Document:

Exhibit
        4.29

      

      SECURITIES
        PURCHASE AGREEMENT

       

      This
        Securities Purchase Agreement (this “Agreement”)
        is
        dated as of May 10, 2007 by and among Ener1 Group, Inc., a Florida corporation
        (the “Company”),
        Ener1, Inc., a Florida corporation (the “Issuer”)
        and
        each purchaser identified on the signature pages hereto (each, including
        its
        successors and assigns, a “Purchaser”
and
        collectively the “Purchasers”).

       

      WHEREAS,
        the Company is the majority shareholder of the Issuer and currently beneficially
        owns, on a fully diluted basis, 463,559,413 shares of Common Stock of the
        Issuer
        which comprises 86.7% of the Issuer’s currently issued and outstanding common
        stock on a fully-diluted basis.

       

      WHEREAS,
        the Company wishes to borrow in the aggregate, $2 million from the
        Purchasers.

       

      WHEREAS,
        subject to the terms and conditions set forth in this Agreement and pursuant
        to
        Section 4(1) of the Securities Act of 1933, as amended (the “Securities
        Act”),
        the
        Company desires to issue and sell to each Purchaser, and each Purchaser,
        severally and not jointly, desires to purchase from the Company, debentures
        exchangeable into shares of Common Stock and common stock purchase warrants
        exercisable into Common Stock.

       

      WHEREAS,
        the shares of Common Stock transferable upon exchange of the debentures and
        upon
        exercise of the warrants are currently registered for resale by the Company
        to
        the Purchasers pursuant to a resale registration statement filed by the Issuer
        pursuant to the Securities Act.

       

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

       

      ARTICLE
        I. 

      DEFINITIONS

       

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

       

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

       

      “Affiliate”
means
        any Person that, directly or indirectly through one or more intermediaries,
        controls or is controlled by or is under common control with a Person, as
        such
        terms are used in and construed under Rule 405 under the Securities
        Act.
        With
        respect to a Purchaser, any investment fund or managed account that is managed
        on a discretionary basis by the same investment manager as such Purchaser
        will
        be deemed to be an Affiliate of such Purchaser.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Board
        of Directors”
means
        the board of directors of the Issuer.

       

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

       

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

       

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

       

      “Commission”
means
        the Securities and Exchange Commission.

       

      “Common
        Stock”
means
        the common stock of the Issuer, par value $0.01 per share, and any other
        class
        of securities into which such securities may hereafter be reclassified or
        changed into.

       

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

       

      “Company
        Counsel”
means
        Mazzeo Song LLP with offices located at 708 Third Avenue, 19th
        Floor,
        New York, New York 10017.

       

      “Debentures”
means
        the 10% Exchangeable Debentures due, subject to the terms therein, one (1)
        year
        from their date of issuance, issued by the Company to the Purchasers hereunder,
        in the form of Exhibit
        A
        attached
        hereto.

       

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

       

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

       

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

      

      “Exchange
        Price”
shall
        have the meaning ascribed to such term in the Debentures.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Exempt
        Issuance”
means
        the issuance of (a) shares of Common Stock or options to employees, officers
        or
        directors of the Issuer pursuant to any stock or option plan duly adopted
        for
        such purpose by a majority of the non-employee members of the Board of Directors
        or a majority of the members of a committee of non-employee directors
        established for such purpose, (b) securities upon the exercise or exchange
        of or
        conversion of any Securities issued hereunder, (c) any other securities
        purchased by a Purchaser from the Company or the Issuer, (d) other securities
        exercisable or exchangeable for or convertible into shares of Common Stock
        issued and outstanding on the date of this Agreement, provided that such
        securities have not been amended since the date of this Agreement to increase
        the number of such securities or to decrease the exercise, exchange or
        conversion price of such securities, (e) securities issued by the Issuer
        pursuant to acquisitions or strategic transactions approved by a majority
        of the
        disinterested directors of the Issuer, provided that any such issuance shall
        only be to a Person which is, itself or through its subsidiaries, an operating
        company in a business synergistic with the business of the Issuer and in
        which
        the Issuer receives benefits in addition to the investment of funds, but
        shall
        not include a transaction in which the Issuer is issuing securities primarily
        for the purpose of raising capital or to an entity whose primary business
        is
        investing in securities and (f) shares of Common Stock issued to Boris
        Zingarevich or his Affiliates.

       

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

       

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

       

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

       

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

       

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

       

      “Liens”
means
        a
        lien, charge, security interest, encumbrance, right of first refusal, preemptive
        right or other restriction.

       

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

       

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

       

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

       

      “Participation
        Maximum”
shall
        have the meaning ascribed to such term in Section 4.10.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

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

       

      “Pledge
        Agreement”
means
        that certain Pledge Agreement, dated as of the date hereof, by and among
        the
        Company and the Purchasers pursuant to which the Company will pledge 10 million
        shares of Common Stock (subject to adjustment for reverse and forward stock
        splits and the like) to the Purchasers.

       

      “Pre-Notice”
shall
        have the meaning ascribed to such term in Section 4.10.

       

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

       

      “Purchaser
        Party”
shall
        have the meaning ascribed to such term in Section 4.8.

       

      “Registration
        Rights Agreement”
means
        the Registration Rights Agreement, dated the date hereof, among the Company,
        the
        Issuer and the Purchasers, in the form of Exhibit
        B
        attached
        hereto.

       

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

       

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

       

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

       

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

       

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

       

      “Securities”
means
        the Debentures, the Warrants, the Warrant Shares and the Underlying
        Shares.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Securities
        Act”
means
        the Securities Act of 1933, as amended, and the rules and regulations
        promulgated thereunder.

       

      “Shareholder
        Lock-up Agreement”
means
        the Lock-Up Agreement, dated as of May 10, 2007, between the Company, the
        Issuer
        and the Chief Executive Officer of the Company.

       

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

       

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

       

      “Subsequent
        Financing”
shall
        have the meaning ascribed to such term in Section 4.10.

       

      “Subsequent
        Financing Notice”
shall
        have the meaning ascribed to such term in Section 4.10. 

       

      “Subsidiary”
means
        any subsidiary of the Issuer having material assets and operations as set
        forth
        on Schedule
        3.1(a)
        and
        shall, where applicable, include any direct or indirect subsidiary of the
        Issuer
        formed or acquired after the date hereof having material assets and
        operations.

       

      “Trading
        Day”
means
        a
        day on which the New York Stock Exchange is open for trading.

       

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

       

      “Transaction
        Documents”
means
        this Agreement, the Debentures, the Warrants, the Registration Rights Agreement,
        the Pledge Agreement, the Shareholder Lock-up Agreement, all exhibits and
        schedules thereto and hereto and any other documents or agreements executed
        in
        connection with the transactions contemplated hereunder.

       

      “Transfer
        Agent”
means
        Registrar and Transfer Company, the current transfer agent of the Issuer,
        with a
        mailing address of 10 Commerce Drive, Cranford, New Jersey 07016 and a facsimile
        number of (908) 497-2310, and any successor transfer agent of the
        Issuer.

       

      “Underlying
        Shares”
means
        the shares of Common Stock transferred and transferable upon exchange of
        the
        Debentures and upon exercise of the Warrants and transferred and transferable
        in
        lieu of the cash payment of interest on the Debentures in accordance with
        the
        terms of the Debentures.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Variable
        Rate Transaction”
        shall
        have the meaning ascribed to such term in Section 4.11(b).

       

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

       

      “Warrants”
means,
        collectively, the Common Stock purchase warrants delivered to the Purchasers
        at
        the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
        be
        exercisable immediately and have a term of exercise equal to 5 years, in
        the
        form of Exhibit C
        attached
        hereto.

       

      “Warrant
        Shares”
means
        the shares of Common Stock transferable upon exercise of the
        Warrants.

       

       

      ARTICLE
        II.

                                                                 
            PURCHASE AND SALE                        
        

       

      2.1  Closing.
        On the
        Closing Date, upon the terms and subject to the conditions set forth herein,
        substantially concurrent with the execution and delivery of this Agreement
        by
        the parties hereto, the Company agrees to sell, and the Purchasers, severally
        and not jointly, agree to purchase, up to an aggregate of $2,000,000 in
        principal amount of the Debentures. Each Purchaser shall deliver to the Company,
        via wire transfer or a certified check, immediately available funds equal
        to its
        Subscription Amount and the Company shall deliver to each Purchaser its
        Debenture and a Warrant, as determined pursuant to Section 2.2(a), and the
        Company and each Purchaser shall deliver the other items set forth in Section
        2.2 deliverable at the Closing. Upon satisfaction of the conditions set forth
        in
        Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS or such
        other location as the parties shall mutually agree.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      2.2  Deliveries

       

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

      

       

      (i) this
        Agreement duly executed by the Company;

       

      (ii) a
        legal
        opinion or opinions of Company Counsel or in-house counsel to the Company
        or the
        Issuer, as the case may be and as reasonably acceptable to the Purchasers,
        covering the matters described on Exhibit
        D
        attached
        hereto; 

       

      (iii)
        a
        Debenture with a principal amount equal to such Purchaser’s Subscription Amount,
        registered in the name of such Purchaser and executed by the
        Company;

       

      (iv)
        a
        Warrant
        registered in the name of such Purchaser to purchase from the Company up
        to a
        number of shares of Common Stock equal to 60% of such Purchaser’s Subscription
        Amount divided by $0.25, with an exercise price equal to $0.30,
        subject
        to adjustment therein;

       

      (v)
        the
        Shareholder Lock-up Agreement duly executed by the Company, the Issuer and
        the
        Chief Executive Officer of the Company;

       

      (vi)
        the
        Pledge Agreement duly executed by the Company and the Purchasers;
        and

       

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

       

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

       

      (i)
        this
        Agreement duly executed by such Purchaser;

       

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

       

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

       

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

       

      2.3  Closing
        Conditions. 

       

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

       

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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

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

       

      (iii) the
        delivery by each Purchaser of the items set forth in Section 2.2(b) of this
        Agreement.

       

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

       

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

       

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

       

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

       

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

       

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

       

       

      ARTICLE
        III.

      REPRESENTATIONS
        AND WARRANTIES

       

      3.1  Representations
        and Warranties of the Company and the Issuer.
        

       

      Except
        as
        set forth in the Disclosure Schedules, which Disclosure Schedules shall be
        deemed a part hereof and shall qualify any representation or otherwise made
        herein to the extent of the disclosure contained in the corresponding section
        of
        the Disclosure Schedules, the Company and the Issuer, jointly and severally,
        hereby make the following representations and warranties to each
        Purchaser:

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (a)  Subsidiaries.
        All of
        the direct and indirect subsidiaries of the Company (that have material assets
        and operations) and the Issuer are set forth on Schedule
        3.1(a).
        Except
        as set forth on Schedule
        3.1(a),
        the
        Company or the Issuer each owns, directly or indirectly, all of the capital
        stock or other equity interests of each Subsidiary free and clear of any
        Liens
        imposed by or through the Company or the Issuer, and all of the issued and
        outstanding shares of capital stock of each Subsidiary are validly issued
        and
        are fully paid, non-assessable and free of preemptive and similar rights
        to
        subscribe for or purchase securities. The Company’s ownership of debt and equity
        securities of the Issuer is set forth on Schedule
        3.1(a).
        

       

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

       

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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

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

       

      (e)  Filings,
        Consents and Approvals.
        Neither
        the Company nor the Issuer is required to obtain any consent, waiver,
        authorization or order of, give any notice to, or make any filing or
        registration with, any court or other federal, state, local or other
        governmental authority or other Person in connection with the execution,
        delivery and performance by the Company and the Issuer of the Transaction
        Documents, other than (i) the Issuer’s filings required pursuant to Section 4.6,
        and (ii) the Issuer’s filing with the Commission of the Registration Statement
        as and when required by the terms of the Registration Rights Agreement
        (collectively, the “Required
        Approvals”).

       

      (f)  Issuance
        of the Securities.
        The
        Debentures and Warrants are duly authorized by the Company and, when issued
        and
        paid for in accordance with the applicable Transaction Documents, will be
        duly
        and validly issued, fully paid and nonassessable, free and clear of all Liens
        imposed by the Company other than restrictions on transfer provided for in
        the
        Transaction Documents. The Underlying Shares have been validly issued to
        the
        Company, are fully paid and nonassessable, free and clear of all Liens imposed
        by the Issuer. There are currently no restrictions or limitations on the
        Company’s ability to transfer the Underlying Shares to the Purchaser pursuant to
        the Transaction Documents.

       

      
        
          
          

        

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

       

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

       

      
        
          
          

        

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

       

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

       

      (k)  Labor
        Relations.
        No
        material labor dispute exists or, to the knowledge of the Company or the
        Issuer,
        is imminent with respect to any of the employees of the Company or the Issuer
        which could reasonably be expected to result in a Material Adverse Effect.
        None
        of the employees of the Company, the Issuer or the Subsidiaries is a member
        of a
        union that relates to such employee’s relationship with the Company, the Issuer
        or such Subsidiary, and neither the Company, nor the Issuer nor any of its
        Subsidiaries is a party to a collective bargaining agreement, and the Company,
        the Issuer and its Subsidiaries believe that their relationships with their
        employees are good. No executive officer, to the knowledge of the Company,
        is,
        or is now expected to be, in violation of any material term of any employment
        contract, confidentiality, disclosure or proprietary information agreement
        or
        non-competition agreement, or any other contract or agreement or any restrictive
        covenant in favor of any third party, and the continued employment of each
        such
        executive officer does not subject the Company, the Issuer or any of its
        Subsidiaries to any liability with respect to any of the foregoing matters.
        The
        Company, the Issuer and its Subsidiaries are in compliance with all U.S.
        federal, state, local and foreign laws and regulations relating to employment
        and employment practices, terms and conditions of employment and wages and
        hours, except where the failure to be in compliance would not, individually
        or
        in the aggregate, reasonably be expected to have a Material Adverse
        Effect.

       

      
        
          
          

        

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

       

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

       

      (n)  Title
        to Assets.
        The
        Company, the Issuer and the Subsidiaries have good and marketable title in
        fee
        simple to all real property owned by them and good and marketable title in
        all
        personal property owned by them that is material to the business of the Company
        and the Subsidiaries, in each case free and clear of all Liens, except for
        Liens
        as do not materially affect the value of such property and do not materially
        interfere with the use made and proposed to be made of such property by the
        Company, the Issuer and the Subsidiaries and Liens for the payment of federal,
        state or other taxes, the payment of which is neither delinquent nor subject
        to
        penalties. Any real property and facilities held under lease by the Company,
        the
        Issuer and the Subsidiaries are held by them under valid, subsisting material
        and enforceable leases with which the Company, the Issuer and the Subsidiaries
        are in compliance in all material respects.

       

      (o)  Patents
        and Trademarks.
        The
        Company, the Issuer and the Subsidiaries have, or have rights to use, all
        patents, patent applications, trademarks, trademark applications, service
        marks,
        trade names, trade secrets, inventions, copyrights, licenses and other
        intellectual property rights and similar rights necessary or material for
        use in
        connection with their respective businesses as described in the SEC Reports
        and
        where the failure to so have would be reasonably expected to have a Material
        Adverse Effect (collectively, the “Intellectual
        Property Rights”).
        Neither the Company, nor the Issuer nor any Subsidiary has received a notice
        (written or otherwise) that any of the Intellectual Property Rights used
        by the
        Company, the Issuer or any Subsidiary violates or infringes upon the rights
        of
        any Person. To the knowledge of the Company or the Issuer, all such Intellectual
        Property Rights are enforceable and there is no existing infringement by
        another
        Person of any of the Intellectual Property Rights. The Company, the Issuer
        and
        the Subsidiaries have taken reasonable security measures to protect the secrecy,
        confidentiality and value of all of their intellectual properties, except
        where
        failure to do so could not, individually or in the aggregate, reasonably
        be
        expected to have a Material Adverse Effect.

       

      
        
          
          

        

        
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      (p)  Insurance.
        The
        Company, the Issuer and the Subsidiaries are insured by insurers of recognized
        financial responsibility against such losses and risks and in such amounts
        as
        are prudent and customary in the businesses in which the Company, the Issuer
        and
        the Subsidiaries are engaged, including, but not limited to, directors and
        officers insurance coverage at least equal to the aggregate Subscription
        Amount.
        The Company, has no reason to believe that the Company, the Issuer or any
        such
        Subsidiary will not be able to renew its existing insurance coverage as and
        when
        such coverage expires or to obtain similar coverage from similar insurers
        as may
        be necessary to continue its business without a significant increase in
        cost.

       

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

       

      (r)  Sarbanes-Oxley;
        Internal Accounting Controls.
        The
        Issuer is in material compliance with all provisions of the Sarbanes-Oxley
        Act
        of 2002 which are applicable to it as of the Closing Date. The
        Issuer and its Subsidiaries maintain a system of internal accounting controls
        sufficient to provide reasonable assurance that (i) transactions are executed
        in
        accordance with management’s general or specific authorizations, (ii)
        transactions are recorded as necessary to permit preparation of financial
        statements in conformity with GAAP and to maintain asset accountability,
        (iii)
        access to assets is permitted only in accordance with management’s general or
        specific authorization, and (iv) the recorded accountability for assets is
        compared with the existing assets at reasonable intervals and appropriate
        action
        is taken with respect to any differences. The Issuer has established disclosure
        controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
        15d-15(e)) for the Issuer and designed such disclosure controls and procedures
        to ensure that information required to be disclosed by the Issuer in the
        reports
        it files or submits under the Exchange Act is recorded, processed, summarized
        and reported, within the time periods specified in the Commission’s rules and
        forms. The Issuer’s certifying officers have, to the extent required by
        applicable law, evaluated the effectiveness of the Issuer’s disclosure controls
        and procedures as of the end of the period covered by the Issuer’s most recently
        filed periodic report under the Exchange Act (such date, the “Evaluation
        Date”).
        The
        Issuer presented in its most recently filed periodic report under the Exchange
        Act, to the extent required by applicable law, the conclusions of the certifying
        officers about the effectiveness of the disclosure controls and procedures
        based
        on their evaluations as of the Evaluation Date. Since the Evaluation Date,
        there
        have been no changes in the Issuer’s internal control over financial reporting
        (as such term is defined in the Exchange Act) that has materially affected,
        or
        would reasonably be expected to materially affect, the Issuer’s internal control
        over financial reporting.

       

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

       

      
        
          
          

        

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

       

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

       

      (v)  Registration
        Rights.
        Except
        as set forth on Schedule
        3.1(v),
        other
        than the Company and, to the extent required by the Registration Rights
        Agreement, each of the Purchasers, no Person has any right to cause the Issuer
        to effect the registration under the Securities Act of any securities of
        the
        Issuer.

       

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

       

      (x)  Application
        of Takeover Protections.
        The
        Company, the board of directors of the Company, the Issuer and the Board
        of
        Directors have taken all necessary action, if any, in order to render
        inapplicable any control share acquisition, business combination, poison
        pill
        (including any distribution under a rights agreement) or other similar
        anti-takeover provision under the Company’s or Issuer’s certificate of
        incorporation (or similar charter documents) or the laws of its state of
        incorporation that is or could become applicable to the Purchasers as a result
        of the Purchasers, the Company and Issuer fulfilling their respective
        obligations or exercising their rights under the Transaction Documents,
        including without limitation as a result of the Company’s issuance of the
        Debentures and the Warrants and the Purchasers’ ownership of the
        Securities.

       

      
        
          
          

        

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

       

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

       

      (aa)  Solvency.
        Based
        on the consolidated financial condition of the Company and the Issuer,
        respectively, as of the Closing Date after giving effect to the receipt by
        the
        Company of the proceeds from the sale of the Securities hereunder, (i) the
        fair
        saleable value of the assets of the Company and the Issuer, respectively,
        exceeds the amount that will be required to be paid on or in respect of the
        existing debts and other liabilities (including known contingent liabilities)
        of
        the Company and the Issuer, respectively, as they mature, (ii) the assets
        of the
        Company and the Issuer, respectively, do not constitute unreasonably small
        capital to carry on its business as now conducted and as proposed to be
        conducted including its capital needs taking into account the particular
        capital
        requirements of the business conducted by the Company and the Issuer,
        respectively, and projected capital requirements and capital availability
        thereof, and (iii) the current cash flow of the Company and the Issuer,
        respectively, together with the proceeds the Company and the Issuer,
        respectively, would receive, were it to liquidate all of its assets, after
        taking into account all anticipated uses of the cash, would be sufficient
        to pay
        all amounts on or in respect of its liabilities when such amounts are required
        to be paid. The Company and the Issuer do not intend to incur debts beyond
        their
        ability to pay such debts as they mature (taking into account the timing
        and
        amounts of cash to be payable on or in respect of its debt). The Company
        and the
        Issuer has no knowledge of any facts or circumstances which lead it to believe
        that it will file for reorganization or liquidation under the bankruptcy
        or
        reorganization laws of any jurisdiction within one year from the Closing
        Date.
Schedule
        3.1(aa)
        sets
        forth as of the date hereof all outstanding secured and unsecured indebtedness
        of the Company, the Issuer and any Subsidiary, or for which the Company,
        the
        Issuer or any Subsidiary has commitments. For the purposes of this Agreement,
        “Indebtedness”
means
        (a) any liabilities for borrowed money or amounts owed in excess of $50,000
        (other than trade accounts payable incurred in the ordinary course of business),
        (b) all guaranties, endorsements and other contingent obligations in respect
        of
        Indebtedness of others, whether or not the same are or should be reflected
        in
        the Company’s balance sheet (or the notes thereto), except guaranties by
        endorsement of negotiable instruments for deposit or collection or similar
        transactions in the ordinary course of business; and (c) the present value
        of
        any lease payments
        in excess of $50,000 due under leases required to be capitalized in accordance
        with GAAP. Neither
        the Company, nor the Issuer nor any Subsidiary is in default with respect
        to any
        Indebtedness.

       

      
        
          
          

        

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

       

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

       

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

       

      (ee)  Accountants.
        The
        accounting firm(s) of the Company and the Issuer is set forth on Schedule
        3.1(ee)
        of the
        Disclosure Schedule. To the knowledge of the Company, the Issuer’s accounting
        firm (i) is a registered public accounting firm as required by the Exchange
        Act
        and (ii) shall express its opinion with respect to the financial statements
        to
        be included in the Issuer’s Annual Report on Form 10-KSB for the year ending
        December 31, 2007.

       

      
        
          
          

        

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

       

      (gg)  No
        Disagreements with Accountants and Lawyers.
        There
        are no disagreements of any kind presently existing, or reasonably anticipated
        by the Company to arise, between the Issuer and the accountants and lawyers
        formerly or presently employed by the Issuer and the Issuer is current with
        respect to any fees owed to its accountants and lawyers which could affect
        the
        Company’s or Issuer’s ability to perform any of its obligations under any of the
        Transaction Documents.

       

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

       

      (ii)  Acknowledgment
        Regarding Purchasers’ Trading Activity.
        Notwithstanding anything in this Agreement or elsewhere herein to the contrary
        (except for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged
        by the Company that (i) none of the Purchasers has been asked to agree by
        the
        Issuer or the Company, nor has any Purchaser agreed, to desist from purchasing
        or selling, long and/or short, securities of the Issuer, or “derivative”
securities based on securities issued by the Issuer or to hold the Securities
        for any specified term, (ii) past or future open market or other transactions
        by
        any Purchaser, specifically including, without limitation, Short Sales or
        “derivative” transactions, before or after the closing of this or future private
        placement transactions, may negatively impact the market price of the Issuer’s
        publicly-traded securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
        indirectly, may presently have a “short” position in the Common Stock, and (iv)
        each Purchaser shall not be deemed to have any affiliation with or control
        over
        any arm’s length counter-party in any “derivative” transaction solely as a
        result of engaging in such transaction. The
        Company further understands and acknowledges that any hedging activities
        (if
        any) could reduce the value of the existing shareholders’ equity interests in
        the Issuer at and after the time that the hedging activities are being
        conducted.  The Company acknowledges that such aforementioned hedging
        activities do not constitute a breach of any of the Transaction
        Documents.

       

      
        
          
          

        

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

       

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

       

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

       

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

       

      
        
          
          

        

        
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      (c)  Purchaser
        Status.
        At the
        time such Purchaser was offered the Debentures and Warrants, it was, and
        at the
        date hereof it is, an “accredited investor” as defined in Rule 501 under the
        Securities Act. Such Purchaser is not required to be registered as a
        broker-dealer under Section 15 of the Exchange Act.

       

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

       

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

       

      ARTICLE
        IV.

      OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1  Transfer
        Restrictions.

       

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

       

      
        
          
          

        

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

       

      THIS
        SECURITY IS NOT REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
        THE
        SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
        REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
        ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
        EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
        AN
        AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
        SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
        TO
        SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
        COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON [EXERCISE] [EXCHANGE]
        OF
        THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
        OR
        OTHER LOAN SECURED BY SUCH SECURITIES.

       

      The
        Company and the Issuer acknowledge and agree that a Purchaser may from time
        to
        time pledge pursuant to a bona fide margin agreement with a registered
        broker-dealer or grant a security interest in some or all of the Securities
        to a
        financial institution that is an “accredited investor” as defined in Rule 501(a)
        under the Securities Act and who agrees to be bound by the provisions of
        this
        Agreement and the Registration Rights Agreement and, if required under the
        terms
        of such arrangement, such Purchaser may transfer pledged or secured Securities
        to the pledgees or secured parties. Such a pledge would not be subject to
        approval of the Company or the Issuer and no legal opinion of legal counsel
        of
        the pledgee, secured party or pledgor shall be required in connection therewith.
        Further, no notice shall be required of such pledge. At the appropriate
        Purchaser’s expense, the Company and Issuer will execute and deliver such
        reasonable documentation as a pledgee or secured party of Securities may
        reasonably request in connection with a pledge or transfer of the Securities,
        including, if the Securities are subject to registration pursuant to the
        Registration Rights Agreement, the preparation and filing of any required
        prospectus supplement under Rule 424(b)(3) under the Securities Act or other
        applicable provision of the Securities Act to appropriately amend the list
        of
        Selling Shareholders thereunder.

       

      (c)  Certificates
        evidencing the Underlying Shares shall not contain any legend (including
        the
        legend set forth in Section 4.1(b) hereof): (i) while a registration statement
        (including the Registration Statement) covering the resale of such security
        by
        the Purchasers is effective under the Securities Act and such securities
        have
        been or will be sold, or (ii) following any sale of such Underlying Shares
        pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for
        sale
        under Rule 144(k), or (iv) if such legend is not required under applicable
        requirements of the Securities Act (including judicial interpretations and
        pronouncements issued by the staff of the Commission). If all or any portion
        of
        a Debenture or Warrant is exchanged or exercised (as applicable) at a time
        when
        there is an effective registration statement to cover the resale of the
        Underlying Shares and the Purchasers effecting such exchange or exercise
        has
        represented in writing that such shares are or will be sold pursuant to such
        registration statement, or if such Underlying Shares may be sold under Rule
        144(k) or if such legend is not otherwise required under applicable requirements
        of the Securities Act (including judicial interpretations and pronouncements
        issued by the staff of the Commission) then such Underlying Shares shall
        be
        transmitted to the Purchaser by crediting the account of the Purchaser’s prime
        broker with The Depository Trust Company System as directed by such Purchaser
        free from all restrictive and other legends. The Company and the Issuer agree
        that at such time as such legend is no longer required under this Section
        4.1(c), it will, no later than five (5) Trading Days following the delivery
        by a
        Purchaser to the Company of a certificate representing Underlying Shares,
        as
        applicable, issued with a restrictive legend (such fifth Trading Day, the
        “Legend
        Removal Date”),
        transmit such Underlying Shares to the Purchaser by crediting the account
        of the
        Purchaser’s prime broker with The Depository Trust Company System as directed by
        such Purchaser from all restrictive and other legends. Neither the Company
        nor
        the Issuer shall make any notation on its records or give instructions to
        the
        Transfer Agent that enlarge the restrictions on transfer set forth in this
        Section.

       

      
        
          
          

        

        
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      (d)  In
        addition to such Purchaser’s other available remedies, the Company shall pay to
        a Purchaser, in cash, as partial liquidated damages and not as a penalty,
        for
        each $2,000 of Underlying Shares (based on the VWAP of the Common Stock on
        the
        date such Securities are submitted to the Company) delivered for removal
        of the
        restrictive legend and subject to Section 4.1(c), $10 per Trading Day for
        each
        Trading Day following the delivery of written notice to the Company that
        such
        legend was not removed on or before the Legend Removal Date until such
        certificate is delivered without a legend. Nothing herein shall limit such
        Purchaser’s right to pursue actual damages for the Company’s failure to deliver
        certificates representing any Securities as required by the Transaction
        Documents, and such Purchaser shall have the right to pursue all remedies
        available to it at law or in equity including, without limitation, a decree
        of
        specific performance and/or injunctive relief.

       

      4.2  Furnishing
        of Information.
        Until
        the earliest of the time that (i) no Purchaser owns Securities or (ii) the
        Warrants have expired, the Issuer covenants to timely file (or obtain extensions
        in respect thereof and file within the applicable grace period) all reports
        required to be filed by the Issuer after the date hereof pursuant to the
        Exchange Act even if the Issuer is not then subject to the reporting
        requirements of the Exchange Act. As long as any Purchaser owns Securities,
        if
        the Issuer is not required to file reports pursuant to the Exchange Act,
        it will
        prepare and furnish to the Purchasers and make publicly available in accordance
        with Rule 144(c) such information as is required for the Purchasers to sell
        the
        Securities under Rule 144. The Company and Issuer further covenant that they
        will take such further action as any holder of Securities may reasonably
        request, to the extent required from time to time to enable such Person to
        sell
        such Securities without registration under the Securities Act within the
        requirements of the exemption provided by Rule 144.

       

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

       

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

       

      
        
          
          

        

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

       

      4.6  Non-Public
        Information.
        Except
        with respect to the material terms and conditions of the transactions
        contemplated by the Transaction Documents, the Company and the Issuer covenant
        and agree that neither it nor any other Person acting on their behalf will
        provide any Purchaser or its agents or counsel with any information that
        the
        Company or the Issuer believes constitutes material non-public information
        concerning the Issuer, unless prior thereto such Purchaser shall have executed
        a
        written agreement regarding the confidentiality and use of such information.
        The
        Company and the Issuer understand and confirm that each Purchaser shall be
        relying on the foregoing covenant in effecting transactions in securities
        of the
        Company and the Issuer.

       

      4.7  Use
        of
        Proceeds.
        Except
        as set forth on Schedule
        4.7
        attached
        hereto, the Company shall use at least 80% of the net proceeds from the sale
        of
        the Debentures and Warrants hereunder for working capital purposes of the
        Issuer
        and 20% of the net proceeds from the sale of the Debentures and Warrants
        hereunder for working capital purposes of the Company and shall not use such
        proceeds for (a) the satisfaction of any portion of the Company’s, Issuer’s or a
        Subsidiary’s debt (other than payment of trade payables in the ordinary course
        of the Company’s, Issuer’s and Subsidiary’s business and prior practices), (b)
        the redemption of any Common Stock or Common Stock Equivalents or securities
        of
        the Company or (c) the settlement of any outstanding litigation. Net proceeds
        shall be transferred to the bank account of the Issuer within 30 days of
        the
        Closing Date.

       

      4.8  Indemnification
        of Purchasers.
        Subject
        to the provisions of this Section 4.8, the Company, will indemnify and hold
        each
        Purchaser and its directors, officers, shareholders, members, partners,
        employees and agents (and any other Persons with a functionally equivalent
        role
        of a Person holding such titles notwithstanding a lack of such title or any
        other title), each Person who controls such Purchaser (within the meaning
        of
        Section 15 of the Securities Act and Section 20 of the Exchange Act), and
        the
        directors, officers, shareholders, agents, members, partners or employees
        (and
        any other Persons with a functionally equivalent role of a Person holding
        such
        titles notwithstanding a lack of such title or any other title) of such
        controlling person (each, a “Purchaser
        Party”)
        harmless from any and all losses, liabilities, obligations, claims,
        contingencies, damages, costs and expenses, including all judgments, amounts
        paid in settlements, court costs and reasonable attorneys’ fees and costs of
        investigation that any such Purchaser Party may suffer or incur as a result
        of
        or relating to (a) any breach of any of the representations, warranties,
        covenants or agreements made by the Company in this Agreement or in the other
        Transaction Documents or (b) any action instituted against a Purchaser in
        any
        capacity, or any of them or their respective Affiliates, by any shareholder
        of
        the Company or Issuer who is not an Affiliate of such Purchaser, with respect
        to
        any of the transactions contemplated by the Transaction Documents (unless
        such
        action is based upon a breach of such Purchaser’s representations, warranties or
        covenants under the Transaction Documents or any agreements or understandings
        such Purchaser may have with any such stockholder or any violations by the
        Purchaser of state or federal securities laws or any conduct by such Purchaser
        which constitutes fraud, gross negligence, willful misconduct or malfeasance).
        If any action shall be brought against any Purchaser Party in respect of
        which
        indemnity may be sought pursuant to this Agreement, such Purchaser Party
        shall
        promptly notify the Company in writing, and the Company shall have the right
        to
        assume the defense thereof with counsel of its own choosing reasonably
        acceptable to the Purchaser Party. Any Purchaser Party shall have the right
        to
        employ separate counsel in any such action and participate in the defense
        thereof, but the fees and expenses of such counsel shall be at the expense
        of
        such Purchaser Party except to the extent that (i) the employment thereof
        has
        been specifically authorized by the Company in writing, (ii) the Company
        has
        failed after a reasonable period of time to assume such defense and to employ
        counsel or (iii) in such action there is, in the reasonable opinion of such
        separate counsel, a material conflict on any material issue between the position
        of the Company and the position of such Purchaser Party, in which case the
        Company shall be jointly and severally responsible for the reasonable fees
        and
        expenses of no more than one such separate counsel. The Company shall not
        be
        liable to any Purchaser Party under this Agreement (i) for any settlement
        by a
        Purchaser Party effected without the Company’s prior written consent, which
        shall not be unreasonably withheld or delayed; or (ii) to the extent, but
        only
        to the extent that a loss, claim, damage or liability is attributable to
        any
        Purchaser Party’s breach of any of the representations, warranties, covenants or
        agreements made by such Purchaser Party in this Agreement or in the other
        Transaction Documents or violations by the Purchaser of state or federal
        securities laws or any conduct by such Purchaser which constitutes fraud,
        gross
        negligence, willful misconduct or malfeasance.

       

      
        
          
          

        

        
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      4.9  Reservation
        and Listing of Underlying Shares.

       

      (a)  The
        Company shall at all times own, free and clear of any Liens, a number of
        shares
        of Common Stock for issuance pursuant to the Transaction Documents in such
        amount as may be required to fulfill its obligations in full under the
        Transaction Documents but in no event less than the Required Minimum. All
        shares
        of Common Stock held by the Company and subject to an effective registration
        statement, up to a number equal to the Required Minimum, shall first be applied
        and reserved for transfer under the Transaction Documents.

       

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

       

      4.10  Participation
        in Future Financing.
        

       

      (a)  From
        the
        date hereof until the date that is the later of (i) the 12 month anniversary
        of
        the date hereof and (ii) the date that the Debentures are no longer outstanding,
        upon any issuance by the Company, the Issuer or any of its Subsidiaries
        (“Offering
        Company”)
        of
        Common Stock or Common Stock Equivalents (a “Subsequent
        Financing”),
        each
        Purchaser shall have the right to participate in up to an amount of the
        Subsequent Financing equal to 30% of the Subsequent Financing (the “Participation
        Maximum”)
        on the
        same terms, conditions and price provided for in the Subsequent Financing.
        

       

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

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      (e)  If
        by
        5:30 p.m. (New York City time) on the 5th
        Trading
        Day after all of the Purchasers have received the Pre-Notice, the Offering
        Party
        receives responses to a Subsequent Financing Notice from Purchasers seeking
        to
        purchase more than the aggregate amount of the Participation Maximum, each
        such
        Purchaser shall have the right to purchase its Pro Rata Portion (as defined
        below) of the Participation Maximum.  “Pro
        Rata Portion”
means
        the ratio of (x) the Subscription Amount of Securities purchased on the Closing
        Date by a Purchaser participating under this Section 4.10 and (y) the sum
        of the
        aggregate Subscription Amounts of Securities purchased on the Closing Date
        by
        all Purchasers participating under this Section 4.10.

       

      (f)  The
        Offering Party must provide the Purchasers with a second Subsequent Financing
        Notice, and the Purchasers will again have the right of participation set
        forth
        above in this Section 4.10, if the Subsequent Financing subject to the initial
        Subsequent Financing Notice is not consummated for any reason on the terms
        set
        forth in such Subsequent Financing Notice within 60 Trading Days after the
        date
        of the initial Subsequent Financing Notice. 

       

      (g)  Notwithstanding
        the foregoing, this Section 4.10 shall not apply in respect of (i) an Exempt
        Issuance or (ii) an underwritten public offering of Common Stock.

       

      4.11  [INTENTIONALLY
        DELETED]. 

       

      
        
          
          

        

        
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      4.12  Equal
        Treatment of Purchasers.
        No
        consideration shall be offered or paid to any Person to amend or consent
        to a
        waiver or modification of any provision of any of the Transaction Documents
        unless the same consideration is also offered to all of the parties to the
        Transaction Documents. Further, neither the Company nor the Issuer shall
        make
        any payment of principal or interest on the Debentures in amounts which are
        disproportionate to the respective principal amounts outstanding on the
        Debentures at any applicable time. For clarification purposes, this provision
        constitutes a separate right granted to each Purchaser by the Company and
        the
        Issuer and negotiated separately by each Purchaser, and is intended for the
        Company and the Issuer to treat the Purchasers as a class and shall not in
        any
        way be construed as the Purchasers acting in concert or as a group with respect
        to the purchase, disposition or voting of Securities or otherwise.

       

      4.13  Capital
        Changes.
        Until
        the one year anniversary of the date hereof, the Issuer shall not undertake
        a
        reverse stock split or reclassification of the Common Stock without the prior
        written consent of the Purchasers holding a majority in principal amount
        outstanding of the Debentures.

       

      4.14.  Pledge
        Shares.
        Upon
        the occurrence of an Event of Default under the Pledge Agreement, the Issuer
        shall provide any documentation or opinions reasonably requested by the Pledgees
        (as defined in the Pledge Agreement) to allow for the immediate sale of the
        Pledge Shares (as defined in the Pledge Agreement) by the Pledgees.

       

      ARTICLE
        V.

      MISCELLANEOUS

       

      5.1  Termination. 
        This Agreement may be terminated by any Purchaser, as to such Purchaser’s
        obligations hereunder only and without any effect whatsoever on the obligations
        between the Company, the Issuer and the other Purchasers, by written notice
        to
        the other parties, if the Closing has not been consummated on or before May
        18,
        2007; provided,
        however,
        that
        such termination will not affect the right of any party to sue for any breach
        by
        the other party (or parties).

       

      5.2  Fees
        and Expenses.
        At the
        Closing, the Company has agreed to reimburse Enable Capital Management, LLC
        (“Enable”)
        the
        non-accountable sum of $25,000 for its legal fees and expenses. Accordingly,
        in
        lieu of the foregoing payments, the aggregate amount that Enable (or Purchasers
        managed by Enable) is to pay for the Securities at the Closing shall be reduced
        by $25,000 in lieu thereof. Except as expressly set forth in the Transaction
        Documents to the contrary, each party shall pay the fees and expenses of
        its
        advisers, counsel, accountants and other experts, if any, and all other expenses
        incurred by such party incident to the negotiation, preparation, execution,
        delivery and performance of this Agreement. The Company shall pay all transfer
        agent fees, stamp taxes and other taxes and duties levied in connection with
        the
        delivery of any Securities to the Purchasers.

       

      5.3  Entire
        Agreement.
        The
        Transaction Documents, together with the exhibits and schedules thereto,
        contain
        the entire understanding of the parties with respect to the subject matter
        hereof and supersede all prior agreements and understandings, oral or written,
        with respect to such matters, which the parties acknowledge have been merged
        into such documents, exhibits and schedules.

       

      
        
          
          

        

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

       

      5.5  Amendments;
        Waivers.
        No
        provision of this Agreement may be waived, modified, supplemented or amended
        except in a written instrument signed, in the case of an amendment, by the
        Company, the Issuer and the holders of at least 85% in interest of the
        Securities still held by Purchasers or, in the case of a waiver, by the party
        against whom enforcement of any such waived provision is sought. No waiver
        of
        any default with respect to any provision, condition or requirement of this
        Agreement shall be deemed to be a continuing waiver in the future or a waiver
        of
        any subsequent default or a waiver of any other provision, condition or
        requirement hereof, nor shall any delay or omission of any party to exercise
        any
        right hereunder in any manner impair the exercise of any such
        right.

       

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

       

      5.7  Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their successors and permitted assigns. Neither the Company nor the Issuer
        may
        assign this Agreement or any rights or obligations hereunder without the
        prior
        written consent of each Purchaser (other than by merger). Any Purchaser may
        assign any or all of its rights under this Agreement to any Person to whom
        such
        Purchaser assigns or transfers any Securities, provided that such transferee
        agrees in writing to be bound, by the provisions of the Transaction Documents
        that apply to the “Purchasers.”

       

      5.8  No
        Third-Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        successors and permitted assigns and is not for the benefit of, nor may any
        provision hereof be enforced by, any other Person, except as otherwise set
        forth
        in Section 4.8.

       

      5.9  Governing
        Law.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of the Transaction Documents shall be governed by and construed and enforced
        in
        accordance with the internal laws of the State of New York, without regard
        to
        the principles of conflicts of law thereof. Each party agrees that all legal
        proceedings concerning the interpretations, enforcement and defense of the
        transactions contemplated by this Agreement and any other Transaction Documents
        (whether brought against a party hereto or its respective affiliates, directors,
        officers, shareholders, employees or agents) shall be commenced exclusively
        in
        the state and federal courts sitting in the City of New York. Each party
        hereby
        irrevocably submits to the exclusive jurisdiction of the state and federal
        courts sitting in the City of New York, borough of Manhattan for the
        adjudication of any dispute hereunder or in connection herewith or with any
        transaction contemplated hereby or discussed herein (including with respect
        to
        the enforcement of any of the Transaction Documents), and hereby irrevocably
        waives, and agrees not to assert in any suit, action or proceeding, any claim
        that it is not personally subject to the jurisdiction of any such court,
        that
        such suit, action or proceeding is improper or is an inconvenient venue for
        such
        proceeding. Each party hereby irrevocably waives personal service of process
        and
        consents to process being served in any such suit, action or proceeding by
        mailing a copy thereof via registered or certified mail or overnight delivery
        (with evidence of delivery) to such party at the address in effect for notices
        to it under this Agreement and agrees that such service shall constitute
        good
        and sufficient service of process and notice thereof. Nothing contained herein
        shall be deemed to limit in any way any right to serve process in any other
        manner permitted by law. If either party shall commence an action or proceeding
        to enforce any provisions of the Transaction Documents, then the prevailing
        party in such action or proceeding shall be reimbursed by the other party
        for
        its reasonable attorneys’ fees and other costs and expenses incurred with the
        investigation, preparation and prosecution of such action or
        proceeding.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      5.13  Rescission
        and Withdrawal Right.
        Notwithstanding anything to the contrary contained in (and without limiting
        any
        similar provisions of) any of the other Transaction Documents, whenever any
        Purchaser exercises a right, election, demand or option under a Transaction
        Document and the Company does not timely perform its related obligations
        within
        the periods therein provided, then such Purchaser may rescind or withdraw,
        in
        its sole discretion from time to time upon written notice to the Company,
        any
        relevant notice, demand or election in whole or in part without prejudice
        to its
        future actions and rights; provided,
        however,
        in the
        case of a rescission of a exchange of a Debenture or exercise of a Warrant,
        the
        Purchaser shall be required to return any shares of Common Stock delivered
        in
        connection with any such rescinded exchange or exercise notice.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

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

       

      5.19  Liquidated
        Damages.
        The
        Company’s obligations to pay any partial liquidated damages or other amounts
        owing under the Transaction Documents is a continuing obligation of the Company
        and shall not terminate until all unpaid partial liquidated damages and other
        amounts have been paid notwithstanding the fact that the instrument or security
        pursuant to which such partial liquidated damages or other amounts are due
        and
        payable shall have been canceled.

       

      5.20  Saturdays,
        Sundays, Holidays, etc.If
        the
        last or appointed day for the taking of any action or the expiration of any
        right required or granted herein shall not be a Business Day or a Trading
        Day as
        the case may be, then such action may be taken or such right may be exercised
        on
        the next succeeding Business Day or Trading Day.

       

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

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

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

       

      

       

      (Signature
        Pages Follow)

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

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

       

      
        	
                ENER1
                  GROUP, INC.

                 

              	
                Address
                  for Notice:

              
	
                By:__________________________________________

                Name:

                Title:

                 

              	
                Fax:

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

                 

                 

              	
              

      

      

      

      
        	
                ENER1,
                  INC.

                 

              	
                Address
                  for Notice:

              
	
                By:__________________________________________

                Name:

                Title:

                 

              	
                500
                  West Cypress Creek Road, Suite 100

                Fort
                  Lauderdale, Florida

                33309

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

                 

                 

              	 

      

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
        PAGE FOR PURCHASER FOLLOWS]

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      [PURCHASER
        SIGNATURE PAGES TO ENEI SECURITIES PURCHASE AGREEMENT]

      

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

       

      Name
        of
        Purchaser: ________________________________________________________

      Signature
        of Authorized Signatory of Purchaser:
        __________________________________

      Name
        of
        Authorized Signatory:
        ____________________________________________________

      Title
        of
        Authorized Signatory:
        _____________________________________________________

      Email
        Address of Purchaser:
        ________________________________________________

      Facsimile
        Number of Purchaser:
        ________________________________________________

      

      Address
        for Notice to Purchaser:

      

      

      

      

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

      

      

      

      

      Subscription
        Amount: _____________

      

      Warrant
        Shares: _________________

      

      

      

      

      EIN
        Number: [PROVIDE
        THIS UNDER SEPARATE COVER]

      

      [SIGNATURE
        PAGES CONTINUE]

      

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

       

      EXHIBIT
        D

      
        

        FORM
          OF LEGAL OPINION

        

        

        [List
          of
          Purchasers]

        

        

        Ladies
          and Gentlemen:

        

        We
          have
          acted as counsel to [_______________, a [___________ corporation (the
“Company”),
          in
          connection with the execution and delivery by the Company of the Securities
          Purchase Agreement, dated as of [__________ __, 2007 (the “Agreement”),
          by
          and among the Company and the purchasers identified on the signature pages
          thereto (the “Purchasers”).
          This
          opinion is given to you pursuant to Section 2.2(a)(ii) of the Agreement.
          (Capitalized
          terms not otherwise defined herein are defined as set forth in the
          Agreement.)

        

        We
          have
          participated in the preparation and negotiation of the Agreement and the
          Exhibits and Schedules thereto, and the other documents referred to therein.
          We
          also have examined such certificates of public officials, corporate documents
          and records and other certificates, opinions, agreements and instruments
          and
          have made such other investigations as we have deemed necessary in connection
          with the opinions hereinafter set forth.

        

        Based
          on
          the foregoing and upon such investigation as we have deemed necessary,
          we give
          you our opinion as follows:

        

        1.
          The
          Company is a corporation duly organized, validly existing and in good standing
          under the laws of [________________. The Company has all requisite power
          and
          authority, and all material governmental licenses, authorizations, consents
          and
          approvals, that are required to own and operate its properties and assets
          and to
          carry on its business as now conducted and as proposed to be conducted
          (all as
          described in the Company’s Annual Report on Form 10-[K for its fiscal year ended
          [_________________). The Company is duly qualified to transact business
          and is
          in good standing in each jurisdiction in which the failure to qualify could
          have
          a Material Adverse Effect on the Company.

        

        2.
          Each
          of
          the following subsidiaries of the Company (the “Subsidiaries”)
          is a
          corporation, duly organized and in good standing under the laws of its
          state of
          organization, as noted:
          [                                 
 ].

        

        3.
          The
          Company has all requisite power and authority (i) to execute, deliver and
          perform the Transaction Documents, (ii) to issue, sell and deliver the
          Debentures,
          the Warrants and the Underlying Shares pursuant
          to the Transaction Documents and (iii) to carry out and perform its obligations
          under, and to consummate the transactions contemplated by, the Transaction
          Documents.

         

        
          
            
            

          

          
            34

            
              

            

          

          
            
            

          

        

         

        4.
          All
          action on the part of the Company, its directors and its stockholders necessary
          for the authorization, execution and delivery by the Company of the Transaction
          Documents, the authorization, issuance, sale and delivery of the Debentures
          and
          the Warrants pursuant to the Agreement, the issuance and delivery the
          Underlying Shares and
          the
          consummation by the Company of the transactions contemplated by the Transaction
          Documents has been duly taken. The Transaction Documents have been duly
          and
          validly executed and delivered by the Company and constitute the legal,
          valid
          and binding obligation of the Company, enforceable against the Company
          in
          accordance with their terms, except that (a) such enforceability may be
          limited
          by bankruptcy, insolvency or other similar laws affecting the enforcement
          of
          creditors’ rights in general and (b) the remedies of specific performance and
          injunctive and other forms of injunctive relief may be subject to equitable
          defenses.

        

        5.
          After
          giving effect to the transactions contemplated by the Agreement, and immediately
          after the Closing, the authorized capital stock of the Company will consist
          of:
          an aggregate of _________ shares of Common Stock, of which  shares
          will be issued and outstanding and _________ shares will be reserved for
          issuance upon conversion of issued and outstanding options, warrants and
          other
          derivative securities, __________ shares will be reserved for issuance
          to
          employees, officers and directors under the Company’s [_________
          Stock
          Incentive Plan], of which __________ shares are subject to currently outstanding
          incentive stock option grants and __________ shares are subject to currently
          outstanding non-qualified stock option grants, and __________ shares will
          be
          reserved for issuance upon exercise of Warrants, and _____ shares will
          be
          reserved for issuance upon conversion of the Debentures. All presently
          issued
          and outstanding shares of Common Stock have been duly authorized and validly
          issued and are fully paid and nonassessable and free of any preemptive
          or
          similar rights, and have been issued in compliance with applicable securities
          laws and regulations. The Debentures and Warrants which are being issued
          on the
          date hereof pursuant to the Agreement have been duly authorized and validly
          issued and are fully paid and nonassessable and free of preemptive or similar
          rights, and have been issued in compliance with applicable securities laws,
          rules and regulations. The Underlying
          Shares have been
          duly
          and validly authorized and reserved for issuance, and when issued upon
          the
          conversion of the Debenture or the exercise of the Warrants in accordance
          with
          the respective terms therein, will be validly issued, fully paid and
          nonassessable, and free of any preemptive or similar rights. To our knowledge,
          except for rights described in Schedule [3.1(g) of the Agreement, there
          are no
          other options, warrants, conversion privileges or other rights presently
          outstanding to purchase or otherwise acquire from the Company any capital
          stock
          or other securities of the Company, or any other agreements to issue any
          such
          securities or rights. The rights, privileges and preferences of the Common
          Stock
          are as stated in the Company’s [_______________]1 .

        

        6.
          To
          our
          knowledge, the Company has filed all reports (the “SEC
          Reports”)
          required to be filed by it under Sections 13(a) and 15(d) of the Exchange
          Act of
          1934, as amended (the “Exchange
          Act”).
          As of
          their respective filing dates, the SEC Reports complied in all material
          respects
          as to form with the requirements of the Exchange Act and the rules and
          regulations of the Commission promulgated thereunder.

         

        
          

        

        1  Insert
          appropriate organizational document.

         

        
          
            
            

          

          
            35

            
              

            

          

          
            
            

          

        

         

        7.
          Based
          in
          part upon the representations of the Purchasers contained in the Agreement,
          the
          Debentures, the Warrants
          and the Underlying Shares may
          be
          issued to the Purchasers without registration under the Securities Act
          of 1933,
          as amended. 

        

        8.
          The
          execution, delivery and performance by the Company of, and the compliance
          by the
          Company with the terms of, the Transaction Documents and the issuance,
          sale and
          delivery of the Debentures,
          the Warrants and the Underlying Shares pursuant
          to the Agreement do not (a) conflict with or result in a violation of any
          provision of law, rule or regulation applicable to the Company or its
          Subsidiaries or of the certificate of incorporation or by-laws or other
          similar
          organizational documents of the Company or its Subsidiaries, (b) conflict
          with,
          result in a breach of or constitute a default (or an event which with notice
          or
          lapse of time or both would become a default) under, or result in or permit
          the
          termination or modification of, any agreement, instrument, order, writ,
          judgment
          or decree known to us to which the Company of its Subsidiaries is a party
          or is
          subject or (c) result in the creation or imposition of any lien, claim
          or
          encumbrance on any of the assets or properties of the Company or its
          Subsidiaries’. 

        

        9.
          To
          our
          knowledge, except as set forth in the Disclosure Schedule to the Agreement,
          there is no claim, action, suit, proceeding, arbitration, investigation
          or
          inquiry, pending or threatened, before any court or governmental or
          administrative body or agency, or any private arbitration tribunal, against
          the
          Company or its Subsidiaries, or any of the officers, directors or employees
          (in
          connection with the discharge of their duties as officers, directors and
          employees) of the Company or its Subsidiaries, or affecting any of its
          properties or assets.

        

        10.
          In
          connection with the valid execution, delivery and performance by the Company
          of
          the Transaction Documents, or the offer, sale, issuance or delivery of
          the
Debentures,
          the Warrants and the Underlying Shares or
          the
          consummation of the transactions contemplated thereby, no consent, license,
          permit, waiver, approval or authorization of, or designation, declaration,
          registration or filing with, any court, governmental or regulatory authority,
          or
          self-regulatory organization, is required.

        

        11.
          The
          Company is not, and after the consummation of the transactions contemplated
          by
          the Transaction Documents shall not be, an Investment Company within the
          meaning
          of the Investment Company Act of 1940, as amended.

        

        12.
          Upon
          the
          occurrence of an Event of Default under the Pledge Agreement, the Pledge
          Shares
          (as defined in the Pledge Agreement) may be immediately sold by the
          non-affiliate Pledgees (as defined in the Pledge Agreement) pursuant to
          Rule
          144(k) without limitation as to volume or manner of sale.

        

        

          
            	
                     

                  	
                    Very
                      truly yours,

                  

          

           

           

          
            
              
              

            

            
              36Unassociated Document

     

    
      DIET
        COFFEE, INC.

      2007
        STOCK INCENTIVE PLAN

       

      1.
           Purpose.    The
        purpose of the 2007 Stock Incentive Plan of Diet Coffee, Inc. is to further
        align the interests of employees, directors and non-employee Consultants
        with
        those of the stockholders by providing incentive compensation opportunities
        tied
        to the performance of the Common Stock and by promoting increased ownership
        of
        the Common Stock by such individuals. The Plan is also intended to advance
        the
        interests of the Company and its stockholders by attracting, retaining and
        motivating key personnel upon whose judgment, initiative and effort the
        successful conduct of the Company’s business is largely dependent. 

       

      2.
           Definitions.    Wherever
        the following capitalized terms are used in the Plan, they shall have the
        meanings specified below: 

       

      “Affiliate”
        means
        (i) any entity that would be treated as an “affiliate” of the Company for
        purposes of Rule 12b-2 under the Exchange Act and (ii) any joint venture
        or
        other entity in which the Company has a direct or indirect beneficial ownership
        interest representing at least one-third (1/3) of the aggregate voting power
        of
        the equity interests of such entity or one-third (1/3) of the aggregate fair
        market value of the equity interests of such entity, as determined by the
        Committee.

       

      “Award”
        means an
        award of a Stock Option, Stock Award, or Restricted Stock Award granted under
        the Plan. 

       

      “Award
        Agreement”
        means a
        written or electronic agreement entered into between the Company and a
        Participant setting forth the terms and conditions of an Award granted to
        a
        Participant. 

       

      “Board”
        means
        the Board of Directors of the Company. 

       

      “Code”
        means
        the Internal Revenue Code of 1986, as amended. 

       

      “Common
        Stock”
        means
        the Company’s common stock, $0.001 par value per share. 

       

      “Committee”
        means
        the Compensation Committee of the Board, or such other committee of the Board
        appointed by the Board to administer the Plan, or if no such committee exists,
        the Board. 

       

      “Company”
        means
        Diet Coffee, Inc., a Delaware corporation. 

      

      “Consultant”
        means
        any
        person which is a consultant or advisor to the Company and which is a natural
        person and who provides bona fide services to the Company which are not in
        connection with the offer or sale of securities in a capital-raising transaction
        for the Company, and do not directly or indirectly promote or maintain a
        market
        for the Company’s securities.

      

      “Date
        of Grant”
        means
        the date on which an Award under the Plan is made by the Committee, or such
        later date as the Committee may specify to be the effective date of an Award.
        

       

      “Disability”
        means a
        Participant being considered “disabled” within the meaning of Section
        409A(a)(2)(C) of the Code, unless otherwise provided in an Award Agreement.
        

       

      “Eligible
        Person”
        means
        any person who is an employee of the Company or any Affiliate or any person
        to
        whom an offer of employment with the Company or any Affiliate is extended,
        as
        determined by the Committee, or any person who is a Non-Employee Director,
        or
        any person who is Consultant to the Company.

       

      “Exchange
        Act”
        means
        the Securities Exchange Act of 1934, as amended. 

       

      “Fair
        Market Value”
        means
        the mean between the highest and lowest reported sales prices of the Common
        Stock on the New York Stock Exchange Composite Tape or, if not listed on
        such
        exchange, on any other national securities exchange on which the Company’s
        common stock is listed or on The Nasdaq Stock Market, or, if not so listed
        on
        any other national securities exchange or The Nasdaq Stock Market, then the
        average of the bid price of the Company’s common stock during the last five
        trading days on the OTC Bulletin Board immediately preceding the last trading
        day prior to the date with respect to which the Fair Market Value is to be
        determined. If the Company’s common stock is not then publicly traded, then the
        Fair Market Value of the Common Stock shall be the book value of the Company
        per
        share as determined on the last day of March, June, September, or December
        in
        any year closest to the date when the determination is to be made. For the
        purpose of determining book value hereunder, book value shall be determined
        by
        adding as of the applicable date called for herein the capital, surplus,
        and
        undivided profits of the Company, and after having deducted any reserves
        theretofore established; the sum of these items shall be divided by the number
        of shares of the Company’s common stock outstanding as of said date, and the
        quotient thus obtained shall represent the book value of each share of the
        Company’s common stock.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      “Incentive
        Stock Option”
        means a
        Stock Option granted under Section 6 hereof that is intended to meet the
        requirements of Section 422 of the Code and the regulations thereunder.

       

      “Non-Employee
        Director”
        means
        any member of the Board who is not an employee of the Company. 

       

      “Nonqualified
        Stock Option”
        means a
        Stock Option granted under Section 6 hereof that is not an Incentive Stock
        Option. 

       

      “Participant”
        means
        any Eligible Person who holds an outstanding Award under the Plan. 

       

      “Plan”
        means
        the 2007 Stock Incentive Plan of the Company as set forth herein, as amended
        from time to time. 

      

      “Restricted
        Stock Award”
        means a
        grant of shares of Common Stock to an Eligible Person under Section 8 hereof
        that are issued subject to such vesting and transfer restrictions as the
        Committee shall determine and set forth in an Award Agreement. 

       

      “Service”
        means a
        Participant’s employment with the Company or any Affiliate or a Participant’s
        service as a Non-Employee Director with the Company, as applicable.

       

      “Stock
        Award”
        means a
        grant of shares of Common Stock to an Eligible Person under Section 7 hereof
        that are issued free of transfer restrictions and forfeiture conditions.
        

       

      “Stock
        Option”
        means a
        contractual right granted to an Eligible Person under Section 6 hereof to
        purchase shares of Common Stock at such time and price, and subject to such
        conditions, as are set forth in the Plan and the applicable Award Agreement.
        

       

      3.
           Administration. 

       

      3.1    Committee
        Members.    The
        Plan shall be administered by a Committee comprised of one or more members
        of
        the Board, or if no such committee exists, the Board.

       

      3.2    Committee
        Authority.    The
        Committee shall have such powers and authority as may be necessary or
        appropriate for the Committee to carry out its functions as described in
        the
        Plan. Subject to the express limitations of the Plan, the Committee shall
        have
        authority in its discretion to determine the Eligible Persons to whom, and
        the
        time or times at which, Awards may be granted, the number of shares, units
        or
        other rights subject to each Award, the exercise, base or purchase price
        of an
        Award (if any), the time or times at which an Award will become vested,
        exercisable or payable, the performance goals and other conditions of an
        Award,
        the duration of the Award, and all other terms of the Award. Subject to the
        terms of the Plan, the Committee shall have the authority to amend the terms
        of
        an Award in any manner that is not inconsistent with the Plan, provided that
        no
        such action shall adversely affect the rights of a Participant with respect
        to
        an outstanding Award without the Participant’s consent. The Committee shall also
        have discretionary authority to interpret the Plan, to make factual
        determinations under the Plan, and to make all other determinations necessary
        or
        advisable for Plan administration, including, without limitation, to correct
        any
        defect, to supply any omission or to reconcile any inconsistency in the Plan
        or
        any Award Agreement hereunder. The Committee may prescribe, amend, and rescind
        rules and regulations relating to the Plan. The Committee’s determinations under
        the Plan need not be uniform and may be made by the Committee selectively
        among
        Participants and Eligible Persons, whether or not such persons are similarly
        situated. The Committee shall, in its discretion, consider such factors as
        it
        deems relevant in making its interpretations, determinations and actions
        under
        the Plan including, without limitation, the recommendations or advice of
        any
        officer or employee of the Company or such attorneys, consultants, accountants
        or other advisors as it may select. All interpretations, determinations and
        actions by the Committee shall be final, conclusive, and binding upon all
        parties. 

       

      
        
           

        

        
          Page
            2 of
            12

          
            

          

        

        
           

        

      

       

      3.3    Delegation
        of Authority.    The
        Committee shall have the right, from time to time, to delegate to one or
        more
        officers of the Company the authority of the Committee to grant and determine
        the terms and conditions of Awards granted under the Plan, subject to the
        requirements of state law and such other limitations as the Committee shall
        determine. In no event shall any such delegation of authority be permitted
        with
        respect to Awards to any members of the Board or to any Eligible Person who
        is
        subject to Rule 16b-3 under the Exchange Act or Section 162(m) of the Code.
        The
        Committee shall also be permitted to delegate, to any appropriate officer
        or
        employee of the Company, responsibility for performing certain ministerial
        functions under the Plan. In the event that the Committee’s authority is
        delegated to officers or employees in accordance with the foregoing, all
        provisions of the Plan relating to the Committee shall be interpreted in
        a
        manner consistent with the foregoing by treating any such reference as a
        reference to such officer or employee for such purpose. Any action undertaken
        in
        accordance with the Committee’s delegation of authority hereunder shall have the
        same force and effect as if such action was undertaken directly by the Committee
        and shall be deemed for all purposes of the Plan to have been taken by the
        Committee. 

       

      4.
           Shares Subject to the Plan. 

       

      4.1    Maximum
        Share Limitations.    Subject
        to Section 4.3 hereof, the maximum aggregate number of shares of Common Stock
        that may be issued and sold under all Awards granted under the Plan shall
        be
        Twenty One Million Four Hundred Fifty Thousand (21,450,000) shares. Shares
        of
        Common Stock issued and sold under the Plan may be either authorized but
        unissued shares or shares held in the Company’s treasury. To the extent that any
        Award involving the issuance of shares of Common Stock is forfeited, cancelled,
        returned to the Company for failure to satisfy vesting requirements or other
        conditions of the Award, or otherwise terminates without an issuance of shares
        of Common Stock being made thereunder, the shares of Common Stock covered
        thereby will no longer be counted against the foregoing maximum share
        limitations and may again be made subject to Awards under the Plan pursuant
        to
        such limitations. Any Awards or portions thereof that are settled in cash
        and
        not in shares of Common Stock shall not be counted against the foregoing
        maximum
        share limitations. 

       

      4.2    Adjustments.
           If
        there shall occur any change with respect to the outstanding shares of Common
        Stock by reason of any recapitalization, reclassification, stock dividend,
        extraordinary dividend, stock split, reverse stock split or other distribution
        with respect to the shares of Common Stock, or any merger, reorganization,
        consolidation, combination, spin-off or other similar corporate change, or
        any
        other change affecting the Common Stock, the Committee may, in the manner
        and to
        the extent that it deems appropriate and equitable to the Participants and
        consistent with the terms of the Plan, cause an adjustment to be made in
        (i) the
        maximum number and kind of shares provided in Section 4.1 hereof, (ii) the
        number and kind of shares of Common Stock, or other rights subject to then
        outstanding Awards, (iii) the exercise or base price for each share or other
        right subject to then outstanding Awards, and (iv) any other terms of an
        Award
        that are affected by the event. Notwithstanding the foregoing, in the case
        of
        Incentive Stock Options, any such adjustments shall, to the extent practicable,
        be made in a manner consistent with the requirements of Section 424(a) of
        the
        Code. 

      

      4.3
        Anti-Dilution.
        Notwithstanding anything contained in the Plan to cover the contrary, including
        any adjustments discussed in this Section 4, the maximum aggregate number
        of
        shares of Common Stock that may be issued and sold under all Awards granted
        under the Plan shall be anti-dilutive in the event of a reverse stock split
        by
        the Company and shall not result in any reduction in the number of shares
        available and authorized under the Plan at the effective time of such reverse
        stock split(s).

      

      5.
           Participation and Awards.

       

      5.1    Designations
        of Participants.    All
        Eligible Persons are eligible to be designated by the Committee to receive
        Awards and become Participants under the Plan. The Committee has the authority,
        in its discretion, to determine and designate from time to time those Eligible
        Persons who are to be granted Awards, the types of Awards to be granted and
        the
        number of shares of Common Stock or units subject to Awards granted under
        the
        Plan. In selecting Eligible Persons to be Participants and in determining
        the
        type and amount of Awards to be granted under the Plan, the Committee shall
        consider any and all factors that it deems relevant or appropriate.

       

      
        
           

        

        
          Page
            3 of
            12

          
            

          

        

        
           

        

      

       

      5.2    Determination
        of Awards.    The
        Committee shall determine the terms and conditions of all Awards granted
        to
        Participants in accordance with its authority under Section 3.2 hereof. An
        Award
        may consist of one type of right or benefit hereunder or of two or more such
        rights or benefits granted in tandem or in the alternative. In the case of
        any
        fractional share or unit resulting from the grant, vesting, payment or crediting
        of dividends or dividend equivalents under an Award, the Committee shall
        have
        the discretionary authority to (i) disregard such fractional share or unit,
        (ii)
        round such fractional share or unit to the nearest lower or higher whole
        share
        or unit, or (iii) convert such fractional share or unit into a right to receive
        a cash payment. To the extent deemed necessary by the Committee, an Award
        shall
        be evidenced by an Award Agreement as described in Section 11.1 hereof.

       

      6.
           Stock Options. 

       

      6.1    Grant
        of Stock Options.    A
        Stock Option may be granted to any Eligible Person selected by the Committee.
        Subject to the provisions of Section 6.8 hereof and Section 422 of the Code,
        each Stock Option shall be designated, in the discretion of the Committee,
        as an
        Incentive Stock Option or as a Nonqualified Stock Option. 

       

      6.2    Exercise
        Price.    The
        exercise price per share of a Stock Option shall not be less than 85 percent
        of
        the Fair Market Value of the shares of Common Stock on the Date of Grant,
        provided that the Committee may in its discretion specify for any Stock Option
        an exercise price per share that is higher than the Fair Market Value on
        the
        Date of Grant, except that the price shall not be less than 110 percent of
        the
        Fair Market Value in the case of any person who owns securities possessing
        more
        than 10 percent of the total combined voting power of all classes of securities
        of the Company.

       

      6.3    Vesting
        of Stock Options.    The
        Committee shall in its discretion prescribe the time or times at which, or
        the
        conditions upon which, a Stock Option or portion thereof shall become vested
        and/or exercisable, and may accelerate the vesting or exercisability of any
        Stock Option at any time, provided, however, that any Stock Option shall
        vest at
        the rate of at least twenty percent (20%) per year over five (5) years from
        the
        date the Stock Option is granted, subject to reasonable conditions as may
        be
        provided for in the Award Agreement. However, in the case of a Stock Option
        granted to officers, Non-employee Directors, managers or Consultants of the
        Company, the Stock Option may become fully exercisable, subject to reasonable
        conditions, at anytime or during any period established by the Company. The
        requirements for vesting and exercisability of a Stock Option may be based
        on
        the continued Service of the Participant with the Company or its Affiliates
        for
        a specified time period (or periods) or on the attainment of specified
        performance goals established by the Committee in its discretion. 

       

      6.4    Term
        of Stock Options.    The
        Committee shall in its discretion prescribe in an Award Agreement the period
        during which a vested Stock Option may be exercised, provided that the maximum
        term of a Stock Option shall be ten years from the Date of Grant. Except
        as
        otherwise provided in this Section 6 or as otherwise may be provided by the
        Committee, no Stock Option issued to an employee or a Non-Employee Director
        of
        the Company may be exercised at any time during the term thereof unless the
        employee or a Non-Employee Director Participant is then in the Service of
        the
        Company or one of its Affiliates. 

       

      6.5    Termination
        of Service.    Subject
        to Section 6.8 hereof with respect to Incentive Stock Options, the Stock
        Option
        of any Participant whose Service with the Company or one of its Affiliates
        is
        terminated for any reason shall terminate on the earlier of (A) the date
        that
        the Stock Option expires in accordance with its terms or (B) unless otherwise
        provided in an Award Agreement, and except for termination for cause (as
        described in Section 10.2 hereof), the expiration of the applicable time
        period
        following termination of Service, in accordance with the following: (1) twelve
        months if Service ceased due to Disability, (2) eighteen months if Service
        ceased at a time when the Participant is eligible to elect immediate
        commencement of retirement benefits at a specified retirement age under a
        pension plan to which the Company or any of its Affiliates had made
        contributions, (3) eighteen months if the Participant died while in the Service
        of the Company or any of its Affiliates, or (iv) three months if Service
        ceased
        for any other reason. During the foregoing applicable period, except as
        otherwise specified in the Award Agreement or in the event Service was
        terminated by the death of the Participant, the Stock Option may be exercised
        by
        such Participant in respect of the same number of shares of Common Stock,
        in the
        same manner, and to the same extent as if he or she had remained in the
        continued Service of the Company or any Affiliate during the first three
        months
        of such period; provided that no additional rights shall vest after such
        three
        months. The Committee shall have authority to determine in each case whether
        an
        authorized leave of absence shall be deemed a termination of Service for
        purposes hereof, as well as the effect of a leave of absence on the vesting
        and
        exercisability of a Stock Option. Unless otherwise provided by the Committee,
        if
        an entity ceases to be an Affiliate of the Company or otherwise ceases to
        be
        qualified under the Plan or if all or substantially all of the assets of
        an
        Affiliate of the Company are conveyed (other than by encumbrance), such
        cessation or action, as the case may be, shall be deemed for purposes hereof
        to
        be a termination of the Service. 

       

      
        
           

        

        
          Page
            4 of
            12

          
            

          

        

        
           

        

      

       

      6.6    Stock
        Option Exercise; Tax Withholding.    Subject
        to such terms and conditions as shall be specified in an Award Agreement,
        a
        Stock Option may be exercised in whole or in part at any time during the
        term
        thereof by notice in the form required by the Company, together with payment
        of
        the aggregate exercise price therefor and applicable withholding tax. Payment
        of
        the exercise price shall be made in the manner set forth in the Award Agreement,
        unless otherwise provided by the Committee: (i) in cash or by cash equivalent
        acceptable to the Committee, (ii) by payment in shares of Common Stock that
        have
        been held by the Participant for at least six months (or such period as the
        Committee may deem appropriate, for accounting purposes or otherwise) valued
        at
        the Fair Market Value of such shares on the date of exercise, (iii) through
        an
        open-market, broker-assisted sales transaction pursuant to which the Company
        is
        promptly delivered the amount of proceeds necessary to satisfy the exercise
        price, (iv) by a combination of the methods described above or (v) by such
        other
        method as may be approved by the Committee and set forth in the Award Agreement.
        In addition to and at the time of payment of the exercise price, the Participant
        shall pay to the Company the full amount of any and all applicable income
        tax,
        employment tax and other amounts required to be withheld in connection with
        such
        exercise, payable under such of the methods described above for the payment
        of
        the exercise price as may be approved by the Committee and set forth in the
        Award Agreement.

       

      6.7    Limited
        Transferability of Nonqualified Stock Options.    All
        Stock Options shall be nontransferable except (i) upon the Participant’s death,
        in accordance with Section 11.2 hereof or (ii) in the case of Nonqualified
        Stock
        Options only, for the transfer of all or part of the Stock Option to a
        Participant’s “family member” (as defined for purposes of the Form S-8
        registration statement under the Securities Act of 1933), as may be approved
        by
        the Committee in its discretion at the time of proposed transfer. The transfer
        of a Nonqualified Stock Option may be subject to such terms and conditions
        as
        the Committee may in its discretion impose from time to time. Subsequent
        transfers of a Nonqualified Stock Option shall be prohibited other than in
        accordance with Section 11.2 hereof. 

       

      6.8    Additional
        Rules for Incentive Stock Options. 

       

      (a)    Eligibility.
           An
        Incentive Stock Option may only be granted to an Eligible Person who is
        considered an employee for purposes of Treasury Regulation §1.421-7(h) with
        respect to the Company or any Affiliate that qualifies as a “subsidiary
        corporation” with respect to the Company for purposes of Section 424(f) of the
        Code. 

       

      (b)     Termination
        of Employment.    An
        Award of an Incentive Stock Option may provide that such Stock Option may
        be
        exercised not later than 3 months following termination of employment of
        the
        Participant with the Company and all Subsidiaries, or not later than one
        year
        following a permanent and total disability within the meaning of Section
        22(e)(3) of the Code, as and to the extent determined by the Committee to
        comply
        with the requirements of Section 422 of the Code. 

       

      (c)    Other
        Terms and Conditions; Nontransferability.    Any
        Incentive Stock Option granted hereunder shall contain such additional terms
        and
        conditions, not inconsistent with the terms of the Plan, as are deemed necessary
        or desirable by the Committee, which terms, together with the terms of the
        Plan,
        shall be intended and interpreted to cause such Incentive Stock Option to
        qualify as an “incentive stock option” under Section 422 of the Code. An Award
        Agreement for an Incentive Stock Option may provide that such Stock Option
        shall
        be treated as a Nonqualified Stock Option to the extent that certain
        requirements applicable to “incentive stock options” under the Code shall not be
        satisfied. An Incentive Stock Option shall by its terms be nontransferable
        other
        than by will or by the laws of descent and distribution, and shall be
        exercisable during the lifetime of a Participant only by such Participant.
        

       

      (d)    Disqualifying
        Dispositions.    If
        shares of Common Stock acquired by exercise of an Incentive Stock Option
        are
        disposed of within two years following the Date of Grant or one year following
        the transfer of such shares to the Participant upon exercise, the Participant
        shall, promptly following such disposition, notify the Company in writing
        of the
        date and terms of such disposition and provide such other information regarding
        the disposition as the Company may reasonably require. 

       

      
        
           

        

        
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      6.9    Repricing
        Prohibited.    Subject
        to the adjustment provisions contained in Section 4.2 hereof, without the
        prior
        approval of the Company’s stockholders, evidenced by a majority of votes cast,
        neither the Committee nor the Board shall cause the cancellation, substitution
        or amendment of a Stock Option that would have the effect of reducing the
        exercise price of such a Stock Option previously granted under the Plan,
        or
        otherwise approve any modification to such a Stock Option that would be treated
        as a “repricing” under the then applicable rules, regulations or listing
        requirements. 

       

      7.
           Stock Awards. 

       

      7.1    Grant
        of Stock Awards.    A
        Stock Award may be granted to any Eligible Person selected by the Committee.
        A
        Stock Award may be granted for past services, in lieu of bonus or other cash
        compensation, as directors’ compensation or for any other valid purpose as
        determined by the Committee. A Stock Award granted to an Eligible Person
        represents shares of Common Stock that are issued without restrictions on
        transfer and other incidents of ownership and free of forfeiture conditions,
        except as otherwise provided in the Plan and the Award Agreement. The deemed
        issuance price of shares of Common Stock subject to each Stock Award shall
        not
        be less than 85 percent of the Fair Market Value of the Common Stock on the
        date
        of the grant. In the case of any person who owns securities possessing more
        than
        ten percent of the combined voting power of all classes of securities of
        the
        issuer or its parent or subsidiaries possessing voting power, the deemed
        issuance price of shares of Common Stock subject to each Stock Award shall
        be at
        least 100 percent of the Fair Market Value of the Common Stock on the date
        of
        the grant. The Committee may, in connection with any Stock Award, require
        the
        payment of a specified purchase price. 

       

      7.2    Rights
        as Stockholder.    Subject
        to the foregoing provisions of this Section 7 and the applicable Award
        Agreement, upon the issuance of the Common Stock under a Stock Award the
        Participant shall have all rights of a stockholder with respect to the shares
        of
        Common Stock, including the right to vote the shares and receive all dividends
        and other distributions paid or made with respect thereto. 

      

      8.    Restricted
        Stock Awards. 

       

      8.1    Grant
        of Restricted Stock Awards.    A
        Restricted Stock Award may be granted to any Eligible Person selected by
        the
        Committee. The deemed issuance price of shares of Common Stock subject to
        each
        Restricted Stock Award shall not be less than 85 percent of the Fair Market
        Value of the Common Stock on the date of the grant. In the case of any person
        who owns securities possessing more than ten percent of the combined voting
        power of all classes of securities of the issuer or its parent or subsidiaries
        possessing voting power, the deemed issuance price of shares of Common Stock
        subject to each Restricted Stock Award shall be at least 100 percent of the
        Fair
        Market Value of the Common Stock on the date of the grant. The Committee
        may
        require the payment by the Participant of a specified purchase price in
        connection with any Restricted Stock Award. 

       

      8.2    Vesting
        Requirements.    The
        restrictions imposed on shares granted under a Restricted Stock Award shall
        lapse in accordance with the vesting requirements specified by the Committee
        in
        the Award Agreement, provided that the Committee may accelerate the vesting
        of a
        Restricted Stock Award at any time. Such vesting requirements may be based
        on
        the continued Service of the Participant with the Company or its Affiliates
        for
        a specified time period (or periods) or on the attainment of specified
        performance goals established by the Committee in its discretion. If the
        vesting
        requirements of a Restricted Stock Award shall not be satisfied, the Award
        shall
        be forfeited and the shares of Common Stock subject to the Award shall be
        returned to the Company. 

       

      8.3    Restrictions.    Shares
        granted under any Restricted Stock Award may not be transferred, assigned
        or
        subject to any encumbrance, pledge, or charge until all applicable restrictions
        are removed or have expired, unless otherwise allowed by the Committee. Failure
        to satisfy any applicable restrictions shall result in the subject shares
        of the
        Restricted Stock Award being forfeited and returned to the Company. The
        Committee may require in an Award Agreement that certificates representing
        the
        shares granted under a Restricted Stock Award bear a legend making appropriate
        reference to the restrictions imposed, and that certificates representing
        the
        shares granted or sold under a Restricted Stock Award will remain in the
        physical custody of an escrow holder until all restrictions are removed or
        have
        expired. 

       

      8.4    Rights
        as Stockholder.    Subject
        to the foregoing provisions of this Section 8 and the applicable Award
        Agreement, the Participant shall have all rights of a stockholder with respect
        to the shares granted to the Participant under a Restricted Stock Award,
        including the right to vote the shares and receive all dividends and other
        distributions paid or made with respect thereto. The Committee may provide
        in an
        Award Agreement for the payment of dividends and distributions to the
        Participant at such times as paid to stockholders generally or at the times
        of
        vesting or other payment of the Restricted Stock Award. 

       

      
        
           

        

        
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      8.5    Section
        83(b) Election.    If
        a Participant makes an election pursuant to Section 83(b) of the Code with
        respect to a Restricted Stock Award, the Participant shall file, within 30
        days
        following the Date of Grant, a copy of such election with the Company and
        with
        the Internal Revenue Service, in accordance with the regulations under Section
        83 of the Code. The Committee may provide in an Award Agreement that the
        Restricted Stock Award is conditioned upon the Participant’s making or
        refraining from making an election with respect to the Award under Section
        83(b)
        of the Code. 

       

      9.
           Change in Control. 

       

      9.1    Effect
        of Change in Control.    Except
        to the extent an Award Agreement provides for a different result (in which
        case
        the Award Agreement will govern and this Section 9 of the Plan shall not
        be
        applicable), notwithstanding anything elsewhere in the Plan or any rules
        adopted
        by the Committee pursuant to the Plan to the contrary, if a Triggering Event
        shall occur within the 12-month period beginning with a Change in Control
        of the
        Company, then, effective immediately prior to such Triggering Event, each
        outstanding Stock Option, to the extent that it shall not otherwise have
        become
        vested and exercisable, shall automatically become fully and immediately
        vested
        and exercisable, without regard to any otherwise applicable vesting requirement.
        

       

      9.2    Definitions 

       

      (a)    Cause.
           For
        purposes of this Section 9, the term “Cause” shall mean a determination by the
        Committee that a Participant (i) has been convicted of, or entered a plea
        of
        nolo contendere to, a crime that constitutes a felony under Federal or state
        law, (ii) has engaged in willful gross misconduct in the performance of the
        Participant’s duties to the Company or an Affiliate or (iii) has committed a
        material breach of any written agreement with the Company or any Affiliate
        with
        respect to confidentiality, noncompetition, nonsolicitation or similar
        restrictive covenant. Subject to the first sentence of Section 9.1 hereof,
        in
        the event that a Participant is a party to an employment agreement with the
        Company or any Affiliate that defines a termination on account of “Cause” (or a
        term having similar meaning), such definition shall apply as the definition
        of a
        termination on account of “Cause” for purposes hereof, but only to the extent
        that such definition provides the Participant with greater rights. A termination
        on account of Cause shall be communicated by written notice to the Participant,
        and shall be deemed to occur on the date such notice is delivered to the
        Participant. 

       

      (b)    Change
        in Control.    For
        purposes of this Section 9, a “Change in Control” shall be deemed to have
        occurred upon: 

       

      (i)
        the
        occurrence of an acquisition by any individual, entity or group (within the
        meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of
        beneficial ownership (within the meaning of Rule 13d-3 promulgated under
        the
        Exchange Act) of a percentage of the combined voting power of the then
        outstanding voting securities of the Company entitled to vote generally in
        the
        election of directors (the “Company Voting Securities”) (but excluding (1) any
        acquisition directly from the Company (other than an acquisition by virtue
        of
        the exercise of a conversion privilege of a security that was not acquired
        directly from the Company), (2) any acquisition by the Company or an Affiliate
        and (3) any acquisition by an employee benefit plan (or related trust) sponsored
        or maintained by the Company or any Affiliate) (an “Acquisition”) that is thirty
        percent (30%) or more of the Company Voting Securities; 

       

      (ii)
        at
        any time during a period of two (2) consecutive years or less, individuals
        who
        at the beginning of such period constitute the Board (and any new directors
        whose election by the Board or nomination for election by the Company’s
        stockholders was approved by a vote of at least two-thirds (2/3) of the
        directors then still in office who either were directors at the beginning
        of the
        period or whose election or nomination for election was so approved) cease
        for
        any reason (except for death, Disability or voluntary retirement) to constitute
        a majority thereof;

       

      
        
           

        

        
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      (iii)
        an
        Acquisition that is fifty percent (50%) or more of the Company Voting
        Securities; 

       

      (iv)
        the
        consummation of a merger, consolidation, reorganization or similar corporate
        transaction, whether or not the Company is the surviving company in such
        transaction, other than a merger, consolidation, or reorganization that would
        result in the Persons who are beneficial owners of the Company Voting Securities
        outstanding immediately prior thereto continuing to beneficially own, directly
        or indirectly, in substantially the same proportions, at least fifty percent
        (50%) of the combined voting power of the Company Voting Securities (or the
        voting securities of the surviving entity) outstanding immediately after
        such
        merger, consolidation or reorganization; 

       

      (v)
        the
        sale or other disposition of all or substantially all of the assets of the
        Company; 

       

      (vi)
        the
        approval by the stockholders of the Company of a complete liquidation or
        dissolution of the Company; or 

       

      (vii)
        the
        occurrence of any transaction or event, or series of transactions or events,
        designated by the Board in a duly adopted resolution as representing a change
        in
        the effective control of the business and affairs of the Company, effective
        as
        of the date specified in any such resolution. 

       

      (c)    Constructive
        Termination.    For
        purposes of this Section 9, a “Constructive Termination” shall mean a
        termination of employment by a Participant within sixty (60) days following
        the
        occurrence of any one or more of the following events without the Participant’s
        written consent (i) any reduction in position, title (for Vice Presidents
        or
        above), overall responsibilities, level of authority, level of reporting
        (for
        Vice Presidents or above), base compensation, annual incentive compensation
        opportunity, aggregate employee benefits or (ii) a request that the
        Participant’s location of employment be relocated by more than fifty (50) miles.
        Subject to the first sentence of Section 9.1 hereof, in the event that a
        Participant is a party to an employment agreement with the Company or any
        Affiliate (or a successor entity) that defines a termination on account of
        “Constructive Termination,” “Good Reason” or “Breach of Agreement” (or a term
        having a similar meaning), such definition shall apply as the definition
        of
“Constructive Termination” for purposes hereof in lieu of the foregoing, but
        only to the extent that such definition provides the Participant with greater
        rights. A Constructive Termination shall be communicated by written notice
        to
        the Committee, and shall be deemed to occur on the date such notice is delivered
        to the Committee, unless the circumstances giving rise to the Constructive
        Termination are cured within five (5) days of such notice. 

       

      (d)    Triggering
        Event.    For
        purposes of this Section 9, a “Triggering Event” shall mean (i) the termination
        of Service of a Participant by the Company or an Affiliate (or any successor
        thereof) other than on account of death, Disability or Cause, (ii) the
        occurrence of a Constructive Termination or (iii) any failure by the Company
        (or
        a successor entity) to assume, replace, convert or otherwise continue any
        Award
        in connection with the Change in Control (or another corporate transaction
        or
        other change effecting the Common Stock) on the same terms and conditions
        as
        applied immediately prior to such transaction, except for equitable adjustments
        to reflect changes in the Common Stock pursuant to Section 4.2 hereof.

       

      9.3    Excise
        Tax Limit.    In
        the event that the vesting of Awards together with all other payments and
        the
        value of any benefit received or to be received by a Participant would result
        in
        all or a portion of such payment being subject to the excise tax under Section
        4999 of the Code, then the Participant’s payment shall be either (i) the full
        payment or (ii) such lesser amount that would result in no portion of the
        payment being subject to excise tax under Section 4999 of the Code (the “Excise
        Tax”), whichever of the foregoing amounts, taking into account the applicable
        Federal, state, and local employment taxes, income taxes, and the Excise
        Tax,
        results in the receipt by the Participant, on an after-tax basis, of the
        greatest amount of the payment notwithstanding that all or some portion of
        the
        payment may be taxable under Section 4999 of the Code. All determinations
        required to be made under this Section 9 shall be made by Malone & Bailey,
        PLLC or any other accounting firm which is the Company’s outside auditor
        immediately prior to the event triggering the payments that are subject to
        the
        Excise Tax (the “Accounting Firm”). The Company shall cause the Accounting Firm
        to provide detailed supporting calculations of its determinations to the
        Company
        and the Participant. All fees and expenses of the Accounting Firm shall be
        borne
        solely by the Company. The Accounting Firm’s determinations must be made with
        substantial authority (within the meaning of Section 6662 of the Code). For
        the
        purposes of all calculations under Section 280G of the Code and the application
        of this Section 9.3, all determinations as to present value shall be made
        using
        120 percent of the applicable Federal rate (determined under Section 1274(d)
        of
        the Code) compounded semiannually, as in effect on December 30, 2004.

       

      
        
           

        

        
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      10.
           Forfeirture Events. 

       

      10.1    General.
           The
        Committee may specify in an Award Agreement at the time of the Award that
        the
        Participant’s rights, payments and benefits with respect to an Award shall be
        subject to reduction, cancellation, forfeiture or recoupment upon the occurrence
        of certain specified events, in addition to any otherwise applicable vesting
        or
        performance conditions of an Award. Such events shall include, but shall
        not be
        limited to, termination of Service for cause, violation of material Company
        policies, breach of noncompetition, confidentiality or other restrictive
        covenants that may apply to the Participant, or other conduct by the Participant
        that is detrimental to the business or reputation of the Company. 

       

      10.2    Termination
        for Cause.    Unless
        otherwise provided by the Committee and set forth in an Award Agreement,
        if a
        Participant’s employment with the Company or any Affiliate shall be terminated
        for cause, the Company may, in its sole discretion, immediately terminate
        such
        Participant’s right to any further payments, vesting or exercisability with
        respect to any Award in its entirety. In the event a Participant is party
        to an
        employment (or similar) agreement with the Company or any Affiliate that
        defines
        the term “cause,” such definition shall apply for purposes of the Plan. The
        Company shall have the power to determine whether the Participant has been
        terminated for cause and the date upon which such termination for cause occurs.
        Any such determination shall be final, conclusive and binding upon the
        Participant. In addition, if the Company shall reasonably determine that
        a
        Participant has committed or may have committed any act which could constitute
        the basis for a termination of such Participant’s employment for cause, the
        Company may suspend the Participant’s rights to exercise any option, receive any
        payment or vest in any right with respect to any Award pending a determination
        by the Company of whether an act has been committed which could constitute
        the
        basis for a termination for “cause” as provided in this Section 10.2.

       

      11.
           General Provisions. 

       

      11.1    Award
        Agreement.    To
        the extent deemed necessary by the Committee, an Award under the Plan shall
        be
        evidenced by an Award Agreement in a written or electronic form approved
        by the
        Committee setting forth the number of shares of Common Stock or units subject
        to
        the Award, the exercise price, base price, or purchase price of the Award,
        the
        time or times at which an Award will become vested, exercisable or payable
        and
        the term of the Award. The Award Agreement may also set forth the effect
        on an
        Award of termination of Service under certain circumstances. The Award Agreement
        shall be subject to and incorporate, by reference or otherwise, all of the
        applicable terms and conditions of the Plan, and may also set forth other
        terms
        and conditions applicable to the Award as determined by the Committee consistent
        with the limitations of the Plan. Award Agreements evidencing Incentive Stock
        Options shall contain such terms and conditions as may be necessary to meet
        the
        applicable provisions of Section 422 of the Code. The grant of an Award under
        the Plan shall not confer any rights upon the Participant holding such Award
        other than such terms, and subject to such conditions, as are specified in
        the
        Plan as being applicable to such type of Award (or to all Awards) or as are
        expressly set forth in the Award Agreement. The Committee need not require
        the
        execution of an Award Agreement by a Participant, in which case, acceptance
        of
        the Award by the Participant shall constitute agreement by the Participant
        to
        the terms, conditions, restrictions and limitations set forth in the Plan
        and
        the Award Agreement as well as the administrative guidelines of the Company
        in
        effect from time to time. 

       

      11.2    No
        Assignment or Transfer; Beneficiaries.    Except
        as provided in Section 6.7 hereof, Awards under the Plan shall not be assignable
        or transferable by the Participant, except by will or by the laws of descent
        and
        distribution, and shall not be subject in any manner to assignment, alienation,
        pledge, encumbrance or charge. Notwithstanding the foregoing, the Committee
        may
        provide in the terms of an Award Agreement that the Participant shall have
        the
        right to designate a beneficiary or beneficiaries who shall be entitled to
        any
        rights, payments or other benefits specified under an Award following the
        Participant’s death. During the lifetime of a Participant, an Award shall be
        exercised only by such Participant or such Participant’s guardian or legal
        representative. In the event of a Participant’s death, an Award may to the
        extent permitted by the Award Agreement be exercised by the Participant’s
        beneficiary as designated by the Participant in the manner prescribed by
        the
        Committee or, in the absence of an authorized beneficiary designation, by
        the
        legatee of such Award under the Participant’s will or by the Participant’s
        estate in accordance with the Participant’s will or the laws of descent and
        distribution, in each case in the same manner and to the same extent that
        such
        Award was exercisable by the Participant on the date of the Participant’s death.

       

      
        
           

        

        
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      11.3    Deferrals
        of Payment.    The
        Committee may in its discretion permit a Participant to defer the receipt
        of
        payment of cash or delivery of shares of Common Stock that would otherwise
        be
        due to the Participant by virtue of the exercise of a right or the satisfaction
        of vesting or other conditions with respect to an Award. If any such deferral
        is
        to be permitted by the Committee, the Committee shall establish rules and
        procedures relating to such deferral in a manner intended to comply with
        the
        requirements of Section 409A of the Code, including, without limitation,
        the
        time when an election to defer may be made, the time period of the deferral
        and
        the events that would result in payment of the deferred amount, the interest
        or
        other earnings attributable to the deferral and the method of funding, if
        any,
        attributable to the deferred amount. 

       

      11.4    Rights
        as Stockholder.    A
        Participant shall have no rights as a holder of shares of Common Stock with
        respect to any unissued securities covered by an Award until the date the
        Participant becomes the holder of record of such securities. Except as provided
        in Section 4.2 hereof, no adjustment or other provision shall be made for
        dividends or other stockholder rights, except to the extent that the Award
        Agreement provides for dividend payments or dividend equivalent rights.

       

      11.5    Employment
        or Service.    Nothing
        in the Plan, in the grant of any Award or in any Award Agreement shall confer
        upon any Eligible Person any right to continue in the Service of the Company
        or
        any of its Affiliates, or interfere in any way with the right of the Company
        or
        any of its Affiliates to terminate the Participant’s employment or other service
        relationship for any reason at any time. 

       

      11.6    Securities
        Laws.    No
        shares of Common Stock will be issued or transferred pursuant to an Award
        unless
        and until all then applicable requirements imposed by Federal and state
        securities and other laws, rules and regulations and by any regulatory agencies
        having jurisdiction, and by any exchanges upon which the shares of Common
        Stock
        may be listed, have been fully met. As a condition precedent to the issuance
        of
        shares pursuant to the grant or exercise of an Award, the Company may require
        the Participant to take any reasonable action to meet such requirements.
        The
        Committee may impose such conditions on any shares of Common Stock issuable
        under the Plan as it may deem advisable, including, without limitation,
        restrictions under the Securities Act of 1933, as amended, under the
        requirements of any exchange upon which such shares of the same class are
        then
        listed, and under any blue sky or other securities laws applicable to such
        shares. The Committee may also require the Participant to represent and warrant
        at the time of issuance or transfer that the shares of Common Stock are being
        acquired only for investment purposes and without any current intention to
        sell
        or distribute such shares. 

       

      11.7    Tax
        Withholding.    The
        Participant shall be responsible for payment of any taxes or similar charges
        required by law to be withheld from an Award or an amount paid in satisfaction
        of an Award, which shall be paid by the Participant on or prior to the payment
        or other event that results in taxable income in respect of an Award. The
        Award
        Agreement may specify the manner in which the withholding obligation shall
        be
        satisfied with respect to the particular type of Award. 

       

      11.8    Unfunded
        Plan.    The
        adoption of the Plan and any reservation of shares of Common Stock or cash
        amounts by the Company to discharge its obligations hereunder shall not be
        deemed to create a trust or other funded arrangement. Except upon the issuance
        of Common Stock pursuant to an Award, any rights of a Participant under the
        Plan
        shall be those of a general unsecured creditor of the Company, and neither
        a
        Participant nor the Participant’s permitted transferees or estate shall have any
        other interest in any assets of the Company by virtue of the Plan.
        Notwithstanding the foregoing, the Company shall have the right to implement
        or
        set aside funds in a grantor trust, subject to the claims of the Company’s
        creditors or otherwise, to discharge its obligations under the Plan.

       

      11.9    Other
        Compensation and Benefit Plans.    The
        adoption of the Plan shall not affect any other share incentive or other
        compensation plans in effect for the Company or any Affiliate, nor shall
        the
        Plan preclude the Company from establishing any other forms of share incentive
        or other compensation or benefit program for employees of the Company or
        any
        Affiliate. The amount of any compensation deemed to be received by a Participant
        pursuant to an Award shall not constitute includable compensation for purposes
        of determining the amount of benefits to which a Participant is entitled
        under
        any other compensation or benefit plan or program of the Company or an
        Affiliate, including, without limitation, under any pension or severance
        benefits plan, except to the extent specifically provided by the terms of
        any
        such plan. 

       

      
        
           

        

        
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      11.10    Plan
        Binding on Transferees.    The
        Plan shall be binding upon the Company, its transferees and assigns, and
        the
        Participant, the Participant’s executor, administrator and permitted transferees
        and beneficiaries. 

       

      11.11    Severability.
           If
        any provision of the Plan or any Award Agreement shall be determined to be
        illegal or unenforceable by any court of law in any jurisdiction, the remaining
        provisions hereof and thereof shall be severable and enforceable in accordance
        with their terms, and all provisions shall remain enforceable in any other
        jurisdiction. 

       

      11.12    Foreign
        Jurisdictions.    The
        Committee may adopt, amend and terminate such arrangements and grant such
        Awards, not inconsistent with the intent of the Plan, as it may deem necessary
        or desirable to comply with any tax, securities, regulatory or other laws
        of
        other jurisdictions with respect to Awards that may be subject to such laws.
        The
        terms and conditions of such Awards may vary from the terms and conditions
        that
        would otherwise be required by the Plan solely to the extent the Committee
        deems
        necessary for such purpose. Moreover, the Board may approve such supplements
        to
        or amendments, restatements or alternative versions of the Plan, not
        inconsistent with the intent of the Plan, as it may consider necessary or
        appropriate for such purposes, without thereby affecting the terms of the
        Plan
        as in effect for any other purpose. 

       

      11.13    Substitute
        Awards in Corporate Transactions.    Nothing
        contained in the Plan shall be construed to limit the right of the Committee
        to
        grant Awards under the Plan in connection with the acquisition, whether by
        purchase, merger, consolidation or other corporate transaction, of the business
        or assets of any corporation or other entity. Without limiting the foregoing,
        the Committee may grant Awards under the Plan to an employee or director
        of
        another corporation who becomes an Eligible Person by reason of any such
        corporate transaction in substitution for awards previously granted by such
        corporation or entity to such person. The terms and conditions of the substitute
        Awards may vary from the terms and conditions that would otherwise be required
        by the Plan solely to the extent the Committee deems necessary for such purpose.
        

       

      11.14
        Governing Law. The
        Plan
        and all rights hereunder shall be subject to and interpreted in accordance
        with
        the laws of the State of Delaware, without reference to the principles of
        conflicts of laws, and to applicable Federal securities laws. 

      

      11.15
        Financial Statements. All
        Participants shall receive the financial statements of the Company at least
        annually.  

      

      11.16 Performance
        Based Awards.    For
        purposes of Stock Awards and Restricted Stock Awards granted under the Plan
        that
        are intended to qualify as “performance-based” compensation under Section 162(m)
        of the Code, such Awards shall be granted to the extent necessary to satisfy
        the
        requirements of Section 162(m) of the Code. 

      

      11.17
        Stockholder Approval. The
        Plan
        must be approved by the stockholders by a majority of all shares entitled
        to
        vote within twelve (12) months after the date the Plan was adopted by the
        Board.
        Any Incentive Stock Options granted before stockholder approval is obtained
        shall be converted into Nonqualified Stock Options if stockholder approval
        is
        not obtained within twelve (12) months before or after the Plan was adopted.
        

       

      12.
           Effective Date; Amendment and Termination.

       

      12.1    Effective
        Date.    The
        Plan shall become effective following its adoption by the Board. The term
        of the
        Plan shall be ten (10) years from the date of adoption by the Board, subject
        to
        Section 12.3 hereof. 

       

      12.2    Amendment.
           
        The Board may at any time and from time to time and in any respect, amend
        or
        modify the Plan. The Board may seek the approval of any amendment or
        modification by the Company’s stockholders to the extent it deems necessary or
        advisable in its discretion for purposes of compliance with Section 162(m)
        or
        Section 422 of the Code, or exchange or securities market or for any other
        purpose. No amendment or modification of the Plan shall adversely affect
        any
        Award theretofore granted without the consent of the Participant or the
        permitted transferee of the Award. 

       

      
        
           

        

        
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            11
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      12.3    Termination.
           The
        Plan shall terminate on the tenth anniversary of the date of its adoption
        by the
        Board. The Board may, in its discretion and at any earlier date, terminate
        the
        Plan. Notwithstanding the foregoing, no termination of the Plan shall adversely
        affect any Award theretofore granted without the consent of the Participant
        or
        the permitted transferee of the Award. 

       

      
        
           

        

        
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            12
            of 12

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