8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  August 1, 2005

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PANAMERICAN BANCORP

(Exact name of registrant as specified in its charter)

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Delaware	0-22911	65-032364
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

3400 Coral Way, Miami, Florida 33145

(Address of principal executive offices) (Zip Code)

305-421-6800

(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement.

On August 2, 2005, PanAmerican Bancorp (the “Company”) completed the private placement (the “Private Placement”) of $17.4 million of units (the “Units”) to “accredited investors,” as such term is defined in Regulation D (“Regulation D”) promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), (collectively, the “Investors”). In connection with the Private Placement, the Company and the Investors entered into the Securities Purchase Agreement (the “Purchase Agreement”) and the Registration Rights Agreement (the “Registration Rights Agreement”), each of which is dated as of August 1, 2005, forms of which are attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively. Pursuant to the terms of the Purchase Agreement, the Company sold 4,3 50,000 Units, each of which consisted of one share of common stock, par value $.01 per share (“Common Stock”), and one Series F Common Stock Purchase Warrant (the “Series F Warrant” and, together with the Purchase Agreement and the Registration Rights Agreement, the “Private Placement Documents”) to purchase 0.5 shares of Common Stock, at a purchase price of $4.00 per Unit. The Company entered into definitive Purchase Agreements with York Capital Management, L.P., York Investment Limited and York Global Value Partners, L.P. (collectively, “York Entities”) to purchase, in aggregate, 3,150,000 Units, subject to receipt of bank regulatory approval by York Entities. The closing for the transaction with York Entities will occur promptly upon the receipt of bank regulatory approval.

The Company also agreed, as part of the compensation of the placement agents engaged by the Company in connection with the Private Placement, to issue to the placement agents, in aggregate, Series F Warrants to purchase a number of shares of Common Stock equal to 6% of the total number of shares of Common Stock, including shares of Common Stock issuable upon the exercise of the Series F Warrants, issued in the Private Placement. The son of the Company’s Chief Executive Officer and President is the majority owner of one of the placement agents involved in the Private Placement.

Under the Purchase Agreement, subject to certain limited exceptions, if the Company proposes to issue any (i) shares of Common Stock, (ii) warrants, options, or other rights to purchase Common Stock (“Rights”), or (iii) any debentures or other securities convertible into or exchangeable for shares of Common Stock (collectively, “Convertible Securities” and, together with shares of Common Stock and Rights, “New Securities”), each Investor who purchased more than $1.0 million of Units (a “First Refusal Purchaser”) will have the right to purchase such number of  New Securities at the price and on the terms upon which the new issuance is proposed to be made so that, after giving effect to the issuance of the New Securities and the conversion, exercise and exchange into or for, directly or indirectly, shares of Common Stock of all such New Securities, the First Refusal Purchaser who exercises such right will continue to maintain its same proportionate ownership of Common Stock, on a fully diluted basis, as of the date immediately preceding the New Issuance. However, the Company will not be required to consummate any securities sale transaction with any First Refusal Purchaser, as described above, if the First Refusal Purchaser violates any law or regulation governing the acquisition of control of financial institutions due to its ownership of the Company’s securities, or the First Refusal Purchaser is required to divest any of the Company’s securities to avoid such violation. The right of first refusal on new issuances described above expires on the third anniversary of the applicable closing date of the Private Placement with respect to each First Refusal Purchaser.

The Company agreed that it would not:  (i) redeem, purchase or otherwise reduce the number of its outstanding securities or take any other action after the consummation of the Private Placement that would cause the voting stock of the Company owned by York Entities to represent a percentage of the voting power of all voting stock of the Company in excess of 24.99% or, in case of Pequot Mariner Master Fund, L.P. and Pequot Scout Fund, L.P. (collectively, “Pequot Entities”), in excess of 9.99%; (ii) become subject to any obligation to redeem or repurchase any shares of its voting stock that would cause the voting stock of the Company owned by York Entities or Pequot Entities to exceed the limitations set forth in paragraph (i) above; or (iii) take any action that would result in York Entities or Pequot Entities being in violation of any law or regulation governing the acquisition of control of financial institutions as a result of York Entities’ or Pequot Entities’ ownership of securities of the Company or being required to divest any securities of the Company to avoid such violation.

Pursuant to the terms of the Purchase Agreement, the Company is obligated to invite a representative of York Entities to attend all meetings of the Company’s Board of Directors in a nonvoting observer capacity and to give such representative copies of all materials that the Company provides to its directors.

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Under the Registration Rights Agreement, on or prior to the 90^th calendar day after the last closing under the Private Placement, but not later than December 31, 2005, the Company is obligated to file with the SEC a shelf registration statement covering the resale of the registrable securities, including (i) shares of Common Stock and Series F Warrants sold in the Private Placement, (ii) shares of Common Stock issuable upon exercise of Series F Warrants sold in the Private Placement, (iii) Series F Warrants issued to the placement agents, and (iv) shares of Common Stock issuable upon exercise of Series F Warrants issued to the placement agents. The Company will use its commercially reasonable efforts to cause the registration statement to be declared effective under the Securities Act prior to the 120^th calendar day following the last closing date under the Private Placement, but not later than January 31, 2006, or prior to the 180^th calendar day if the SEC notifies the Company that the registration statement will be reviewed, but not later than March 31, 2006. The Company is also obligated to use its commercially reasonable efforts to keep such registration statement continuously effective under the Securities Act until all registrable securities covered by such registration statement have been sold or may be sold without volume restrictions pursuant to Rule 144 under the Securities Act.

A holder of two Series F Warrants, a form of which is attached hereto as Exhibit 10.3, is entitled to purchase one share of Common Stock at an exercise price of $4.00 per share, subject to adjustments as described below, at any time prior to the 5^th anniversary of the date of issuance. A holder of the Series F Warrant may pay the exercise price through a “cashless exercise,” and the Company will issue to such holder the number of shares of Common Stock determined by a formulae specified in the Series F Warrant.

The number of shares of Common Stock that a holder may acquire upon any exercise of the Series F Warrant will be limited to the extent necessary to ensure that following such exercise, the total number of shares of Common Stock then beneficially owned by holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the holder’s for purposes of the Securities Exchange Act of 1934, as amended, does not exceed 9.999% of the total number of issued and outstanding shares of Common Stock, including for such purpose the shares of Common Stock issuable upon such exercise of the Series F Warrant.

The exercise price and/or the number of shares of Common Stock issuable upon the exercise of the Series F Warrants is subject to adjustments in case of a stock dividend, stock split, any recapitalization, reorganization, reclassification, consolidation or merger, to which the Company is a party, or sale of all or substantially all of the Company’s assets to another person or other transaction that is effected in such a way that holders of Common Stock are entitled to receive stock, securities or assets with respect to or in exchange for Common Stock. The Company may at any time during the term of the Series F Warrant reduce the then current exercise price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

If after the date of issuance of the Series F Warrant the closing sale price per share of Common Stock for each of 20 consecutive trading days, which period will commence on or after the date that the registration statement filed pursuant to the Registration Rights Agreement is declared effective by the SEC, exceeds $5.60, subject to adjustment, then the Company may within five trading days of the end of such period call for redemption all or any portion of the Series F Warrant for $0.50 per share.

The Private Placement Documents also include various representations, warranties and covenants which are customary for a transaction of this nature.

The foregoing brief summary of the Private Placement Documents is not intended to be complete and is qualified in its entirety by reference to the documents attached as exhibits to this Current Report on Form 8-K.

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Item 3.02

Unregistered Sales of Equity Securities.

On August 2, 2005, the Company raised $17.4 million by selling 4,350,000 Units, consisting of, in aggregate, 4,350,000 shares of Common Stock and Series F Warrants to purchase 2,175,000 shares of Common Stock, at a purchase price of $4.00 per Unit, to Investors in a Private Placement described in Item 1.01 above. In addition, the Company issued Series F Warrants to purchase, in aggregate, 391,500 shares of Common Stock to the placement agents, as part of compensation for their services related to the Private Placement. The Company is also obligated to pay, in aggregate, fees and commission of approximately $1.5 million to the placement agents.

The terms of the Series F Warrant, including, but not limited to, the terms of exercise into shares of Common Stock, are described in Item 1.01 above. The Company offered and sold all of its shares of Common Stock and Series F Warrants in the Private Placement to “accredited investors,” as such term is defined in Rule 501 of Regulation D, without general solicitation or general advertising, and, as a result, the Company relied on the exemption from the registration requirements of the Securities Act provided by Rule 506 of Regulation D.

Item 5.01

Changes in Control of Registrant.

In connection with the Private Placement described in Item 1.01 above, the Company entered into definitive Purchase Agreements with York Entities to purchase, in aggregate, 3,150,000 Units, subject to receipt of bank regulatory approval by York Entities. If the transaction with York Entities is consummated, it is anticipated that York Entities will own 17.99% of shares of Common Stock outstanding as of the closing date of such transaction, which may result in a change in control of the Company.

Item 8.01

Other Events.

The Company has previously disclosed that it received a warning letter from the staff of the American Stock Exchange (“AMEX”) indicating that the Company had not satisfied the requirements of Section 301 of the AMEX Company Guide related to the listing of additional securities. The Company has been advised by the staff of AMEX that the Company complied with these requirements as of August 3, 2005.

Item 9.01

Financial Statements and Exhibits.

(a)

Financial statements of businesses acquired.

None.

(b)

Pro forma financial information.

None.

(c)

Exhibits.

The following exhibits are filed herewith:

Exhibit No.

Description

10.1

Form of Securities Purchase Agreement, dated as of August 1, 2005, by and among the

Company and the Investors.

10.2

Form of Registration Rights Agreement, dated as of August 1, 2005, by and among the

Company and the Investors.

10.3

Form of Series F Common Stock Purchase Warrant.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  August 3, 2005

PANAMERICAN BANCORP
By:	/s/ MICHAEL E. GOLDEN
Name: Title:	Michael E. Golden Chief Executive Officer and President

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Form of Securities Purchase Agreement, dated as of August 1, 2005, by and among the Company and the Investors.
10.2	Form of Registration Rights Agreement, dated as of August 1, 2005, by and among the Company and the Investors.
10.3	Form of Series F Common Stock Purchase Warrant.

EX-10.1

EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of August ___, 2005, by and among PanAmerican Bancorp, a Delaware corporation (the “Company”), and the purchasers identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agrees as follows:

ARTICLE I
DEFINITIONS

1.1

Definitions.  In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section 1.1:

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act.  With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

“BHCA” means the Bank Holding Company Act of 1956, as amended.

“CBCA” means the Change in Bank Control Act.

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.  The Company may effect more than one Closing.

“Closing Date” means the Trading Day selected by the Company after all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities have been satisfied or waived.  The Company may have more than one Closing Date.

“Commission” means the U.S. Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.01 per share, and any securities into which such common stock shall hereinafter have been reclassified into.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Company Counsel” means Blank Rome LLP with offices located at 1200 North Federal Highway, Suite 417, Boca Raton, FL 33432.

“DGCL” means the Delaware General Corporation Law, as amended.

“Equity Securities” shall have the meaning set forth under Rule 405 (or any successor rule) promulgated by the commission under the Securities Act.

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

 “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

“including” means including, without limitation.

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

“Memorandum” means the Company’s Confidential Private Placement Memorandum dated as of July 13, 2005, as supplemented, with respect to the offering contemplated hereby.

“Over-Allotment Option” shall have the meaning set forth in Section 2.4.

“Pequot Entities” means [       ].

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

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“Placement Agents” means Noble International Investments, Inc. and Colonial Capital Partners, LLC.

“Registration Rights Agreement” means the Registration Rights Agreement in the form of Exhibit B delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof.

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

“Securities” means the Common Stock, the Warrants, and the Warrant Shares issuable under the Transaction Documents.

“Securities Act” means the Securities Act of 1933, as amended.

“Shareholder Approval” means such approval of the shareholders of the Company as may be required by:  (a) the applicable provisions of the DGCL to authorize sufficient shares of Common Stock to effect the transactions contemplated by the Transaction Documents and (b) the applicable rules and regulations of the Trading Market (or any successor entity) with respect to the transactions contemplated by the Transaction Documents, including the issuance of Common Stock and Warrant Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.   The term “Shareholder Approval” shall also include the filing of a certificate of amendment to the certificate of incorporation of the Company to effect the increase in the authorized shares referred in clause (a) above.

“Subscription Amount” shall mean, as to each Purchaser, the amount to be paid for the Units purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount”, in United States Dollars and in immediately available funds.

 “Subsidiary” means Pan American Bank, a bank chartered under the laws of  Florida.

“Trading Day” means a day during which trading in securities generally occurs on the Trading Market in which the Common Stock is then listed or traded.

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the OTC Bulletin Board, the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange or the Nasdaq National Market.

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“Transaction Documents” means this Agreement, the Registration Rights Agreement, the Warrants, and any other documents or agreements executed in connection with the transactions contemplated hereunder.

“Unit” means one share of Common Stock and a Warrant to purchase 0.50 of a share of Common Stock at an exercise price of $4.00 per whole share.

“Voting Stock” shall mean Equity Securities of any class or classes, however designated, having ordinary voting power for the election of the members of the board of directors or other governing body of the subject entity.

“Warrants” means the Common Stock Purchase Warrants in the form of Exhibit A delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof.  Each Warrant shall represent the right to purchase 0.50 of a share of Common Stock at an exercise price of $4.00 per whole share, subject to adjustment.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

“York Entities” means York Capital Management, L.P., York Investment Limited and York Global Value Partners, L.P., collectively.

ARTICLE II
PURCHASE AND SALE

2.1

Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and each Purchaser agrees to purchase in the aggregate, severally and not jointly, up to 6,250,000 Units, plus at the option of the Company, the Units represented by its Over-Allotment Option.  The number of Units to be purchased by each Purchaser shall be as set forth opposite such Purchaser’s name on the signature page hereto, subject to the rights of the Company to reject any subscription in whole or in part in its sole and absolute discretion.  Each Purchaser shall deliver to the Company via wire transfer or a certified check of immediately available funds in an amount equal to its Subscription Amount and the Company shall deliver to each Purchaser its respective shares of Common Stock and Warrants as determined pursuan t to Section 2.2(a) and the other items set forth in Section 2.2 issuable at the Closing.  Upon satisfaction of the conditions set forth in Section 2.2, the Closing shall occur at the offices of the Company Counsel, or such other location as the parties shall mutually agree.  The Company may enter into Transaction Documents (including a Securities Purchase Agreement, Registration Rights Agreement and Warrants) with other purchasers with respect to the Units offered hereby.  Each set of Transaction Documents shall be identical in all material respects except as to the identities of the respective Purchasers, the amount of Securities to be purchased and the date of execution and closing.  The Company may have more than one Closing and Closing Date with respect to such other Transaction Documents.

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2.2

Deliveries.

(a)

On the Closing Date, the Company shall deliver or cause to be delivered to the Company Counsel with respect to each Purchaser the following:

(i)

this Agreement and the Registration Rights Agreement duly executed by the Company;

(ii)

a certificate evidencing a number of shares of Common Stock equal to one share of Common Stock for each Unit purchased; and

(iii)

Warrants registered in the name of such Purchaser to purchase 0.50 shares of Common Stock for each Unit purchased, in the form of Exhibit A attached hereto.

(b)

On the Closing Date, each Purchaser shall deliver or cause to be delivered the following:

(i)

this Agreement and the Registration Rights Agreement duly executed by such Purchaser;

(ii)

such Purchaser’s Subscription Amount by wire transfer or by certified check of immediately available funds to the account as specified in writing by the Company; and

(iii)

an Investor Questionnaire, completed by each such Purchaser and reasonably satisfactory to counsel for the Company.

2.3

Closing Conditions.

(a)

The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

(i)

the accuracy in all material respects when made and on the Closing Date (except for representations and warranties made as of a specific date, which must be accurate in all material respects as of such date) of the representations and warranties of the Purchasers contained herein and in theInvestor Questionnaire;

(ii)

all obligations, covenants and agreements of the Purchasers required to be performed at or prior to the Closing Date shall have been performed;

(iii)

Shareholder Approval shall have been obtained; and

(iv)

the delivery by each of the Purchasers of the items set forth in Section 2.2(b) of this Agreement.

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(b)

The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

(i)

the accuracy in all material respects when made and on the Closing Date (except for representations and warranties made as of a specific date, which must be accurate in all material respects as of such date) of the representations and warranties of the Company contained herein;

(ii)

all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

(iii)

Shareholder Approval shall have been obtained;

(iv)

the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; and

(v)

in the case of the York Entities, receipt of all necessary approvals from the Federal Reserve Bank of Atlanta or the Board of Governors of the Federal Reserve System required under the BHCA or CBCA in connection with the York Entities’ purchase of Units.

2.4

Over-Allotment Option.  The Company shall have the right to offer and sell up to an additional 1,250,000 Units on the terms and conditions set forth herein in its sole and absolute discretion.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

3.1

Representations and Warranties of the Company.  Except as set forth: (i) in the Memorandum or (ii) within any SEC Reports, as of the date hereof, the Company hereby makes the representations and warranties set forth below to each Purchaser.

(a)

Subsidiaries.  The Subsidiary is the only direct or indirect subsidiary of the Company.  The Company owns, directly or indirectly, all of the capital stock or other equity interests of the Subsidiary free and clear of any Liens other than: (i) as disclosed in the SEC Reports and (ii) with respect to PanAmerican Bank, of which the Company owns 99.9% of the outstanding capital stock, and all the issued and outstanding shares of capital stock of the Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  The Corporation and its Subsidiary do not own any securities of any Person other than the Subsidiary, except for securities owned in a trust capacity or held on account of a debt previously contracted.

(b)

Organization and Qualification.  Each of the Company and the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its

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business as currently conducted.  The Company is duly registered as a bank holding company under the BHCA. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or would not reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operat ions, assets, business, or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and to its knowledge no Action has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c)

Authorization; Enforcement.  Subject to Shareholder Approval, the Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith other than in connection with the Required Approvals.  Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms thereof, will constitute the valid and binding obligation of the Company enforceabl e against the Company in accordance with its terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(d)

No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the other transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or othe rwise) to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which

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the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or would not reasonably be expected to result in a Material Adverse Effect.

(e)

Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 4.6, (ii) the filing with the Commission of the Registration Statement, (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Common Stock and Warrants and the listing of the Common Stock and the Warrant Shares for trading thereon in the time and manner required thereby, (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securi ties laws and (vi) Shareholder Approval (collectively, the “Required Approvals”).

(f)

Issuance of the Securities.  Subject to Shareholder Approval, the Securities will be duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  On or before the Closing Date, the Company will have reserved from its duly authorized capital stock a number of shares of Common Stock at least equal to the full number of Warrant Shares then issuable upon exercise of the Warrants.

(g)

Capitalization.  The capitalization of the Company is as described in the Company’s most recent Annual Report on Form 10-KSB filed with the Commission, except as updated by the Company’s SEC Reports (as defined below).  Except as described in the Company’s SEC Reports (as defined below), the Company has not issued any capital stock since such filing other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan and pursuant to the conversion or exercise of outstanding Common Stock Equivalents. Except as described in the Company’s SEC Reports and except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, script rights to subscribe to , calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  

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(h)

SEC Reports; Financial Statements.   The Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Repo rts, when filed, 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.  The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial condition of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

(i)

Material Changes.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders, other th an dividends of $14,360 paid on the Company’s preferred stock in February 2005, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.  The Company does not have pending before the Commission any request for confidential treatment of information.

(j)

Litigation.  Except as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents

9

or the Securities or (ii) would, if there were an unfavorable decision, have or would reasonably be expected to result in a Material Adverse Effect.  Since January 1, 2003, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

(k)

Labor Relations.  No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.

(l)

Compliance.  Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its busi ness except in each case as would not reasonably be expected to have a Material Adverse Effect.

(m)

Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not have or would not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

(n)

Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except as described in the SEC Reports and except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them u nder valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance.

10

(o)

Patents and Trademarks.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any o f the Intellectual Property Rights.

(p)

Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including but not limited to, directors and officers insurance coverage.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(q)

Transactions With Affiliates and Employees.  Except as set forth in the SEC Reports or the Memorandum, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $60,000 other than (i) for payment of salary or con sulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company.

(r)

Sarbanes-Oxley; Internal Accounting Controls.  The Company has recently commenced an analysis of its internal controls for purposes of complying with Section 404 of the Sarbanes-Oxley Act of 2002, but otherwise is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.

(s)

Certain Fees.  Except fees being paid to the Placement Agents hereunder, no brokerage or finder’s fees or commissions are or will be payable to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement based upon arrangements made by the Company or any of its Affiliates.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of Persons for fees of a type

11

contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement based upon arrangements made by the Company or any of its Affiliates.

(t)

Private Placement. Assuming the accuracy of the Purchasers representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Units by the Company to the Purchasers as contemplated hereby. Assuming Shareholder Approval shall have been obtained and the Trading Market shall have approved the listing of additional shares of Common Stock, the issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

(u)

Investment Company. The Company is not, and immediately after receipt of payment for the shares of Common Stock, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(v)

Listing and Maintenance Requirements.  The Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  

(w)

Disclosure.  All disclosure provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, furnished by or on behalf of the Company with respect to the representations and warranties made herein are true and correct with respect to such representations and warranties and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(x)

Tax Status.  Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

(y)

No General Solicitation.  Neither the Company nor, to the knowledge of the Company, any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to Persons it reasonably believes to be “accredited investors” as defined in Regulation D under the Securities Act.

(z)

Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of the Company, any agent or other Person acting on behalf of the Company, has (i) directly or indirectly, used any corrupt funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic

12

political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

The Purchaser acknowledges and agrees that the Company does not make and has not made any representations or warranties, written or oral, with respect to the Company (including its assets, financial condition, results of operations, business or prospects) or the transactions contemplated hereby other than those specifically set forth in this Section 3.1, provided that nothing in this sentence shall be deemed to limit the Company’s representations and warranties set forth in Section 3.1(w).

3.2

Representations and Warranties of the Purchasers.  Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

(a)

Organization; Authority.  Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations thereunder.  The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordan ce with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b)

Purchaser Representation.  Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account for investment and not with a view to, or for sale in connection with, any distribution of such Securities or any part thereof, has no present intention of distributing any of such Securities and has no arrangement or understanding with any other persons regarding the distribution of such Securities (this representation and warranty does not limit such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities hereunder in the ordinar y course of its business.  Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.

13

(c)

Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises any Warrants, it will be   an “accredited investor” as defined in Regulation D under the Securities Act.  Such Purchaser is not, and is not required to be, registered as a broker-dealer under Section 15 of the Exchange Act.

(d)

Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities has no need for liquidity with respect to its investment and, at the present time, is able to afford a complete loss of such investment.

(e)

General Solicitation.  Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

(f)

Purchaser Investigation. Such Purchaser has had the opportunity to request and receive all information deemed necessary by it to evaluate an investment in the Company.  The Purchaser confirms that the Company has made available to the Purchaser the opportunity to ask questions of, and receive answers from the Company concerning the terms and conditions of the Securities and the nature of the business of the Company, and to obtain additional information or documents which the Company possesses or can acquire without unreasonable effort or expense. In formulating the decision to acquire the Securities, the Purchaser has relied solely upon its own advisors and its own independent investigation of the Company with respect to this Agreement and the nature and effect of any investment in the Securities as well as the representations and warranties of the Company in Section 3.1 and the information contained, or incorporated by reference, in the Company’s Private Placement Memorandum dated July 13, 2005.  

(g)

Short Sale.  Each Purchaser represents that after the date that such Purchaser learned of the terms of this transaction and prior to the date hereof, neither it nor any Person over which the Purchaser has direct control, have made any net short sales of, or granted any option for the purchase of or entered into any hedging or similar transaction with the same economic effect as a net short sale, in the Common Stock.

(h)

Certain Fees.  No brokerage or finder’s fees or commissions are or will be payable to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement based upon arrangements made by the Purchaser or any of its Affiliates.  The Company shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement based upon arrangements made by any Purchaser or any of its Affiliates.

14

The Company acknowledges and agrees that each Purchaser does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2 and in the Investor Questionnaire.

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

4.1

Transfer Restrictions.

(a)

The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant to an effective registration statement, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and the Registration Rights Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement, provided, that the foregoing shall not apply to a transfer of Securities pursuant to an effective registration statement.

(b)

The Purchasers agree to the imprinting, so long as is required by applicable federal and state securities laws, of a legend on any of the Securities in the following form:

With respect to certificates representing Common Stock (including Warrant Shares):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION, OR THE SECURITIES COMMISSION OF ANY STATE, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

15

With respect to the Warrants:

THE EXERCISE OF THIS WARRANT HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.  THIS WARRANT MAY ONLY BE EXERCISED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE SECURITIES LAWS.  AS A CONDITION PRECEDENT TO THE EXERCISE OF THIS WARRANT, THE COMPANY MAY REQUIRE SUCH CERTIFICATES AND OPINIONS OF COUNSEL AS IT DEEMS NECESSARY FROM THE PERSON EXERCISING THIS WARRANT TO ESTABLISH THE EXISTENCE OF SUCH EXEMPTIONS.

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

THIS WARRANT IS SUBJECT TO OTHER RESTRICTIONS ON TRANSFER AS SET FORTH IN A SECURITIES PURCHASE AGREEMENT, THE FORM OF WHICH IS AVAILABLE FROM THE COMPANY.

(c)

Certificates evidencing the Common Stock, including Warrant Shares, shall not contain any legend (including the legend set forth in Section 4.1(b) hereof):  (i) following any sale of such Common Stock pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144, or (ii) if such Common Stock is eligible for sale under Rule 144(k), provided that, in each case, the Purchase provides a copy of such certificates or confirmations as the Company reasonably requests.

16

(d)

Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance that the Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom.

4.2

Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market.  

4.3

Securities Laws Disclosure; Publicity.  Following the Closing Date, the Company will issue a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby.  The Purchaser shall not issue any such press release or otherwise make any such public statement without the prior consent of the Company, which consent shall not unreasonably be withheld, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.

4.4

Use of Proceeds.  The Company intends to use the net proceeds from the sale of the Securities hereunder for working capital purposes.

4.5

Indemnification of Purchasers.  Unless such action is based upon a breach of such Purchaser’s representation, warranties or covenants under the Transaction Documents or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance (collectively, “Non-Indemnifiable Claims”) and subject to the provisions of this Section 4.5, the Company will indemnify and hold the Purchasers and their directors, officers, shareholders, partners, employees and agents (each a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation th at any such Purchaser Party may suffer or incur as a result of or relating to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or any violations by the Company of state or federal securities laws.  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing, which counsel shall be reasonably acceptable to such Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the C ompany has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material

17

issue between the position of the Company and the position of such Purchaser Party.  The Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s Non-Indemnifiable Claim. The Company shall not settle any action without the prior written consent of the relevant Purchaser Party, which consent shall not be unreasonably withheld, delayed or conditioned, unless such settlement includes an unconditional release of such Purchaser Party from all liability and does not otherwise impose any obligations on such Purchaser Party.

4.6

Reservation and Listing of Securities.

(a)

The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.

(b)

The Company shall, if applicable: (i) in the time and manner required by the Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Common Stock sold hereunder and the number of Warrant Shares then issuable under the Warrants on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing on the Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing upon request, and (iv) maintain the listing of such Common Stock on any date at least equal to the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents on such date on such Trading Market or another Trading Market.

4.7

Equal Treatment of Purchasers.  Except as set forth below in Section 4.10 and 4.11, no consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended to treat for the Company the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

4.8

No Net Short Position.  Each Purchaser agrees, severally and not jointly with any other Purchasers, that they or any Person acting at the request or direction of Purchaser, will not enter into any Short Sales (as hereinafter defined) from the period commencing on the Closing Date and ending on the date that such Purchaser no longer holds any Common Stock.  For purposes of this Section 4.14, a “Short Sale” by any Purchaser shall mean a sale of Common Stock by such Purchaser that is marked as a short sale and that is made at a time when there is no equivalent offsetting long position in Common Stock held by such Purchaser.  For purposes of determining whether there is an equivalent offsetting long position in Common Stock held by the Purchaser, shares of Common Stock underlying that have not yet been exercised pursuant to the Warrant s shall be deemed to be held long by the Purchaser, and the amount of shares of

18

Common Stock held in a long position shall be all unexercised Warrant Shares (ignoring any exercise limitations included therein) held by such Purchaser on such date, plus any shares of Common Stock otherwise then held by such Purchaser.  Additionally, each Purchaser understands and acknowledges, severally and not jointly with any other Purchaser, that the SEC currently takes the position that coverage of short sales of shares of the Common Stock “against the box” prior to the effective date of a Registration Statement with the Shares purchased hereunder is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation Finance.  Accordingly, each Purchaser hereby agrees not to use any of t he Warrant Shares to cover any short sales made prior to any effective registration.

4.9

Prohibited Redemptions.  

The Company covenants and agrees that it shall not:

(a)

redeem, purchase or otherwise reduce the number of outstanding shares of its Voting Stock or other securities or take any other action after the Closing Date if such redemption, repurchase, reduction or other action would cause (i) the Voting Stock of the Company owned by the York Entities to represent a percentage of the voting power of all Voting Stock of the Company in excess of 24.99%, or (ii) the Voting Stock of the Company owned by the Pequot Entities to represent a percentage of the voting power of all Voting Stock of the Company in excess of 9.99%;

(b)

become subject to any obligation to redeem or repurchase any shares of its Voting Stock (“Redemption Requirements”) that, if given effect, and after giving effect to all other Redemption Requirements, would cause (i) the Voting Stock of the Company owned by the York Entities to exceed the limitation set forth in Section 4.9(a)(i), or (ii) the Voting Stock of the Company owned by the Pequot Entities to exceed the limitation set forth in Section 4.9(a)(ii); or

(c)

take any action after the Closing Date, including, without limitation, any action described in paragraph (a) or (b) of this Section 4.9(a) that would, either alone or after giving effect to any Redemption Requirements, result in the York Entities or Pequot Entities being (i) in violation of the BHCA or the CBCA, or any other law or regulation governing the acquisition of control of financial institutions as a result of the York Entities’ or the Pequot Entities’ ownership of securities of the Company or (ii) required to divest any securities of the Company to avoid violation of the BHCA or the CBCA or any other law or regulation.

4.10

Right of First Refusal on Future Securities Issuances.  

(a)

Notice of New Issuance.  Except with respect to Exempt Issuances (as defined in Section 4.10(c)), in the event that the Company proposes to issue any (i) shares of Common Stock, (ii) warrants, options, or other rights to purchase Common Stock or Convertible Securities (collectively, “Rights”), or (iii) any debentures or other securities convertible into or exchangeable for shares of Common Stock (collectively, “Convertible Securities” and, together

19

with shares of Common Stock and Rights, “New Securities”), the Company will deliver to each Purchaser whose Subscription Amount exceeds $1.0 million (each, a “First Refusal Purchaser,” and together, the “First Refusal Purchasers”) a notice (the “Offer Notice”) of such proposed issuance (the “New Issuance”), stating the price and other terms and conditions thereof.

(b)

Right to Purchase Shares, Rights or Convertible Securities.  In the event of a New Issuance (other than an Exempt Issuance), the First Refusal Purchasers shall have the right to purchase such number of New Securities at the price and on the terms upon which the New Issuance is proposed to be made, such price to be paid in full at the time of issuance of such New Securities to each First Refusal Purchaser so that, after giving effect to the issuance of the New Securities and the conversion, exercise and exchange into or for (whether directly or indirectly) shares of Common Stock of all such New Securities, each First Refusal Purchaser who exercises such right will continue to maintain its same proportionate ownership of Common Stock as of the date immediately preceding the New Issuance, treating the First Refusal Purchaser, for the purpose of such computatio n, as the holder of the number of shares of Common Stock which would be issuable to it upon conversion, exercise and exchange of all Rights and Convertible Securities held by it on the date immediately preceding the New Issuance and assuming the like conversion, exercise and exchange of all such securities held by other persons.  The rights set forth in this Section 4.10 shall be exercised by the First Refusal Purchasers, if at all, by written notice to the Company delivered not later than five (5) business days after the receipt by the First Refusal Purchasers of the Offer Notice in accordance with the terms and conditions stated therein, and such right shall expire at the end of the thirtieth day after the day of the receipt by the First Refusal Purchasers of the Offer Notice.  Notwithstanding the foregoing, the Company will not be required to consummate any securities sale transaction with  any First Refusal Purchaser related to the right to purchase New Securities as described in this Section 4.10 if such purchase would result in such First Refusal Purchaser being (i) in violation of the BHCA, the CBCA, or any other law or regulation governing the acquisition of control of financial institutions as a result of such First Refusal Purchaser’s ownership of securities of the Company or (ii) required to divest any securities of the Company to avoid violation of the BHCA, the CBCA or any other law or regulation unless the First Refusal Purchaser can demonstrate that such First Refusal Purchaser is in compliance with the applicable requirements of the BHCS, the CBCA or any law or regulation governing the acquisition of control of financial institutions.

(c)

Exempt Issuances.  The issuances referred to in this Section 4.10 which will not give the First Refusal Purchasers the rights described in this Section 4.10 (the “Exempt Issuances”) are issuances in which New Securities are issued or deemed issued (i) as a dividend or distribution payable pro rata to all holders of Common Stock or to all holders of any other class of securities of the Company; (ii) shares of Common Stock or options to purchase shares of Common Stock issued to employees, consultants, officers and directors of the Company pursuant to any stock option plan or other employee benefit plans of the Company; (iii) in connection with the conversion or exercise of any options, warrants or other rights to purchase Common Stock (A) existing on the date hereof or (B) issued in accordance with the foregoing claus e (ii); (iv) securities issued to Persons with whom the Company enters into bona fide research, development, marketing, sales, distribution, capital raising or similar arrangements; (v) securities issued in connection with acquisitions of all or substantially all of the assets or business of

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another entity; (vi) securities issued to commercial financing or leasing companies in connection with financing or leasing transactions and the shares of Common Stock issuable upon exercise thereof; (vii) the issuance of the shares of Common Stock and Warrants under and pursuant to the Agreement; (vii) the issuance of shares of Common Stock upon exercise of the Warrants, and (viii) securities issues as part of a firm underwritten offering, whether public or private.

(d)

Expiration.  This Section 4.10 and the rights provided hereunder shall expire on the third anniversary of the applicable Closing Date with respect to each such First Refusal Purchaser.

4.11

Board of Director Observer Rights.  The Company shall invite a representative of the York Entities to attend all meetings of its Board of Directors in a nonvoting observer capacity and shall give such representative copies of all notices, minutes, consents, and other material that it provides to its directors.  Any Person who attends such meetings on behalf of the York Entities shall execute a confidentiality and non-disclosure agreement in a form reasonably acceptable to counsel for the Company and such person must abide by all federal and state securities laws relative to persons who possess inside information.

ARTICLE V
MISCELLANEOUS

5.1

Termination.  This Agreement may be terminated by any Purchaser (with respect to such Purchaser only), by written notice to the Company, if the Closing has not been consummated on or before September 15, 2005 or, in the case of the York Entities, on any earlier date that the condition to closing set forth in Section 2.3(b)(v) is no longer capable of being satisfied; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties). Upon termination of this Agreement by a Purchaser, such Purchaser’s Subscription Amount shall be returned to such Purchaser promptly if such Subscription Amount was deposited in an escrow account pending Closing.

5.2

Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the issuance of any Securities in the name of the Purchaser.

5.3

Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

5.4

Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via

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facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (Eastern Time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (Eastern Time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

5.5

Amendments; Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and each Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

5.6

Construction.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

5.7

Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser.  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Purchasers.”

5.8

No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

5.9

Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Florida, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of Florida.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the County of Palm Beach, State of F lorida for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the

22

enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  The parties h ereby waive all rights to a trial by jury.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.  

5.10

Survival.  The representations and warranties contained herein shall survive the Closing and the delivery, exercise and/or conversion of the Securities, as applicable for a period of two years after the Closing Date.

5.11

Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

5.12

Severability.  If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

5.13

Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, in the case of an exercise of a Warrant, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice.

5.14

Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution

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therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested.  The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities.

5.15

Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

5.16

Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

5.17

Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents.  The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

PANAMERICAN BANCORP	Address for Notice:
By:__________________________________________      Name:      Title:
	With a copy to (which shall not constitute notice): Blank Rome LLP 1200 N. Federal Highway, Suite 417 Boca Raton, FL 33432

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGE FOR PURCHASER FOLLOWS]

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PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Number of Units
Subscribed For Subscription Amount
(Number of Units Subscribed for  x  $4.00)

The Purchaser understands that the Company has the right to reject this subscription in whole or in part.

Name of Purchaser:  __________________________

Signature of Authorized Signatory of Purchaser: __________________________

Name of Authorized Signatory:  _________________________

Title of Authorized Signatory:  __________________________

Email Address of Authorized Signatory:  ________________________________

Amount:  __________________________

EIN Number of Purchaser:  ______________________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

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EX-10.2

EXHIBIT 10.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of August ___, 2005 among PanAmerican Bancorp., a Delaware corporation (the “Company”), and the Persons identified as “Holders” on the signature page hereto (each such Person is a “Holder” and all such purchasers are, collectively, the “Holders”).

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of August __, 2005 among the Company and the Holders (the “Purchase Agreement”).

The Company and the Holders hereby agree as follows:

1. Definitions

Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

“Advice” shall have the meaning set forth in Section 6(c).

“Effectiveness Date” means, with respect to the initial Registration Statement required to be filed hereunder, the 120^th calendar day following the last closing under the Private Placement, but in no event later than January 31, 2006, (or the 180^th calendar day if the Company is notified by the Commission that the Registration Statement will be reviewed, but in no event later than March 31, 2006).

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

“Filing Date” means, with respect to the initial Registration Statement required hereunder, the 90^th calendar day following the last closing under the Private Placement, but in no event later than December 31, 2005.

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

“Indemnified Party” shall have the meaning set forth in Section 5(c) hereof.

“Indemnifying Party” shall have the meaning set forth in Section 5(c) hereof.

“Losses” shall have the meaning set forth in Section 5(a).

“Placement Agents” means Noble International Investments, Inc. and Colonial Capital Partners, LLC.

“Private Placement” shall have the meaning set forth within the definition of “Registrable Securities.”

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition).

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means all of the Shares and the Warrants sold under the Purchase Agreement (and any other Securities Purchase Agreement entered into by the Company with respect to the offer of up to 6,250,000 Units  and up to an additional 1,250,000 Units pursuant to the Company’s Over-Allotment Option (the “Private Placement”), all of the Warrant Shares issuable upon exercise of the Warrants, the warrants and the shares of Common Stock issued to, or issuable upon exercise of the warrants issued to, the Placement Agents, together with any shares of Common Stock issued to or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any of the foregoing securities shall cease to be “Registrable Securities” to the ex tent (i) a Registration Statement with respect to their sale has been declared effective under the Securities Act and they have been disposed of pursuant to such Registration Statement, (ii) they have been distributed pursuant to Rule 144 (or any similar provision then in force) under the Securities Act, (iii) they shall have been otherwise transferred and (A) new certificates for them not bearing a legend restricting transfer under the Securities Act shall have been delivered by the Company and (B) such securities may be publicly resold (without volume or method of sale restrictions) without registration under the Securities Act, or (iv) such securities may be publicly resold (without volume or method of sale restrictions) without registration under the Securities Act pursuant to Rule 144(k) under the Securities Act (or any successor rule or regulation) (and with respect to Common Stock issuable upon exercise of the Warrants or the Placement Agents’ warrants, assuming that such shares were acquired in a cashless exercise under the Warrant or Placement Agents’ warrants).

“Registration Statement” means the registration statements required to be filed hereunder, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

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“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

2. Shelf Registration

(a)

On or prior to each Filing Date, the Company shall prepare and file with the Commission a “Shelf” Registration Statement covering the resale of the Registrable Securities on such Filing Date for an offering to be made on a continuous basis pursuant to Rule 415.  The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) and shall contain (unless otherwise directed by the Holders) the “Plan of Distribution” substantially in the form attached hereto as Annex A.  Subject to the terms of this Agreement, the Company shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness Date, and shall use its commercially reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144(e) as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).  The Company shall notify the Holders via facsimile of the effectiveness of the Registration Statement as soon as practicable after the Company receives notification of the effectiveness from the Commission.  

(b)

In order to be named a selling shareholder and have their Registrable Securities included in such Registration Statement, each Holder shall furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex B (a “Selling Holder Questionnaire”) not less than 60 days after the date hereof.  Anything in this Agreement to the contrary notwithstanding, the Company shall be under no obligation to include in such Registration Statement the Registrable Securities of any Holder that has failed to complete and return a Selling Holder Questionnaire by such date.

3. Registration Procedures

In connection with the Company's registration obligations hereunder, the Company shall:

(a)

Not less than three Trading Days prior to the filing of the initial Registration Statement or any related Prospectus or any amendment or supplement thereto, that modifies in

3

any material respect the information provided by a Holder for inclusion therein, the Company shall, (i) furnish to such Holder copies of all such documents proposed to be filed, which documents will be subject to the review of such Holder(s).  

(b)

(i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

(c)

Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than three Trading Days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed (except that if a filing is proposed for the purpose of adding a selling shareholder to the Registration Statement or changing or adding information with respect to a selling shareholder contained in the Registration Statement, such notice and proposed filing need only be sent to such selling shareholder); and (B) with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclus ion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (vi) the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the

4

determination of the Company, makes it not in the best interest of the Company to allow continued availability of the Registration Statement or Prospectus; provided that any and all of such information shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided, further, notwithstanding each Holder’s agreement to keep such information confidential, the Holders make no acknowledgement that any such information is material, non-public information.

(d)

Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

(e)

Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission.

(f)

Promptly deliver to each Holder, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request in connection with resales by the Holder of Registrable Securities.  Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(c).

(g)

Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Comp any to any tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

(h)

If requested by the Holders, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request.

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(i)

Upon the occurrence of any event contemplated by clause (c)(ii) through (vi) of Section 3, as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  I f the Company notifies the Holders in accordance with clauses (ii) through (v) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its commercially efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall only be entitled to exercise its right under this Section 3(i) to suspend the availability of a Registration Statement and Prospectus for a period not to exceed 90 days (which need not be consecutive days) in any 12 month period.

(j)

Comply with all applicable rules and regulations of the Commission.

(k)

The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the person thereof that has voting and dispositive control over the shares.  

4. Registration Expenses.  All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to the Registration Statement.  The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the Trading Market on which the Common Stock is then listed for trading, and (B) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of th e Registrable Securities for investment under the laws of such jurisdictions as requested by the Holders), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the holders of a majority of the Registrable Securities included in a Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries

6

and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any broker or similar commissions or any legal fees or other costs of the Holders.

5. Indemnification

(a)

Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, brokers, investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys' fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment o r supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the c ase of an occurrence of an event of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(c).  The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.

(b)

Indemnification by Holders.  Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a

7

material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or such form of Prospect us or in any amendment or supplement thereto or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(c)

Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and counsel to the Indemnifying Party shall advise the Indemnifying Party that representation of both the Indemnified Party and the Indemnifying Party would be prohibited under applicable rules of professional conduct due to material conf licts of interest between the Indemnified Party and the Indemnifying Party, in which case of clause (1), (2) or (3), if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of one separate counsel shall be at the expense of the Indemnifying Party; provided, however, that if the Company is the Indemnifying Party, it shall not be responsible for the reasonable fees and

8

expenses of more than one counsel for all of the Holders and their related Indemnifying Parties, which counsel shall be selected by the Holders holding a majority of the Registrable Securities that are the basis of the Proceeding for which indemnification is sought.  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

(d)

Contribution.  If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party (other than because such indemnification is not available by the terms of such Sections), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omi ssion of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Holder.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

6. Miscellaneous.

(a)

Remedies.  In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in

9

addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

(b)

Compliance.  Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement.

(c)

Discontinued Disposition.  Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement, or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement.  

(d)

Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than (i) an offering that it being offered on a firm-commitment basis or (ii) an offering on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, then the Company shall send to each Holder a written notice of such determination and, if within ten days a fter the date of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered; provided, that, the Company shall not be required to register any Registrable Securities pursuant to this Section 6(d) that are eligible for resale pursuant to Rule 144(k) promulgated under the Securities Act or that are the subject of a then effective Registration Statement.

(e)

Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and each Holder of the then outstanding Registrable Securities.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the

10

provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.

(f)

Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 4:00 p.m. (Eastern Time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 4:00 p.m. (Eastern Time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to b e given.  The address for such notices and communications shall be (a) if to a Holder, at the registered address of such Holder as set forth in the books and records of the Company kept at the principal office of the Company, or (b) if to the Company, to it at 1200 N. Federal Highway, Suite 111, Boca Raton, FL 33432, with a copy to (which shall not constitute notice) to: Blank Rome LLP, 1200 N. Federal Highway, Suite 417, Boca Raton, FL 33432.  

(g)

Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder.  The Company may not assign its rights or obligations hereunder without the prior written consent of all of the Holders of the then-outstanding Registrable Securities. Each Holder may assign its respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement.

(h)

No Inconsistent Agreements.  Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof; provided, however that the foregoing shall not be deemed to prohibit the entrance into Registration Rights Agreements on substantially similar terms with other Holders after the date hereof.  Neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full other than Registration Rights Agreements on substantially similar terms as this A greement with other Holders of Registrable Securities.

(i)

Execution and Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement.  In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

11

(j)

Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined with the provisions of the Purchase Agreement.

(k)

Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

(l)

Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(m)

Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(n)

Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement.  Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary f or any other Holder to be joined as an additional party in any proceeding for such purpose.

[SIGNATURE PAGE FOLLOWS]

12

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

PANAMERICAN BANCORP.

By:__________________________________________

     Name:

     Title:

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

13

HOLDER’S SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT

Name of Investing Entity: __________________________

Signature of Authorized Signatory of Investing Entity: __________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

14

ANNEX A

Plan of Distribution

Each selling stockholder (the “Selling Stockholders”) of the common stock  of PanAmerican Bancorp., a Delaware corporation (the “Company”) and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the Trading Market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions.  These sales may be at fixed or negotiated prices.  A Selling Stockholder may use any one or more of the following methods when selling shares:

·

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·

an exchange distribution in accordance with the rules of the applicable exchange;

·

privately negotiated transactions;

·

settlement of short sales entered into after the date of this prospectus;

·

broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;

·

a combination of any such methods of sale;

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or

·

any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated.  Each Selling Stockholder does not expect these commissions and discounts relating to its sales of shares to exceed what is customary in the types of transactions involved.

15

In connection with the sale of our common stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume.  The Selling Stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities.  The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financ ial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.  Each Selling Stockholder has informed the Company that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock.

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the shares.  The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.  

Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act.  In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus.  Each Selling Stockholder has advised us that they have not entered into any agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the resale shares.  There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders.

We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the Selling Stockholders without registration and without regard to any volume limitations by reason of Rule 144(e) under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to the prospectus or Rule 144 under the Securities Act or any other rule of similar effect.  The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement

16

of the distribution.  In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the Selling Stockholders or any other person.  We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale.

17

Annex B

PanAmerican Bancorp.

Selling Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock, par value $0.01 per share (the “Common Stock”), of PanAmerican Bancorp., a Delaware corporation (the “Company”), (the “Registrable Securities”) understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement, dated as of August ___, 2005 (the “Registration Rights Agreement”), among the Company and the Holders named therein.  A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

In order to have Registrable Securities included in the Registration Statement (or a supplement or amendment thereto), this Selling Securityholder Notice and Questionnaire (“Selling Securityholder Questionnaire”) must be completed, executed and delivered to the Company at the address set forth herein for receipt on or before the dates required in the Registration Rights Agreement.  Record or beneficial owners of Registrable Securities who do not properly complete, execute and return this Selling Securityholder Questionnaire by such dates (i) will not be named as selling securityholders in the Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities.

Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.

NOTICE

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by him/it and listed below in Item 3 (unless otherwise specified under such Item 3) in the Registration Statement.  The undersigned, by signing and returning this Selling Securityholder Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Selling Securityholder Questionnaire and the Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto.

18

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

QUESTIONNAIRE

1.

Name.

(a)

Full Legal Name of Selling Securityholder

____________________________________________________________

____________________________________________________________

(b)

Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held:

____________________________________________________________

____________________________________________________________

(c)

Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):

____________________________________________________________

____________________________________________________________

2.

Address for Notices to Selling Securityholder:

_________________________________________________________________

_________________________________________________________________

Telephone:

___________________________________________________

Email:

___________________________________________________

Fax:

___________________________________________________

Contact Person:

___________________________________________________

3.

Beneficial Ownership of Securities:

Except as set forth below in this Item (3), the undersigned Selling Securityholder does not beneficially own any securities or shares of Common Stock issued upon conversion of any securities.

(a)

Number of Registrable Securities (as defined in the Registration Rights Agreement) beneficially owned:

____________________________________________________________

____________________________________________________________

Number of shares of Common Stock (if any) issued upon conversion of securities:

19

(b)

Number of securities other than Registrable Securities beneficially owned:

____________________________________________________________

____________________________________________________________

Number of shares of Common Stock (if any) issued upon conversion of such other securities:

____________________________________________________________

(c)

Number of Registrable Securities to be included in the Registration Statement:

____________________________________________________________

____________________________________________________________

Number of shares of Common Stock (if any) issued upon conversion of Registrable Securities which are to be included in the Registration Statement:

____________________________________________________________

(d)

Except as set forth above in this Item (3), the undersigned Selling Securityholder is not the beneficial or record owner of any shares of Common Stock or any other security of the Company.

____________________________________________________________

____________________________________________________________

4.

(a)

State whether the undersigned Selling Securityholder has or will enter into “hedging transactions” with respect to shares of Company Common Stock.

Yes

¨

No

¨

If yes, you must provide a complete description of the hedging transactions into which the undersigned Selling Securityholder has entered or will enter and the purpose of such hedging transactions, the extent to which such hedging transactions remain in place.

____________________________________________________________

____________________________________________________________

Please note that the SEC may deem short sales of securities covered by a registration statement prior to the effectiveness of such registration statement as a violation of Section 5 of the Securities Act.

20

(b)

State whether the undersigned Selling Securityholder has sold any of the Registrable Securities or shares of common stock of the Company short since the date of original issuance of the Registrable Securities.

Yes

¨

No

¨

If yes, you must provide a complete description of the short sale, including the number of shares of common stock of the Company involved and whether the short position remains in place.

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

5.

Broker-Dealer Status:

(a)

Are you a broker-dealer?

Yes

¨

No

¨

Note:

If yes, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

(b)

Are you an affiliate of a broker-dealer?

Yes

¨

No

¨

(c)

If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

Yes

¨

No

¨

Note:

If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

(d)

State whether the undersigned Selling Securityholder received Registrable Securities as compensation for underwriting activities and please explain.

Yes

¨

No

¨

21

____________________________________________________________

____________________________________________________________

____________________________________________________________

6.

Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

State any exceptions here:

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the prospectus delivery and other provisions of the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, particularly Regulation M.

In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company (other than transfers of Registrable Securities pursuant to an effective Registration Statement), the Selling Securityholder agrees to notify the transferee(s) of its rights and obligations under this selling Securityholder Questionnaire and the Registration Rights Agreement.

By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Registration Statement and related Prospectus.

In accordance with the Selling Securityholder's obligations under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Registration Statement remains in effect (other than changes due to transfers of Registrable Securities pursuant to an effective Registration Statement and to provide any additional information as the Company reasonably may request.  Except as otherwise provided in the Registration Rights Agreement, all notices hereunder and pursuant to

22

the Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows:

To the Company:

PanAmerican Bancorp

1200 N. Federal Highway, Suite 111

Boca Raton, Florida 33432

Attention:  Michael Golden

With a copy to:

Blank Rome LLP

1200 N. Federal Highway, Suite 417

Boca Raton, Florida 33432

Attn: Bruce C. Rosetto, Esq.

23

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Selling Securityholder Questionnaire to be executed and delivered either in person or by its duly authorized agent.

Dated:

Selling Securityholder(Print/type full legal name of beneficial owner of Registrable Securities)

By: _____________________________________

Name:

Title:

PLEASE RETURN THE COMPLETED AND EXECUTED SELLING SECURITYHOLDER QUESTIONNAIRE FOR RECEIPT ON OR BEFORE _____________, 2005 TO THE COMPANY AT:

PanAmerican Bancorp

___________________

1200 N. Federal Highway, Suite 111

Boca Raton, Florida 33432

Attention:  Michael Golden

With a copy to:

Blank Rome LLP

1200 N. Federal Highway, Suite 417

Boca Raton, Florida 33432

Attn: Bruce C. Rosetto, Esq.

24

EX-10.3

EXHIBIT 10.3

THE EXERCISE OF THIS WARRANT HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.  THIS WARRANT MAY ONLY BE EXERCISED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE SECURITIES LAWS.  AS A CONDITION PRECEDENT TO THE EXERCISE OF THIS WARRANT, THE COMPANY MAY REQUIRE SUCH CERTIFICATES AND OPINIONS OF COUNSEL AS IT REASONABLY DEEMS NECESSARY FROM THE PERSON EXERCISING THIS WARRANT TO ESTABLISH THE EXISTENCE OF SUCH EXEMPTIONS.

NEITHER THIS SECURITY NOR THE SECURITY INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

THIS WARRANT IS SUBJECT TO OTHER RESTRICTIONS ON TRANSFER AS SET FORTH IN A SECURITIES PURCHASE AGREEMENT, THE FORM OF WHICH IS AVAILABLE FROM THE COMPANY.

SERIES F COMMON STOCK PURCHASE WARRANT

To Purchase __________ Shares of Common Stock of

PANAMERICAN BANCORP

No. [    ] - ___________                                                                                  Date:____________                                                                                                                                                            

THIS SERIES F COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on August___, 2010 the fifth anniversary following the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from PanAmerican Bancorp., a Delaware corporation (the “Company”), ____ shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”).  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.

Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated August __, 2005, among the Company and the purchasers signatory thereto.

Section 2.

Exercise.

(a)

Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) of: (i) the Notice of Exercise Form annexed hereto duly completed and executed; (ii) the aggregate Exercise Price of the shares thereby purchased by wire transfer of immediately available United States funds or cashier’s check drawn on a United States bank (unless the Holder has elected to acquire the Warrant Shares pursuant to a Cashless Exercise (as defined in Section 2(c)(ii)); (iii) the surrender of this Warrant; and (iv) payment of all taxes required to b e paid by the Holder, if any, pursuant to Section 2(e)(vi); and (iv) the receipt of such certificates and other documents as reasonably may be required by the Company to determine that the exercise complies with applicable securities laws.  The Trading Day on which the last of the foregoing deliveries is received by the Company is referred to as the “Exercise Date”; provided, however, that if the last of such deliveries is received after the close of trading on the Trading Market for the Common Stock, the Exercise Date shall be deemed to be the next Trading Day.  This Warrant shall be deemed to have been exercised,  the Warrant Shares shall be deemed to have been issued, and the Holder or any other person so designated to be named therein as the holder of the Warrant Shares shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date.

(b)

Exercise Price.  The exercise price for each Warrant Share issuable under this Warrant shall be $4.00 per share, subject to adjustment hereunder (the “Exercise Price”).

(c)

Payment of Exercise Price:  The Holder shall pay the aggregate Exercise Price using one of the following methods:

(i)

Cash Exercise.  The Holder shall pay the aggregate Exercise Price by wire transfer of immediately available United States funds or cashier’s check drawn on a United States bank.

(ii)

Cashless Exercise.  The Holder may satisfy its obligation to pay the aggregate Exercise Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

	X = Y [(A-B)/A]
where:
	X = the number of Warrant Shares to be issued to the Holder.

Y = the number of Warrant Shares with respect to which this Warrant is being exercised.

A = the average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Exercise Date (the “Average Closing Price”).

B = the Exercise Price.

The foregoing is referred to as a “Cashless Exercise.”  No Cashless Exercise shall be permitted unless the Average Closing Price exceeds the Exercise Price and, if the Average Closing Price does not exceed the Exercise Price, the Company shall refuse to honor any purported exercise of this Warrant pursuant to a Cashless Exercise.  “Closing Price” means, for any Trading Day, the price determined as follows: (I) if the Common Stock is then listed or quoted on a Trading Market, the closing sale price per share (or, if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported in composite transactions for such Trading Market; (II) if the Common Stock is not listed then listed or quoted o n a Trading Market, the last quoted bid price for the Common Stock in the over-the-counter market on the relevant date as reported by Pink Sheets LLC or any similar organization; or (III) in all other cases, the fair market value of a share of Common Stock as determined by the Board of Directors of the Company in good faith.  

(d)

Mechanics of Exercise.

i.

Authorization of Warrant Shares.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).  The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full auth ority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such

Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

ii.

Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder (A) by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system, provided that (I) the Company is a participant in such system and (II) the DWAC system provides an adequate method of protecting against the transfer of the Warrant Shares in violation of the restrictions on transfer set forth herein, and (B) otherwise by depositing the certificate(s) representing the Warrant Shares with a nationally recognized overnight courier for delivery to the address specified by the Holder in the Notice of Exercise on the next Trading Day, in either event within 3 Trading Days of the E xercise Date (“Warrant Share Delivery Date”).  

iii.

Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iv.

Rescission Rights.  If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise; provided that it return any certificate representing any Warrant Shares received by it.

v.

No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

vi.

Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when

surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

vii.

Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

viii.

Government Filings.  The Company shall assist and cooperate with the Holder, at the Holder’s expense, with respect to any governmental filings required to be made or any governmental approvals required to be obtained by the Holder prior to or in connection with any exercise of this Warrant (including, without limitation, making any filings required to be made by the Company; provided, however, filings required to be made by the Company under federal or state securities laws shall be governed by the Registration Rights Agreement).

(e)

Call Provision.  Subject to the provisions of this Section 2(e), if after the date of issuance of this Warrant the Closing Price for each of 20 consecutive Trading Days (the “Measurement Period”, which period shall not commence until beginning on or after the date that the Registration Statement filed pursuant to the Registration Rights Agreement is declared effective by the Securities and Exchange Commission) exceeds $5.60 (subject to adjustment as set forth herein) (the “Threshold Price”), then the Company may, within five Trading Days of the end of such period, call for redemption all or any portion of this Warrant for $0.50 per share (the “Call Price”) for which a Notice of Exercise has not yet been delivered (such right, a “Call”).  To exercise this right, the Company must deliver to the Holder an irrevocable written notice (a “Call Notice”), indicating therein the portion of unexercised portion of this Warrant to which such notice applies.  If the conditions set forth below for such Call are satisfied from the period from the date of the Call Notice through and including the Call Date (as defined below), then any portion of this Warrant subject to such Call Notice for which a Notice of Exercise shall not have been received by the Call Date will be cancelled at 5:00 p.m. (New York City time) on the 10^th Trading Day after the date the Call Notice is sent to the Holder (such date, the “Call Date”).  Any unexercised portion of this Warrant to which the Call Notice does not pertain will be unaffected by such Call Notice.  In furtherance thereof, the Company covenants and agrees that it will honor all Notices of Exercise with respect to Warrant Shares subject to a Call Notice that are tendered through 5:00 p.m. (New York City tim e) on the Call Date.  The parties agree that any Notice of Exercise delivered following a Call Notice shall first reduce to zero the number of Warrant Shares subject to such Call Notice prior to reducing the remaining Warrant Shares available for purchase under this Warrant.  For example, if (x) this Warrant then permits the Holder to acquire 200 Warrant Shares, (y) a Call Notice pertains to 75 Warrant Shares, and (z) prior to 5:00 p.m. (New York City time) on the Call Date the Holder tenders a Notice of Exercise in respect of 50 Warrant Shares, then (1) on the Call Date the right under this Warrant to acquire 25 Warrant Shares will be automatically cancelled, (2) the Company, in the time and manner required under this Warrant, will have issued and delivered to the Holder 50 Warrant Shares in respect of the exercises following receipt of the Call Notice, and (3) the Holder may, until the Termination Date, exercise this Warrant for 125 Warrant Shares (subject to

adjustment as herein provided and subject to subsequent Calls).  Subject again to the provisions of this Section 2(e), the Company may at ant time and from time to time exercise its Call right and deliver subsequent Call Notices for any portion of this Warrant for which the Holder shall not have delivered a Notice of Exercise.  The Company’s right to Call the Warrant shall be exercised ratably among the Holders based on the number of Warrants then held by each  Holder.

(f)

Limitation on Exercise.  Notwithstanding any provisions of this Warrant to the contrary, the number of shares of Common Stock that may be acquired by Holder upon any exercise of this Warrant shall be limited to the extent necessary to ensure that, following such exercise, the total number of shares of Common Stock then beneficially owned by Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), does not exceed 9.999% (the “Limiting Percentage”) of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise of this Warrant).  For such purposes, beneficial owner ship shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations thereunder, it being acknowledged by Holder that the Company is not representing to Holder that such calculation is in compliance with Section 13(d) or Section 16 of the Exchange Act and Holder is solely responsible for any schedules or reports required to be filed in accordance therewith.  The Company’s obligation to issue shares of Common Stock in excess of the limitation referred to in this Section 2(f) shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. To the extent that the limitation contained in this Section 2(f) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of such Holder, and the submission of a Notice of Exercise shall be deemed to be such Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   By written notice to the Company at any time on or after the date hereof, Holder may waive the provisions of this Section 2(f) or increase or decrease such limitation percentage to any other percentage specified in such notice, but not exceeding 9.999%.  Any such waiver or increase will not be effective until the sixty-fifth day after such notice is delivered to the Company, unless such notice is issued by the Holder prior to or concurrently with the issuance of this Warrant, and will not be effective with respect to any subsequent transferee of the Warrant.

Section 3.

Certain Adjustments.

(a)

Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a distribution on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant or any other option, warrant or other right to acquire the Common Stock), (B) subdivides outstanding shares of Common Stock into a larger number of shares (including by way of a stock split), or (C) combines (including by way of

reverse stock split) outstanding shares of Common Stock into a smaller number of shares, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

(b)

Adjustment of Number of Shares.  Upon each adjustment in the Exercise Price pursuant to Section 3(a), the number of shares of Common Stock issuable upon exercise hereof shall be adjusted, rounded up to the nearest whole share, to the product obtained by multiplying such number of shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter.

(c)

Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. The number of shares of Common Stock outstanding at any given time shall not includes shares of Common Stock owned or held by or for the account of the Company as treasury shares.

(d)

Failure to Effect Event Requiring Adjustment.  If any event requiring an adjustment in the Exercise Price and the number of Warrant shares issuable hereunder is not paid or made, then the Exercise Price and number of shares issuable upon exercise of this Warrant shall again be adjusted to be the Exercise Price and number of shares which would then be in effect if such adjustment had not been made for such.

(e)

Notice to Holders.  Whenever the Exercise Price is adjusted pursuant to Section 3(a), the Company shall promptly mail to each Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(f)

Organic Change. Any recapitalization, reorganization, reclassification, consolidation or merger to which the Company is a party, or sale of all or substantially all of the Company’s assets to another Person or other transaction that is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an “Organic Change.”  Prior to the consummation of any Organic Change, the Company will make appropriate provision to ensure that the Holder will thereafter have the right to acquire and receive, upon exercise of this Warrant, in lieu of or addition to (as the case may be) the Warrant Shares immediately theretofore acquirable and receivable upon the exercise of such holder’s Warrant, such stock, securities o r assets as may be issued or payable with respect to or in exchange for the number of Warrant Shares immediately theretofore acquirable and receivable upon exercise of the Holder’s Warrant had such Organic Change not taken place.  In any such case, the Company will make appropriate provision with respect to the Holder’s rights and interests to ensure that the provisions of this Section 3(f) hereof will

thereafter be applicable to the Warrant.  The Company will not effect any such Organic Change, unless prior to the consummation thereof, the successor entity (if other than the Company) resulting from consolidation or merger or the corporation purchasing such assets assumes by written instrument, the obligation to deliver to the Holder such stock, securities or assets as, in accordance with the foregoing provisions, Holder may be entitled to acquire.  The Company will give written notice to the Holder at least 20 days prior to the date on which the Company closes its books or takes a record for determining rights to vote with respect to any Organic Change, dissolution or liquidation.  The Company will also give written notice to the Holder at least 20 days prior to the date on which any Organic Change, dissolution or liquidation will take place.

(g)

Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

Section 4.

Transfer of Warrant.

(a)

Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Sections 4(d) and 5(a) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a ne w Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.  

(b)

New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

(c)

Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

(d)

Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under

applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Regulation D promulgated under the Securities Act.

(e)

Legend.  The Warrant Shares issuable hereunder shall bear the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION, OR THE SECURITIES COMMISSION OF ANY STATE, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

Certificates evidencing the Warrant Shares shall not contain the legend set forth above:  (i) following any sale of such Warrant pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144, or (ii) if such Warrant Shares are eligible for sale under Rule 144(k), provided that, in each case, the Holder provides a copy of such certificates or confirmations as the Company reasonably requests.

Section 5.

Miscellaneous.

(a)

Title to Warrant.  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose, in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any notice to the Holder, and for all other purposes, absent actual written notice to the contrary and compliance with the applicable provisions concerning transfer of this Warrant.

(b)

No Rights as Shareholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the Exercise Date and then only with respect to the Warrant Shares to be issued with respect threreto.  

(c)

Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

(d)

Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

(e)

Exchange of Warrant for Warrants of Different Denominations.  This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for new Warrants of like tenor representing in the aggregate the right to purchase the number of Warrant Shares then purchasable hereunder, and each of such new Warrant will represent such portion of such rights as is designated by the Purchaser at the time of such surrender.  The date the Company initially issued this Warrant will be deemed to be the warrant issue date for such new Warrants regardless of the number of times new certificates representing the unexplored and unexercised rights formerly represented by this Warrant shall be issued.

(f)

Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

(g)

Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

(h)

No waiver.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies; provided, however, that all rights hereunder shall terminate on the Termination Date.  

(i)

Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (I) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 4:00 p.m. (Eastern Time) on a Trading Day, (II) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 4:00 p.m. (Eastern Time) on any Trading Day, (III) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (IV) upon actual receipt by the party to whom suc h notice is required to be given; provided,

however, that any exercise of the Warrant shall be effective in the manner provided in Section 2(a).  The address for such notices and communications shall be (A) if to the Holder of this Warrant, at the registered address of such Holder as set forth in the Warrant register kept at the principal office of the Company or its Warrant registrar, if any, or (b) if to the Company, to it at the address set forth on the signature page hereto.

(j)

Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

(k)

Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(l)

Successors and Assigns.  Subject to applicable securities laws and the other restrictions on transfer set forth herein, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder.

(m)

Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

(n)

Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(o)

Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated:  August __, 2005

PANAMERICAN BANCORP

By:__________________________________________

     Name:

     Title:

Address for Notice:

_____________________________________________

_____________________________________________

_____________________________________________

with a copy to (which shall not constitute notice) to:

Blank Rome LLP

1200 N. Federal Highway, Suite 417

Boca Raton, FL 33432

Attention: Bruce C. Rosetto, Esquire