  Manipulation
      of Price.
      The
      Company has not, and to its knowledge no one acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of the
      Securities, or (iii) paid or agreed to pay to any person any compensation for
      soliciting another to purchase any other securities of the Company.

     

    (hh)  Real
      Property Holding Corporation.
      The
      Company is not, nor has ever been, a U.S. real property holding corporation
      within the meaning of Section 897 of the Internal Revenue Code of 1986, as
      amended, and the Company shall so certify upon Buyer's request.

     

    (ii)  OFAC.
      Neither
      the Company nor any of its Subsidiaries (i) is a Person whose property or
      interest in property is blocked or subject to blocking pursuant to Section
      1 of
      Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
      Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism
      (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions
      prohibited by Section 2 of such executive order, or is otherwise associated
      with
      any such Person in any manner violative of Section 2 of such executive order,
      or
      (iii) is a Person on the list of Specially Designated Nationals and Blocked
      Persons or subject to the limitations or prohibitions under any other U.S.
      Department of Treasury's Office of Foreign Assets Control regulation or
      executive order.

     

    (jj)  Ranking
      of Debentures.
      No
      Indebtedness of the Company is senior to the Debentures in right of payment,
      whether with respect of payment of redemptions, interest, damages or upon
      liquidation or dissolution or otherwise. Except for the Pari Passu Debentures,
      no Indebtedness of the Company ranks pari
      passu
      with the
      Debentures in right of payment, whether with respect of payment of redemptions,
      interest, damages or upon liquidation or dissolution or otherwise.

     

    (kk)  Disclosure.
      The
      Company confirms that neither it nor any other Person acting on its behalf
      has
      provided any of the Buyers or their agents or counsel with any information
      that
      constitutes material, nonpublic information. The Company understands and
      confirms that each of the Buyers will rely on the foregoing representations
      in
      effecting transactions in securities of the Company. All disclosure provided
      to
      the Buyers regarding the Company, its business and the transactions contemplated
      hereby, including the Schedules to this Agreement, is true and correct in all
      material respects and does not contain any untrue statement of a material fact
      or omit to state any material fact necessary in order to make the statements
      made therein, in the light of the circumstances under which they were made,
      in
      all material respects not misleading. No event or circumstance has occurred
      or
      information exists with respect to the Company or any of its Subsidiaries or
      its
      or their business, properties, operations or financial conditions, which, under
      applicable law, rule or regulation, requires public disclosure or announcement
      by the Company but which has not been so publicly announced or
      disclosed.

     

    (ll)  Acknowledgement
      Regarding Buyers' Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
      it is understood and acknowledged by the Company (i) that none of the Buyers
      have been asked to agree, nor has any Buyer agreed, to desist from purchasing
      or
      selling, long and/or short, securities of the Company, or "derivative"
      securities based on securities issued by the Company or to hold the Securities
      for any specified term; (ii) that any Buyer, and counter parties in "derivative"
      transactions to which any such Buyer is a party, directly or indirectly,
      presently may have a "short" position in the Common Stock, and (iii) that each
      Buyer shall not be deemed to have any affiliation with or control over any
      arm's
      length counter-party in any "derivative" transaction. The Company further
      understands and acknowledges that one or more Buyers may engage in hedging
      activities at various times during the period that the Securities are
      outstanding, including, without limitation, during the periods that the value
      of
      the Conversion Shares, the Warrant Shares and Interest Shares deliverable with
      respect to Securities are being determined.

     

    4.  COVENANTS.

     

    (a)  Best
      Efforts.
      Each
      party shall use its best efforts timely to satisfy each of the conditions to
      be
      satisfied by it as provided in Sections 6 and 7 of this Agreement.

     

    (b)  Form
      D
      and Blue Sky.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to each Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, take such action
      as
      the Company shall reasonably determine is necessary in order to obtain an
      exemption for or to qualify the Securities for sale to the Buyers at the Closing
      pursuant to this Agreement under applicable securities or "Blue Sky" laws of
      the
      states of the United States (or to obtain an exemption from such qualification).
      The Company shall make all filings and reports relating to the offer and sale
      of
      the Securities required under applicable securities or "Blue Sky" laws of the
      states of the United States following the Closing Date.

     

    (c)  Reporting
      Status.
      Until
      the date on which the Investors (as defined in the Registration Rights
      Agreement) shall have sold all the Conversion Shares, Interest Shares and
      Warrant Shares and
      none
      of the Debentures or
      Warrants is outstanding (the "Reporting
      Period"),
      the
      Company shall timely file all reports required to be filed with the SEC pursuant
      to the 1934 Act, and the Company shall not terminate its status as an issuer
      required to timely file reports under the 1934 Act even if the 1934 Act or
      the
      rules and regulations thereunder would otherwise permit such
      termination.

     

    (d)  Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Securities for working
      capital and general corporate purposes and not for the repayment of any
      outstanding Indebtedness of the Company or any of its Subsidiaries or redemption
      or repurchase of any of its equity securities, except in connection with an
      acquisition of assets or securities by the Company not for capital raising
      purposes.

     

    (e)  Financial
      Information.
      The
      Company agrees to send the following to each Investor during the Reporting
      Period (i) unless the following are filed with the SEC through EDGAR and are
      available to the public through the EDGAR system, within one (1) Business Day
      after the filing thereof with the SEC, a copy of its Annual Reports on Form
      10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
      any registration statements (other than on Form S-8) or amendments filed
      pursuant to the 1933 Act, and (ii) copies of any notices and other information
      made available or given to the stockholders of the Company generally,
      contemporaneously with the making available or giving thereof to the
      stockholders. For the purposes of this Section 4(e) only, the Company may send
      notice to the Investors by electronic mail to their respective electronic mail
      addresses as set forth in the Schedule of Buyers attached hereto. As used
      herein, "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (f)  Listing.
      The
      Company shall use its best efforts to promptly secure the listing of all of
      the
      Registrable Securities (as defined in the Registration Rights Agreement) upon
      each national securities exchange and automated quotation system, if any, upon
      which the Common Stock is then listed (subject to official notice of issuance)
      and shall use its best efforts to maintain, so long as any other shares of
      Common Stock shall be so listed and in accordance with the Debentures and
      Warrants, such listing of all Registrable Securities from time to time issuable
      under the terms of the Transaction Documents. The Company shall use its best
      efforts to maintain the Common Stocks' authorization for quotation on the
      Principal Market. Neither the Company nor any of its Subsidiaries shall take
      any
      action which would be reasonably expected to result in the delisting or
      suspension of the Common Stock on the Principal Market; provided, however,
      that
      the Company makes no covenant regarding the trading price of the Common Stock.
      The Company shall pay all fees and expenses in connection with satisfying its
      obligations under this Section 4(f).

     

    (g)  Fees.
      The
      Company and the Buyers hereby acknowledge that the Company has advanced to
      Portside Growth & Opportunity Fund an amount equal to $25,000 for fees and
      expenses of the Buyers in connection with the preparation, execution and
      performance of the Transaction Documents and the transactions contemplated
      hereby and thereby. Subject to Section 8 below, at the Closing, subject to
      receipt of appropriate supporting documentation, the Company shall reimburse
      Portside Growth & Opportunity Fund (a Buyer) or its designee(s) (in addition
      to any other amounts paid to any Buyer or its designee prior to the date of
      this
      Agreement) for its reasonable fees and expenses in connection with the
      preparation, execution and performance of the Transaction Documents and the
      transactions contemplated hereby and thereby, in an amount not to exceed
      $50,000, which amount shall be withheld from such Buyer's Purchase Price at
      the
      Closing. The Company shall be responsible for the payment of any placement
      agent's fees, financial advisory fees, or broker's commissions (other than
      for
      Persons engaged by any Buyer or its agents) relating to or arising out of the
      transactions contemplated hereby. The Company shall pay, and hold each Buyer
      harmless against, any liability, loss or expense (including, without limitation,
      reasonable attorney's fees and out-of-pocket expenses) arising in connection
      with any claim relating to any such payment. Except as otherwise set forth
      in
      the Transaction Documents, each party to this Agreement shall bear its own
      expenses in connection with the sale of the Securities to the
      Buyers.

     

    (h)  Pledge
      of Securities.
      The
      Company acknowledges and agrees that the Securities may be pledged by an
      Investor (as defined in the Registration Rights Agreement) in connection with
      a
      bona fide margin agreement or other loan or financing arrangement that is
      secured by the Securities. The pledge of Securities shall not be deemed to
      be a
      transfer, sale or assignment of the Securities hereunder, and no Investor
      effecting a pledge of Securities shall be required to provide the Company with
      any notice thereof or otherwise make any delivery to the Company pursuant to
      this Agreement or any other Transaction Document, including, without limitation,
      Section 2(f) hereof; provided that an Investor and its pledgee shall be required
      to comply with the provisions of Section 2(f) hereof in order to effect a sale,
      transfer or assignment of Securities to such pledgee. The Company hereby agrees
      to execute and deliver such documentation acknowledging the existence of a
      pledge as a pledgee of the Securities may reasonably request in connection
      with
      a pledge of the Securities to such pledgee by an Investor.

     

    (i)  Disclosure
      of Transactions and Other Material Information.
      On or
      before 8:30 a.m., New York City time, on the first Business Day following the
      date hereof, the Company shall file a Current Report on Form 8-K describing
      the
      terms of the transactions contemplated by the Transaction Documents in the
      form
      required by the 1934 Act and attaching the material Transaction Documents
      (including, without limitation, this Agreement the form of Debenture, the form
      of Warrant, the form of the Voting Agreement and the form of the Registration
      Rights Agreement) as exhibits to such filing (including all attachments, the
      "8-K
      Filing").
      From
      and after the filing of the 8-K Filing with the SEC, no Buyer shall be in
      possession of any material, nonpublic information received from the Company,
      any
      of its Subsidiaries or any of its respective officers, directors, employees
      or
      agents, that is not disclosed in the 8-K Filing. The Company shall not, and
      shall cause each of its Subsidiaries and its and each of their respective
      officers, directors, employees and agents, not to, provide any Buyer with any
      material, nonpublic information regarding the Company or any of its Subsidiaries
      from and after the filing of the 8-K Filing with the SEC without the express
      written consent of such Buyer. If, notwithstanding the foregoing, the Company,
      its Subsidiaries or each of their respective officers, directors, employees
      and
      agents, provide any Buyer with any material, nonpublic information, regarding
      the Company or any of its Subsidiaries, the Buyer shall provide the Company
      with
      written notice thereof. The Company shall, within five (5) Trading Days of
      receipt of such notice, make public disclosure of such material, nonpublic
      information. In the event of a breach of the foregoing covenant by the Company,
      any of its Subsidiaries, or any of its or their respective officers, directors,
      employees and agents, in addition to any other remedy provided herein or in
      the
      Transaction Documents, a Buyer shall have the right to make a public disclosure,
      in the form of a press release, public advertisement or otherwise, of such
      material, nonpublic information without the prior approval by the Company,
      its
      Subsidiaries, or any of its or their respective officers, directors, employees
      or agents. No Buyer shall have any liability to the Company, its Subsidiaries,
      or any of its or their respective officers, directors, employees, stockholders
      or agents for any such disclosure. Subject to the foregoing, neither the Company
      nor any Buyer shall issue any press releases or any other public statements
      with
      respect to the transactions contemplated hereby; provided, however, that the
      Company shall be entitled, without the prior approval of any Buyer, to make
      any
      press release or other public disclosure with respect to such transactions
      (i)
      in substantial conformity with the 8-K Filing and contemporaneously therewith
      and (ii) as is required by applicable law and regulations (provided that in
      the
      case of clause (i) each Buyer shall be consulted by the Company in connection
      with any such press release or other public disclosure prior to its
      release).

     

    (j)  Additional
      Registration Statements.
      Until
      the date that the Registration Statement (as defined in the Registration Rights
      Agreement) is first declared effective by the SEC (the "Effective
      Date"),
      the
      Company shall not file a registration statement under the 1933 Act relating
      to
      securities that are not the Securities.

     

    (k)  Additional
      Debentures; Variable Securities; Dilutive Issuances.
      So long
      as any Buyer beneficially owns any Debentures, the Company will not issue any
      Debentures other than to the Buyers as contemplated hereby and the Company
      shall
      not issue any other securities that would cause a breach or default under the
      Debentures. For so long as 25% or more of the Debentures or Warrants remain
      outstanding, the Company shall not, in any manner, issue or sell any rights,
      warrants or options to subscribe for or purchase Common Stock or directly or
      indirectly convertible into or exchangeable or exercisable for Common Stock
      at a
      price which varies or may vary with the market price of the Common Stock,
      including by way of one or more reset(s) to any fixed price unless the
      conversion, exchange or exercise price of any such security cannot be less
      than
      the then applicable Conversion Price (as defined in the Debentures) with respect
      to the Common Stock into which any Debenture is convertible or the then
      applicable Exercise Price (as defined in the Warrants) with respect to the
      Common Stock into which any Warrant is exercisable. For so long as any
      Debentures or Warrants remain outstanding, the Company shall not, in any manner,
      enter into or affect any Dilutive Issuance (as defined in the Debentures) if
      the
      effect of such Dilutive Issuance is to cause the Company to be required to
      issue
      upon conversion of any Debenture or exercise of any Warrant any shares of Common
      Stock in excess of that number of shares of Common Stock which the Company
      may
      issue upon conversion of the Debentures, and exercise of the Warrants without
      breaching the Company's obligations under the rules or regulations of the
      Principal Market.

     

    (l)  Corporate
      Existence.
      So long
      as any Buyer beneficially owns any Debentures or Warrants, the Company shall
      not
      be party to any Fundamental Transaction (as defined in the Debentures) unless
      the Company is in compliance with the applicable provisions governing
      Fundamental Transactions set forth in the Debentures and the
      Warrants.

     

    (m)  Reservation
      of Shares.
      The
      Company shall take all action necessary to at all times have authorized, and
      reserved for the purpose of issuance, no less than the sum of (i) 140% of the
      aggregate of the maximum number of shares of Common Stock issuable upon
      conversion of the Debentures (assuming for purposes hereof, that the Debentures
      are convertible at an Initial Conversion Price equal to the arithmetic average
      of the VWAP of the Common Stock over the thirty (30) consecutive Trading Days
      ending on the Trading Day immediately preceding the Closing Date and without
      taking into account any limitations on the conversion of the Debentures set
      forth in the Debentures), (ii) 100% of the maximum number of Interest Shares
      issuable pursuant to the terms of the Debentures and (iii) 100% of the maximum
      number of shares of Common Stock issuable upon exercise of the Warrants (without
      taking into account any limitations on the exercise of the Warrants set forth
      in
      the Warrants). .

     

    (n)  Conduct
      of Business.
      The
      business of the Company and its Subsidiaries shall not be conducted in violation
      of any law, ordinance or regulation of any governmental entity applicable to
      the
      business of the Company and its Subsidiaries, except where such violations
      could
      not result, either individually or in the aggregate, in a Material Adverse
      Effect.

     

    (o)  Additional
      Issuances of Securities.

     

    (i)  For
      purposes of this Section 4(o), the following definitions shall
      apply.

     

    (1)  "Convertible
      Securities"
      means
      any stock or securities (other than Options) convertible into or exercisable
      or
      exchangeable for shares of Common
      Stock.

     

    (2)  "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of
Common
      Stock or
      Convertible Securities.

     

    (3)  "Common
      Stock Equivalents"
      means,
      collectively, Options and Convertible Securities.

     

    (ii)  From
      the
      date hereof until the date that is thirty (30) Trading Days following the
      Effective Date (as defined in the Registration Rights Agreement) (the
      "Trigger
      Date"),
      the
      Company will not, directly or indirectly, offer, sell, grant any option to
      purchase, or otherwise dispose of (or announce any offer, sale, grant or any
      option to purchase or other disposition of) any of its or its Subsidiaries'
      equity or equity equivalent securities, including without limitation any debt,
      preferred stock or other instrument or security that is, at any time during
      its
      life and under any circumstances, convertible into or exchangeable or
      exercisable for shares of Common Stock or Common Stock Equivalents (any such
      offer, sale, grant, disposition or announcement being referred to as a
      "Subsequent
      Placement").

     

    (iii)  From
      the
      Trigger Date until the two year anniversary of the Closing Date, the Company
      will not, directly or indirectly, effect any Subsequent Placement unless the
      Company shall have first complied with this Section 4(o)(iii).

     

    (1)  The
      Company shall deliver to each Buyer a written notice (the "Offer
      Notice")
      (which
      will be used by the Buyer in compliance with applicable law) of any proposed
      or
      intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (w) identify and describe the
      Offered Securities, (x) describe the price and other terms upon which they
      are to be issued, sold or exchanged, and the number or amount of the Offered
      Securities to be issued, sold or exchanged, (y) identify the persons or
      entities (if known) to which or with which the Offered Securities are to be
      offered, issued, sold or exchanged and (z) offer to issue and sell to or
      exchange with such Buyers a pro rata portion of 30% of the Offered Securities
      allocated among such Buyers (a) based on such Buyer's pro rata portion of the
      aggregate Debentures purchased hereunder (the "Basic
      Amount"),
      and
      (b) with respect to each Buyer that elects to purchase its Basic Amount, any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Buyers as such Buyer shall indicate it will purchase or acquire should
      the other Buyers subscribe for less than their Basic Amounts (the "Undersubscription
      Amount"),
      which
      process shall be repeated until the Buyers shall have an opportunity to
      subscribe for any remaining Undersubscription Amount.

     

    (2)  To
      accept
      an Offer, in whole or in part, such Buyer must deliver a written notice to
      the
      Company prior to the end of the fifth (5th)
      Business Day after such Buyer's receipt of the Offer Notice (the "Offer
      Period"),
      setting forth the portion of such Buyer's Basic Amount that such Buyer elects
      to
      purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
      the
      Undersubscription Amount, if any, that such Buyer elects to purchase (in either
      case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Buyers are less than the total of all
      of
      the Basic Amounts, then each Buyer who has set forth an Undersubscription Amount
      in its Notice of Acceptance shall be entitled to purchase, in addition to the
      Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
      "Available
      Undersubscription Amount"),
      each
      Buyer who has subscribed for any Undersubscription Amount shall be entitled
      to
      purchase only that portion of the Available Undersubscription Amount as the
      Basic Amount of such Buyer bears to the total Basic Amounts of all Buyers that
      have subscribed for Undersubscription Amounts, subject to rounding by the
      Company to the extent its deems reasonably necessary. Notwithstanding the
      foregoing, if the Company desires to modify or amend the terms and conditions
      of
      the Offer prior to the expiration of the Offer Period, the Company may deliver
      to the Buyers a new Offer Notice and the Offer Period shall expire on the fifth
      (5th) Business Day after such Buyer's receipt of such new Offer
      Notice.

     

    (3)  The
      Company shall have twenty (20) Business Days from the expiration of the Offer
      Period above (i) to offer, issue, sell or exchange all or any part of such
      Offered Securities as to which a Notice of Acceptance has not been given by
      the
      Buyers (the "Refused
      Securities")
      pursuant to a definitive agreement(s) (the "Subsequent
      Placement Agreement"),
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer Notice and
      (ii) to publicly announce (a) the execution of such Subsequent Placement
      Agreement, and (b) either (x) the consummation of the transactions contemplated
      by such Subsequent Placement Agreement or (y) the termination of such Subsequent
      Placement Agreement, which shall be filed with the SEC on a Current Report
      on
      Form 8-K with such Subsequent Placement Agreement and any documents contemplated
      therein filed as exhibits thereto.

     

    (4)  In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in Section
      4(o)(iii)(3) above), then each Buyer may, at its sole option and in its sole
      discretion, reduce the number or amount of the Offered Securities specified
      in
      its Notice of Acceptance to an amount that shall be not less than the number
      or
      amount of the Offered Securities that such Buyer elected to purchase pursuant
      to
      Section 4(o)(iii)(2) above multiplied by a fraction, (i) the numerator of which
      shall be the number or amount of Offered Securities the Company actually
      proposes to issue, sell or exchange (including Offered Securities to be issued
      or sold to Buyers pursuant to Section 4(o)(iii)(3) above prior to such
      reduction) and (ii) the denominator of which shall be the original amount of
      the
      Offered Securities. In the event that any Buyer so elects to reduce the number
      or amount of Offered Securities specified in its Notice of Acceptance, the
      Company may not issue, sell or exchange more than the reduced number or amount
      of the Offered Securities unless and until such securities have again been
      offered to the Buyers in accordance with Section 4(o)(iii)(1)
      above.

     

    (5)  Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Buyers shall acquire from the Company, and the Company shall
      issue to the Buyers, the number or amount of Offered Securities specified in
      the
      Notices of Acceptance, as reduced pursuant to Section Section 4(o)(iii)(3)
      above
      if the Buyers have so elected, upon the terms and conditions specified in the
      Offer. The purchase by the Buyers of any Offered Securities is subject in all
      cases to the preparation, execution and delivery by the Company and the Buyers
      of a purchase agreement relating to such Offered Securities reasonably
      satisfactory in form and substance to the Buyers and their respective
      counsel.

     

    (6)  Any
      Offered Securities not acquired by the Buyers or other persons in accordance
      with Section 4(o)(iii)(3) above may not be issued, sold or exchanged until
      they
      are again offered to the Buyers under the procedures specified in this
      Agreement.

     

    (7)  The
      Company and the Buyers agree that if any Buyer elects to participate in the
      Offer, (x) neither the Subsequent Placement Agreement with respect to such
      Offer
      nor any other transaction documents related thereto (collectively, the
      "Subsequent
      Placement Documents")
      shall
      include any term or provisions whereby any Buyer shall be required to agree
      to
      any restrictions in trading prior to the time such Buyer received the Offer
      Notice relating to such Subsequent Placement as to any securities of the Company
      owned by such Buyer prior to such Subsequent Placement, and (y) any registration
      rights set forth in such Subsequent Placement Documents shall be similar in
      all
      material respects to the registration rights contained in the Registration
      Rights Agreement.

     

    (8)  Notwithstanding
      anything to the contrary in this Section 4(o) and unless otherwise agreed to
      by
      the Buyers, the Company shall either confirm in writing to the Buyers that
      the
      transaction with respect to the Subsequent Placement has been abandoned or
      shall
      publicly disclose its intention to issue the Offered Securities, in either
      case
      in such a manner such that the Buyers will not be in possession of material
      non-public information, by the thirtieth (30th) Business Day following delivery
      of the Offer Notice. If by the thirtieth (30th) following delivery of the Offer
      Notice no public disclosure regarding a transaction with respect to the Offered
      Securities has been made, and no notice regarding the abandonment of such
      transaction has been received by the Buyers, such transaction shall be deemed
      to
      have been abandoned and the Buyers shall not be deemed to be in possession
      of
      any material, non-public information with respect to the Company. Should the
      Company decide to pursue such transaction with respect to the Offered
      Securities, the Company shall provide each Buyer with another Offer Notice
      and
      each Buyer will again have the right of participation set forth in this Section
      4(o)(iii). The Company shall not be permitted to deliver more than one such
      Offer Notice to the Buyers in any 60 day period.

     

    (iv)  The
      restrictions contained in subsections (ii) and (iii) of this Section 4(o) shall
      not apply in connection with the issuance of any Excluded Securities (as defined
      in the Debentures).

     

    (p)  Stockholder
      Approval.
      The
      Company shall provide each stockholder entitled to vote at a special or annual
      meeting of stockholders of the Company (the "Stockholder
      Meeting"),
      which
      shall be promptly called and held not later than May 31, 2007 (the "Stockholder
      Meeting Deadline"),
      a
      proxy statement, substantially in the form which has been previously reviewed
      by
      the Buyers and a counsel of their choice, at the expense of the Company, not
      to
      exceed $5,000, which review shall be completed within five (5) Business Days
      of
      such counsel's receipt of the proxy statement and such review requirement shall
      be waived if such counsel has not completed its review within such five (5)
      Business Day period, soliciting each such stockholder's affirmative vote at
      the
      Stockholder Meeting for approval of resolutions (the "Stockholder
      Resolutions")
      providing for the Company's issuance of all of the Securities as described
      in
      the Transaction Documents in accordance with applicable law and the rules and
      regulations of the Principal Market (such
      affirmative
      approval being referred to herein as the "Stockholder
      Approval"),
      and
      the Company shall use its best efforts to solicit its stockholders' approval
      of
      such resolutions and to cause the Board of Directors of the Company to recommend
      to the stockholders that they approve such resolutions. The Company shall be
      obligated to seek to obtain the Stockholder Approval by the Stockholder Meeting
      Deadline. If, despite the Company's best efforts the Stockholder Approval is
      not
      obtained on or prior to the Stockholder Meeting Deadline, the Company shall
      either (x) cause an additional Stockholder Meeting to be held every six (6)
      months thereafter until such Stockholder Approval is obtained or (y) cause
      one
      (1) additional Stockholder Meeting to be held within six (6) months
      thereafter.

     

    (q)  Most
      Favored Nations.
      For so
      long as any Debentures remain outstanding, if the Company issues any Permitted
      Pari Passu Indebtedness and any of the terms, individually or in the aggregate,
      of such Permitted Pari Passu Indebtedness are more beneficial to the investors
      in such Permitted Pari Passu Indebtedness than those provided to the Buyers
      in
      the Debentures or the Warrants (including, without limitation, with respect
      to
      the warrant coverage thereunder if warrants are issued in connection with any
      such Permitted Pari Passu Indebtedness), the Debentures or the Warrants, as
      applicable, shall be, without any further action by any Buyer or the Company,
      deemed amended and modified in an economically and legally equivalent manner
      such that the Buyers shall receive the benefit of each such more favorable
      term
      of such Permitted Pari Passu Indebtedness. Notwithstanding the foregoing, the
      Company hereby agrees, at its expense, to take such other actions (such as
      entering into amendments to this Agreement, the Debenture or any other
      Transaction Document) as any Buyer may reasonably request to further effectuate
      the foregoing. 

     

    (r)  Voting
      Agreement.
      The
      Company shall use its reasonable best efforts to effectuate the transactions
      contemplated by the Voting Agreement, substantially in the form attached hereto
      as Exhibit
      D
      (the
      "Voting
      Agreement"),
      executed by the Company and each of John Giolli, Adam Briggs, Rex Luzader,
      Dave
      Ramm, Chris Andersen, George Zalepa and John Battaglini (the "Stockholders").

     

    5.  REGISTER;
      TRANSFER AGENT INSTRUCTIONS.

     

    (a)  Register.
      The
      Company shall maintain at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to each holder of
      Securities), a register for the Debentures and the Warrants, in which the
      Company shall record the name and address of the Person in whose name the
      Debentures and
      the
      Warrants have been issued (including the name and address of each transferee),
      the principal amount of Debentures held by such Person and the number of Warrant
      Shares issuable upon exercise of the Warrants held by such Person. The Company
      shall keep the register open and available at all times during business hours
      for inspection of any Buyer or its legal representatives.

     

    (b)  Transfer
      Agent Instructions.
      The
      Company shall issue irrevocable instructions to its transfer agent, and any
      subsequent transfer agent, to issue certificates or credit shares to the
      applicable balance accounts at The Depository Trust Company ("DTC"),
      registered in the name of each Buyer or its respective nominee(s), for the
      Conversion Shares, and the Warrant Shares issued at the Closing or upon
      conversion of the Debentures or exercise of the Warrants in such amounts as
      specified from time to time by each Buyer to the Company upon conversion of
      the
      Debentures or exercise of the Warrants in the form of Exhibit
      E
      attached
      hereto (the "Irrevocable
      Transfer Agent Instructions").
      The
      Company warrants that no instruction other than the Irrevocable Transfer Agent
      Instructions referred to in this Section 5(b), and stop transfer instructions
      to
      give effect to Section 2(g) hereof, will be given by the Company to its transfer
      agent, and that the Securities shall otherwise be freely transferable on the
      books and records of the Company as and to the extent provided in this Agreement
      and the other Transaction Documents. If a Buyer effects a sale, assignment
      or
      transfer of the Securities in accordance with Section 2(f), the Company shall
      permit the transfer and shall promptly instruct its transfer agent to issue
      one
      or more certificates or credit shares to the applicable balance accounts at
      DTC
      in such name and in such denominations as specified by such Buyer to effect
      such
      sale, transfer or assignment. In the event that such sale, assignment or
      transfer involves Conversion Shares, Interest Shares or Warrant Shares sold,
      assigned or transferred pursuant to an effective registration statement or
      pursuant to Rule 144, the transfer agent shall issue such Securities to the
      Buyer, assignee or transferee, as the case may be, without any restrictive
      legend. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
      acknowledges that the remedy at law for a breach of its obligations under this
      Section 5(b) will be inadequate and agrees, in the event of a breach or
      threatened breach by the Company of the provisions of this Section 5(b), that
      a
      Buyer shall be entitled, in addition to all other available remedies, to an
      order and/or injunction restraining any breach and requiring immediate issuance
      and transfer, without the necessity of showing economic loss and without any
      bond or other security being required.

     

    6.  CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL.
      The
      obligation of the Company hereunder to issue and sell the Debentures and to
      each
      Buyer at the Closing is subject to the satisfaction, at or before the Closing
      Date, of each of the following conditions, provided that these conditions are
      for the Company's sole benefit and may be waived by the Company at any time
      in
      its sole discretion by providing each Buyer with prior written notice
      thereof:

     

    (a)  Such
      Buyer shall have executed and delivered each of the Transaction Documents to
      which it is a party and delivered the same to the Company

     

    (b)  Such
      Buyer shall have delivered to the Company the Purchase Price (less, in the
      case
      of Portside Growth & Opportunity Fund, the amounts withheld pursuant to
      Section 4(g)) for the Debentures and the related Warrants being purchased by
      such Buyer at the Closing by wire transfer of immediately available funds
      pursuant to the wire instructions provided by the Company.

     

    (c)  The
      representations and warranties of such Buyer shall be true and correct in all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall remain true and correct as of such specific
      date), and such Buyer shall have performed, satisfied and complied in all
      material respects with the covenants, agreements and conditions required by
      this
      Agreement to be performed, satisfied or complied with by such Buyer at or prior
      to the Closing Date.

     

    7.  CONDITIONS
      TO EACH BUYER'S OBLIGATION TO PURCHASE. The
      obligation of each Buyer hereunder to purchase the Debentures and
      the
      related Warrants at the Closing is subject to the satisfaction, at or before
      the
      Closing Date, of each of the following conditions, provided that these
      conditions are for each Buyer's sole benefit and may be waived by such Buyer
      at
      any time in its sole discretion by providing the Company with prior written
      notice thereof:

     

    (a)  The
      Company shall have executed and delivered to such Buyer (i) each of the
      Transaction Documents and (ii) the Debentures (allocated in such principal
      amounts as such Buyer shall request), the related Warrants (allocated in such
      amounts as such Buyer shall request) being purchased by such Buyer at the
      Closing pursuant to this Agreement.

     

    (b)  The
      Voting Agreement shall have been executed and delivered to such Buyer by the
      Company and each of the Stockholders.

     

    (c)  Such
      Buyer shall have received the opinion of Dickstein Shapiro LLP, the Company's
      counsel, dated as of the Closing Date, in substantially the form of Exhibit
      F
      attached
      hereto.

     

    (d)  The
      Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
      Agent Instructions, in the form of Exhibit
      E
      attached
      hereto, which instructions shall have been delivered to and acknowledged in
      writing by the Company's transfer agent.

     

    (e)  The
      Company shall have delivered to such Buyer a certificate evidencing the
      formation and good standing of the Company issued by the Secretary of State
      of
      the State of Delaware, as of a date within 10 days of the Closing
      Date.

     

    (f)  The
      Company shall have delivered to such Buyer a certificate evidencing the
      Company's qualification as a foreign corporation and good standing issued by
      the
      Secretary of State of the State of New Jersey as of a date within 10 days of
      the
      Closing Date.

     

    (g)  The
      Company shall have delivered to such Buyer a certified copy of the Certificate
      of Incorporation as certified by the Secretary of State of the State of Delaware
      within 10 days of the Closing Date.

     

    (h)  The
      Company shall have delivered to such Buyer a certificate, executed by the
      Secretary of the Company and dated as of the Closing Date, as to (i) the
      resolutions as adopted by the Executive Committee of the Company's Board of
      Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
      of
      Incorporation and (iii) the Bylaws, each as in effect at the Closing in the
      form
      attached hereto as Exhibit
      G.

     

    (i)  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date when made and as of the Closing Date
      as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall be true and correct as of such specific
      date)
      and the Company shall have performed, satisfied and complied in all material
      respects with the covenants, agreements and conditions required by the
      Transaction Documents to be performed, satisfied or complied with by the Company
      at or prior to the Closing Date. Such Buyer shall have received a certificate,
      executed by the Chief Executive Officer of the Company, dated as of the Closing
      Date, to the foregoing effect and as to such other matters as may be reasonably
      requested by such Buyer in the form attached hereto as Exhibit
      H.

     

    (j)  The
      Company shall have delivered to such Buyer a letter from the Company's transfer
      agent certifying the number of shares of Common Stock outstanding as of a date
      within five Business Days of the Closing Date.

     

    (k)  The
      Common Stock (i) shall be designated for quotation or listed on the Principal
      Market and (ii) shall not have been suspended, as of the Closing Date, by the
      SEC or the Principal Market from trading on the Principal Market nor shall
      suspension by the SEC or the Principal Market have been threatened, as of the
      Closing Date, either (A) in writing by the SEC or the Principal Market or (B)
      by
      falling below the minimum listing maintenance requirements of the Principal
      Market.

     

    (l)  The
      Company shall have obtained all governmental, regulatory or third party consents
      and approvals, if any, required to be obtained on or prior to the Closing Date
      with respect to the sale of the Securities.

     

    (m)  The
      Company shall have received a waiver, in form and substance reasonably
      satisfactory to the Buyers, (the "Piggy-Back
      Waiver")
      from
      The Dow Chemical Company ("Dow"),
      whereby Dow shall agree to waive any rights it has to have the Common Stock
      issuable upon (A) conversion of the Series A2 Preferred Stock and the Series
      B
      Preferred Stock and (B) exercise of the warrants to purchase Common Stock of
      the
      Company held by Dow included in any Registration Statement filed pursuant to
      the
      Registration Rights Agreement.

     

    (n)  The
      Company shall have delivered to such Buyer such other documents relating to
      the
      transactions contemplated by this Agreement as such Buyer or its counsel may
      reasonably request.

     

    8.  TERMINATION.
      In the
      event that the Closing shall not have occurred with respect to a Buyer on or
      before five (5) Business Days from the date hereof due to the Company's or
      such
      Buyer's failure to satisfy the conditions set forth in Sections 6 and 7 above
      (and the nonbreaching party's failure to waive such unsatisfied condition(s)),
      the nonbreaching party shall have the option to terminate this Agreement with
      respect to such breaching party at the close of business on such date without
      liability of any party to any other party; provided, however, that if this
      Agreement is terminated pursuant to this Section 8, the Company shall remain
      obligated to reimburse the non-breaching Buyers for the expenses described
      in
      Section 4(g) above.

     

    9.  MISCELLANEOUS.

     

    (a)  Governing
      Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, 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 for such 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.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    (b)  Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    (c)  Headings.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    (d)  Severability.
      If any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

     

    (e)  Entire
      Agreement; Amendments.
      This
      Agreement supersedes all other prior oral or written agreements between the
      Buyers, the Company, their affiliates and Persons acting on their behalf with
      respect to the matters discussed herein, and this Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor any Buyer makes any representation,
      warranty, covenant or undertaking with respect to such matters. No provision
      of
      this Agreement may be amended other than by an instrument in writing signed
      by
      the Company and the holders of at least a majority of the Registrable
      Securities then
      outstanding, and any amendment to this Agreement made in conformity with the
      provisions of this Section 9(e) shall be binding on all Buyers and holders
      of
      Securities. No provision hereof may be waived other than by an instrument in
      writing signed by the party against whom enforcement is sought. No such
      amendment shall be effective to the extent that it applies to less than all
      of
      the holders of the applicable Securities then outstanding. No consideration
      shall be offered or paid to any Person to amend or consent to a waiver or
      modification of any provision of any of the Transaction Documents unless the
      same consideration also is offered to all of the parties to the Transaction
      Documents, holders of Debentures or holders of the Warrants, as the case may
      be.
      The Company has not, directly or indirectly, made any agreements with any Buyers
      relating to the terms or conditions of the transactions contemplated by the
      Transaction Documents except as set forth in the Transaction
      Documents.

     

    (f)  Notices.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with an overnight courier service,
      in
      each case properly addressed to the party to receive the same. The addresses
      and
      facsimile numbers for such communications shall be:

     

    If
      to the
      Company:

     

    Millennium
      Cell Inc.

    One
      Industrial Way West

    Eatontown,
      New Jersey 07724

    Telephone: (732)
      542-4000

    Facsimile: (732)
      542-4010

    Attention: President

    

    with
      a
      copy to:

     

    Dickstein
      Shapiro LLP 

    1177
      Avenue of the Americas 

    New
      York,
      New York 10036 

    Telephone: (212)
      227-6525

    Facsimile: (212)
      391-7616

    Attention: Malcolm
      I. Ross, Esq.

     

    If
      to the
      Transfer Agent:

    

    American
      Stock Transfer & Trust Company

    59
      Maiden
      Lane

    New
      York,
      NY 10038

    Telephone:
      (718) 921-8293

    Facsimile:
      (718) 921-8334

    Attention:
      Isaac Kagan

     

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
      with copies to such Buyer's representatives as set forth on the Schedule of
      Buyers, 

     

    with
      a
      copy (for informational purposes) to:

     

    Schulte
      Roth & Zabel LLP

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Telephone:
      (212) 756-2000

    Facsimile:
      (212) 593-5955

    Attention:
      Eleazer N. Klein, Esq.

     

     

    or
      to
      such other address and/or facsimile number and/or to the attention of such
      other
      Person as the recipient party has specified by written notice given to each
      other party five (5) days prior to the effectiveness of such change. Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender's facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    (g)  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of the
      Debentures or the Warrants. The Company shall not assign this Agreement or
      any
      rights or obligations hereunder without the prior written consent of the holders
      of at least a majority of the Debentures then outstanding, including by way
      of a
      Fundamental Transaction (unless the Company is in compliance with the applicable
      provisions governing Fundamental Transactions set forth in the Debentures and
      the Warrants). A Buyer may assign some or all of its rights hereunder without
      the consent of the Company in connection with a transfer by such Buyer of any
      of
      the Securities, in which event such assignee shall be deemed to be a Buyer
      hereunder with respect to such assigned rights; provided
      that
      such assignment is in compliance with applicable securities laws and the terms
      of the Transaction Documents.

     

    (h)  No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    (i)  Survival.
      Unless
      this Agreement is terminated under Section 8, the representations and warranties
      of the Company and the Buyers contained in Sections 2 and 3, the agreements
      and
      covenants set forth in Sections 4, 5 and 9 shall survive the Closing. Each
      Buyer
      shall be responsible only for its own representations, warranties, agreements
      and covenants hereunder.

     

    (j)  Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (k)  Indemnification.
      In
      consideration of each Buyer's execution and delivery of the Transaction
      Documents and acquiring the Securities thereunder and in addition to all of
      the
      Company's other obligations under the Transaction Documents, the Company shall
      defend, protect, indemnify and hold harmless each Buyer and each other holder
      of
      the Securities and all of their stockholders, partners, members, officers,
      directors, employees and direct or indirect investors and any of the foregoing
      Persons' agents or other representatives (including, without limitation, those
      retained in connection with the transactions contemplated by this Agreement)
      (collectively, the "Indemnitees")
      from
      and against any and all actions, causes of action, suits, claims, losses, costs,
      penalties, fees, liabilities and damages (other than lost profits), and expenses
      in connection therewith (irrespective of whether any such Indemnitee is a party
      to the action for which indemnification hereunder is sought), and including
      reasonable attorneys' fees and disbursements (the "Indemnified
      Liabilities"),
      incurred by any Indemnitee as a result of, or arising out of, or relating to
      (a)
      any breach of any representation or warranty made by the Company in the
      Transaction Documents, or (b) any breach of any covenant, agreement or
      obligation of the Company contained in the Transaction Documents or (c) any
      cause of action, suit or claim brought or made against such Indemnitee by a
      third party (including for these purposes a derivative action brought on behalf
      of the Company) and arising out of or resulting from (i) the execution, delivery
      or performance of the Transaction Documents, (ii) any transaction financed
      or to
      be financed in whole or in part, directly or indirectly, with the proceeds
      of
      the issuance of the Securities, or (iii) the status of such Buyer or holder
      of
      the Securities as an investor in the Company pursuant to the transactions
      contemplated by the Transaction Documents; provided that indemnification
      pursuant to this Section 9(k) shall not be available to the extent arising
      from
      such Buyer's bad faith, breach of the Transaction Documents, fraud, gross
      negligence or willful misconduct. To the extent that the foregoing undertaking
      by the Company may be unenforceable for any reason, the Company shall make
      the
      maximum contribution to the payment and satisfaction of each of the Indemnified
      Liabilities that is permissible under applicable law. Except as otherwise set
      forth herein, the mechanics and procedures with respect to the rights and
      obligations under this Section 9(k) shall be the same as those set forth in
      Section 6 of the Registration Rights Agreement.

     

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

     

    (m)  Remedies.
      Each
      Buyer and each holder of the Securities shall have all rights and remedies
      set
      forth in the Transaction Documents and all rights and remedies which such
      holders have been granted at any time under any other agreement or contract
      and
      all of the rights which such holders have under any law. Any Person having
      any
      rights under any provision of this Agreement shall be entitled to enforce such
      rights specifically (without posting a bond or other security), to recover
      damages by reason of any breach of any provision of this Agreement and to
      exercise all other rights granted by law. Furthermore, the Company recognizes
      that in the event that it fails to perform, observe, or discharge any or all
      of
      its obligations under the Transaction Documents, any remedy at law may prove
      to
      be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
      shall be entitled to seek temporary and permanent injunctive relief in any
      such
      case without the necessity of proving actual damages and without posting a
      bond
      or other security.

     

    (n)  Rescission
      and
      Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever any Buyer exercises
      a
      right, election, demand or option under a Transaction Document and the Company
      does not timely perform its related obligations within the periods therein
      provided, then such Buyer may rescind or withdraw, in its sole discretion from
      time to time upon written notice to the Company, any relevant notice, demand
      or
      election in whole or in part without prejudice to its future actions and
      rights

     

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

     

    (p)  Independent
      Nature of Buyers' Obligations and Rights.
      The
      obligations of each Buyer under any Transaction Document are several and not
      joint with the obligations of any other Buyer, and no Buyer shall be responsible
      in any way for the performance of the obligations of any other Buyer under
      any
      Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Buyer pursuant hereto or thereto, shall
      be
      deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
      do not so constitute, a partnership, an association, a joint venture or any
      other kind of entity, or create a presumption that the Buyers are in any way
      acting in concert or as a group, and the Company will not assert any such claim
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents and the Company acknowledges that the Buyers are not
      acting in concert or as a group with respect to such obligations or the
      transactions contemplated by the Transaction Documents. The Company acknowledges
      and each Buyer confirms that it has independently participated in the
      negotiation of the transaction contemplated hereby with the advice of its own
      counsel and advisors. Each Buyer shall be entitled to independently protect
      and
      enforce its rights, including, without limitation, the rights arising out of
      this Agreement or out of any other Transaction Documents, and it shall not
      be
      necessary for any other Buyer to be joined as an additional party in any
      proceeding for such purpose.

     

    [Signature
      Page Follows]

    

    
 

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              COMPANY:

            
	 	
              MILLENNIUM
                CELL INC.

               

              By: /s/
                John Giolli

              Name:
                John Giolli

              Title:
                CFO

            
	 	 

    

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              BUYERS:

            
	 	
              PORTSIDE
                GROWTH & OPPORTUNITY FUND

               

              By: /s/
                Jeffrey C. Smith 

              Name:
                Jeffrey C. Smith

              Title:
                Authorized Signatory

            
	 	 

    

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

 

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
            	
              OTHER
                BUYERS:

            
	 	
              MAINFIELD
                ENTERPRISES, INC.

               

              By: /s/
                Avi Vigder

              Name:
                Avi Vigder

              Title:
                Authorized Signatory

            
	 	 

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

     

    
      	
            	
            
	 	
              GEMINI
                INVESTMENT STRATEGIES, LLC

               

              By: /s/
                Steven W. Winters 

              Name:
                Steven W. Winters

              Title:
                President of the Investment Manager

            
	 	 

    

     

    

 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
            	
            
	 	
              
                IROQUOIS
                  MASTER FUND LTD.

                 

              

              
                By: /s/
                  Joshua Silverman 

                Name:
                  Joshua Silverman

                Title:
                  Authorized Signatory

              

            
	 	 

    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
            	
            
	 	
              
                JCB
                  CAPITAL L.P.

                 

                By: /s/
                  Brett Cohen 

                Name:
                  Brett Cohen

                Title:
                  President

              

            
	 	 

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
            	
            
	 	
              
                JCB
                  CAPITAL OFFSHORE, LTD.

                 

                By: /s/
                  Brett Cohen 

                Name:
                  Brett Cohen

                Title:
                  President

              

            
	 	 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
            	
            
	 	
              
                SOLOMON
                  STRATEGIC HOLDINGS, INC.

                 

                By:  /s/
                  Andrew P. Mackellar 

                Name:
                  Andrew
                  P. Mackellar

                Title:
                  Director

              

            
	 	 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Securities Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	
            	
            
	 	
              
                THE
                  TAIL WIND FUND LTD.

                By:
                  Tail Wind Advisory and Management Ltd., as investment
                  manager

                 

                By:  /s/
                  Daniel Nye 

                Name:
                  Daniel
                  Nye

                Title:
                  Portfolio
                  ManagerRegistration Rights Agreement

                                                                                    Exhibit
    10.2

    

    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of February 15, 2007, by and among Millennium Cell Inc., a Delaware
      corporation, with headquarters located at One Industrial Way West, Eatontown,
      New Jersey 07724 (the "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the "Securities
      Purchase Agreement"),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer (i)
      convertible debentures of the Company (the "Debentures"),
      which
      will, among other things, be convertible into shares of the Company's common
      stock, $.001 par value per share (the "Common
      Stock",
      as
      converted, the "Conversion
      Shares")
      in
      accordance with the terms of the Debentures and (ii) warrants (the "Warrants"),
      which
      will be exercisable to purchase shares of Common Stock (as exercised
      collectively, the "Warrant
      Shares").

     

     

    B. The
      Debentures bear interest, which at the option of the Company, subject to certain
      conditions, may be paid in shares of Common Stock (the "Interest
      Shares").

     

    C. To
      induce
      the Buyers to execute and deliver the Securities Purchase Agreement, the Company
      has agreed to provide certain registration rights under the Securities Act
      of
      1933, as amended, and the rules and regulations promulgated thereunder, or
      any
      similar successor statute (collectively, the "1933
      Act"),
      and
      applicable state securities or "blue sky" laws and regulations.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and each of the Buyers hereby agree as
      follows:

     

    1.  Definitions.
      

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

     

    a.  "Business
      Day"
      means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in the City of New York are authorized or required by law to remain
      closed.

     

    b.  "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement.

     

    c.  "Effective
      Date"
      means
      the date the Registration Statement has been declared effective by the
      SEC.

     

    d.  "Effectiveness
      Deadline"
      means
      the date that is 90 days after the Closing Date.

     

    e.  "Filing
      Deadline"
      means
      the date that is 45 days after the Closing Date.

     

    f.  "Investor"
      means a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      under this Agreement and who agrees to become bound by the provisions of this
      Agreement in accordance with Section 9 and any transferee or assignee thereof
      to
      whom a transferee or assignee assigns its rights under this Agreement and who
      agrees to become bound by the provisions of this Agreement in accordance with
      Section 9.

     

    g.  "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    h.  "register,"
      "registered,"
      and
      "registration"
      refer
      to a registration effected by preparing and filing one or more Registration
      Statements (as defined below) in compliance with the 1933 Act and pursuant
      to
      Rule 415 and the declaration or ordering of effectiveness of such Registration
      Statement(s) by the SEC.

     

    i.  "Registrable
      Securities"
      means
      (i) the Conversion Shares issued or issuable upon conversion of the Debentures,
      (ii) the Warrant Shares issued or issuable upon exercise of the Warrants, (iii)
      any Interest Shares issued or issuable with respect to the Debentures and (iv)
      any shares of Common Stock issued or issuable with respect to the Conversion
      Shares, the Debentures, the Interest Shares, the Warrant Shares and the Warrants
      as a result of any stock split, stock dividend, recapitalization, exchange
      or
      similar event or otherwise, without regard to any limitations on conversions
      of
      the Debentures or exercises of the Warrants.

     

    j.  "Registration
      Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

     

    k.  "Required
      Holders"
      means
      the holders of at least a majority of the Registrable Securities.

     

    l.  "Required
      Registration Amount"
      for the
      Registration Statement means the sum of (i) 140% of the aggregate of the maximum
      number of Conversion Shares issued and issuable upon conversion of the
      Debentures (assuming conversion at an Initial Conversion Price (as defined
      in
      the Debentures) equal to the arithmetic average of the VWAP (as defined in
      the
      Debentures) of the Common Stock over the thirty (30) consecutive Trading Days
      (as defined in the Debentures) ending on the Trading Day immediately preceding
      the Closing Date), (ii) 100% of the maximum number of Interest Shares issued
      or
      issuable pursuant to the terms of the Debentures as of the Trading Day (as
      defined in the Debentures) immediately preceding the applicable date of
      determination assuming that the Debentures remain outstanding through the
      Maturity Date (as defined in the Debentures), and (iii) 100% of the number
      of
      Warrant Shares issued and issuable pursuant to Warrants as of the Trading Day
      immediately preceding the applicable date of determination, all subject to
      adjustment as provided in Section 2(e).

     

    m.  "Rule
      415"
      means
      Rule 415 promulgated under the 1933 Act or any successor rule providing for
      offering securities on a continuous or delayed basis.

     

    n.  "SEC"
      means
      the United States Securities and Exchange Commission.

     

    2.  Registration.

     

    a.  Mandatory
      Registration.
      The
      Company shall prepare, and, as soon as practicable but in no event later than
      the Filing Deadline, file with the SEC the Registration Statement on Form S-3
      registering for resale of a number of Registrable Securities equal to at least
      the Required Registration Amount determined as of date the Registration
      Statement is initially filed with the SEC. In the event that Form S-3 is
      unavailable for such a registration, the Company shall use such other form
      as is
      available for such a registration, subject to the provisions of Section 2(d).
      The Registration Statement shall contain (except if otherwise directed by the
      Required Holders) the "Selling
      Shareholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      The
      Company shall use its best efforts to have the Registration Statement declared
      effective by the SEC as soon as practicable, but in no event later than the
      Effectiveness Deadline. By 9:30 am on the Business Day following the Effective
      Date, the Company shall file with the SEC in accordance with Rule 424 under
      the
      1933 Act the final prospectus to be used in connection with sales pursuant
      to
      such Registration Statement.

     

    b.  Allocation
      of Registrable Securities.
      The
      initial number of Registrable Securities included in any Registration Statement
      and any increase in the number of Registrable Securities included therein shall
      be allocated pro rata among the Investors based on the number of Registrable
      Securities held by each Investor at the time the Registration Statement covering
      such initial number of Registrable Securities or increase thereof is declared
      effective by the SEC. In the event that an Investor sells or otherwise transfers
      any of such Investor's Registrable Securities, each transferee shall be
      allocated a pro rata portion of the then remaining number of Registrable
      Securities included in such Registration Statement for such transferor. Any
      shares of Common Stock included in a Registration Statement and which remain
      allocated to any Person which ceases to hold any Registrable Securities covered
      by such Registration Statement shall be allocated to the remaining Investors,
      pro rata based on the number of Registrable Securities then held by such
      Investors which are covered by such Registration Statement. In no event shall
      the Company include any securities other than the Registrable Securities on
      any
      Registration Statement without the prior written consent of the Required
      Holders.

     

    c.  Legal
      Counsel.
      Subject
      to Section 5 hereof, the Required Holders shall have the right to select one
      legal counsel to review and oversee any registration pursuant to this Section
      2
      ("Legal
      Counsel"),
      which
      shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
      designated by the Required Holders. The Company and Legal Counsel shall
      reasonably cooperate with each other in performing the Company's obligations
      under this Agreement.

     

    d.  Ineligibility
      for Form S-3.
      In the
      event that Form S-3 is not available for the registration of the resale of
      Registrable Securities hereunder, the Company shall (i) register the resale
      of
      the Registrable Securities on another appropriate form reasonably acceptable
      to
      the Required Holders and (ii) undertake to register the Registrable Securities
      on Form S-3 as soon as such form is available, provided that the Company shall
      use best efforts to maintain the effectiveness of the Registration Statement
      then in effect until such time as a Registration Statement on Form S-3 covering
      the Registrable Securities has been declared effective by the SEC.

     

    e.  Sufficient
      Number of Shares Registered.
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section 2(a) is insufficient to cover all of the Registrable
      Securities required to be covered by such Registration Statement or an
      Investor's allocated portion of the Registrable Securities pursuant to Section
      2(b), the Company shall amend the applicable Registration Statement, or file
      a
      new Registration Statement (on the short form available therefor, if
      applicable), or both, so as to cover at least the Required Registration Amount
      as of the trading day immediately preceding the date of the filing of such
      amendment or new Registration Statement, in each case, as soon as practicable,
      but in any event not later than forty-five (45) days after the necessity
      therefor arises. The Company shall use its best efforts to cause such amendment
      and/or new Registration Statement to become effective as soon as practicable
      following the filing thereof. For purposes of the foregoing provision, the
      number of shares available under a Registration Statement shall be deemed
      "insufficient to cover all of the Registrable Securities" if at any time the
      number of shares of Common Stock available for resale under the Registration
      Statement is less than the product determined by multiplying (i) the Required
      Registration Amount as of such time by (ii) 0.90. The calculation set forth
      in
      the foregoing sentence shall be made without regard to any limitations on the
      conversion of the Debentures or the exercise of the Warrants and such
      calculation shall assume that the Debentures are then convertible into shares
      of
      Common Stock at the then applicable Conversion Rate (as defined in the
      Debentures) and that the Warrants are then exercisable for shares of Common
      Stock at the then prevailing Exercise Price (as defined in the
      Warrants).

     

    f.  Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      If (i)
      a Registration Statement covering all of the Registrable Securities required
      to
      be covered thereby and required to be filed by the Company pursuant to this
      Agreement is (A) not filed with the SEC on or before the Filing Deadline (a
      "Filing
      Failure")
      or (B)
      not declared effective by the SEC on or before the 30th
      day
      after the Effectiveness Deadline (an "Effectiveness
      Failure")
      or
      (ii) on any day after the Effective Date sales of all of the Registrable
      Securities required to be included on such Registration Statement cannot be
      made
      for more than five (5) Business Days (other than during an Allowable Grace
      Period (as defined in Section 3(r)) pursuant to such Registration Statement
      (including, without limitation, because of a failure to keep such Registration
      Statement effective, to disclose such information as is necessary for sales
      to
      be made pursuant to such Registration Statement or to register a sufficient
      number of shares of Common Stock) (a "Maintenance
      Failure")
      then,
      as partial relief for the damages to any holder by reason of any such delay
      in
      or reduction of its ability to sell the underlying shares of Common Stock (which
      remedy shall not be exclusive of any other remedies available at law or in
      equity), the Company shall pay to each holder of Registrable Securities relating
      to such Registration Statement an amount in cash equal to one and one-half
      percent (1.5%) of the aggregate Purchase Price (as such term is defined in
      the
      Securities Purchase Agreement) of such Investor's Registrable Securities
      included in such Registration Statement on each of the following dates: (i)
      the
      day of a Filing Failure and on every thirtieth day (pro rated for periods
      totaling less than thirty (30) days) thereafter until such Filing Failure is
      cured; (ii) the day of an Effectiveness Failure and on every thirtieth day
      (pro
      rated for periods totaling less than thirty (30) days) thereafter until such
      Effectiveness Failure is cured; and (iii) the initial day of a Maintenance
      Failure and on every thirtieth day (pro rated for periods totaling less than
      thirty (30) days) thereafter until such Maintenance Failure is cured. The
      payments to which a holder shall be entitled pursuant to this Section 2(f)
      are
      referred to herein as "Registration
      Delay Payments."
      Notwithstanding the foregoing, no Investor shall be entitled to a Registration
      Delay Payment if the Filing Failure, Effectiveness Failure or Maintenance
      Failure, as applicable, for which such Registration Delay Payments would
      otherwise be payable are the result of the failure of (A) such Investor to
      provide the Company with information reasonably requested by the Company and
      necessary to complete, amend or supplement the Registration Statement or (B)
      Legal Counsel to timely deliver any comments or objections to the Registration
      Statement to the Company in accordance with Section 3(c). Registration Delay
      Payments shall be paid on the earlier of (I) the last day of the calendar month
      during which such Registration Delay Payments are incurred and (II) the third
      Business Day after the event or failure giving rise to the Registration Delay
      Payments is cured. In the event the Company fails to make Registration Delay
      Payments in a timely manner, such Registration Delay Payments shall bear
      interest at the rate of one percent (1.0%) per month (prorated for partial
      months) until paid in full. 

     

    3.  Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2(a), 2(d) or 2(e), the Company will use its best efforts
      to
      effect the registration of the Registrable Securities in accordance with the
      intended method of disposition thereof and, pursuant thereto, the Company shall
      have the following obligations:

     

    a.  The
      Company shall submit to the SEC, within two (2) Business Days after the Company
      learns that no review of a particular Registration Statement will be made by
      the
      staff of the SEC or that the staff has no further comments on a particular
      Registration Statement, as the case may be, a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. The
      Company shall use best efforts to keep each Registration Statement effective
      pursuant to Rule 415 at all times until the earlier of (i) the date as of which
      the Investors may sell all of the Registrable Securities covered by such
      Registration Statement without restriction pursuant to Subsection (k) of Rule
      144 promulgated under the 1933 Act (or any successor rule thereto, "Rule
      144")
      or
      (ii) the date on which the Investors shall have sold all of the Registrable
      Securities covered by such Registration Statement (the "Registration
      Period").
      The
      Company shall use best efforts to ensure that each Registration Statement
      (including any amendments or supplements thereto and prospectuses contained
      therein) shall not contain any untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein, or necessary to make the
      statements therein (in the case of prospectuses, in the light of the
      circumstances in which they were made) not misleading.

     

    b.  The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective at all times during
      the
      Registration Period, and, during such period, comply with the provisions of
      the
      1933 Act with respect to the disposition of all Registrable Securities of the
      Company covered by such Registration Statement in accordance with the intended
      methods of disposition by the seller or sellers thereof as set forth in such
      Registration Statement. In the case of amendments and supplements to a
      Registration Statement which are required to be filed pursuant to this Agreement
      (including pursuant to this Section 3(b)) by reason of the Company filing a
      report on Form 10-Q, Form 10-K or any other periodic report pursuant to the
      Securities Exchange Act of 1934, as amended (the "1934
      Act"),
      the
      Company shall have incorporated such report by reference into such Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the 1934 Act report is filed which created the
      requirement for the Company to amend or supplement such Registration
      Statement.

     

    c.  The
      Company shall (A) permit Legal Counsel to review and comment upon (i) a
      Registration Statement at least five (5) Business Days prior to its filing
      with
      the SEC and (ii) all amendments and supplements to all Registration Statements
      filed pursuant to this Agreement (except for periodic reports filed pursuant
      to
      the 1934 Act) within a reasonable number of days prior to their filing with
      the
      SEC, and (B) not file any Registration Statement or amendment or supplement
      thereto in a form to which Legal Counsel reasonably objects. The Company shall
      not submit a request for acceleration of the effectiveness of a Registration
      Statement or any amendment or supplement thereto without the prior approval
      of
      Legal Counsel, which consent shall not be unreasonably withheld, delayed or
      conditioned. The Company shall furnish to Legal Counsel, without charge, (i)
      copies of any correspondence from the SEC or the staff of the SEC to the Company
      or its representatives relating to any Registration Statement, (ii) promptly
      after the same is prepared and filed with the SEC, one copy of any Registration
      Statement and any amendment(s) thereto, including financial statements and
      schedules, all documents incorporated therein by reference, if requested by
      an
      Investor, and all exhibits and (iii) upon the effectiveness of any Registration
      Statement, one copy of the prospectus included in such Registration Statement
      and all amendments and supplements thereto (except for periodic reports
      incorporated by reference into such Registration Statements). The Company shall
      reasonably cooperate with Legal Counsel in performing the Company's obligations
      pursuant to this Section 3. 

     

    d.  The
      Company shall furnish to each Investor whose Registrable Securities are included
      in any Registration Statement, without charge, (i) promptly after the same
      is
      prepared and filed with the SEC, at least one copy of such Registration
      Statement and any amendment(s) thereto, including financial statements and
      schedules, all documents incorporated therein by reference, if requested by
      such
      Investor, all exhibits and each preliminary prospectus, (ii) upon the
      effectiveness of any Registration Statement, ten (10) copies of the prospectus
      included in such Registration Statement and all amendments and supplements
      thereto (except for periodic reports incorporated by reference into such
      Registration Statements) (or such other number of copies as such Investor may
      reasonably request) and (iii) such other documents, including copies of any
      preliminary or final prospectus, as such Investor may reasonably request from
      time to time in order to facilitate the disposition of the Registrable
      Securities owned by such Investor.

     

    e.  The
      Company shall use its best efforts to (i) register and qualify, unless an
      exemption from registration and qualification applies, the resale by Investors
      of the Registrable Securities covered by a Registration Statement under such
      other securities or "blue sky" laws of all applicable jurisdictions in the
      United States, (ii) prepare and file in those jurisdictions, such amendments
      (including post-effective amendments) and supplements to such registrations
      and
      qualifications as may be necessary to maintain the effectiveness thereof during
      the Registration Period, (iii) take such other actions as may be necessary
      to
      maintain such registrations and qualifications in effect at all times during
      the
      Registration Period and (iv) take all other actions reasonably necessary or
      advisable to qualify the Registrable Securities for sale in such jurisdictions;
      provided,
      however,
      that
      the Company shall not be required in connection therewith or as a condition
      thereto to (x) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify but for this Section 3(e), (y) subject itself
      to general taxation in any such jurisdiction or (z) file a general consent
      to
      service of process in any such jurisdiction. The Company shall promptly notify
      Legal Counsel and each Investor who holds Registrable Securities of the receipt
      by the Company of any notification with respect to the suspension of the
      registration or qualification of any of the Registrable Securities for sale
      under the securities or "blue sky" laws of any jurisdiction in the United States
      or its receipt of actual notice of the initiation or threatening of any
      proceeding for such purpose.

     

    f.  The
      Company shall notify Legal Counsel and each Investor whose Registrable
      Securities are included in any Registration Statement in writing of the
      happening of any event, as promptly as practicable after becoming aware of
      such
      event, as a result of which the prospectus included in such Registration
      Statement, as then in effect, includes an untrue statement of a material fact
      or
      omission to state a material fact required to be stated therein or necessary
      to
      make the statements therein, in the light of the circumstances under which
      they
      were made, not misleading (provided that in no event shall such notice contain
      any material, nonpublic information), and, subject to Section 3(m), promptly
      prepare a supplement or amendment to such Registration Statement to correct
      such
      untrue statement or omission, and deliver ten (10) copies of such supplement
      or
      amendment to Legal Counsel and each such Investor (or such other number of
      copies as Legal Counsel or such Investor may reasonably request). The Company
      shall also promptly notify Legal Counsel and each such Investor in writing
      (i)
      when a prospectus or any prospectus supplement or post-effective amendment
      has
      been filed (other than the filing of any periodic report pursuant to the 1934
      Act), and when a Registration Statement or any post-effective amendment has
      become effective (notification of such effectiveness shall be delivered to
      Legal
      Counsel and each Investor by facsimile on the same day of such effectiveness
      and
      by overnight mail), (ii) of any request by the SEC for amendments or supplements
      to a Registration Statement or related prospectus or related information, and
      (iii) of the Company's reasonable determination that a post-effective amendment
      to a Registration Statement would be appropriate.

     

    g.  The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction and, if such an order or suspension is issued, to obtain the
      withdrawal of such order or suspension at the earliest possible moment and
      to
      notify Legal Counsel and each Investor who holds Registrable Securities being
      sold of the issuance of such order and the resolution thereof or its receipt
      of
      actual notice of the initiation or threat of any proceeding for such
      purpose.

     

    h.  If
      any
      Investor is required under applicable securities law to be described in the
      Registration Statement as an underwriter and which is otherwise conducting
      diligence of the sort that an underwriter would conduct, at the reasonable
      request of any Investor, the Company shall furnish to such Investor, on the
      date
      of the effectiveness of the Registration Statement and thereafter from time
      to
      time on such dates as an Investor may reasonably request (i) a letter, dated
      such date, from the Company's independent certified public accountants in form
      and substance as is customarily given by independent certified public
      accountants to underwriters in an underwritten public offering, addressed to
      the
      Investors, and (ii) an opinion, dated as of such date, of counsel representing
      the Company for purposes of such Registration Statement, in form, scope and
      substance as is customarily given in an underwritten public offering, addressed
      to the Investors.

     

    i.  Upon
      the
      written request of any Investor in connection with any Investor's due diligence
      requirements, if any, and other than records, documents and properties of the
      Company the provision of which would (A) compromise the ability of the Company
      to assert a privilege motion or (B) result in a violation of any confidentiality
      obligation of the Company to any Person other than the Buyers (including,
      without limitation, confidentiality obligations to Dow), the Company shall
      make
      available for inspection by (i) any Investor, (ii) Legal Counsel and (iii)
      one
      firm of accountants or other agents retained by the Investors (collectively,
      the
      "Inspectors"),
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the "Records"),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company's
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree
      to
      hold in strict confidence and shall not make any disclosure (except to an
      Investor) or use of any Record or other information which the Company determines
      in good faith to be confidential, and of which determination the Inspectors
      are
      so notified, unless (a) the disclosure of such Records is necessary to avoid
      or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the 1933 Act, (b) the release of such Records is ordered pursuant
      to a final, non-appealable subpoena or order from a court or government body
      of
      competent jurisdiction, or (c) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other agreement of which the Inspector has knowledge. Each Investor
      agrees that it shall, upon learning that disclosure of such Records is sought
      in
      or by a court or governmental body of competent jurisdiction or through other
      means, give prompt notice to the Company and allow the Company, at its expense,
      to undertake appropriate action to prevent disclosure of, or to obtain a
      protective order for, the Records deemed confidential. Nothing herein (or in
      any
      other confidentiality agreement between the Company and any Investor) shall
      be
      deemed to limit the Investors' ability to sell Registrable Securities in a
      manner which is otherwise consistent with applicable laws and
      regulations.

     

    j.  The
      Company shall hold in confidence and not make any disclosure of information
      concerning an Investor provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws or
      is
      otherwise required to be included in a Registration Statement (or any amendments
      or supplements thereto), (ii) the disclosure of such information is necessary
      to
      avoid or correct a misstatement or omission in any Registration Statement,
      (iii)
      the release of such information is ordered pursuant to a subpoena or other
      final, non-appealable order from a court or governmental body of competent
      jurisdiction or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement to which the Company is bound. The Company agrees that it shall,
      upon
      learning that disclosure of such information concerning an Investor is sought
      in
      or by a court or governmental body of competent jurisdiction or through other
      means, give prompt written notice to such Investor and allow such Investor,
      at
      the Investor's expense, to undertake appropriate action to prevent disclosure
      of, or to obtain a protective order for, such information.

     

    k.  The
      Company shall use its best efforts either to cause all of the Registrable
      Securities covered by a Registration Statement to be listed for quotation on
      The
      NASDAQ Capital Market (the "Capital
      Market")
      of the
      National Association of Securities Dealers, Inc. Automated Quotation System
      ("Nasdaq")
      or, if
      the Common Stock is no longer quoted on the Capital Market, secure listing
      and
      quotation of all of the Registrable Securities covered by a Registration
      Statement on any national securities exchange or quotation services on which
      the
      Common Stock is listed or quoted. The Company shall pay all fees and expenses
      in
      connection with satisfying its obligation under this Section 3(k).

     

    l.  [INTENTIONALLY
      OMITTED]

     

    m.  The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable, facilitate the timely preparation and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Investors may reasonably request and registered in such names as
      the
      Investors may request.

     

    n.  If
      requested by an Investor, the Company shall (i) as soon as practicable
      incorporate in a prospectus supplement or post-effective amendment such
      information as an Investor reasonably requests to be included therein relating
      to the sale and distribution of Registrable Securities, including, without
      limitation, information with respect to the number of Registrable Securities
      being offered or sold, the purchase price being paid therefor and any other
      terms of the offering of the Registrable Securities to be sold in such offering;
      (ii) as soon as practicable make all required filings of such prospectus
      supplement or post-effective amendment after being notified of the matters
      to be
      incorporated in such prospectus supplement or post-effective amendment; and
      (iii) as soon as practicable, supplement or make amendments to any Registration
      Statement if reasonably requested by an Investor holding any Registrable
      Securities.

     

    o.  The
      Company shall use its best efforts to cause the Registrable Securities covered
      by a Registration Statement to be registered with or approved by such other
      governmental agencies or authorities as may be necessary to consummate the
      disposition of such Registrable Securities in the United States.

     

    p.  The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with, and in the
      manner provided by, the provisions of Rule 158 under the 1933 Act) covering
      a
      twelve-month period beginning not later than the first day of the Company's
      fiscal quarter next following the effective date of a Registration
      Statement.

     

    q.  The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

     

    r.  Within
      two (2) Business Days after a Registration Statement which covers Registrable
      Securities is ordered effective by the SEC, the Company shall deliver, and
      shall
      cause legal counsel for the Company to deliver, to the transfer agent for such
      Registrable Securities (with copies to the Investors whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      A.

     

    s.  Notwithstanding
      anything to the contrary herein, at any time after the Registration Statement
      has been declared effective by the SEC, the Company may delay the disclosure
      of
      material, non-public information concerning the Company the disclosure of which
      at the time is not, in the good faith opinion of the Board of Directors of
      the
      Company and its counsel, in the best interest of the Company and, in the opinion
      of counsel to the Company, otherwise required (a "Grace
      Period");
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      (provided that in each notice the Company will not disclose the content of
      such
      material, non-public information to the Investors) and the date on which the
      Grace Period will begin, and (ii) notify the Investors in writing of the date
      on
      which the Grace Period ends; and, provided further, that no Grace Period shall
      exceed ten (10) consecutive days and during any three hundred sixty five (365)
      day period such Grace Periods shall not exceed an aggregate of thirty (30)
      days
      and the first day of any Grace Period must be at least two (2) trading days
      after the last day of any prior Grace Period (each, an "Allowable
      Grace Period").
      For
      purposes of determining the length of a Grace Period above, the Grace Period
      shall begin on and include the date the Investors receive the notice referred
      to
      in clause (i) and shall end on and include the later of the date the Investors
      receive the notice referred to in clause (ii) and the date referred to in such
      notice. The provisions of Section 3(g) hereof shall not be applicable during
      the
      period of any Allowable Grace Period. Upon expiration of the Grace Period,
      the
      Company shall again be bound by the first sentence of Section 3(f) with respect
      to the information giving rise thereto unless such material, non-public
      information is no longer applicable. Notwithstanding anything to the contrary,
      the Company shall cause its transfer agent to deliver unlegended shares of
      Common Stock to a transferee of an Investor in accordance with the terms of
      the
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an Investor has entered into a contract for
      sale, and delivered a copy of the prospectus included as part of the applicable
      Registration Statement (unless an exemption from such prospectus delivery
      requirements exists), prior to the Investor's receipt of the notice of a Grace
      Period and for which the Investor has not yet settled. 

     

    4.  Obligations
      of the Investors.

     

    a.  Upon
      the
      execution of this Agreement, each Investor shall deliver to the Company an
      executed Selling Stockholder Questionnaire, substantially in the form set forth
      as Exhibit C hereto, and at least five (5) Business Days prior to the first
      anticipated filing date of a Registration Statement, the Company shall notify
      each Investor in writing of the additional information the Company requires
      from
      each such Investor if such Investor elects to have any of such Investor's
      Registrable Securities included in such Registration Statement. It shall be
      a
      condition precedent to the obligations of the Company to complete the
      registration pursuant to this Agreement with respect to the Registrable
      Securities of a particular Investor that such Investor shall furnish to the
      Company such information regarding itself, the Registrable Securities held
      by it
      and the intended method of disposition of the Registrable Securities held by
      it
      as shall be reasonably required to effect the effectiveness of the registration
      of such Registrable Securities and shall execute such documents in connection
      with such registration as the Company may reasonably request. 

     

    b.  Each
      Investor, by such Investor's acceptance of the Registrable Securities, agrees
      to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor's election
      to
      exclude all of such Investor's Registrable Securities from such Registration
      Statement.

     

    c.  Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(g) or the first
      sentence of 3(f), such Investor will immediately discontinue disposition of
      Registrable Securities pursuant to any Registration Statement(s) covering such
      Registrable Securities until such Investor's receipt of the copies of the
      supplemented or amended prospectus contemplated by Section 3(g) or the first
      sentence of 3(f) or receipt of notice that no supplement or amendment is
      required. Notwithstanding anything to the contrary, the Company shall cause
      its
      transfer agent to deliver unlegended shares of Common Stock to a transferee
      of
      an Investor in accordance with the terms of the Securities Purchase Agreement
      in
      connection with any sale of Registrable Securities with respect to which an
      Investor has entered into a contract for sale and delivered a copy of the
      prospectus included as part of the applicable Registration Statement (unless
      an
      exemption from such prospectus delivery requirements exists) prior to the
      Investor's receipt of a notice from the Company of the happening of any event
      of
      the kind described in Section 3(g) or the first sentence of 3(f) and for which
      the Investor has not yet settled.

     

    d.  Each
      Investor covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it or an exemption therefrom
      in
      connection with sales of Registrable
      Securities pursuant to the Registration Statement.

     

    5.  Expenses
      of Registration.

     

    All
      reasonable expenses, other than underwriting discounts and commissions and
      as
      provided in the second sentence of this Section 5, incurred in connection with
      registrations, filings or qualifications pursuant to Sections 2 and 3,
      including, without limitation, all registration, listing and qualifications
      fees, printers and accounting fees, and fees and disbursements of counsel for
      the Company, shall be paid by the Company. The Company shall reimburse the
      Investors for the fees and disbursements of Legal Counsel in connection with
      registration, filing or qualification pursuant to Sections 2 and 3 of this
      Agreement which amount shall be limited to $10,000 in the
      aggregate.

     

    6.  Indemnification.

     

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    a.  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Investor, the
      directors, officers, members, partners, employees, agents, representatives
      of,
      and each Person,
      if any,
      who controls any Investor within the meaning of the 1933 Act or the 1934 Act
      (each, an "Indemnified
      Person"),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys' fees, amounts paid in settlement or
      expenses, joint or several, (collectively, "Claims")
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto ("Indemnified
      Damages"),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other "blue sky" laws of any jurisdiction
      in
      which Registrable Securities are offered ("Blue
      Sky Filing"),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading, (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      preliminary prospectus if used prior to the effective date of such Registration
      Statement, or contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the SEC)
      or
      the omission or alleged omission to state therein any material fact necessary
      to
      make the statements made therein, in the light of the circumstances under which
      the statements therein were made, not misleading, or (iii) any violation or
      alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement (the matters in the foregoing
      clauses (i) through (iii) being, collectively, "Violations").
      Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
      promptly as such expenses are incurred and are due and payable, for any legal
      fees or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      for such Indemnified Person expressly for use in connection with the preparation
      of the any prospectus, a Registration Statement, a Blue Sky Filing or any such
      amendment thereof or supplement thereto, if a prospectus was timely made
      available by the Company pursuant to Section 3(d); and (ii) shall not apply
      to
      amounts paid in settlement of any Claim if such settlement is effected without
      the prior written consent of the Company, which consent shall not be
      unreasonably withheld or delayed. Such indemnity shall remain in full force
      and
      effect regardless of any investigation made by or on behalf of the Indemnified
      Person and shall survive the transfer of the Registrable Securities by the
      Investors pursuant to Section 9.

     

    b.  In
      connection with any Registration Statement in which an Investor is
      participating, each such Investor agrees to severally and not jointly indemnify,
      hold harmless and defend, to the same extent and in the same manner as is set
      forth in Section 6(a), the Company, each of its directors, each of its officers
      who signs the Registration Statement and each Person, if any, who controls
      the
      Company within the meaning of the 1933 Act or the 1934 Act (each, an
      "Indemnified
      Party"),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are based upon any Violation, in each case
      to the extent, and only to the extent, that such Violation occurs in reliance
      upon and in conformity with written information furnished to the Company by
      such
      Investor expressly for use in connection with such Registration Statement;
      and,
      subject to Section 6(c), such Investor will reimburse any legal or other
      expenses reasonably incurred by an Indemnified Party in connection with
      investigating or defending any such Claim; provided, however, that the indemnity
      agreement contained in this Section 6(b) and the agreement with respect to
      contribution contained in Section 7 shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of such Investor, which consent shall not be unreasonably withheld
      or
      delayed; provided, further, however, that such Investor shall be liable under
      this Section 6(b) for only that amount of a Claim or Indemnified Damages as
      does
      not exceed the net proceeds to such Investor as a result of the sale of
      Registrable Securities pursuant to such Registration Statement. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of such Indemnified Party and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9. 

     

    c.  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof and specifying in reasonable detail
      the factual basis of the Claim, and the indemnifying party shall have the right
      to participate in, and, to the extent the indemnifying party so desires, jointly
      with any other indemnifying party similarly noticed, to assume control of the
      defense thereof with counsel mutually satisfactory to the indemnifying party
      and
      the Indemnified Person or the Indemnified Party, as the case may be;
provided,
      however,
      that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses of not more than one counsel for such
      Indemnified Person or Indemnified Party to be paid by the indemnifying party,
      if, in the reasonable opinion of counsel retained by the indemnifying party
      reasonably satisfactory to the indemnifying party, the representation by counsel
      of the Indemnified Person or Indemnified Party and the indemnifying party would
      be inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. In the case of an Indemnified Person, legal counsel
      referred to in the immediately preceding sentence shall be selected by the
      Investors holding at least a majority in
      interest of the Registrable Securities included in the Registration Statement
      to
      which the Claim relates. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or Claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or Claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      reasonably apprised at all times as to the status of the defense or any
      settlement negotiations with respect thereto. No indemnifying party shall be
      liable for any settlement of any action, claim or proceeding effected without
      its prior written consent; provided,
      however,
      that
      the indemnifying party shall not unreasonably withhold, delay or condition
      its
      consent. No indemnifying party shall, without the prior written consent of
      the
      Indemnified Party or Indemnified Person, consent to entry of any judgment or
      enter into any settlement or other compromise which does not include as an
      unconditional term thereof the giving by the claimant or plaintiff to such
      Indemnified Party or Indemnified Person of a release from all liability in
      respect to such Claim or litigation. Following indemnification as provided
      for
      hereunder, the indemnifying party shall be subrogated to all rights and remedies
      of the Indemnified Party or Indemnified Person with respect to all third
      parties, firms or corporations relating to the matter for which indemnification
      has been made. The failure to deliver written notice to the indemnifying party
      within a reasonable time of the commencement of any such action shall not
      relieve such indemnifying party of any liability to the Indemnified Person
      or
      Indemnified Party under this Section 6, except to the extent that the
      indemnifying party is prejudiced in its ability to defend such
      action.

     

    d.  The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received (with accompanying detail of services rendered and
      imbursements incurred) or Indemnified Damages are incurred.

     

    e.  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

     

    7.  Contribution.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      applicable law, public policy or otherwise, the indemnifying party agrees to
      make the maximum contribution with respect to any amounts for which it would
      otherwise be liable under Section 6 to the fullest extent permitted by law;
      provided,
      however,
      that:
      (i) no Person involved in the sale of Registrable Securities, which Person
      is
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the 1933 Act) in connection with such sale, shall be entitled to contribution
      from any Person involved in such sale of Registrable Securities who was not
      guilty of fraudulent misrepresentation; and (ii) contribution by any seller
      of
      Registrable Securities shall be limited in amount to the net amount of proceeds
      received by such seller from the sale of such Registrable Securities pursuant
      to
      such Registration Statement. 

     

    8.  Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration ("Rule
      144"),
      the
      Company agrees to:

     

    a.  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    b.  file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements and the filing of such reports and other documents
      is required for the applicable provisions of Rule 144; and

     

    c.  furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company, if true, that it has
      complied with the reporting requirements of Rule 144, the 1933 Act and the
      1934
      Act, (ii) a copy of the most recent annual report of the Company and such other
      reports and documents so filed by the Company and (iii) such other information
      as may be reasonably requested to permit the Investors to sell such securities
      pursuant to Rule 144 without registration; provided,
      that
      the Company shall not be obligated to deliver to any Investor any information
      that is filed by the Company with the SEC and is available on
      EDGAR.

     

    9.  Assignment
      of Registration Rights.
      

     

    The
      rights under this Agreement shall be automatically assignable by the Investors
      to any transferee of all or any portion of such Investor's Registrable
      Securities if: (i) the Investor agrees in writing with the transferee or
      assignee to assign such rights and a copy of such agreement is furnished to
      the
      Company promptly after such assignment; (ii) the Company is, promptly after
      such
      transfer or assignment, furnished with written notice of (a) the name and
      address of such transferee or assignee and (b) the securities with respect
      to
      which such registration rights are being transferred or assigned; (iii)
      immediately following such transfer or assignment the further disposition of
      such securities by the transferee or assignee is restricted under the 1933
      Act
      and applicable state securities laws; (iv) at or before the time the Company
      receives the written notice contemplated by clause (ii) of this sentence the
      transferee or assignee agrees in writing with the Company to be bound by all
      of
      the provisions contained herein; and (v) such transfer shall have been made
      in
      accordance with the applicable requirements of the Securities Purchase
      Agreement.

     

    10.  Amendment
      of Registration Rights.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and the Required
      Holders. Any amendment or waiver effected in accordance with this Section 10
      shall be binding upon each Investor and the Company. No such amendment shall
      be
      effective to the extent that it applies to less than all of the holders of
      the
      Registrable Securities. No consideration shall be offered or paid to any Person
      to amend or consent to a waiver or modification of any provision of any of
      this
      Agreement unless the same consideration also is offered to all of the parties
      to
      this Agreement.

     

    11.  Miscellaneous.

     

    a.  A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities. If the Company receives
      conflicting instructions, notices or elections from two or more Persons with
      respect to the same Registrable Securities, the Company shall act upon the
      basis
      of instructions, notice or election received from the such record owner of
      such
      Registrable Securities.

     

    b.  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) Business Day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

     

    

    

    If
      to the
      Company: 

     

    Millennium
      Cell Inc.

    One
      Industrial Way West

    Eatontown,
      New Jersey 07724

    Telephone: (732)
      542-4000

    Facsimile: (732)
      542-4010

    Attention: President

    

    with
      a
      copy to:

     

    Dickstein
      Shapiro LLP 

    1177
      Avenue of the Americas 

    New
      York,
      New York 10036 

    Telephone: (212)
      277-6525

    Facsimile: (212)
      391-7616

    Attention: Malcolm
      I. Ross, Esq.

    

    If
      to
      Legal Counsel:

    

    
      	 	 	
              Schulte
                Roth & Zabel LLP

            

    

    
      	 	 	
              919
                Third Avenue

            

    

    
      	 	 	
              New
                York, New York 10022

            

    

    
      	 	 	
              Telephone:
                (212) 756-2000

            

    

    
      	 	 	
              Facsimile:
                (212) 593-5955

            

    

    
      	 	 	
              Attention:
                Eleazer N. Klein, Esq.

            

    

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, or to such other address and/or facsimile number and/or
      to
      the attention of such other Person as the recipient party has specified by
      written notice given to each other party five (5) days prior to the
      effectiveness of such change. Written confirmation of receipt (A) given by
      the
      recipient of such notice, consent, waiver or other communication, (B)
      mechanically or electronically generated by the sender's facsimile machine
      containing the time, date, recipient facsimile number and an image of the first
      page of such transmission or (C) provided by a courier or overnight courier
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or receipt from a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    c.  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    d.  All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, 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 for such 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.
      If any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    e.  This
      Agreement, the other Transaction Documents (as defined in the Securities
      Purchase Agreement) and the instruments referenced herein and therein constitute
      the entire agreement among the parties hereto with respect to the subject matter
      hereof and thereof. There are no restrictions, promises, warranties or
      undertakings, other than those set forth or referred to herein and therein.
      This
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein supersede all prior agreements and understandings among the parties
      hereto with respect to the subject matter hereof and thereof.

     

    f.  Subject
      to the requirements of Section 9, this Agreement shall inure to the benefit
      of
      and be binding upon the permitted successors and assigns of each of the parties
      hereto.

     

    g.  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    h.  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    i.  Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    j.  All
      consents and other determinations required to be made by the Investors pursuant
      to this Agreement shall be made, unless otherwise specified in this Agreement,
      by the Required Holders.

     

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

     

    l.  This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    m.  The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated herein.

     

    *
      * * * *
      *

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              COMPANY:

            
	 	 
	 	
              MILLENNIUM
                CELL INC.

            
	 	 
	 	 
	 	 
	 	
              By: /s/
                John Giolli

              Name: 
                John Giolli

              Title: CFO

            
	 	 

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    

    
      	 	
              BUYERS:

            
	 	 
	 	
              PORTSIDE
                GROWTH & OPPORTUNITY FUND

            
	 	 
	 	 
	 	 
	 	
              By: /s/
                Jeffrey C. Smith

              Name: Jeffrey
                C. Smith

              Title: Authorized
                Signatory

            
	 	 

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              OTHER
                BUYERS

            
	 	 
	 	
              MAINFIELD
                ENTERPRISES, INC.

            
	 	 
	 	 
	 	
              By: /s/
                Avi Vigder

              Name: Avi
                Vigder

              Title: Authorized
                Signatory

            
	 	 

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              OTHER
                BUYERS

            
	 	 
	 	
              GEMINI
                INVESTMENT STRATEGIES, LLC

            
	 	 
	 	 
	 	
              By: /s/
                Steven W. Winters

              Name: Steven
                W. Winters

              Title: President
                of the Investment Manager

            
	 	 

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              OTHER
                BUYERS

            
	 	 
	 	
              IROQUOIS
                MASTER FUND LTD.

            
	 	 
	 	 
	 	
              By: /s/
                Joshua Silverman

              Name: Joshua
                Silverman

              Title: Authorized
                Signatory

            
	 	 

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              OTHER
                BUYERS

            
	 	 
	 	
              JGB
                CAPITAL L.P.

            
	 	 
	 	 
	 	
              By: /s/
                Brett Cohen

              Name: Brett
                Cohen

              Title: President

            
	 	 

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              OTHER
                BUYERS

            
	 	 
	 	
              JGB
                CAPITAL OFFSHORE, LTD.

            
	 	 
	 	 
	 	
              By: /s/
                Brett Cohen

              Name: Brett
                Cohen

              Title: President

            
	 	 

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              OTHER
                BUYERS

            
	 	 
	 	
              SOLOMON
                STRATEGIC HOLDINGS, INC.

            
	 	 
	 	 
	 	
              By: /s/
                Andrew P. Mackellar

              Name:
                Andrew
                P. Mackellar

              Title:
                Director

            
	 	 

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
 

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	
              OTHER
                BUYERS

            
	 	 
	 	
              THE
                TAIL WIND FUND LTD.

              By:
                Tail Wind Advisory and Management Ltd., as investment
                manager

            
	 	 
	 	 
	 	
              By: /s/
                Daniel Nye

              Name:
                Daniel
                Nye

              Title:
                Portfolio
                Manager

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