Document:

INCENTIVE
      STOCK OPTION AGREEMENT

    UNDER
      THE
      DOV PHARMACEUTICAL, INC.

    2000
      STOCK OPTION AND GRANT PLAN

     

    Name
      of
      Optionee:______________________________

    

    No.
      of
      Option Shares:____________________________

    

    Option
      Exercise Price per Share: $___________________

     

    Grant
      Date:____________________________________

    

    Expiration
      Date:________________________________

     

    Pursuant
      to the DOV Pharmaceutical, Inc. 2000 Stock Option and Grant Plan, as amended
      through the date hereof (the “Plan”), DOV Pharmaceutical, Inc. (the “Company”)
      hereby grants to the Optionee named above an option (the “Stock Option”) to
      purchase on or prior to the Expiration Date specified above all or part of
      the
      number of shares of Common Stock, par value $0.0001 per share (the “Stock”), of
      the Company specified above at the Option Exercise Price per Share specified
      above subject to the terms and conditions set forth herein and in the
      Plan.

     

    1.  Exercisability
      Schedule.
      No
      portion of this Stock Option may be exercised until such portion shall have
      become exercisable. Except as set forth below, and subject to the discretion
      of
      the Committee (as defined in Section 2 of the Plan) to accelerate the
      exercisability schedule hereunder, this Stock Option shall be exercisable with
      respect to the following number of Option Shares on the dates
      indicated:

     

    
      	
              Incremental
                Number of Option
                Shares Exercisable

            	 	
              Exercisability
                Date

            
	
              _____________                        
                (___%)

            	 	
              ____________

            
	
              _____________                        
                (___%)

            	 	
              ____________

            
	
              _____________                        
                (___%)

            	 	
              ____________

            
	
              _____________                        
                (___%)

            	 	
              ____________

            
	
              _____________                        
                (___%)

            	 	
              ____________

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Once
      exercisable, this Stock Option shall continue to be exercisable at any time
      or
      times prior to the close of business on the Expiration Date, subject to the
      provisions hereof and of the Plan.

     

    2.  Manner
      of Exercise.

     

    (a)  The
      Optionee may exercise this Stock Option only in the following manner: from
      time
      to time on or prior to the Expiration Date of this Stock Option, the Optionee
      may give written notice to the Committee of his or her election to purchase
      some
      or all of the Option Shares purchasable at the time of such notice. This notice
      shall specify the number of Option Shares to be purchased.

     

    Payment
      of the purchase price for the Option Shares may be made by one or more of the
      following methods: (i) in cash, by certified or bank check or other
      instrument acceptable to the Committee; (ii) through the delivery (or
      attestation to the ownership) of shares of Stock that have been purchased by
      the
      Optionee on the open market or that are beneficially owned by the Optionee
      and
      are not then subject to any restrictions under any Company plan and that
      otherwise satisfy any holding periods as may be required by the Committee;
      (iii) by the Optionee delivering to the Company a properly executed
      exercise notice together with irrevocable instructions to a broker to promptly
      deliver to the Company cash or a check payable and acceptable to the Company
      to
      pay the option purchase price, provided that in the event the Optionee chooses
      to pay the option purchase price as so provided, the Optionee and the broker
      shall comply with such procedures and enter into such agreements of indemnity
      and other agreements as the Committee shall prescribe as a condition of such
      payment procedure; or (iv) a combination of (i), (ii) and (iii) above.
      Payment instruments will be received subject to collection. 

     

    The
      transfer to the Optionee on the records of the Company or of the transfer agent
      of the Option Shares will be contingent upon the Company’s receipt from the
      Optionee of full payment for the Option Shares, as set forth above and any
      agreement, statement or other evidence that the Company may require to satisfy
      itself that the issuance of Stock to be purchased pursuant to the exercise
      of
      Stock Options under the Plan and any subsequent resale of the shares of Stock
      will be in compliance with applicable laws and regulations. In the event the
      Optionee chooses to pay the purchase price by previously-owned shares of Stock
      through the attestation method, the number of shares of Stock transferred to
      the
      Optionee upon the exercise of the Stock Option shall be net of the shares
      attested to.

     

    (b)  The
      shares of Stock purchased upon exercise of this Stock Option shall be
      transferred to the Optionee on the records of the Company or of the transfer
      agent upon compliance to the satisfaction of the Committee with all requirements
      under applicable laws or regulations in connection with such issuance and with
      the requirements hereof and of the Plan. The determination of the Committee
      as
      to such compliance shall be final and binding on the Optionee. The Optionee
      shall not be deemed to be the holder of, or to have any of the rights of a
      holder with respect to, any shares of Stock subject to this Stock Option unless
      and until this Stock Option shall have been exercised pursuant to the terms
      hereof, the Company or the transfer agent shall have transferred the shares
      to
      the Optionee, and the Optionee’s name shall have been entered as the stockholder
      of record on the books of the Company. Thereupon, the Optionee shall have full
      voting, dividend and other ownership rights with respect to such shares of
      Stock.

     

    
      
         

      

      
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    (c)  Notwithstanding
      any other provision hereof or of the Plan, no portion of this Stock Option
      shall
      be exercisable after the Expiration Date hereof.

     

    3.  Termination
      of Employment.
      If the
      Optionee’s employment by the Company or a Subsidiary (as defined in the Plan) is
      terminated, the period within which to exercise the Stock Option may be subject
      to earlier termination as set forth below.

     

    (a)  Termination
      Due to Death or Retirement.
      If the
      Optionee’s employment terminates by reason of the Optionee’s death or retirement
      (after attainment of age sixty (60)), any portion of this Stock Option
      outstanding on such date shall become fully exercisable and may thereafter
      be
      exercised by the Optionee or the Optionee’s legal representative or legatee for
      a period of 12 months
      from the date of death or retirement or until the Expiration Date, if
      earlier.

     

    (b)  Termination
      Due to Disability.
      If the
      Optionee’s employment terminates by reason of the Optionee’s disability (as
      determined by the Committee), any portion of this Stock Option outstanding
      on
      such date shall become fully exercisable and may thereafter be exercised by
      the
      Optionee for a period of 12 months
      from the date of termination or until the Expiration Date, if earlier. The
      death
      of the Optionee during the 12-month period provided in this Section 3(b)
      shall extend such period for another 12 months from the date of death or until
      the Expiration Date, if earlier.

     

    (c)  Termination
      for Cause.
      If the
      Optionee’s employment terminates for Cause, any portion of this Stock Option
      outstanding on such date shall terminate immediately and be of no further force
      and effect. For purposes hereof, “Cause” shall mean a determination by the
      Company that
      the
      Optionee shall be dismissed as a result of (i) any material breach by the
      Optionee of any agreement between the Optionee and the Company; (ii) the
      conviction of, indictment for or plea of nolo contendere by the Optionee to
      a
      felony or a crime involving moral turpitude; or (iii) any material misconduct
      or
      willful and deliberate non-performance (other than by reason of disability)
      by
      the Optionee of the Optionee’s duties to the Company.

     

    (d)  Other
      Termination.
      If the
      Optionee’s employment terminates for any reason other than the Optionee’s death,
      the Optionee’s disability, or Cause, and unless otherwise determined by the
      Committee, any portion of this Stock Option outstanding on such date may be
      exercised, to the extent exercisable on the date of termination, for a period
      of
      three months from the date of termination or until the Expiration Date, if
      earlier. Any portion of this Stock Option that is not exercisable on the date
      of
      termination shall terminate immediately and be of no further force or effect.
      

     

    The
      Committee’s determination of the reason for termination of the Optionee’s
      employment shall be conclusive and binding on the Optionee and his or her
      representatives or legatees.

     

    4.  Incorporation
      of Plan.
      Notwithstanding anything herein to the contrary, this Stock Option shall be
      subject to and governed by all the terms and conditions of the Plan, including
      the powers of the Committee set forth in Section 2(b) of the Plan. Capitalized
      terms in this Agreement shall have the meaning specified in the Plan, unless
      a
      different meaning is specified herein.

     

    
      
         

      

      
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    5.  Transferability.
      This
      Agreement is personal to the Optionee, is non-assignable and is not transferable
      in any manner, by operation of law or otherwise, other than by will or the
      laws
      of descent and distribution. This Stock Option is exercisable, during the
      Optionee’s lifetime, only by the Optionee, and thereafter, only by the
      Optionee’s legal representative or legatee.

     

    6.  Status
      of the Stock Option.
      This
      Stock Option is intended to qualify as an “incentive stock option” under Section
      422 of the Internal Revenue Code of 1986, as amended (the “Code”), but the
      Company does not represent or warrant that this Stock Option qualifies as such.
      The Optionee should consult with his or her own tax advisors regarding the
      tax
      effects of this Stock Option and the requirements necessary to obtain favorable
      income tax treatment under Section 422 of the Code, including, but not
      limited to, holding period requirements. To the extent any portion of this
      Stock
      Option does not so qualify as an “incentive stock option,” such portion shall be
      deemed to be a non-qualified stock option. If the Optionee intends to dispose
      or
      does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares
      within the one-year period beginning on the date after the transfer of such
      shares to him or her, or within the two-year period beginning on the day after
      the grant of this Stock Option, he or she will so notify the Company within
      30
      days after such disposition.

     

    7.  Tax
      Withholding.
      The
      Optionee shall, not later than the date as of which the exercise of this Stock
      Option becomes a taxable event for Federal income tax purposes, pay to the
      Company or make arrangements satisfactory to the Committee for payment of any
      Federal, state, and local taxes required by law to be withheld on account of
      such taxable event. The Optionee may elect to have the minimum required tax
      withholding obligation satisfied, in whole or in part, by (i) authorizing the
      Company to withhold from shares of Stock to be issued, or (ii) transferring
      to
      the Company, a number of shares of Stock with an aggregate Fair Market Value
      that would satisfy the withholding amount due. 

     

    8.  No
      Obligation to Continue Employment.
      Neither
      the Company nor any Subsidiary is obligated by or as a result of the Plan or
      this Agreement to continue the Optionee in employment and neither the Plan
      nor
      this Agreement shall interfere in any way with the right of the Company or
      any
      Subsidiary to terminate the employment of the Optionee at any time.

     

    
      
         

      

      
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    9.  Notices.
      Notices
      hereunder shall be mailed or delivered to the Company at its principal place
      of
      business and shall be mailed or delivered to the Optionee at the address on
      file
      with the Company or, in either case, at such other address as one party may
      subsequently furnish to the other party in writing.

     

    
      	 	 	 
	 	DOV PHARMACEUTICAL, INC.
	 
 	 
 	 
 
	
            	By:  	 
	 	
              

              Name:
                Barbara Duncan

              Title:
                President and CFO

            
	 	
            

    

    

    The
      foregoing Agreement is hereby accepted and the terms and conditions thereof
      hereby agreed to by the undersigned.

     

     

    
      	
            	 	
            
	Dated: _________________________	 	_____________________________________
	
            	 	Optionee’s Signature
	
            	 	
            
	
            	 	Optionee’s name and address:
	 	 	 
	 	 	_____________________________________
	 	 	_____________________________________
	
            	 	_____________________________________

    

     

    
      
         

      

      
        5EXHIBIT
      10.1

     

    PURCHASE
      AGREEMENT

    

    

    THIS
      AGREEMENT is made as of the 17th day of October, 2006, by and between
PSI
      Corporation (the
      “Company”), a corporation organized under the laws of the State of Nevada, with
      its principal offices at 7222 Commerce Center Drive, Suite 240, Colorado
      Springs, Colorado 80919, and Lazarus
      Investment Partners LLLP, a
      Delaware limited liability limited partnership, with its principal offices
      at
      2401 East Second Avenue, Suite 400, Denver, Colorado 80206 (the
“Purchaser”). 

    

    IN
      CONSIDERATION of the mutual covenants contained in this Agreement, the Company
      and the Purchaser agree as follows: 

    

    SECTION
      1. Authorization
      of Sale of the Shares.
      Subject
      to the terms and conditions of this Agreement, the Purchaser will purchase
      from
      the Company and the Company will sell to the Purchaser 5,000,000 shares of
      Common Stock (“Purchased Shares”) and two stock purchase warrants (“Warrants”)
      exercisable for an aggregate of 5,000,000 shares of Common Stock (subject to
      adjustment, “Warrant Shares”), for an aggregate purchase price of $500,000.00.
      Each of the Warrants will be in the form delivered contemporaneously herewith,
      will be exercisable for a period of five years (subject to earlier termination
      as provided therein), commencing on the date of issuance, and will be
      exercisable for 2,500,000 shares of Common Stock, subject to adjustment as
      provided therein. The initial exercise prices under the Warrants will be $.15
      and $.20 per share, respectively, subject to adjustment as provided in the
      Warrants. 

    

    SECTION
      2. Closing.
      The
      closing of the purchase and sale (“Closing”) shall take place on the date of
      this Agreement (“Closing Date”) and shall be consummated by mail or otherwise in
      accordance with arrangements reasonably acceptable to counsel for the Purchaser
      and counsel for the Company. At the Closing, the Company will deliver to the
      Purchaser the Warrants and certificates representing the Purchased Shares,
      registered in the name of the Purchaser, and the Purchaser will deliver to
      the
      Company the purchase price therefor by wire transfer or check payable to the
      order of the Company. The Purchaser’s obligations at the Closing are subject to
      the following conditions, any one or more of which may be waived by the
      Purchaser: 

    

    (a) Each
      of
      the representations and warranties of the Company made herein shall be accurate
      as of the Closing Date and the Purchaser shall have received a certificate
      from
      the Company’s chief executive officer and chief financial or accounting officer
      to that effect. 

    

    (b) The
      Purchaser shall have received certified copies of (i) resolutions of the
      directors of the Company in form and substance satisfactory to counsel to the
      Purchaser with respect to the authorization of this Agreement and the
      transactions referred to herein, and (ii) the Company’s bylaws and articles
      of incorporation, both as amended and in effect on the Closing Date.

    

    (c) The
      execution by the Company of a management rights letter reasonably satisfactory
      to the Purchaser. 

    

    (d) Fulfillment,
      in all material respects, of those agreements and undertakings of the Company
      to
      be fulfilled prior to or at the Closing. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    SECTION
      3. Representations,
      Warranties, and Covenants of the Company.
      Except
      as qualified on the Schedule of Exceptions attached hereto, the Company hereby
      represents and warrants to, and covenants with, the Purchaser as follows:

    

    3.1 Organization
      and Qualification.
      The
      Company is a corporation duly incorporated, validly existing, and in good
      standing under the laws of the State of Nevada and the Company is qualified
      to
      do business as a foreign corporation and in good standing in each jurisdiction
      in which qualification is required, except where failure to so qualify would
      not
      reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect (as defined herein). The material subsidiaries of the Company
      are
      listed on Schedule
      3.1
      to the
      Schedule of Exceptions (each a “Subsidiary” and collectively, the
“Subsidiaries”). Each Subsidiary is a direct or indirect wholly owned subsidiary
      of the Company. Each Subsidiary is duly organized, validly existing, and in
      good
      standing under the laws of its jurisdiction of organization and is qualified
      to
      do business as a foreign entity in each jurisdiction in which qualification
      is
      required, except where failure to so qualify would not reasonably be expected
      to
      have, individually or in the aggregate, a Material Adverse Effect. For purposes
      of this Agreement, the term “Material Adverse Effect” shall mean a material
      adverse effect upon the business, financial condition, properties or results
      of
      operations of the Company and its Subsidiaries, taken as a whole. 

    

    3.2 Authorized
      Capital Stock.
      Immediately prior to the Closing, the authorized capital stock of the Company
      will consist solely of 5,000,000 shares of Preferred Stock, par value $.001
      per
      share, none of which are outstanding, and 300,000,000 shares of Common Stock,
      par value $.001 per share, 66,962,747 of which are issued and outstanding.
      The
      issued and outstanding shares of the Company’s Common Stock have been duly
      authorized and validly issued, are fully paid and non-assessable, have been
      issued in compliance with all federal and state securities laws, and were not
      issued in violation of or subject to any preemptive rights or other rights
      to
      subscribe for or purchase securities. Other than pursuant to plans or agreements
      described in the SEC Documents (as defined in Section 3.18) or the Schedule
      of Exceptions (collectively, “Disclosure Documents”), the Company does not have
      outstanding any options to purchase, or any preemptive rights or other rights
      to
      subscribe for or to purchase, any securities or obligations convertible into,
      or
      any contracts or commitments to issue or sell, shares of its capital stock
      or
      any such options, rights, convertible securities, or obligations. The
      description of the Company’s stock, stock bonus, and other stock plans or
      arrangements and the options or other rights granted and exercised thereunder,
      set forth in the Disclosure Documents accurately and fairly presents all
      material information with respect to such plans, arrangements, options, and
      rights. With respect to each Subsidiary, (i) all the issued and outstanding
      shares of each Subsidiary’s capital stock or other equity interests have been
      duly authorized and validly issued, are fully paid and, in the case of each
      Subsidiary that is a corporation, non-assessable, have been issued in compliance
      with applicable federal and state securities laws, were not issued in violation
      of or subject to any preemptive rights or other rights to subscribe for or
      purchase securities, and (ii) there are no outstanding options to purchase,
      or
      any preemptive rights or other rights to subscribe for or to purchase, any
      securities or obligations convertible into, or any contracts or commitments
      to
      issue or sell, shares of any Subsidiary’s capital stock or other equity
      interests or any such options, rights, convertible securities, or obligations.
      Any anti-dilution or other adjustments in the number of shares issuable upon
      exercise, conversion, or exchange of the Company’s rights, options, warrants,
      and exercisable, convertible, and exchangeable securities have been waived
      and
      will not be invoked by the issuance of the Purchased Shares, Warrants, and
      the
      Warrant Shares, including any subsequent adjustments in the number of shares
      issuable under the terms of the Warrants. 

     

    
      
        
        

      

      
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    3.3 Warrant
      Shares Percentage.
      Attached hereto as Schedule 3.3 is the Company’s Capitalization Table
      showing all outstanding shares of Common Stock on a fully diluted basis. For
      such purpose, “Fully Diluted Shares” means outstanding shares of Common Stock
      and Common Stock issuable upon exercise, conversion, or exchange of all
      outstanding rights, options, warrants, securities, agreements, and instruments
      provided that the exact number of shares issuable upon conversion or exchange
      is
      currently ascertainable and does not include, for example, “Penalty” shares
      which may be issuable pursuant to prior financings, shares issuable in payment
      of principal or interest under outstanding promissory notes, or shares issuable
      as a result of any anti-dilution adjustments. On the date hereof, the Purchased
      Shares and the Warrant Shares constitute 11.54% (“Purchaser’s Percentage) of the
      Company’s Fully Diluted Shares. 

    

    3.4 Issuance,
      Sale, and Delivery of the Purchased Shares.
      The
      Purchased Shares and the Warrants have been duly authorized and, when issued,
      delivered and paid for in the manner set forth in this Agreement, will be duly
      authorized, validly issued, fully paid, and non-assessable and free and clear
      of
      all pledges, liens, restrictions, and encumbrances (other than restrictions
      on
      transfer under state and/or federal securities laws). The shares of Common
      Stock
      issuable upon exercise of the Warrants have been duly authorized and, if and
      when issued, delivered, and paid for upon exercise of the Warrants will be
      duly
      authorized, validly issued, fully paid, non-assessable, and free of clear of
      all
      pledges, liens, restrictions, and encumbrances (other than restrictions on
      transfer under state and/or federal securities laws). No preemptive rights
      or
      other rights to subscribe for or purchase exist with respect to the issuance
      and
      sale of the Purchased Shares and Warrants by the Company pursuant to this
      Agreement or the Warrant Shares upon exercise of the Warrants. Except as
      otherwise disclosed in the Schedule of Exceptions, no stockholder of the Company
      has any right to require the Company to register the sale of any shares owned
      by
      such stockholder under the Securities Act of 1933, as amended (the “Securities
      Act”). Neither the Company nor its Subsidiaries nor, to the Company’s knowledge,
      any shareholder of the Company has entered into any agreement with respect
      to
      the voting of equity securities of the Company or any Subsidiary. No further
      approval or authority of the stockholders or the Board of Directors of the
      Company will be required for the issuance and sale of the Purchased Shares
      or
      the Warrants to be sold by the Company as contemplated herein or for the
      issuance of the Warrant Shares upon exercise of the Warrants. 

    

    3.5 Due
      Execution, Delivery, and Performance of this Agreement.
      The
      Company has full legal right, corporate power and authority to enter into this
      Agreement and perform the transactions contemplated hereby. This Agreement
      has
      been duly authorized, executed, and delivered by the Company. The execution,
      delivery, and performance of this Agreement by the Company and the consummation
      of the transactions herein contemplated will not violate any provision of the
      certificate of incorporation or bylaws of the Company or any of its Subsidiaries
      and will not result in the creation of any lien, charge, security interest,
      or
      encumbrance upon any assets of the Company or any of its Subsidiaries pursuant
      to the terms or provisions of, and will not conflict with, result in the breach
      or violation of, or constitute, either by itself or upon notice or the passage
      of time or both, a default under (i) any agreement, lease, franchise, license,
      permit, or other instrument to which the Company or any of its Subsidiaries
      is a
      party or by which the Company or any of its Subsidiaries or any of their
      respective properties may be bound or affected and in each case which would
      reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect, or (ii) any statute or any judgment, decree, order, rule, or
      regulation of any court or any regulatory body, administrative agency, or other
      governmental body applicable to the Company or any of its Subsidiaries or any
      of
      their respective properties where such conflict, breach, violation, or default
      would reasonably be expected to have, individually or in the aggregate, a
      Material Adverse Effect. No consent, approval, authorization, or other order
      of
      any court, regulatory body, administrative agency, or other governmental body
      is
      required for the execution and delivery of this Agreement or the consummation
      of
      the transactions contemplated by this Agreement, except for compliance with
      the
      blue sky laws and federal securities laws applicable to the offering of the
      Purchased Shares, Warrants, and Warrant Shares. Upon the execution and delivery
      of this Agreement, and assuming the valid execution thereof by the Purchaser,
      this Agreement will constitute a valid and binding obligation of the Company,
      enforceable against the Company in accordance with its terms, except as
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, or similar laws affecting creditors’ and contracting
      parties’ rights generally and except as enforceability may be subject to general
      principles of equity (regardless of whether such enforceability is considered
      in
      a proceeding in equity or at law) and except as the indemnification agreements
      of the Company in Section 6.3 hereof may be limited by federal or state
      securities laws or the public policy underlying such laws. 

    

    
      
        
        

      

      
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    3.6 Accountants.
      Each of
      the firms of Lopez, Blevins, Bork & Associates, Ltd. and Asher &
Company, which has audited the consolidated financial statements of the Company
      included in the SEC Documents is an independent accountant as required by the
      Securities Act and the rules and regulations promulgated thereunder (the “Rules
      and Regulations”). 

    

    3.7 No
      Defaults.
      Neither
      the Company nor any of its Subsidiaries is in violation or default of any
      provision of its articles of incorporation, bylaws, or equivalent organizational
      documents, or in breach of or default with respect to any provision of any
      agreement, judgment, decree, order, lease, franchise, license, permit, or other
      instrument to which it is a party or by which it or any of its properties are
      bound which would reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect and there does not exist any state of
      facts
      which, with notice or lapse of time or both, would constitute an event of
      default on the part of the Company or any of its Subsidiaries as defined in
      such
      documents and which would reasonably be expected to have, individually or in
      the
      aggregate, a Material Adverse Effect. 

    

    3.8 Contracts.
      The
      Company and its Subsidiaries have no material contracts that are required to
      be
      filed with the Securities and Exchange Commission (the “Commission”) that are
      not described in the Disclosure Documents. All contracts described in the
      Disclosure Documents that are material to the Company and its Subsidiaries,
      taken as a whole, are in full force and effect on the date hereof; and neither
      the Company nor any of its Subsidiaries is, nor, to the Company’s knowledge, is
      any other party in breach of or default under any of such contracts which breach
      or default would reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect. 

    

    3.9 No
      Actions.
      Except
      as may be described in the Schedule of Exceptions: (i) there are no legal
      or governmental actions, suits, or proceedings pending against the Company
      or
      any Subsidiary; and (ii) to the Company’s knowledge, there are no legal or
      governmental inquiries, investigations, actions, suits, or proceedings
      threatened against the Company or any of its Subsidiaries or of which property
      owned or leased by the Company or any of its Subsidiaries is subject, or related
      to environmental or discrimination matters, which actions, suits, or
      proceedings, individually or in the aggregate, would reasonably be expected
      to
      have a Material Adverse Effect; and no labor disturbance by the employees of
      the
      Company exists or, to the Company’s knowledge, is imminent which would
      reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect. Neither the Company nor any of its Subsidiaries is party to
      or
      subject to the provisions of any injunction, judgment, decree, or order of
      any
      court, regulatory body, administrative agency, or other governmental body which
      would reasonably be expected to have, individually or in the aggregate, a
      Material Adverse Effect. 

    

    
      
        
        

      

      
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    3.10 Properties.
      The
      Company and the Subsidiaries have good and marketable title to all properties
      and assets reflected as owned in the financial statements included in the SEC
      Documents, subject to no lien, mortgage, pledge, charge, or encumbrance of
      any
      kind except (i) those, if any, reflected in such financial statements, or
      (ii) those which are not material in amount and do not adversely affect the
      use of such property by the Company and its Subsidiaries. Each of the Company
      and its Subsidiaries holds its leased properties under valid and binding leases,
      with such exceptions as are not materially significant in relation to its
      business taken as a whole. The Company leases all such properties as are
      necessary to its operations as now conducted. 

    

    3.11 No
      Material Change.
      Since
      July 31, 2006, and except as disclosed in the Schedule of
      Exceptions:  (i) the Company and its Subsidiaries have not
      incurred any material liabilities or obligations, indirect, or contingent which
      are not in the ordinary course of business or which would reasonably be expected
      to have, individually or in the aggregate, a Material Adverse Effect;
      (ii) neither the Company nor any Subsidiary has entered into any
      transaction which is not in the ordinary course of business; (iii) the
      Company and its Subsidiaries have not sustained any material loss or
      interference with their businesses or properties from fire, flood, windstorm,
      accident, or other calamity; (iv) the Company and its Subsidiaries have not
      paid or declared any dividends or other distributions with respect to their
      capital stock and neither the Company nor any of its Subsidiaries is in default
      in the payment of principal or interest on any outstanding debt obligations;
      (v) (a) there has not been any change in the capital stock of the
      Company or any of its Subsidiaries other than the sale of the Purchased Shares
      and Warrants hereunder, shares or options issued pursuant to employee equity
      incentive plans or purchase plans approved by the Company’s Board of Directors
      and repurchases of shares or options pursuant to repurchase plans already
      approved by the Company's Board of Directors, in each case, which plans have
      been disclosed in the Disclosure Documents, and (b) there has not been any
      incurrence of indebtedness not incurred in the ordinary course of business
      or
      that is material to the Company and its Subsidiaries, taken as a whole; and
      (vi) there has not been any other event which has caused or would
      reasonably be expected to cause a Material Adverse Effect. 

    

    3.12 Intellectual
      Property.
      Except
      as disclosed in the Schedule of Exceptions: (i) the Company owns, or has
      obtained valid and enforceable licenses or options for the inventions, patent
      applications, patents, trademarks (both registered and unregistered), trade
      names, copyrights, and trade secrets necessary for the conduct of the Company’s
      business as currently conducted (collectively, the “Intellectual Property”); and
      (ii) (a) there are no third parties who have any ownership rights to
      any Intellectual Property that is owned by, or has been licensed to, the Company
      for the products described in the Disclosure Documents that would preclude
      the
      Company from conducting its business as currently conducted and which would
      reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect, except for the ownership rights of the owners of the
      Intellectual Property who have licensed or optioned such Intellectual Property
      to the Company; (b) to the Company’s knowledge, there are currently no
      sales of any products that would constitute an infringement by third parties
      of
      any Intellectual Property owned, licensed, or optioned by the Company, which
      infringement would reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect; (c) there is no pending or, to the
      Company’s knowledge, threatened action, suit, proceeding, or claim by others
      challenging the rights of the Company in or to any Intellectual Property owned,
      licensed, or optioned by the Company; (d) there is no pending or, to the
      Company’s knowledge, threatened action, suit, proceeding, or claim by others
      challenging the validity or scope of any Intellectual Property owned, licensed,
      or optioned by the Company; and (e) there is no pending or, to the
      Company’s knowledge, threatened action, suit, proceeding, or claim by others
      that the Company infringes or otherwise violates any patent, trademark,
      copyright, trade secret, or other proprietary right of others. 

    

    3.13 Compliance.
      Each of
      the Company and its Subsidiaries is conducting its business in compliance with
      all applicable laws, rules and regulations of the jurisdictions in which it
      is
      conducting its business, including, without limitation, all applicable local,
      state, and federal environmental laws and regulations; except where failure
      to
      be so in compliance would not reasonably be expected to have, individually
      or in
      the aggregate, a Material Adverse Effect. 

    

    3.14 Taxes.
      Each of
      the Company and its Subsidiaries has filed all necessary federal, state, and
      foreign income and franchise tax returns and has paid or accrued all taxes
      shown
      as due thereon, and neither the Company nor any of its Subsidiaries has any
      tax
      deficiency which has been, or to its knowledge might be, asserted or threatened
      against it which would reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect. 

    

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

    

    3.16 Investment
      Company.
      The
      Company is not an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
      meaning of the Investment Company Act of 1940, as amended. 

    

    3.17 Insurance.
      The
      Company and its Subsidiaries maintain insurance of the types and in the amounts
      that the Company reasonably believes is adequate for their businesses,
      including, but not limited to, insurance covering all real and personal property
      owned and leased by the Company and its Subsidiaries against theft, damage,
      destruction, acts of vandalism, and all other risks customarily insured against
      by similarly situated companies, all of which insurance is in full force and
      effect. 

    

    
      
        
        

      

      
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    3.18 Additional
      Information.
      The
      information contained in the following documents (“SEC Documents”), which the
      Company has furnished to the Purchaser, or will furnish prior to the Closing,
      does not include any untrue statement of a material fact or omit to state any
      material fact required to be stated therein or necessary to make the statements
      therein, in the light of the circumstances in which they were made, not
      misleading, as of their respective final dates: 

    

    (a) The
      Company’s Annual Report on Form 10-KSB for the fiscal year ended October 31,
      2005; 

    

    (b) The
      Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended January
      31, 2006; 

    

    (c) The
      Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended
      April 30, 2006; 

    

    (d) The
      Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended July 31,
      2006; 

    

    (e) Any
      current reports on Form 8-K filed by the Company with the Commission since
      July 31, 2006, but prior to the date hereof. 

    

    3.19 Price
      of Common Stock.
      The
      Company has not taken, and will not take, directly or indirectly, any action
      designed to cause or result in, or which has constituted or which might
      reasonably be expected to constitute, the stabilization or manipulation of
      the
      price of the shares of the Common Stock to facilitate the sale or resale of
      the
      Purchased Shares or Warrant Shares. 

    

    3.20 Certificate.
      At the
      Closing, the Company will deliver to Purchaser a certificate executed by the
      chief executive officer and the chief financial or accounting officer of the
      Company, dated as of the Closing Date, in form and substance reasonably
      satisfactory to the Purchaser, to the effect that the representations and
      warranties of the Company set forth in this Section 3 are true and correct
      as of the date of this Agreement and as of the Closing Date and that the Company
      has complied with all the agreements and satisfied all the conditions herein
      on
      its part to be performed or satisfied on or prior to or on such Closing
      Date.

    

    3.21 Waiver
      of Anti-Dilution.
      At the
      Closing, the Company will deliver to Purchaser, written waivers of any
      anti-dilution or other adjustments in the number of shares issuable upon
      exercise, conversion, or exchange of the Company’s rights, options, warrants,
      and exercisable, convertible, and exchangeable securities that that in the
      absence of such waivers would have been invoked by the issuance of the Purchased
      Shares, Warrants, and the Warrant Shares, which waivers shall include a waiver
      for any subsequent adjustments in the number of shares issuable under the terms
      of the Warrants. 

    

    
      
        
        

      

      
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    3.22 Reporting
      Company; Form SB-2.
      The
      Company is subject to the reporting requirements of the Securities Exchange
      Act
      of 1934, as amended (the “Exchange Act”) and has filed all reports required
      thereby. The Company is eligible to register the Purchased Shares and Warrant
      Shares for resale by the Purchaser on a registration statement on Form SB-2
      under the Securities Act. There exist no facts or circumstances (including
      without limitation any required approvals or waivers or any circumstances that
      may delay or prevent the obtaining of accountant’s consents) that reasonably
      could be expected to prohibit or delay the preparation and filing of a
      registration statement on Form SB-2 that will be available for the resale
      of the Purchased Shares and Warrant Shares by the Purchaser. 

    

    3.23 Use
      of
      Proceeds.
      The
      Company shall use the proceeds from the sale of Purchased Shares and Warrants
      as
      described under “Use of Proceeds” in the Schedule of Exceptions. 

    

    3.24 Non-Public
      Information.
      The
      Company has not disclosed to the Purchaser information that would constitute
      material non-public information as of the Closing Date.

    

    3.25 Use
      of
      Purchaser Name.
      Except
      in the registration statement (“Registration Statement”) and the prospectus
      (“Prospectus”) that may be filed to register the Purchased Shares and the
      Warrant Shares, as provided below, and as may be required by applicable law
      or
      regulation, the Company shall not use the Purchaser’s name or the name of any of
      its affiliates in any advertisement, announcement, press release, or other
      similar public communication unless it has received the prior written consent
      of
      the Purchaser for the specific use contemplated or as otherwise required by
      applicable law or regulation. 

    

    3.26 Related
      Party Transactions.
      No
      transaction has occurred between or among the Company, any of the Subsidiaries
      and their affiliates, officers or directors or any affiliate or affiliates
      of
      any such officer or director that is required to have been described under
      applicable securities laws in its Exchange Act filings and is not so described
      in such filings.

    

    3.27 Off-Balance Sheet Arrangements.  There
      is no transaction, arrangement, or other relationship between the Company or
      any
      Subsidiary and an unconsolidated or other off-balance sheet entity that is
      required to be disclosed by the Company in its Exchange Act filings and is
      not
      so disclosed or that otherwise would be reasonably likely to have, individually
      or in the aggregate, a Material Adverse Effect (and no such transaction,
      arrangement, or relationship has occurred since the time periods covered by
      such
      filings that is required to be reported in an upcoming Exchange Act filing).
      There are no such transactions, arrangements, or other relationships with the
      Company or any Subsidiary that may create contingencies or liabilities that
      are
      not otherwise disclosed by the Company in its Exchange Act filings (and no
      such
      transaction, arrangement, or relationship has occurred since the time periods
      covered by such filings that is required to be reported in an upcoming Exchange
      Act filing). 

    

    3.28 Governmental
      Permits, Etc.
      Each of
      the Company and its Subsidiaries has all franchises, licenses, certificates,
      and
      other authorizations from such federal, state, or local government or
      governmental agency, department, or body that are currently required for the
      operation of the business of the Company and its Subsidiaries as currently
      conducted, except where the failure to possess currently such franchises,
      licenses, certificates, and other authorizations would not reasonably be
      expected to have, individually or in the aggregate, a Material Adverse Effect.
      The Company and its Subsidiaries have not received any notice of proceedings
      relating to the revocation or modification of any such permit which, if the
      subject of an unfavorable decision, ruling, or finding would reasonably be
      expected to have, individually or in the aggregate, a Material Adverse Effect.
      

    

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

       

    

    3.29 Financial
      Statements.
      The
      consolidated financial statements of the Company and the related notes contained
      in its Exchange Act filings present fairly, in accordance with generally
      accepted accounting principles, the consolidated financial position of the
      Company and its Subsidiaries as of the dates indicated, and the results of
      their
      operations, cash flows, and the changes in stockholders’ equity for the periods
      therein specified, subject, in the case of unaudited financial statements for
      interim periods, to normal year-end audit adjustments. Such consolidated
      financial statements (including the related notes) have been prepared in
      accordance with generally accepted accounting principles applied on a consistent
      basis throughout the periods therein specified, except that unaudited financial
      statements may not contain all footnotes required by generally accepted
      accounting principles. 

    

    3.30 Sarbanes-Oxley
      Act.
      The
      Chief Executive Officer and the Chief Financial Officer of the Company have
      signed, and the Company has furnished to the Commission, all certifications
      required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and neither
      the Company nor any of its officers have received notice from any governmental
      entity questioning or challenging the accuracy, completeness, form, or manner
      of
      filing or submission of such certifications. 

    

    3.31 ERISA
      Compliance.
      Each
      material employee benefit plan, within the meaning of Section 3(3) of the
      Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that is
      maintained, administered, or contributed to by the Company or any of its
      affiliates for employees or former employees of the Company and its Subsidiaries
      has been maintained in material compliance with its terms and the requirements
      of any applicable statutes, orders, rules, and regulations, including but not
      limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”);
      no prohibited transaction, within the meaning of Section 406 of ERISA or Section
      4975 of the Code, has occurred which would result in a material liability to
      the
      Company with respect to any such plan excluding transactions effected pursuant
      to a statutory or administrative exemption; and for each such plan that is
      subject to the funding rules of Section 412 of the Code or Section 302 of ERISA,
      no “accumulated funding deficiency” as defined in Section 412 of the Code has
      been incurred, whether or not waived, and the fair market value of the assets
      of
      each such plan (excluding for these purposes accrued but unpaid contributions)
      exceeds the present value of all benefits accrued under such plan determined
      using reasonable actuarial assumptions. 

    

    3.32 Listing.
      The
      Company’s Common Stock is listed for trading on the Over the Counter Bulletin
      Board (“OTCBB”) and satisfies all requirements for the continuation of such
      trading. The Company has not received any notice that its Common Stock will
      not
      be eligible to be traded on the OTCBB or that its Common Stock does not meet
      all
      requirements for such trading. 

    

    
      
        
        

      

      
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    3.33 No
      Integrated Offering.
      Neither
      the Company, nor any of its Subsidiaries or affiliates, nor any person acting
      on
      its or their behalf, has directly or indirectly made any offers or sales of
      any
      security or solicited any offers to buy any security under circumstances that
      would cause the offering of the Purchased Shares, Warrants, and/or Warrant
      Shares to be integrated with prior offerings by the Company for purposes of
      the
      Securities Act and which would prevent the Company from selling securities
      pursuant to Rule 506 under the Securities Act, or any applicable
      exchange-related stockholder approval provisions, nor will the Company or any
      of
      its affiliates or Subsidiaries take any action or steps that would cause the
      offering of the Purchased Shares, Warrants, and Warrant Shares to be integrated
      with other offerings for such purpose. 

    

    3.34 Stop
      Transfer.
      The
      Purchased Shares, Warrants, and Warrant Shares are restricted securities as
      of
      the date of this Agreement. Neither the Company nor any of its Subsidiaries
      will
      issue any stop transfer order or other order impeding the sale and delivery
      of
      any of the Purchased Shares, Warrants, or Warrant Shares at such time as the
      they are registered for public sale or an exemption from registration is
      available, except as required by state and federal securities laws.

    

    3.35 Patriot
      Act.
      The
      Company certifies that, to the best of Company’s knowledge, neither the Company
      nor any of its Subsidiaries has been designated, and is not owned or controlled,
      by a “suspected terrorist” as defined in Executive Order 13224. The Company
      hereby acknowledges that the Purchaser seeks to comply with all applicable
      laws
      concerning money laundering and related activities. In furtherance of those
      efforts, the Company hereby represents, warrants, and agrees that: (i) none
      of the cash or property that the Company or any of its Subsidiaries will pay
      or
      will contribute to the Purchaser has been or shall be derived from, or related
      to, any activity that is deemed criminal under United States law; and (ii)
      no
      contribution or payment by the Company or any of its Subsidiaries to the
      Purchaser, to the extent that they are within the Company’s and/or its
      Subsidiaries’ control shall cause the Purchaser to be in violation of the United
      States Bank Secrecy Act, the United States International Money Laundering
      Control Act of 1986, or the United States International money Laundering
      Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly
      notify the Purchaser if any of these representations ceases to be true and
      accurate regarding the Company or any of its Subsidiaries. The Company agrees
      to
      provide the Purchaser any additional information regarding the Company or any
      of
      its Subsidiaries that the Purchaser deems necessary or convenient to ensure
      compliance with all applicable laws concerning money laundering and similar
      activities. The Company understands and agrees that if, at any time, it is
      discovered that any of the foregoing representations are incorrect, or if
      otherwise required by applicable law or regulation related to money laundering
      or similar activities, the Purchaser may undertake appropriate actions to ensure
      compliance with such applicable law or regulation, including, but not limited
      to, segregation and/or redemption of the Purchaser’s investment in the Company.
      The Company further understands that the Purchaser may release confidential
      information about the Company and its Subsidiaries and, if applicable, any
      underlying beneficial owners, to proper authorities if the Purchaser, in its
      sole reasonable discretion, after consultation with legal counsel, determines
      that it is in the best interests of the Purchaser in light of relevant rules
      and
      regulations under the laws set forth in subsection (ii) above.

    

    3.36 Completeness
      of Representations and Warranties.
      Neither
      the Disclosure Documents, this Agreement, nor any Exhibit or Schedule to this
      Agreement contains any untrue statement of a material fact or omits to state
      a
      material fact necessary in order to make the statements contained therein or
      herein, in light of the circumstances under which they are made, not misleading,
      and there is no fact which materially and adversely affects the business,
      prospects, affairs, operations, condition, financial or otherwise, of the
      Company which has not been disclosed to the Purchaser in writing by the Company.
      

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

       

    

    SECTION
      4. Representations,
      Warranties, and Covenants of the Purchaser.
      

    

    (a) The
      Purchaser represents and warrants to, and covenants with , the Company that:
      (i)
      the Purchaser is knowledgeable, sophisticated and experienced in making, and
      is
      qualified to make, decisions with respect to investments like those involved
      in
      the purchase of the Purchased Shares and Warrants and has had the opportunity
      to
      request, receive, review, and consider all information it deems relevant in
      making an informed decision to purchase the Purchased Shares and Warrants
      (collectively, “Securities”); (ii) the Purchaser is acquiring the
      Securities in the ordinary course of its business and for its own account for
      investment only and with no present intention of distributing any of such
      Securities or any arrangement or understanding with any other persons regarding
      the distribution of such Securities (this representation and warranty not
      limiting the Purchaser’s right to sell pursuant to the Registration Statement or
      in compliance with the Securities Act and the Rules and Regulations, the
      Purchaser’s right to indemnification under Section 6.3); (iii) the
      Purchaser will not, directly or indirectly, offer, sell, pledge, transfer,
      or
      otherwise dispose of (or solicit any offers to buy, purchase or otherwise
      acquire or take a pledge of) any of the Securities, nor will the Purchaser
      engage in any short sale that results in a disposition of any of the Securities
      by the Purchaser, except in compliance with the Securities Act and the Rules
      and
      Regulations and any applicable state securities laws; (iv)  the Purchaser
      has had an opportunity to discuss this investment with representatives of the
      Company and ask questions of them; (v) the Purchaser is an “accredited
      investor” within the meaning of Rule 501(a) of Regulation D promulgated
      under the Securities Act; (vi) the Purchaser has not engaged any finder,
      broker or agent who is entitled to receive a finder’s or broker’s or agent’s fee
      or commission in connection with the purchase of the Securities; and
      (vii) the Purchaser acknowledges that no oral or written representations
      have been made to the Purchaser in connection with the offering of the
      Securities which were in any way inconsistent with the information reviewed
      by
      the Purchaser. 

    

    (b) The
      Purchaser understands that the Securities are being offered and sold to it
      in
      reliance upon specific exemptions from the registration requirements of the
      Securities Act, the Rules and Regulations, and state securities laws and that
      the Company is relying upon the truth and accuracy of, and the Purchaser’s
      compliance with, the representations, warranties, agreements, acknowledgments,
      and understandings of the Purchaser set forth herein in order to determine
      the
      availability of such exemptions and the eligibility of the Purchaser to acquire
      the Securities. 

    

    (c) The
      Purchaser understands that its investment in the Securities involves a
      significant degree of risk, including a risk of total loss of the Purchaser’s
      investment, and the Purchaser has full cognizance of and understands all of
      the
      risk factors related to the Purchaser’s purchase of the Securities. The
      Purchaser understands that the market price of the Common Stock has been
      volatile and that no representation is being made as to the future value of
      the
      Common Stock. The Purchaser has the knowledge and experience in financial and
      business matters as to be capable of evaluating the merits and risks of an
      investment in the Securities and has the ability to bear the economic risks
      of
      an investment in the Securities. 

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

       

    

    (d) The
      Purchaser understands that no United States federal or state agency or any
      other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Securities. 

    

    (e) The
      Purchaser understands that, until such time as the Registration Statement has
      been declared effective or the Securities may be sold pursuant to Rule 144(k)
      under the Securities Act without any restriction as to the number of securities
      as of a particular date that can then be immediately sold, the Securities will
      bear a restrictive legend in substantially the following form: 

    

    “The
      shares represented by this certificate may be transferred, sold, assigned,
      or
      hypothecated, only if registered under the Securities Act of 1933 and if
      registered or qualified in every applicable state, or if the issuer has received
      the favorable opinion of counsel to the holder, which opinion and counsel shall
      be reasonably satisfactory to counsel to the issuer, to the effect that such
      registration is not necessary in connection with such transfer, sale,
      assignment, or hypothecation.”

    

    (f) The
      Purchaser’s principal executive offices are in the jurisdiction set forth in the
      first paragraph of this Agreement. 

    

    (g) The
      Purchaser hereby covenants with the Company not to make any sale of the
      Purchased Shares or Warrant Shares under the Registration Statement without
      complying with the provisions of this Agreement and without effectively causing
      the prospectus delivery requirement under the Securities Act to be satisfied.
      The Purchaser will notify the Company promptly after the sale of all of the
      Purchased Shares and Warrant Shares. The Purchaser acknowledges that there
      may
      occasionally be times when the Company may need to suspend the use of the
      Prospectus forming a part of the Registration Statement (a “Suspension”) until
      such time as an amendment to the Registration Statement has been filed by the
      Company and declared effective by the Commission, or until such time as the
      Company has filed an appropriate report with the Commission pursuant to the
      Exchange Act. The Purchaser hereby covenants that it will not sell any Purchased
      Shares or Warrant Shares pursuant to said Prospectus during the period
      commencing at the time at which the Company gives the Purchaser written notice
      of the Suspension of the use of said Prospectus and ending at the time the
      Company gives the Purchaser written notice that the Purchaser may thereafter
      effect sales pursuant to said Prospectus. Notwithstanding the foregoing, the
      Company agrees that no Suspension shall be for a period of longer than 60
      consecutive days, there shall be no more than two Suspensions during any twelve
      month period, and the Company shall use best efforts to lift any such Suspension
      as soon as practicable following such Suspension. Nothing in this paragraph
      shall be interpreted to restrict or prohibit the Purchaser from selling any
      of
      the Securities in a private transaction in compliance with applicable laws
      (including, but not limited to, Rule 144), and otherwise in accordance with
      the other provisions of this Agreement.

    

    
      
        
        

      

      
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    (h) The
      Purchaser further represents and warrants to, and covenants with, the Company
      that:  (i) the Purchaser has full right, power, authority, and
      capacity to enter into this Agreement and to consummate the transactions
      contemplated hereby and has taken all necessary action to authorize the
      execution, delivery, and performance of this Agreement; (ii) the making and
      performance of this Agreement by the Purchaser and the consummation of the
      transactions herein contemplated will not violate any provision of the
      organizational documents of the Purchaser or conflict with, result in the breach
      or violation of, or constitute, either by itself or upon notice or the passage
      of time or both, a default under any material agreement, mortgage, deed of
      trust, lease, franchise, license, indenture, permit, or other instrument to
      which the Purchaser is a party, or any statute or any authorization, judgment,
      decree, order, rule, or regulation of any court or any regulatory body,
      administrative agency, or other governmental body applicable to the Purchaser;
      (iii) no consent, approval, authorization, or other order of any court,
      regulatory body, administrative agency, or other governmental body is required
      on the part of the Purchaser for the execution and delivery of this Agreement
      or
      the consummation of the transactions contemplated by this Agreement;
      (iv) upon the execution and delivery of this Agreement, this Agreement
      shall constitute a legal, valid, and binding obligation of the Purchaser,
      enforceable in accordance with its terms, except as enforceability may be
      limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
      similar laws affecting creditors’ and contracting parties’ rights generally and
      except as enforceability may be subject to general principles of equity
      (regardless of whether such enforceability is considered in a proceeding in
      equity or at law) and except to the extent enforcement of the indemnification
      provisions, set forth in Section 6.3 of this Agreement, may be limited by
      federal or state securities laws or the public policy underlying such laws;
      and
      (v) there is not in effect any order enjoining or restraining the Purchaser
      from entering into or engaging in any of the transactions contemplated by this
      Agreement. 

    

    (i) The
      Purchaser further represents and warrants that at no time during the 30 days
      prior to the Closing has the Purchaser engaged in or effected, in any manner
      whatsoever, directly or indirectly, in any “short sale” (as such term is defined
      in Rule 3b-3 of the Exchange Act) of the Common Stock (a “Short Sale”) of the
      Company. 

    

    SECTION
      5. Survival of Representations, Warranties, and Agreements.
      Notwithstanding any investigation made by any party to this Agreement, all
      covenants, agreements, representations, and warranties made by the Company
      and
      the Purchaser herein and in the Warrants and certificates for the Purchased
      Shares delivered pursuant hereto shall survive the execution of this Agreement,
      the delivery to the Purchaser of the Purchased Shares and Warrants being
      purchased and the payment therefor. 

    

    SECTION
      6. Registration
      of the Shares; Compliance with the Securities Act.
      

    

    6.1 Registration
      Procedures and Expenses.
      The
      Company shall: 

    

    (a) Take
      all
      actions to permit the Purchaser to sell all of the Purchased Shares and Warrant
      Shares (“Total Shares”) pursuant to Rule 144, including, but not limited
      to, making and keeping public information available, filing all required
      Commission reports and other documents in a timely manner, and providing
      Purchaser with a written statement as to the compliance with the reporting
      requirements of Rule 144.. 

    

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

       

    

    (b) In
      addition, within 60 days after the date hereof (“Filing Date”), the Company
      shall prepare and file with the Securities and Exchange Commission (the
“Commission”) a Registration Statement covering the Purchased Shares and the
      Warrant Shares (“Total Shares”) for an offering to be made on a continuous basis
      pursuant to Rule 415. The Registration Statement shall be on Form SB-2
      (except if the Company is not then eligible to register for resale the Total
      Shares on Form SB-2, in which case such registration shall be on another
      appropriate form in accordance herewith). The Company shall cause the
      Registration Statement to become effective and remain effective as provided
      herein. The Company shall use its reasonable commercial efforts to cause the
      Registration statement to be declared effective under the Securities Act as
      promptly as possible after the filing thereof, but in any event no later than
      90
      days after the date hereof (“Effectiveness Target Date”). The Company shall use
      its reasonable commercial efforts to keep the Registration Statement
      continuously effective under the Securities Act until the date which is the
      earlier date of when (i) the Warrants have been fully exercised or have
      terminated and all of the Total Shares have been sold, or (ii) the Warrants
      have been fully exercised or have terminated and all of the Total Shares may
      be
      sold immediately without registration under the Securities Act and without
      volume restrictions pursuant to Rule 144(k), as determined by the counsel
      to the Company pursuant to a written opinion letter to such effect addressed
      and
      acceptable to the Company’s transfer agent and the Purchaser (the “Effectiveness
      Period”). 

    

    (c) If:
      (i) the Registration Statement is not filed on or prior to the Filing Date;
      (ii) the Company fails to respond in writing to comments received from the
      Commission in connection with the Registration Statement within 15 business
      days
      of receipt thereof; (iii) the Registration Statement is not declared
      effective by the Commission by the Effectiveness Target Date; (iv) after
      the Registration Statement is filed with and declared effective by the
      Commission, the Registration Statement ceases to be effective (by suspension
      or
      otherwise) as to any of the Total Shares to which it is required to relate
      at
      any time prior to the expiration of the Effectiveness Period (without being
      succeeded immediately by an additional registration statement filed and declared
      effective) for a period of time which shall exceed 30 days in the aggregate
      per
      year (defined as a period of 365 days commencing on the date the Registration
      Statement is declared effective) or more than 20 consecutive calendar days;
      or
      (v) the Common Stock is not listed or quoted, or is suspended from trading
      on the OTCBB for a period of three consecutive trading days (provided the
      Company shall not have been able to cure such trading suspension within 30
      days
      of the notice thereof or list the Common Stock on another trading market
      acceptable to Purchaser) (any such failure or breach being referred to as an
      “Event,” and for purposes of clauses (i) or (ii) the date on which such
      Event occurs, or for purposes of clause (iv) the date on which such 30 day
      or 20 consecutive day period (as the case may be) is exceeded, or for purposes
      of clause (v) the date on which such three trading day period is exceeded,
      being referred to as “Event Date”), then until the applicable Event is cured,
      the Company shall pay to each Holder an amount in cash, as liquidated damages,
      and not as a penalty, equal to 2.0% for each thirty (30) day period (prorated
      for partial periods) on a daily basis of the sum of the purchase price of the
      Purchased Shares ($500,000) and the aggregate exercise price under the Warrants
      ($875,000). While such Event continues, such liquidated damages shall be paid
      not less often than each 30 days. Any unpaid liquidated damages as of the date
      when an Event has been cured by the Company shall be paid within three days
      following the date on which such Event has been cured by the Company.

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

       

    

    (d) Use
      its
      best efforts to promptly prepare and file with the Commission such amendments
      and supplements to the Registration Statement and the prospectus used in
      connection therewith as may be necessary to keep the Registration Statement
      effective during the Effectiveness Period. 

    

    (e) Furnish
      to the Purchaser with respect to the Total Shares registered under the
      Registration Statement (and to each underwriter, if any, of such Total Shares)
      such number of copies of prospectuses and such other documents as the Purchaser
      may reasonably request, in order to facilitate the public sale or other
      disposition of all or any of the Total Shares by the Purchaser. 

    

    (f) File
      documents required of the Company for normal Blue Sky clearance in states
      specified in writing by the Purchaser; provided, however, that the Company
      shall
      not be required to qualify to do business or consent to service of process
      in
      any jurisdiction in which it is not now so qualified or has not so consented.
      

    

    (g) Bear
      all
      expenses in connection with the procedures in Paragraphs (a) through (f) of
      this Section 6.1 and the registration of the Total Shares pursuant to the
      Registration Statement, other than fees and expenses, if any, of counsel or
      other advisers to the Purchaser or underwriting discounts, brokerage fees,
      and
      commissions incurred by the Purchaser. 

    

    (h) Make
      available, while the Registration Statement is effective, its Chief Executive
      Officer, Chief Financial Officer, and Chief Operating Officer for questions
      regarding information which the Purchaser may reasonably request in order to
      fulfill any due diligence obligation on its part.

    

    The
      Company understands that the Purchaser disclaims being an underwriter, but
      the
      Purchaser being deemed an underwriter shall not relieve the Company of any
      obligations it has hereunder. 

    

    6.2 Transfer
      of Shares and Registration Rights.
      

    

    (a) The
      Purchaser agrees that it will not effect any disposition of any Total Shares
      that are registered under the Registration Statement that would constitute
      a
      sale within the meaning of the Securities Act or any applicable state securities
      laws, except as contemplated in the Registration Statement, and that it will
      promptly notify the Company of any changes in the information set forth in
      the
      Registration Statement regarding the Purchaser or its plan of distribution.
      

    

    (b) Subject
      to the provisions of this Agreement, the Purchaser may assign the registration
      rights with respect to the Total Shares to any party or parties to which it
      may
      from time to time transfer all or any portion of the Total Shares, provided
      that
      the transferee agrees in writing with the Company to be bound by the applicable
      provisions of this Agreement regarding such registration rights and
      indemnification relating thereto. Upon assignment of any registration rights
      pursuant to this Section 6.2(b), the Purchaser shall deliver to the Company
      a notice of such assignment which includes the identity and address of any
      assignee and such other information reasonably requested by the Company in
      connection with effecting any such registration (the term “Purchaser” under this
      Section 6 will also include all such assignees). 

    

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

       

    

    6.3 Indemnification.
      

    

    (a) Indemnification
      by Company.
      In the
      event of any registration of any of its securities under the Securities Act
      pursuant to this Agreement, the Company shall indemnify and hold harmless each
      holder requesting or joining in a registration of such securities (“Holder”),
      each of its officers, directors, and partners and such Holder's legal counsel
      and accountants, each underwriter (as defined in the Securities Act) and each
      controlling person of each of the foregoing, if any, (within the meaning of
      the
      Securities Act) against any losses, claims, damages, or liabilities, joint
      or
      several (or actions in respect thereof), including any of the foregoing incurred
      in the settlement of any litigation, commenced or threatened, to which any
      of
      them may be subject under the Securities Act or any other statute or at common
      law, insofar as such losses, claims, damages, or liabilities (or actions in
      respect thereof) arise out of or based upon:  (i) any untrue
      statement (or alleged untrue statement) of any material fact contained in any
      Registration Statement under which such securities were registered under the
      Securities Act, any preliminary prospectus or final prospectus contained
      therein, or any summary prospectus issued in connection with any securities
      being registered, or any amendment or supplement thereto, or any other document;
      or (ii) any omission (or alleged omission) to state therein a material fact
      required to be stated therein or necessary to make the statements therein not
      misleading; or (iii) any violation by the Company of the Securities Act or
      any Blue Sky law or any other statute or common law, or any rule or regulation
      promulgated under the Securities Act or any Blue Sky law or any other law,
      applicable to the Company in connection with any such registration,
      qualification, or compliance, and shall reimburse each such person entitled
      to
      indemnification under this Paragraph (a) for any legal or other expenses
      reasonably incurred by such person in connection with investigating or defending
      any such loss, claim, damage, liability, or action including if requested by
      Holders holding a majority of the Total Shares included in the registration,
      the
      fees and disbursements of separate counsel designated by Holders holding a
      majority of such included Total Shares; provided, however, that the Company
      shall not be liable to any such person in any such case to the extent that
      any
      such loss, claim, damage, or liability arises out of or is based upon any untrue
      statement or omission made in such Registration Statement, preliminary
      prospectus, summary prospectus, prospectus, or amendment or supplement thereto,
      or any other document, in reliance upon and in conformity with written
      information furnished to the Company by such person, specifically for use
      therein. The indemnity provided for herein shall remain in full force and effect
      regardless of any investigation made by or on behalf of the person seeking
      indemnification and shall survive transfer of such securities by such Holder.
      

    

    (b) Indemnification
      by Holders.
      Each
      Holder who holds any Total Shares included in the Registration Statement hereby
      agrees, severally and not jointly, to indemnify the Company, its directors
      and
      officers and its legal counsel and accountants, each underwriter (as defined
      in
      the Securities Act), each controlling person of each of the foregoing and each
      other such Holder, each of its officers, directors, and partners and each
      controlling person of such Holder, against any losses, claims, damages, or
      liabilities (or actions in respect thereof), including any of the foregoing
      incurred in the settlement of any litigation, commenced or threatened, joint
      or
      several, to which any of them may become subject under the Securities Act or
      under any other statute or at common law, insofar as such losses, claims,
      damages, or liabilities (or actions in respect thereof) arise out of or are
      based upon any untrue statement (or alleged untrue statement) of any material
      fact contained in any Registration Statement under which such securities were
      registered under the Securities Act at the request of such Holder pursuant
      to
      this Agreement, any preliminary prospectus or final prospectus contained
      therein, or any summary prospectus issued in connection with any securities
      being registered, or any amendment or supplement thereto, or any omission (or
      alleged omission) to state therein a material fact required to be stated therein
      or necessary to make the statements therein not misleading, in each case to
      the
      extent that such untrue statement (or alleged untrue statement) or omission
      (or
      alleged omission) was made in such Registration Statement, preliminary
      prospectus, summary prospectus, prospectus, or amendment or supplement thereto,
      solely in reliance upon and in conformity with written information furnished
      to
      the Company by such Holder specifically for use therein, and to reimburse such
      persons for any legal or other expenses reasonably incurred in connection with
      investigating or defending any such loss, claim, damage, liability, or action,
      provided that a Holder's total liability under any indemnity given pursuant
      to
      this Paragraph (b) shall not exceed the net proceeds received by such
      Holder from the sale of stock pursuant to the registration. 

    

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

       

    

    (c) Notice
      of Claim.
      Each
      party entitled to indemnification under this Agreement (the “Indemnified Party”)
      shall give written notice to the party required to provide indemnification
      (the
“Indemnifying Party”) promptly after such Indemnified Party has written
      notification of any claim as to which indemnity may be sought, and shall permit
      the Indemnifying Party to assume the defense of any such claim or any litigation
      resulting therefrom, provided that (i) if the claim is made under
      Paragraph (a) above, the Holders of a majority of the Total Shares included
      in the Registration will have the right to designate separate counsel at the
      Indemnifying Party’s expense, (ii) if separate counsel is not designated under
      clause (i) counsel for the Indemnifying Party, who shall conduct the defense
      of
      such claim or litigation, shall be approved by the Indemnified Party (whose
      approval shall not unreasonably be withheld), and the Indemnified Party may
      participate in such defense at the Indemnified Party's expense, and (iii) the
      failure of any Indemnified Party to give notice as provided herein shall not
      relieve the Indemnifying Party of its obligations under this Paragraph (c).
      No Indemnifying Party, in the defense of any such claim or litigation, shall,
      except with the consent of each Indemnified Party, consent to entry of any
      judgment or enter into any settlement which does not include as an unconditional
      term thereof the giving by the claimant or plaintiff to such Indemnified Party
      of a release from all liability in respect of such claim or litigation.

    

    6.4 Contribution.
      If the
      indemnification provided for in Section 6.3 is for any reason held to be
      unavailable, or insufficient to hold harmless an indemnified party with respect
      to any losses, claims, damages, or liabilities referred to therein, then each
      Indemnifying Party shall contribute to the amount paid or payable by such
      Indemnified Party as a result of such losses, claims, damage or liabilities
      in
      such proportion as is appropriate to reflect the relative fault of the
      Indemnifying Party on the one hand, and of the Indemnified Party on the other,
      in connection with the statements or omissions that resulted in such losses,
      claims, damages or liabilities as well as any other relevant equitable
      considerations; provided, however that each Holder's liability under this
      Section 6.4 shall not exceed such Holder's net proceeds from the offering
      of securities made in connection with a registered offering pursuant to this
      Agreement. The relative fault of this Indemnifying Party and of the Indemnified
      Party shall be determined by reference to, among other things, whether the
      untrue or alleged untrue statement of a material fact or the omission or alleged
      omission to state a material fact relates to information supplied by the
      Indemnifying Party or by the Indemnified Party and the parties' relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      statement or omission. For purposes of this Section 6.4 each person, if
      any, who controls, within the meaning of the Securities Act, any Indemnified
      Party shall have the same rights to contribution as such Indemnified Party,
      and
      each person, if any, who controls the Company within the meaning of the
      Securities Act, each officer of the Company who shall have signed the
      Registration Statement and each director of the Company shall have the same
      rights to contribution as the Company. Any party entitled to contribution,
      promptly after receipt of notice of commencement of any action, suit or
      proceeding against such party in respect of which a claim for contribution
      may
      be made against another party or parties under this Section 6.4, will
      notify such party or parties from whom contribution may be sought, but the
      omission so to notify such party or parties from whom contribution may be sought
      shall not relieve the party or parties from whom contribution may be sought
      from
      any other obligation it or they may have hereunder or otherwise than under
      this
      Section 6.4. 

    

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

       

    

    6.5 Information
      Available.
      So long
      as the Registration Statement is effective covering the resale of Total Shares
      owned by the Purchaser, the Company will furnish to the Purchaser: 

    

    (a) As
      soon
      as practicable after available (but in the case of the Annual Report to the
      Stockholders, within 150 days after the end of each fiscal year of the Company),
      one copy of: (i) its Annual Report to Stockholders (which Annual Report
      shall contain financial statements audited in accordance with generally accepted
      accounting principles by a national firm of certified public accountants);
      (ii) if not included in substance in the Annual Report to Stockholders,
      upon the request of Purchaser, its Annual Report on Form 10-K or 10-KSB;
      (iii) upon request of Purchaser, its quarterly reports on Form 10-Q or
      10-QSB; and (iv) a full copy of the Registration Statement (the foregoing,
      in each case, excluding exhibits). 

    

    (b) Upon
      the
      reasonable request of the Purchaser, a reasonable number of copies of the
      Prospectuses, and any supplements thereto, to supply to any other party
      requiring such Prospectuses. 

    

    The
      Company, upon the reasonable request of the Purchaser and with prior notice,
      will be available to the Purchaser or a representative thereof at the Company’s
      headquarters to discuss information relevant for disclosure in the Registration
      Statement and will otherwise cooperate with any Purchaser conducting an
      investigation for the purpose of reducing or eliminating such Purchaser’s
      exposure to liability under the Securities Act, including the reasonable
      production of information at the Company’s headquarters, subject to appropriate
      confidentiality limitations. 

    

    6.6 Lost,
      Stolen, etc. Certificates Evidencing Shares.
      Upon
      receipt by the Company of evidence reasonably satisfactory to it of the loss,
      theft, destruction, or mutilation of any Warrant or any certificate evidencing
      any Purchased Shares or Warrant Shares owned by Purchaser, and (in the case
      of
      loss, theft, or destruction) of an unsecured indemnity satisfactory to it and,
      upon surrender and cancellation of such Warrant or certificate, if mutilated,
      the Company will make and deliver in lieu of such Warrant or certificate a
      new
      Warrant or certificate of like tenor and for the number of Purchased Shares
      or
      Warrant Shares evidenced by such certificate which remain outstanding.
      Purchaser’s agreement of indemnity for losses described in this paragraph shall
      constitute indemnity satisfactory to the Company for purposes of this
      Section 6.6. 

    

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

       

    

    6.7 Other
      Registration Rights.
      If at
      any time during the Effectiveness Period, the Company has an effective
      registration rights agreement with any other shareholder that the Purchaser
      determines are more favorable than those granted herein, the Purchaser shall
      be
      entitled to such other registration rights upon written notice to the Company.
      

    

    SECTION
      7. Broker’s
      Fee.
      The
      Company agrees to pay all brokers’, finders’, or agents’ fees and commissions
      payable as a result of the Company’s agreements or actions. The Purchaser and
      the Company each hereby agrees to indemnify and hold the other harmless from
      and
      against any losses, claims, damages, liabilities, or expenses, joint or several,
      to which the other party may become subject as a result of any brokers’,
      finders’, or agents’ fees or commissions resulting from actions or agreements of
      the Indemnifying Party. 

    

    SECTION
      8. Participation
      Right.
      

    

    (a) If
      the
      Company should desire to issue any Common Stock, preferred stock, options,
      stock
      purchase warrants, convertible securities, or any other securities exercisable,
      exchangeable, or convertible for capital stock of the Company (collectively,
      “Equity Securities”) for cash in a transaction not registered under the
      Securities Act, it shall give the Purchaser a right to purchase the Purchaser’s
      Percentage of such Equity Securities. Such purchase shall be made on the same
      terms as the Company is willing to sell such Equity Securities to any other
      person. Prior to or contemporaneously with any sale or issuance by the Company
      of Equity Securities, the Company shall notify Purchaser, in writing, of its
      intention to sell and issue such Equity Securities, setting forth the amount
      of
      Equity Securities it desires to sell and the terms under which it proposes
      to
      make such sale. Purchaser shall have 20 days after the Company gives its
      aforesaid notice to notify the Company of the maximum number of the Equity
      Securities that it desires to purchase upon the terms set forth in the Company’s
      notice. If Purchaser exercises the option, it may also specify in its notice
      whether its purchase is contingent upon the Company consummating the sale of
      all
      of the Equity Securities (or any portion thereof) which it has proposed to
      sell
      as set forth in the Company’s notice. 

    

    (b) After
      giving such notice, the Company may sell all but Purchaser’s Percentage of such
      Equity Securities and, after the end of the 20-day period that Purchaser has
      to
      exercise its option, the Company may sell any Equity Securities with respect
      to
      which the Purchaser did not indicate a desire to purchase, provided that all
      such sales described in this sentence shall be made within 90 days following
      the
      Company’s notice and shall be upon terms and conditions no more favorable to the
      purchaser than those set forth in the Company’s notice. Any Equity Securities
      described in the Company’s notice which are not sold within such 90-day period
      may not be sold thereafter unless the Company again follows the provisions
      of
      this Section. 

    

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

       

    

    (c) If
      the
      Purchaser gives the Company notice that it desires to purchase any of the Equity
      Securities, it shall pay for the Equity Securities which it has notified the
      Company that it will purchase by check against delivery of the Equity Securities
      at the executive office of the Company within 10 days after the expiration
      of
      the 20-day period referred to above unless the Purchaser made its purchase
      contingent upon the sale of all Equity Securities (or any portion thereof)
      specified in the Company’s notice, in which event, such purchase and sale will
      take place upon satisfaction of such contingency with at least 10 days’ prior
      written notice. 

    

    (d) The
      provisions of this Section will expire five years after the date hereof and
      will
      not apply to: (i) options, warrants, or other rights to purchase Common
      Stock (and the issuance of shares of Common Stock on the exercise thereof)
      issued to the Company’s employees, consultants, or directors pursuant to any
      plan or arrangement approved by the Board of Directors of the Company;
      (ii) the issuance of securities pursuant to a registered public offering;
      (iii) the issuance of securities in connection with a bona fide acquisition
      of or by the Company of any business or property, whether by merger,
      consolidation, sale of assets, sale, or exchange of stock or otherwise;
      (iv) the issuance of Common stock upon conversion, exchange, or exercise of
      rights of any option, right, warrant, or convertible or exchangeable security
      that is either outstanding on the date hereof or was previously offered to
      the
      Purchaser pursuant to this Section. 

    

    SECTION
      9. Company’s
      Agreements.
      The
      Company further agrees as follows:

    

    (a) The
      Company will file a Form D and any required state filings with respect to
      the Purchased Shares, Warrants, and Warrant Shares as required under
      Regulation D and applicable state securities laws and provide copies
      thereof to the Purchaser promptly after filing.

     

    (b) Prior
      to
      the date of an effective registration statement covering the resale of the
      Total
      Shares (or any portion), the Company shall have caused its officers, directors,
      controlling shareholders, and certain other persons requested by the Purchaser
      to agree to “lockup” and not sell their shares of Common stock of the Company,
      pursuant to documentation, and on terms and conditions, acceptable to the
      Purchaser. 

    

    (c) The
      Company will advise the Purchaser, promptly after it receives notice of issuance
      by the SEC, any state securities commission, or any other regulatory authority
      of any stop order or of any order preventing or suspending any offering of
      any
      securities of the Company, or of the suspension of the qualification of the
      Common Stock of the Company for offering or sale in any jurisdiction, or the
      initiation of any proceeding for any such purpose. 

    

    (d) The
      Company will cause the Total Shares to be included with its Common Stock that
      is
      listed on the OTCBB (the “Principal Market”) and the Company shall maintain such
      on the Principal Market so long as any other shares of Common Stock shall be
      so
      listed. The Company will maintain the listing of its Common Stock on the
      Principal Market, and will comply in all material respects with its reporting,
      filing, and other obligations. 

    

    (e) To
      the
      extent required, the Company shall notify the SEC, NASD, and applicable state
      authorities, in accordance with their requirements, of the transactions
      contemplated by this Agreement, and shall take all other necessary action and
      proceedings as may be required and permitted by applicable law, rule, and
      regulation, for the legal and valid issuance of the Securities to the Purchaser
      and promptly provide copies thereof to the Purchaser. 

    

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

       

    

    (f) The
      Company will timely file with the SEC all reports required to be filed pursuant
      to the Exchange Act and refrain from terminating its status as an issuer
      required by the Exchange Act to file reports thereunder, even if the Exchange
      Act or the rules or regulations thereunder would permit such termination.

    

    (g) Until
      the
      first to occur of the expiration of five years after the date of this Agreement
      and the Purchaser’s sale or disposition of all of the Purchased Shares,
      Warrants, and Warrant Shares, the Company will deliver to the Purchaser copies
      of all press releases and all of its public filings made with the Commission
      within one business day after the release or filing is made. 

    

    (h) The
      Company will bear all its own expenses in connection with the transactions
      contemplated by this Agreement and will pay at Closing by wire transfer to
      Purchaser’s attorneys the legal fees and expenses incurred by Purchaser;
      provided that the Company’s share of the Purchaser’s legal fees will not exceed
      $20,000.00. 

    

    SECTION
      10. Notices.
      All
      notices required or permitted hereunder shall be in writing and shall be deemed
      effectively given: (i) upon delivery to the party to be notified; (ii) when
      received by confirmed facsimile or (iii) one (1) business day after deposit
      with
      a nationally recognized overnight carrier, specifying next business day
      delivery, with written verification of receipt. All communications shall be
      sent
      to the Company and the Purchaser as follows or at such other addresses as the
      Company or the Purchaser may designate upon 10 days’ advance written notice to
      the other party: 

    

    
      	
            	If
              to the Company, to:	
              PSI
                Corporation

            

      	 	 	7222 Commerce Center
              Drive 

      	 	 	Suite 240 

      	 	 	Colorado Springs, Colorado
              80919 

      	 	 	Attn: Ken
              Upcraft, Chief Executive Officer and President

      	 	 	Fax: 719-598-3897 

      	 	 	 

      	 	If to the Purchaser,
              to: 	Lazarus Investment Partners
              LLLP 

      	 	 	2401 East Second
              Avenue 

      	 	 	Suite 400 

      	 	 	Denver, Colorado
              80206 

      	 	 	Attn: Justin
              Borus, Member 

      	 	 	Fax: 303-302-9050 

    

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    
      	
            	With
              a copy to:	
              James
                A. Jacobson, Esq.

            

      	 	 	Berenbaum, Weinshienk & Eason,
              P.C. 

      	 	 	370 Seventeenth Street, 48th
              Floor 

      	 	 	Denver, Colorado
              80202-5698 

      	 	 	Fax: 303-629-7610 

    

    

    SECTION
      11. Changes.
      This
      Agreement may not be modified or amended except pursuant to an instrument in
      writing signed by the Company and the Purchaser. No provision hereunder may
      be
      waived other than in a written instrument executed by the waiving party.

    

    SECTION
      12. Headings.
      The
      headings of the various sections of this Agreement have been inserted for
      convenience of reference only and shall not be deemed to be part of this
      Agreement. 

    

    SECTION
      13. Severability.
      In case
      any provision contained in this Agreement should be invalid, illegal or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions contained herein shall not in any way be affected or
      impaired thereby. 

    

    SECTION
      14. Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Colorado and the federal law of the United States of America.

    

    SECTION
      15. Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      constitute an original, but all of which, when taken together, shall constitute
      but one instrument, and shall become effective when one or more counterparts
      have been signed by each party hereto and delivered (including by facsimile)
      to
      the other parties.

    

    SECTION
      16. Entire
      Agreement.
      This
      Agreement and the instruments referenced herein contain the entire understanding
      of the parties with respect to the matters covered herein and therein and,
      except as specifically set forth herein or therein, neither the Company nor
      the
      Purchaser makes any representation, warranty, covenant, or undertaking with
      respect to such matters. 

    

    SECTION
      17. Assignment.
      Except
      as otherwise expressly provided herein, the provisions hereof shall inure to
      the
      benefit of, and be binding upon, the parties hereto and their respective
      permitted successors, assigns, heirs, executors, and administrators. This
      Agreement and the rights of the Purchaser hereunder may be assigned by the
      Purchaser without the Company’s consent, except as may otherwise be provided in
      this Agreement. 

    

    SECTION
      18. Further
      Assurances.
      Each
      party agrees to cooperate fully with the other parties and to execute such
      further instruments, documents, and agreements and to give such further written
      assurance as may be reasonably requested by any other party to evidence and
      reflect the transactions described herein and contemplated hereby and to carry
      into effect the intents and purposes of this Agreement.

    

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their duly authorized representatives as of the day and year first above
      written.

     

    
      	 	 	 
	 	COMPANY:
	 	 
	 	PSI Corporation, a
              Nevada corporation 
	 	 
	 	By:  	/s/
              Kenneth J.
              Upcraft
	 	Name: 	Kenneth
              J.
              Upcraft 
	 	Title: 	Chief Executive
              Officer 
	 	 	 
	 	 	 
	 	PURCHASER: 
	 	 	 
	 	Lazarus Investment
              Partners LLLP,
              a 
	 	Delaware limited liability
              limited
              partnership 
	 	 	 
	 	By: 	Lazarus Management Company LLC, 
	 	 	its General Partner 
	 	 	 
	 	 	By:  /s/
              Justin B. Borus 
	 	 	
              Justin B.
                Borus,
                Manager 

            

    

     

    
      
        
        

      

      
        -22-

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