Document:

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Exhibit 10.1

                                                                  EXECUTION COPY

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of July 28,
2008, by and among Raptor Networks Technology, Inc., a Colorado corporation,
with headquarters located at 1241 E. Dyer Road, Suite 150, Santa Ana, California
92705 (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 the Buyers are parties to a Securities Purchase
Agreement, dated as of dated as of July 30, 2006 (as amended by the Amended and
Restated Amendment and Exchange Agreements dated as of January 22, 2007, and as
further amended, restated, supplemented or otherwise modified from time to time,
the "2006 SECURITIES PURCHASE AGREEMENT") pursuant to which the Company has
sold, and the Buyers have purchased (i) senior secured convertible notes issued
pursuant thereto (as such notes may be amended, restated, replaced or otherwise
modified from time to time in accordance with the terms thereof, collectively,
the "2006 NOTES"), which 2006 Notes are convertible into the Company's common
stock, par value $0.001 per share (the "COMMON STOCK"), in accordance with the
terms of the 2006 Notes and (ii) warrants exercisable into Common Stock (the
"2006 WARRANTS");

         B. The Company and the Buyers are parties to a Securities Purchase
Agreement, dated as of July 31, 2007 (as amended, restated, supplemented or
otherwise modified from time to time, the "2007 SECURITIES PURCHASE AGREEMENT")
pursuant to which the Company has sold, and the Buyers have purchased (i) senior
secured convertible notes issued pursuant thereto (as such notes may be amended,
restated, replaced or otherwise modified from time to time in accordance with
the terms thereof, collectively, the "2007 NOTES"), which 2007 Notes are
convertible into Common Stock, in accordance with the terms of the 2007 Notes
and (ii) warrants exercisable into Common Stock (the "2007 WARRANTS");

         C. The Company and the Buyers are parties to a Securities Purchase
Agreement, dated as of March 31, 2008 (as amended, restated, supplemented or
otherwise modified from time to time, the "MARCH 2008 SECURITIES PURCHASE
AGREEMENT", and together with the 2006 Securities Purchase Agreement and the
2007 Securities Purchase Agreements, the "EXISTING PURCHASE AGREEMENTS"),
pursuant to which the Company has sold, and the Buyers have purchased (i) senior
secured convertible notes issued pursuant thereto (as such notes may be amended,
restated, replaced or otherwise modified from time to time in accordance with
the terms thereof, collectively, the "MARCH 2008 NOTES" and together with the
2006 Notes and the 2007 Notes and any other notes convertible into Common Stock
held by the Buyers as of date hereof, each an "EXISTING NOTE" and collectively,
the "EXISTING NOTES"), which March 2008 Notes are convertible into Common Stock
in accordance with the terms of the March 2008 Notes and (ii) warrants
exercisable into Common Stock (the "MARCH 2008 WARRANTS", and together with the
2006 Warrants, the 2007 Warrants and any other warrants exercisable into Common
Stock held by the Buyers as of the date hereof, the "EXISTING WARRANTS");

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         D. The Company has authorized a new series of senior secured
convertible notes of the Company which notes shall be convertible into Common
Stock in accordance with the terms of the New Notes (as defined below).

         E. 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 New Notes, in substantially the form attached hereto as EXHIBIT A
(the "NEW NOTES"), set forth opposite such Buyer's name in column (3) on the
Schedule of Buyers attached hereto (which aggregate amount for all Buyers shall
be $1,250,000) (as converted, collectively, the "CONVERSION SHARES"), (ii)
warrants, in substantially the form attached hereto as EXHIBIT B-1 (the "NEW
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 "NEW WARRANT SHARES") and (iii) that aggregate number of
shares (the "COMMON SHARES") of Common Stock, set forth opposite such Buyer's
name in column (5) on the Schedule of Buyers (which aggregate amount for all
Buyers shall be 1,250,000 shares).

         F. The Company and each Buyer also desire to exchange the March 2008
Warrants of such Buyer to acquire that number of shares of Common Stock set
forth opposite such Buyer's name in column (6) on the Schedule of Buyers for (i)
warrants, in substantially the form attached hereto as EXHIBIT B-2 (the "AMENDED
AND RESTATED WARRANTS"), to acquire that number of shares of Common Stock set
forth opposite such Buyer's name in column (7) on the Schedule of Buyers (as
exercised, collectively, the "AMENDED AND RESTATED WARRANT SHARES") and (ii)
additional warrants, in substantially the form attached hereto as EXHIBIT B-3
(the "REPLACEMENT WARRANTS", and together with the New Warrants and the Amended
and Restated Warrants, the "WARRANTS"), to acquire that number of shares of
Common Stock set forth opposite such Buyer's name in column (8) on the Schedule
of Buyers (the "REPLACEMENT WARRANT SHARES" and together with the New Warrant
Shares and the Amended and Restated Warrant Shares, the "WARRANT SHARES").

         G. 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. The exchange
of the March 2008 Warrants for the Amended and Restated Warrants and the
Replacement Warrants is being made in reliance upon the exemption from
registration provided by Section 3(a)(9) of the 1933 Act.

         H. 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 has agreed 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.

         I. The New Notes, the Conversion Shares, the Common Shares, the
Warrants and the Warrant Shares collectively are referred to herein as the
"SECURITIES".

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         J. The New Notes will rank pari passu with the Existing Notes and
senior to all outstanding and future indebtedness of the Company, guaranteed by
each of the Company's subsidiaries, and the New Notes and the Existing Notes
will collectively be secured by a first priority, perfected security interest in
all of the assets of the Company and the stock and assets of each of the
Company's subsidiaries, as evidenced by (i) an amended and restated pledge
agreement, in the form attached hereto as EXHIBIT D (as amended or modified from
time to time in accordance with its terms, the "PLEDGE AGREEMENT"), (ii) an
amended and restated security agreement, in the form attached hereto as EXHIBIT
E (as amended or modified from time to time in accordance with its terms, the
"SECURITY AGREEMENT"), (iii) an amended and restated intellectual property
security agreement, in the form attached hereto as EXHIBIT F (as amended or
modified from time to time in accordance with its terms, the "IP SECURITY
AGREEMENT") and (iv) amended and restated guaranties of the subsidiaries of the
Company in the form attached hereto as EXHIBIT G (as amended or modified from
time to time in accordance with its terms, the "Guaranty" and, together with the
Pledge Agreement, the Security Agreement, the IP Security Agreement and any
ancillary documents related thereto, collectively the "SECURITY DOCUMENTS"). All
payments due under the New Notes shall rank pari passu with each other and the
Existing Notes.

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

         1. PURCHASE AND SALE OF NOTES, WARRANTS AND COMMON SHARES.

                  (a) PURCHASE OF NEW NOTES, WARRANTS AND COMMON SHARES;
EXCHANGE OF MARCH 2008 WARRANTS. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, (i) 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), (w) a
principal amount of New Notes as is set forth opposite such Buyer's name in
column (3) on the Schedule of Buyers and (x) New Warrants to acquire that number
of New Warrant Shares as is set forth opposite such Buyer's name in column (4)
on the Schedule of Buyers and (y) the number of Common Shares as is set forth
opposite such Buyer's name in column (5) on the Schedule of Buyers, (ii) each
Buyer shall surrender to the Company at the Closing (as defined below) the March
2008 Warrants of such Buyer, which are exercisable into that number of Common
Shares set forth opposite such Investor's name in column (6) of the Schedule of
Buyers and (iii) the Company shall issue and deliver to each Buyer (A) Amended
and Restated Warrants to acquire that number of Amended and Restated Warrants
Warrant Shares as is set forth opposite such Buyer's name in column (7) on the
Schedule of Buyers and (B) Replacement Warrants to acquire that number of
Replacement Warrant Shares as is set forth opposite such Buyer's name in column
(8) on the Schedule of Buyers (the "CLOSING").

                  (b) PURCHASE PRICE. The purchase price for each Buyer of the
New Notes, the New Warrants and the Common Shares to be purchased by each such
Buyer at the Closing (the "PURCHASE PRICE") shall be the amount set forth
opposite such Buyer's name in column (9) of the Schedule of Buyers. Each Buyer
shall pay $1.00 for each $1.00 of principal amount of New Notes and the related
New Warrants and Common Shares to be purchased at the Closing. The Buyers and
the Company agree that the New Notes, Common Shares and the New Warrants
constitute an "investment unit" for purposes of Section 1273(c)(2) of the
Internal Revenue Code of 1986, as amended (the "CODE"). The Buyers and the
Company mutually agree that the allocation of the issue price of such investment
unit between the New Notes, Common Shares and the New Warrants in accordance
with Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h)

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shall be an aggregate amount of $125,000 allocated to the New Warrants, an
aggregate of $187,500 allocated to the Common Shares and the balance of the
Purchase Price allocated to the New Notes, and neither the Buyers nor the
Company shall take any position inconsistent with such allocation in any tax
return or in any judicial or administrative proceeding in respect of taxes. The
Buyers and the Company mutually agree that the foregoing allocation of the issue
price of such investment unit between the New Notes, Common Shares and the New
Warrants shall not be used to determine the anti-dilution adjustments under the
Transaction Documents (as defined in the Existing Purchase Agreements).

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

                  (d) FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall
pay the Purchase Price to the Company for the New Notes, the New Warrants and
the Common Shares to be issued and sold to such Buyer at the Closing less its
Prepaid Interest (as defined below) and less the amounts withheld pursuant to
Section 4(g), 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 (A) the New Notes (in the principal amounts as set forth opposite
such Buyer's name in column (3) on the Schedule of Buyers) which such Buyer is
then purchasing, (B) the New Warrants (in the amounts as set forth opposite such
Buyer's name in column (4) on the Schedule of Buyers) which such Buyer is
purchasing, (C) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section 2(g)
hereof), evidencing the number of Common Shares which such Buyer is purchasing,
(D) the Amended and Restated Warrants (in the amounts as set forth opposite such
Buyer's name in column (7) on the Schedule of Buyers) which such Buyer is
receiving in the exchange and (E) the Replacement Warrants (in the amounts as
set forth opposite such Buyer's name in column (8) on the Schedule of Buyers)
which such Buyer is receiving in the exchange, in each case duly executed on
behalf of the Company and registered in the name of such Buyer or its designee
(so long as any such designee is an "accredited investor" as that term is
defined in Rule 501(d) of Regulation D).

                  (e) PREPAID INTEREST. The Company shall prepay the interest
payable under the New Notes through the Maturity Date (as defined in the New
Notes) on the Closing Date in such amount set forth opposite such Buyer's name
in column (9) of the Schedule of Buyers (for each such Buyer, its "PREPAID
INTEREST") which Prepaid Interest shall be nonrefundable.

                  (f) WAIVER OF EXISTING WARRANT ANTIDILUTION. Each of the
Buyers hereby waives any antidilution adjustments in the Existing Warrants
arising from any of the Replacement Warrants.

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         2. BUYER'S REPRESENTATIONS AND WARRANTIES.

                  Each Buyer represents and warrants with respect to only itself
that:

                  (a) NO PUBLIC SALE OR DISTRIBUTION. Such Buyer is (i)
acquiring the New Notes, the Warrants and the Common Shares and (ii) upon
conversion of the New Notes and exercise of the Warrants will acquire the
Conversion Shares issuable upon conversion of the New Notes 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 public 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. 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 (as defined herein) 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 which 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. 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,

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and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, 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 or Rule 144A promulgated
under the 1933 Act, as amended, (or a successor rule thereto) (collectively,
"RULE 144"); (ii) any sale of the Securities made in reliance on 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. The Securities may be pledged in connection with a
bona fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer 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 (as defined in Section 3(b)), including, without
limitation, this Section 2(f).

                  (g) LEGENDS. Such Buyer understands that the certificates or
other instruments representing the New Notes, the Warrants and the Common Shares
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 GENERALLY ACCEPTABLE FORM,
                  THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
                  UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A 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.

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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 or issue to such holder by electronic delivery at the applicable balance
account at DTC (as defined below), unless otherwise required by state securities
laws, (i) such Securities as are registered for resale under the 1933 Act, (ii)
in connection with a sale, assignment or other transfer of such Securities, in
the event that such holder provides the Company with an opinion of counsel, 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) in the event that such holder provides
the Company with an opinion of counsel, in a generally acceptable form, to the
effect that the Securities can be sold, assigned or transferred pursuant to Rule
144 or Rule 144A.

                  (h) VALIDITY; ENFORCEMENT. This Agreement, the Registration
Rights Agreement and the Security Documents to which such Buyer is a party 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, the Registration Rights Agreement and the Security
Documents 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.

         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

                  The Company represents and warrants to each of the Buyers
that:

                  (a) ORGANIZATION AND QUALIFICATION. Each of the Company and
its "SUBSIDIARIES" (which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns any of the capital stock or
holds an equity or similar interest) are entities duly organized and validly
existing in good standing under the laws of the jurisdiction in which they are

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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 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, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents 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 has no Subsidiaries
except as set forth on SCHEDULE 3(A).

                  (b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement, the New Notes, the Registration Rights Agreement, the Security
Documents, the Irrevocable Transfer Agent Instructions (as defined in Section
5(b) below), 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, the issuance of the New Notes, the Warrants and the Common Shares,
the reservation for issuance and the issuance of the Conversion Shares issuable
upon conversion of the New Notes and the reservation for issuance and issuance
of Warrant Shares issuable upon exercise of the Warrants and the granting of a
security interest in the Collateral (as defined in the Security Documents) have
been duly authorized by the Company's Board of Directors and (other than (i) the
filing of appropriate UCC financing statements with the appropriate states and
other authorities pursuant to the Security Agreement, (ii) the filing with the
SEC and applicable state securities commissions of Form D and related filings,
(iii) the filings with the U.S. Patent and Trademark Office and the U.S.
Copyright Office as may be required with respect to the perfection of a security
interest against the Company's patents, trademarks and copyrights, and (iv) the
filing with the SEC of one or more Registration Statements in accordance with
the requirements of the Registration Rights Agreement) 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 New Notes, the
Warrants and the Common Shares are duly authorized and are free from all taxes,
liens and charges with respect to the issue thereof. As of the Closing, a number
of shares of Common Stock shall have been duly authorized and reserved for
issuance which equals at least the sum of (I) 100% of the maximum number of

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shares of Common Stock issuable (i) upon conversion of the New Notes and (ii)
upon exercise of the Warrants and (II) 100% of the number of Common Shares
issued hereunder. Upon conversion in accordance with the New Notes or exercise
in accordance with the Warrants, as the case may be, the Conversion 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, with the holders being entitled to
all rights accorded to a holder of Common Stock. 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 New Notes, the Warrants and the Common Shares, and the
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Articles of Incorporation (as
defined in Section 3(r)) of the Company or any of its Subsidiaries, any capital
stock of the Company or Bylaws (as defined in Section 3(r)) of the Company or
any of its Subsidiaries, (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 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 OTC
Bulletin Board (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) 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.

                  (e) CONSENTS. Except as set forth in Section 3(b), neither the
Company nor any of its Subsidiaries is 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. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the Closing
Date, and the Company and its Subsidiaries are unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any of
the registration, application or filings pursuant to the preceding sentence. The
Company is not in violation of the listing requirements of the Principal Market
and has no knowledge of any facts which would reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future.

                  (f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES.
The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby and that no Buyer is (i) an
officer or director of the Company, (ii) to the Company's knowledge, an
"affiliate" of the Company (as defined in Rule 144) or (iii) to the knowledge of
the Company, a "beneficial owner" of more than 10% of the shares of Common Stock

                                      -9-

<PAGE>

(as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended (the "1934 ACT")). 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. The Company shall be responsible for the payment of any placement
agent's fees, financial advisory fees, or brokers' commissions (other than for
persons engaged by any Buyer or its investment advisor) 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, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company has not engaged any placement agent or other
agent in connection with the 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 the issuance 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 the
issuance 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 New Notes
and the Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Conversion Shares upon conversion of the New Notes in accordance with this
Agreement and the New Notes and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants, in
each case, is 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 Articles of Incorporation or
the laws of the jurisdiction of its formation which is or could become
applicable to any Buyer as a result of the transactions contemplated by this

                                      -10-

<PAGE>

Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. The Company has not
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.

                  (k) SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed
in SCHEDULE 3(K), during the two (2) years prior to the date hereof, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
1934 Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements, notes and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC DOCUMENTS"). The Company has delivered to the Buyers or their respective
representatives true, correct and complete copies of the SEC Documents not
available on the EDGAR system. As of their respective dates or as a result of
subsequent amendment or modification prior to the date hereof, 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, as amended or modified, at the time
they were filed with the SEC or as a result of subsequent amendment or
modification prior to the date hereof, 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. 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). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.

                  (l) ABSENCE OF CERTAIN CHANGES. Except as disclosed in
SCHEDULE 3(L), since the date of Company's most recently filed audited financial
statements contained in an Annual Report on Form 10-K, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiaries. Except as disclosed
in SCHEDULE 3(L), since the time the Company's most recently filed audited
financial statements contained in an Annual Report on Form 10-K were filed, the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $100,000. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary

                                      -11-

<PAGE>

bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof
after elimination of the debt owing to the Buyers, 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, (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) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company 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) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. Except as contemplated by this Agreement or the Transaction
Documents, no event, liability, development or circumstance has occurred or
currently exists with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form SB-2 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.

                  (n) CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the
Company nor its Subsidiaries is in violation of any term of or in default under
any certificate of designations of any outstanding series of preferred stock,
its Articles of Incorporation or Bylaws or their organizational charter or
articles of incorporation 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, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except for possible
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in violation of any of the 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 foreseeable future. During the two years prior to the date hereof,
the Common Stock has been designated for quotation on the Principal Market.
During the two years prior to the date hereof, (i) trading in the Common Stock
has not been suspended by the SEC or the Principal Market and (ii) the Company
has received no communication, written or oral, from the SEC or 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 any director, officer, agent, employee or other Person
acting on behalf of the Company or any of its Subsidiaries has, in the course of

                                      -12-

<PAGE>

its actions for, or on behalf of, the Company or any of its Subsidiaries (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 requirements of the Sarbanes-Oxley Act of 2002 that are effective and
applicable to the Company 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.

                  (q) TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3(Q), none of the officers, directors or employees of the Company or
any Subsidiary 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 or any of
its Subsidiaries, 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 the date hereof, the
authorized capital stock of the Company consists of (i) 200,000,000 shares of
Common Stock, of which as of the date hereof, 68,561,316 are issued and
outstanding, 3,000,000 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans and 1,145,000 shares are reserved for
options granted outside the Company's stock option plan and 103,130,714 shares
are reserved for issuance pursuant to securities (other than the aforementioned
options, the New Notes and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 5,000,000 shares of preferred
stock, no par value of which as of the date hereof, none are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued, fully paid and nonassessable. Except as disclosed in SCHEDULE
3(R): (i) none of the Company's capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company; (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
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 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
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 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,

                                      -13-

<PAGE>

filed in connection with the Company or any of its Subsidiaries; (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 pursuant to 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
furnished to the Buyers true, correct and complete copies of the Company's
Articles of Incorporation, as amended and as in effect on the date hereof (the
"ARTICLES 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 (or an event which
with notice or lapse of time or both would become a default) under which, by the
other party(ies) to such contract, agreement or instrument would 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. SCHEDULE 3(S) provides a detailed description of the material
terms of any such outstanding Indebtedness. 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 (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

                                      -14-

<PAGE>

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. 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 or affecting the
Company or any of its Subsidiaries, the Common Stock or the capital stock of any
of the Company's Subsidiaries or any of the Company's or its Subsidiaries'
officers or directors in their capacities as such, except as set forth in
SCHEDULE 3(T) or except where the Company reasonably believes that such action,
suit, proceeding, inquiry or investigation is not expected to 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. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave or otherwise terminate such officer's employment with the
Company or any such Subsidiary. No executive officer of the Company or any of
its Subsidiaries, to the knowledge of the Company, is, or is now expected to be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, 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.

                                      -15-

<PAGE>

                           (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. Except as set forth on SCHEDULE 3(W), the Company
and its Subsidiaries have good and marketable title in fee simple to all real
property 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 such as 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, buildings 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, buildings
and facilities 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,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
businesses as now conducted. Except as set forth in SCHEDULE 3(X), none of the
Intellectual Property Rights of the Company or any Subsidiary have expired or
terminated, or are expected to expire or terminate, within three years from the
date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others. There is no claim, action or proceeding being made or brought, or to
the knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights. The Company is unaware
of any facts or circumstances which would be reasonably expected to give rise to
any of the foregoing infringements or claims, actions or proceedings. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.

                  (y) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i)
are in compliance with any and all applicable 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 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,

                                      -16-

<PAGE>

injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

                  (z) SUBSIDIARY RIGHTS. Except as set forth in SCHEDULE 3(Z),
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) 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.

                  (bb) 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 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.

                  (cc)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 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.

                  (dd) 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 SEC Documents and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.

                                      -17-

<PAGE>

                  (ee) RANKING OF NEW NOTES. Except as set forth on SCHEDULE
3(EE), no Indebtedness of the Company is senior to or ranks PARI PASSU with the
New Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.

                  (ff) FORM SB-2 ELIGIBILITY. The Company is eligible to
register the Conversion Shares, the Warrant Shares and the Common Shares for
resale by the Buyers using Form SB-2 promulgated under the 1933 Act, subject to
the limitations of Rule 415 of the 1933 Act.

                  (gg) 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 applicable laws imposing such taxes will be or will have
been complied with, except where the failure to comply would not reasonably be
expected to have a Material Adverse Effect.

                  (hh) 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.

                  (ii) ACKNOWLEDGEMENT REGARDING BUYERS' TRADING ACTIVITY.
Except pursuant to Section 4(s) hereto, 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 (except as to the SEC
position that short sales "against the box" prior to the effective date of a
registration statement may not be covered with shares registered under such
registration statement); (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 by the Company to have any affiliation with
or control over any arm's length counter-party in any "derivative" transaction.
The Company further understands and acknowledges that (a) one or more Buyers may
engage in hedging and/or trading 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 and the Warrant Shares
deliverable with respect to Securities are being determined and (b) such hedging
and/or trading activities, if any, can reduce the value of the existing
stockholders' equity interest in the Company both at and after the time the
hedging and/or trading activities are being conducted. The Company acknowledges
that such aforementioned hedging and/or trading activities do not constitute a
breach of this Agreement, the New Notes, the Warrants or any of the documents
executed in connection herewith.

                  (jj) U.S. 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 any Buyer's request.

                                      -18-

<PAGE>

                  (kk) NO ADDITIONAL AGREEMENTS. The Company does not have any
agreement or understanding with any Buyer with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.

                  (ll) BANK HOLDING COMPANY ACT. Neither the Company nor any of
its Subsidiaries or affiliates is subject to the Bank Holding Company Act of
1956, as amended (the "BHCA") and to regulation by the Board of Governors of the
Federal Reserve System (the "Federal Reserve"). Neither the Company nor any of
its Subsidiaries or affiliates owns or controls, directly or indirectly, five
percent or more of the outstanding shares of any class of voting securities or
twenty-five percent or more of the total equity of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

                  (mm) SHELL COMPANY STATUS. The Company is not, and has never
been, an issuer identified in Rule 144(i)(1).

                  (nn) DISCLOSURE. The Company confirms that neither it, nor to
the Company's knowledge, any other Person acting on its behalf has provided any
of the Buyers or their agents or counsel with any information that constitutes
or could reasonably be expected to constitute 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 by the Company, its Subsidiaries, its officers
or directors, its agents or its counsel to the Buyers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. Each press release issued by the Company during the
twelve (12) months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
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, prospects, 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, except
where the failure to make any such filing or report would not have a Material
Adverse Effect.

         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.

                                      -19-

<PAGE>

                  (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 reasonably promptly after such filing. The Company
shall, reasonably promptly (and in no event later than 15 days) after the
Closing Date, take such action as the Company shall reasonably determine is
necessary (taking into account The National Securities Markets Improvement Act
of 1996, as amended), 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), and shall provide
evidence of any such action so taken to the Buyers reasonably promptly after
such filing. 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. The
Company shall have no obligations with respect to the securities laws of any
jurisdiction outside of the United States, regardless of the foreign residence
of such Buyer.

                  (c) REPORTING STATUS. Until the date on which the Investors
(as defined in the Registration Rights Agreement) shall have sold all the
Conversion Shares, Warrant Shares and Common Shares and none of the New Notes,
Warrants or Common Shares is outstanding (the "REPORTING PERIOD"), the Company
shall 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
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 the payment of the Prepaid Interest and general
corporate purposes, including general and administrative expenses, and not for
(i) the repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (ii) the redemption or repurchase of any of its or its
Subsidiaries' equity securities.

                  (e) FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor (as defined in the Registration Rights Agreement)
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 or 10-KSB, any Quarterly Report on Form 10-Q or 10-QSB, 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, (ii) on the same day as the
release thereof, facsimile or e-mailed copies of all press releases issued by
the Company or any of its Subsidiaries, and (iii) 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. 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 promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon the Principal Market and 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 thereafter maintain such

                                      -20-

<PAGE>

listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall maintain the Common Stock's
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. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).

                  (g) FEES. The Company shall reimburse each Buyer or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior to
the date of this Agreement) for all reasonable costs and expenses incurred in
connection with the transactions contemplated by the Transaction Documents
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), which amount
shall be withheld by such Buyer from its 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) 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, other than for Persons engaged by any Buyer. 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 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 of this Agreement, the Company shall issue a press release and 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 Security Documents, the form of the New Notes, the form of
Warrant, 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 their 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

                                      -21-

<PAGE>

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 a Buyer has, or believes it has, received any such material, nonpublic
information regarding the Company or any of its Subsidiaries, it shall promptly
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,
except where, as a result of the willful misconduct or gross negligence of such
Buyer, any such disclosure contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Subject to the foregoing, neither the Company,
its Subsidiaries 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). Without the prior written consent of
any applicable Buyer, and except as contemplated by the prior subsection (i) or
as required by applicable law or regulation, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of such Buyer in any filing,
announcement, release or otherwise.

                  (j) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. So long as
any New Notes are outstanding, the Company shall not, directly or indirectly,
redeem, or declare or pay any cash dividend or distribution on, the Common Stock
without the prior express written consent of the holders of New Notes
representing not less than a majority of the aggregate principal amount of the
then outstanding New Notes.

                  (k) ADDITIONAL NEW NOTES; VARIABLE SECURITIES; DILUTIVE
ISSUANCES. So long as any Buyer beneficially owns any Securities, the Company
will not issue any New Notes 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 New Notes. For so long as any New Notes 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

                                      -22-

<PAGE>

the then applicable Conversion Price (as defined in the New Notes) with respect
to the Common Stock into which any New Note 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 New Notes
or Warrants remain outstanding, the Company shall not, in any manner, enter into
or affect any Dilutive Issuance (as defined in the New Notes) if the effect of
such Dilutive Issuance is to cause the Company to be required to issue upon
conversion of any New Note 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 New Notes and exercise of the Warrants without breaching
the Company's obligations under the rules or regulations of the Principal Market
or any applicable Eligible Market (as defined in the Registration Rights
Agreement).

                  (l) CORPORATE EXISTENCE. So long as any Buyer beneficially
owns any Securities, the Company shall not be party to any Fundamental
Transaction (as defined in the New Notes) unless the Company is in compliance
with the applicable provisions governing Fundamental Transactions set forth in
the New Notes and the Warrants.

                  (m) RESERVATION OF SHARES. So long as any Buyer owns any
Securities, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than (x) at any
time on or prior to the Stockholder Approval Date (as defined below), 100% and
(y) at any time after the Stockholder Approval Date, 130% of the sum of the
number of shares of Common Stock issuable (i) upon conversion of the New Notes,
and (ii) upon exercise of the Warrants then outstanding (without taking into
account any limitations on the conversion of the New Notes or exercise of the
Warrants set forth in the New Notes and Warrants, respectively).

                  (n) CONDUCT OF BUSINESS. The business of the Company and its
Subsidiaries shall not be conducted in violation of any applicable law,
ordinance or regulation of any governmental entity, except where such violations
would 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
twelve (12) months from the Closing Date (the "TRIGGER DATE"), the Company will
not, (i) 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' debt, equity

                                      -23-

<PAGE>

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"), other than to one or more of the Buyers provided the
Company provides each of the Buyers a right to participate in such Subsequent
Placement pro rata based on the aggregate principal amount of New Notes
purchased hereunder and does not give any other Person the right to participate
in such Subsequent Placement or (ii) be party to any solicitations, negotiations
or discussions with regard to the foregoing.

                           (iii)    Until the  earlier  of (I) later of the date
(i) that is three (3) years after the Closing Date and (ii) the New Notes are no
longer outstanding and (II) the date the Company redeems the entire portion of
the New Notes not previously converted by the Buyers in full in cash in
accordance with the terms of the New Notes (the "PARTICIPATION RIGHTS
TERMINATION 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
                           written notice (the "OFFER NOTICE") 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 all of
                           the Offered Securities, allocated among such Buyers
                           (a) based on such Buyer's pro rata portion of the
                           aggregate principal amount of New Notes 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").

                                    (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 tenth (10th) 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

                                      -24-

<PAGE>

                           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 it deems reasonably necessary.

                                    (3) The Company shall have ten (10) Business
                           Days from the expiration of the Offer Period above 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"), 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.

                                    (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 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.

                           (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 New Notes).

                                      -25-

<PAGE>

                  (p) ADDITIONAL REGISTRATION STATEMENTS. Except as permitted in
the Registration Rights Agreement, from the date hereof until the earlier of (i)
the Effective Date (as defined in the Registration Rights Agreement) and (ii)
date when all Registrable Securities (as defined in the Registration Rights
Agreement) are freely tradeable without the requirement to be in compliance with
Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule
144, the Company will not file a registration statement (other than on Form S-8)
under the 1933 Act relating to securities that are not the Securities or were
not issued to any Buyer pursuant to this Agreement or to any Buyer or Montgomery
& Co., LLC, as placement agent, pursuant to the Existing Purchase Agreements or
agreements related hereto or thereto, without the prior written consent of the
Buyers. Notwithstanding anything to the contrary in this Agreement or the
Transaction Documents, the Company may file such supplements, amendments or
other filings as may be deemed reasonably necessary or appropriate by the
Company to maintain the effectiveness of its outstanding registration statements
on Form SB-2.

                  (q)      COLLATERAL AGENT.

                           (i) Each Buyer hereby (a) appoints Castlerigg Master
Investments Ltd.
("Castlerigg") as the collateral agent hereunder and under the other Security
Documents (in such capacity, the "COLLATERAL AGENT"), and (b) authorizes the
Collateral Agent (and its officers, directors, employees and agents) to take
such action on such Buyer's behalf in accordance with the terms hereof and
thereof. The Collateral Agent shall not have, by reason hereof or any of the
other Security Documents, a fiduciary relationship in respect of any Buyer.
Neither the Collateral Agent nor any of its officers, directors, employees and
agents shall have any liability to any Buyer for any action taken or omitted to
be taken in connection hereof or any other Security Document except to the
extent caused by its own gross negligence or willful misconduct, and each Buyer
agrees to defend, protect, indemnify and hold harmless the Collateral Agent and
all of its officers, directors, employees and agents (collectively, the
"INDEMNITEES") from and against any losses, damages, liabilities, obligations,
penalties, actions, judgments, suits, fees, costs and expenses (including,
without limitation, reasonable attorneys' fees, costs and expenses) incurred by
such Indemnitee ("INDEMNITY COSTS"), arising from or in connection with the
performance by such Indemnitee of the duties and obligations of Collateral Agent
pursuant hereto or any of the Security Documents; provided, that, (i) the
liability of any Buyer pursuant to this Section 4(q) shall be several and not
joint with any other Buyer, and shall not exceed in the aggregate its pro rata
percentage of such Indemnity Costs (based on the percentage of Securities that
such Buyer shall acquire at the Closing as a percentage of all Securities sold
at the Closing) and (ii) no Buyer shall be obligated under this Section 4 (q)
for any indirect or consequential Indemnity Costs.

                           (ii) The Collateral Agent shall be entitled to rely
upon any written notices, statements, certificates, orders or other documents or
any telephone message believed by it reasonably and in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person, and with
respect to all matters pertaining to this Agreement or any of the other
Transaction Documents and its duties hereunder or thereunder, upon advice of
counsel selected by it.

                           (iii) The Collateral Agent may resign from the
performance of all its functions and duties hereunder and under the New Notes
and the Security Documents at any time by giving at least ten (10) Business Days

                                      -26-

<PAGE>

prior written notice to the Company and each holder of the New Notes. Such
resignation shall take effect upon the acceptance by a successor Collateral
Agent of appointment as provided below. Upon any such notice of resignation, the
holders of a majority of the outstanding principal under the New Notes shall
appoint a successor Collateral Agent. Upon the acceptance of the appointment as
Collateral Agent, such successor Collateral Agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall be discharged from its
duties and obligations under this Agreement, the New Notes and the other
Security Documents. After any Collateral Agent's resignation hereunder, the
provisions of this Section 4(q) shall inure to its benefit. If a successor
Collateral Agent shall not have been so appointed within said ten (10) Business
Day period, the retiring Collateral Agent shall then appoint a successor
Collateral Agent who shall serve until such time, if any, as the holders of a
majority of the outstanding principal under the New Notes appoint a successor
Collateral Agent as provided above.

                  (r)      STOCKHOLDER APPROVAL.

                           (i) If the Common Stock is listed on an Eligible
Market (as defined in the Registration Rights Agreement) other than the
Principal Market (the "NEW PRINCIPAL MARKET") and the issuance of the Conversion
Shares, Warrant Shares and Common Shares as contemplated under the Transaction
Documents would exceed that number of shares of Common Stock which the Company
may issue without breaching the Company's obligations under the rules or
regulations of the New Principal Market, then the Company shall obtain the
approval of its stockholders as required by the applicable rules of the New
Principal Market for issuances of the Conversion Shares, Warrant Shares and
Common Shares in excess of such amount. At such time, 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 75 days after the earlier of (i) the New Principal Market
indication of and (ii) the Company becoming aware of, any limitation imposed by
the New Principal Market on the issuance of Conversion Shares, Warrant Shares or
Common Shares (the "STOCKHOLDER MEETING DEADLINE"), a proxy statement,
substantially in the form which has been previously reviewed by the Buyers and
Schulte Roth & Zabel LLP, at the expense of the Company, soliciting each such
stockholder's affirmative vote at the Stockholder Meeting for approval of
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 New Principal Market and such affirmative approval
being referred to herein as the "STOCKHOLDER APPROVAL", and the date of such
Stockholder Approval, the "STOCKHOLDER APPROVAL DATE"), and the Company shall
use its reasonable best efforts to (i) solicit its stockholders' approval of
such resolutions and to (ii) cause the Board of Directors of the Company to
recommend to the stockholders that they approve such resolutions. The Company
shall be obligated to use its reasonable best efforts to obtain the Stockholder
Approval by the Stockholder Meeting Deadline. If, despite the Company's
reasonable best efforts the Stockholder Approval is not obtained on or prior to
the Stockholder Meeting Deadline, the Company shall cause an additional
Stockholder Meeting to be held every six (6) months thereafter until such
Stockholder Approval is obtained or the New Notes and the Warrants are no longer
outstanding.

                                      -27-

<PAGE>

                  (s) TRADING RESTRICTIONS. Neither the Buyer, nor any affiliate
of the Buyer that is controlled by the Buyer or is otherwise aware of this
restriction, may purchase, sell or enter into any put option, short position or
similar arrangement with respect to securities of the Company that violates
Current Securities Laws (as defined below) or otherwise trade in the securities
of the Company in violation of applicable Current Securities Laws. In addition,
during each Company Conversion Measuring Period (as defined in the New Notes)
neither the Buyer, nor any affiliate of the Buyer that is controlled by the
Buyer or is otherwise aware of this restriction, may engage in a Restricted
Activity other than the sale of shares of Common Stock received upon a Company
Conversion, a Mandatory Conversion or an Optional Conversion (as such terms are
defined in the New Notes), upon a conversion, amortization or redemption of New
Notes or any Existing Notes, pursuant to terms contained therein, upon exercise
of any Warrants, or any Existing Warrants issued by the Company to the Buyers,
or the transfer of any New Notes or Warrants or Existing Notes or Existing
Warrants as permitted by their terms. "RESTRICTED ACTIVITY" means, (a) any
Acquisition or Disposition, in open market transactions of (i) any shares of
Common Stock or (ii) any securities convertible into or exchangeable for or
derivative of shares of Common Stock and (b) any other action taken
intentionally for the purpose of manipulating the price of shares of Common
Stock. "ACQUISITION" means any direct or indirect voluntary acquisition or
purchase (other than by merger, consolidation, combination, recapitalization or
other reorganization, or by operation of law). "DISPOSITION" means any direct or
indirect voluntary sale, or monetization, including through a subsidiary or by
means of an equity offering by any such subsidiary, but shall not include, any
of the actions contemplated by Section 4(h) or any disposition thereunder.
"CURRENT SECURITIES LAWS" means the rules and regulations, as then in effect, of
the 1933 Act and the 1934 Act, in each case as are set forth in currently
disseminated interpretations by the SEC in writing, through rules, regulations,
releases, no-action letters or published telephone interpretations.

                  (t) PUBLIC INFORMATION. At any time during the period
commencing from the six (6) month anniversary of the Closing Date and ending at
such time that all of the Securities can be sold either pursuant to a
Registration Statement may be sold without the requirement to be in compliance
with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to
Rule 144, including, if applicable, Rule 144(i), if a registration statement is
not available for the resale of all of the Securities and the Company shall fail
for any reason to satisfy the current public information requirement under Rule
144 (a "PUBLIC INFORMATION FAILURE") then, as partial relief for the damages to
any holder of Securities by reason of any such delay in or reduction of its
ability to sell the Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each such
holder an amount in cash equal to two percent (2.0%) of the aggregate Purchase
Price of such holder's Securities on the day of a Public Information Failure and
on every thirtieth day (pro rated for periods totaling less than thirty days)
thereafter until the earlier of (i) the date such Public Information Failure is
cured and (ii) such time that such public information is no longer required
pursuant to Rule 144. The payments to which a holder shall be entitled pursuant
to this Section 4(q) are referred to herein as "PUBLIC INFORMATION FAILURE
PAYMENTS." Public Information Failure Payments shall be paid on the earlier of
(I) the last day of the calendar month during which such Public Information
Failure Payments are incurred and (II) the third Business Day after the event or
failure giving rise to the Public Information Failure Payments is cured. In the
event the Company fails to make Public Information Failure Payments in a timely
manner, such Public Information Failure Payments shall bear interest at the rate
of 1.5% per month (prorated for partial months) until paid in full.

                                      -28-

<PAGE>

                  (u) ADDITIONAL RELIEF. If the Company shall fail for any
reason or for no reason to issue to the Buyer unlegended certificates or issue
such Common Shares to such Buyer by electronic delivery at the applicable
balance account at DTC within three (3) Trading Days after the receipt of
documents necessary for the removal of the legend set forth in Section 2(g)
above (the "REMOVAL DATE"), then in addition to all other remedies available to
the Buyer, if on or after the Trading Day immediately following such three
Trading Day period, the Buyer purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Buyer of such Common Shares that the Buyer anticipated receiving without legend
from the Company (a "BUY-IN"), then the Company shall, within five (5) Business
Days after the Buyer's request and in the Buyer's discretion, either (i) pay
cash to the Buyer in an amount equal to the Buyer's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased (the "BUY-IN PRICE"), at which point the Company's obligation to
deliver such unlegended Common Shares shall terminate, or (ii) promptly honor
its obligation to deliver to the Buyer such unlegended Common Shares as provided
above and pay cash to the Buyer in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Bid Price (as defined in the Warrants) on the Removal
Date.

                  (v) CLOSING DOCUMENTS. On or prior to fourteen (14) calendar
days after the Closing Date, the Company agrees to deliver, or cause to be
delivered, to each Buyer and Schulte Roth & Zabel LLP executed copies of the
Transaction Documents, Securities and any other document required to be
delivered by the Company to any party pursuant to Section 7 hereof.

                  (w) WAIVER OF CONFLICT WITH EXISTING PURCHASE AGREEMENTS AND
EXISTING NOTES. The Buyers and the Company hereby acknowledge and agree that
prior to the Participation Rights Termination Date, the provisions of Section
4(o) hereof shall supersede the provisions of Section 4(o) of each of the
Existing Purchase Agreements; provided, however, that after the Participation
Rights Termination Date, nothing in this Agreement shall be deemed to effect,
waive or amend any Buyer's rights to participate in any Subsequent Placement
pursuant to the terms of any Prior Transaction Document then in effect and
applicable to such Subsequent Placement. The Buyers and the Company hereby
acknowledge and agree that for purposes of each of the Existing Notes, the New
Notes issued hereunder shall be deemed to be Permitted Senior Indebtedness and
the security interest created by the Security Documents shall be deemed to be a
Permitted Lien.

         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 New Notes,
the Warrants and the Common Shares in which the Company shall record the name
and address of the Person in whose name the New Notes, the Warrants and the
Common Shares have been issued (including the name and address of each
transferee), the principal amount of New Notes held by such Person, the number
of Conversion Shares issuable upon conversion of the New Notes and 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.

                                      -29-

<PAGE>

                  (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, the Warrant Shares and
Common Shares issued at the Closing or upon conversion of the New Notes or
exercise of the Warrants in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the New Notes or exercise of the
Warrants in the form of EXHIBIT H 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
permitted by applicable federal and state securities laws and as 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, Warrant Shares or Common
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.

                  CLOSING DATE. The obligation of the Company hereunder to issue
and sell the New Notes and the related Warrants and Common Shares 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:

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

                           (ii) Such Buyer and each other Buyer shall have
delivered to the Company the Purchase Price set forth opposite such Buyer's and
each other Buyer's name in column (10) of the Schedule of Buyers less its
Prepaid Interest and less the amounts withheld pursuant to Section 4(g), for the
New Notes and the related Warrants and Common Shares being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.

                                      -30-

<PAGE>

                           (iii) The representations and warranties of such
Buyer shall be true and correct in all material 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 specified 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.

                  CLOSING DATE. The obligation of each Buyer hereunder to
purchase the New Notes and the related Warrants and Common Shares 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:

                           (i) The Company shall have executed and delivered to
such Buyer (A) each of the Transaction Documents, (B) the New Notes (in such
principal amounts as set forth opposite such Buyer's name in column (3) of the
Schedule of Buyers) being purchased by such Buyer at the Closing pursuant to
this Agreement, (C) the New Warrants (in such amounts as set forth opposite such
Buyer's name in columns (4) of the Schedule of Buyers) being purchased by such
Buyer at the Closing pursuant to this Agreement, (D) the related Common Shares
(in such amounts as set forth opposite such Buyer's name in columns (5) of the
Schedule of Buyers) being purchased by such Buyer at the Closing pursuant to
this Agreement, (E) the Amended and Restated Warrants (in the amounts as set
forth opposite such Buyer's name in column (7) on the Schedule of Buyers) and
(F) the Replacement Warrants (in the amounts as set forth opposite such Buyer's
name in column (8) on the Schedule of Buyers).

                           (ii) Such Buyer shall have received the opinion of
in-house counsel to the Company and Moye White LLP, one of the Company's outside
counsel, dated as of the Closing Date, in substantially the form of EXHIBIT I
attached hereto.

                           (iii) The Company shall have delivered to such Buyer
a copy of the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT H
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent and the related side
letter, in form and substance reasonably satisfactory to such Buyer, executed
and delivered to such Buyer by the Company.

                           (iv) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity's jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within 10 days of the Closing Date.

                           (v) 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 (or comparable office) of each
jurisdiction in which the Company is required to be so qualified, as of a date
within 10 days of the Closing Date.

                                      -31-

<PAGE>

                           (vi) 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 consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in
effect at the Closing, in the form attached hereto as EXHIBIT I.

                           (vii) The representations and warranties of the
Company shall be true and correct 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
specified date) and the Company shall have performed, satisfied and complied in
all 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 J.

                           (viii) The Company shall have delivered to such Buyer
all required notices setting forth the adjustment to the conversion and/or
exercise prices of the securities of the Company held by such Buyer as a result
of the transactions contemplated hereby and by the other Transaction Documents.

                           (ix) 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 days of the Closing Date.

                           (x) 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.

                           (xi) In accordance with the terms of the Security
Agreement, the Company shall have
delivered to the Collateral Agent appropriate financing statements on Form UCC-1
to be duly filed in such office or offices as may be necessary or, in the
opinion of the Collateral Agent, desirable to perfect the security interests
purported to be created by each Security Agreement.

                           (xii) Within six (6) Business Days prior to the
Closing, the Company shall have delivered or caused to be delivered to each
Buyer (A) certified copies of UCC search results, listing all effective
financing statements which name as debtor the Company or any of its Subsidiaries
filed in the prior five years to perfect an interest in any assets thereof,
together with copies of such financing statements, none of which, except as
otherwise agreed in writing by the Buyers, shall cover any of the Collateral (as
defined in the Security Agreement) and the results of searches for any tax lien
and judgment lien filed against such Person or its property, which results,
except as otherwise agreed to in writing by the Buyers shall not show any such
Liens (as defined in the Security Agreement); and (B) a perfection certificate,
duly completed and executed by the Company and each of its Subsidiaries, in form
and substance satisfactory to the Buyers.

                                      -32-

<PAGE>

                           (xiii) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Securities.

                           (xiv) All rights of first refusal, participation, or
similar rights that would entitle any Person other than a Buyer to participate
in the transactions contemplated hereby shall have expired.

                           (xv) The Company shall have delivered to such Buyer
written notice as to the Conversion Price (as defined in each of the Existing
Notes) of each of the Existing Notes and the Exercise Price (as defined in each
of the Existing Warrants) and the number of shares of Common Stock underlying
each of the Existing Warrants that will be in effect immediately following the
Closing Date (after giving effect to antidilution adjustments set forth in such
Existing Notes and Existing Warrants), in form and substance reasonably
satisfactory to the Buyers.

                           (xvi) 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 due to the Company's failure to satisfy the conditions set forth in Section 7
above, 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

                                      -33-

<PAGE>

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 is
prohibited by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise be
prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the
remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the
parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair
the respective expectations or reciprocal obligations of the parties or the
practical realization of the benefits that would otherwise be conferred upon the
parties. The parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid provision(s), the
effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

                  (e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Transaction Documents supersede 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, the
other Transaction Documents and the instruments referenced herein and therein
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 aggregate number of
Registrable Securities issued and issuable hereunder, 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, as applicable. 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

                                      -34-

<PAGE>

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 New Notes 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. Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement, no Buyer has made
any commitment or promise or has any other obligation to provide any financing
to the Company or otherwise.

                  (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:

                                    Raptor Networks Technology, Inc.
                                    1241 E. Dyer Road, Suite 150
                                    Santa Ana, California 92705
                                    Telephone:    (949) 623-9300
                                    Facsimile:    (949) 623-9400
                                    Attention:    Thomas M. Wittenschlaeger
                                                  Bob Van Leyen

                           With a copy (for informational purposes only) to:

                                    Rutan & Tucker, LLP
                                    611 Anton Blvd., 14th Floor
                                    Costa Mesa, CA 92626
                                    Telephone:     (714) 641-3464
                                    Facsimile:     (714) 546-9035
                                    Attention:     Thomas J. Crane, Esq.

                           If to the Transfer Agent:

                                    First American Stock Transfer
                                    706 E. Bell Road
                                    Phoenix, Arizona 85022
                                    Telephone:     (602) 485-1346
                                    Facsimile:     (602) 788-0423
                                    Attention:     Salli Marinov

                                      -35-

<PAGE>

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 only) 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 New Notes 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 aggregate
number of Registrable Securities issued and issuable hereunder, including by way
of a Fundamental Transaction (unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the New
Notes and the Warrants). A Buyer may assign some or all of its rights hereunder
without the consent of the Company, in which event such assignee shall be deemed
to be a Buyer hereunder with respect to such assigned rights.

                  (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 and 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.
\

                                      -36-

<PAGE>

                  (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, 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 misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby 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, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (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, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) 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. 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 which 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. This
Section 9(k) shall not apply to any Indemnified Liabilities to the extent that
such Indemnified Liabilities result from or relate to the willful misconduct or
gross negligence of any Buyer.

                  (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

                                      -37-

<PAGE>

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 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 with respect to such obligations or
the transactions contemplated by the Transaction Documents and the Company
acknowledges that, to the Company's knowledge, the Buyers are not acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. 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]

                                      -38-

<PAGE>

         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:

                                    RAPTOR NETWORKS TECHNOLOGY, INC.

                                    By:  /s/ Thomas M. Wittenschlaeger
                                         ---------------------------------
                                         Name: Thomas M. Wittenschlaeger
                                         Title:  Chairman and Chief Executive
                                                 Officer

<PAGE>

         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:

                                    CASTLERIGG MASTER INVESTMENTS LTD.

                                    BY: SANDELL ASSET MANAGEMENT CORP.

                                    By:  /s/ Timothy O'Brien
                                        -----------------------------------
                                         Name: Timothy O'Brien
                                         Title: Chief Financial Officer

<PAGE>

         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:

                                    CEDAR HILL CAPITAL PARTNERS ONSHORE, LP

                                     By: /s/ Charles Cascarilla
                                        ----------------------------------
                                        Name: Charles Cascarilla
                                        Title: Managing Member

<PAGE>

         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:

                                    CEDAR HILL CAPITAL PARTNERS OFFSHORE, LTD.

                                    By:
                                        /s/ Charles Cascarilla
                                         Name: Charles Cascarilla
                                         Title: Manager

<PAGE>

<TABLE>
<CAPTION>
<S>     <C>

                               SCHEDULE OF BUYERS

        (1)                    (2)                (3)          (4)          (5)         (6)          (7)
                                                                                                  NUMBER OF
                                               AGGREGATE                   NUMBER    NUMBER OF   AMENDED AND
                                               PRINCIPAL    NUMBER OF        OF      MARCH 2008   RESTATED   R
                           ADDRESS AND         AMOUNT OF     WARRANT       COMMON     WARRANT     WARRANT
       BUYER            FACSIMILE NUMBER       NEW NOTES     SHARES        SHARES     SHARES      SHARES

                   c/o Sandell Asset            $850,000    1,700,000     850,000    4,250,000    4,250,000
CASTLERIGG MASTER  Management
INVESTMENTS LTD.   ------------------------
                   40 West 57th St
                   26th Floor
                   New York, NY 10019
                   Attention: Cem
                   Hacioglu/Matthew Pliskin
                   Fax:  212-603-5710
                   Telephone: 212-603-5700
                   Residence: British
                   Virgin Islands

CEDAR HILL CAPITAL 445 Park Avenue, 5th Floor   $172,000     344,000      172,000     900,000      900,000
PARTNERS ONSHORE,  New York, New York 10022
LP                 Attention: Charles
                   Cascarilla
                   Facsimile: (646)
                   417-7702
                   Telephone: (212)
                   201-5804
                   Residence: New York
CEDAR HILL CAPITAL 445 Park Avenue, 5th Floor   $228,000     456,000      228,000    1,100,000    1,100,000
PARTNERS OFFSHORE, New York, New York 10022
LTD.               Attention: Charles
                   Cascarilla
                   Facsimile: (646)
                   417-7702
                   Telephone: (212)
                   201-5804
                   Residence: Cayman
                   Islands

[TABLE CONTINUED]

        (1)            (8)         (9)         (10)                 (11)

                    NUMBER OF
                   REPLACEMENT
                     WARRANT    PREPAID     PURCHASE      LEGAL REPRESENTATIVE'S
       BUYER         SHARES     INTEREST     PRICE     ADDRESS AND FACSIMILE NUMBER

                    4,250,000    $170,000    $850,000  Schulte Roth & Zabel LLP
CASTLERIGG MASTER                                      919 Third Avenue
INVESTMENTS LTD.                                       New York, New York  10022
                                                       Attention:  Eleazer Klein,
                                                       Esq.
                                                       Facsimile: (212) 593-5955
                                                       Telephone:  (212) 756-2376

CEDAR HILL CAPITAL   900,000     $34,400     $172,000  Sadis & Goldberg LLP
PARTNERS ONSHORE,                                      551 5th Avenue
LP                                                     New York, New York 10176
                                                       Attention: Ron Geffner, Esq.
                                                       Facsimile: (212) 573-6660
                                                       Telephone: (212) 573-6662

CEDAR HILL CAPITAL  1,100,000    $45,600     $228,000  Sadis & Goldberg LLP
PARTNERS OFFSHORE,                                     551 5th Avenue
LTD.                                                   New York, New York 10176
                                                       Attention: Ron Geffner, Esq.
                                                       Facsimile: (212) 573-6660
                                                       Telephone: (212) 573-6662

                   201-5804
                   Residence: Cayman
                   Islands
</TABLE>

<PAGE>

                                    EXHIBITS

Exhibit A         Form of New Notes
Exhibit B-1       Form of New Warrants
Exhibit B-2       Form of Amended and Restated Warrants
Exhibit B-3       Form of Replacement Warrants
Exhibit C         Registration Rights Agreement
Exhibit D         Form of Pledge Agreement
Exhibit E         Form of Security Agreement
Exhibit F         IP Security Agreement
Exhibit G         Form of Guaranty
Exhibit H         Irrevocable Transfer Agent Instructions
Exhibit I         Form of Company Counsel Opinion
Exhibit J         Form of Secretary's Certificate
Exhibit K         Form of Officer's Certificate

                                    SCHEDULES

Schedule 3(a)              Subsidiaries
Schedule 3(k)              SEC Documents; Financial Statements
Schedule 3(l)              Absence of Certain Changes
Schedule 3(q)              Transactions with Affiliates
Schedule 3(r)              Capitalization
Schedule 3(s)              Indebtedness and Other Contracts
Schedule 3(w)              Title
Schedule 3(t)              Litigation
Schedule 3(x)              Intellectual Property
Schedule 3(z)              Subsidiary Rights
Schedule 3(ee)             Ranking of New Notes<PAGE>
Exhibit 10.2

                                                                  EXECUTION COPY

                          REGISTRATION RIGHTS AGREEMENT

                  REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
July 28, 2008, by and among Raptor Networks Technology, Inc., a Colorado
corporation, with headquarters located at 1241 Dyer Road, Suite 150, Santa Ana,
California 92705 (the "COMPANY"), and the undersigned investors (each, an
"INVESTOR", and collectively, the "INVESTORS").

                  WHEREAS:

                  A. In connection with the Securities Purchase Agreement, dated
as of the date hereof, by and among the Company and the Investors (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 Investor (i) senior secured convertible notes of the
Company (the "NOTES"), which will, among other things, be convertible into
shares of the Company's common stock, $0.001 par value per share (the "COMMON
STOCK", as converted, the "CONVERSION SHARES") in accordance with the terms of
the Notes, (ii) warrants (the "WARRANTS"), which will be exercisable to purchase
shares of Common Stock (as exercised collectively, the "WARRANT SHARES") and
(iii) shares of Common Stock (the "COMMON SHARES").

                  B. In accordance with the terms of 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
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws.

                  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 Investors 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. "2007 REGISTRATION RIGHTS AGREEMENT" means that
certain Registration Rights Agreement, dated as of July 31, 2007, by and among
the Company and the investors listed on the signature pages thereto.

                           b. "2008 REGISTRATION RIGHTS AGREEMENT" means that
certain Registration Rights Agreement, dated as of March 31, 2008, by and among
the Company and the investors listed on the signature pages thereto.

                           c. "ADDITIONAL EFFECTIVE DATE" means the date that
the applicable Additional Registration Statement is declared effective by the
SEC.

<PAGE>

                           d. "ADDITIONAL EFFECTIVENESS DEADLINE" means the date
which is (i) in the event that an Additional Registration Statement is not
subject to a review by the SEC, 30 calendar days after the earlier of the
Additional Filing Deadline and the Additional Filing Date or (ii) in the event
that an Additional Registration Statement is subject to a review by the SEC, 60
calendar days after the earlier of the Additional Filing Deadline and the
Additional Filing Date.

                           e. "ADDITIONAL FILING DATE" means the date that the
applicable Additional Registration Statement is filed with the SEC.

                           f. "ADDITIONAL FILING DEADLINE" means 30 calendar
days from the date of the applicable Investor Demand; PROVIDED HOWEVER, that if
such date would otherwise fall between February 11 and April 14 of a particular
year and the Company's most recent 1934 Act (as defined below) reports do not
include financial statements less than 135 days old, such date shall be extended
for that particular Additional Registration Statement to April 15 of such year.

                           g. "ADDITIONAL REGISTRABLE SECURITIES" means (i) the
Conversion Shares issued or issuable upon conversion of the Notes then
outstanding and not previously registered on a Registration Statement, (ii) the
Warrant Shares issuable upon the exercise of any Warrants then outstanding and
not previously registered on a Registration Statement, (iii) the Common Shares
outstanding and not previously registered on a Registration Statement, and (iv)
any capital stock of the Company issued or issuable with respect to the
Conversion Shares, the Notes, the Warrant Shares, the Warrants or the Common
Shares 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 Notes or exercises of the Warrants.

                           h. "ADDITIONAL REGISTRATION STATEMENT" a registration
statement or registration statements of the Company filed under the 1933 Act
covering any Additional Registrable Securities.

                           i. "ADDITIONAL REQUIRED REGISTRATION AMOUNT" means
the Maximum Allowable Amount of the remaining sum of (i) the number of
previously unregistered Conversion Shares issued and issuable pursuant to the
Notes as of the Trading Day immediately preceding the applicable date of
determination, (ii) the number of previously unregistered Warrant Shares issued
and issuable pursuant to the Warrants as of the Trading Day immediately
preceding the applicable date of determination and (iii) the number of
previously unregistered Common Shares as of the Trading Day immediately
preceding the applicable date of determination, all subject to adjustment as
provided in Section 2(f) (without regard to any limitations on conversion of the
Notes or exercise of the Warrants). Unless a different priority is specified in
writing to the Company by an Investor as to such Investor's Registrable
Securities at least five (5) Business Days prior to the applicable Additional
Filing Deadline, the Company shall first register (x) all Common Shares, then
(y) all Warrant Shares, then (z) all Conversion Shares.

                           j. "AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT" means that certain Amended and Restatement Registration Rights
Agreement, dated as of January 18, 2007, by and among the Company and the
investors listed on the signature pages thereto.

                                      -2-

<PAGE>

                           k. "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.

                           l. "CLOSING DATE" shall have the meaning set forth in
                  the Securities Purchase Agreement.

                           m. "EFFECTIVE DATE" means the Initial Effective Date
                  or an Additional Effective Date, as applicable.

                           n. "EFFECTIVENESS DEADLINE" means the Initial
                  Effectiveness Deadline or an Additional Effectiveness
                  Deadline, as applicable.

                           o. "EXISTING REGISTRABLE SECURITIES" means
                  Registrable Securities as defined in the Amended and Restated
                  Registration Rights Agreement, the 2007 Registration Rights
                  Agreement and the 2008 Registration Rights Agreement.

                           p. "EXISTING REGISTRATION RIGHTS AGREEMENT" means the
                  Amended and Restated Registration Rights Agreement, the 2007
                  Registration Rights Agreement and/or 2008 Registration Rights
                  Agreement, as applicable.

                           q. "FILING DEADLINE" means the Initial Filing
                  Deadline or an Additional Filing Deadline, as applicable.

                           r. "HOLIDAY" means a day other than a Business Day or
                  on which trading does not take place on the Principal Market
                  (a "HOLIDAY"); to the extent any deadlines or dates of Company
                  obligations referenced herein fall on a Holiday, such
                  deadlines or dates shall be extended to the next date that is
                  not a Holiday.

                           s. "INITIAL EFFECTIVE DATE" means the date that the
                  Initial Registration Statement is declared effective by the
                  SEC.

                           t. "INITIAL FILING DEADLINE" means 30 calendar days
                  from the date of the applicable Investor Demand; PROVIDED
                  HOWEVER, that if such date would otherwise fall between
                  February 11 and April 14 of a particular year and the
                  Company's most recent 1934 Act (as defined below) reports do
                  not include financial statements less than 135 days old, such
                  date shall be extended to April 15 of such year.

                           u. "INITIAL FILING DATE" means the date that the
                  Initial Registration Statement is filed with the SEC.

                           v. "INITIAL EFFECTIVENESS DEADLINE" means the date
                  which is (i) in the event that the Initial Registration
                  Statement is not subject to a review by the SEC, 60 calendar
                  days after the earlier of the Initial Filing Deadline and the
                  Initial Filing Date or (ii) in the event that the Initial
                  Registration Statement is subject to a review by the SEC, 90
                  calendar days after the earlier of the Initial Filing Deadline
                  and the Initial Filing Date.

                                      -3-

<PAGE>

                           w. "INITIAL REGISTRABLE SECURITIES" means (i) the
Conversion Shares issued or issuable upon conversion of the Notes, (ii) the
Warrant Shares issued or issuable upon exercise of the Warrants, (iii) the
Common Shares and (iv) any capital stock of the Company issued or issuable with
respect to the Conversion Shares, the Notes, the Warrant Shares, the Warrants or
the Common Shares 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 Notes or exercises of the Warrants.

                           x. "INITIAL REGISTRATION STATEMENT" means a
registration statement or registration statements of the Company filed under the
1933 Act covering the Initial Required Registration Amount of Initial
Registrable Securities.

                           y. "INITIAL REQUIRED REGISTRATION AMOUNT" means the
Maximum Allowable Amount of the sum of (i) the number of Conversion Shares
issued and issuable pursuant to the Notes as of the Trading Day immediately
preceding the applicable date of determination and (ii) the number of Warrant
Shares issued and issuable pursuant to the Warrants as of the Trading Day
immediately preceding the applicable date of determination and (iii) the Common
Shares as of the Trading Day immediately preceding the applicable date of
determination, all subject to adjustment as provided in Section 2(f) (without
regard to any limitations on conversion of the Notes or exercise of the
Warrants). Unless a different priority is specified in writing to the Company by
an Investor at least five (5) Business Days prior to the Initial Filing
Deadline, the Company shall first register (x) all Common Shares, then (y) all
Warrant Shares, then (z) all Conversion Shares.

                           z. "INVESTOR" means an Investor or any transferee or
assignee thereof to whom an Investor 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.

                           aa. "INVESTOR DEMAND" means a written request by an
Investor to the Company that the Company prepare and file with the SEC the
Initial Registration Statement to register the Initial Registrable Securities or
an Additional Registration Statement to register Additional Registrable
Securities, as applicable.

                           bb. "MAXIMUM ALLOWABLE AMOUNT" means a number of
shares of Common Stock equal to 30% (or the greatest such other percentage as is
permitted by the SEC) of the issued and outstanding Common Stock of the Company
that is not beneficially owned by an affiliate of the Company.

                           cc. "MOST RECENT REGISTRATION STATEMENT" means the
most recent registration statement filed by the Company registering Existing
Registrable Securities.

                           dd. "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.

                                      -4-

<PAGE>

                           ee. "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.

                           ff. "REGISTRABLE SECURITIES" means the Initial
Registrable Securities and the Additional Registrable Securities.

                           gg. "REGISTRATION STATEMENT" means the Initial
Registration Statement or an Additional Registration Statement, as applicable.

                           hh. "REQUIRED HOLDERS" means the holders of at least
a majority of the Registrable Securities.

                           ii. "REQUIRED REGISTRATION AMOUNT" means with respect
to the Initial Registration Statement, the Initial Required Registration Amount
or with respect to an Additional Registration Statement, the Additional Required
Registration Amount, as applicable.

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

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

                           ll. "TRADING DAY" means any day on which the Common
Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market for less than 4.5 hours or any day
that the Common Stock is suspended from trading during the final hour of trading
on such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., Eastern Standard Time).

         2. REGISTRATION.

                  a. INITIAL MANDATORY REGISTRATION. In the event there is no
registration statement registering any of the Existing Registrable Securities,
an Investor may deliver to the Company an Investor Demand requesting that the
Company prepare and file with the SEC the Initial Registration Statement to
register the Initial Registrable Securities at any such time. In the event there
is a registration statement registering any of the Existing Registrable
Securities, the Required Holders may deliver to the Company a notice (the
"EXISTING REGISTRATION TERMINATION NOTICE"), a copy of which shall be delivered
to the Investors, requesting that the Company withdraw the effectiveness of the
Most Recent Registration Statement, and the Company shall on, but not prior to,
the fifth (5th) Business Day after delivery of the Existing Registration
Termination Notice (the "EXISTING REGISTRATION WITHDRAWAL DATE"), withdraw the
effectiveness of the Most Recent Registration Statement. The Required Holders
shall be permitted to revoke the Existing Registration Termination Notice at any

                                      -5-

<PAGE>

time prior to the Existing Registration Withdrawal Date. Upon the withdrawal of
the Most Recent Registration Statement on the Existing Registration Withdrawal
Date, the Company shall be deemed to have satisfied its registration obligations
pursuant to Sections 2(a) and 2(b) of the Existing Registration Rights Agreement
as to the Existing Registrable Securities (as defined in the Existing
Registration Rights Agreement) and the Company's obligation to file an
Additional Registration Statement (as defined in the Existing Registration
Rights Agreement) shall be suspended until such time as the Company is permitted
to file an Additional Registration Statement (as defined in the Existing
Registration Rights Agreement) by the SEC without violating its registration
obligations pursuant to Sections 2(a) and 2(b) of this Agreement. After the
Existing Registration Termination Notice has been delivered to the Company, an
Investor may deliver to the Company an Investor Demand requesting that the
Company prepare and file with the SEC the Initial Registration Statement to
register the Initial Registrable Securities beginning on the date which is the
later of (i) five (5) months following the date the Most Recent Registration
Statement is declared effective by the SEC and (ii) thirty (30) days after the
earlier of (x) the date substantially all of the Existing Registrable Securities
covered by the Most Recent Registration Statement are sold and (y) the date the
withdrawal of effectiveness of the Most Recent Registration Statement becomes
effective with the SEC. Upon receipt of an Investor Demand in accordance with
the provisions set forth above, the Company shall prepare and as soon as
practicable but in no event later than the Initial Filing Deadline, file with
the SEC the Initial Registration Statement on Form SB-2 covering the resale of
the Maximum Allowable Amount of the Initial Registrable Securities. In the event
that Form SB-2 is unavailable for such a registration, the Company shall use
such other form as is available for such a registration on another appropriate
form reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(e). The Initial Registration Statement prepared pursuant hereto shall
register for resale at least the number of shares of Common Stock equal to the
Initial Required Registration Amount determined as of date the Initial
Registration Statement is initially filed with the SEC. The Initial Registration
Statement shall contain (except if otherwise directed by the Required Holders)
the "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially
the form attached hereto as EXHIBIT B. The Company shall use its best efforts to
have the Initial Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Initial Effectiveness Deadline. By
9:30 am on the Business Day following the Initial 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 the Initial
Registration Statement.

                  b. ADDITIONAL MANDATORY REGISTRATION. An Investor successively
may deliver to the Company an Investor Demand requesting that the Company
prepare and file with the SEC an Additional Registration Statement to register
any Additional Registrable Securities beginning on the date which is the later
of (i) five (5) months following the Initial Effective Date and (ii) the date
thirty (30) days after the date substantially all of the Registrable Securities
registered under the immediately preceding Registration Statement are sold and
thereafter on the date which is the later of (i) five (5) months following the
Additional Effective Date of the immediately preceding Additional Registration
Statement and (ii) the date thirty (30) days after the date substantially all of
the Registrable Securities registered under the immediately preceding
Registration Statement are sold until the earlier date of when (x) all
Additional Registrable Securities have been registered on Additional
Registration Statements and (y) all Additional Registrable Securities not
previously registered on an Additional Registration Statement may be sold by the

                                      -6-

<PAGE>

Investors without restriction or limitation pursuant to Rule 144 and without the
requirement to be in compliance with Rule 144(c)(1) (or any successor thereto)
promulgated under the 1933 Act. Upon receipt of an Investor Demand, the Company
shall (x) promptly send a copy of such Investor Demand to all other Investors
and (y) prepare and as soon as practicable but in no event later than the
Additional Filing Deadline, file with the SEC such Additional Registration
Statement on Form SB-2 covering the resale of the Maximum Allowable Amount of
the Additional Registrable Securities set forth on an Investor Demand and in any
additional Investor Demand received at least five (5) Business Days prior to the
applicable Additional Filing Deadline. In the event that Form SB-2 is
unavailable for such a registration, the Company shall use such other form as is
available for such a registration on another appropriate form reasonably
acceptable to the Required Holders, subject to the provisions of Section 2(e).
The Additional Registration Statement prepared pursuant hereto shall register
for resale at least the number of shares of Common Stock equal to the Additional
Required Registration Amount determined as of date the Additional Registration
Statement is initially filed with the SEC. The Additional Registration Statement
shall contain (except if otherwise directed by the Required Holders) the
"SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially the
form attached hereto as EXHIBIT B. The Company shall use its best efforts to
have the Additional Registration Statement declared effective by the SEC as soon
as practicable, but in no event later than the Additional Effectiveness
Deadline. By 9:30 am on the Business Day following the Additional Effective Date
of the applicable Additional Registration Statement, 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 Additional Registration
Statement.

                  c. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and any increase
or decrease 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 Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders; except that the shares of Common Stock underlying the Warrants
previously issued to Montgomery & Co., LLC, as placement agent and the shares of
Common Stock underlying the Existing Registrable Securities may be included in
one or more Registration Statements, provided that all of the remaining
Conversion Shares issued or issuable upon conversion of all of the Notes and all
of the remaining Warrant Shares issued or issuable upon exercise of all of the
Warrants are included in the same Registration Statement or have previously been
included in one or more Registration Statements. Subject to the previous
sentence, the Investors party to the Amended and Restated Registration Rights
Agreement, the 2007 Registration Rights Agreement and/or the 2008 Registration

                                      -7-

<PAGE>

Rights Agreement hereby consent to the inclusion of the Registrable Securities
on the same Registration Statement with the Existing Registrable Securities.

                  d. LEGAL COUNSEL. Subject to Section 5 hereof, each Investor
(with Cedar Hill Capital Partners Onshore, LP and Cedar Hill Capital Partners
Offshore, Ltd. (together, "CEDAR HILL") being deemed one Investor for purposes
hereof) shall have the right to select one legal counsel to review and oversee
any registration pursuant to this Section 2 ("LEGAL COUNSEL"). The Company and
Legal Counsel shall reasonably cooperate with each other in performing the
Company's obligations under this Agreement.

                  e. FORM S-3. The Company shall undertake to register the
Registrable Securities on Form S-3 as soon as such form is available for use by
the Company, provided that the Company shall 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.

                  f. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) or Section 2(b) is insufficient to cover all of the Registrable
Securities required pursuant to this Agreement to be covered by such
Registration Statement or an Investor's allocated portion of the Registrable
Securities pursuant to Section 2(c) required pursuant to this Agreement to be
covered by such Registration Statement, 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 permitted by the SEC. 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 required
pursuant to this Agreement to be covered by such Registration Statement" 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) 0.80. The calculation
set forth in the foregoing sentence shall be made without regard to any
limitations on the conversion of the Notes or the exercise of the Warrants and
such calculation shall assume that the Notes are then convertible into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the Notes)
and that the Warrants are then exercisable for shares of Common Stock at the
then prevailing Exercise Price (as defined in the Warrants).

                  g. 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 respective Filing Deadline (a "FILING FAILURE") or
(B) not declared effective by the SEC on or before the respective Effectiveness
Deadline (an "EFFECTIVENESS FAILURE") or (ii) on any day after the applicable
Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r)) pursuant to such

                                      -8-

<PAGE>

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, to
register a sufficient number of shares of Common Stock or to maintain the
listing of the 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 two percent (2.0%) of the aggregate
Purchase Price (as such term is defined in the Securities Purchase Agreement) of
such Investor's Notes relating to the 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 days) after a Filing Failure until such Filing Failure is cured; (ii) (A)
the day of an Effectiveness Failure (except if such Effectiveness Failure occurs
between February 11 and April 14 of a particular year and the Effectiveness
Failure occurs because the Company's most recent 1934 Act reports do not include
financial statements less than 135 days old, the Registration Delay Payment
pursuant to this clause (A) shall not apply) and (B) on every thirtieth day (pro
rated for periods totaling less than thirty days) after an Effectiveness Failure
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 days) after a Maintenance Failure until such Maintenance
Failure is cured. The payments to which a holder shall be entitled pursuant to
this Section 2(g) are referred to herein as "REGISTRATION DELAY PAYMENTS."
Registration Delay Payments shall be paid on the day of the Filing Failure,
Effectiveness Failure and the initial day of a Maintenance Failure, as
applicable, and thereafter on the earlier of (I) the thirtieth day after the
event or failure giving rise to the Registration Delay Payments has occurred 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 two percent (2.0%) per month (prorated for
partial months) until paid in full. Notwithstanding anything herein to the
contrary, in no event shall the aggregate Registration Delay Payments exceed
twelve and one-half percent (12.5%) of the aggregate Purchase Price for all
Investors (the "REGISTRATION DELAY PAYMENTS CAP"). Notwithstanding anything to
the contrary contained herein, in no event shall the Company be liable for any
damages in connection with the Warrants or Warrant Shares. In addition, and
notwithstanding anything to the contrary contained herein, in no event shall the
Registration Delay Payments be payable with respect to any Registrable
Securities that are not included on any applicable Registration Statement solely
as a result of a comment received by the SEC requiring a limit on the number of
Registrable Securities included in such Registration Statement in order for such
Registration Statement to be able to avail itself of Rule 415.

         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((b), 2(e) or
2(f), 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:

                                      -9-

<PAGE>

                  a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities and use its
best efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the Effectiveness Deadline). The Company shall 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 the
requirement to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144 (or any successor thereto)
promulgated under the 1933 Act 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 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. The term
"best efforts" shall mean, the Company's reasonable best efforts, which include
among other things, that the Company shall submit to the SEC, within two (2)
Business Days after the later of the date that (i) 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, and (ii) the approval of Legal Counsel pursuant
to Section 3(c) (which approval is immediately sought), 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.

                  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 until such time as all of such Registrable Securities
shall have been disposed of 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-QSB, Form 10-K, Form 10-KSB or any analogous report under 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) the Initial Registration Statement at least one (1) Business
Day prior to its filing with the SEC and any Additional 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 (except for amendments
and supplements required to be filed by reason of the Company filing Annual
Reports on Form 10-K or Form 10 KSB, Quarterly Reports on Form 10-Q or 10-QSB,

                                      -10-

<PAGE>

or Current Reports on Form 8-K (except those that refer to an Investor or the
transactions contemplated hereby, which will be subject to such review and
comment) and any similar or successor reports) 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. 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. 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 an 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 (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 notice of the initiation or threatening of any proceeding for
such purpose.

                                      -11-

<PAGE>

                  f. The Company shall notify Legal Counsel and each Investor 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 a
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(r), 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 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 Investor in writing
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, 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 or e-mail 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 or 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 notice of the initiation or threat of any
proceeding for such purpose.

                  h. If any Investor is deemed to be, alleged to be or
reasonably believes it may be deemed or alleged to be, an underwriter or is
required under applicable securities laws to be described in the Registration
Statement as an underwriter, 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
such Investor's due diligence requirements, if any, 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

                                      -12-

<PAGE>

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 Agreement or any other Transaction Document.
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, (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. 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 (i) cause
all of the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
(ii) secure the inclusion for quotation of all of the Registrable Securities on
The NASDAQ Global Market or (iii) if, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to
secure the inclusion for quotation on The NASDAQ Capital Market or the American
Stock Exchange for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the Financial Industry Regulatory Authority
("FINRA") as such with respect to such Registrable Securities. The Company shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(k).

                  l. 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 an
effective Registration Statement and enable such certificates to be in such

                                      -13-

<PAGE>

denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.

                  m. 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.

                  n. 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.

                  o. 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.

                  p. 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.

                  q. 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.

                  r. Notwithstanding anything to the contrary herein, at any
time after the Effective Date of an applicable Registration Statement, the
Company may (x) 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 and (y) file supplements and/or amendments to the
Registration Statement to incorporate filings under the 1934 Act into the
Registration Statement in order to maintain the effectiveness of the
Registration Statement which may cause the Registration Statement to be
ineffective while being reviewed by the SEC (each, a "GRACE PERIOD"); provided,
that the Company shall promptly (i) notify the Investors in writing of the
existence of material, non-public information or other event giving rise to a

                                      -14-

<PAGE>

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 of the type described in clause (x) above shall exceed ten (10)
consecutive days, no Grace Period of the type described in clause (y) above
shall exceed twenty (20) consecutive days and during any three hundred sixty
five (365) day period such Grace Periods shall not exceed an aggregate of sixty
(60) days and the first day of any Grace Period must be at least five (5)
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 are
prohibited from selling Registrable Securities under the Registration Statement
due to the ineffectiveness of the Registration Statement and shall end on and
include the date the effectiveness of the Registration Statement is restored and
the Investors can continue to sell Registrable Securities pursuant to such
Registration Statement. 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 requirement exists) the ineffectiveness of the Registration Statement
and for which the Investor has not yet settled.

                  s. Neither the Company nor any Subsidiary or affiliate thereof
shall identify any Buyer as an underwriter in any public disclosure or filing
with the SEC or any Principal Market (as defined in the Securities Purchase
Agreement) or Eligible Market and any Buyer being deemed an underwriter by the
SEC shall not relieve the Company of any obligations it has under this Agreement
or any other Transaction Document (as defined in the Securities Purchase
Agreement); PROVIDED, HOWEVER, that the foregoing shall not prohibit the Company
from including the disclosure found in the "Plan of Distribution" section
attached hereto as EXHIBIT B in the Registration Statement.

         4. OBLIGATIONS OF THE INVESTORS.

                  a. 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 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 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, 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 also reimburse each Investor (with Cedar Hill being deemed one
Investor for purposes hereof) 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 $15,000 per Investor (and
limited to a total of $15,000 for each group of affiliated Investors) for each
Registration Statement filed by the Company with the SEC.

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,

                                      -15-

<PAGE>

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, (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 or (iv) any violation of this Agreement (the matters in
the foregoing clauses (i) through (iv) 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 Registration Statement or any such amendment thereof or supplement
thereto, if such 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

                                      -16-

<PAGE>

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 the 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 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, the
representation by such 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, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations

                                      -17-

<PAGE>

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 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 law, 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 or
quarterly report of the Company and such other reports and documents so filed by

                                      -18-

<PAGE>

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.

         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 within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the Registrable 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
Registrable Securities by the transferee or assignee is restricted under the
1933 Act or 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 this Agreement and the
other Transaction Documents (as defined in 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 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 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:

                                      -19-

<PAGE>

         If to the Company:

                  Raptor Networks Technology, Inc.
                  1241 E. Dyer Road, Suite 150
                  Santa Ana, CA 92705
                  Telephone:        (949) 623-9300
                  Facsimile:        (949) 623-9400
                  Attention:        Thomas M. Wittenschlaeger
                                    Bob Van Leyen

                  With a copy to:

                  Rutan & Tucker , LLP
                  611 Anton Blvd. 14th Floor
                  Costa Mesa, CA 92626
                  Telephone:        (949) 641-5100
                  Facsimile:        (949) 546-9035
                  Attention:        Thomas J. Crane, 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.

                  and

                  Sadis & Goldberg LLP
                  551 5th Avenue
                  New York, New York 10176
                  Telephone:        (212) 573-6660
                  Facsimile:        (212) 573-6662
                  Attention:        Ron Geffner, Esq.

If to an Investor, to its address and facsimile number set forth on the Schedule
of Investors attached hereto, with copies to such Investor's representatives as
set forth on the Schedule of Investors, 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

                                      -20-

<PAGE>

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. 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. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

                  f. 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

                                      -21-

<PAGE>

referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

                  g. 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.

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

                  i. 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.

                  j. 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. 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.

                  l. 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. 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.

                  n. 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-a-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.

                            [Signature Page Follows]

                                      -22-

<PAGE>

                  IN WITNESS WHEREOF, each Investor 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:

                                        RAPTOR NETWORKS TECHNOLOGY, INC.

                                        By:   /s/ Thomas M. Wittenschlaeger
                                            ----------------------------------
                                              Name:  Thomas M. Wittenschlaeger
                                              Title: Chief Executive Officer

<PAGE>

                  IN WITNESS WHEREOF, each Investor 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.

                                        INVESTORS:

                                        CASTLERIGG MASTER INVESTMENTS LTD.
                                        BY: SANDELL ASSET MANAGEMENT CORP.

                                        By:   /s/ Timothy O'Brien
                                            ------------------------------------
                                              Name:   Timothy O'Brien
                                              Title:  Chief Financial Officer

<PAGE>

                  IN WITNESS WHEREOF, each Investor 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.

                                        INVESTORS:

                                        CEDAR HILL CAPITAL PARTNERS ONSHORE, LP

                                        By:
                                            /s/ Charles Cascarilla
                                              Name: Charles Cascarilla
                                              Title: Managing Member

<PAGE>

                  IN WITNESS WHEREOF, each Investor 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.

                                         INVESTORS:

                                         CEDAR HILL CAPITAL PARTNERS OFFSHORE,
                                         LTD.

                                         By:
                                            /s/ Charles Cascarilla
                                               Name:Charles Cascarilla
                                               Title: Manager

<PAGE>

<TABLE>
<CAPTION>
<S>     <C>

                              SCHEDULE OF INVESTORS

                                                 INVESTOR'S ADDRESS               INVESTOR'S REPRESENTATIVE'S
             INVESTOR                           AND FACSIMILE NUMBER                       ADDRESS
                                                                                     AND FACSIMILE NUMBER

CASTLERIGG MASTER INVESTMENTS LTD    c/o Sandell Asset Management Corp.           Schulte Roth & Zabel LLP
                                     40 West 57th Street                          919 Third Avenue
                                     26th Floor                                   New York, New York 10022
                                     New York, New York  10019                    Attn:  Eleazer Klein, Esq.
                                     Attention: Cem Hacioglu/Matthew Pliskin      Facsimile:  (212) 593-5955
                                     Facsimile:     (212) 603-5710                Telephone:  (212) 756-2000
                                     Telephone:     (212) 603-5775
CEDAR HILL CAPITAL PARTNERS          445 Park Avenue, 5th Floor                   Sadis & Goldberg LLP
ONSHORE, LP                          New York, New York 10022                     551 5th Avenue
                                     Attention: Charles Cascarilla                New York, New York 10176
                                     Facsimile: (646) 417-7702                    Attention: Ron Geffner, Esq.
                                     Telephone: (212) 201-5804                    Facsimile: (212) 573-6662
                                     Residence: New York                          Telephone: (212) 573-6660
CEDAR HILL CAPITAL PARTNERS          445 Park Avenue, 5th Floor                   Sadis & Goldberg LLP
OFFSHORE. LTD                        New York, New York 10022                     551 5th Avenue
                                     Attention: Charles Cascarilla                New York, New York 10176
                                     Facsimile: (646) 417-7702                    Attention: Ron Geffner, Esq.
                                     Telephone: (212) 201-5804                    Facsimile: (212) 573-6662
                                     Residence: Cayman Islands                    Telephone: (212) 573-6660
</TABLE>

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

First American Stock Transfer
706 E. Bell Road
Phoenix, Arizona 85022
Attention:  Salli Marinov

                  Re:      RAPTOR NETWORKS TECHNOLOGY, INC.

Ladies and Gentlemen:

                  [We are][I am] counsel to Raptor Networks Technology, Inc., a
Colorado corporation (the "Company"), and have represented the Company in
connection with that certain Securities Purchase Agreement (the "PURCHASE
AGREEMENT") entered into by and among the Company and the investors named
therein (collectively, the "HOLDERS") pursuant to which the Company issued to
the Holders convertible notes (the "NOTES") convertible into the Company's
common stock, $0.001 par value per share (the "COMMON STOCK"), warrants
exercisable for shares of Common Stock (the "WARRANTS") and shares (the "COMMON
SHARES") of Common Stock. Pursuant to the Purchase Agreement, the Company also
has entered into a Registration Rights Agreement with the Holders (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Notes, the shares of Common Stock issuable upon exercise
of the Warrants and the Common Shares, under the Securities Act of 1933, as
amended (the "1933 ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on ____________ ___, 200_, the Company filed a
Registration Statement on Form SB-2 (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.

                  In connection with the foregoing, [we][I] advise you that a
member of the SEC's staff has advised [us][me] by telephone that the SEC has
entered an order declaring the Registration Statement effective under the 1933
Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and
[we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
staff, that any stop order suspending its effectiveness has been issued or that
any proceedings for that purpose are pending before, or threatened by, the SEC
and the Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.

                  This letter shall serve as our standing instruction to you
that the shares of Common Stock are freely transferable by the Holders pursuant
to the Registration Statement. You need not require further letters from us to
effect any future legend-free issuance or reissuance of shares of Common Stock
to the Holders as contemplated by the Company's Irrevocable Transfer Agent
Instructions dated _____________, 2008.

                                                     Very truly yours,

                                                     [ISSUER'S COUNSEL]

                                                     By:_____________________
CC: [LIST NAMES OF HOLDERS]

                                      A-1

<PAGE>

                                                                       EXHIBIT B

                              SELLING STOCKHOLDERS

         The shares of Common Stock being offered by the selling stockholders
are those previously issued to the selling stockholders and those issuable upon
conversion of the convertible notes and upon exercise of the warrants. For
additional information regarding the issuance of those convertible notes and
warrants, see "Private Placement of Convertible Notes, Warrants and Common
Shares" above. We are registering the shares of Common Stock in order to permit
the selling stockholders to offer the shares for resale from time to time.
Except for the ownership of the convertible notes, the warrants and common
shares issued pursuant to the Securities Purchase Agreement and prior
convertible debt, common stock and warrant purchases with the Company, the
selling stockholders have not had any material relationship with us within the
past three years.

         The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, based on its ownership of
the convertible notes and warrants, as of ________, 200_, assuming conversion of
all convertible notes and exercise of the warrants held by the selling
stockholders on that date, without regard to any limitations on conversions or
exercise.

         The third column lists the shares of Common Stock being offered by this
prospectus by the selling stockholders.

         In accordance with the terms of registration rights agreement among the
Company and the selling stockholders, this prospectus covers the resale of (i) [
] shares of Common Stock, (ii) [ ] shares of Common Stock issuable upon
conversion of the convertible notes as of the Trading Day immediately preceding
the date the registration statement is initially filed with the SEC and (iii) [
] shares of Common Stock issuable upon exercise of the related warrants as of
the Trading Day immediately preceding the date the registration statement is
initially filed with the SEC. Because the conversion price of the convertible
notes and the exercise price of the warrants may be adjusted, the number of
shares that will actually be issued may be more or less than the number of
shares being offered by this prospectus. The fourth column assumes the sale of
all of the shares offered by the selling stockholders pursuant to this
prospectus.

         Under the terms of the convertible notes and the warrants, a selling
stockholder may not convert the convertible notes or exercise the warrants to
the extent such conversion or exercise would cause such selling stockholder,
together with its affiliates, to beneficially own a number of shares of Common
Stock which would exceed 4.99% of our then outstanding shares of Common Stock
following such conversion or exercise, excluding for purposes of such
determination shares of Common Stock issuable upon conversion of the convertible
notes which have not been converted and upon exercise of the warrants which have
not been exercised. The number of shares in the second column does not reflect
this limitation. The selling stockholders may sell all, some or none of their
shares in this offering. See "Plan of Distribution."

                                      B-1

<PAGE>

<TABLE>
<CAPTION>
<S>     <C>

                                                                    MAXIMUM NUMBER OF SHARES
                                          NUMBER OF SHARES OWNED     TO BE SOLD PURSUANT TO      NUMBER OF SHARES
NAME OF SELLING STOCKHOLDER                  PRIOR TO OFFERING           THIS PROSPECTUS        OWNED AFTER OFFERING
---------------------------                  -----------------           ---------------        --------------------
CASTLERIGG MASTER INVESTMENTS (1)                                                                        0
CEDAR HILL CAPITAL PARTNERS ONSHORE,
LP (2)
CEDAR HILL CAPITAL PARTNERS OFFSHORE,
LTD. (3)
</TABLE>

         (1) Sandell Asset Management Corp. ("SAMC") is the investment manager
of Castlerigg Master Investments Ltd. ("Master"). Thomas Sandell is the
sole-shareholder of SAMC and may be deemed to have voting and dispositive power
over the shares beneficially owned by Master. No other natural person has voting
or dispositive power over the shares being registered on behalf of Master.
Castlerigg International Ltd. ("Castlerigg International") is the controlling
shareholder of Castlerigg International Holdings Limited ("Holdings"). Holdings
is the controlling shareholder of Master. Each of Holdings and Castlerigg
International may be deemed to share beneficial ownership of the shares
beneficially owned by Castlerigg Master Investments. SAMC, Mr. Sandell, Holdings
and Castlerigg International each disclaims beneficial ownership of the
securities with respect to which indirect beneficial ownership is described.

         (2) Power to vote or dispose of the shares is shared by Emil Woods and
Charles Cascarilla, who are the principals of Cedar Hill Capital Partners, LLC,
which is the investment advisor to Cedar Hill Capital Partners Onshore, LP.

         (3) Power to vote or dispose of the shares is shared by Emil Woods and
Charles Cascarilla, who are the principals of Cedar Hill Capital Partners, LLC,
which is the investment advisor to Cedar Hill Capital Partners Offshore, Ltd.

                                      B-2

<PAGE>

                              PLAN OF DISTRIBUTION

         We are registering the shares of Common Stock previously issued and
those issuable upon conversion of the convertible notes and upon exercise of the
warrants to permit the resale of these shares of Common Stock by the holders of
the convertible notes and warrants from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of Common Stock. We will bear all fees and expenses
incident to our obligation to register the shares of Common Stock.

         The selling stockholders may sell all or a portion of the shares of
Common Stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of Common Stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of Common Stock may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,

         o        on any national securities exchange or quotation service on
                  which the securities may be listed or quoted at the time of
                  sale;

         o        in the over-the-counter market;

         o        in transactions otherwise than on these exchanges or systems
                  or in the over-the-counter market;

         o        through the writing of options, whether such options are
                  listed on an options exchange or otherwise;

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

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

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

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

         o        privately negotiated transactions;

         o        short sales;

         o        sales pursuant to Rule 144;

                                      B-3

<PAGE>

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

         o        a combination of any such methods of sale; and

         o        any other method permitted pursuant to applicable law.

         If the selling stockholders effect such transactions by selling shares
of Common Stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of Common Stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the shares of Common Stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of Common Stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of Common
Stock short and deliver shares of Common Stock covered by this prospectus to
close out short positions and to return borrowed shares in connection with such
short sales. The selling stockholders may also loan or pledge shares of Common
Stock to broker-dealers that in turn may sell such shares.

         The selling stockholders may pledge or grant a security interest in
some or all of the convertible notes, warrants or shares of Common Stock owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of Common Stock
from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933, as amended, amending, if necessary, the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may
transfer and donate the shares of Common Stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus.

         The selling stockholders and any broker-dealer participating in the
distribution of the shares of Common Stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of shares of Common Stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.

         Under the securities laws of some states, the shares of Common Stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of Common Stock may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.

                                       B-4

<PAGE>

         There can be no assurance that any selling stockholder will sell any or
all of the shares of Common Stock registered pursuant to the registration
statement, of which this prospectus forms a part.

         The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.

         We will pay all expenses of the registration of the shares of Common
Stock pursuant to the registration rights agreement, estimated to be $125,000 in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreement, or we may be entitled
to contribution.

         Once sold under the registration statement, of which this prospectus
forms a part, the shares of Common Stock will be freely tradable in the hands of
persons other than our affiliates.

                                      B-5

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