AUTHENTIDATE HOLDING CORP
FORM OF SECURITIES PURCHASE AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>b327232_ex10-1.htm
<DESCRIPTION>FORM OF SECURITIES PURCHASE AGREEMENT
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Prepared and filed by St Ives Burrups
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<p align="right"><font size="2" face="serif"><b>Exhibit 10.1</b></font></p>
<p align="center"><font size="2" face="serif"><b>SECURITIES PURCHASE AGREEMENT</b></font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">This Securities Purchase Agreement
    (this &#147;<u>Agreement</u>&#148;) is dated as of September __, 2003 among
    Authentidate Holding Corp., a Delaware corporation (the &#147;<u>Company</u>&#148;),
    and the purchaser identified on the signature pages hereto (including its
    successors and assigns, a &#147;<u>Purchaser</u>&#148;).</font></p>
<p align="justify"><font size="2" face="serif">WHEREAS, subject to the terms and
    conditions set forth in this Agreement and pursuant to Section 4(2) of the
    Securities Act of 1933, as amended (the &#147;<u>Securities Act</u>&#148;)
    and Rule 506 promulgated thereunder, the Company desires to issue and sell
    to each Purchaser, and each Purchaser, severally and not jointly, desires
    to purchase from the Company, securities of the Company as more fully described
    in this Agreement.</font></p>
<p align="justify"><font size="2" face="serif">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 agrees as follows:</font></p>
</div>
<p align="center"><font size="2" face="serif"><b>ARTICLE I<br>DEFINITIONS</b></font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">1.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Definitions</u>.
    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 indicated in this Section 1.1:</font></p>
</div>
<div style="text-indent:3%; margin-left:3%">
<p align="justify"><font size="2" face="serif">&#147;<u>Actual Minimum</u>&#148; means,
    as of any date, the maximum aggregate number of shares of Common Stock then
    issued or potentially issuable in the future pursuant to the Transaction
    Documents, including any shares of Common Stock issuable upon exercise in
full of all Warrants, ignoring any exercise limits set forth therein.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Affiliate</u>&#148; 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 144 under the Securities
Act.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Capital Shares</u>&#148; shall
    mean the Common Stock and any shares of any other class of common stock whether
    now or hereafter authorized, having the right to participate in the distribution
of earnings and assets of the Company.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Capital Shares Equivalents</u>&#148; shall
    mean any securities, rights, or obligations that are convertible into or
    exchangeable for or give any right to subscribe for or purchase, directly
    or indirectly, any Capital Shares of the Company or any warrants, options
    or other rights to subscribe for or purchase, directly or indirectly, Capital
Shares or any such convertible or exchangeable securities.</font></p>
</div>
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<div style="text-indent:3%; margin-left:3%">
  <p><font size="2" face="serif">&#147;<u>Closing</u>&#148; means the closing of
    the purchase and sale of the Securities pursuant to Section 2.1.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Closing Date</u>&#148; means the date
    of the Closing, which date shall occur within 10 days from the date hereof.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Commission</u>&#148; means the Securities
  and Exchange Commission.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Common Stock</u>&#148; means the common
  stock of the Company, par value $0.001 per share, and any securities into which
  such common stock may hereinafter be reclassified into.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Company Counsel</u>&#148; means Goldstein &amp; DiGioia
  LLP, outside counsel to the Company.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Disclosure Schedules</u>&#148; shall
    have the meaning ascribed to such term in Section 3.1.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Effective Date</u>&#148; means the date
  that the Registration Statement is first declared effective by the Commission.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Exchange Act</u>&#148; means the Securities
  Exchange Act of 1934, as amended.</font>
</p>
<p><font size="2" face="serif">&#147;<u>GAAP</u>&#148; shall have the meaning
  ascribed to such term in Section 3.1(h).</font>
</p>
<p><font size="2" face="serif">&#147;<u>Liens</u>&#148; shall have the meaning
  ascribed to such term in Section 3.1(a).</font>
</p>
<p><font size="2" face="serif">&#147;<u>Losses</u>&#148; means any and all losses,
  claims, damages, liabilities, settlement costs and expenses, including without
  limitation costs of preparation and reasonable attorneys&#146; fees.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Material Adverse Effect</u>&#148; shall
  have the meaning assigned to such term in Section 3.1(b).</font>
</p>
<p><font size="2" face="serif">&#147;<u>Person</u>&#148; 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.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Principal Market</u>&#148; shall initially
  mean the NASDAQ National Market and shall also include the American Stock Exchange,
  the New York Stock Exchange or the NASDAQ Small-Cap Market, whichever is at
    the time the principal trading exchange or market for the Common Stock, based
    upon
  share volume.</font>
</p>
<p><font size="2" face="serif">&#147;<u>Proceeding</u>&#148; means an action,
    claim, suit, investigation or proceeding (including, without limitation,
    an investigation
  or partial proceeding, such as a deposition), whether commenced or threatened.</font>
</p>
</div>
<p align="center"><font size="2" face="serif">-2-</font></p>
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<div style="text-indent:3%; margin-left:3%">
<p align="justify"><font size="2" face="serif">&#147;<u>Registration Rights Agreement</u>&#148; means
    the Registration Rights Agreement, dated the Closing Date, among the Company
  and the Purchasers, in the form of <u>Exhibit B</u>.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Required Approvals</u>&#148; shall
  have the meaning ascribed to such term in Section 3.1(e).</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Rule 144</u>&#148; 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.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>SEC Reports</u>&#148; shall
  have the meaning ascribed to such term in Section 3.1(h).</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Securities</u>&#148; means
  the Common Stock, the Warrants and the Warrant Shares.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Securities Act</u>&#148; means
  the Securities Act of 1933, as amended.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Subscription Amount</u>&#148; as
    to each Purchaser, the aggregate amount of Common Stock purchased at the
    Closing as indicated on the signature pages hereto below such Purchaser&#146;s
  address for notice.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Subsidiary</u>&#148; means
    any subsidiary of the Company that is required to be listed in <u>Schedule
  3.1(a)</u>.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Trading Day</u>&#148; shall
  mean any day during which the Principal Market shall be open for business.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Transaction Documents</u>&#148; means
    this Agreement, the Warrants, the Registration Rights Agreement and any other
    documents or agreements executed in connection with the transactions contemplated
  hereunder.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Warrant Shares</u>&#148; means
  the shares of Common Stock issuable upon exercise of the Warrants.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>Registration Statement</u>&#148; means
    a registration statement meeting the requirements set forth in the Registration
    Rights Agreement and covering the resale of the Common Stock and Warrant
  Shares by the Purchasers.</font></p>
<p align="justify"><font size="2" face="serif">&#147;<u>VWAP</u>&#148; 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 an Trading
    Market, the daily volume weighted average price of the Common Stock for such
    date (or the nearest preceding date) on the primary Trading Market on which
    the Common Stock is then listed or quoted as reported by Bloomberg Financial
    L.P. (based on a trading day from 9:30 a.m. ET to 4:02 p.m. Eastern Time)
    using the VAP function; (b)&nbsp;if the Common Stock is not then listed or
    quoted on an Trading Market and if prices for the Common Stock are then quoted
    on the OTC Bulletin Board, the volume weighted average price of the Common
  Stock for such date (or the nearest preceding date) on the </font></p>
</div>
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<div style="margin-left:3%">
  <p align="justify"><font size="2" face="serif">OTC Bulletin Board; (c)&nbsp; 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 &#147;Pink Sheets&#148; published
      by the National Quotation Bureau Incorporated (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)&nbsp;in all
      other cases, the fair market value of a share of Common Stock as determined
      by a nationally recognized-independent appraiser selected in good faith
      by Purchasers then holding a majority of shares Common Stock purchased
  hereunder.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
  <p align="justify"><font size="2" face="serif">&#147;<u>Warrants</u>&#148; means
      collectively the Common Stock purchase warrants, in the form of <u>Exhibit&nbsp;A</u> delivered
  to the Purchasers at the Closing in accordance with Section 2.2.</font></p>
</div>
<p align="center"><font size="2" face="serif"><b>ARTICLE II<br>PURCHASE AND SALE</b></font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">2.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Closing</u>.
    Subject to the terms and conditions set forth in this Agreement, at the Closing
    the Company shall issue and sell to each Purchaser, and each Purchaser shall,
    severally and not jointly, purchase from the Company, such number of shares
    of Common Stock equal to such Purchaser&#146;s Subscription Amount and the
    Warrants for an aggregate Subscription Amount of up to $500,000 at a per
    share purchase price of $3.00 (the &#147;Purchase Price&#148;). The Closing
    shall take place at the offices of Company Counsel immediately following
    the execution hereof, or at such other location or time as the parties may
    agree and in no event later than 10 days following the date hereof.</font></p>
<p align="justify"><font size="2" face="serif">2.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Closing
      Deliveries</u>.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"><font size="2" face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; At
    or prior to the Closing, the Company shall deliver or cause to be delivered
to the Company the following:</font></p>
</div>
<div style="margin-left:6%; text-indent:3%">
<p align="justify"><font size="2" face="serif">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Certificates
    representing such number of shares of Common Stock as can be purchased at
    the Purchase Price in the Subscription Amount indicated below such Purchaser's
    name on the signature page of this Agreement, registered in the name of such
Purchaser;</font></p>
<p align="justify"> <font size="2" face="serif">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
    Warrant to purchase up to a number of shares of Common Stock equal to 30%
    of the number of shares of Common Stock purchased by Purchaser with a term
    of 4 years and an exercise price of $3.00 per Warrant Share, subject to adjustment
therein.</font></p>
<p align="justify"> <font size="2" face="serif">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
    legal opinion of Company Counsel, in the form of <u>Exhibit C</u> attached
hereto, addressed to the Purchasers;</font></p>
<p align="justify"> <font size="2" face="serif">(viii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
Registration Rights Agreement duly executed by the Company.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; At
    or prior to the Closing, each Purchaser shall deliver or cause to be delivered
to the Company the following:</font></p>
</div>
<p align="center"><font size="2" face="serif">-4-</font></p>
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<div style="margin-left:6%; text-indent:3%">
<p align="justify"><font size="2" face="serif">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
    Subscription Amount indicated below such Purchaser's name on the signature
    page of this Agreement, in United States dollars and in immediately available
    funds, by wire transfer to the instructions set forth on the Company&#146;s
signature page hereto;</font></p>
<p align="justify"> <font size="2" face="serif">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
  Registration Rights Agreement duly executed by such Purchaser.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All
    representations and warranties of the other party contained herein shall
remain true and correct as of the Closing Date;</font></p>
<p align="justify"> <font size="2" face="serif">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
    shall have been no Material Adverse Effect (as defined in Section 3.1(b))
with respect to the Company since the date hereof;</font></p>
<p align="justify"> <font size="2" face="serif">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    Company shall have obtained approval of the transaction, if required, from
The Nasdaq Stock Market; and</font></p>
<p align="justify"> <font size="2" face="serif">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; From
    the date hereof to the Closing Date, trading in the Common Stock shall not
    have been suspended by the Commission (except for any suspension of trading
    of limited duration agreed to by the Company, 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 Financial Markets 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
    the Principal 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 the Purchasers, makes it impracticable or inadvisable to purchase
the Securities at the Closing.</font></p>
</div>
<p align="center"><font size="2" face="serif"><b>ARTICLE III<br>REPRESENTATIONS AND WARRANTIES</b></font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Representations
      and Warranties of the Company</u>. Except as set forth under the corresponding
      section of the disclosure schedules attached hereto (the &#147;<u>Disclosure
      Schedules</u>&#148;) which Disclosure Schedules shall be deemed a part
      hereof, the Company hereby makes the representations and warranties set
      forth below to the Purchasers. Any disclosure made in the Disclosure Schedules
      shall be deemed an amendment and disclosure to all the representations
      and warranties set forth below.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Subsidiaries</u>.
    The Company has no direct or indirect subsidiaries. The Company owns, directly
    or indirectly, all of the capital stock or other equity interests of each
    Subsidiary free and clear of any lien, charge, security interest, encumbrance,
    right of first refusal or other restriction (collectively, &#147;<u>Liens</u>&#148;),
    and all the issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, non-</font></p>
</div>
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<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">assessable and free of preemptive
      and similar rights. If the Company has no subsidiaries, then references
    in the Transaction Documents to the Subsidiaries will be disregarded.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Organization
      and Qualification</u>. Each of the Company and 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 nor any Subsidiary is in violation of any of the provisions
      of its respective certificate or articles of incorporation, bylaws or other
      organizational or charter documents. Each of the Company and the Subsidiaries
      is duly qualified to do 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, individually or in the aggregate: (i) adversely affect the
      legality, validity or enforceability of any Transaction Document, (ii)
      have or result in or be reasonably likely to have or result in a material
      adverse effect on the results of operations, assets, prospects, business
      or condition (financial or otherwise) of the Company and the Subsidiaries,
      taken as a whole, or (iii) adversely impair the Company's ability to perform
      fully on a timely basis its obligations under any of the Transaction Documents
(any of (i), (ii) or (iii), a &#147;<u>Material Adverse Effect</u>&#148;).</font></p>
<p align="justify"> <font size="2" face="serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Authorization;
      Enforcement</u>. The Company 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
      or thereunder. The execution and delivery of each of the Transaction Documents
      by the Company and the consummation by it of the transactions contemplated
      hereby or thereby have been duly authorized by all necessary action on
      the part of the Company and no further consent or action is required by
      the Company. Each of the Transaction Documents has been (or upon delivery
      will be) duly executed by the Company and, when delivered in accordance
      with the terms hereof, will constitute the valid and binding obligation
      of the Company enforceable against the Company in accordance with its terms,
      subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
      moratorium and similar laws affecting creditors&#146; rights and remedies
      generally and general principles of equity. Neither the Company nor any
      Subsidiary is in violation of any of the provisions of its respective certificate
      or articles of incorporation, by-laws or other organizational or charter
documents.</font></p>
<p align="justify"> <font size="2" face="serif">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>No
      Conflicts</u>. The execution, delivery and performance of the Transaction
      Documents by the Company and the consummation by the Company of the transactions
      contemplated thereby do not and will not: (i) conflict with or violate
      any provision of the Company's or any Subsidiary's certificate or articles
      of incorporation, bylaws or other organizational or charter documents,
      or (ii) subject to obtaining the Required Approvals (as defined below),
      conflict with, or constitute a default (or an event that with notice or
      lapse of time or both would become a default) under, or give to others
      any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of </font></p>
</div>
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<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">time or both) of, any agreement,
    credit facility, debt or other instrument (evidencing a Company or Subsidiary
    debt or otherwise)
        or other understanding to which the Company or any Subsidiary is a party
        or by which any property or asset of the Company or any Subsidiary is
    bound or affected, or (iii) result, to the Company&#146;s knowledge, 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
        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, individually or in the aggregate, have
  or result in a Material Adverse Effect.</font></p>
</div>
<div style="text-indent:3%;margin-left:3%">
<p align="justify"> <font size="2" face="serif">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Filings,
      Consents and Approvals</u>. Neither the Company nor any Subsidiary 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 of the Transaction
      Documents, other than (i) the filings required under Section 4.8, (ii)
      the filing with the Commission of the Registration Statement, (iii) the
      notice and/or application(s), as may be required, to each applicable Principal
      Market for the issuance and sale of the Common Stock and Warrants and the
      listing of the Common Stock and Warrant Shares for trading thereon in the
      time and manner required thereby, and (iv) the filing of Form D with the
      Commission and applicable Blue Sky filings (collectively, the &#147;<u>Required
Approvals</u>&#148;).</font></p>
<p align="justify"> <font size="2" face="serif">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Issuance
      of the Securities</u>. The Securities are duly authorized and, when issued
      and paid for in accordance with the applicable Transaction Documents, will
      be duly and validly issued, fully paid and non assessable, free and clear
      of all Liens. The Company has reserved from its duly authorized capital
      stock a number of shares of Common Stock for issuance pursuant to this
Agreement at least equal to the Actual Minimum on the date hereof.</font></p>
<p align="justify"> <font size="2" face="serif">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Capitalization</u>.
    The number of shares and type of all authorized, issued and outstanding capital
    stock of the Company is set forth in the Disclosure Schedules attached hereto.
    No securities of the Company are entitled to preemptive or similar rights,
    and 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 Securities, there are no outstanding options, warrants, script rights
    to subscribe to, calls or commitments of any character whatsoever relating
    to, or securities, rights or obligations convertible into 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 or any Subsidiary is or may become bound to issue additional
    shares of Common Stock, or securities or rights convertible or exchangeable
    into shares of Common Stock. The issuance and sale of the Securities will
    not obligate the Company to issue 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 securities to adjust the exercise, conversion, exchange
or reset price under such securities.</font></p>
</div>
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<p align="justify"> <font size="2" face="serif">(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>SEC
      Reports; Financial Statements</u>. The Company has filed all reports required
      to be filed by it 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 Company was required by
      law to file such material) (the foregoing materials being collectively
      referred to herein as the &#147;<u>SEC Reports</u>&#148; and, together
      with the Schedules to this Agreement, the &#147;<u>Disclosure Materials</u>&#148;)
      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. The Company has delivered to the Purchasers a copy of all SEC
      Reports filed within the 10 days preceding the date hereof. As of their
      respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act and the rules
      and regulations of the Commission promulgated thereunder, 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 light of the circumstances
      under which they were made, not misleading. The financial statements of
      the Company 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 generally
      accepted accounting principles applied on a consistent basis during the
      periods involved (&#147;<u>GAAP</u>&#148;), except as may be otherwise specified
      in such financial statements or the notes thereto, and fairly present in
      all material respects the financial position of the Company 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.</font></p>
<p align="justify"> <font size="2" face="serif">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Material
      Changes</u>. Since the date of the latest audited financial statements
      included within the SEC Reports, except as specifically disclosed in the
      SEC Reports: (i) there has been no event, occurrence or development that
      has had or that could result in a Material Adverse Effect, (ii) the Company
      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 Company's financial statements pursuant to GAAP
      or required to be disclosed in filings made with the Commission, (iii)
      the Company has not altered its method of accounting or the identity of
      its auditors, (iv) the Company has not declared or made any dividend or
      distribution of cash or other property to its stockholders or purchased,
      redeemed or made any agreements to purchase or redeem any shares of its
      capital stock, and (v) the Company has not issued any equity securities
      to any officer, director or Affiliate, except pursuant to existing Company
stock option or similar plans.</font></p>
<p align="justify"> <font size="2" face="serif">(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Litigation</u>.
    There is no action, suit, inquiry, notice of violation, proceeding or investigation
    pending or, to the knowledge of the Company, threatened against or affecting
    the Company, 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 &#147;<u>Action</u>&#148;)
    which: (i) adversely affects or challenges the legality, validity or enforceability
of any of the Transaction </font></p>
</div>
<p align="center"><font size="2" face="serif">-8-</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">Documents or the Securities or
    (ii) could, if there were an unfavorable decision, individually or in the
    aggregate, have or reasonably
      be expected to result in a Material Adverse Effect. Neither the Company
    nor 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. The Company
      does not have pending before the Commission any request for confidential
      treatment of information. There has not been, and to the knowledge of the
      Company, there is not pending or contemplated, any investigation by the
    Commission involving the Company or any current or former director or officer
    of the
      Company. The Commission has not issued any stop order or other order suspending
      the effectiveness of any registration statement filed by the Company or
    any Subsidiary under the Exchange Act or the Securities Act.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Compliance</u>.
    Neither the Company 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 or any
    Subsidiary under), nor has the Company 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, except in each case as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.</font></p>
<p align="justify"> <font size="2" face="serif">(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Labor
      Relations</u>. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company.</font></p>
<p align="justify"> <font size="2" face="serif">(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Regulatory
      Permits</u>. The Company 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 could not, individually or in the aggregate, have
      or reasonably be expected to result in a Material Adverse Effect (&#147;<u>Material
      Permits</u>&#148;), and neither the Company nor any Subsidiary has received
      any notice of proceedings relating to the revocation or modification of
any Material Permit.</font></p>
<p align="justify"> <font size="2" face="serif">(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Title
      to Assets</u>. The Company and the Subsidiaries have good and marketable
      title in fee simple to all real property owned by them that is material
      to the business of the Company and the Subsidiaries 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 and the Subsidiaries. Any real property
      and facilities held under lease by the Company and the Subsidiaries are
      held by them under valid, subsisting and enforceable leases of which the
Company and the </font></p>
</div>
<p align="center"><font size="2" face="serif">-9-</font></p>
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<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">Subsidiaries are in compliance,
    except where such failure to be in compliance would not have a Material Adverse
    Effect.</font></p>
</div>
<div style="text-indent:3%; margin-left:3%">
<p align="justify"> <font size="2" face="serif">(o)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Patents
      and Trademarks</u>. The Company and the Subsidiaries have, or have rights
      to use, all patents, patent applications, trademarks, trademark applications,
      service marks, trade names, copyrights, licenses and other similar rights
      that are necessary or material for use in connection with their respective
      businesses as described in the SEC Reports and which the failure to so
      have could have a Material Adverse Effect (collectively, the &#147;<u>Intellectual
      Property Rights</u>&#148;). Neither the Company nor any Subsidiary has received
      a written notice that the Intellectual Property Rights used by the Company
      or any Subsidiary violates or infringes upon the rights of any Person.
      To the knowledge of the Company, all such Intellectual Property Rights
      are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.</font></p>
<p align="justify"> <font size="2" face="serif">(p)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Insurance</u>.
    The Company 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 and the Subsidiaries
    are engaged. A list of the Company&#146;s insurance contracts and policies
    are set forth on the Disclosure Schedules. The Company has delivered to the
    Purchasers, prior to the Closing, such contracts and policies. To the best
    of Company&#146;s knowledge, such insurance contracts and policies are accurate
    and complete. Neither the Company nor any Subsidiary has any reason to believe
    that it will not be able to renew its existing insurance coverage as and
    when such coverage expires or to obtain similar coverage from similar insurers
    as may be necessary to continue its business without a significant increase
in cost.</font></p>
<p align="justify"> <font size="2" face="serif">(q)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Transactions
      With Affiliates and Employees</u>. Except as set forth in SEC Reports,
      none of the officers or directors of the Company and, to the knowledge
      of the Company, none of the employees of the Company is presently a party
      to any transaction with the Company or any Subsidiary (other than for services
      as employees, officers and directors), including any contract, agreement
      or other arrangement providing for the furnishing of services to or by,
      providing for rental of real or personal property to or from, or otherwise
      requiring payments to or from any officer, director or such employee or,
      to the knowledge of the Company, any entity in which any officer, director,
      or any such employee has a substantial interest or is an officer, director,
trustee or partner.</font></p>
<p align="justify"> <font size="2" face="serif">(r)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Internal
      Accounting Controls</u>. The Company and the Subsidiaries maintain a system
      of internal accounting controls sufficient to provide reasonable assurance
      that (i) transactions are executed in accordance with management's general
      or specific authorizations, (ii) transactions are recorded as necessary
      to permit preparation of financial statements in conformity with generally
      accepted accounting principles and to maintain asset 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 Company has established
disclosure controls </font></p>
</div>
<p align="center"><font size="2" face="serif">-10-</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">and procedures (as defined in
    Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such disclosures
    controls and
        procedures to ensure that material information relating to the Company,
        including its subsidiaries, is made known to the certifying officers
    by others within those entities, particularly during the period in which
    the
        Company's Form 10-K or 10-Q, as the case may be, is being prepared. The
        Company's certifying officers have evaluated the effectiveness of the
    Company's controls and procedures as of a date within 90 days prior to the
    filing
        date of the Form 10-Q for the quarter ended March 31, 2003 (such date,
        the &#147;<u>Evaluation Date</u>&#148;). The Company presented in the Form
        10-Q for the quarter ended March 31, 2003 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 significant changes in the Company's internal
        controls (as such term is defined in Item 307(b) of Regulation S-K under
        the Exchange Act) or, the Company's knowledge, in other factors that could
  significantly affect the Company's internal controls.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(s)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Solvency</u>.
    Based on the financial condition of the Company as reflected in the financial
    statements on Form 10-Q for the fiscal quarter ended March 31, 2003: (i)
    the Company's fair saleable value of its assets exceeds the amount that will
    be required to be paid on or in respect of the Company's existing debts and
    other liabilities (including known contingent liabilities) as they mature;
    (ii) the Company's assets do not constitute unreasonably small capital to
    carry on its business for the current fiscal year 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 projected capital requirements and capital availability thereof; and
    (iii) the current cash flow of the Company, together with the proceeds the
    Company 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 debt when such amounts are required to
    be paid. The Company does not intend to incur debts beyond its 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).</font></p>
<p align="justify"> <font size="2" face="serif">(t)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Certain
      Fees</u>. No brokerage or finder's fees or commissions are or will be payable
      by the Company to any broker, financial advisor or consultant, finder,
      placement agent, investment banker, bank or other Person with respect to
      the transactions contemplated by this Agreement, and the Company has not
      taken any action that would cause any Purchaser to be liable for any such
      fees or commissions. The Company agrees that the Purchasers shall have
      no obligation with respect to any fees or with respect to any claims made
      by or on behalf of any Person for fees of the type contemplated by this
Section with the transactions contemplated by this Agreement.</font></p>
<p align="justify"> <font size="2" face="serif">(u)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Private
      Placement</u>. Assuming the accuracy of the representations and warranties
      of the Purchasers set forth in Sections 3.2(b)-(f), the offer, issuance
      and sale of the Securities to the Purchasers as contemplated hereby are
      exempt from the registration requirements of the Securities Act. The issuance
      and sale of the Securities hereunder does not contravene the rules and
regulations of the Principal Market and no shareholder </font></p>
</div>
<p align="center"><font size="2" face="serif">-11-</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">approval is required
  for the Company to fulfill its obligations under the Transaction Documents.</font></p>
</div>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Listing
      and Maintenance Requirements</u>. The Company has not, in the 12 months
      preceding the date hereof, received notice from any Principal Market on
      which the Common Stock is or has been listed or quoted to the effect that
      the Company is not in compliance with the listing or maintenance requirements
      of such Principal Market. The Company 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.</font></p>
<p align="justify"> <font size="2" face="serif">(w)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Registration
      Rights</u>. The Company has not granted or agreed to grant to any Person
      any rights (including &#147;piggy-back&quot; registration rights) to have
      any securities of the Company registered with the Commission or any other
      governmental authority that have not been satisfied (other than any such
      rights previously granted to any Purchaser); provided, however, in the
      event that a previously declared effective registration statement becomes
      stale, the Company may be required to file a new registration statement
with respect to all or some of the previously registered transactions.</font></p>
<p align="justify"> <font size="2" face="serif">(x)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Application
      of Takeover Protections</u>. The Company and its Board of Directors have
      taken all necessary action, if any, in order to render inapplicable any
      control share acquisition, business combination, poison pill (including
      any distribution under a rights agreement) or other similar anti-takeover
      provision under the Company'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
      and the Company fulfilling their obligations or exercising their rights
      under the Transaction Documents, including without limitation as a result
      of the Company's issuance of the Securities and the Purchasers' ownership
of the Securities.</font></p>
<p align="justify"> <font size="2" face="serif">(y)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Disclosure</u>.
    The Company confirms that neither it nor any other Person acting on its behalf
    has provided any of the Purchasers or their agents or counsel with any information
    that constitutes or might constitute material, nonpublic information. The
    Company understands and confirms that the Purchasers will rely on the foregoing
    representations in effecting transactions in securities of the Company. All
    disclosure provided to the Purchasers regarding the Company, its business
    and the transactions contemplated hereby, including the Schedules to this
    Agreement, furnished by or on behalf of the Company with respect to the representations
    and warranties made herein are true and correct in all material respects
    with respect to such representations and warranties and do 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 Company acknowledges and
    agrees 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.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">3.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Representations
      and Warranties of the Purchasers</u>. Each Purchaser hereby, for itself
      and for no other Purchaser, represents and warrants to the Company as follows:</font></p>
</div>
<p align="center"><font size="2" face="serif">-12-</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Organization;
      Authority</u>. If Purchaser is an entity, it is duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      organization with the requisite 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 thereunder. The purchase
      by such Purchaser of the Securities hereunder has been duly authorized
      by all necessary action on the part of such Purchaser. Each of this Agreement
      and the Registration Rights Agreement 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.</font></p>
<p align="justify"> <font size="2" face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Investment
      Intent</u>. Such Purchaser is acquiring the Securities as principal for
      its own account for investment purposes only and not with a view to or
      for distributing or reselling such Securities or any part thereof, without
      prejudice, however, to such Purchaser&#146;s right, subject to the provisions
      of this Agreement, at all times to sell or otherwise dispose of all or
      any part of such Securities pursuant to an effective registration statement
      under the Securities Act or under an exemption from such registration and
      in compliance with applicable federal and state securities laws. Nothing
      contained herein shall be deemed a representation or warranty by such Purchaser
      to hold Securities for any period of time. Such Purchaser is acquiring
      the Securities hereunder in the ordinary course of its business. Such Purchaser
      does not have any agreement or understanding, directly or indirectly, with
any Person to distribute any of the Securities.</font></p>
<p align="justify"> <font size="2" face="serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purchaser
      Status</u>. At the time such Purchaser was offered the Securities, it was,
      and at the date hereof it is, and on each date on which it exercises any
      Warrants or converts any Debentures, it will be an &#147;accredited investor&#148;    as defined in Rule 501(a) under the Securities Act. Such Purchaser has
      not
      been formed solely for the purpose of acquiring the Securities. Such Purchaser
is not a registered broker-dealer under Section 15 of the Exchange Act.</font></p>
<p align="justify"> <font size="2" face="serif">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Experience
      of such Purchaser</u>. 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. Such purchaser
      has been represented by its own legal counsel with respect to the negotiation
and preparation of the Transaction Documents.</font></p>
<p align="justify"><font size="2" face="serif">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>General
      Solicitation</u>. Such Purchaser is not purchasing the Securities 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.</font></p>
</div>
<p align="center"><font size="2" face="serif">-13-</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%; text-indent:3%">
<p align="justify"> <font size="2" face="serif">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Reliance</u>.
    Such Purchaser understands and acknowledges that: (i) the Securities are
    being offered and sold to it without registration under the Securities Act
    in a private placement that is exempt from the registration provisions of
    the Securities Act and (ii) the availability of such exemption depends in
    part on, and the Company will rely upon the accuracy and truthfulness of,
    the foregoing representations and such Purchaser hereby consents to such
reliance.</font></p>
<p align="justify"> <font size="2" face="serif">(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Limitations
      on Short Sales</u>. The Purchasers agree, severally and not jointly, that
      they will not enter into any Short Sales (as hereinafter defined) from
      the period commencing on the Closing Date and ending on the date that all
      of the Warrants have been exercised. For purposes of this Section&nbsp;3.2(h),
      a &#147;Short Sale&#148; by any Purchaser shall mean a sale of Common Stock
      by such Purchaser that is marked as a short sale and that is made at a
      time when there is no equivalent offsetting long position in Common Stock
      held by such Purchaser. For purposes of determining whether there is an
      equivalent offsetting long position in Common Stock held by the Purchasers,
      Warrant Shares that have not yet been issued upon exercise of the Warrant
      shall be deemed to be held long by the Purchasers, and the amount of shares
      of Common Stock held in a long position shall be the number of Warrant
Shares issuable pursuant to the Warrant.</font></p>
</div>
<p align="center"><font size="2" face="serif"><b>ARTICLE IV<br>OTHER AGREEMENTS OF THE PARTIES</b></font></p>
<div style="text-indent:3%">
<p align="left"><font size="2" face="serif">4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Transfer
      Restrictions</u>.</font></p>
</div>
<div style="text-indent:3%; margin-left:3%">
<p align="justify"> <font size="2" face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    Securities may only be disposed of in compliance with state and federal securities
    laws. In connection with any transfer of Securities other than pursuant to
    an effective registration statement, to the Company or to an Affiliate of
    a Purchaser or to an entity managed by a Purchaser, the Company may require
    the transferor thereof to provide to the Company an opinion of counsel selected
    by the transferor, the form and substance of which opinion shall be reasonably
    satisfactory to the Company, to the effect that such transfer does not require
    registration of such transferred Securities 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.</font></p>
<p align="justify"> <font size="2" face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of the following legend on any certificate evidencing Securities: </font></p>
<p align="justify"><font size="2" face="serif">[NEITHER] THESE SECURITIES [NOR
    THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]]
    HAVE BEEN 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 &#147;SECURITIES ACT&#148;), AND,
    ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN</font></p>
</div>
<p align="center"><font size="2" face="serif">-14-</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">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. THESE
      SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
      MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
  SECURED BY SUCH SECURITIES.</font></p>
</div>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">4.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Acknowledgment
      of Dilution</u>. The Company acknowledges that the issuance of the Securities
      may result in dilution of the outstanding shares of Common Stock, which
      dilution may be substantial under certain market conditions. The Company
      further acknowledges that its obligations under the Transaction Documents,
      including without limitation its obligation to issue the Warrant Shares
      pursuant to the Transaction Documents, are unconditional and absolute and
      not subject to any right of set off, counterclaim, delay or reduction,
      regardless of the effect of any such dilution or any claim that the Company
      may have against any Purchaser.</font></p>
<p align="justify"><font size="2" face="serif">4.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Furnishing
      of Information</u>. As long as any Purchaser owns Securities, the Company
      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 Company after the date hereof pursuant to the Exchange Act. Upon the
      request of any Purchaser, the Company shall deliver to such Purchaser a
      written certification of a duly authorized officer as to whether it has
      complied with the preceding sentence. As long as any Purchaser owns Securities,
      if the Company is not required to file reports pursuant to such laws, 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 further covenants
      that it will take such further action as any holder of Securities may reasonably
      request, all to the extent required from time to time to enable such Person
      to sell such Securities without registration under the Securities Act within
      the limitation of the exemptions provided by Rule 144.</font></p>
<p align="justify"><font size="2" face="serif">4.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Integration</u>.
    The Company shall not, and shall use its best efforts to ensure that no Affiliate
    of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
    negotiate in respect of any security (as defined in Section 2 of the Securities
    Act) that would be integrated with the offer or sale of the Securities in
    a manner that would require the registration under the Securities Act of
    the sale of the Securities to the Purchasers, or that would be integrated
    with the offer or sale of the Securities for purposes of the rules and regulations
    of any Principal Market.</font></p>
<p align="justify"><font size="2" face="serif">4.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Reservation
      and Listing of Securities</u>.</font></p>
</div>
<div style="text-indent:3%; margin-left:3%">
<p align="justify"> <font size="2" face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    Company shall maintain a reserve from its duly authorized 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. </font></p>
<p align="justify"> <font size="2" face="serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
    Company shall: (i) in the time and manner required by each Principal Market,
    prepare and file with such Principal Market such application or notification
as</font></p>
</div>
<p align="center"><font size="2" face="serif">-15-</font></p>
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<div style="page-break-before:always"></div>
<page>
<div style="margin-left:3%">
<p align="justify"><font size="2" face="serif">may be required by such Principal
    Market covering a number of shares of Common Stock at least equal to the
    number of shares of Common Stock and Warrant
      Shares issuable hereunder, (ii) take all steps that may be necessary to
    cause such shares of Common Stock to be approved for listing on each Principal
      Market as soon as possible thereafter, (iii) provide to the Purchasers
    evidence
      of such listing, if available, and (iv) maintain the listing of such Common
  Stock on each such Principal Market or another Principal Market.</font></p>
</div>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">4.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Exercise
      Procedures</u>. The form of Election to Purchase included in the Warrants
      set forth the totality of the procedures required of the Purchasers in
      order to exercise the Warrants. No additional legal opinion or other information
      or instructions shall be required of the Purchasers to exercise their Warrants.
      The Company shall honor exercises of the Warrants and shall deliver Warrant
      Shares in accordance with the terms, conditions and time periods set forth
in the Transaction Documents.</font></p>
<p align="justify"><font size="2" face="serif">4.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Future
      Financings</u>. From the date hereof until 90 days after the Effective
      Date, other than as contemplated by this Agreement, neither the Company
      nor any Subsidiary shall (i) incur, issue, create, guarantee, assume or
      otherwise become liable on account of any indebtedness, except in the ordinary
      course of business, or (ii) increase any amounts owing or to which such
      Person is liable under any existing obligations, except in the ordinary
      course of business. Notwithstanding anything to the contrary herein, this
      Section 4.7 shall not apply to the following (a) the granting of options
      to employees, officers and directors of the Company pursuant to any stock
      option plan duly adopted by a majority of the non-employee members of the
      Board of Directors of the Company or a majority of the members of a committee
      of non-employee directors established for such purpose, or (b) the exercise
      of the Debenture or any other security issued by the Company in connection
      with the offer and sale of this Company&#146;s securities pursuant to this Agreement,
      or (c) the exercise of or conversion of any Convertible Securities, options,
      or warrants issued and outstanding on the date hereof, or (d) acquisitions
      or strategic investments, the primary purpose of which is not to raise
      capital.</font></p>
<p align="justify"><font size="2" face="serif">4.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Securities
      Laws Disclosure; Publicity</u>. The Company shall, within 1 Trading Day
      after the Closing Date, issue a press release or file a Current Report
      on Form 8-K reasonably acceptable to the Purchasers disclosing all material
      terms of the transactions contemplated hereby. The Company and the Purchasers
      shall consult with each other in issuing any press releases with respect
      to the transactions contemplated hereby. Notwithstanding the foregoing,
      other than in any registration statement filed pursuant to the Registration
      Rights Agreement and filings related thereto, the Company 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 Principal
      Market, without the prior written consent of such Purchaser, except to
      the extent such disclosure is required by law or Principal Market regulations,
      in which case the Company shall provide the Purchasers with prior notice
      of such disclosure. </font></p>
<p align="justify"><font size="2" face="serif">4.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Non-Public
      Information</u>. The Company covenants and agrees that neither it nor any
      other Person acting on its behalf will provide any Purchaser or its agents
      or counsel with any information that the Company believes constitutes material
      non-public information, unless prior thereto such Purchaser shall have
      executed a written agreement regarding the confidentiality and</font></p>
</div>
<p align="center"><font size="2" face="serif">-16-</font></p>
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<div style="page-break-before:always"></div>
<page>
<p align="justify"><font size="2" face="serif">use of such
        information. The Company understands and confirms that each Purchaser
    shall be relying on the foregoing representations in effecting transactions
    in
        securities of the Company.</font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">4.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Use
      of Proceeds</u>. The Company shall use the net proceeds from the sale of
      the Securities hereunder for working capital purposes and not for the satisfaction
      of (i) any portion of the Company's debt (other than payment of trade payables,
      capital lease obligations, up to $1,281,700 relating to the mortgage and
      loan held by Central National Bank with respect to the Company&#146;s
      headquarters and accrued expenses in the ordinary course of the Company's
      business and prior practices), (ii) except for the Company&#146;s repurchase
      of its outstanding shares of Series A Preferred Stock held by the Chairman
      and CEO of the Company, to redeem any Company equity or equity-equivalent
      securities or (iii) to settle any outstanding litigation.</font></p>
<p align="justify"><font size="2" face="serif">4.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u></u><u>Reimbursement.</u> If
    any Purchaser becomes involved in any capacity in any Proceeding by or against
    any Person who is a stockholder of the Company, solely as a result of such
    Purchaser&#146;s acquisition of the Securities under this Agreement and without
    causation by any other activity, obligation, condition or liability pertaining
    to such Purchaser and not to the transactions contemplated by this Agreement,
    the Company will reimburse such Purchaser for its reasonable legal and other
    expenses (including the cost of any investigation, preparation and travel
    in connection therewith) incurred in connection therewith, as such expenses
    are incurred. The reimbursement obligations of the Company under this paragraph
    shall be in addition to any liability which the Company may otherwise have,
    shall extend upon the same terms and conditions to any Affiliates of the
    Purchasers who are actually named in such action, proceeding or investigation,
    and partners, directors, agents, employees and controlling persons (if any),
    as the case may be, of the Purchasers and any such Affiliate, and shall be
    binding upon and inure to the benefit of any successors, assigns, heirs and
    personal representatives of the Company, the Purchasers and any such Affiliate
    and any such Person. The Company also agrees that neither the Purchasers
    nor any such Affiliates, partners, directors, agents, employees or controlling
    persons shall have any liability to the Company or any Person asserting claims
    on behalf of or in right of the Company solely as a result of acquiring the
    Securities under this Agreement.</font></p>
<p align="justify"><font size="2" face="serif">4.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Indemnification
      of Purchasers</u>. The Company will indemnify and hold the Purchasers and
      their directors, officers, shareholders, partners, employees and agents
      (each, a &#147;<u>Purchaser Party</u>&#148;) 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 misrepresentation, breach or inaccuracy, or any allegation by a
      third party that, if true, would constitute a breach or inaccuracy, 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 cause of action, suit or claim brought or made against such Purchaser
      Party and arising solely out of or solely resulting from the execution,
      delivery, performance or enforcement of this Agreement or any of the other
      Transaction Documents and without causation by any other activity, obligation,
      condition or liability pertaining to such Purchaser and not to the transactions
      contemplated by this Agreement. The Company will reimburse such Purchaser
      for its reasonable legal and other expenses (including the cost of any
      investigation, preparation and travel in connection therewith) incurred
      in connection therewith, as such expenses are incurred.</font></p>
</div>
<p align="center"><font size="2" face="serif">-17-</font></p>
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<page>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">4.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Shareholders
      Rights Plan</u>. In the event that a shareholders rights plan is adopted
      by the Company, no claim will be made or enforced by the Company or any
      other Person that any Purchaser is an &#147;Acquiring Person&#148; under
      the plan or in any way could be deemed to trigger the provisions of such
      plan by virtue of receiving Securities under the Transaction Documents.</font></p>
<p align="justify"><font size="2" face="serif">4.14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u></u><u>Lock
      Up Agreement</u>. During
    the period commencing on the date hereof and ending on the date which is
    the first anniversary thereof (such period herein referred to as the &#147;Lock-Up
    Period&#148;), the Purchaser will not, directly or indirectly, through an &#147;affiliate&#148;, &#147;associate&#148;     (as
    such terms are defined in the General Rules and Regulations under the Securities
    Act of 1933, as amended (the &#147;Securities Act&#148;)), a family member
    or otherwise, offer, sell, pledge, hypothecate, grant an option for sale
    or otherwise dispose of, or transfer or grant any rights with respect thereto
    in any manner (either privately or publicly pursuant to Rule 144 of the General
    Rules and Regulations under the Securities Act, or otherwise) any Securities
    acquired hereunder or any additional Capital Shares hereafter acquired by
    the Purchaser solely on account of the Securities acquired hereunder, pursuant
    to any stock split, stock dividend or recapitalization or similar transaction
    received by the Purchaser pursuant to this Agreement, or enter into any,
    enter into any swap or any other agreement or any transaction that transfers,
    in whole or part, directly or indirectly, the economic consequence of the
    ownership of the Securities, whether any such swap or transaction is to be
    settled by delivery of Capital Shares or other securities, in cash or otherwise,
    during the Lock-Up Period; <u>provided</u>, however, that such Securities
    may be sold or otherwise transferred in a private transaction (including,
    without limitation, to any affiliate of the Purchaser) during the Lock-Up
    Period so long as the acquirer of the Securities by written agreement with
    the Company entered into at the time of the acquisition and delivered to
    the Company prior to the consummation of such acquisition, agrees to be bound
    by the terms of this provision of this Agreement. Purchaser agrees that the
    Securities issued pursuant to this Agreement shall bear a legend consistent
    with the foregoing agreement. </font></p>
</div>
<p align="center"><font size="2" face="serif"><b>ARTICLE V<br>MISCELLANEOUS</b></font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">5.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Termination</u>.
    This Agreement may be terminated by the Company or any Purchaser, by written
    notice to the other parties, if the Closing has not been consummated by the
    third business day following the date of this Agreement; provided that no
    such termination will affect the right of any party to sue for any breach
    by the other party (or parties).</font></p>
<p align="justify"><font size="2" face="serif">5.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Fees
      and Expenses</u>. 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 issuance of any Securities.</font></p>
<p align="justify"><font size="2" face="serif">5.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Entire
      Agreement</u>. 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.</font></p>
</div>
<p align="center"><font size="2" face="serif">-18-</font></p>
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<div style="page-break-before:always"></div>
<page>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">5.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Notices</u>.
    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 specified
    in this Section prior to 5:30 p.m. (New York City time) on a Trading Day,
    (b) the next Trading Day after the date of transmission, if such notice or
    communication is delivered via facsimile at the facsimile number specified
    in this Section on a day that is not a Trading Day or later than 5:30 p.m.
    (New York City time) on any Trading Day, (c) the Trading 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. All notices or other communications or deliveries given hereunder,
    if delivered via facsimile, shall be followed with a copy delivered by a
    U.S. nationally recognized overnight courier service. The addresses for such
    notices and communications are those set forth on the signature pages hereof,
    or such other address as may be designated in writing hereafter, in the same
    manner, by such Person. Set forth on the Disclosure Schedule is a list of
    names and contact information for the Company&#146;s executive officers
    and corporate counsel, including, if applicable, in-house counsel, the Company&#146;s
    outside counsel (including securities counsel, if different than corporate
    counsel), the Company&#146;s accountants and the Company&#146;s transfer
    agent.</font></p>
<p align="justify"><font size="2" face="serif">5.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Amendments;
      Waivers</u>. No provision of this Agreement may be waived or amended except
      in a written instrument signed, in the case of an amendment, by the Company
      and each of the Purchasers or, in the case of a waiver, by the party against
      whom enforcement of any such waiver 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 either party to
      exercise any right hereunder in any manner impair the exercise of any such
      right.</font></p>
<p align="justify"><font size="2" face="serif">5.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Construction</u>.
    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. The language used in this Agreement will be deemed to be the language
    chosen by the parties to express their mutual intent, and no rules of strict
    construction will be applied against any party.</font></p>
<p align="justify"><font size="2" face="serif">5.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Successors
      and Assigns</u>. This Agreement shall be binding upon and inure to the
      benefit of the parties and their successors and permitted assigns. The
      Company may not assign this Agreement or any rights or obligations hereunder
      without the prior written consent of the Purchasers. Any Purchaser may
      assign its rights under this Agreement and the Registration Rights Agreement
      to any Person to whom such Purchaser assigns or transfers any Securities.</font></p>
<p align="justify"><font size="2" face="serif">5.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>No
      Third-Party Beneficiaries</u>. 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 Sections 4.12.</font></p>
<p align="justify"><font size="2" face="serif">5.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Governing
      Law; Venue; Waiver of Jury Trial</u>. All questions concerning the construction,
      validity, enforcement and interpretation of this Agreement shall be governed
      by and construed and enforced in accordance with the internal laws of the
      State of New York,</font></p>
</div>
<p align="center"><font size="2" face="serif">-19-</font></p>
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<div style="page-break-before:always"></div>
<page>
<p align="justify"><font size="2" face="serif">without regard to the principles
    of conflicts of law thereof. 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
        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 manner permitted
        by law. The parties hereby waive all rights to a trial by jury. If either
        party shall commence an action or proceeding to enforce any provisions
        of this Agreement, then the prevailing party in such action or proceeding
        shall be reimbursed by the other party for its attorneys fees and other
        costs and expenses incurred with the investigation, preparation and prosecution
        of such action or proceeding.</font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">5.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Survival</u>.
    The representations, warranties, agreements and covenants contained herein
    shall survive the Closing and the delivery, exercise and/or conversion of
    the Securities, as applicable.</font></p>
<p align="justify"><font size="2" face="serif">5.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Execution</u>.
    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, 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 signature page were an original
    thereof.</font></p>
<p align="justify"><font size="2" face="serif">5.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Severability</u>.
    If any provision of this Agreement is held to be invalid or unenforceable
    in any respect, the validity and enforceability of the remaining terms and
    provisions of this Agreement shall not in any way be affected or impaired
    thereby and the parties will attempt to agree upon a valid and enforceable
    provision that is a reasonable substitute therefor, and upon so agreeing,
    shall incorporate such substitute provision in this Agreement.</font></p>
<p align="justify"><font size="2" face="serif">5.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Rescission
      and Withdrawal Right</u>. Notwithstanding anything to the contrary contained
      in (and without limiting any similar provisions of) the 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.</font></p>
</div>
<p align="center"><font size="2" face="serif">-20-</font></p>
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<div style="page-break-before:always"></div>
<page>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">5.14&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Replacement
      of Securities</u>. If any certificate or instrument evidencing any Securities
      is mutilated, lost, stolen or destroyed, the Company shall issue or cause
      to be issued in exchange and substitution for and upon cancellation thereof,
      or in lieu of and substitution therefor, a new certificate or instrument,
      but only upon receipt of evidence reasonably satisfactory to the Company
      of such loss, theft or destruction and customary and reasonable indemnity,
      if requested. The applicants for a new certificate or instrument under
      such circumstances shall also pay any reasonable third-party costs associated
      with the issuance of such replacement Securities.</font></p>
<p align="justify"><font size="2" face="serif">5.15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Remedies</u>.
    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 described in
    the foregoing sentence and hereby agrees to waive in any action for specific
    performance of any such obligation the defense that a remedy at law would
    be adequate.</font></p>
<p align="justify"><font size="2" face="serif">5.16&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Payment
      Set Aside</u>. 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.</font></p>
<p align="justify"><font size="2" face="serif">5.17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Usury</u>.
    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 under
    the Transaction Documents for payments in the nature of interest shall not
    exceed the maximum lawful rate authorized under applicable law (the &#147;<u>Maximum
    Rate</u>&#148;), 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 of interest
    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</font></p>
</div>
<p align="center"><font size="2" face="serif">-21-</font></p>
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<div style="page-break-before:always"></div>
<page>

<p align="justify"><font size="2" face="serif">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,
    the manner
      of handling such excess to be at such Purchaser&#146;s election.</font></p>
<div style="text-indent:3%">
<p align="justify"> <font size="2" face="serif">5.18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Independent
      Nature of Purchasers&#146; Obligations and Rights</u>. 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 of the obligations of any other Purchaser
      under any Transaction Document. Nothing contained herein or in any 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
      Document. 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.</font></p>
<p align="justify"> <font size="2" face="serif">5.19&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Liquidated
      Damages</u>. The Company&#146;s obligations to pay any liquidated damages
      or other amounts owing under the Transaction Documents is a continuing
      obligation of the Company and shall not terminate until all unpaid liquidated
      damages and other amounts have been paid notwithstanding the fact that
      the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled.</font></p>
</div>
<p align="center"><font size="2" face="serif">***********************</font></p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="center"><font size="2" face="serif">-22-</font></p>
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<div style="page-break-before:always"></div>
<page>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">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.</font></p>
</div>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr align="left" valign="top">
    <td width="40%">&nbsp;</td>
    <td><font size="2" face="serif"><b>AUTHENTIDATE HOLDING CORP.</b></font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">By:________________________________________</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">Name:</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">Title:</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif"><u>Address for Notice</u>:</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">2165 Technology Drive</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">Schenectady, New York 12308</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">Attn: Dennis Bunt</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">Tel: (518) 346-7799</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td><font size="2" face="serif">Fax: (518) 346-3644</font></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="top">
    <td rowspan="6"><font size="2" face="serif">With a copy to:<br>
    (which shall not constitute<br>notice)</font></td>
    <td> <font size="2" face="serif"> Goldstein &amp; DiGioia LLP</font></td>
  </tr>
  <tr>
    <td> <font size="2" face="serif"> 45 Broadway &#150; 11<sup>th</sup> Floor</font></td>
  </tr>
  <tr>
    <td> <font size="2" face="serif"> New York, New York 10006</font></td>
  </tr>
  <tr>
    <td><font size="2" face="serif">Attn: Brian C. Daughney, Esq.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="serif"><b></b>Tel: (212) 599-3322</font></td>
  </tr>
  <tr>
    <td><font size="2" face="serif">Fax: (212) 557-0295</font></td>
  </tr>
</table>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font size="2" face="serif">[REMAINDER OF PAGE INTENTIONALLY
    LEFT BLANK<br>SIGNATURE PAGE FOR PURCHASER FOLLOWS]</font></p>
<p align="center"><font face="serif" size="2">-23-</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<p align="center"><font size="2" face="serif">[PURCHASERS SIGNATURE PAGE TO SPA]</font></p>
<div style="text-indent:3%">
<p align="justify"><font size="2" face="serif">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.</font><font size="2" face="serif"><b> </b></font></p>
</div>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td align="left"><font size="2" face="serif"><b>PURCHASER</b></font></td>
    <td align="left" width="45%"><font size="2" face="serif"><u>Address for Notice</u>:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="serif">By:________________________________________</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="serif"><u>Subscription Amount</u>: $500,000</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">-24-</font></p>
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