ADVANCED PHOTONIX INC
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v087198_ex10-1.htm
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>SUBSCRIPTION
      AGREEMENT</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SUBSCRIPTION
      AGREEMENT (this &#8220;Agreement&#8221; or this &#8220;Subscription Agreement&#8221;) dated as
      of&#160;_________ __, 2007 between Advanced Photonix, Inc., a Delaware
      corporation (the &#8220;Company&#8221;) and the undersigned investor (the &#8220;Investor&#8221; and
      together with all other investors in the offering herein described, the
&#8220;Investors&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company is offering (the &#8220;Offering&#8221;) a limited number of eligible investors the
      opportunity to purchase up to 786,725 units of its securities (the &#8220;Units&#8221;) at a
      price equal to the Formula Price (as defined below), each Unit consisting of
      (i)
      four (4) shares of its Class A Common Stock, par value $.001 a share (&#8220;Common
      Stock&#8221; ), and (ii)&#160;one&#160;(1) warrant to purchase a share of Common Stock
      (the &#8220;2007 Series Warrants&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor desires to participate in the Offering.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor has reviewed copies of the various documents referred to in
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Schedule&#160;1</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      attached
      hereto (the &#8220;Disclosure Documents&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NOW,
      THEREFORE, the Company and the Investor hereby agree as follows:</font></div>
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            <td align="right" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
              1.&#160;</strong></font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;<u>Purchase
                and Sale of Units; Description of 2007 Series Warrants; Use of Proceeds;
                Power of Attorney</u></font></div>
            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Purchase
      of Units and Payment; Description of Warrants</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Upon
      the terms and subject to the conditions contained in this Agreement, the
      Investor has on or prior to this day paid to the Company, by check, by wire
      transfer of immediately available funds, or by other means acceptable to the
      Company, the sum of money set forth opposite the Investor&#8217;s name on the
      signature page to this Agreement (the "Purchase Price"). In consideration of
      such payment, by (and subject to) its acceptance of this Subscription Agreement,
      the Company will issue to the Investor at the Closing (as defined below) the
      number of Units determined by dividing the Purchase Price by the Formula Price
      provided that no fractional shares or warrants are to be issued, but rather
      the
      number of shares and warrants to be issued shall be rounded down to the nearest
      whole number. The &#8220;Formula Price&#8221; means the product of four (4) multiplied by
      the closing price of the Company&#8217;s Common Stock on the American Stock Exchange
      (&#8220;AMEX&#8221;) on the business day immediately preceding the Closing, but in no event
      will be more than $6.00 a Unit or less than $5.72 a Unit. The Investor
      acknowledges that the Investor&#8217;s Purchase Price is non-refundable except to the
      limited extent expressly provided by the last sentence of the first paragraph
      of
      Section 1.5 below.&#160;</font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;Each
      2007
      Series Warrant will have a term of five years (subject to earlier exercise
      or
      termination if the closing price of the Common Stock on the AMEX equals or
      exceeds $4.50 for at least twenty (20) consecutive Business Days (as defined
      in
      2007 Series Warrant to Purchase Class&#160;A Common Stock)), will be exercisable
      for the number of shares Common Stock stated therein at any time and from time
      to time during its term at an exercise price of $1.85 per share, subject to
      adjustment in certain circumstances, and will be substantially in the form
      attached hereto as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Exhibit
      A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;
</font></font>The
      Common Stock and the 2007
      Series Warrants comprising the Units shall be immediately separable upon
      issuance.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Maximum/Minimum.</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      The
      Company will not accept subscriptions having an aggregate Purchase Price of
      more
      than $4,500,000 or less than $2,500,000, and the Offering will terminate and
      be
      of no force and effect unless the Company has received and accepted valid
      subscription agreements from one or more Investors having an aggregate Purchase
      Price of at least $2,500,000 (the &#8220;Minimum Condition&#8221;) on or prior to the
      Closing.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Use
      of
      Proceeds</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      proceeds of the Offering will provide a portion of the funds required to
      discharge in full (the &#8220;Debt Retirement&#8221;) the indebtedness under the Company&#8217;s
      outstanding convertible notes as provided on </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Schedule
      1.3</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (the
&#8220;Convertible Notes&#8221;). The balance of the funds required to discharge such
      indebtedness is expected to be provided out of cash on hand and bank
      indebtedness. In this connection, the Company has received a formal commitment
      from Fifth Third Bank with respect to a proposed increase in the Company&#8217;s
      existing credit facility with that bank. No assurances can be given that the
      financing contemplated in such commitment letter can be consummated.
</font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;In
      the
      unlikely event that the outstanding Convertible Notes are converted prior to
      the
      Debt Retirement, the proceeds of the Offering will be used to pay down other
      indebtedness of the Company and/or working capital.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Closing</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Subject
      to this Section 1.4 and assuming the Minimum Condition has been met, the closing
      of the Offering with respect to each individual Investor (the "Closing") shall
      take place at the offices of the Company&#8217;s attorney, Dornbush Schaeffer Strongin
&amp; Venaglia, LLP (at the address in Section 5.8, Notices) upon the Company&#8217;s
      acceptance of such Investor&#8217;s Subscription Agreement on such date as may be
      determined by the Company, but which shall be no later than September 7, 2007.
      The Investor understands and agrees that the Company, in its sole discretion,
      has the right to reject any Subscription Agreement proffered to it by an
      Investor at any time prior to the Closing, and/or to waive any of the
      requirements for the purchase of the Units set forth herein with respect to
      any
      Investor or Investors (which waivers need not be uniform as among or between
      Investors). In the event that this Subscription Agreement is not accepted by
      the
      Company on or before the September 7, 2007 or in the event that the Company
      withdraws or terminates this Offering, the Company will promptly return to
      the
      undersigned Investor, without interest, all funds received from the undersigned
      Investor in respect hereof. </font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;At
      the
      Closing, the Company (i) shall deliver (or irrevocably instruct its transfer
      agent to deliver) to the Investor, certificates representing the number of
      shares of Common Stock and 2007 Series Warrants to be purchased by the Investor
      hereunder, (ii) shall execute and deliver (or cause to be delivered) to the
      Investor, a fully executed copy of the Registration Rights Agreement attached
      hereto as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Exhibit
      B</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      (iii) shall execute and deliver (or cause to be delivered) to the Investor
      a
      signed counterpart of this Subscription Agreement. The Investor expressly
      acknowledges and agrees that the certificates to be issued to him at the Closing
      shall bear a legend to the following effect:</font></div>
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                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
                    ISSUANCE AND SALE OF THE SECURITIES</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;REPRESENTED
                    BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
                    ACT OF
                    1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
                    MAY
                    NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT
                    PURSUANT TO
                    AN EFFECTIVE REGISTRATION UNDER THE ACT OR PURSUANT TO AN EXEMPTION
                    THEREFROM.</font></div>
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            <td align="right" style="width: 90pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
              2.&#160;&#160;</strong></font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Representations
                and Warranties</u></font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Representations
      and Warranties of the Company</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company hereby represents and warrants to the Investor as of the date hereof
      and
      the Closing Date that:</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Organization,
      Good Standing and Qualification</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company is a corporation duly incorporated and existing in good standing under
      the General Corporation Law of the State of Delaware and has all requisite
      corporate power and authority to own and operate its assets and properties,
      to
      conduct its business as it is currently being conducted, to execute and deliver
      this Agreement and to consummate the transactions contemplated
      herein.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Valid
      Issuance</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Common Stock subscribed for hereunder and issuable upon the exercise of the
      2007
      Series Warrants, when issued in accordance with the terms hereof and thereof,
      will be duly authorized, validly issued and non-assessable and free and clear
      of
      all taxes, liens, options, calls, contracts, commitments, demands, charges,
      security interests, encumbrances or restrictions on transfer, other than
      restrictions on transfer under applicable state and federal securities
      laws.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Authorization</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company has all requisite corporate power and authority to enter into and
      perform its obligations under this Agreement and the Registration Rights
      Agreement (collectively, the &#8220;Transaction Documents&#8221;) and to issue the Common
      Stock and Warrants in accordance with the terms hereof; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      execution and delivery of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated hereby and thereby,
      including the issuance of the Common Stock and Warrants, have been duly
      authorized by all necessary corporate action, and no further consent or
      authorization of the Company or its Board of Directors (or any committee or
      subcommittee thereof) or stockholders is required; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      Transaction Documents have been duly executed and delivered by the Company;
      </font></div>
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      Transaction Documents constitute valid and binding obligations of the Company
      enforceable against the Company; and </font></div>
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      Common Stock and the Warrants, and shares of Common Stock issuable upon the
      exercise of the Warrants thereof, have been duly authorized and, upon issuance
      thereof and payment therefor in accordance with the terms of this Agreement,
      will be validly issued, fully paid and non-assessable, free and clear of any
      and
      all liens, claims and encumbrances.</font></div>
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      The
      Disclosure Documents as at the respective dates of filing thereof:</font></div>
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      as to form in all material respects with applicable accounting requirements
      and
      the published rules and regulations of the Securities Exchange Commission with
      respect thereto;</font></div>
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      financial statements included therein were prepared in accordance with generally
      accepted accounting principles, consistently applied during the periods involved
      (except (x) as may otherwise be disclosed or indicated in such financial
      statements or the notes thereto or (y) in the case of unaudited interim
      statements, to the extent they may exclude footnotes or may be condensed or
      summary statements) and fairly present in all material respects the financial
      position of the Company as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      year end statements to normal year-end audit adjustments); and</font></div>
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      not
      contain any untrue statement of a material fact or omit to state any material
      fact necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading.</font></div>
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      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the consummation by the Company of the transactions contemplated hereby
      and
      thereby and issuance of the Common Stock and Warrants, and the shares Common
      Stock issuable upon exercise of the Warrants will not:</font></div>
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      in
      a violation of the Certificate of Incorporation, any certificate of
      designations, preferences and rights of any outstanding series of preferred
      stock of the Company or the By-laws that would have a material adverse effect;
      </font></div>
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      with, or constitute a default (or an event which with notice or lapse of time
      or
      both would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture or
      instrument to which the Company or any of its subsidiaries is a party, or
</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">result
      in
      a violation of any law, rule, regulation, order, judgment or decree (including
      United States federal and state securities laws and regulations and the rules
      and regulations of the American Stock Exchange (&#8220;Principal Market&#8221;) or other
      principal securities exchange or trading market on which the Common Stock is
      traded or listed) applicable to the Company or any of its subsidiaries or by
      which any property or asset of the Company or any of its subsidiaries is bound
      or affected that would have a material adverse effect. </font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Absence
      of Litigation</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      There
      is no action, suit, proceeding, inquiry or investigation before or by any court,
      public board, government agency, self-regulatory organization or body pending
      or, to the knowledge of the Company or any of its subsidiaries, threatened
      against or affecting the Company, the Common Stock or any of the Company&#8217;s
      subsidiaries or any of the Company&#8217;s or the Company&#8217;s subsidiaries&#8217; officers or
      directors in their capacities as such, which would be material to the Company
      except as set forth in SEC Documents which were filed at least 10 days before
      the date hereof. </font></div>
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      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any security
      or
      solicited any offers to buy any security, under circumstances that would cause
      this offering of the Common Stock and Warrants to the Investors to be integrated
      with prior offerings by the Company for purposes of the Securities Act of 1933,
      as amended (the &#8220;1933 Act&#8221;), or any applicable stockholder approval provisions,
      including, without limitation, under the rules and regulations of the Principal
      Market, nor will the Company or any of its subsidiaries take any action or
      steps
      that would cause the offering of the Common Stock and Warrants to be integrated
      with other offerings.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(h)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Manner
      of Sale</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Sales
      of the Common Stock offered hereby will be made directly by the Company to
      a
      limited number of accredited investors as defined in Rule 501of Regulation
      D of
      the 1933 Act and no brokers or other intermediaries will be retained by the
      Company in connection with the Offering.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Representations
      and Warranties of the Investor</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Investor hereby represents and warrants to the Company as of the date hereof
      and
      the Closing Date that:</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Review
      of Agreements</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Investor has reviewed the Disclosure Documents. The Investor acknowledges that
      certain of the Disclosure Documents include &#8220;forward looking&#8221; statements that
      involve a number of risks and uncertainties, including the risks and
      uncertainties referred to in the Company&#8217;s Annual Report on Form 10-K most
      recently filed with the Securities and Exchange Commission.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Suitability
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor is acquiring the Units for the Investor&#8217;s own account, for investment
      purposes only and not with a view to the resale or distribution
      thereof.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor has not and will not, directly or indirectly, offer, sell, transfer,
      assign, exchange or otherwise dispose of all or any part of the Units, except
      in
      accordance with applicable federal and state securities laws.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor has such knowledge and experience in financial, business and tax
      matters that the Investor is capable of evaluating the merits and risks relating
      to the Investor&#8217;s investment in the Units and making an investment decision with
      respect to the Company. The Investor has independently evaluated the risks
      and
      merits of purchasing the Units and has independently determined that the Units
      are a suitable investment for such Investor. The Investor acknowledges that
      except as otherwise expressly provided herein, the Company has made no
      representation or warranty to the Investor with respect to the income or other
      tax consequences to the Investor under the laws of any jurisdiction with respect
      to an investment in the Units.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      the
      full satisfaction of the Investor, the Investor has been given the opportunity
      to obtain information and documents relating to the Company and to ask questions
      of and receive answers from representatives of the Company concerning the
      Company and the investment made hereby.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Neither
      the Investor nor any of its affiliates has engaged in any activity that would
      be
      deemed a &#8220;general solicitation&#8221; under the provisions of Regulation D under the
      1933 Act.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(vi)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor is able at this time, and in the foreseeable future, to bear the
      economic risk of a total loss of its investment in the Company.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(vii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor is aware that there are substantial risks incident to an investment
      in
      the Company, including without limitation, those set forth in the Disclosure
      Documents. </font></div>
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      Investor understands that, unless he, she or it notifies the Company in writing
      to the contrary at or before the Closing, all the undersigned&#8217;s representations
      and warranties contained in this Agreement will be deemed to have been
      reaffirmed and confirmed as of the Closing, taking into account all information
      received by the undersigned Investor.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 144pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ix)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor is an &#8220;accredited investor&#8221; within the meaning of that term as set
      forth in Rule 501(a) under the 1933 Act, and the Investor has completed the
      Investor Certificate attached as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Annex
      A</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      hereto
      to indicate the qualifications that make the Investor such an accredited
      investor.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>American
      Stock Exchange Investor Questionnaire</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Investor has completed and returned to the Company the AMEX Investor
      Questionnaire if applicable.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Accuracy
      of Information</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      information concerning the Investor (and its executive officers, directors
      and
      owners, if applicable) which is set forth in the Investor Certificate and the
      AMEX Investor Questionnaire, is true and correct on the date of the Investor&#8217;s
      execution and delivery of this Agreement and the Investor will promptly notify
      the Company of any event which would cause the same not to be true and
      correct.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Authorization</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      All
      action on the part of the Investor necessary for the authorization, execution
      and delivery of this Agreement and for the performance of all obligations of
      the
      Investor hereunder has been taken. This Agreement has been duly executed and
      delivered by the Investor and constitutes the valid and binding obligation
      of
      the Investor, enforceable against the Investor in accordance with its
      terms.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Trading
      in Common Stock.</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Since
      August 1, 2007 the Investor has not executed, and during the period between
      August 1, 2007 and the Closing the Investor will not execute, any purchase
      or
      sale of the Common Stock or any short sales. For purposes of this clause (g),
      the term short sale means all types of direct and indirect stock pledges,
      forward sale contacts, options, puts, calls, short sales, swaps (including
      on a
      total return basis), and any other similar transactions whether or not having
      the effect of hedging any position in the Common Stock. </font></div>
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        </div>
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      <div id="HDR">
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      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 90pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
              3.&#160;&#160;</strong></font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnification</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Company
      Indemnification</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company covenants and agrees to defend, indemnify and save and hold harmless
      the
      Investor, together with its officers, directors, partners, members, employees,
      trustees, and affiliates, attorneys and representatives, from and against any
      and all losses, costs, expenses, liabilities, claims or legal damages
      (including, without limitation, reasonable fees and disbursements of counsel
      and
      accountants and other costs and expenses incident to any actual or threatened
      claim, suit, action or proceeding, whether incurred in connection with a claim
      against the Company or a third party claim) (collectively, &#8220;Investor Losses&#8221;) up
      to the amount of the Purchase Price arising out of or resulting from: (i) any
      inaccuracy in or breach of any representation, warranty, covenant or agreement
      made by the Company in this Agreement; or (ii) the failure of the Company to
      perform or observe fully any covenant, agreement or provision to be performed
      or
      observed by it pursuant to this Agreement. Investor Losses resulting directly
      from the gross negligence or willful misconduct of the Investor or any of its
      respective officers, directors, employees, affiliates and attorneys are not
      covered under this Section. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: black; FONT-FAMILY: Times New Roman">3.2.&#160;&#160;<u>Investor
      Indemnification</u>. The Investor covenants and agrees to defend, indemnify and
      save and hold harmless the Company, its officers, directors, partners, members,
      employees, trustees, affiliates, attorneys and representatives, from and against
      any and all losses, costs, expenses, liabilities, claims or legal damages
      (including, without limitation, reasonable fees and disbursements of counsel
      and
      accountants and other costs and expenses incident to any actual or threatened
      claim, suit, action or proceeding, whether incurred in connection with a claim
      against the Investor or a third party claim) (collectively, &#8220;Company Losses&#8221;),
      relating to violations of 1933 Act or other applicable law arising out of or
      resulting from: (i) any inaccuracy in or breach of any representation, warranty,
      covenant or agreement made by the Investor in this Agreement; or (ii) the
      failure of the Investor to perform or observe fully any covenant, agreement
      or
      provision to be performed or observed by it pursuant to this Agreement.
      Notwithstanding the foregoing, the Investor shall only be liable to make any
      indemnification pursuant to this Section 3.2 to the extent of the aggregate
      dollar amount invested by the Investor pursuant to the offering. Company Losses
      resulting directly from the gross negligence or willful misconduct of the
      Company or any of its respective officers, directors, employees, affiliates
      and
      attorneys are not covered under this Section. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnification
      Procedure</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each
      party entitled to be indemnified pursuant to Section 3.1 and 3.2 (each, an
      &#8220;Indemnified Party&#8221;) shall notify the other party (the &#8220;Indemnifying Party&#8221;) in
      writing of any action against such Indemnified Party in respect of which the
      other party is or may be obligated to provide indemnification pursuant to
      Section 3.1 or 3.2, promptly after the receipt of notice or knowledge of the
      commencement thereof. The omission of any Indemnified Party so to notify the
      other party of any such action shall not relieve the Indemnifying Party from
      any
      liability which it may have to such Indemnified Party except to the extent
      the
      Indemnifying Party shall have been prejudiced by the omission of such
      Indemnified Party so to notify it, pursuant to this Section 3.3. In case any
      such action shall be brought against any Indemnified Party, the Indemnifying
      Party shall be entitled to participate therein and, to the extent that the
      Indemnifying Party may wish, to assume the defense thereof, with counsel
      reasonably satisfactory to such Indemnified Party, and after notice from it
      to
      such Indemnified Party of its election so to assume the defense thereof, the
      Indemnifying Party will not be liable to such Indemnified Party for any legal
      or
      other expense subsequently incurred by such Indemnified Party in connection
      with
      the defense thereof nor for any settlement thereof entered into without the
      consent of the Indemnifying Party; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>provided,
      however</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      (i) if the Indemnifying Party shall elect not to assume the defense of such
      claim or action or (ii) if the Indemnified Party reasonably determines (x)
      that
      there is a substantial actual conflict between the positions of the Indemnifying
      Party and of the Indemnified Party in defending such claim or action or (y)
      that
      there may be legal defenses available to such Indemnified Party different from
      or in addition to those available to the Indemnifying Party, then separate
      counsel for the Indemnified Party shall be entitled to participate in and
      conduct the defense, and the Indemnifying Party shall be liable for any
      reasonable legal or other expenses incurred by the Indemnified Party in
      connection therewith.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnification
      Exclusive</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      foregoing indemnification provisions are exclusive, and in lieu of any
      statutory, equitable or common law remedy any party may have for breach of
      representation, warranty, covenant or agreement, all of which are hereby
      irrevocably waived and relinquished to the maximum legal effect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font>Section
      4.<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;</font>&#160;<font id="TAB2" style="LETTER-SPACING: 9pt">&#160;</font></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Registration
      Rights.</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      The
      Investor is aware that except as set forth below, the Company does not intend
      (and is not required) to register the offer or sale of the Common Stock and
      2007
      Series Warrants offered hereby under the Securities Act of 1933, as amended
      or
      under any similar law of any other jurisdiction (the &#8220;Act&#8221;), that such offer and
      sale are intended to be exempt from registration under the Acts, and that the
      Acts may prohibit or severely limit the Investor&#8217;s ability to sell, assign,
      transfer or otherwise dispose of the Common Stock and 2007 Series Warrants
      to be
      purchased hereunder unless and until any such registration is completed.
      Notwithstanding the foregoing, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">at
      the
      Closing the Investor and the Company shall enter into the Registration Rights
      Agreement providing, among other things, that the Company will (i) file a
      registration statement covering the resale of the shares of Common Stock of
      the
      Investor purchased hereunder and issuable upon exercise of the 2007 Series
      Warrants with the Securities Exchange Commission not later than December 7,
      2007
      (the &#8220;Filing Deadline&#8221;) and (ii) cause such registration statement to become
      effective not later than 120 days following the Filing Deadline, in each case
      as
      more fully provided and subject to the terms and conditions of such Registration
      Rights Agreement, provided that if </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">there
      is
      a full review of the Registration Statement by the Securities and Exchange
      Commission, 150 days after the Filing Deadline.</font></div>
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    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
              5.&#160;&#160;</strong></font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Miscellaneous</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Survival
      of Warranties and Covenants</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      representations, warranties and rights to indemnification set forth in Section
      2
      shall survive indefinitely except as limited by applicable laws.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Successors
      and Assigns</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      This
      Agreement may not be assigned by the Investor without the prior written consent
      of the Company. Nothing in this Agreement, express or implied, is intended
      to
      confer upon any party, other than the parties hereto or their respective
      successors and permitted assigns, any rights, remedies, obligations, or
      liabilities under or by reason of this Agreement, except as expressly provided
      in this Agreement.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Waiver
      and Amendment</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Neither
      this Agreement nor any provisions hereof shall be modified, amended, discharged
      or terminated, except by an instrument in writing, signed by the party against
      whom any modification, amendment, discharge or termination is sought. Any term
      or condition of this Agreement may be waived at any time by the party that
      is
      entitled to the benefit thereof, but no such waiver shall be effective unless
      set forth in a written instrument duly executed by or on behalf of the party
      waiving such term or condition. No waiver by any party of any term or condition
      of this Agreement, in any one or more instances, shall be deemed to be or
      construed as a waiver of the same or any other term or condition of this
      Agreement on any future occasion. All remedies, either under this Agreement
      or
      by law or otherwise afforded, will be cumulative and not
      alternative.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Submission
      to Jurisdiction</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each of
      the Investor and the Company hereby submits to the exclusive jurisdiction of
      the
      courts of the State of New York and the federal courts of the United States
      located in the State of New York, for purposes of all legal proceedings arising
      out of or relating to this Agreement and the transactions contemplated hereby.
      Each of the Investor and the Company irrevocably waives, to the fullest extent
      permitted by law, any objection which it may now or hereafter have to the laying
      of the venue of any such proceeding brought in such a court and any claim that
      any such proceeding brought in such a court has been brought in an inconvenient
      forum.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Waiver
      of Jury Trial</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each
      party hereto hereby waives its rights to a jury trial of any claim or cause
      of
      action based upon or arising out of this Agreement. The scope of this waiver
      is
      intended to be all-encompassing of any and all disputes that may be filed in
      any
      court and that relate to the subject matter of this transaction, including,
      without limitation, contract claims, tort claims, breach of duty claims and
      all
      other common law and statutory claims. Each party hereto hereby further warrants
      and represents that such party knowingly and voluntarily waives its jury trial
      rights following consultation with legal counsel. This waiver is irrevocable,
      meaning that it may not be modified either orally or in writing, and this waiver
      shall apply to any subsequent amendments, supplement or modifications to (or
      assignments of) this Agreement. In the event of litigation, this Agreement
      may
      be filed as a written consent to a trial (without a jury) by the
      court.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.6.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Section
      and Other Headings</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      section and other headings contained in this Agreement are for reference
      purposes only and shall not affect the meaning or interpretation of this
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.7.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Counterparts</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed and delivered shall be deemed to be an original and all of which
      together shall be deemed to be one and the same agreement. The Parties agree
      that facsimile signatures of this Agreement shall be deemed a valid and binding
      execution of this Agreement.</font></div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.8.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Notices</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Unless
      otherwise provided, any notice or other communication required or permitted
      to
      be given or effected under this Agreement shall be in writing and shall be
      deemed effective upon personal or facsimile delivery to the party to be notified
      or three business days after deposit with an internationally recognized courier
      service, delivery fees prepaid, and addressed to the party to be notified at
      the
      following respective addresses, or at such other addresses as may be designated
      by written notice; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>provided,
      however</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      that
      any notice of change of address shall be deemed effective only upon
      receipt:</font></div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 144pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Advanced
                Photonix, Inc.</font></div>
            </td>
          </tr>

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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 144pt;">&#160;</td>
            <td>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2925
                Boardwalk</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ann
                Arbor, MI 48104</font></div>
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                President</font></div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 144pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                a copy to:</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dornbush
                Schaeffer Strongin &amp; Venaglia, LLP</font></div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 144pt;">&#160;</td>
            <td>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">747
                Third Avenue</font></div>
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                York, New York 10017</font></div>
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    </div>
    <div>
    </div>
    <div>&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 144pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                to the Investor:</font></div>
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
                the address of the Investor indicated on the signature page
                hereof.</font></div>
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      Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      This
      Agreement, including the Schedules and Exhibits attached hereto, supersedes
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      prior discussions and agreements among the parties hereto with respect to the
      subject matter hereof and contains the sole and entire agreement among the
      parties hereto with respect to the subject matter hereof.</font></div>
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      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company shall pay reasonable legal costs not to exceed $10,000 incurred by
      Investors in connection with the Offering including directly related
      post-Closing matters, and review of any registration statement filed pursuant
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      reasonably be necessary or desirable to consummate the transactions contemplated
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      Whenever possible, each provision of this Agreement shall be interpreted in
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      of this Agreement shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
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      may
      be applicable to the operation of the Company and its business, the Company
      may
      require such proof of identity or other documentation as may be required to
      comply with such laws and regulations before this Agreement can be processed
      and
      the Company and its directors, officers, employees, and agents shall be held
      harmless and indemnified against any loss ensuing due to the failure of the
      Investor to truthfully provide any such proof as may be so
      required.</font></div>
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      _____&#160;day of __________, 2007.</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
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                State and Zip</font></div>
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              <div>&#160;</div>
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            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">
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          <tr bgcolor="white">
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      INVESTORS MUST COMPLETE THE QUESTIONNAIRE </font></div>
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