COMMON STOCK PURCHASE AGREEMENT

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Exhibit 10.42

COMMON STOCK PURCHASE AGREEMENT

COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of March

21, 2007, by and between AETHLON MEDICAL, INC., a Nevada corporation (the

"Company"), and FUSION CAPITAL FUND II, LLC, an Illinois limited liability

company (the "Buyer"). Capitalized terms used herein and not otherwise defined

herein are defined in Section 10 hereof.

WHEREAS:

Subject to the terms and conditions set forth in this Agreement, the

Company wishes to sell to the Buyer, and the Buyer wishes to buy from the

Company, up to Eight Million Four Hundred Thousand Dollars ($8,400,000.00) of

the Company's common stock, par value $0.001 per share (the "Common Stock") The

shares of Common Stock to be purchased hereunder are referred to herein as the

"Purchase Shares."

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

1. PURCHASE OF COMMON STOCK.

Subject to the terms and conditions set forth in this Agreement, the

Company has the right to sell to the Buyer, and the Buyer has the obligation to

purchase from the Company, Purchase Shares as follows:

(a) INITIAL PURCHASE; COMMENCEMENT OF BASE AND BLOCK PURCHASES OF

COMMON STOCK. On the Filing Date (as defined in Section 4(a) hereof), the Buyer

shall buy from the Company as of such date Four Hundred Thousand Dollars

($400,000.00) of Purchase Shares (the "Initial Purchase" and such Purchase

Shares are referred to herein as the "Initial Purchase Shares") at the lesser of

(i) the Purchase Price as of the Business Day prior to the Filing Date, or (ii)

$0.30. The Initial Purchase Shares shall be issued in certificated form and

(subject to Section 5 hereof) shall bear only the restrictive legend set forth

in Section 4(e) hereof. Thereafter, the purchase and sale of Purchase Shares

hereunder shall occur from time to time upon written notices by the Company to

the Buyer on the terms and conditions as set forth herein following the

satisfaction of the conditions (the "Commencement") as set forth in Sections 6

and 7 below (the date of satisfaction of such conditions, the "Commencement

Date").

(b) THE COMPANY'S RIGHT TO REQUIRE PURCHASES. Any time on or after the

Commencement Date, the Company shall have the right but not the obligation to

direct the Buyer by its delivery to the Buyer of Base Purchase Notices from time

to time to buy Purchase Shares (each such purchase a "Base Purchase") in any

amount up to Thirty Two Thousand Dollars ($32,000.00) per Base Purchase Notice

(the "Base Purchase Amount") at the Purchase Price on the Purchase Date. The

Company may deliver multiple Base Purchase Notices to the Buyer so long as at

least two (2) Business Days have passed since the most recent Base Purchase was

completed. Notwithstanding the forgoing, any time on or after the Commencement

Date, the Company shall also have the right but not the obligation by its

delivery to the Buyer of Block Purchase Notices from time to time to direct the

Buyer to buy Purchase Shares (each such purchase a "Block Purchase") in any

amount up to One Million Dollars ($1,000,000.00) per Block Purchase Notice at

the Block Purchase Price on the Purchase Date as provided herein. For a Block

Purchase Notice to be valid the following conditions must be met: (1) the Block

Purchase Amount shall not exceed Fifty Thousand Dollars ($50,000.00) per Block

Purchase Notice, (2) the Company must deliver the Purchase Shares before 11:00

a.m. eastern time on the Purchase Date and (3) the Sale Price of the Common

Stock must not be below $0.30 (subject to equitable adjustment for any

reorganization, recapitalization, non-cash dividend, stock split or other

similar transaction) during the Purchase Date, the date of the delivery of the

Block Purchase Notice and during the Business Day prior to the delivery of the

Block Purchase Notice. The Block Purchase Amount may be increased to up to One

Hundred Thousand Dollars ($100,000.00) per Block Purchase Notice if the Sale

Price of the Common Stock is not below $0.40 (subject to equitable adjustment

for any reorganization, recapitalization, non-cash dividend, stock split or

other similar transaction) during the Purchase Date, the date of the delivery of

the Block Purchase Notice and during the Business Day prior to the delivery of

the Block Purchase Notice. The Block Purchase Amount may be increased to up to

Two Hundred Thousand Dollars ($200,000.00) per Block Purchase Notice if the Sale

Price of the Common Stock is not below $0.55 (subject to equitable adjustment

for any reorganization, recapitalization, non-cash dividend, stock split or

other similar transaction) during the Purchase Date, the date of the delivery of

the Block Purchase Notice and during the Business Day prior to the delivery of

the Block Purchase Notice. The Block Purchase Amount may be increased to up to

Four Hundred Thousand Dollars ($400,000.00) per Block Purchase Notice if the

Sale Price of the Common Stock is not below $0.70 (subject to equitable

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adjustment for any reorganization, recapitalization, non-cash dividend, stock

split or other similar transaction) during the Purchase Date, the date of the

delivery of the Block Purchase Notice and during the Business Day prior to the

delivery of the Block Purchase Notice. The Block Purchase Amount may be

increased to up to One Million Dollars ($1,000,000.00) per Block Purchase Notice

if the Sale Price of the Common Stock is not below $1.50 (subject to equitable

adjustment for any reorganization, recapitalization, non-cash dividend, stock

split or other similar transaction) during the Purchase Date, the date of the

delivery of the Block Purchase Notice and during the Business Day prior to the

delivery of the Block Purchase Notice. As used herein, the term "Block Purchase

Price" shall mean the lesser of (i) the lowest Sale Price of the Common Stock on

the Purchase Date or (ii) the lowest Purchase Price during the previous seven

(7) Business Days prior to the date that the valid Block Purchase Notice was

received by the Buyer. However, if at any time during the Purchase Date, the

date of the delivery of the Block Purchase Notice or during the Business Day

prior to the delivery of the Block Purchase Notice, the Sale Price of the Common

Stock is below the applicable Block Purchase threshold price, such Block

Purchase shall be void and the Buyer's obligations to buy Purchase Shares in

respect of that Block Purchase Notice shall be terminated. Thereafter, the

Company shall again have the right to submit a Block Purchase Notice as set

forth herein by delivery of a new Block Purchase Notice only if the Sale Price

of the Common Stock is above the applicable Block Purchase threshold price

during the date of the delivery of the Block Purchase Notice and during the

Business Day prior to the delivery of the Block Purchase Notice. The Company may

deliver multiple Block Purchase Notices to the Buyer so long as at least two (2)

Business Days have passed since the most recent Block Purchase was completed.

(c) PAYMENT FOR PURCHASE SHARES. The Buyer shall pay to the Company an

amount equal to the Purchase Amount with respect to such Purchase Shares as full

payment for such Purchase Shares via wire transfer of immediately available

funds on the same Business Day that the Buyer receives such Purchase Shares if

they are received by the Buyer before 11:00 a.m. eastern time or if received by

the Buyer after 11:00 a.m. eastern time, the next Business Day. The Company

shall not issue any fraction of a share of Common Stock upon any purchase. If

the issuance would result in the issuance of a fraction of a share of Common

Stock, the Company shall round such fraction of a share of Common Stock up or

down to the nearest whole share. All payments made under this Agreement shall be

made in lawful money of the United States of America or wire transfer of

immediately available funds to such account as the Company may from time to time

designate by written notice in accordance with the provisions of this Agreement.

Whenever any amount expressed to be due by the terms of this Agreement is due on

any day that is not a Business Day, the same shall instead be due on the next

succeeding day that is a Business Day.

(d) PURCHASE PRICE FLOOR. The Company and the Buyer shall not effect

any sales under this Agreement on any Purchase Date where the Purchase Price for

any purchases of Purchase Shares would be less than the Floor Price. "Floor

Price" means $0.25, which shall be appropriately adjusted for any

reorganization, recapitalization, non-cash dividend, stock split or other

similar transaction.

(e) RECORDS OF PURCHASES. The Buyer and the Company shall each maintain

records showing the remaining Available Amount at any give time and the dates

and Purchase Amounts for each purchase or shall use such other method,

reasonably satisfactory to the Buyer and the Company.

(f) TAXES. The Company shall pay any and all transfer, stamp or similar

taxes that may be payable with respect to the issuance and delivery of any

shares of Common Stock to the Buyer made under this Agreement.

2. BUYER'S REPRESENTATIONS AND WARRANTIES.

The Buyer represents and warrants to the Company that as of the date

hereof and as of the Commencement Date:

(a) INVESTMENT PURPOSE. The Buyer is entering into this Agreement and

acquiring the Commitment Shares, (as defined in Section 4(e) hereof) (this

Agreement, the Purchase Shares and the Commitment Shares are collectively

referred to herein as the "Securities"), for its own account for investment only

and not with a view towards, or for resale in connection with, the public sale

or distribution thereof; provided however, by making the representations herein,

the Buyer does not agree to hold any of the Securities for any minimum or other

specific term.

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(b) ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor"

as that term is defined in Rule 501(a)(3) of Regulation D.

(c) RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities

are being offered and sold to it in reliance on specific exemptions from the

registration requirements of United States federal and state securities laws and

that the Company is relying in part upon the truth and accuracy of, and the

Buyer's compliance with, the representations, warranties, agreements,

acknowledgments and understandings of the Buyer set forth herein in order to

determine the availability of such exemptions and the eligibility of the Buyer

to acquire the Securities.

(d) INFORMATION. The Buyer has been furnished with all materials

relating to the business, finances and operations of the Company and materials

relating to the offer and sale of the Securities that have been reasonably

requested by the Buyer, including, without limitation, the SEC Documents (as

defined in Section 3(f) hereof). The Buyer understands that its investment in

the Securities involves a high degree of risk. The Buyer (i) is able to bear the

economic risk of an investment in the Securities including a total loss, (ii)

has such knowledge and experience in financial and business matters that it is

capable of evaluating the merits and risks of the proposed investment in the

Securities and (iii) has had an opportunity to ask questions of and receive

answers from the officers of the Company concerning the financial condition and

business of the Company and others matters related to an investment in the

Securities. Neither such inquiries nor any other due diligence investigations

conducted by the Buyer or its representatives shall modify, amend or affect the

Buyer's right to rely on the Company's representations and warranties contained

in Section 3 below. The Buyer has sought such accounting, legal and tax advice

as it has considered necessary to make an informed investment decision with

respect to its acquisition of the Securities.

(e) NO GOVERNMENTAL REVIEW. The Buyer understands that no United States

federal or state agency or any other government or governmental agency has

passed on or made any recommendation or endorsement of the Securities or the

fairness or suitability of the investment in the Securities nor have such

authorities passed upon or endorsed the merits of the offering of the

Securities.

(f) TRANSFER OR SALE. The Buyer understands that except as provided in

the Registration Rights Agreement (as defined in Section 4(a) hereof): (i) the

Securities have not been and are not being registered under the 1933 Act or any

state securities laws, and may not be offered for sale, sold, assigned or

transferred unless (A) subsequently registered thereunder or (B) an exemption

exists permitting such Securities to be sold, assigned or transferred without

such registration; (ii) any sale of the Securities made in reliance on Rule 144

may be made only in accordance with the terms of Rule 144 and further, if Rule

144 is not applicable, any resale of the Securities under circumstances in which

the seller (or the person through whom the sale is made) may be deemed to be an

underwriter (as that term is defined in the 1933 Act) may require compliance

with some other exemption under the 1933 Act or the rules and regulations of the

SEC thereunder; and (iii) neither the Company nor any other person is under any

obligation to register the Securities under the 1933 Act or any state securities

laws or to comply with the terms and conditions of any exemption thereunder.

(g) VALIDITY; ENFORCEMENT. This Agreement has been duly and validly

authorized, executed and delivered on behalf of the Buyer and is a valid and

binding agreement of the Buyer enforceable against the Buyer in accordance with

its terms, subject as to enforceability to general principles of equity and to

applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and

other similar laws relating to, or affecting generally, the enforcement of

applicable creditors' rights and remedies.

(h) RESIDENCY. The Buyer is a resident of the State of Illinois.

(i) NO PRIOR SHORT SELLING. The Buyer represents and warrants to the

Company that at no time prior to the date of this Agreement has any of the

Buyer, its agents, representatives or affiliates engaged in or effected, in any

manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is

defined in Section 242.200 of Regulation SHO of the Securities Exchange Act of

1934, as amended (the "1934 Act")) of the Common Stock or (ii) hedging

transaction, which establishes a net short position with respect to the Common

Stock.

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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Buyer that as of the date

hereof and as of the Commencement Date:

(a) ORGANIZATION AND QUALIFICATION. The Company and its "Subsidiaries"

(which for purposes of this Agreement means any entity in which the Company,

directly or indirectly, owns 50% or more of the voting stock or capital stock or

other similar equity interests) are corporations duly organized and validly

existing in good standing under the laws of the jurisdiction in which they are

incorporated, and have the requisite corporate power and authority to own their

properties and to carry on their business as now being conducted. Each of the

Company and its Subsidiaries is duly qualified as a foreign corporation to do

business and is in good standing in every jurisdiction in which its ownership of

property or the nature of the business conducted by it makes such qualification

necessary, except to the extent that the failure to be so qualified or be in

good standing could not reasonably be expected to have a Material Adverse

Effect. As used in this Agreement, "Material Adverse Effect" means any material

adverse effect on any of: (i) the business, properties, assets, operations,

results of operations or financial condition of the Company and its

Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the

Company to perform its obligations under the Transaction Documents (as defined

in Section 3(b) hereof). The Company has no Subsidiaries except as set forth on

Schedule 3(a).

(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. (i) The Company has the

requisite corporate power and authority to enter into and perform its

obligations under this Agreement, the Registration Rights Agreement and each of

the other agreements entered into by the parties on the Commencement Date and

attached hereto as exhibits to this Agreement (collectively, the "Transaction

Documents"), and to issue the Securities in accordance with the terms hereof and

thereof, (ii) the execution and delivery of the Transaction Documents by the

Company and the consummation by it of the transactions contemplated hereby and

thereby, including without limitation, the issuance of the Commitment Shares and

the reservation for issuance and the issuance of the Purchase Shares issuable

under this Agreement, have been duly authorized by the Company's Board of

Directors and no further consent or authorization is required by the Company,

its Board of Directors or its shareholders, (iii) this Agreement has been, and

each other Transaction Document shall be on the Commencement Date, duly executed

and delivered by the Company and (iv) this Agreement constitutes, and each other

Transaction Document upon its execution on behalf of the Company, shall

constitute, the valid and binding obligations of the Company enforceable against

the Company in accordance with their terms, except as such enforceability may be

limited by general principles of equity or applicable bankruptcy, insolvency,

reorganization, moratorium, liquidation or similar laws relating to, or

affecting generally, the enforcement of creditors' rights and remedies. The

Board of Directors of the Company has approved the resolutions (the "Signing

Resolutions") substantially in the form as set forth as EXHIBIT C-1 attached

hereto to authorize this Agreement and the transactions contemplated hereby The

Signing Resolutions are valid, in full force and effect and have not been

modified or supplemented in any respect other than by the resolutions set forth

in EXHIBIT C-2 attached hereto regarding the registration statement referred to

in Section 4 hereof. The Company has delivered to the Buyer a true and correct

copy of a unanimous written consent adopting the Signing Resolutions executed by

all of the members of the Board of Directors of the Company. No other approvals

or consents of the Company's Board of Directors and/or shareholders is necessary

under applicable laws and the Company's Certificate of Incorporation and/or

Bylaws to authorize the execution and delivery of this Agreement or any of the

transactions contemplated hereby, including, but not limited to, the issuance of

the Commitment Shares and the issuance of the Purchase Shares.

(c) CAPITALIZATION. As of the date hereof, the authorized capital stock

of the Company consists of (i) 100,000,000 shares of Common Stock, of which as

of the date hereof, 29,423,874 shares are issued and outstanding, none are held

as treasury shares, 500,000 shares are reserved for issuance pursuant to the

Company's stock option plans of which 467,500 shares remain available for future

grants and 20,021,809 shares are issuable and reserved for issuance pursuant to

securities (other than stock options issued pursuant to the Company's stock

option plans) exercisable or exchangeable for, or convertible into, shares of

Common Stock and (ii) no shares of Preferred Stock are issued and outstanding.

All of such outstanding shares have been, or upon issuance will be, validly

issued and are fully paid and nonassessable. Except as disclosed in Schedule

3(c), (i) no shares of the Company's capital stock are subject to preemptive

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rights or any other similar rights or any liens or encumbrances suffered or

permitted by the Company, (ii) there are no outstanding debt securities, (iii)

there are no outstanding options, warrants, scrip, rights to subscribe to, calls

or commitments of any character whatsoever relating to, or securities or rights

convertible into, any shares of capital stock of the Company or any of its

Subsidiaries, or contracts, commitments, understandings or arrangements by which

the Company or any of its Subsidiaries is or may become bound to issue

additional shares of capital stock of the Company or any of its Subsidiaries or

options, warrants, scrip, rights to subscribe to, calls or commitments of any

character whatsoever relating to, or securities or rights convertible into, any

shares of capital stock of the Company or any of its Subsidiaries, (iv) there

are no agreements or arrangements under which the Company or any of its

Subsidiaries is obligated to register the sale of any of their securities under

the 1933 Act (except the Registration Rights Agreement), (v) there are no

outstanding securities or instruments of the Company or any of its Subsidiaries

which contain any redemption or similar provisions, and there are no contracts,

commitments, understandings or arrangements by which the Company or any of its

Subsidiaries is or may become bound to redeem a security of the Company or any

of its Subsidiaries, (vi) there are no securities or instruments containing

anti-dilution or similar provisions that will be triggered by the issuance of

the Securities as described in this Agreement and (vii) the Company does not

have any stock appreciation rights or "phantom stock" plans or agreements or any

similar plan or agreement. The Company has furnished to the Buyer true and

correct copies of the Company's Certificate of Incorporation, as amended and as

in effect on the date hereof (the "Certificate of Incorporation"), and the

Company's By-laws, as amended and as in effect on the date hereof (the

"By-laws"), and summaries of the terms of all securities convertible into or

exercisable for Common Stock, if any, and copies of any documents containing the

material rights of the holders thereof in respect thereto.

(d) ISSUANCE OF SECURITIES. The Commitment Shares and the Initial

Purchase Shares have been duly authorized and, upon issuance (and payment

therefor in the case of the Initial Purchase Shares) in accordance with the

terms hereof, the Commitment Shares and Initial Purchase Shares shall be (i)

validly issued, fully paid and non-assessable and (ii) free from all taxes,

liens and charges with respect to the issue thereof. 6,000,000 shares of Common

Stock have been duly authorized and reserved for issuance as Purchase Shares

under this Agreement after the Commencement. Upon issuance and payment therefor

in accordance with the terms and conditions of this Agreement, the Purchase

Shares shall be validly issued, fully paid and nonassessable and free from all

taxes, liens and charges with respect to the issue thereof, with the holders

being entitled to all rights accorded to a holder of Common Stock.

(e) NO CONFLICTS. Except as disclosed in Schedule 3(e), the execution,

delivery and performance of the Transaction Documents by the Company and the

consummation by the Company of the transactions contemplated hereby and thereby

(including, without limitation, the reservation for issuance and issuance of the

Purchase Shares) will not (i) result 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 or (ii)

conflict with, or constitute a default (or an event which with notice or lapse

of time or both would become a default) under, or give to others any rights of

termination, amendment, acceleration or cancellation of, any agreement,

indenture or instrument to which the Company or any of its Subsidiaries is a

party, or result in a violation of any law, rule, regulation, order, judgment or

decree (including federal and state securities laws and regulations and the

rules and regulations of the Principal Market applicable to the Company or any

of its Subsidiaries) or by which any property or asset of the Company or any of

its Subsidiaries is bound or affected, except in the case of conflicts,

defaults, terminations, amendments, accelerations, cancellations and violations

under clause (ii), which could not reasonably be expected to result in a

Material Adverse Effect. Except as disclosed in Schedule 3(e), neither the

Company nor its Subsidiaries is in violation of any term of or in default under

its Certificate of Incorporation, any Certificate of Designation, Preferences

and Rights of any outstanding series of preferred stock of the Company or

By-laws or their organizational charter or by-laws, respectively. Except as

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disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is

in violation of any term of or is in default under any material contract,

agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or

order or any statute, rule or regulation applicable to the Company or its

Subsidiaries, except for possible conflicts, defaults, terminations or

amendments which could not reasonably be expected to have a Material Adverse

Effect. The business of the Company and its Subsidiaries is not being conducted,

and shall not be conducted, in violation of any law, ordinance, regulation of

any governmental entity, except for possible violations, the sanctions for which

either individually or in the aggregate could not reasonably be expected to have

a Material Adverse Effect. Except as specifically contemplated by this Agreement

and as required under the 1933 Act or applicable state securities laws, the

Company is not required to obtain any consent, authorization or order of, or

make any filing or registration with, any court or governmental agency or any

regulatory or self-regulatory agency in order for it to execute, deliver or

perform any of its obligations under or contemplated by the Transaction

Documents in accordance with the terms hereof or thereof. Except as disclosed in

Schedule 3(e), all consents, authorizations, orders, filings and registrations

which the Company is required to obtain pursuant to the preceding sentence shall

be obtained or effected on or prior to the Commencement Date. Except as listed

in Schedule 3(e), since January 1, 2006, the Company has not received nor

delivered any notices or correspondence from or to the Principal Market. The

Principal Market has not commenced any delisting proceedings against the

Company.

(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed in

Schedule 3(f), since January 1, 2006,, the Company has timely filed all reports,

schedules, forms, statements and other documents required to be filed by it with

the SEC pursuant to the reporting requirements of the 1934 Act (all of the

foregoing filed prior to the date hereof and all exhibits included therein and

financial statements and schedules thereto and documents incorporated by

reference therein being hereinafter referred to as the "SEC Documents"). As of

their respective dates (except as they have been correctly amended), the SEC

Documents complied in all material respects with the requirements of the 1934

Act and the rules and regulations of the SEC promulgated thereunder applicable

to the SEC Documents, and none of the SEC Documents, at the time they were filed

with the SEC (except as they may have been properly amended), 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. As of

their respective dates (except as they have been properly amended), the

financial statements of the Company included in the SEC Documents complied as to

form in all material respects with applicable accounting requirements and the

published rules and regulations of the SEC with respect thereto. Such financial

statements have been prepared in accordance with generally accepted accounting

principles, consistently applied, during the periods involved (except (i) as may

be otherwise indicated in such financial statements or the notes thereto or (ii)

in the case of unaudited interim statements, to the extent they may exclude

footnotes or may be condensed or summary statements) and fairly present in all

material respects the financial position of the Company as of the dates thereof

and the results of its operations and cash flows for the periods then ended

(subject, in the case of unaudited statements, to normal year-end audit

adjustments). Except as listed in Schedule 3(f), the Company has received no

notices or correspondence from the SEC since January 1, 2006. The SEC has not

commenced any enforcement proceedings against the Company or any of its

subsidiaries.

(g) ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3(g),

since January 1, 2007, there has been no material adverse change in the

business, properties, operations, financial condition or results of operations

of the Company or its Subsidiaries. The Company has not taken any steps, and

does not currently expect to take any steps, to seek protection pursuant to any

Bankruptcy Law nor does the Company or any of its Subsidiaries have any

knowledge or reason to believe that its creditors intend to initiate involuntary

bankruptcy or insolvency proceedings. The Company is financially solvent and is

generally able to pay its debts as they become due.

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(h) ABSENCE OF LITIGATION. 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's Subsidiaries or any of the Company's or

the Company's Subsidiaries' officers or directors in their capacities as such,

which could reasonably be expected to have a Material Adverse Effect. A

description of each action, suit, proceeding, inquiry or investigation before or

by any court, public board, government agency, self-regulatory organization or

body which, as of the date of this Agreement, is pending or threatened in

writing against or affecting the Company, the Common Stock or any of the

Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'

officers or directors in their capacities as such, is set forth in Schedule

3(h).

(i) ACKNOWLEDGMENT REGARDING BUYER'S STATUS. The Company acknowledges

and agrees that the Buyer is acting solely in the capacity of arm's length

purchaser with respect to the Transaction Documents and the transactions

contemplated hereby and thereby. The Company further acknowledges that the Buyer

is not acting as a financial advisor or fiduciary of the Company (or in any

similar capacity) with respect to the Transaction Documents and the transactions

contemplated hereby and thereby and any advice given by the Buyer or any of its

representatives or agents in connection with the Transaction Documents and the

transactions contemplated hereby and thereby is merely incidental to the Buyer's

purchase of the Securities. The Company further represents to the Buyer that the

Company's decision to enter into the Transaction Documents has been based solely

on the independent evaluation by the Company and its representatives and

advisors.

(j) NO GENERAL SOLICITATION. Neither the Company, nor any of its

affiliates, nor any person acting on its or their behalf, has engaged in any

form of general solicitation or general advertising (within the meaning of

Regulation D under the 1933 Act) in connection with the offer or sale of the

Securities.

(k) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own

or possess adequate rights or licenses to use all material trademarks, trade

names, service marks, service mark registrations, service names, patents, patent

rights, copyrights, inventions, licenses, approvals, governmental

authorizations, trade secrets and rights necessary to conduct their respective

businesses as now conducted. Except as set forth on Schedule 3(k), none of the

Company's material trademarks, trade names, service marks, service mark

registrations, service names, patents, patent rights, copyrights, inventions,

licenses, approvals, government authorizations, trade secrets or other

intellectual property rights have expired or terminated, or, by the terms and

conditions thereof, could expire or terminate within two years from the date of

this Agreement. The Company and its Subsidiaries do not have any knowledge of

any infringement by the Company or its Subsidiaries of any material trademark,

trade name rights, patents, patent rights, copyrights, inventions, licenses,

service names, service marks, service mark registrations, trade secret or other

similar rights of others, or of any such development of similar or identical

trade secrets or technical information by others and, except as set forth on

Schedule 3(k), there is no claim, action or proceeding being made or brought

against, or to the Company's knowledge, being threatened against, the Company or

its Subsidiaries regarding trademark, trade name, patents, patent rights,

invention, copyright, license, service names, service marks, service mark

registrations, trade secret or other infringement, which could reasonably be

expected to have a Material Adverse Effect.

(l) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in

compliance with any and all applicable foreign, federal, state and local laws

and regulations relating to the protection of human health and safety, the

environment or hazardous or toxic substances or wastes, pollutants or

contaminants ("Environmental Laws"), (ii) have received all permits, licenses or

other approvals required of them under applicable Environmental Laws to conduct

their respective businesses and (iii) are in compliance with all terms and

conditions of any such permit, license or approval, except where, in each of the

three foregoing clauses, the failure to so comply could not reasonably be

expected to have, individually or in the aggregate, a Material Adverse Effect.

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(m) TITLE. The Company and its Subsidiaries have good and marketable

title in fee simple to all real property and good and marketable title to all

personal property owned by them which is material to the business of the Company

and its Subsidiaries, in each case free and clear of all liens, encumbrances and

defects except such as are described in Schedule 3(m) or such as do not

materially affect the value of such property and do not interfere with the use

made and proposed to be made of such property by the Company and any of its

Subsidiaries. Any real property and facilities held under lease by the Company

and any of its Subsidiaries are held by them under valid, subsisting and

enforceable leases with such exceptions as are not material and do not interfere

with the use made and proposed to be made of such property and buildings by the

Company and its Subsidiaries.

(n) INSURANCE. The Company and each of its Subsidiaries are insured by

insurers of recognized financial responsibility against such losses and risks

and in such amounts as management of the Company believes to be prudent and

customary in the businesses in which the Company and its Subsidiaries are

engaged. Neither the Company nor any such Subsidiary has been refused any

insurance coverage sought or applied for and neither the Company nor any such

Subsidiary has any reason to believe that it will not be able to renew its

existing insurance coverage as and when such coverage expires or to obtain

similar coverage from similar insurers as may be necessary to continue its

business at a cost that would not materially and adversely affect the condition,

financial or otherwise, or the earnings, business or operations of the Company

and its Subsidiaries, taken as a whole.

(o) REGULATORY PERMITS. The Company and its Subsidiaries possess all

material certificates, authorizations and permits issued by the appropriate

federal, state or foreign regulatory authorities necessary to conduct their

respective businesses, and neither the Company nor any such Subsidiary has

received any notice of proceedings relating to the revocation or modification of

any such certificate, authorization or permit.

(p) TAX STATUS. The Company and each of its Subsidiaries has made or

filed all federal and state income and all other material tax returns, reports

and declarations required by any jurisdiction to which it is subject (unless and

only to the extent that the Company and each of its Subsidiaries has set aside

on its books provisions reasonably adequate for the payment of all unpaid and

unreported taxes) and has paid all taxes and other governmental assessments and

charges that are material in amount, shown or determined to be due on such

returns, reports and declarations, except those being contested in good faith

and has set aside on its books provision reasonably adequate for the payment of

all taxes for periods subsequent to the periods to which such returns, reports

or declarations apply. There are no unpaid taxes in any material amount claimed

to be due by the taxing authority of any jurisdiction, and the officers of the

Company know of no basis for any such claim.

(q) TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 3(q)

and other than the grant or exercise of stock options disclosed on Schedule

3(c), none of the officers, directors, or employees of the Company is presently

a party to any transaction with the Company or any of its Subsidiaries (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 corporation, partnership, trust or other entity in

which any officer, director, or any such employee has an interest or is an

officer, director, trustee or partner.

(r) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board of

directors have taken or will take prior to the Commencement Date 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 Certificate of

Incorporation or the laws of the state of its incorporation which is or could

become applicable to the Buyer as a result of the transactions contemplated by

this Agreement, including, without limitation, the Company's issuance of the

Securities and the Buyer's ownership of the Securities.

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(s) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its

Subsidiaries, nor any director, officer, agent, employee or other person acting

on behalf of the Company or any of its Subsidiaries has, in the course of its

actions for, or on behalf of, the Company, used any corporate funds for any

unlawful contribution, gift, entertainment or other unlawful expenses relating

to political activity; made any direct or indirect unlawful payment to any

foreign or domestic government official or employee from corporate funds;

violated or is in violation of any provision of the U.S. Foreign Corrupt

Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,

influence payment, kickback or other unlawful payment to any foreign or domestic

government official or employee.

4. COVENANTS.

(a) FILING OF FORM 8-K AND REGISTRATION STATEMENT. The Company agrees

that it shall, within the time required under the 1934 Act file a Report on Form

8-K disclosing this Agreement and the transaction contemplated hereby. The

Company shall also file within ten (10) Business Days from the date hereof a new

registration statement covering only the sale of the Commitment Shares and

7,333,333 Purchase Shares (which includes the 1,333,333 Initial Purchase Shares)

in accordance with the terms of the Registration Rights Agreement between the

Company and the Buyer, dated as of the date hereof ("Registration Rights

Agreement"). After such registration statement is declared effective by the SEC,

the Company agrees and acknowledges that any sales by the Company to the Buyer

pursuant to this Agreement are sales of the Company's equity securities in a

transaction that is registered under the 1933 Act.

(b) BLUE SKY. The Company shall take such action, if any, as is

reasonably necessary in order to obtain an exemption for or to qualify (i) the

initial sale of the Commitment Shares and any Purchase Shares to the Buyer under

this Agreement and (ii) any subsequent sale of the Commitment Shares and any

Purchase Shares by the Buyer, in each case, under applicable securities or "Blue

Sky" laws of the states of the United States in such states as is reasonably

requested by the Buyer from time to time, and shall provide evidence of any such

action so taken to the Buyer.

(c) LISTING. The Company shall promptly secure the listing of all of

the Purchase Shares and Commitment Shares upon each national securities exchange

and automated quotation system, if any, upon which shares of Common Stock are

then listed (subject to official notice of issuance) and shall maintain, so long

as any other shares of Common Stock shall be so listed, such listing of all such

securities from time to time issuable under the terms of the Transaction

Documents. The Company shall maintain the Common Stock's authorization for

quotation on the Principal Market. Neither the Company nor any of its

Subsidiaries shall take any action that would be reasonably expected to result

in the delisting or suspension of the Common Stock on the Principal Market. The

Company shall promptly, and in no event later than the following Business Day,

provide to the Buyer copies of any notices it receives from the Principal Market

regarding the continued eligibility of the Common Stock for listing on such

automated quotation system or securities exchange. The Company shall pay all

fees and expenses in connection with satisfying its obligations under this

Section.

(d) LIMITATION ON SHORT SALES AND HEDGING TRANSACTIONS. The Buyer

agrees that beginning on the date of this Agreement and ending on the date of

termination of this Agreement as provided in Section 11(k), the Buyer and its

agents, representatives and affiliates shall not in any manner whatsoever enter

into or effect, directly or indirectly, any (i) "short sale" (as such term is

defined in Section 242.200 of Regulation SHO of the 1934 Act) of the Common

Stock or (ii) hedging transaction, which establishes a net short position with

respect to the Common Stock.

(e) ISSUANCE OF COMMITMENT SHARES; LIMITATION ON SALES OF COMMITMENT

SHARES. Immediately upon the execution of this Agreement, the Company shall

issue to the Buyer as consideration for the Buyer entering into this Agreement

1,050,000 shares of Common Stock (the "Commitment Shares"). The Commitment

Shares shall be issued in certificated form and (subject to Section 5 hereof)

shall bear the following restrictive legend and no other restrictive legend:

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED

UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE

SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND

MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE

ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER

THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES

LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF

1933, AS AMENDED, OR (2) AN OPINION OF HOLDER'S COUNSEL, IN A CUSTOMARY

FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE

STATE SECURITIES LAWS.

The Buyer agrees that the Buyer shall not transfer or sell the

Commitment Shares until the earlier of 500 Business Days (25 Monthly Periods)

from the date hereof or the date on which this Agreement has been terminated,

provided, however, that such restrictions shall not apply: (i) in connection

with any transfers to or among affiliates (as defined in the 1934 Act), (ii) in

connection with any pledge in connection with a bona fide loan or margin

account, (iii) in the event that the Commencement does not occur on or before

July 1, 2007, due to the failure of the Company to satisfy the conditions set

forth in Section 7 or (iv) if an Event of Default has occurred, or any event

which, after notice and/or lapse of time, would become an Event of Default,

including any failure by the Company to timely issue Purchase Shares under this

Agreement. Notwithstanding the forgoing, the Buyer may transfer Commitment

Shares to a third party in order to settle a sale made by the Buyer where the

Buyer reasonably expects the Company to deliver Purchase Shares to the Buyer

under this Agreement so long as the Buyer maintains ownership of the same

overall number of shares of Common Stock by "replacing" the Commitment Shares so

transferred with Purchase Shares when the Purchase Shares are actually issued by

the Company to the Buyer.

(g) DUE DILIGENCE. The Buyer shall have the right, from time to time as

the Buyer may reasonably deem appropriate, to perform reasonable due diligence

on the Company during normal business hours. The Company and its officers and

employees shall provide information and reasonably cooperate with the Buyer in

connection with any reasonable request by the Buyer related to the Buyer's due

diligence of the Company, including, but not limited to, any such request made

by the Buyer in connection with (i) the filing of the registration statement

described in Section 4(a) hereof and (ii) the Commencement. Each party hereto

agrees not to disclose any Confidential Information of the other party to any

third party and shall not use the Confidential Information for any purpose other

than in connection with, or in furtherance of, the transactions contemplated

hereby. Each party hereto acknowledges that the Confidential Information shall

remain the property of the disclosing party and agrees that it shall take all

reasonable measures to protect the secrecy of any Confidential Information

disclosed by the other party.

5. TRANSFER AGENT INSTRUCTIONS.

Immediately upon the execution of this Agreement, the Company shall

deliver to the Transfer Agent a letter in the form as set forth as EXHIBIT E

attached hereto with respect to the issuance of the Commitment Shares. On the

Commencement Date, the Company shall cause any restrictive legend on the

Commitment Shares and the Initial Purchase Shares to be removed and all of the

remaining Purchase Shares to be issued under this Agreement shall be issued

without any restrictive legend unless the Buyer expressly consents otherwise.

The Company shall issue irrevocable instructions to the Transfer Agent, and any

subsequent transfer agent, to issue Purchase Shares in the name of the Buyer for

the Purchase Shares (the "Irrevocable Transfer Agent Instructions"). The Company

warrants to the Buyer that no instruction other than the Irrevocable Transfer

Agent Instructions expressly referred to in this Agreement, will be given by the

Company to the Transfer Agent with respect to the Purchase Shares and that the

Commitment Shares and the Purchase Shares shall otherwise be freely transferable

on the books and records of the Company as and to the extent provided in this

Agreement and the Registration Rights Agreement subject to the provisions of

Section 4(e) in the case of the Commitment Shares.

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6. CONDITIONS TO THE COMPANY'S RIGHT TO COMMENCE

SALES OF SHARES OF COMMON STOCK UNDER THIS AGREEMENT.

The right of the Company hereunder to commence sales of the Purchase

Shares is subject to the satisfaction of each of the following conditions on or

before the Commencement Date (the date that the Company may begin sales):

(a) The Buyer shall have executed each of the Transaction

Documents and delivered the same to the Company;

(b) A registration statement covering the sale of all of the

Commitment Shares and Purchase Shares shall have been declared

effective under the 1933 Act by the SEC and no stop order with

respect to the registration statement shall be pending or

threatened by the SEC.

7. CONDITIONS TO THE BUYER'S OBLIGATION TO MAKE PURCHASES OF

SHARES OF COMMON STOCK.

The obligation of the Buyer to buy Purchase Shares under this Agreement

is subject to the satisfaction of each of the following conditions on or before

the Commencement Date (the date that the Company may begin sa