Common use of Convertible Preferred Stock Clause in Contracts

Convertible Preferred Stock. and accompanying Warrants to purchase shares of the Company’s common stock, par value $.01 per share1 50% of the number of shares of Common Stock into which Holder's Preferred Stock is convertible. (the “Common Stock”). The conversion shares and the warrant shares underlying each Unit may not be separately transferred. The Units together with the Convertible Preferred Stock, the Warrants and the securities underlying each Unit are sometimes collectively referred to as “Securities”). The Certificate of Rights and Designations of the Convertible Preferred Stock and the form of Warrant are included in the Booklet, which accompanies this Subscription Agreement. For purposes of this Offering, the minimum offering shall mean thirty (30) Units (the “Minimum Offering”) and a minimum gross amount raised of $3,000,000 (the “Minimum Amount”). The maximum offering shall mean seventy (70) Units (the “Maximum Offering”) and a maximum gross amount raised of $7,000,000 (the “Maximum Amount”). The minimum investor subscription amount is $100,000 to purchase one (1) Unit (“Minimum Investor Subscription Amount”); the Company reserves the right to accept subscriptions for lesser amounts. The Company, on notice to the purchasers of Units, may, within 30 days of the last closing with respect to the Maximum, exercise its option to sell an additional $3,000,000 of Units (30 Units), upon the same terms and conditions as set forth herein (the “Over Allotment Option”). If the Company exercises its Over Allotment Option, then the Offering Period defined below may be extended for a period not to exceed an additional 30 days. The Units are being offered by the Company. The Company, however, reserves the right to retain registered broker-dealers, “finders”, and other individuals and entities authorized by federal and applicable state securities laws to assist with the distribution of the Securities offered hereby. In such event, the Company shall pay a selling commission or finders fees to registered broker-dealers, “finders”, individuals and entities legally authorized to receive such commissions or fees, as applicable (collectively, the “Selling Agents”) of a sum ordinarily not to exceed ten percent (10%) of the investor subscription amount received, provided that such payments are permitted under federal and applicable state securities laws. Such broker’s compensation may include warrants as well. Subscriptions to purchase Units will be solicited until the earliest of: (i) November 30, 2006, unless extended by the Company in its sole discretion without notice for a period of up to an additional 90 days2 , (ii) the sale of the entire Offering, or (iii) if the Company elects to exercise its Over Allotment Option, for a period of up to an additional 30 days (the “Offering Period”). The Offering Period has been extended to January 15, 2007. __________________________ 1 50% of the number of shares of Common Stock into which Holder's Preferred Stock is convertible. 2 The Company initially extended the Offering Period to December 15, 2006 in order to close on the Minimum Offering. On December 14, 2006, the Company entered into subscription agreements with 27 individual investors for an offering of $3.875 million in consideration for 3,875 shares of Series A-1 Cumulative Convertible Preferred Stock, (the “Series A-1 Preferred Stock”). In addition, the Company issued warrants to purchase 1,160,204 shares of common stock exercisable at $1.67 per share.

Convertible Preferred Stock. Following the Effective Time, and accompanying Warrants without requiring any further action by the Lender, the Company shall use its best efforts to purchase issue shares of senior preferred equity of the Company (the “Preferred Equity”) in exchange for the reduction and termination of the Obligations as described in Section 4.c. The Preferred Equity shall be issued based on a price of $1 per share, shall have a 7.5% per annum payment-in-kind dividend and shall be convertible at the Lender’s sole option into fully paid common stock of the Company at a per-share conversion price equal to the prior 10-day average common stock trading price at the time the preferred equity is issued. Aside from the Loan and the JV Loan, the Preferred Equity shall be the most senior security in the capital structure; provided, however, that the Lender acknowledges and agrees that the Preferred Equity may not be issued without, and shall be subject to, the approval of the holders of Series A Preferred Stock of the Company. Further, the payment of stock dividends shall be subject to the availability of authorized, unissued and unreserved shares, although the Company agrees to use its best efforts to authorize more preferred shares if needed for the purpose of fulfilling this obligation. The terms of the preferred equity shall include a liquidation preference and a ratchet provision with respect to the conversion price, as well as whatever negative covenants including the further issuance of preferred shares and debt as many be agreeable between the Lender and the Company. The Preferred Equity grant may contain a provision blocking the Lender from converting some or all of such Preferred Equity to common shares, to the extent that, following such conversion, the Lender would be being deemed to be the “beneficial owner” (as such term is defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of more than four and ninety-nine one-hundredths percent (4.99%) of the Company’s outstanding common stock, par value $.01 per share1 50% of the number of shares of Common Stock into which Holder's Preferred Stock is convertible. (the “Common Stock”). The conversion shares and the warrant shares underlying each Unit may not be separately transferred. The Units together with the Convertible Preferred Stock, the Warrants and the securities underlying each Unit are sometimes collectively referred to as “Securities”). The Certificate of Rights and Designations of the Convertible Preferred Stock and the form of Warrant are included in the Booklet, which accompanies this Subscription Agreement. For purposes of this Offering, the minimum offering shall mean thirty (30) Units (the “Minimum Offering”) and a minimum gross amount raised of $3,000,000 (the “Minimum Amount”). The maximum offering shall mean seventy (70) Units (the “Maximum Offering”) and a maximum gross amount raised of $7,000,000 (the “Maximum Amount”). The minimum investor subscription amount is $100,000 to purchase one (1) Unit (“Minimum Investor Subscription Amount”); the Company reserves the right to accept subscriptions for lesser amounts. The Company, on notice to the purchasers of Units, may, within 30 days of the last closing with respect to the Maximum, exercise its option to sell an additional $3,000,000 of Units (30 Units), upon the same terms and conditions as set forth herein (the “Over Allotment Option”). If the Company exercises its Over Allotment Option, then the Offering Period defined below may be extended for a period not to exceed an additional 30 days. The Units are being offered by the Company. The Company, however, reserves the right to retain registered broker-dealers, “finders”, and other individuals and entities authorized by federal and applicable state securities laws to assist with the distribution of the Securities offered hereby. In such event, the Company shall pay a selling commission or finders fees to registered broker-dealers, “finders”, individuals and entities legally authorized to receive such commissions or fees, as applicable (collectively, the “Selling Agents”) of a sum ordinarily not to exceed ten percent (10%) of the investor subscription amount received, provided that such payments are permitted under federal and applicable state securities laws. Such broker’s compensation may include warrants as well. Subscriptions to purchase Units will be solicited until the earliest of: (i) November 30, 2006, unless extended by the Company in its sole discretion without notice for a period of up to an additional 90 days2 , (ii) the sale of the entire Offering, or (iii) if the Company elects to exercise its Over Allotment Option, for a period of up to an additional 30 days (the “Offering Period”). The Offering Period has been extended to January 15, 2007. __________________________ 1 50% of the number of shares of Common Stock into which Holder's Preferred Stock is convertible. 2 The Company initially extended the Offering Period to December 15, 2006 in order to close on the Minimum Offering. On December 14, 2006, the Company entered into subscription agreements with 27 individual investors for an offering of $3.875 million in consideration for 3,875 shares of Series A-1 Cumulative Convertible Preferred Stock, (the “Series A-1 Preferred Stock”). In addition, the Company issued warrants to purchase 1,160,204 shares of common stock exercisable at $1.67 per share.

Convertible Preferred Stock. and accompanying Warrants to purchase shares of the Company’s common stock, par value $.01 per share1 50% of the number of shares of Common Stock into which Holder's Preferred Stock is convertible. (the “Common Stock”). The conversion shares and the warrant shares underlying each Unit may not be separately transferred. The Units together with the Convertible Preferred Stock, the Warrants and the securities underlying each Unit are sometimes collectively referred to as “Securities”). The Certificate of Rights and Designations of the Convertible Preferred Stock and the form of Warrant are included in the Booklet, which accompanies this Subscription Agreement. For purposes of this Offering, the minimum offering shall mean thirty (30) Units (the “Minimum Offering”) and a minimum gross amount raised of $3,000,000 (the “Minimum Amount”). The maximum offering shall mean seventy (70) Units (the “Maximum Offering”) and a maximum gross amount raised of $7,000,000 (the “Maximum Amount”). The minimum investor subscription amount is $100,000 to purchase one (1) Unit (“Minimum Investor Subscription Amount”); the Company reserves the right to accept subscriptions for lesser amounts. The Company, on notice to the purchasers of Units, may, within 30 days of the last closing with respect to the Maximum, exercise its option to sell an additional $3,000,000 of Units (30 Units), upon the same terms and conditions as set forth herein (the “Over Allotment Option”). If the Company exercises its Over Allotment Option, then the Offering Period defined below may be extended for a period not to exceed an additional 30 days. The Units are being offered by the Company. The Company, however, reserves the right to retain registered broker-dealers, “finders”, and other individuals and entities authorized by federal and applicable state securities laws to assist with the distribution of the Securities offered hereby. In such event, the Company shall pay a selling commission or finders fees to registered broker-dealers, “finders”, individuals and entities legally authorized to receive such commissions or fees, as applicable (collectively, the “Selling Agents”) of a sum ordinarily not to exceed ten percent (10%) of the investor subscription amount received, provided that such payments are permitted under federal and applicable state securities laws. Such broker’s compensation may include warrants as well. Subscriptions to purchase Units will be solicited until the earliest of: (i) November 30, 2006, unless extended by the Company in its sole discretion without notice for a period of up to an additional 90 days2 days, (ii) the sale of the entire Offering, or (iii) if the Company elects to exercise its Over Allotment Option, for a period of up to an additional 30 days (the “Offering Period”). The Offering Period has been extended to January 15, 2007. __________________________ 1 50150% of the number of shares of Common Stock into which Holder's Preferred Stock is convertible. 2 The Company initially extended the Offering Period to December 15, 2006 in order to close on the Minimum Offering. On December 14, 2006, the Company entered into subscription agreements with 27 individual investors for an offering of $3.875 million in consideration for 3,875 shares of Series A-1 Cumulative Convertible Preferred Stock, (the “Series A-1 Preferred Stock”). In addition, the Company issued warrants to purchase 1,160,204 shares of common stock exercisable at $1.67 per share.