SECURITIES PURCHASE AGREEMENT

WHEREAS , the Company and the Buyers are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded, inter alia , by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), and/or Section 4(2) of the Securities Act; and

WHEREAS, the Buyers severally, and not jointly, wish to purchase, upon the terms and subject to the conditions of this Agreement, a minimum aggregate amount of $100,000 and a maximum aggregate amount of $700,000 of Convertible Debentures of the Company (the “Debentures”), in the form of Exhibit A hereto, which will be convertible into shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), upon the terms and subject to the conditions of the Debentures, and subject to acceptance of this Agreement by the Company;

NOW THEREFORE , in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.   AGREEMENT TO PURCHASE; PURCHASE PRICE.

a.   Purchase .

(i)   The undersigned Buyers hereby severally agree to purchase the Debentures from the Company on the terms and conditions set forth below in this Agreement and the other Transaction Documents (as defined below).

(ii)   Subject to the terms and conditions of this Agreement and the other Transaction Documents the Buyers will purchase the Debentures at one or more closings (each, a “Closing”) to be held on the respective Closing Dates (as defined below).

(iii)   The purchase price to be paid respectively by the Buyers shall equal 100% of the face amount of the Debentures being purchased on the Closing Date by each Buyer as set forth on the signature page to this Agreement.

b.   Certain Definitions.

  As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

(i)   “Affiliate” means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled by or is under common control with such specified Person.

(ii)   “Certificates” means the relevant Debentures duly executed on behalf of the Company and issued in the name of the respective Buyer.

(iii)   “Closing Date” means the respective dates on which the Closings referred to in this Agreement are held.

(iv)   “Conversion Shares” means the shares of Common Stock issuable upon conversion of the Debentures.

(v)   “Dollars” or “$” means United States Dollars.

(vi)   “Effective Date” means the effective date of the Registration Statement covering the Registrable Securities (as those terms are defined in the Registration Rights Agreement defined below) for the Debentures issued hereunder.

(vii)   “Escrow” means the Escrow Account maintained at FirstBank in connection with the purchase and sale of the Debentures hereunder.

(viii)   “Existing Liens” shall have the meaning ascribed to such term in Section 4(i).

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

(x)   “Final Closing Date” shall have the meaning ascribed to such term in Section 6(a).

(xi)   “Person” means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.

(xii)   “Placement Agent” means Divine Capital Markets, LLC.

(xiii)   “Placement Agent Shares” shall have the meaning ascribed to such term in Section 12(a).

(xiv)   “Purchase Price” means the purchase price for the Debentures.

(xv)   “Registration Rights Agreement” shall have the meaning ascribed to such term in Section 3(d).

(xvi)   “Securities” means the Debentures and the Shares.

(xvii)   “Shares” means the Conversion Shares and the shares issued to the Placement Agent or any of its designees in connection with its services in connection with this offering of Debentures.

(xviii)   “Subsidiary” shall have the meaning ascribed to such term in Section 3(b).

(xix)   “Transaction Documents” means, collectively, this Agreement, the Debentures, the Registration Rights Agreement and the other agreements, documents and instruments contemplated hereby or thereby.

(xx)   “Transfer Agent” shall have the meaning ascribed to such term in Section 4(a).

c.   Form of Payment; Delivery of Certificates.

(i)   Each of the Buyers shall pay the Purchase Price for the Debentures to be purchased by such Buyer by delivering immediately available good funds in United States Dollars to the Escrow prior to the respective Closing on the applicable Closing Date, determined as provided in Section 6.

(ii)   Promptly following payment to the Company from the Escrow of the Purchase Price to be paid for the purchase of the Debentures being purchased by such Buyer, the Company shall deliver to the Buyers the Certificates purchased at such Closing.

d.   Payment to the Escrow.   All payments to the Escrow for the purchase of the Debentures shall be made at or prior to the Closing by wire transfer of funds to the Escrow, as follows:

2.   BUYERS REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION.

Each Buyer represents and warrants to, and covenants and agrees with, the Company as follows:

a.   Without limiting any Buyer’s right to sell the Common Stock pursuant to the Registration Statement, each Buyer is purchasing the Debentures and will be acquiring the Conversion Shares for its own account for investment only and not with a view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.

b.   Each Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the Securities Act by reason of Rule 501(a)(3), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Securities.

c.   All subsequent offers and sales of the Securities by each Buyer shall be made pursuant to registration of the Shares under the Securities Act or pursuant to an exemption from registration and compliance with applicable states’ securities laws.

d.   Each 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 upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyers set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyers to acquire the Securities.

e.   Each Buyer and its advisors, if any, have 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 which have been requested by the Buyer.  Each Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries.  Without limiting the generality of the foregoing, each Buyer has also had the opportunity to obtain and to review the Company’s (1) Annual Report on Form 10-K for the fiscal year ended January 31, 2009, filed May 18, 2009, (2) Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2009, filed June 15, 2009 and (3) Current Reports on Form 8-K filed June 3, 2009 and July 15, 2009 (collectively, the “SEC Documents”).

f.   Each Buyer understands that its investment in the Securities involves a high degree of risk, including the risk of loss of the Buyer’s entire investment.

g.   Each 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.

h.   Each Buyer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.  This Agreement and the other Transaction Documents have been duly and validly authorized, executed and delivered on behalf of the Buyer and create a valid and binding agreement of the Buyer enforceable in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

i.   The state in which any offer to purchase shares hereunder was made to or accepted by such Buyer is the state shown as the Buyer’s address on the signature page hereof.

j.   Each Buyer understands that the Placement Agent is acting as the Company’s agent in this Offering and is being compensated by the Company for such services (as detailed in Section 12(a)).  Moreover, each Buyer understands and agrees that, to the extent such Buyer utilizes the brokerage services of the Placement Agent in respect of Securities (whether in the form of Debentures or Shares), the Placement Agent shall do so at the direction of such Buyer and the Placement Agent shall not have investment power or investment discretion over such Securities. Each Buyer further represents, acknowledges and agrees that its decision to invest in the securities of the Company was arrived at in the sole discretion of such Buyer, and that, unless and until a separate familial, contractual or other relationship exists between or among specific Buyers providing the basis for such Buyers to be Affiliates of each other, the Buyers have exercised, and shall continue to exercise, their investment power and investment discretion independently of one another.

k.   Each Buyer acknowledges and agrees that (i) upon funding the Purchase Price for the Debentures it agrees to purchase hereunder into the Escrow, Buyer shall not be entitled to withdraw from the Escrow such funds without the written consent of the Company and the Placement Agent, even though a Closing with respect to such purchase has not yet occurred, (ii) funds representing the Purchase Price furnished into the Escrow may be held for an indefinite period of time, pending the purchase and sale of Debentures at a subsequent Closing and (iii) the Buyer’s funding of the Purchase Price into the Escrow shall not constitute its purchase of Debentures unless and until the funds are released from Escrow at a Closing, and accordingly, the Buyer will not own Debentures, and will not be deemed to have invested in Debentures (and accordingly, the holding period for purposes of determining the availability of an exemption from registration under Rule 144 promulgated pursuant to the Securities Act in connection with any Securities will not commence) unless and until the purchase and sale of Debentures occurs at a Closing with respect to such funds.

3.   COMPANY REPRESENTATIONS, ETC.

  The Company represents and warrants to the Buyers that:

a.   Concerning the Debentures and the Shares.   There are no preemptive rights of any stockholder of the Company to acquire the Debentures or the Shares.

b.   Organization; Subsidiaries; Reporting Company Status.   Attached hereto as Schedule 3(b) is an organizational chart describing the Company’s majority-owned subsidiaries (the “Subsidiaries”) and the relationships among the Company and such Subsidiaries, including as to each Subsidiary its jurisdiction of organization and the percentage of ownership held by the Company, and the parent company of the Company, including the percentage of ownership of the Company held by it.  The Company and each Subsidiary is a corporation or other form of businesses entity duly organized, validly existing and in good standing under the laws its respective jurisdiction of organization, and each of them has the requisite corporate or other power to own its properties and to carry on its business as now being conducted.  The Company and each Subsidiary is duly qualified as a foreign corporation or other entity to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a material adverse effect on the business, operations or condition (financial or otherwise) or results of operation of the Company taken as a whole, including, without limitation, a finding that the Company or any Subsidiary, or any of their

c.   Authorized Shares.   The following table sets fort all capital stock and derivative securities of the Company is that are authorized for issuance and that are issued and outstanding:

(1)  Excludes Common Stock to be issued to the Placement Agent in connection with the sale of the Common Stock to the Investors.  See Section 12(a).

(2)  425,000 exercisable at $0.35 until 12/21/2012; 1,350,000 exercisable at $0.07 until 3/4/2014

(3)  Excludes 21,312,000 granted warrants that have not yet vested.  Weighted average exercise price of $0.15 per share.

(4) $50,000 in principal convertible at average closing price for 20 days preceding conversion.

(5) If all above options and warrants were exercised resulting in the 315,093,093 shares of common stock outstanding, the Company would have cash of approximately $6.2 million.

All issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable.  The Company has sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares, assuming the prior issuance and exercise, exchange or conversion, as the case may be, of all  derivative securities authorized, as indicated in the above table.  The Shares have been duly authorized and, when issued upon conversion of, or as interest on, the Debentures, the Shares will be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such holder.  At all times, the Issuer shall keep available and reserved for issuance to the holders of the Debentures Common Stock duly authorized for issuance against the Debentures.

d.   Registration Rights Agreement.   This Agreement and the Registration Rights Agreement, dated as of the date hereof, between the Company and the Buyers, substantially in the form of Exhibit B annexed hereto (the “Registration Rights Agreement”), and the issuance of the Debentures (including without limitation the incurrence of indebtedness thereunder) and the other transactions contemplated by the Transaction Documents, have been duly and validly authorized by the Company, and this Agreement has been duly executed and delivered by the Company.  Each of the Transaction Documents, when executed and delivered by the Company, are and will be, valid, legal and binding agreements of the Company, enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally.

e.   Non-contravention.   The execution and delivery of the Transaction Documents, the issuance of the Securities and the consummation by the Company of the other transactions contemplated by this Agreement, the Registration Rights Agreement and the Debentures (including without limitation the incurrence of indebtedness thereunder) do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under (i) the articles of incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock, except as herein set forth or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the triggering of any preemptive or anti-dilution rights or rights of first refusal or first offer on the part of

f.   Approvals.   No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the entering into and performing this Agreement and the other Transaction Documents (including without limitation the issuance and sale of the Securities to the Buyers as contemplated by this Agreement) except such authorizations, approvals and consents that have been obtained, or such authorizations, approvals and consents, the failure of which to obtain would not have a Material Adverse Effect.

g.   SEC Filings.   None of the SEC Documents contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein in light of the circumstances under which they were made, not misleading.  The Company timely filed all requisite forms, reports and exhibits thereto with the SEC as required as required.  The Company is not aware of any event occurring on or prior to a Closing Date or the Delivery Date (other than the transactions effected hereby) that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after such date.

h.   Absence of Certain Changes.   Since May 18, 2009, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), or results of operations of the Company, except as disclosed in the SEC Documents. Since May 18, 2009, except as provided in the SEC Documents, the Company has not (i) incurred or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business consistent with past practices; (iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business consistent with past practices; (v) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of existing business; (vi) made any changes in employee compensation, except in the ordinary course of business consistent with past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions of their employment.

i.   Full Disclosure.   There is no fact known to the Company (other than general economic conditions known to the public generally or as disclosed in the SEC Documents) that has not been disclosed in writing to the Buyers that (i) would reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations pursuant to the Transaction Documents, or (iii) would reasonably be expected to materially and adversely affect the value of the rights granted to the Buyers in the Transaction Documents.

j.   Absence of Litigation.   Except as described in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the Transaction Documents.  The Company is not a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which could reasonably be expected to have a Material Adverse Effect.

k.   Absence of Events of Default.   No Event of Default (or its equivalent term), as defined in the respective agreement, indenture, mortgage, deed of trust or other instrument, to which the Company is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (or its equivalent term) (as so defined in such document), has occurred and is continuing, which would have a Material Adverse Effect.

l.   No Undisclosed Liabilities or Events.   The Company has no liabilities or obligations other than those disclosed in the SEC Documents or those incurred in the ordinary course of the Company’s business since May 18, 2009, and which individually or in the aggregate, do not or would not have a Material Adverse Effect.  No event or circumstances has occurred or exists with respect to the Company or its properties, business, condition (financial or otherwise), or results of operations, which, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed.  There are no proposals currently under consideration or currently anticipated to be under consideration by the Board of Directors or the executive officers of the Company which proposal would (x) change the articles of incorporation, by-laws or any other charter document of the Company, each as currently in effect, with or without shareholder approval, which change would reduce or otherwise adversely affect the rights and powers of the shareholders of the Common Stock or (y) materially or substantially change the business, assets or capital of the Company.

m.   No Integrated Offering.   Neither the Company nor any of its affiliates nor any Person acting on its or their behalf has, directly or indirectly, at any time during the six month period immediately prior to the date of this Agreement made any offer or sales of any security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Rule 506 of Regulation D in connection with the offer and sale of the Securities as contemplated hereby.

n.   Dilution.   The number of Shares issuable upon conversion of the Debentures may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the market price of the Common Stock declines prior to the conversion of the Debentures.  The Company’s executive officers and directors have studied and fully understand the nature of the securities being sold hereby and recognize that they have a potential dilutive effect and further that the conversion of the Debentures and/or sale of the Conversion Shares may have an adverse effect on the market price of the Common Stock.  The board of directors of the Company has concluded, in its good faith business judgment that such issuance is in the best interests of the Company.  The Company specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Debentures is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.

o.   Regulatory Permits.   The Company has all such permits, easements, consents, licenses, franchises and other governmental and regulatory authorizations from all appropriate federal, state, local or other public authorities (“Permits”) as are necessary to own and lease its properties and conduct its businesses in all material respects in the manner described in the SEC Documents and as currently being conducted.  All such Permits are in full force and effect and the Company has fulfilled and performed all of its material obligations with respect to such Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or will result in any other material impairment of the rights of the holder of any such Permit, subject in each case to such qualification as may be disclosed in the Prospectus.  Such Permits contain no restrictions that would materially impair the ability of the Company to conduct businesses in the manner consistent with its past practices.  The Company has not received notice or otherwise has knowledge of any proceeding or action relating to the revocation or modification of any such Permit.

p.   Hazardous Materials.   The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect.  For purposes of the foregoing:

q.   Independent Public Accountants. Cordovano & Honeck LLP., who has certified the consolidated financial statements of the Company, including the notes thereto, included in the Company’s Annual Report on Forms 10-K for the year ended January 31, 2009, is an independent registered public accounting firm with respect to the Company, as required by the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder.

r.   Internal Accounting Controls.   The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (1) transactions are executed in accordance with management’s general or specific authorization; (2) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (3) access to assets is permitted only in accordance with management’s general or specific authorization; and (4) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

4.   CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

a.   Transfer Restrictions.   The parties acknowledge and agree that:

(1) the Debentures have not been and are not being registered under the provisions of the Securities Act and, except as provided in the Registration Rights Agreement, the Shares have not been and are not being registered under the Securities Act, and may not be transferred unless (A) subsequently registered thereunder or (B) the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration under applicable law;

(2) any sale of the Securities made in reliance on Rule 144 promulgated under the Securities Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such 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 used in the Securities Act, may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder;

(3) at the request of any Buyer, the Company shall, from time to time, within two (2) business days of such request, at the sole cost and expense of the Company, either (i) deliver to its transfer agent and registrar for the Common Stock (the “Transfer Agent”) a written letter (“Company Instructions”) instructing and authorizing the Transfer Agent to process transfers of the Shares at such time as the Buyer has held the Securities for the minimum holding period permitted under Rule 144 (currently, six (6) months), subject to the Buyer’s providing to the Transfer Agent certain customary representations contemporaneously with any requested transfer, or (ii) an opinion of the Company’s counsel (a “Company Trading Opinion”) in favor of the Buyer and the Transfer Agent, reasonably satisfactory in form, scope and substance to the Buyer and the Transfer Agent, to the effect that registration in connection with a resale by such Buyer of any of the Securities in accordance with clause (1)(B) of this Section 4(a) is not required under the Securities Act, the Company shall (except as otherwise provided in clause (2) of this Section 4(a)) permit the transfer of the Securities and, in the case of the Shares, instruct the Company’s Transfer Agent to issue one or more certificates for Common Stock without any restrictive legend in such name and in such denominations as specified by the Buyer; and

(4) neither the Company nor any other Person is under any obligation to register the Securities (other than pursuant to the Registration Rights Agreement) under the Securities Act or to comply with the terms and conditions of any exemption thereunder.

b.   Restrictive Legend.   The Buyers acknowledge and agree that the Debentures, and, unless Company Instructions or a Trading Opinion has been issued in respect of the Shares or the Shares have been registered under the Securities Act as contemplated by the Registration Rights Agreement and sold in accordance with an effective Registration Statement, certificates and other instruments representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):

THESE SECURITIES (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

c.   Registration Rights Agreement.   The parties hereto agree to enter into the Registration Rights Agreement on or before the Closing Date.

d.   Securities Filings.   The Company undertakes and agrees to make all necessary filings in connection with the sale of the Securities to the Buyers required under any United States laws and regulations applicable to the Company (including without limitation a Form D filing under Regulation D promulgated pursuant to the Securities Act and any filings required under state “blue sky” laws), or by any domestic securities exchange or trading market, and to provide copies thereof to any Buyer upon their request.

e.   Reporting Status; Public Trading Market.   So long as any of the Buyers beneficially own any Securities and any Shares are outstanding, (i) the Company shall timely file, prior to or on the date when due, all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination, (ii) the Company shall not be operated as, or report, to the SEC or any other Person, that the Company is a “shell company” or indicate to the contrary to the SEC or any other Person, (iii) the Company shall take all other action under its control necessary to ensure the availability of Rule 144 under the Securities Act for the sale of Shares by the Buyers.  Except as otherwise set forth in Transaction Documents, the Company shall take all action under its control necessary to obtain and to continue the listing and trading of its Common Stock (including, without limitation, all Registrable Securities) on the OTC Bulletin Board Market (“OTCBB”) of the National Association of Securities Dealers, Inc. and will comply in all material respects with the Company’s reporting, filing and other obligations under the by-laws or rules of the National Association of Securities Dealers, Inc. (“NASD”).  If, so long as any of the Buyers beneficially own any of the Securities,  the Company receives any written notice from the OTCBB, NASD or the SEC with respect to either any alleged deficiency in the Company’s compliance with applicable rules and regulations (including without limitation any comments from the SEC on any of the

f.   Use of Proceeds.    The Company will use the proceeds from the sale of the Debentures (excluding amounts paid by the Company for legal fees in connection with the sale of the Debentures) for internal working capital purposes.  Except in connection with the possible redemption of Placement Agent Shares as described in Section 12(a), absent the prior written approval of a majority of the principal amount of the Debentures then outstanding, the Company shall not use any portion of the proceeds of the sale of the Debentures to (i) repay any indebtedness or other obligation of the Company incurred prior to the date of this Agreement outside the normal course of business, (ii) pay any dividends or redemption amount on any of the Company’s equity or equity equivalents or (iii) pay deferred compensation or any compensation to any of the directors or officers of the Company in excess of the rate or amount paid or accrued during the fiscal year ended January 31, 2009, other than modest increases consistent with prior practice that are approved by the Company’s Board of Directors.

g.   Available Shares; Reverse Split.   The Company shall have at all times authorized and reserved for issuance, free from preemptive rights, shares of Common Stock equal to three hundred percent (300%) of the number of shares of Common Stock issuable upon conversion of the then-outstanding Debentures (including accrued interest thereon) as may be required to satisfy the conversion rights of the Buyers pursuant to the terms and conditions of the Debentures.  If the closing bid price of the Common Stock is below $0.05 on three (3) consecutive trading days, then the Company shall seek to implement a reverse stock split in a ratio of at least one-for-five ( i.e., one new share of Common Stock shall be issued to replace five (5) or more existing shares of Common Stock, with the specific ratio to be determined by the Company’s Board of Directors).  The Company shall monitor the foregoing on an ongoing basis.  If at any time either the Company does not have available an amount of authorized and unissued Shares required to be so reserved or the closing bid price of the Common Stock is below $0.05 on three (3) consecutive trading days, then the Company shall, without notice or demand by the Buyers, call within thirty (30) days of such occurrence and hold within sixty (60) days of such occurrence a special meeting of shareholders, for the sole purpose of increasing the number of shares authorized or implementing a reverse stock split of the Common Stock, as the case may be.  At the meeting, management of the Company shall recommend to shareholders that they vote in favor of increasing the number of shares of Common Stock authorized or of implementing the reverse split, as the case may be.  Members of the Company’s Management shall also vote all of their own shares in favor of increasing the number of shares of Common Stock authorized or implementing the reverse split, as the case may be, at the meeting.  If the increase in authorized shares or the reverse split is approved by the stockholders at the meeting, the Company shall implement the increase in authorized

h.   Reimbursement.   If (i) any Buyer, other than by reason of its gross negligence, willful misconduct or breach of law, becomes a party defendant in any capacity in any action or proceeding brought by any stockholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if such Buyer is impleaded in any such action, proceeding or investigation by any Person, or (ii) any Buyer, other than by reason of its gross negligence, willful misconduct or breach of law, becomes a party defendant in any capacity in any action or proceeding brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if such Buyer is impleaded in any such action, proceeding or investigation by any Person, then in any such case, the Company will reimburse such Buyer for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Buyers who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling Persons (if any), as the case may be, of the Buyers and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Buyers and any such Affiliate and any such Person.  Except as otherwise set

i.    forth in the Transaction Documents, the Company also agrees that neither any Buyer nor any such Affiliate, partners, directors, agents, employees or controlling Persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of such Buyer or  from a breach of the representations, covenants and conditions contained herein or from a breach of law.

j.   No New Indebtedness or Liens.   So long as any of the Debentures remain outstanding, the Company shall not, absent the prior written consent of the holders of all Debentures then outstanding, enter into, create, incur, assume or suffer to exist any indebtedness or liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom that is senior to, or pari passu with, in any respect, the Company’s obligations under the Debentures, other than purchase money security interests granted to suppliers to the Company and any of the foregoing that are made in the ordinary course of business of the Company and its Subsidiaries.   Schedule 4(j) hereto sets forth all liens and encumbrances upon the assets of the Company as of the date hereof (the “Existing Liens”).  Notwithstanding the restrictions set forth above in this Section 4(j), the Existing Liens shall be permitted to remain in place until the Company’s underlying obligations have been satisfied, provided , however , that the incurrence of additional indebtedness or other obligations of the Company in connection with the Existing Liens shall not be permitted.  For example, if a creditor has an Existing Lien on certain assets of the Company to secure an obligation consisting of $100,000 indebtedness of the Company, then the Company shall not be permitted to increase the amount of indebtedness above the amount extant on the date of this Agreement (inclusive of interest which may accrue under the terms of such indebtedness) or to transfer or continue the Existing Lien in alternate indebtedness, notwithstanding any agreement between the Company and such creditor to do so.

k.   No Payments to Affiliates or Related Parties.   So long as any of the Debentures remain outstanding, the Company shall not, absent the prior written consent of the holders of all Debentures then outstanding, make any payments in excess of twenty percent (20%) of the gross proceeds from any Closing, to any of the Company’s or the Subsidiaries’ respective affiliates or related parties, including without limitation payments or prepayments of principal or interest accrued on any indebtedness or obligation in favor of affiliates or related parties as described in Note 2 to the Company’s quarterly financial statements included in its Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2009.

l.   Notice of Material Adverse Effect.   The Company shall notify the Buyers (and any subsequent holder of the Debentures), as soon as practicable and in no event later than five (5) business days of the Company’s knowledge of any Material Adverse Effect on the Company.  For purposes of the foregoing, “knowledge” means the earlier of the Company’s actual knowledge or the Company’s constructive knowledge upon due inquiry.

5.   TRANSFER AGENT INSTRUCTIONS.

a.   The Company shall at all times while any Debentures are outstanding engage a Transfer Agent.  As of the date of this Agreement, the Transfer Agent is First American Stock Transfer. Within five (5) business days following the purchase by the Buyers of the Debentures in accordance with Section 1(c) hereof, the Company will irrevocably instruct its Transfer Agent in writing (with copies to be provided to the Placement Agent) to (i) reserve that number of shares of Common Stock as is equal to three hundred percent (300%) of the number of shares of Common Stock issuable upon conversion of the then-outstanding Debentures (including accrued interest thereon) as may be required to satisfy the conversion rights of the Buyers pursuant to the terms and conditions of the Debentures, and (ii) issue Common Stock from time to time upon conversion of the Debentures in such amounts as specified from time to time by the Company to the Transfer Agent, bearing the restrictive legend specified in Section 4(b) of this Agreement

b.   Periodically, if and to the extent necessary to increase the number of reserved shares to remain at 300% to account for any decrease in the market price of the Common Stock, the Company shall notify its registrar and Transfer Agent in writing of the reservation of such additional shares.  The Company shall provide the Placement Agent with a copy of such written instructions to the Company’s Transfer Agent simultaneously with the issuance of such instructions to the Transfer Agent.  The Company agrees that if the Buyer is not in breach of its representations and warranties contained in this Agreement, no instruction other than such instructions referred to in this Section 5 and stop transfer instructions to give effect to Section 4(a) hereof prior to registration and sale of the Converted Shares under the Securities Act, will be given by the Company to the Transfer Agent and that the Converted Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement, the Registration Rights Agreement, Company Instructions or any Trading Opinion and applicable law.  Nothing in this Section 5(a) shall affect in any way the Buyers’ obligations and agreement to comply with all applicable securities laws upon resale of the Securities.

c.   (i)      The Company will permit the Buyers to exercise their rights to convert the Debentures by telecopying or delivering an executed and completed Notice of Conversion to the Company.  The Company will within two (2) business days respond with its endorsement so as to confirm the outstanding principal amount of any Debenture submitted for conversion or shall reconcile any difference with the Buyer promptly after receiving such Notice of Conversion.

(ii)   The term “Conversion Date” means, with respect to any conversion elected by the holder of the Debentures, the date specified in the Notice of Conversion, provided the copy of the Notice of Conversion is given either via mail or facsimile to or otherwise delivered to the Company in accordance with the provisions hereof so that it is received by the Company on or before such specified date.

(iii)   The Company will transmit the certificates representing the Converted Shares issuable upon conversion of any Debentures (together, unless otherwise instructed by the Buyer, with Debentures not being so converted) to the Buyer at the address specified in the Notice of Conversion (which may be the Buyer’s address for notices as contemplated by Section 12 hereof or a different address) via express courier, by electronic transfer or otherwise, within five (5) business days if the address for delivery is in the United States and within seven (7) business days if the address for delivery is outside the United States (such fifth business day or seventh business day, as the case may be, the “Delivery Date”) after (A) the business day on which the Company has received the Notice of Conversion (by facsimile or other delivery) or (B) the date on which payment of interest and principal on the Debentures, which the Company has elected to pay by the issuance of Common Stock, as contemplated by the Debentures, was due, as the case may be.

d.   From and after the date on which the Shares have been registered under the Securities Act as contemplated by the Registration Rights Agreement, the failure to issue unrestricted, freely tradable Conversion Shares to the Buyers upon Conversion shall be considered an Event of Default, which if not cured after ten (10) days, shall entitle the Buyer(s) whose Debentures are being converted to   demand that the   Debentures   held by such Buyer(s) be immediately redeemed in full by a cash payment equal to 130% of the aggregate of the unpaid principal amount of and accrued interest on such Debentures (whether or not the terms of such Debentures   expressly permit the redemption thereof) .  The Company acknowledges that its failure to honor a Notice of Conversion shall cause definable financial hardship on the Buyer(s).

e.   The Company shall inform the Transfer Agent of the reservation of shares contemplated by Section 4(g) and this Section 5, and shall keep current in its payment obligations to the Transfer Agent such that the Transfer Agent will continue to process share transfers and the initial issuance of shares of Common Stock upon the conversion of Debentures.  The Company hereby authorizes the Transfer Agent to correspond and otherwise communicate with the Buyers or their representatives in connection with the foregoing and other matters related to the Common Stock.  Further, the Company hereby authorizes the Buyers or their representatives to provide instructions to the Transfer Agent that are consistent with the foregoing and instructs the Transfer Agent to honor any such instructions.  Should the Company fail for any reason to keep current in its payment obligations to the Transfer Agent, the Buyers may pay such amounts as are necessary to return the Company to good standing with the Transfer Agent, and all amounts so paid shall be promptly reimbursed by the Company.  If not so reimbursed within thirty (30) days, such amounts shall, at the option of the Buyer(s) who paid amounts to the Transfer Agent but without prior notice to or consent of the Company, be added to the principal amount due under the Debenture(s) held by such Buyer(s), whereupon interest will begin to accrue on such amounts at the rate specified in the Debentures.

f.   Each Buyer shall be entitled to exercise its conversion privilege with respect to the Debentures notwithstanding the commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”).  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of such Buyer’s conversion privilege.  The Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of the Debentures.  The Company agrees, without cost or expense to such Buyer, to take or to consent to any and all action necessary to effectuate relief under 11 U.S.C. §362.

6.   CLOSING DATES.

a.   The purchases and sales of Debentures will occur at one or more Closings under this Agreement, the first of which will occur after Buyers have deposited not less than $100,000 of the Purchase Price in the Escrow for the transactions contemplated under this Agreement, on a Closing Date determined by the Placement Agent and the Company.  Subsequent Closing(s) under this Agreement will occur after Buyers who will purchase the balance or a portion thereof of the Debentures to be purchased and sold under this Agreement have deposited the  amount of their Purchase Prices in the Escrow , with the Closing Date(s) from time to time.  The final Closing shall occur after the Buyers who will purchase the balance of the Debentures to be purchased and sold under this Agreement (which may be in any amount up to $700,000, in the aggregate) have deposited the full amount of their Purchase Prices in the Escrow, with the Closing Date of such final Closing (the “Final Closing Date”) to occur on the date determined by the Placement Agent or the Company; provided, that should no additional amounts be deposited into the Escrow, the Final Closing Date shall be a date determined by the Placement Agent, acting in its sole discretion.  If any of the conditions precedent to Closing set forth in Sections 7 or 8 are not satisfied and are not waived within thirty (30) days by the party which benefits from such conditions ( i.e. , the Company, in the case of those conditions set forth in Section 7 and the Buyer(s), in the case of those conditions set forth in Section 8), then the Offering shall terminate, and the Company shall provide written notice of termination to the escrow agent administering the Escrow so stating and instructing the escrow agent to return to the Buyer(s) the amounts held in the Escrow furnished by the Buyer(s), provided, that if the Company does not promptly so furnish such notice and instructions, then the Placement Agent may, in the Company’s stead, provide such notice and instructions, which shall for all purposes be construed as if the same was provided by the Company.

b.   In the case of each Closing, the Closing Date shall occur after each of the conditions contemplated by Sections 7 and 8 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run.  It is anticipated that the initial Closing will occur as soon as reasonably practical after the minimum investment in the Offering has been deposited into the Escrow.  Following the initial Closing, assuming additional funds representing the Purchase Price of Debentures sought to be acquired are furnished by Buyers into the Escrow, absent a contrary agreement by the Placement Agent and the Company, subsequent Closing(s) will occur on or about the second-to-last last business day of each month while the Offering is being made, prior to the final Closing.

c.   In the case of each Closing, the Closing of the purchase and issuance of Debentures shall occur on the respective Closing Date at the offices of the Placement Agent’s counsel, Sullivan & Worcester LLP, 1290 Avenue of the Americas, 32 nd Floor, New York, NY  10104, and shall take place no later than 3:00 P.M., New York time, on such day or such other time as is mutually agreed upon by the Company and the Buyers.

7.   CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

The Company’s obligation to sell the Debentures to the Buyer pursuant to this Agreement on each Closing Date is conditioned upon:

a.   Delivery from the Escrow to the Company of good funds as payment in full of an amount equal to the Purchase Price for the Debentures in accordance with this Agreement;

b.   The accuracy on the Closing Date of the representations and warranties of the Buyers contained in this Agreement, each as if made on such date, and the performance by the Buyers on or before such date of all covenants and agreements of the Buyers required to be performed on or before such date; and

c.   There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

8.   CONDITIONS TO THE BUYERS’ OBLIGATION TO PURCHASE.

The Buyer’s obligation of those Buyers who are purchasing Debentures at a particular closing to purchase t