Common use of Company’s Representations Clause in Contracts

Company’s Representations. The Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. (ii) The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Exchange Shares have been duly authorized by the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. (iii) The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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 clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documents.

Company’s Representations. The As a material inducement to the Warrantholder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company has made all filings under applicable federal and covenants state securities laws necessary to consummate the Creditorissuance of this Warrant pursuant to this Agreement in compliance with such laws, except for such filings as may be made properly after the date hereof. (b) The copies of any existing stock purchase agreements and investor’s rights agreements and the Company’s charter documents and bylaws which have been furnished to Warrantholder or the Warrantholder’s counsel reflect all amendments made thereto at any time prior to the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized are correct and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedcomplete. (iic) With respect to the issuance of this Warrant or the issuance of the Common Stock upon exercise of the Warrant, there are no statutory or contractual stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor’s rights agreements which have been waived. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto not violated any applicable federal or state securities laws in connection with the transactions contemplated by this Agreement (collectivelyoffer, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery sale or issuance of the Exchange Documents by the Company any of its capital stock, and the consummation by the Company of the transactions contemplated hereby offer, sale and thereby, including, without limitation, the issuance of this Warrant does not require registration under the Exchange Shares have been duly authorized by Securities Act or any applicable state securities laws. To the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations best of the Company’s knowledge, enforceable against there are no agreements between the Company in accordance Company’s stockholders with their respective terms, except as such enforceability may be limited by general principles respect to the voting or transfer of equity the Company’s capital stock or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, with respect to any other aspect of the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsCompany’s affairs. (iiid) The execution, delivery and performance of the Exchange Documents this Warrant have been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Common Stock upon exercise of the Warrant, and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company’s capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any of its subsidiaries subsidiary is subject, except for any such filings required under applicable “blue sky” or by which any property state securities laws or asset of required under Regulation D promulgated under the Company or any of its subsidiaries is bound or affected except, in the case of clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsSecurities Act.

Company’s Representations. The As a material inducement to the Warrantholder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company shall have made all filings under applicable federal and covenants state securities laws necessary to consummate the issuance of this Warrant pursuant to this Agreement in compliance with such laws, except for such filings as may be made properly after the Grant Date. (b) If there are parties to any stock purchase agreements whose consent or approval is required prior to the Creditorexecution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such stock purchase agreement to provide for such consent and any required waivers, in such form and substance acceptable to the Warrantholder, and such amendment shall be in full force and effect as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedhereof. (iic) If there are parties to any investor’s rights agreements whose consent or approval is required prior to the execution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such investor’s rights agreement providing for such consent and any required waivers, in such form and substance acceptable to Warrantholder, and such amendment shall be in full force and effect as of the date hereof. (d) The copies of any existing stock purchase agreements and investor’s rights agreements and the Company’s charter documents and bylaws which have been furnished to Warrantholder or the Warrantholder’s counsel reflect all amendments made thereto at any time prior to the date hereof and are correct and complete. (e) As of the date hereof, the authorized capital stock of the Company shall be as stated on the Capitalization Schedule attached hereto as Exhibit B (the “Capitalization Schedule”) and made a part hereof. As of the date hereof, except for this Warrant and except as set forth on the attached Capitalization Schedule, the Company shall not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock or containing any profit participation features, nor shall it have outstanding any rights, warrants or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock plans. The Capitalization Schedule truthfully and accurately sets forth the following information with respect to all outstanding options and rights to acquire the Company’s capital stock: the holder, the number of shares covered, the exercise price and the expiration date. As of the date hereof, except as set forth on the Capitalization Schedule, the Company shall not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock. As of the date hereof, all of the outstanding shares of the Company’s capital stock shall be validly issued, fully paid and nonassessable. (f) With respect to the issuance of this Warrant or the issuance of the Preferred Stock upon exercise of the Warrant (and the shares of Common Stock issuable upon conversion of the Preferred Stock), there are no statutory or contractual stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor’s rights agreements which have been waived. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto not violated any applicable federal or state securities laws in connection with the transactions contemplated by this Agreement (collectivelyoffer, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery sale or issuance of the Exchange Documents by the Company any of its capital stock, and the consummation by the Company of the transactions contemplated hereby offer, sale and thereby, including, without limitation, the issuance of this Warrant does not require registration under the Exchange Shares have been duly authorized by Act or any applicable state securities laws. To the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations best of the Company’s knowledge, enforceable against there are no agreements between the Company in accordance Company’s stockholders with their respective termsrespect to the voting or transfer of the Company’s capital stock or with respect to any other aspect of the Company’s affairs, 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, for any stock purchase agreements and any investor’s rights agreements identified on the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsattached Capitalization Schedule. (iiig) The execution, delivery and performance of the Exchange Documents this Warrant has been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Preferred Stock upon exercise of this Warrant (and the shares of Common Stock issuable upon conversion of the Preferred Stock), and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company’s capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any of its subsidiaries subsidiary is subject, except for any such filings required under applicable “blue sky” or by which any property state securities laws or asset of required under Regulation D promulgated under the Company or any of its subsidiaries is bound or affected except, in the case of clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsAct.

Company’s Representations. The As a material inducement to the Warrantholder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company shall have made all filings under applicable federal and covenants state securities laws necessary to consummate the issuance of this Warrant in compliance with such laws, except for such filings as may be made properly after the Grant Date. (b) If there are parties to any stock purchase agreements whose consent or approval is required prior to the Creditorexecution and delivery of this Warrant, the Company and any such parties shall have entered into a consent, waiver or amendment to each such stock purchase agreement to provide for such consent and any required waivers, in such form and substance acceptable to the Warrantholder, and such consent, waiver or amendment shall be in full force and effect as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedhereof. (iic) The Company has If there are parties to any investor’s rights agreements whose consent or approval is required prior to the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of this Warrant, the Exchange Documents by Company and any such parties shall have entered into a consent, waiver or amendment to each such investor’s rights agreement providing for such consent and any required waivers, in such form and substance acceptable to Warrantholder, and such consent, waiver or amendment shall be in full force and effect as of the date hereof. (d) The copies of any existing stock purchase agreements and investor’s rights agreements of the Company and the consummation by Company’s charter documents and bylaws which have been furnished to Warrantholder or the Warrantholder’s counsel reflect all amendments made thereto at any time prior to the date hereof and are correct and complete. (e) As of the date hereof, the authorized capital stock of the Company shall be as stated on the Capitalization Schedule attached hereto as Exhibit B (the “Capitalization Schedule”) and made a part hereof. As of the transactions contemplated hereby date hereof, except for this Warrant and therebyexcept as set forth on the attached Capitalization Schedule, includingthe Company shall not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock or containing any profit participation features, without limitationnor shall it have outstanding any rights, warrants or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock plans. The Capitalization Schedule truthfully and accurately sets forth the following information with respect to all outstanding options and rights to acquire the Company’s capital stock: the aggregate number of shares covered, the exercise prices and the term of each option agreement. As of the date hereof, except as set forth on the Capitalization Schedule or the Company documents described in section (d) above, the Company shall not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock. As of the date hereof, all of the outstanding shares of the Company’s capital stock shall be validly issued, fully paid and nonassessable. (f) With respect to the issuance of this Warrant or the issuance of the Exchange Shares Preferred Stock upon exercise of the Warrant (and the shares of Common Stock issuable upon conversion of such shares of Preferred Stock), there are no statutory or contractual stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor’s rights agreements which have been duly authorized by waived. The offer, sale and issuance of this Warrant does not require registration under the Company's Board of Directors and no further filing (other than Form 8-K and Act or any applicable state securities laws. To the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations best of the Company’s knowledge, enforceable against there are no agreements between the Company in accordance Company’s stockholders with their respective termsrespect to the voting or transfer of the Company’s capital stock or with respect to any other aspect of the Company’s affairs, except as such enforceability may be limited by general principles of equity for any stock purchase agreements, investor’s rights agreements or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, voting agreements identified on the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsattached Capitalization Schedule. (iiig) The execution, delivery and performance of the Exchange Documents this Warrant has been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Preferred Stock upon exercise of this Warrant (and the shares of Common Stock issuable upon conversion of such shares of Preferred Stock), and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company’s capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any of its subsidiaries subsidiary is subject, except for any such filings required under applicable “blue sky” or by which any property state securities laws or asset of required under Regulation D promulgated under the Company or any of its subsidiaries is bound or affected except, in the case of clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsAct.

Company’s Representations. The As a material inducement to the Warrantholder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company shall have made all filings under applicable federal and covenants state securities laws necessary to consummate the Creditorissuance of this Warrant pursuant to this Agreement in compliance with such laws, except for such filings as may be made properly after the Grant Date. (b) The copies of any existing stock purchase agreements and investor’s rights agreements and the Company’s charter documents and bylaws which have been furnished to Warrantholder or the Warrantholder’s counsel reflect all amendments made thereto at any time prior to the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized are correct and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedcomplete. (iic) With respect to the issuance of this Warrant or the issuance of the Common Stock upon exercise of the Warrant, there are no statutory or contractual stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor’s rights agreements which have been waived. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto not violated any applicable federal or state securities laws in connection with the transactions contemplated by this Agreement (collectivelyoffer, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery sale or issuance of the Exchange Documents by the Company any of its capital stock, and the consummation by the Company of the transactions contemplated hereby offer, sale and thereby, including, without limitation, the issuance of this Warrant does not require registration under the Exchange Shares have been duly authorized by Act or any applicable state securities laws. To the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations best of the Company’s knowledge, enforceable against there are no agreements between the Company in accordance Company’s stockholders with their respective terms, except as such enforceability may be limited by general principles respect to the voting or transfer of equity the Company’s capital stock or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, with respect to any other aspect of the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsCompany’s affairs. (iiid) The execution, delivery and performance of the Exchange Documents this Warrant have been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Common Stock upon exercise of the Warrant, and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company’s capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any of its subsidiaries subsidiary is subject, except for any such filings required under applicable “blue sky” or by which any property state securities laws or asset of required under Regulation D promulgated under the Company or any of its subsidiaries is bound or affected except, in the case of clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsAct.

Company’s Representations. The Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Each of the Company is and its subsidiaries are entities duly organized and validly existing and in good standing under the laws of the State of Delawarejurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and its subsidiaries is duly qualified as a foreign entity 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 would not have a Material Adverse Effect. As used in this Agreement, Other than its subsidiaries, there is no Person in which the Company, directly or indirectly, owns share capital or holds an equity or similar interest. (ii) The Company has the requisite power and authority to enter into and perform its obligations under this Agreement Agreement, the Convertible Notes and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Convertible Notes and the Conversion Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Exchange Convertible Notes and the Conversion Shares have been duly authorized by the Company's ’s Board of Directors and no further filing (other than a Form 8-K and the Nasdaq Listing applicable notification regarding the listing of Additional Shares Notificationadditional shares), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors' ’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. (iii) The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Conversion Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation of any law, rule, regulation, order, judgment or decree (decree, including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital the Principal Market (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 clause (B) or (C) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect. (iv) Neither the Company nor any of its subsidiaries is required to obtain any consent from, authorization or order of, or make any filing (other than a Form 8-K and the applicable notification regarding the listing of additional shares) or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings (other than a Form 8-K and the applicable notification regarding the listing of additional shares) and registrations which the Company or any of its subsidiaries is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof and neither the Company nor any of its subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents. As used in of the date of this Agreement, except as disclosed in the SEC Documents, the Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. (v) All share transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance of the Convertible Note and Conversion Shares to be issued to the Creditor hereunder on such date will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with. (vi) The Company has, during the preceding 12 months, filed with the SEC all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “Material Adverse Effect” means SEC Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange 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, contained any untrue statement of a material adverse effect on (x) fact or omitted to state a material fact required to be stated therein or necessary in order to make the businessstatements therein, propertiesin the light of the circumstances under which they were made, assetsnot misleading. As of their respective dates, liabilities, operations (including results thereof), condition (the financial or otherwise) or prospects statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and its subsidiaries taken the published rules and regulations of the SEC with respect thereto as a wholein effect as of the time of filing. 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 (yii) in the authority case of unaudited interim statements, to the extent they may exclude footnotes or ability 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 which will not be material, either individually or in the aggregate). No other information provided by or on behalf of the Company to perform the Creditor which is not included in the SEC Documents contains any untrue statement of its obligations a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made. There is no event, pending event or threatened event that could result in the Company not filing with the SEC all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, in compliance in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such filings. For so long as the Creditor shall hold any of the Existing Debt or any Exchange DocumentsShares, the Company shall timely file all reports required to be filed with the SEC pursuant to 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 no longer require or otherwise permit such termination. (vii) As of the date hereof, the authorized share capital of the Company consists of: (A) 250,000,000 shares of Common Stock, of which, 3,247,283 shares are issued and outstanding, and

Company’s Representations. The In order to induce the Banks to enter into this Agreement, the Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as followsthat: (ia) The Company is duly organized and incorporated, validly existing and in good standing under the laws of the State of DelawareMinnesota, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. (ii) The Company has the all requisite power and authority to own its property and to carry on its business as now conducted, and is in good standing and authorized to do business in each jurisdiction in which the character of the property owned or leased by it therein or the transaction of its business makes such qualification necessary and where failure to so qualify could reasonably (either individually or in the aggregate) be expected to constitute, cause or result in a Material Adverse Change. (b) The Company has full corporate power and authority to enter into into, execute, deliver and perform carry out its obligations under this Agreement and each the Related Documents to which the Company is a party, and to incur the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary corporate action and are in full compliance with the Company’s articles of incorporation and by-laws. No consent or approval of, or exemption by, or notice to or filing with any Person is required in respect of the Company to authorize the execution, delivery and performance of, or as a condition to the validity or enforceability of, this Agreement, the Related Documents to which the Company is a party or any other agreements entered into by agreement of the parties hereto Company delivered in connection with herewith or therewith, except those which have been received and except those which are required under the transactions securities or blue sky laws of any jurisdiction. (c) The officers of the Company who have executed this Agreement, who have requested the issuance of the Letter of Credit and who have executed or will execute the Related Documents to which the Company is a party and all other documents, instruments and agreements required to be delivered or contemplated by this hereunder or thereunder was and are properly in office and was and are duly authorized to execute the same. (d) This Agreement (collectively, and the “Exchange Documents”) Related Documents to which the Company is a party each constitutes the valid and to issue legally binding obligations of the Exchange Shares Company enforceable in accordance with their terms except that the terms hereof enforceability thereof may be limited by applicable bankruptcy, insolvency, or other laws affecting the enforcement of creditors’ rights generally and thereof. The execution and delivery by equitable principles. (e) Except for the Disclosed Matters, there are no actions, suits or arbitration proceedings pending or, to the knowledge of the Exchange Documents by Company, threatened against the Company, at law or in equity, before any Governmental Body which individually or in the aggregate, if adversely determined, would materially and adversely affect the financial condition of the Company or materially impair the ability of the Company to perform its obligations under this Agreement, the Related Documents to which the Company is a party, or any other document, instrument or agreement required to be delivered or contemplated hereunder or thereunder. There are no proceedings pending or, to the knowledge of the Company, threatened against the Company which call into question the validity or enforceability of this Agreement, the Related Documents to which the Company is a party or any agreement of the Company delivered in connection herewith or therewith. (f) The execution, delivery and the consummation performance by the Company of this Agreement and the transactions contemplated hereby Related Documents to which the Company is a party (i) do not violate any provision of the articles of incorporation or by-laws of the Company, (ii) do not violate any order, decree or judgment, or any provision of any statute, rule or regulation applicable to or binding on the Company or affecting any of its property, (iii) do not violate or conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any shareholder agreement or stock preference agreement or under any material mortgage, indenture, contract or other agreement to which the Company is a party or by which any of its property is bound and thereby(iv) do not result in the creation or imposition of any Lien upon any property of the Company except as set forth in Section 6.3. (g) The Company has filed all United States tax returns and all other tax returns, if any, which are required to be filed by the Company, and has paid all taxes due, if any, as shown on said returns, or pursuant to any assessment received by the Company, except such taxes, if any, as are being contested in good faith and by appropriate proceedings. (h) The consolidated financial statements of the Company and its Consolidated Subsidiaries as of December 31, 2009 and December 31, 2010 contained in the Company’s Annual Report on Form 10-K for the years ended on those dates, copies of which have been furnished to the Banks, present fairly the consolidated financial position of the Company and its Consolidated Subsidiaries as of those dates and the results of their operations for the two years ended December 31, 2010, in conformity with GAAP. The consolidated financial statements contained in the Company’s Quarterly Reports on Form 10-Q for the quarter ended March 31, 2011, copies of which have been furnished to the Bank, present fairly the consolidated financial position of the Company and its Consolidated Subsidiaries as of the dates thereof and have been prepared in conformity with GAAP (subject to normal year-end and audit adjustments). The Company has no contingent liabilities which are required by GAAP to be shown on the financial statements of the Company other than as indicated on said financial statements and since December 31, 2010, there has been no Material Adverse Change. (i) To the best knowledge of the Company, the Company is not in default with respect to any judgment, order, writ, injunction, decree or decision of any Governmental Body which default could reasonably be expected to constitute, cause or result in a Material Adverse Change. (j) The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Bonds or any Drawing Loan will be used, directly or indirectly, by the Company for a purpose which violates any law, rule, or regulation of any Governmental Body, including, without limitation, the issuance provisions of Regulation U or X of the Exchange Shares have been duly authorized Board of Governors of the Federal Reserve System, as amended. (k) No Potential Default or Event of Default has occurred and is continuing or would result from the obligations incurred by the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, Company hereunder or authorization is required by the Company, its Board actions contemplated hereby. (l) The representations and warranties of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. (iii) The execution, delivery and performance of the Exchange Related Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 it is a party, or party are (C) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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 exceptor, in the case of clause (B) or (C) above, Related Documents entered into prior to the extent date hereof, were, when made) true and correct in every material respect, and the Company has furnished the Administrative Agent a true and correct copy of all the Related Documents as in effect on the date hereof. (m) Except for the Disclosed Matters, the Company and its Subsidiaries (a) are in compliance with Environmental Laws, (b) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (c) are in compliance with all terms and conditions of any such violations that permit, license, or approval, except, in each case, such as could not reasonably be expected to have constitute, cause or result in a Material Adverse EffectChange. (n) No Plan has been terminated nor have any proceedings been instituted to terminate any Plan; the Company has not withdrawn from any Multiemployer Plan in a complete or partial withdrawal nor has a condition occurred which if continued would result in a complete or partial withdrawal; the Company has not incurred any withdrawal liability under Section 4201 or 4204 of ERISA with respect to any Multiemployer Plan; the Company has not incurred any liability to PBGC other than for required insurance premiums which have been paid when due; no Reportable Event with respect to any Plan has occurred; and no Plan has an accumulated funding deficiency under Section 302 of ERISA or Section 412 of the Code. As used Each employee benefit plan (as defined in this AgreementSection 3(3) of ERISA) maintained by the Company is in compliance with ERISA, “except where the failure so to comply could not reasonably be expected to constitute, cause or result in a Material Adverse Effect” means any material adverse effect on (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsChange.

Company’s Representations. The In order to induce the Banks to enter into this Agreement, the Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as followsDate of Issuance that: (ia) The Company is duly organized and incorporated, validly existing and in good standing under the laws of the State of DelawareMinnesota, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. (ii) The Company has the all requisite power and authority to own its property and to carry on its business as now conducted, and is in good standing and authorized to do business in each jurisdiction in which the character of the property owned or leased by it therein or the transaction of its business makes such qualification necessary and where failure to so qualify could reasonably (either individually or in the aggregate) result in a Material Adverse Change. (b) The Company has full corporate power and authority to enter into into, execute, deliver and perform carry out its obligations under this Agreement and each the Related Documents to which the Company is a party, and to incur the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary corporate action and are in full compliance with the Company's articles of incorporation and by-laws. No consent or approval of, or exemption by, or notice to or filing with any Person is required in respect of the Company to authorize the execution, delivery and performance of, or as a condition to the validity or enforceability of, this Agreement, the Related Documents to which the Company is a party or any other agreements entered into by agreement of the parties hereto Company delivered in connection with herewith or therewith, except those which have been obtained and except those which are required under the transactions contemplated by this Agreement (collectivelysecurities or blue sky laws of any jurisdiction. Without limiting the generality of the foregoing, the “Exchange Documents”) and to issue MPUC has issued its Authorizing Order authorizing the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery issuance of the Exchange Documents by securities of the Company and the consummation incurrence by the Company of debt so long as (1) the transactions Company's total capitalization does not exceed $1,690,000,000 (or any higher amount so long as total capitalization does not exceed $1,690,000,000 for more than 60 days without prior MPUC approval) and (2) the Company's equity ratio falls in the range between 49.27 and 66.65 percent (or any higher or lower percentages so long as the equity ratio does not deviate from this range for more than 60 days without prior MPUC approval). Such Authorizing Order is in effect through the earlier of (i) April 30, 2007, or (ii) the date at which a subsequent Authorizing Order is issued. The L/C Obligations incurred hereunder will constitute debt for purposes of such Authorizing Order. As of the date hereof, the Company's total capitalization (including Obligations hereunder in an aggregate amount equal to the aggregate L/C Commitments) does not exceed $1,690,000,000 and Company's equity ratio is within the range of 49.27 to 66.65 percent. (c) The officers of the Company who have executed this Agreement, who have requested the issuance of the Letter of Credit and who have executed or will execute the Related Documents to which the Company is a party and all other documents, instruments and agreements required to be delivered or contemplated hereby hereunder or thereunder was and therebyare properly in office and was and are duly authorized to execute the same. (d) This Agreement and the Related Documents to which the Company is a party each constitutes the valid and legally binding obligations of the Company enforceable in accordance with their terms except that the enforceability thereof may be limited by applicable bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally and by equitable principles. (e) Except as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2005 and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, there are no actions, suits or arbitration proceedings pending or, to the knowledge of the Company, threatened against the Company, at law or in equity, before any Governmental Body which individually or in the aggregate, if adversely determined, would materially and adversely affect the financial condition of the Company or materially impair the ability of the Company to perform its obligations under this Agreement, the Related Documents to which the Company is a party, or any other document, instrument or agreement required to be delivered or contemplated hereunder or thereunder. There are no proceedings pending or, to the knowledge of the Company, threatened against the Company which call into question the validity or enforceability of this Agreement, the Related Documents to which the Company is a party or any agreement of the Company delivered in connection herewith or therewith. (f) The execution, delivery and performance by the Company of this Agreement and the Related Documents to which the Company is a party (i) do not violate any provision of the articles of incorporation or by-laws of the Company, (ii) do not violate any order, decree or judgment, or any provision of any statute, rule or regulation applicable to or binding on the Company or affecting any of its property, (iii) do not violate or conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any shareholder agreement or stock preference agreement or under any material mortgage, indenture, contract or other agreement to which the Company is a party or by which any of its property is bound and (iv) do not result in the creation or imposition of any lien upon any material property of the Company. (g) The Company has filed all United States tax returns and all other tax returns, if any, which are required to be filed by the Company, and has paid all taxes due, if any, as shown on said returns, or pursuant to any assessment received by the Company, except such taxes, if any, as are being contested in good faith and by appropriate proceedings. (h) The consolidated financial statements of the Company and its consolidated subsidiaries as of December 31, 2004 and December 31, 2005 contained in the Company's Annual Report on Form 10-K for the years ended on those dates, copies of which have been furnished to the Banks, present fairly the consolidated financial position of the Company and its Consolidated Subsidiaries as of those dates and the results of their operations for the two years ended December 31, 2005, in conformity with generally accepted accounting principles consistently applied. The consolidated financial statements contained in the Company's Quarterly Reports on Form 10-Q for the quarter ended March 31, 2006, copies of which have been furnished to the Bank, present fairly the consolidated financial position of the Company and its Consolidated Subsidiaries as of the dates thereof and have been prepared in conformity with generally accepted accounting principles applied on the basis consistent with that used in the audited consolidated financial statements for the year ended December 31, 2005 (subject to normal year-end and audit adjustments). The Company has no contingent liabilities which are required by generally accepted accounting principles to be shown on the financial statements of the Company other than as indicated on said financial statements and since December 31, 2005, there has been no Material Adverse Change. (i) To the best knowledge of the Company, the Company is not in default with respect to any judgment, order, writ, injunction, decree or decision of any Governmental Body which default could reasonably constitute, cause or result in a Material Adverse Change. (j) The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U. No part of the proceeds of the Bonds or any Drawing Loan will be used, directly or indirectly, by the Company for a purpose which violates any law, rule, or regulation of any Governmental Body, including, without limitation, the issuance provisions of Regulation U or X of the Exchange Shares have been duly authorized Board of Governors of the Federal Reserve System, as amended. (k) No Potential Default or Event of Default has occurred and is continuing or would result from the obligations incurred by the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, Company hereunder or authorization is required by the Company, its Board actions contemplated hereby. (l) The representations and warranties of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective termsthe Related Documents to which it is a party are true and correct in every material respect, except and the Company has furnished the Administrative Agent a true and correct copy of all the Related Documents 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, in effect on the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsdate hereof. (iiim) The executionIn the ordinary course of its business, delivery and performance the Company conducts an ongoing review of the Exchange Documents by effect of Environmental Laws on the business, operations and properties of the Company and its Subsidiaries, in the consummation course of which it identifies and evaluates liabilities and costs arising under or imposed by the Company of the transactions contemplated hereby and thereby Environmental Laws (including, without limitation, each Exchange any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by Environmental Law, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted in such place, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances, and any actual or potential liabilities to third parties, including employees). On the reservation basis of this review, the Company has no reason to conclude that such liabilities and issuance costs arising under, including the costs of the Exchange Shares) will not (A) compliance with, Environmental Laws, could reasonably constitute, cause or result in a violation Material Adverse Change. (n) No Plan has been terminated nor have any proceedings been instituted to terminate any Plan; the Company has not withdrawn from any Multiemployer Plan in a complete or partial withdrawal nor has a condition occurred which if continued would result in a complete or partial withdrawal; the Company has not incurred any withdrawal liability under Section 4201 or 4204 of ERISA with respect to any Multiemployer Plan; the Company has not incurred any liability to PBGC other than for required insurance premiums which have been paid when due; no Reportable Event with respect to any Plan has occurred; and no Plan has an accumulated funding deficiency under Section 302 of ERISA or Section 412 of the Certificate of Incorporation Code. Each employee benefit plan (as defined belowin Section 3(3) or other organizational documents of ERISA) maintained by the Company is in compliance with ERISA, except where the failure so to comply could not reasonably constitute, cause or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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 clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsChange.

Company’s Representations. The Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (ia) The Company is covenants and agrees that all shares of Common Stock issuable upon exercise of this Warrant Certificate will, upon delivery, be duly organized and validly existing authorized and in good standing under the laws of the State of Delawareissued, fully-paid and have the requisite power non-assessable and authorization to own their properties free from all taxes, liens, claims and to carry on their business as now being conducted and as presently proposed to be conductedencumbrances. (iib) The Company covenants and agrees that it will seek approval from its stockholders to an increase in the authorized number of shares of Common Stock and to the extent received will, after such approval, at all times reserve and keep available an authorized number of shares of its Common Stock and other applicable securities sufficient to permit the exercise in full of this Warrant Certificate. (c) The Company has the requisite power taken all necessary action and authority to enter into proceedings as required and perform its obligations under this Agreement permitted by applicable law, rule and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and therebyregulation, including, without limitation, the notification of the principal market on which the Common Stock is traded, for the legal and valid issuance of the Exchange Shares have been duly authorized by this Warrant. (d) The Warrant Shares, after receipt of approval of the Company's Board stockholders to an increase in the number of Directors shares of Common Stock available for issuance, when issued in accordance with the terms hereof, will be duly authorized and, when paid for or issued in accordance with the terms hereof, shall be validly issued, fully paid and no further filing non-assessable. (e) With a view to making available to Holder the benefits of Rule 144 promulgated under the Act and any other than Form 8-K rule or regulation of the Securities and Exchange Commission ("SEC") that may at any time permit Holder to sell securities of the Company to the public without registration, the Company agrees to use its reasonable best efforts to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, at all times; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the Nasdaq Listing Securities Exchange Act of Additional Shares Notification1934, as amended (the "Exchange Act"), consent, or authorization is required ; and (iii) furnish to any Holder forthwith upon request a written statement by the Company, its Board Company that it has complied with the reporting requirements of Directors or its stockholders. This Agreement Rule 144 and of the Act and the other Exchange Documents have been duly executed and delivered by Act, a copy of the most recent annual or quarterly report of the Company, and constitute the legal, valid such other reports and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. (iii) The execution, delivery and performance of the Exchange Documents documents so filed by the Company and the consummation by the Company as may be reasonably requested to permit any such Holder to take advantage of any rule or regulation of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and SEC permitting the reservation and issuance of the Exchange Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation selling of any law, rule, regulation, order, judgment or decree (including foreign, federal and state such securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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 clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documentswithout registration.

Company’s Representations. The As a material inducement to the Warrantholder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company shall have made all filings under applicable federal and covenants state securities laws necessary to consummate the issuance of this Warrant pursuant to this Agreement in compliance with such laws, except for such filings as may be made properly after the Closing. (b) If applicable, the Company, the Warrantholder and any original investors in the Company who are parties to any stock purchase agreements, and whose consent or approval is required prior to the Creditorexecution and delivery of this Warrant, shall have entered into an amendment to each such stock purchase agreement to provide for such consent and any required waivers, in such form and substance acceptable to the Warrantholder, and such amendment shall be in full force and effect as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedhereof. (iic) If applicable, the Company, the Warrantholder and any original holders of shares in the Company who are parties to any investor’s rights agreements, and whose consent or approval is required prior to the execution and delivery of this Warrant, shall have entered into an amendment to each such investor’s rights agreement, providing for such consent and any required waivers and, where appropriate, adding the Warrantholder as a party thereto, in such form and substance acceptable to the Warrantholder, and such amendment shall be in full force and effect as of the date hereof. (d) The copies of any existing stock purchase agreements and investor’s rights agreements and the Company’s charter documents and bylaws which have been furnished to Warrantholder or the Warrantholder’s counsel reflect all amendments made thereto at any time prior to the date hereof and are correct and complete. (e) As of the date hereof, the authorized capital stock of the Company shall be as stated on the Capitalization Schedule attached hereto as Exhibit B (the “Capitalization Schedule”) and made a part hereof. As of the date hereof, except for this Warrant and except as set forth on the attached Capitalization Schedule, the Company shall not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock or containing any profit participation features, nor shall it have outstanding any rights, warrants or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock plans. The Capitalization Schedule truthfully and accurately sets forth the Company’s information with respect to all outstanding options and rights to acquire the Company’s capital stock. As of the date hereof, except as set forth on the Capitalization Schedule, the Company shall not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock. As of the date hereof, all of the outstanding shares of the Company’s capital stock shall be validly issued, fully paid and nonassessable. (f) With respect to the issuance of this Warrant or the issuance of the Preferred Stock upon exercise of the Warrant (and the shares of Common Stock issuable upon conversion of the Preferred Stock), there are no statutory or contractual stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor’s rights agreements which have been waived. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto not violated any applicable federal or state securities laws in connection with the transactions contemplated by this Agreement (collectivelyoffer, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery sale or issuance of the Exchange Documents by the Company any of its capital stock, and the consummation by the Company of the transactions contemplated hereby offer, sale and thereby, including, without limitation, the issuance of this Warrant does not require registration under the Exchange Shares have been duly authorized by Securities Act or any applicable state securities laws. To the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations best of the Company’s knowledge, enforceable against there are no agreements between the Company in accordance Company’s stockholders with their respective termsrespect to the voting or transfer of the Company’s capital stock or with respect to any other aspect of the Company’s affairs, 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, for any stock purchase agreements and any investor’s rights agreements identified on the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsattached Capitalization Schedule. (iiig) The execution, delivery and performance of the Exchange Documents this Warrant has been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its respective terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Preferred Stock upon exercise of this Warrant (and the shares of Common Stock issuable upon conversion of the Preferred Stock), and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company’s capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any of its subsidiaries subsidiary is subject, except for any such filings required under applicable “blue sky” or by which any property state securities laws or asset of required under Regulation D promulgated under the Company or any of its subsidiaries is bound or affected except, in the case of clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsSecurities Act.

Company’s Representations. The Company hereby represents and represents, warrants and covenants as follows: 8.2.1 There is no claim or demand of any person or entity pertaining to, or any proceeding which is pending or, to the Creditorknowledge of Company, threatened, that would have a material adverse effect on the ability of Company to carry out its obligations under this Agreement; and 8.2.2 Company has the full right, power and authority to grant, and is not prohibited by the terms of any agreement to which it is a party from granting, the licenses granted to CDC under Article 5 hereof; 8.2.3 Company has not previously granted and will not grant any rights inconsistent with the rights and licenses granted herein; 8.2.4 as of the Effective Date, Company has provided to CDC all requested documents in its files for, as well as all other information, to its knowledge, that is material to, the Company Intellectual Property, the Compound, Product and the BEMA Technology, including without limitation, any information that relates to the patentability or validity of the Company Patent Rights; 8.2.5 to the best of Company’s knowledge, as of the date Effective Date, the Company Patent Rights are valid and enforceable, and there are no Patent Rights or similar intellectual property rights of a third party that the manufacture, use or sale of Product would infringe; 8.2.6 as of the Effective Date, Company holds good title to and is the legal and beneficial owner of the Company Patent Rights, free and clear of all liens, security interests, charges and other encumbrances of any kind (other than unilateral creditor filings with respect to which this representation shall be made to the best of Company’s knowledge), and no third party has any right, title or interest in the Company Patent Rights; ***CONFIDENTIAL TREATMENT REQUESTED*** Note: The portions hereof for which confidential treatment are being requested are denoted with “*****”. 8.2.7 as of the Effective Date, there are no pending claims, judgments or settlements against or owed by Company pending with respect to the Company Intellectual Property, and, Company has not received written notice of any threatened claims or litigation seeking to invalidate the Company Patent Rights. During the term of this Agreement, Company shall promptly notify CDC in writing upon learning of any such actual or threatened claim, judgment or settlement; 8.2.8 as of the Effective Date, there are no inquiries, actions or other proceedings pending before or, to the best of Company’s knowledge, threatened by any Governmental Authority or other government agency with respect to Product or any facility where Product is manufactured, and Company has not received written notice threatening any such inquiry, action or other proceeding. As of the Effective Date, there are no investigations pending before or, to the best of Company’s knowledge, threatened by any Governmental Authority or other government agency with respect to Product or any facility where Product is manufactured, and Company has not received written notice threatening any such investigation. During the term of this Agreement, Company shall promptly notify CDC in writing upon learning of any such actual or threatened investigation, inquiry or proceeding; 8.2.9 to the best of Company’s knowledge, the making, using or selling of Product would not infringe the Patent Rights of any third party, and Company has no knowledge that any third party is infringing any of the Company Patent Rights; 8.2.10 as of the Effective Date, the development and manufacture of Product has been conducted by Company and its Affiliates and subcontractors in compliance in all material respects with all applicable Laws and, as of the Effective Date, neither Company nor its Affiliates nor subcontractors have received any notice in writing, or otherwise has knowledge of any facts, which have, or reasonably should have, led Company to believe that any of the INDs relating to Product are not currently in good standing with, the FDA; 8.2.11 Company has conducted all aspects of its drug research and development activities relating to the Compound and/or Product and/or BEMA Technology in compliance with all applicable Laws, including, but not limited to, the provisions of the Act, including the regulations issued thereunder, and applicable cGMPs as they relate to processing or preparation of clinical trial materials. To the Company’s knowledge, it is not the subject of any investigation by a Governmental Authority, nor has any investigation, prosecution, or other enforcement action been threatened by a Governmental Authority. The Company has not received from a Governmental Authority any letter or other document asserting that the Company has violated any statute or regulation enforced by such agency; 8.2.12 To the Company’s knowledge, research involving human subjects conducted by or for the Company has (i) been conducted in compliance with all applicable federal, state, and foreign statutes and regulations governing the protection of human subjects and (ii) not involved any investigator who has been disqualified as a clinical investigator by the FDA or any other agency or has been found by any agency with jurisdiction to have engaged in scientific misconduct. The Company has conducted its clinical investigations in accordance with relevant study protocols and Institutional Review Board approvals and requirements, if ***CONFIDENTIAL TREATMENT REQUESTED*** Note: The portions hereof for which confidential treatment are being requested are denoted with “*****”. applicable, has properly supervised use of the treatment drugs throughout the course of all studies, and has ensured that informed patient consent is obtained where appropriate, consistent with the applicable requirements of 21 C.F.R. Part 50 and any state law requirements; 8.2.13 The Company has provided complete and accurate information concerning costs and expenses of its clinical trials in connection with any claims for federal, state, or private third party reimbursement associated with such clinical trials; 8.2.14 Company has never been and is not currently debarred by the FDA pursuant to 21 U.S.C. §335(a) or (b) (“Debarred Entity”) and Company agrees that it will not obtain advice or assistance from any individual debarred pursuant to 21 U.S.C. §335(a) or (b) Company has no knowledge of any circumstances that may affect the accuracy of the foregoing warranties and representations, including, but not limited to, FDA investigations of, or debarment proceedings against, it or any person or entity with which it is associated or that provides services to Company, and Company will immediately notify CDC if it becomes aware of any such circumstances during the term of this Agreement; 8.2.15 Company has, up to and including the Effective Date, endeavored in good faith to furnish CDC with all material information concerning the quality, toxicity, safety and/or efficacy concerns that may materially impair the utility and/or safety of Products or any other information received from or provided to a Governmental Authority with respect to the Products; 8.2.16 The Atrix License and each other date in agreement with a third party under which either (a) rights with respect to the Company issues Exchange Shares Intellectual Property or other assets are or have been assigned, pledged or otherwise granted a lien under, or licensed or sublicensed to or from Company, (b) activities with respect to the CreditorCompound and/or Product and/or BEMA Technology are or have been performed, as follows: or (c) which restrict or otherwise materially effect the Product or the Compound (collectively the “Company Agreements”) are in full force and effect, and no party (including Company) to those Company Agreements is in breach or default thereunder. Company has provided a true and complete copy of each Company Agreement to CDC. Company shall devote commercially reasonable best efforts to maintain in full force and effect and to fully perform its obligations thereunder and to keep CDC fully informed of any material development pertaining thereto that would have an adverse effect on CDC’s rights under this Agreement. Company shall not, without the prior written approval of CDC: (i) The amend any provision of an Company is duly organized and validly existing and in good standing Agreement that would have an adverse effect on CDC’s rights under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. this Agreement or (ii) make any election or exercise any right or option to terminate in whole or in part any Company Agreement. 8.2.17 The Warrant being issued to CDC has been duly authorized, and the shares of common stock to be issued upon exercise of the Warrant will, upon issuance pursuant to the terms thereof, be duly authorized and validly issued, fully paid and nonassessable 8.2.18 Company has the requisite power lawful right and authority license, pursuant to enter into and perform its obligations under this Agreement and each of the other agreements entered into by Atrix License, to use the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and therebyBEMA Technology, including, without limitation, in connection with the issuance development, manufacture, marketing, distribution, sale and commercialization of the Exchange Shares have been duly authorized by the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholdersProduct. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance ***CONFIDENTIAL TREATMENT REQUESTED*** Note: The portions hereof for which confidential treatment are being requested are denoted with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws“*****”. (iii) The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) 8.2.19 On or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable prior 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 clause (B) or (C) aboveEffective Date, to the extent such violations that could not reasonably be expected owned by Subsidiary as of the Effective Date, BioDelivery shall assign, convey and transfer all assets related to have a Material Adverse Effectthe Product to Subsidiary. As used in During the term of this Agreement, “Material Adverse Effect” means any material adverse effect on (x) all rights, licenses and assets related to the businessProduct shall continue to be held, properties, assets, liabilities, operations (including results thereof), condition (financial owned or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company licensed to perform any of its obligations under any of the Exchange DocumentsSubsidiary.

Company’s Representations. The As a material inducement to the Warrantholder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company shall have made all filings under applicable federal and covenants state securities laws necessary to consummate the issuance of this Warrant pursuant to this Agreement in compliance with such laws, except for such filings as may be made properly after the Closing. (b) If there are parties to any stock purchase agreements whose consent or approval is required prior to the Creditorexecution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such stock purchase agreement to provide for such consent and any required waivers, in such form and substance acceptable to the Warrantholder., and such amendment shall be in full force and effect as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedhereof. (iic) If there are parties to any investor’s rights agreements whose consent or approval is required prior to the execution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such investor’s rights agreement providing for such consent and any required waivers, in such form and substance acceptable to Warrantholder, and such amendment shall be in full force and effect as of the date hereof. (d) The copies of any existing stock purchase agreements and investor’s rights agreements and the Company’s charter documents and bylaws which have been furnished to Warrantholder or the Warrantholder’s counsel reflect all amendments made thereto at any time prior to the date hereof and are correct and complete. (e) As of the date hereof, the authorized capital stock of the Company shall be as stated on the Capitalization Schedule attached hereto as Exhibit B (the “Capitalization Schedule”) and made a part hereof. As of the date hereof, except for this Warrant and except as set forth on the attached Capitalization Schedule, the Company shall not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock or containing any profit participation features, nor shall it have outstanding any rights, warrants or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock plans. As of the date hereof, except as set forth on the Capitalization Schedule, the Company shall not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock. As of the date hereof, all of the outstanding shares of the Company’s capital stock shall be validly issued, fully paid and nonassessable. (f) With respect to the issuance of this Warrant or the issuance of the Preferred Stock upon exercise of the Warrant (and the shares of Common Stock issuable upon conversion of the Preferred Stock), there are no statutory or contractual Stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor’s rights agreements which have been waived. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto not violated any applicable federal or state securities laws in connection with the transactions contemplated by this Agreement (collectivelyoffer, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery sale or issuance of the Exchange Documents by the Company any of its capital stock, and the consummation by the Company of the transactions contemplated hereby offer, sale and thereby, including, without limitation, the issuance of this Warrant does not require registration under the Exchange Shares have been duly authorized by Securities Act or any applicable state securities laws. To the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations best of the Company’s knowledge, enforceable against there are no agreements between the Company in accordance Company’s stockholders with their respective termsrespect to the voting or transfer of the Company’s capital stock or with respect to any other aspect, of the Company’s affairs, 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, for any stock purchase agreements and any investor’s rights agreements identified on the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsattached Capitalization Schedule. (iiig) The execution, delivery and performance of the Exchange Documents this Warrant has been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its respective terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Preferred Stock upon exercise of this Warrant (and the shares of Common Stock issuable upon conversion of the Preferred Stock), and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company’s capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any subsidiary is subject, except for any such filings required under applicable “blue sky” or state securities laws or required under Regulation D promulgated under the Act. (h) The number of its subsidiaries or by which any property or asset shares of Common Stock of the Company or any of its subsidiaries into which the Shares may be converted is bound or affected exceptsubject to certain adjustments, in the case of clause (B) or (C) above, pursuant to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects terms of the Company and its subsidiaries taken as a whole, or (y) the authority or ability Certificate of Incorporation of the Company, upon certain issuances by the Company of additional equity securities at certain price per share less than $0.475 (determined on an as converted to perform any of its obligations under any of the Exchange DocumentsCommon Stock basis).

Company’s Representations. The Company hereby represents makes the following representations, all of which will survive the Closing: (a) The Company has not sustained since June 30, 1999 any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree; and warrants since the respective dates as of which information is given in the Official Statement, there have not been any material changes in the capital stock or long-term debt of the Company or any material adverse change, or a development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company, otherwise than as set forth or contemplated in the Official Statement; (b) The Company was organized and covenants subsists as a corporation under the laws of the Commonwealth, with power (corporate and other) to own its properties and conduct its business as described in the Official Statement; (c) The First Mortgage Bond has been duly authorized, and, when issued and delivered as contemplated by this Bond Purchase Agreement, will have been duly executed, authenticated, issued and delivered and will constitute a valid and legally binding obligation of the Company entitled to the Creditorbenefits provided by the First Mortgage Indenture; (d) The Original Indenture has been duly authorized, executed and delivered by the Company and the Mortgage Trustee, and the Thirty-Second Supplemental Indenture has been duly authorized. When the Thirty-Second Supplemental Indenture, in substantially the form approved by the Company, has been executed and delivered by the Company and the Mortgage Trustee and recorded as required by law, the First Mortgage Indenture (i) will constitute a valid and legally binding instrument enforceable in accordance with its terms except as enforceability may be limited by Creditors' Rights Limitations, and (ii) will constitute a direct, valid and enforceable first mortgage lien (except as enforceability of such lien may be limited by Creditors' Rights Limitations), upon all of the date hereof properties and assets of the Company (not heretofore released as provided for in the First Mortgage Indenture) specifically or generally described or referred to in the First Mortgage Indenture as being subject to the lien thereof (which properties and assets constitute substantially all of the Company's properties and assets other than securities), except for permitted liens under the First Mortgage Indenture, and will create a similar lien upon all properties and assets acquired by the Company after the execution and delivery of the Thirty-Second Supplemental Indenture and required to be subjected to the lien of the First Mortgage Indenture pursuant thereto when so acquired (which properties and assets will constitute substantially all of the Company's properties and assets subsequently acquired other than securities), except for permitted liens under the First Mortgage Indenture; the Original Indenture has been, and the Thirty-Second Supplemental Indenture will be duly filed, recorded or registered in each place in the Commonwealth in which such filing, recording or registration was or is required to protect and preserve the lien of the First Mortgage Indenture; and all necessary approvals of regulatory authorities, commissions and other date governmental bodies having jurisdiction over the Company required to subject to the lien of the First Mortgage Indenture, the mortgaged property or trust estate (as defined in the First Mortgage Indenture) have been duly obtained; (e) In each of the following cases with such exceptions as are not material and do not interfere with the conduct of the business of the Company, the Company has good and marketable title to all of its real property currently held in fee simple; good and marketable title to all of its other interests in real property (other than certain rights of way, easements, occupancy rights, riparian and flowage rights and real property interests of a similar nature); and good and marketable title to all personal property owned by it, in each case free and clear of all liens, encumbrances and defects except such as are described in the Official Statement, the lien of the First Mortgage Indenture, permitted liens under the First Mortgage Indenture 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 real property and buildings held under lease by the Company are held by it under valid, subsisting and enforceable leases with such exceptions which are not material and do not interfere with the use made and proposed to be made of such property and buildings of the Company; (f) In each of the following cases except for such exceptions which are not material and do not interfere with the conduct of the business of the Company, the Company has all licenses, franchises, permits, authorizations, rights, approvals, consents and orders of all governmental authorities or agencies necessary for the ownership or lease of the properties owned or leased by it and for the operation of the business carried on by it as described in the Official Statement, and all water rights, riparian rights, easements, rights of way and other similar interests and rights described or referred to in the First Mortgage Indenture necessary for the operation of the business carried on by it as described in the Official Statement; except as otherwise set forth in the Official Statement, all such licenses, franchises, permits, orders, authorizations, rights, approvals and consents are in full force and effect and contain no unduly burdensome provisions; except as otherwise set forth in the Official Statement, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof; and the Company has the legal power to exercise the rights of eminent domain for the purposes of conducting its water utility operations; (g) The issue and sale of the Bonds; the issue and delivery of the First Mortgage Bond and the compliance by the Company with all of the provisions of the First Mortgage Bond and the First Mortgage Indenture; the execution, delivery and performance by the Company of the Thirty-Second Supplemental Indenture, the Financing Agreement, this Bond Purchase Agreement and the Continuing Disclosure Agreement will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than the lien of the First Mortgage Indenture) upon any of the property or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company issues Exchange Shares is a party or by which the Company is bound or to which any of the Creditorproperty or assets of the Company is subject, nor will such action result in a violation of the provisions of the Articles of Incorporation, as follows:amended, or the Bylaws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its property; and no consent, approval, authorization, order, registration or qualification of or with any court or any such regulatory authority or other governmental body (other than those already obtained) is required for the issue and sale of the Bonds; the issue and delivery of the First Mortgage Bond; the execution, delivery and performance by the Company of this Bond Purchase Agreement, the Financing Agreement, the Thirty-Second Supplemental Indenture, the First Mortgage Bond and the Continuing Disclosure Agreement; or the consummation by the Company of the other transactions contemplated by this Bond Purchase Agreement or the First Mortgage Indenture; (h) The Pennsylvania Public Utility Commission by order has duly authorized the issuance and delivery of the First Mortgage Bond on terms not inconsistent with this Bond Purchase Agreement; (i) The Company is duly organized and validly existing and in good standing under not a holding company, a registered holding company or an affiliate of a registered holding company within the laws meaning of the State Public Utility Holding Company Act of Delaware1935, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted.amended; (j) There are no legal or governmental proceedings pending to which the Company is a party or of which any property of the Company is subject, other than as set forth in the Official Statement and other than litigation incident to the kind of business conducted by the Company wherein an unfavorable ruling, decision or finding is likely that would have a material adverse effect on the financial position, stockholders' equity or results of operations of the Company; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (i) The Capital Projects consist of either land or property of a character subject to depreciation for federal income tax purposes and will be used to furnish water that is or will be made available to members of the general public (including electric utility, industrial, agricultural, or commercial users); (ii) the rates for the furnishing or sale of the water have been established or approved by a State or political subdivision thereof, by an agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof; and (iii) all other information supplied by the Company with respect to the exclusion from gross income pursuant to Section 103 of the Code of the interest on the Bonds is correct and complete; (l) The Company has not, within the requisite power and authority immediately preceding ten years, defaulted in the payment of principal or interest on any of its bonds, notes or other securities, or any legally authorized obligation issued by it; (m) The information with respect to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company and the consummation by Capital Projects and the Company descriptions of the transactions contemplated hereby and thereby, including, without limitationBonds, the issuance Indenture, the Financing Agreement, the First Mortgage Bond, the First Mortgage Indenture and the Continuing Disclosure Agreement contained in the Preliminary Official Statement and the Official Statement (including Appendix A and the information incorporated therein by reference) do not contain an untrue statement of a material fact or omit to state a material fact necessary to make such information and descriptions, in the light of the Exchange Shares have been duly authorized by the Company's Board of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification)circumstances under which they were made, consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws.not misleading; and (iiin) The executionCompany will undertake, delivery and performance pursuant to the Continuing Disclosure Agreement dated as of the Exchange Documents by October 1, 1999 to be entered into between the Company and the consummation by Trustee (the Company "Continuing Disclosure Agreement"), to provide annual reports and notices of certain material events in accordance with Rule 15c2-12 under the transactions contemplated hereby and thereby Securities Exchange Act of 1934, as amended (including, without limitation, each Exchange "Rule 15c2-12"). A description of this undertaking and the reservation and issuance of the Exchange Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 Continuing Disclosure Agreement is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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, set forth in the case of clause (B) or (C) above, to Preliminary Official Statement and will also be set forth in the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsFinal Official Statement.

Company’s Representations. The Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, Purchaser as follows: (ia) The Company is an entity duly organized and organized, validly existing and in good standing under the laws of the State jurisdiction of Delawareits organization with full right, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. (ii) The Company has the requisite corporate or partnership power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto in connection with to consummate the transactions contemplated by this Agreement hereby and otherwise to carry out its obligations hereunder. (collectively, the “Exchange Documents”b) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company Agreement and the consummation performance by the Company of the transactions contemplated hereby and thereby, including, without limitation, by the issuance of the Exchange Shares Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of the Company's Board of Directors and no further filing . (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This c) The Agreement and the other Exchange Documents have has been duly executed and delivered by the Company, and when delivered by the Company in accordance with the terms hereof, will constitute the legal, valid and legally binding obligations obligation of the Company, enforceable against the Company it in accordance with their respective its terms, except except: (i) as such enforceability may be limited by general equitable principles of equity or and applicable bankruptcy, insolvency, reorganization, moratoriummoratorium and other laws of general application affecting enforcement of creditors’ rights generally, liquidation or similar (ii) as limited by laws relating toto the availability of specific performance, injunctive relief or affecting generally, the enforcement of applicable creditors' rights and other equitable remedies and except (iii) insofar as rights to indemnification and to contribution provisions may be limited by federal or state securities lawsapplicable law. (iiid) The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the Agreement and the consummation by it of the transactions contemplated hereby thereby do not and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will not (Ai) result in a violation conflict with or violate any provision of the Certificate Company’s certificate or articles of Incorporation (as defined below) incorporation, bylaws or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 partycharter documents, or (Cii) conflict with or result in a violation of any law, rule, regulation, order, judgment judgment, injunction, decree or decree other restriction of any court or governmental authority to which the Company is subject (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to the Company or any of its subsidiaries regulations), or by which any property or asset of the Company or any of its subsidiaries is bound or affected exceptaffected, except in the case of clause subparagraph (Bii) or (C) above, to the extent such violations that as could not have or reasonably be expected to have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the Company. (xe) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects The authorized and outstanding capital stock of the Company is set forth on Annex C attached hereto. All issued and its subsidiaries taken outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. Except as a wholeset forth on Annex C, there are no other outstanding rights, options, warrants, preemptive rights, rights of first refusal, or (y) similar rights for the authority purchase or ability acquisition from the Company of any securities of the Company nor are there any commitments to issue or execute any such rights, options, warrants, preemptive rights or rights of first refusal. Except as otherwise provided in the Company’s certificate of incorporation, there are no outstanding rights or obligations of the Company to perform repurchase or redeem any of its securities. The respective rights, preferences, privileges, and restrictions of the Company’s outstanding shares are as stated in the Company’s certificate of incorporation. All outstanding securities have been issued in compliance with all applicable securities laws. (f) There is no action, suit, proceeding, or investigation (including without limitation any suit, proceeding, or investigation involving the prior employment of any of the Company’s employees, their use in connection with the Company’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers) against or adverse to the Company pending or, to the best of the Exchange DocumentsCompany’s knowledge, currently threatened before any court, administrative agency, or other governmental body. The Company is not a party or subject to, and none of its assets is bound by, the provisions of any order, writ, injunction, judgment, or decree of any court or government agency or instrumentality. There is no action, suit, or proceeding by the Company currently pending or that the Company intends to initiate. (g) The Company has fully provided the Purchaser with all the information that the Purchaser has requested for deciding whether to purchase the Shares and the Warrants. Neither this Agreement, nor any other agreements, statements or certificates made or delivered in connection herewith or therewith contains any untrue statement of a material fact or, when taken together, omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading.

Company’s Representations. The Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (ia) The Company is covenants and agrees that, assuming approval of the Proposal and filing with the Delaware Secretary of State of an amended Certificate of Incorporation reflecting such approval, all shares of Common Stock issuable upon exercise of this Warrant Certificate will, upon delivery, be duly organized and validly existing authorized and in good standing under the laws of the State of Delawareissued, fully-paid and have the requisite power non-assessable and authorization to own their properties free from all taxes, liens, claims and to carry on their business as now being conducted and as presently proposed to be conductedencumbrances. (iib) The Company covenants and agrees that it will seek approval from its stockholders to the Proposal, and to the extent received will, after such approval, at all times reserve and keep available an authorized number of shares of its Common Stock and other applicable securities sufficient to permit the exercise in full of this Warrant Certificate. (c) The Company has the requisite power taken all necessary action and authority to enter into proceedings as required and perform its obligations under this Agreement permitted by applicable law, rule and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and therebyregulation, including, without limitation, the notification of the principal market on which the Common Stock is traded, for the legal and valid issuance of this Warrant. (d) The Warrant Shares, after receipt of approval of the Company’s stockholders to the Proposal, when issued in accordance with the terms hereof, will be duly authorized and, when paid for or issued in accordance with the terms hereof, shall be validly issued, fully paid and non-assessable. (e) With a view to making available to Holder the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the Securities and Exchange Commission (“SEC”) that may at any time permit Holder to sell securities of the Company to the public without registration, the Company agrees to use its reasonable best efforts to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, at all times; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (iii) furnish to any Holder forthwith upon request a written statement by the Company that it has complied with the reporting requirements of Rule 144 and of the Act and the Exchange Shares have been duly authorized by Act, a copy of the Company's Board most recent annual or quarterly report of Directors and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid such other reports and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. (iii) The execution, delivery and performance of the Exchange Documents documents so filed by the Company and the consummation by the Company as may be reasonably requested to permit any such Holder to take advantage of any rule or regulation of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and SEC permitting the reservation and issuance of the Exchange Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation selling of any law, rule, regulation, order, judgment or decree (including foreign, federal and state such securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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 clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documentswithout registration.

Company’s Representations. The Company hereby represents and warrants and covenants to the Creditor, as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, you as follows: (ia) The Company is a corporation, duly organized and validly existing and in good standing under the laws of the State of Delaware, Delaware and have the requisite has full power and authorization authority to own their properties enter into and to carry on their business as now being conducted perform its obligations under this Agreement, the Warrant Agreements, the Warrants and as presently proposed the Notes and to be conductedissue the Securities (and any shares of Common Stock issuable upon exercise of the Warrants). (iib) The Company has the requisite power and authority taken all actions necessary to authorize it to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectivelyAgreement, the “Exchange Documents”) Warrant Agreement, the Warrant and the Note and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of consummate the transactions contemplated hereby and thereby, including, without limitation. This Agreement, the issuance of Warrant Agreement, the Exchange Shares have been duly authorized by the Company's Board of Directors and no further filing (other than Form 8-K Warrant and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the Note are legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except subject, as such enforceability may be limited by general principles of equity or applicable to enforcement only, to bankruptcy, insolvency, reorganization, moratorium, liquidation moratorium or similar laws relating to, or at the time in effect affecting the enforceability of the rights of creditors generally, the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. (iiic) The execution, delivery and performance authorized capital stock of the Exchange Documents Company is 2,000 shares of Common Stock of which 825 shares of Common Stock is issued and outstanding. The Company has reserved twenty one (21) shares of Common Stock for issuance upon exercise of the Warrants. The shares of Common Stock issuable upon exercise of the Warrants have been duly authorized for issuance by the Company and, when issued and the consummation delivered against payment therefor as contemplated by the Company Warrant Agreement to be executed by each Purchaser, will be validly issued, fully paid and non-assessable, free and clear of all liens, claims and other encumbrances. (d) The offer and sale of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and Securities hereunder is exempt from the reservation and issuance registration requirements of the Exchange SharesSecurities Act either pursuant to Section 4(2) will not (A) result in a violation of the Certificate of Incorporation (as defined below) thereof or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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 clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsRegulation D promulgated thereunder.

Company’s Representations. The Company hereby represents and warrants following representations and covenants to the Creditor, as of the date hereof and each other date in which are made by the Company issues Exchange Shares to induce SciGames to make the Creditor, as followsInvestment: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. (iia) The Company has made available to SciGames (a) its annual report on Form 10-KSB for its fiscal year ended December 31, 2003, (b) its quarterly report on Form 10QSB for its quarters ended March 31, 2004 and June 30, 2004, (c) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the requisite power and authority to enter into and perform its obligations under this Agreement and each stockholders of the Company since December 31, 2003, and (d) all of its other agreements entered into by reports, statements, schedules and registration statements filed with the parties hereto Securities and Exchange Commission (the "SEC") since December 31, 2003 (all of the documents in connection subsections (a) - (d) being referred to herein collectively as the "SEC Documents"). The Company has filed with the SEC all necessary forms, documents, exhibits and disclosures regarding the transactions contemplated by this Agreement in compliance with the Securities Act of 1933, as amended (collectivelythe "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and the rules and regulations of the SEC thereunder. As of its filing date, each SEC Document complied in all material respects with the Securities Act, the “Exchange Documents”Act and the rules and regulations of the SEC thereunder. None of the SEC Documents 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, except to the extent any such misstatement or omission has been superseded by a subsequent report or other document filed with the SEC prior to the date hereof. (b) As of the applicable filing date, the consolidated financial statements (including, in each case, any related notes) of the Company included in the SEC Documents complied as to form and to issue substance in all material respects with applicable accounting requirements of the Exchange Shares SEC and the published rules and regulations of the SEC or other applicable SEC or stock exchange rules and regulations with respect thereto. Such financial statements were prepared in accordance with the terms hereof and thereof. The execution and delivery generally accepted accounting principles of the Exchange Documents United States ("GAAP") applied on a consistent basis 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 that they may include footnotes, may be condensed or summary statements) and fairly presented in all material respects, the financial position of the Company as of the respective dates thereof and the results of operations and cash flows for the periods indicated (subject, in the case of unaudited statements, to normal year-end audit adjustments). (c) Except for the conduct and results of the Iowa test market for electronic game cards manufactured by the Company Company, since January 1, 2004, no event, change or effect, that individually or when taken together with all other such events, changes or effects is or could reasonably be expected (as far as can be foreseen at the time) to be materially adverse to the business, assets, liabilities, financial condition, or results of operations (hereinafter, a "Material Adverse Effect") of the Company, has occurred or exists and to the Company's knowledge, no event or circumstance has occurred that, with notice or passage of time or both, is reasonably likely to result in a Material Adverse Effect with respect to the Company. (d) As of the date hereof, all of the issued and outstanding equity interests of EGC (the "Issued Shares") and the consummation by the Company rights to acquire equity interests in EGC are as set forth on Annex 1 hereto. All of the transactions contemplated Issued Shares and the Shares have been, and all of the Warrant Shares will be when issued, duly authorized and validly issued, fully paid and nonassessable and offered, issued, and sold in accordance with all applicable federal and state securities laws. (e) The Company hereby agrees to indemnify and therebyhold harmless SciGames and its affiliates from any liability, loss, cost, damage and expense (including, without limitation, the issuance reasonable costs of the Exchange Shares have been duly authorized by the Company's Board of Directors litigation and no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification)attorneys' fees) arising out of, consentresulting from, or authorization is required by in any way related to the Company, its Board of Directors or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities laws. (iii) The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will not (A) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its subsidiaries, any share capital of the Company or any of its subsidiaries or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 (C) result in a violation breach of any law, rule, regulation, order, judgment representation or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (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 clause (B) or (C) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect. As used warranty set forth in this Agreement, “Material Adverse Effect” means any material adverse effect on (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documents.Section E.

Company’s Representations. The As a material inducement to the Holder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company shall have made all filings under applicable federal and covenants state securities laws necessary to consummate the issuance of this Warrant pursuant to this Agreement in compliance with such laws, except for such filings as may be made properly after the Grant Date. (b) If there are parties to any stock purchase agreements whose consent or approval is required prior to the Creditorexecution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such stock purchase agreement to provide for such consent and any required waivers, in such form and substance acceptable to the Holder, and such amendment shall be in full force and effect as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedhereof. (iic) If there are parties to any investor's rights agreements whose consent or approval is required prior to the execution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such investor's rights agreement providing for such consent and any required waivers, in such form and substance acceptable to Holder, and such amendment shall be in full force and effect as of the date hereof. (d) The copies of any existing stock purchase agreements and investor's rights agreements and the Company's charter documents and bylaws which have been furnished to Holder or the Holder's counsel reflect all amendments made thereto at any time prior to the date hereof and are correct and complete. (e) As of the date hereof, all of the outstanding shares of the Company's capital stock shall be validly issued, fully paid and nonassessable. (f) With respect to the issuance of this Warrant or the issuance of the Common Stock upon exercise of the Warrant, there are no statutory or contractual stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor's rights agreements which have been waived. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto not violated any applicable federal or state securities laws in connection with the transactions contemplated by this Agreement (collectivelyoffer, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery sale or issuance of the Exchange Documents by the Company any of its capital stock, and the consummation by the Company of the transactions contemplated hereby offer, sale and thereby, including, without limitation, the issuance of this Warrant does not require registration under the Exchange Shares have been duly authorized by Securities Act or any applicable state securities laws. To the best of the Company's Board of Directors and knowledge, there are no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by agreements between the Company, its Board of Directors 's stockholders with respect to the voting or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations transfer of the Company, enforceable against 's capital stock or with respect to any other aspect of the Company in accordance with their respective termsCompany's affairs, 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, for any stock purchase agreements and any investor's rights agreements identified on the enforcement of applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsattached Capitalization Schedule. (iiig) The execution, delivery and performance of the Exchange Documents this Warrant has been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Common Stock upon exercise of the Warrant, and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company's capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any of its subsidiaries subsidiary is subject, except for any such filings required under applicable "blue sky" or by which any property state securities laws or asset of required under Regulation D promulgated under the Company or any of its subsidiaries is bound or affected except, in the case of clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsSecurities Act.

Company’s Representations. The As a material inducement to the Holder to purchase this Warrant, the Company hereby represents and warrants that: (a) The Company shall have made all filings under applicable federal and covenants state securities laws necessary to consummate the issuance of this Warrant pursuant to this Agreement in compliance with such laws, except for such filings as may be made properly after the Grant Date. (b) If there are parties to any stock purchase agreements whose consent or approval is required prior to the Creditorexecution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such stock purchase agreement to provide for such consent and any required waivers, in such form and substance acceptable to the Holder, and such amendment shall be in full force and effect as of the date hereof and each other date in which the Company issues Exchange Shares to the Creditor, as follows: (i) The Company is duly organized and validly existing and in good standing under the laws of the State of Delaware, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conductedhereof. (iic) If there are parties to any investor's rights agreements whose consent or approval is required prior to the execution and delivery of this Warrant, the Company and any such parties shall have entered into an amendment to each such investor's rights agreement providing for such consent and any required waivers, in such form and substance acceptable to Holder, and such amendment shall be in full force and effect as of the date hereof. (d) The copies of any existing stock purchase agreements and investor's rights agreements and the Company's charter documents and bylaws which have been furnished to Holder or the Holder's counsel reflect all amendments made thereto at any time prior to the date hereof and are correct and complete. (e) As of the date hereof, all of the outstanding shares of the Company's capital stock shall be validly issued, fully paid and nonassessable. (f) With respect to the issuance of this Warrant or the issuance of the Common Stock upon exercise of the Warrant, there are no statutory or contractual stockholders preemptive rights or rights of refusal, except for any such rights contained in any stock purchase agreement and/or investor's rights agreements which have been waived. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and each of the other agreements entered into by the parties hereto not violated any applicable federal or state securities laws in connection with the transactions contemplated by this Agreement (collectivelyoffer, the “Exchange Documents”) and to issue the Exchange Shares in accordance with the terms hereof and thereof. The execution and delivery sale or issuance of the Exchange Documents by the Company any of its capital stock, and the consummation by the Company of the transactions contemplated hereby offer, sale and thereby, including, without limitation, the issuance of this Warrant does not require registration under the Exchange Shares have been duly authorized by Securities Act or any applicable state securities laws. To the best of the Company's Board of Directors and knowledge, there are no further filing (other than Form 8-K and the Nasdaq Listing of Additional Shares Notification), consent, or authorization is required by agreements between the Company, its Board of Directors 's stockholders with respect to the voting or its stockholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations transfer of the Company, enforceable against 's capital stock or with respect to any other aspect of the Company in accordance with their respective 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 applicable creditors' rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities lawsCompany's affairs. (iiig) The execution, delivery and performance of the Exchange Documents this Warrant has been duly authorized by the Company Company. This Warrant constitutes a valid and binding obligation of the consummation Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Warrant, the transactions contemplated hereby and thereby (including, without limitation, each Exchange and the reservation and issuance of the Exchange Shares) will Common Stock upon exercise of the Warrant, and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (Ai) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company's capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of the Certificate of Incorporation of, or (as defined belowvi) require any authorization, consent, approval, exemption or other organizational documents action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant to, the charter or bylaws of the Company or any of its subsidiariessubsidiary, any share capital of the Company or any of its subsidiaries law, statute, rule or Bylaws (as defined below) of the Company or any of its subsidiaries, (B) 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 regulation to which the Company or any of its subsidiaries subsidiary is a partysubject, or (C) result in a violation of any lawagreement, rule, regulationinstrument, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The NASDAQ Capital Market (the “Principal Market”) applicable to which the Company or any of its subsidiaries subsidiary is subject, except for any such filings required under applicable "blue sky" or by which any property state securities laws or asset of required under Regulation D promulgated under the Company or any of its subsidiaries is bound or affected except, in the case of clause (B) or (C) above, to the extent such violations that 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 (x) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries taken as a whole, or (y) the authority or ability of the Company to perform any of its obligations under any of the Exchange DocumentsSecurities Act.