EXHIBIT 10.1
 
SUBSCRIPTION AGREEMENT
 
 
THIS SUBSCRIPTION AGREEMENT (this “Agreement”), is dated as of December 5, 2007,
by and among Rim Semiconductor Company, a Utah corporation (the “Company”), and
the subscribers identified on the signature page hereto (each a “Subscriber” and
collectively “Subscribers”).

WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as amended (the “1933 Act”).
 
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Subscribers, as
provided herein, and the Subscribers, in the aggregate, shall purchase for up to
$6,000,000 (the “Purchase Price”) up to $6,666,666.67 (the “Principal Amount”)
of principal amount of promissory notes of the Company (“Note” or “Notes”), a
form of which is annexed hereto as Exhibit A, convertible into shares of the
Company’s Common Stock, $0.001 par value (the “Common Stock”) at a per share
conversion price set forth in the Note (“Conversion Price”); and share purchase
warrants (the “Warrants”), in the form annexed hereto as Exhibit B, to purchase
shares of Common Stock (the “Warrant Shares”).  The Notes, shares of Common
Stock issuable upon conversion of the Notes (the “Shares”), the Warrants and the
Warrant Shares are collectively referred to herein as the “Securities”; and
 
WHEREAS, the aggregate proceeds of the sale of the Notes and the Warrants
contemplated hereby shall be held in escrow pursuant to the terms of a Funds
Escrow Agreement to be executed by the parties substantially in the form
attached hereto as Exhibit C (the “Escrow Agreement”).
 
NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscribers hereby agree as
follows:
 
1.           Closing Date.  The “Closing Date” shall be the date that the
Purchase Price is transmitted by wire transfer or otherwise credited to or for
the benefit of the Company.  The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, upon the satisfaction or waiver of
all conditions to closing set forth in this Agreement.   Subject to the
satisfaction or waiver of the terms and conditions of this Agreement, on the
Closing Date, each Subscriber shall purchase and the Company shall sell to each
Subscriber a Note in the Principal Amount designated on the signature page
hereto for the Purchase Price indicated thereon, and Warrants as described in
Section 2 of this Agreement.  The Company shall have up to twenty (20)
additional days after the first Closing to close on the balance of the Purchase
Price in one or more Closings.  The Notes and Warrants to be issued on the
additional closing dates will have the same Maturity Dates and exercise periods,
respectively, as the Notes and Warrants issued on the First Closing Date.  The
first such Closing Date shall be the Closing Date for all amounts representing
the Closing Purchase Price.

2.           Warrants.  On the Closing Date, the Company will issue and deliver
Class A Warrants to the Subscribers.  One Class A Warrant will be issued for
each Share which would be issued on the Closing Date assuming the complete
conversion of the Note on the Closing Date at the Conversion Price set forth in
Section 2.1 of the Note.  The exercise price to acquire a Warrant Share upon
exercise of a Class A Warrant shall be equal to $0.10, subject to reduction as
described in the Class A Warrant.  The Class A Warrants shall be exercisable
until five years after the issue date of the Class A Warrants.

1

--------------------------------------------------------------------------------

3.           Security Interest.  The Subscribers will be granted a security
interest in the assets of the Company, including ownership of the Subsidiaries
(as defined in Section 5(a) of this Agreement) and in the assets of the
Subsidiaries, which security interest will be memorialized in a “Security
Agreement,” a form of which is annexed hereto as Exhibit D. The Subsidiaries
will guaranty the Company’s obligations under the Transaction Documents [as
defined in Section 5(c)].  Such guarantys will be memorialized in a “Subsidiary
Guaranty”, the form of which is annexed hereto as Exhibit E.  The Company will
execute such other agreements, documents and financing statements reasonably
requested by the Subscribers, which will be filed at the Company’s expense with
the jurisdictions, states and counties designated by the Subscribers.  The
Company will also execute all such documents reasonably necessary in the opinion
of the Subscribers to memorialize and further protect the security interest
described herein.  The Subscribers will appoint a Collateral Agent to represent
them collectively in connection with the security interests to be granted to the
Subscribers. The appointment of the Collateral Agent in connection with the
Security Agreement will be pursuant to a “Collateral Agent Agreement,” a form of
which is annexed hereto as Exhibit F.

4.           Subscriber Representations and Warranties.  Each Subscriber hereby
represents and warrants to and agrees with the Company only as to such
Subscriber that:

(a)           Organization and Standing of the Subscribers.  If such Subscriber
is an entity, such Subscriber is a corporation, partnership or other entity duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.

(b)           Authorization and Power.  Such Subscriber has the requisite power
and authority to enter into and perform this Agreement and the other Transaction
Documents and to purchase the Notes and Warrants being sold to it
hereunder.  The execution, delivery and performance of this Agreement and the
other Transaction Documents by such Subscriber and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Subscriber or its Board of Directors, stockholders,
partners, members, as the case may be, is required.  This Agreement and the
other Transaction Documents have been duly authorized, executed and delivered by
such Subscriber and each constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of such Subscriber enforceable against
such Subscriber in accordance with the terms thereof.

(c)           No Conflicts.  The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by such
Subscriber of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Subscriber’s
charter documents or bylaws or other organizational documents or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Subscriber).  Such Subscriber is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the other
Transaction Documents  or to purchase the Securities in accordance with the
terms hereof, provided that for purposes of the representation made in this
sentence, such Subscriber is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.

2

--------------------------------------------------------------------------------

(d)           Information on Company.   Such Subscriber has been furnished with
or has had access at the EDGAR Website of the Commission to the Company’s Form
10-KSB filed on February 5, 2007 for the fiscal year ended October 31, 2006, and
the financial statements included therein for the year ended October 31, 2006,
the Company’s 10-QSB filed on March 14, 2007 and the financial statements
included for the quarter ended January 31, 2007, the Company’s 10-QSB filed on
June 13, 2007 and the financial statements included for the quarter ended April
30, 2007, the Company’s 10-QSB filed on September 14, 2007 and the financial
statements included for the quarter ended July 31, 2007, and the Company’s
definitive proxy statement filed on April 2, 2007, together with all subsequent
filings made with the Commission available at the EDGAR website (hereinafter
referred to collectively as the “Reports”).  In addition, such Subscriber may
have received in writing from the Company such other information concerning its
operations, financial condition and other matters as such Subscriber has
requested in writing, identified thereon as OTHER WRITTEN INFORMATION (such
other information is collectively, the “Other Written Information”), and
considered all factors such Subscriber deems material in deciding on the
advisability of investing in the Securities.

(e)           Information on Subscriber.  Such Subscriber is, and will be at the
time of the conversion of the Notes and exercise of the Warrants, an “accredited
investor”, as such term is defined in Regulation D promulgated by the Commission
under the 1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable such Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment.  Such Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities.  Such Subscriber
is able to bear the risk of such investment for an indefinite period and to
afford a complete loss thereof.  The information set forth on the signature page
hereto regarding such Subscriber is accurate.

(f)           Purchase of Notes and Warrants.  On the Closing Date, such
Subscriber will purchase the Notes and Warrants as principal for its own account
for investment only and not with a view toward, or for resale in connection
with, the public sale or any distribution thereof.

(g)           Compliance with Securities Act.  Such Subscriber understands and
agrees that the Securities have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of such Subscriber contained
herein), and that such Securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration.  Such Subscriber will comply with all
applicable rules and regulations in connection with the sales of the Securities
including laws relating to short sales.

3

--------------------------------------------------------------------------------

(h)           Shares Legend.  The Shares, and the Warrant Shares shall bear the
following or similar legend:

“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.”

(i)           Warrants Legend.  The Warrants shall bear the following or similar
legend:
 
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

4

--------------------------------------------------------------------------------

(j)           Note Legend.  The Note shall bear the following legend:
 
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
 
(k)           Communication of Offer.  The offer to sell the Securities was
directly communicated to such Subscriber by the Company.  At no time was such
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
 
(l)           Authority; Enforceability.  This Agreement and other agreements
delivered together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by such Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity; and such Subscriber has full power and
authority necessary to enter into this Agreement and such other agreements and
to perform its obligations hereunder and under all other agreements entered into
by such Subscriber relating hereto.

(m)          Restricted Securities.  Such Subscriber understands that the
Securities have not been registered under the 1933 Act and such Subscriber will
not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of the Securities unless pursuant to an effective registration statement under
the 1933 Act, or unless an exemption from registration is
available.  Notwithstanding anything to the contrary contained in this
Agreement, such Subscriber may transfer (without restriction and without the
need for an opinion of counsel) the Securities to its Affiliates (as defined
below) provided that each such Affiliate is an “accredited investor” under
Regulation D, such Affiliate agrees to be bound by the terms and conditions of
this Agreement, and written notice of such transfer is provided the Company
within five (5) business days of said transfer. For the purposes of this
Agreement, an “Affiliate” of any person or entity means any other person or
entity directly or indirectly controlling, controlled by or under direct or
indirect common control with such person or entity.  Affiliate includes each
Subsidiary of the Company.  For purposes of this definition, “control” means the
power to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

5

--------------------------------------------------------------------------------

(n)           Intentionally Deleted.

(o)           No Governmental Review.  Such Subscriber understands that no
United States federal or state agency or any other governmental or state agency
has passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

(p)           Correctness of Representations.  Such Subscriber represents as to
such Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless such Subscriber otherwise notifies the
Company prior to the Closing Date shall be true and correct as of the Closing
Date.

(q)           Survival.  The foregoing representations and warranties shall
survive the Closing Date.
 
5.           Company Representations and Warranties.  The Company represents and
warrants to and agrees with each Subscriber that:
 
(a)           Due Incorporation.  The Company is a corporation or other entity
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has the
requisite corporate power to own its properties and to carry on its business as
presently conducted.  The Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
a Material Adverse Effect.  For purposes of this Agreement, a “Material Adverse
Effect” shall mean a material adverse effect on the financial condition, results
of operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole.  For purposes of this Agreement, “Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which more than 30% of (i) the
outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or limited
liability company or (iii) in the case of a trust, estate, association, joint
venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such
entity.  The Company’s Subsidiaries as of the Closing Date are set forth on
Schedule 5(a).
 
(b)           Outstanding Stock.  All issued and outstanding shares of capital
stock of the Company and Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable.
 
(c)           Authority; Enforceability.  This Agreement, the Note, the
Warrants, the Security Agreement, Subsidiary Guaranty, Escrow Agreement, Lockup
Agreement and any other agreements delivered together with this Agreement or in
connection herewith (collectively “Transaction Documents”) have been duly
authorized, executed and delivered by the Company and Subsidiaries (as
applicable) and are valid and binding agreements of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights generally and to general principles
of equity.  The Company has full corporate power and authority necessary to
enter into and deliver the Transaction Documents and to perform its obligations
thereunder.

6

--------------------------------------------------------------------------------

 
(d)           Additional Issuances.  There are no outstanding agreements or
preemptive or similar rights affecting the Company’s Common Stock or equity and
no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of Common Stock or equity of the
Company or Subsidiaries or other equity interest in the Company except as
described on Schedule 5(d).  The Common Stock of the Company on a fully diluted
basis outstanding as of the last Business Day preceding the Closing Date is set
forth on Schedule 5(d).
 
(e)           Consents.  No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its Affiliates, the OTC Bulletin Board (the “Bulletin Board”)
or the Company’s shareholders is required for the execution by the Company of
the Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities.  The Transaction Documents and the
Company’s performance of its obligations thereunder has been unanimously
approved by the Company’s Board of Directors.
 
(f)           No Violation or Conflict.  Assuming the representations and
warranties of the Subscribers in Section 4 are true and correct, neither the
issuance and sale of the Securities nor the performance of the Company’s
obligations under this Agreement and all other agreements entered into by the
Company relating thereto by the Company will:
 
(i)           except as set forth on Schedule 5(f), violate, conflict with,
result in a breach of, or constitute a default (or an event which with the
giving of notice or the lapse of time or both would be reasonably likely to
constitute a default) under (A) the articles or certificate of incorporation,
charter or bylaws of the Company, (B) to the Company’s knowledge, any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or over the properties or assets of the Company or
any of its Affiliates, (C) the terms of any bond, debenture, note or any other
evidence of indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to which the
Company or any of its Affiliates is a party, by which the Company or any of its
Affiliates is bound, or to which any of the properties of the Company or any of
its Affiliates is subject, or (D) the terms of any “lock-up” or similar
provision of any underwriting or similar agreement to which the Company, or any
of its Affiliates is a party except the violation, conflict, breach, or default
of which would not have a Material Adverse Effect; or
 
(ii)           result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company or any of
its Affiliates except as described herein; or
 
(iii)           except as described on Schedule 5(f), result in the activation
of any anti-dilution rights or a reset or repricing of any debt or security
instrument of any other creditor or equity holder of the Company, nor result in
the acceleration of the due date of any obligation of the Company; or
 
(iv)           except as described on Schedule 5(f), result in the triggering of
any piggy-back registration rights of any person or entity holding securities of
the Company or having the right to receive securities of the Company.
 
(g)           The Securities.  The Securities upon issuance:
 
(i)           are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
1933 Act and any applicable state securities laws;

7

--------------------------------------------------------------------------------

(ii)           have been, or will be, duly and validly authorized and on the
date of issuance of the Shares upon conversion of the Notes and the Warrant
Shares and upon exercise of the Warrants, the Shares and Warrant Shares will be
duly and validly issued, fully paid and non-assessable and if registered
pursuant to the 1933 Act and resold pursuant to an effective registration
statement will be free trading and unrestricted;
 
(iii)           will not have been issued or sold in violation of any preemptive
or other similar rights of the holders of any securities of the Company;
 
(iv)           will not subject the holders thereof to personal liability by
reason of being such holders; and
 
(v)           assuming the representations and warranties of the Subscribers as
set forth in Section 4 hereof are true and correct, will not result in a
violation of Section 5 under the 1933 Act.
 
(h)           Litigation.  There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under the Transaction
Documents.  Except as disclosed in the Reports, there is no pending or, to the
best knowledge of the Company, basis for or threatened action, suit, proceeding
or investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its Affiliates which litigation
if adversely determined would have a Material Adverse Effect.
 
(i)           Intentionally Deleted.
 
(j)           Information Concerning Company.  The Reports and Other Written
Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein.   Since the date of the
financial statements included in the Reports, and except as modified in the
Other Written Information or in the Schedules hereto, there has been no Material
Adverse Event relating to the Company’s business, financial condition or affairs
not disclosed in the Reports. The Reports and Other Written Information do not
contain any 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, taken
as a whole, not misleading in light of the circumstances when made.
 
(k)           Stop Transfer.  The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the Subscriber.
 
(l)           Defaults.  The Company is not in violation of its articles of
incorporation or bylaws.  Except as set forth on Schedule 5(l), the Company is
(i) not in default under or in violation of any other material agreement or
instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a Material Adverse
Effect, (ii) not in default with respect to any order of any court, arbitrator
or governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) not in violation of any statute, rule
or regulation of any governmental authority which violation would have a
Material Adverse Effect.

8

--------------------------------------------------------------------------------

 
(m)           No Integrated Offering.  Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder.  Neither the Company nor any of its Affiliates will take any action
or steps that would cause the offer or issuance of the Securities to be
integrated with other offerings which would impair the exemptions relied upon in
this Offering or the Company’s ability to timely comply with its obligations
hereunder.  The Company will not conduct any offering other than the
transactions contemplated hereby that will be integrated with the offer or
issuance of the Securities that would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder.
 
(n)           No General Solicitation.  Neither the Company, nor any of its
Affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities.
 
(o)           No Undisclosed Liabilities.  The Company has no liabilities or
obligations which are material, individually or in the aggregate, other than
those incurred in the ordinary course of the Company businesses since October
31, 2006 and which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect, except as disclosed in the Reports
or on Schedule 5(o).
 
(p)           No Undisclosed Events or Circumstances.  Since October 31, 2006,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the Reports.
 
(q)           Capitalization.  The authorized and outstanding capital stock of
the Company and Subsidiaries as of the date of this Agreement and the Closing
Date (not including the Securities) are set forth in the Reports or on Schedule
5(d).  Except as set forth on Schedule 5(d), there are no options, warrants, or
rights to subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company or any of its Subsidiaries.
 
(r)           Dilution.  The Company’s executive officers and directors
understand the nature of the Securities being sold hereby and recognize that the
issuance of the Securities will have a potential dilutive effect on the equity
holdings of other holders of the Company’s equity or rights to receive equity of
the Company.  The board of directors of the Company has concluded, in its good
faith business judgment that the issuance of the Securities is in the best
interests of the Company.  The Company specifically acknowledges that its
obligation to issue the Shares upon conversion of the Notes, and the Warrant
Shares upon exercise of the Warrants, is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company or parties entitled to receive
equity of the Company.

9

--------------------------------------------------------------------------------

 
(s)           No Disagreements with Accountants and Lawyers.  There are no
material disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise between the Company and the accountants and lawyers
presently employed by the Company, including but not limited to disputes or
conflicts over payment owed to such accountants and lawyers, nor have there been
any such disagreements during the two years prior to the Closing Date.

(t)           Investment Company.  Neither the Company nor any Affiliate of the
Company is an “investment company” within the meaning of the Investment Company
Act of 1940, as amended.
 
(u)           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 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 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.

(v)           Reporting Company.  The Company is a publicly-held company subject
to reporting obligations pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended (the “1934 Act”) and has a class of Common Stock registered
pursuant to Section 12(g) of the 1934 Act.  Pursuant to the provisions of the
1934 Act, the Company has filed all reports and other materials required to be
filed thereunder with the Commission during the preceding twelve months.

(w)           Listing.  The Company’s Common Stock is quoted on the Bulletin
Board under the symbol RSMI.OB.  The Company has not received any oral or
written notice that its Common Stock is not eligible nor will become ineligible
for quotation on the Bulletin Board nor that its Common Stock does not meet all
requirements for the continuation of such quotation.  The Company satisfies all
the requirements for the continued quotation of its Common Stock on the Bulletin
Board.

(x)           [Reserved].

(y)           Solvency.  Based on the financial condition of the Company as of
the Closing Date after giving effect to the receipt by the Company of the
proceeds from the sale of the Notes hereunder, (i) the Company’s fair saleable
value of its assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof, after the receipt of proceeds from the sale of the
Notes hereunder; and (iii) the current cash flow of the Company, together with
the proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its debt when such amounts are required
to be paid.  The Company does not intend to incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).

10

--------------------------------------------------------------------------------

(z)           Company Subsidiaries.  Except as provided in Schedule 5(a), the
Company makes each of the representations contained in Sections 5(a), (b), (c),
(d), (e), (f), (h), (j), (l), (o), (p), (q), (s), (t) and (u) of this Agreement,
as same relate to the Subsidiary of the Company.  All representations made by or
relating to the Company of a historical or prospective nature and all
undertakings described in Sections 9(g) through 9(l) shall relate, apply and
refer to the Company and its predecessors.  The Company represents that it owns
100% of the outstanding equity of the Subsidiaries and rights to receive equity
of the Subsidiaries free and clear of all liens, encumbrances and claims, except
as set forth on Schedule 5(d).  No person or entity other than the Company has
the right to receive any equity interest in the Subsidiaries.

(AA)         Correctness of Representations.  The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date; provided, that, if such representation or
warranty is made as of a different date in which case such representation or
warranty shall be true in all material respects as of such date.
 
(BB)           The Company agrees and acknowledges that for purposes of Rule
144, the holding period of all of the securities issued in the Bridge Loan
Transaction with Double U Master Fund LP and Professional Offshore Opportunity
Fund Ltd., as amended, modified and/or extended, commenced on its funding date,
July 27, 2007, respectively.
 
(CC)           Survival.  The foregoing representations and warranties shall
survive the Closing Date.
 
6.           Regulation D Offering/Legal Opinion.  The offer and issuance of the
Securities to the Subscribers is being made pursuant to the exemption from the
registration provisions of the 1933 Act afforded by Section 4(2) or Section 4(6)
of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.  On the
Closing Date, the Company will provide an opinion reasonably acceptable to the
Subscribers from the Company’s legal counsel opining on the availability of an
exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers.  A form of the legal opinion is annexed hereto as Exhibit G.  The
Company will provide, at the Company’s expense, such other legal opinions, if
any, as are reasonably necessary  in each Subscriber’s opinion for the issuance
and resale of the Common Stock issuable upon conversion of the Notes and
exercise of the Warrants pursuant to an effective registration statement, Rule
144 under the 1933 Act or an exemption from registration.

7.1.           Conversion of Note.

(a)           Upon the conversion of a Note or part thereof, the Company shall,
at its own cost and expense, take all necessary action, including obtaining and
delivering, an opinion of counsel to assure that the Company’s transfer agent
shall issue stock certificates in the name of Subscriber (or its permitted
nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion.  The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company’s Common Stock and that the certificates
representing such shares shall contain no legend other than the usual 1933 Act
restriction from transfer legend.  If and when a Subscriber sells the Shares,
assuming (i) the Registration Statement (as defined below) is effective and the
prospectus, as supplemented or amended, contained therein is current and (ii)
such Subscriber or its agent confirms in writing to the transfer agent that such
Subscriber has complied with the prospectus delivery requirements, the Company
will reissue the Shares without restrictive legend and the Shares will be
free-trading, and freely transferable.  In the event that the Shares are sold in
a manner that complies with an exemption from registration, the Company will
promptly instruct its counsel to issue to the transfer agent an opinion
permitting removal of the legend (indefinitely, if pursuant to Rule 144(k) of
the 1933 Act, or for ninety (90) days if pursuant to the other provisions of
Rule 144 of the 1933 Act, provided that Subscriber delivers all reasonably
requested representations in support of such opinion).

11

--------------------------------------------------------------------------------

(b)           A Subscriber will give notice of its decision to exercise its
right to convert the Note, interest, or part thereof by telecopying, or
otherwise delivering a completed Notice of Conversion (a form of which is
annexed as Exhibit A to the Note) to the Company via confirmed telecopier
transmission or otherwise pursuant to Section 13(a) of this Agreement.  Such
Subscriber will not be required to surrender the Note until the Note has been
fully converted or satisfied.  Each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof by 6 PM
Eastern Time (“ET”) (or if received by the Company after 6 PM ET then the next
business day) shall be deemed a “Conversion Date.”  The Company will itself or
cause the Company’s transfer agent to transmit the Company’s Common Stock
certificates representing the Shares issuable upon conversion of the Note to
such Subscriber via express courier for receipt by such Subscriber within three
(3) business days after receipt by the Company of the Notice of Conversion (such
third day being the “Delivery Date”).  In the event the Shares are
electronically transferable, then delivery of the Shares must be made by
electronic transfer provided request for such electronic transfer has been made
by the Subscriber.  A Note representing the balance of the Note not so converted
will be provided by the Company to such Subscriber if requested by Subscriber,
provided such Subscriber delivers the original Note to the Company.  In the
event that a Subscriber elects not to surrender a Note for reissuance upon
partial payment or conversion of a Note, such Subscriber hereby indemnifies the
Company against any and all loss or damage attributable to a third-party claim
in an amount in excess of the actual amount then due under the Note.

(c)           The Company understands that a delay in the delivery of the Shares
in the form required pursuant to Section 7.1 hereof, or the Mandatory Redemption
Amount described in Section 7.2 hereof, respectively later than the Delivery
Date or the Mandatory Redemption Payment Date (as hereinafter defined) could
result in economic loss to the Subscriber.  As compensation to a Subscriber for
such loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to such Subscriber for late issuance of Shares in the form required
pursuant to Section 7.1 hereof upon Conversion of the Note in the amount of $100
per business day after the Delivery Date for each $10,000 of Note principal
amount (and proportionately for other amounts) being converted of the
corresponding Shares which are not timely delivered.  The Company shall pay any
payments incurred under this Section in immediately available funds upon
demand.  Furthermore, in addition to any other remedies which may be available
to the Subscriber, in the event that the Company fails for any reason to effect
delivery of the Shares within seven (7) business days after the Delivery Date or
make payment within seven (7) business days after the Mandatory Redemption
Payment Date (as defined in Section 7.2 below), such Subscriber will be entitled
to revoke all or part of the relevant Notice of Conversion or rescind all or
part of the notice of Mandatory Redemption by delivery of a notice to such
effect to the Company whereupon the Company and such Subscriber shall each be
restored to their respective positions immediately prior to the delivery of such
notice, except that the liquidated damages described above shall be payable
through the date notice of revocation or rescission is given to the Company.

(d)           The Company agrees and acknowledges that despite the pendency of a
not yet effective Registration Statement which includes for registration the
Registrable Securities (as defined in Section 11.1(iv)), a Subscriber is
permitted to and the Company will issue to such Subscriber Shares upon
conversion of the Note and Warrant Shares upon exercise of the Warrants.  Such
Shares will, if required by law, bear the legends described in Section 4 above
and if the requirements of Rule 144 under the 1933 Act are satisfied, be
resalable thereunder.

12

--------------------------------------------------------------------------------

7.2.           Mandatory Redemption at Subscriber’s Election.  In the event (i)
the Company is prohibited from issuing Shares, (ii) upon the occurrence of any
other Event of Default (as defined in the Note or in this Agreement) that
continues for more than twenty (20) business days, (iii) a Change in Control (as
defined below), or (iv) of the liquidation, dissolution or winding up of the
Company, then at the Subscriber’s election, the Company must pay to each
Subscriber ten (10) business days after request by each Subscriber (“Calculation
Period”), a sum of money determined by multiplying up to the outstanding
principal amount of the Note designated by each such Subscriber by 120%, plus
accrued but unpaid interest (“Mandatory Redemption Payment”).  The Mandatory
Redemption Payment must be received by each Subscriber on the same date as the
Shares otherwise deliverable or within ten (10) business days after request,
whichever is sooner (“Mandatory Redemption Payment Date”).  Upon receipt of the
Mandatory Redemption Payment, the corresponding Note principal and interest will
be deemed paid and no longer outstanding.  Liquidated damages calculated
pursuant to Section 7.1(c) hereof, that have been paid or accrued for the ten
(10) day period prior to the actual receipt of the Mandatory Redemption Payment
by a Subscriber shall be credited against the Mandatory Redemption Payment. For
purposes of this Section 7.2, “Change in Control” shall mean (i) the Company no
longer having a class of shares publicly traded or listed on a Principal Market,
(ii) the Company  becoming a Subsidiary of another entity (other than a
corporation formed by the Company for purposes of reincorporation in another
U.S. jurisdiction), (iii) Ray Willenberg, Jr. and Brad Ketch no longer serve as
directors of the Company except due to natural causes (which shall include,
termination of such directors by the holders of more than 50% of the equity
outstanding as of the Closing Date), and (iv) the sale, lease or transfer of
substantially all the assets of the Company or its Subsidiaries.

7.3.           Maximum Conversion.  No Subscriber shall be entitled to convert
on a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by such Subscriber and its Affiliates
on a Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the Note with respect to which the determination of this
provision is being made on a Conversion Date, which would result in beneficial
ownership by such Subscriber and its Affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Company on such Conversion Date.  For
the purposes of the provision to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Rule 13d-3 thereunder.  Subject to the
foregoing, the Subscriber shall not be limited to aggregate conversions of only
4.99% and aggregate conversions by the Subscriber may exceed 4.99%.  The
Subscriber may increase the permitted beneficial ownership amount up to 9.99%
upon and effective after sixty-one (61) days’ prior written notice to the
Company.  Such Subscriber may allocate which of the equity of the Company deemed
beneficially owned by such Subscriber shall be included in the 4.99% amount
described above and which shall be allocated to the excess above 4.99%.

7.4.           Injunction Posting of Bond.  In the event a Subscriber shall
elect to convert a Note or part thereof, the Company may not refuse conversion
or exercise based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or for
any other reason, unless, an injunction from a court, on notice, restraining and
or enjoining conversion of all or part of such Note shall have been sought and
obtained by the Company or at the Company’s request or with the Company’s
assistance, and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 120% of the outstanding principal and interest of
the Note, or aggregate purchase price of the Shares which are sought to be
subject to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Subscriber to the extent Subscriber obtains judgment in
Subscriber’s favor.

13

--------------------------------------------------------------------------------

7.5.           Buy-In.  In addition to any other rights available to a
Subscriber, if the Company fails to deliver to a Subscriber such shares issuable
upon conversion of a Note by the Delivery Date and if after seven (7) business
days after the Delivery Date such Subscriber or a broker on such Subscriber’s
behalf purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by such Subscriber of the Common
Stock which such Subscriber was entitled to receive upon such conversion (a
“Buy-In”), then the Company shall pay in cash to such Subscriber (in addition to
any remedies available to or elected by the Subscriber) the amount by which (A)
such Subscriber’s total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored together with interest thereon at a rate of 15% per annum, or the
maximum amount legally allowed under the jurisdiction in which the subscriber
resides, accruing until such amount and any accrued interest thereon is paid in
full (which amount shall be paid as liquidated damages and not as a
penalty.  For example, if a Subscriber purchases shares of Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of $10,000 of note principal and/or interest, the Company shall be
required to pay such Subscriber $1,000 plus interest.  Such Subscriber shall
provide the Company written notice and evidence indicating the amounts payable
to such Subscriber in respect of the Buy-In.

7.6          Adjustments.  The Conversion Price, Warrant exercise price and
amount of Shares issuable upon conversion of the Notes and exercise of the
Warrants shall be equitably adjusted and as otherwise described in this
Agreement, the Notes and Warrants.
 
7.7.         Redemption.  The Notes shall not be redeemable or prepayable except
as described in the Notes.

8.           Finder Fee/Due Diligence Fee/Legal Fees.
 
(a)           Finder’s Fee/Due Diligence Fee.  The Company on the one hand, and
each Subscriber (for himself only) on the other hand, agrees to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming Finder’s Fee/Due Diligence Fee other than the one or more
entities identified on Schedule 8 hereto, (each a “Finder”) on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party’s actions.  Anything in this Agreement to the contrary
notwithstanding, each Subscriber is providing indemnification only for such
Subscriber’s own actions and not for any action of any other Subscriber.  Each
Subscriber’s liability hereunder is several and not joint.  The Company agrees
that it will pay the Finder the fees set forth on Schedule 8 hereto (“Finder/Due
Diligence Fees”).  The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection with
the offering described in this Agreement except the Finder.
 
(b)           Subscriber’s Legal Fees.  The Company shall pay to Grushko &
Mittman, P.C., a fee of $25,000 (“Subscriber’s Legal Fees”) as reimbursement for
services rendered to the Subscribers in connection with this Agreement and the
purchase and sale of the Notes and Warrants (the “Offering”).  The Subscriber’s
Legal Fees and expenses will be payable out of funds held pursuant to the Escrow
Agreement.  Grushko & Mittman, P.C. will be reimbursed at Closing for all lien
searches, filing fees, and printing and shipping costs for the closing
statements to be delivered to Subscribers.
 
9.           Covenants of the Company.  The Company covenants and agrees with
the Subscribers as follows:

14

--------------------------------------------------------------------------------

 
(a)           Stop Orders.  The Company will advise the Subscribers, within
twenty-four (24) hours after it receives notice of issuance by the Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock of
the Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
 
(b)           Listing/Quotation.  The Company shall promptly secure the
quotation or listing of the Shares and Warrant Shares upon each national
securities exchange, or automated quotation system upon which they are or become
eligible for quotation or listing (subject to official notice of issuance) and
shall maintain same so long as any Warrants are outstanding. The Company will
maintain the quotation or listing of its Common Stock on the American Stock
Exchange, Nasdaq Capital Market, Nasdaq Global Market, Nasdaq Global Select
Market, Bulletin Board, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock
(the “Principal Market”), and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market, as applicable.  The Company will provide the Subscribers
copies of all notices it receives notifying the Company of the threatened and
actual delisting of the Common Stock from any Principal Market. As of the date
of this Agreement and the Closing Date, the Bulletin Board is and will be the
Principal Market.
 
(c)           Market Regulations.  The Company shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Securities to the Subscribers and promptly provide copies thereof to the
Subscribers.
 
(d)           Filing Requirements.  From the date of this Agreement and until
the last to occur of (i) two (2) years after the Closing Date, (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations or (iii) the Notes are no longer
outstanding (the date of occurrence of the last such event being the “End
Date”), the Company will (A) cause its Common Stock to be registered under
Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) voluntarily comply with
all reporting requirements that are applicable to an issuer with a class of
shares registered pursuant to Section 12(g) of the 1934 Act, if Company is not
subject to such reporting requirements, and (D) comply with all requirements
related to any registration statement filed pursuant to this Agreement.  The
Company will use its best efforts not to take any action or file any document
(whether or not permitted by the 1933 Act or the 1934 Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said acts until the End Date.  Until
the End Date, the Company will continue the listing or quotation of the Common
Stock on a Principal Market and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the
Principal Market.  The Company agrees to timely file a Form D with respect to
the Securities if required under Regulation D and to provide a copy thereof to
each Subscriber promptly after such filing.
 
(e)           Use of Proceeds.   The proceeds of the Offering will be employed
by the Company as described on Schedule 9(e).  Except as set forth on Schedule
9(e), the Purchase Price may not and will not be used for accrued and unpaid
officer and director salaries, payment of financing related debt, redemption of
outstanding notes or equity instruments of the Company nor non-trade obligations
outstanding on a Closing Date.  For so long as any Notes are outstanding, except
as otherwise permitted hereunder, the Company will not prepay any financing
related debt obligations nor redeem any equity instruments of the Company.

15

--------------------------------------------------------------------------------

 
(f)           Reservation.  Prior to the Closing Date, and at all times
thereafter, the Company shall have reserved, pro rata, on behalf of each holder
of a Note or Warrant, from its authorized but unissued Common Stock, a number of
common shares equal to 125% of the amount of Common Stock necessary to allow
each holder of a Note to be able to convert all such outstanding Notes and
interest (if any) and reserve the amount of Warrant Shares issuable upon
exercise of the Warrants.
 
(g)           [Reserved].
 
(h)           Taxes.  From the date of this Agreement and until the End Date,
the Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore.
 
(i)           Insurance.  From the date of this Agreement and until the End
Date, the Company will keep its assets which are of an insurable character
insured by financially sound and reputable insurers against loss or damage by
fire, explosion and other risks customarily insured against by companies in the
Company’s line of business, in amounts sufficient to prevent the Company from
becoming a co-insurer and not in any event less than 100% of the insurable value
of the property insured less reasonable deductible amounts; and the Company will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated and to
the extent available on commercially reasonable terms.
 
(j)           Books and Records.  From the date of this Agreement and until the
End Date, the Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
 
(k)           Governmental Authorities.  From the date of this Agreement and
until the End Date, the Company shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to the
conduct of its business or to its properties or assets.
 
(l)           Intellectual Property.  From the date of this Agreement and until
the End Date, the Company shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses and other rights to use
intellectual property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business, unless it is sold for value.
 
(m)           Properties.  From the date of this Agreement and until the End
Date, the Company will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could reasonably be expected to have a Material Adverse
Effect.

16

--------------------------------------------------------------------------------

 
(n)           Confidentiality/Public Announcement.  From the date of this
Agreement and until the End Date, the Company agrees that except in connection
with a Form 8-K and the registration statement or statements regarding the
Subscribers’ securities or in correspondence with the SEC regarding same, it
will not disclose publicly or privately the identity of the Subscribers unless
expressly agreed to in writing by a Subscriber or only to the extent required by
law and then only upon not less than two (2) days prior notice to
Subscriber.  In any event and subject to the foregoing, the Company undertakes
to file a Form 8-K or make a public announcement describing the Offering not
later than the business day after the Closing Date.  Prior to filing or
announcement, such Form 8-K or public announcement will be provided to
Subscribers for their review and approval, which will not be unreasonably
withheld, delayed or conditioned.  In the Form 8-K or public announcement, the
Company will specifically disclose the amount of Common Stock outstanding
immediately after the Closing.  Upon delivery by the Company to the Subscribers
after the Closing Date of any notice or information, in writing, electronically
or otherwise, and while a Note, Shares, Warrants, or Warrant Shares are held by
such Subscribers, unless the Company has in good faith determined that the
matters relating to such notice do not constitute material, nonpublic
information relating to the Company or Subsidiaries, the Company shall within
one (1) business day after any such delivery publicly disclose such material,
nonpublic information on a Report on Form 8-K or otherwise.  In the event that
the Company believes that a notice or communication to a Subscriber contains
material, nonpublic information, relating to the Company or Subsidiaries, the
Company shall so indicate to such Subscriber contemporaneously with delivery of
such notice or information.  In the absence of any such indication, such
Subscriber shall be allowed to presume that all matters relating to such notice
and information do not constitute material, nonpublic information relating to
the Company or its Subsidiaries.
 
(o)           Non-Public Information.  The Company covenants and agrees that
except for the Reports, Other Written Information and schedules and exhibits to
this Agreement, which information the Company undertakes to publicly disclose
not later than the sooner of the required or actual filing date of the Form 8-K
described in Section 9(n) above, neither it nor any other person acting on its
behalf will at any time provide any Subscriber or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Subscriber shall have agreed in writing
to keep such information in confidence.  The Company understands and confirms
that each Subscriber shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
 
(p)           Negative Covenants.  So long as a Note is outstanding, without the
consent of the Subscribers, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:

(i)           create, incur, assume or suffer to exist any pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, mortgage, security deed or deed of trust, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Uniform Commercial
Code or comparable law of any jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for:  (A) the Excepted
Issuances (as defined in Section 12 hereof), and (B) (a) Liens imposed by law
for taxes that are not yet due or are being contested in good faith and for
which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than thirty (30) days or that are being contested in good faith and by
appropriate proceedings; (c) pledges and deposits made in the ordinary course of
business in compliance with workers’ compensation, unemployment insurance and
other social security laws or regulations; (d) deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business; (e) Liens created with respect to the
financing of the purchase of new property in the ordinary course of the
Company’s business up to the amount of the purchase price of such property; and
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property (each of (a) through (f), a “Permitted Lien”);

17

--------------------------------------------------------------------------------

 
(ii)           amend its certificate of incorporation, bylaws or its charter
documents so as to materially and adversely affect any rights of the Subscriber
(an increase in the amount of authorized shares and an increase in the number of
directors will not be deemed adverse to the rights of the Subscribers);
 
(iii)           repay, repurchase or offer to repay, repurchase or otherwise
acquire or make any dividend or distribution in respect of any of its Common
Stock, preferred stock, or other equity securities other than to the extent
permitted or required under the Transaction Documents;
 
(iv)           engage in any transactions with any officer, director, employee
or any Affiliate of the Company, 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 $100,000 other than (i) for payment of salary or consulting
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; and
 
(v)           prepay or redeem any financing related debt or past due
obligations outstanding as of the Closing Date except as described on Schedule
9(e).
 
(q)           Further Registration Statements.  Except for a registration
statement filed on behalf of the Subscribers pursuant to Section 11 of this
Agreement, and as set forth on Schedule 11.1 hereto, the Company will not,
without the consent of the Subscribers, file with the Commission or with state
regulatory authorities any registration statements or amend any already filed
registration statement to increase the amount of Common Stock registered
therein, or reduce the price of which such Common Stock is registered therein,
(including but not limited to Forms S-8), until the expiration of the “Exclusion
Period,” which shall be defined as the sooner of (i) the Registration Statement
having been current and available for use in connection with the resale of all
of the Registrable Securities (as defined in Section 11.1(i)) for a period of
one hundred eighty (180) days, or (ii) until all the Shares and Warrant Shares
have been resold or transferred by the Subscribers pursuant to the Registration
Statement or Rule 144, without regard to volume limitations.  The Exclusion
Period will be tolled or reinstated, as the case may be, during the pendency of
an Event of Default as defined in the Note.
 
(r)           Blackout.    The Company undertakes and covenants that, until the
end of the Exclusion Period, the Company will not enter into any acquisition,
merger, exchange or sale or other transaction or fail to take any action that
could have the effect of delaying the effectiveness of any pending Registration
Statement or causing an already effective Registration Statement to no longer be
effective or current for a period of forty-five (45) or more days in the
aggregate during any three hundred sixty-five (365) day period.

18

--------------------------------------------------------------------------------

 
(s)           Offering Restrictions.  Until the effectiveness of the
Registration Statement and/or during the pendency of an Event of Default, except
for the Excepted Issuances, the Company will not enter into an agreement to
issue nor issue any equity, convertible debt or other securities convertible
into Common Stock or equity of the Company nor modify any of the foregoing which
may be outstanding at anytime, without the prior written consent of the
Subscriber, which consent may be withheld for any reason.  Until the later of
(i) one year after the Effective Date of the Registration Statement, and (ii)
such time as less than 25% of the principal amount of the Notes are outstanding,
the Company will not enter into any Equity Line of Credit or similar agreement,
nor issue nor agree to issue any floating or Variable Priced Equity Linked
Instruments nor any of the foregoing or equity with price reset rights
(collectively, the “Variable Rate Restrictions”).  For purposes hereof, “Equity
Line of Credit” shall include any transaction involving a written agreement
between the Company and an investor or underwriter whereby the Company has the
right to “put” its securities to the investor or underwriter over an agreed
period of time and at an agreed price or price formula, and “Variable Priced
Equity Linked Instruments” shall include: (A) any debt or equity securities
which are convertible into, exercisable or exchangeable for, or carry the right
to receive additional shares of Common Stock either (1) at any conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security, or (2) with a fixed
conversion, exercise or exchange price that is subject to being reset at some
future date at any time after the initial issuance of such debt or equity
security due to a change in the market price of the Company’s Common Stock since
date of initial issuance, and (B) any amortizing convertible security which
amortizes prior to its maturity date, where the Company is required or has the
option to (or any investor in such transaction has the option to require the
Company to) make such amortization payments in shares of Common Stock which are
valued at a price that is based upon and/or varies with the trading prices of or
quotations for Common Stock at any time after the initial issuance of such debt
or equity security (whether or not such payments in stock are subject to certain
equity conditions).  The only officer, director, employee and consultant stock
option or stock incentive plans currently in effect or contemplated by the
Company are described on Schedule 5(d).
 
(t)           Limited Standstill.  The Company will deliver to the Subscribers
on or before the Closing Date and enforce the provisions of an irrevocable
lockup agreement (“Lockup Agreement”) in the form annexed hereto as Exhibit H,
with the persons identified on Schedule 9(t).
 
(u)           Seniority.   Except for Permitted Liens and as otherwise provided
for herein, until the Notes are fully satisfied or converted, the Company shall
not grant nor allow any security interest to be taken in the assets of the
Company or any Subsidiary; nor issue any debt, equity or other instrument which
would give the holder thereof directly or indirectly, a right in any assets of
the Company or any Subsidiary, superior to any right of the holder of a Note in
or to such assets.
 
(v)           Notices.  For so long as the Subscribers hold any Securities, the
Company will maintain a United States address and United States fax number for
notices purposes under the Transaction Documents.
 
(w)           Stop Transfer.  The Company will not issue any stop transfer order
or other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the Subscriber.

19

--------------------------------------------------------------------------------

 
10.           Covenants of the Company Regarding Indemnification.
 
(a)           The Company agrees to indemnify, hold harmless, reimburse and
defend the Subscribers, the Subscribers’ officers, directors, agents,
Affiliates, members, managers, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Subscriber or any such person which results, arises out of or is based upon (i)
any material misrepresentation by Company or breach of any representation or
warranty by Company in this Agreement or in any Exhibits or Schedules attached
hereto, or other agreement delivered pursuant hereto; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
the Company of any covenant or undertaking to be performed by the Company
hereunder, or any other agreement entered into by the Company and Subscriber
relating hereto.
 
(b)           The procedures set forth in Section 11.6 shall apply to the
indemnification set forth in Section 10(a).
 
11.1.           Registration Rights.  The Company hereby grants the following
registration rights to holders of the Securities.
 
(i)           On one occasion, for a period commencing one hundred twenty-one
(121) days after the Closing Date, but not later than two years after the
Closing Date, upon a written request therefor from any record holder or holders
of more than 50% of the Shares issued and issuable upon conversion of the
outstanding Notes and outstanding Warrant Shares, the Company shall prepare and
file with the Commission a registration statement under the 1933 Act registering
the Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
subject of such request for unrestricted public resale by the holder
thereof.  For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities
shall not include Securities which are (A) registered for resale in an effective
registration statement, (B) included for registration in a pending registration
statement, (C) which have been issued without further transfer restrictions
after a sale or transfer pursuant to Rule 144 under the 1933 Act or (D) which
may be resold under Rule 144(k) or Rule 144 without volume limitations.  Upon
the receipt of such request, the Company shall promptly give written notice to
all other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within ten
(10) days after the Company gives such written notice.  Such other requesting
record holders shall be deemed to have exercised their demand registration right
under this Section 11.1(i).
 
(ii)           If the Company at any time proposes to register any of its
securities under the 1933 Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscribers or Holder pursuant to an effective registration statement, each
such time it will give at least ten (10) days’ prior written notice to the
record holder of the Registrable Securities of its intention so to do.  Upon the
written request of the holder, received by the Company within ten (10) days
after the giving of any such notice by the Company, to register any of the
Registrable Securities not previously registered, the Company will cause such
Registrable Securities as to which registration shall have been so requested to
be included with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required to permit the
sale or other disposition of the Registrable Securities so registered by the
holder of such Registrable Securities (the “Seller” or “Sellers”).  In the event
that any registration pursuant to this Section 11.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction.  Notwithstanding the foregoing provisions, or Section
11.4 hereof, the Company may withdraw or delay or suffer a delay of any
registration statement referred to in this Section 11.1(ii) without thereby
incurring any liability to the Seller.

20

--------------------------------------------------------------------------------

 
(iii)           If, at the time any written request for registration is received
by the Company pursuant to Section 11.1(i), the Company has determined to
proceed with the actual preparation and filing of a registration statement under
the 1933 Act in connection with the proposed offer and sale for cash of any of
its securities for the Company's own account and the Company actually does file
such other registration statement, such written request shall be deemed to have
been given pursuant to Section 11.1(ii) rather than Section 11.1(i), and the
rights of the holders of Registrable Securities covered by such written request
shall be governed by Section 11.1(ii).
 
(iv)          The Company shall file with the Commission a Form SB-2
registration statement (the “Registration Statement”) (or such other form that
it is eligible to use) in order to register the Registrable Securities for
resale and distribution under the 1933 Act within forty-five (45) calendar days
after the Closing Date (the “Filing Date”), and cause the Registration Statement
to be declared effective not later than one hundred fifty (150) calendar days
after the Closing Date (the “Effective Date”).  The Company will register not
less than a number of shares of common stock in the aforedescribed registration
statement that is equal to 125% of the Shares issued and issuable upon
conversion of all of the Notes (collectively the “Registrable Securities”).  The
Registrable Securities shall be reserved and set aside exclusively for the
benefit of each Subscriber, pro rata, and not issued, employed or reserved for
anyone other than each such Subscriber. The Registration Statement will be
immediately be amended or  additional registration statements will be
immediately filed by the Company as necessary to register additional shares of
Common Stock to allow the public resale of all Common Stock included in and
issuable by virtue of the Registrable Securities.  Except with the written
consent of the Subscribers, no securities of the Company other than the
Registrable Securities will be included in the Registration Statement.  It shall
be deemed a Non-Registration Event if at any time after the date the
Registration Statement is declared effective by the Commission (“Actual
Effective Date”) the Company has registered for unrestricted resale on behalf of
the Subscribers fewer than 120% of the amount of Common Shares issuable upon
full conversion of all sums due under the Notes (“Shortfall”).  The foregoing
notwithstanding, the Company must take all actions necessary to cause at least
120% of the amount of shares of Common Stock issuable upon full conversion of
all sums due under the Notes to be registered within sixty (60) days after the
date the Shortfall occurs.  Provided a Subscriber has not noticed the Company
that an Event of Default has occurred and the Company has timely eliminated the
Shortfall within the sixty (60) day period, the Shortfall will be deemed to have
not occurred.   Except for Common Stock described on Schedule 11.1, no other
securities of the Company will be included in the Registration Statement other
than the Registrable Securities.
 
           (v)           The amount of Registrable Securities required to be
included in the Registration Statement as described in Section 11.1(iv)
(“Initial Registrable Securities”) shall be limited to not less than 100% of the
maximum amount (“Rule 415 Amount”) of Common Stock which may be included in a
single Registration Statement without exceeding registration limitations imposed
by the Commission pursuant to Rule 415 of the 1933 Act but in any event not less
than 135,000,000 shares of Common Stock.  In the event that less than all of the
Initial Registrable Securities are included in the Registration Statement as a
result of the limitation described in this Section 11.1(v), then the Company
will file additional Registration Statements each registering the Rule 415
Amount (each such Registration Statement a “Subsequent Registration Statement”),
seriatim, until all of the Initial Registrable Securities have been
registered.  The Filing Date and Effective Date of each such additional
Registration Statement shall be, respectively, fourteen (14) and forty-five (45)
days after the first day such Subsequent Registration Statement may be filed
without objection by the Commission based on Rule 415 of the 1933 Act.  The
Subscribers agree and acknowledge that notwithstanding anything contained herein
to the contrary, the Registration Statement will include for registration on
behalf of the Subscribers not fewer than 135,000,000 shares of Common Stock for
the Shares issuable upon conversion of the Notes and thereafter may include, at
the Company’s discretion, up to zero shares of Common Stock on behalf of the
holders thereof (“Other Holders”) described on Schedule 11.1.  In the event for
any reason the amount of Common Stock to be registered must be reduced, then
such reduction must come entirely from the Common Stock being registered on
behalf of the Other Holders and not the Subscribers.

21

--------------------------------------------------------------------------------

 
(vi)           Unless otherwise instructed in writing by a holder of Registrable
Securities and only if the initial Registration Statement does not include all
of the Registrable Securities, the Registrable Securities will be registered on
behalf of each such holder in the Registration Statements based in the following
order and priority:
 
(A)           Shares.
 
(B)           Conversion Shares issued and issuable upon conversion of the Notes
(based on the multiple set forth above).
 
11.2.           Registration Procedures. If and whenever the Company is required
by the provisions of Sections 11.1(i), 11.1(ii) or 11.1(iv) to effect the
registration of any Registrable Securities under the 1933 Act, the Company will,
as expeditiously as possible:
 
(a)           subject to the timelines provided in this Agreement, prepare and
file with the Commission a registration statement required by Section 11, with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), promptly provide to the
holders of the Registrable Securities copies of all filings and Commission
letters of comment and notify the Subscribers (by telecopier and by e-mail
addresses provided by the Subscribers) and Grushko & Mittman, P.C. (by
telecopier and by email to Counslers@aol.com) on or before the second  business
day thereafter that the Company receives notice that (i) the Commission has no
comments or no further comments on the Registration Statement, and (ii) the
registration statement has been declared effective (failure to timely provide
notice as required by this Section 11.2(a) shall be a material breach of the
Company’s obligation and an Event of Default as defined in the Notes and a
Non-Registration Event as defined in Section 11.4 of this Agreement);
 
(b)           prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until such registration statement has been effective for a period of two (2)
years, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Sellers’ intended method of disposition set
forth in such registration statement for such period;
 
(c)           furnish to the Sellers, at the Company’s expense, such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement or make them electronically available;
 
(d)           use its reasonable best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or “blue sky” laws of New York and such jurisdictions as the Sellers
shall request in writing, provided, however, that the Company shall not for any
such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;

22

--------------------------------------------------------------------------------

 
(e)           if applicable, list the Registrable Securities covered by such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;
 
(f)           notify the Subscribers within twenty-four hours of the Company’s
becoming aware that a prospectus relating thereto is required to be delivered
under the 1933 Act, of the happening of any event of which the Company has
knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing or which becomes subject to a Commission, state or other governmental
order suspending the effectiveness of the registration statement covering any of
the Registrable Securities;
 
(g)           provided same would not be in violation of the provision of
Regulation FD under the 1934 Act, make available for inspection by the Sellers
during reasonable business hours, and any attorney, accountant or other agent
retained by the Seller or underwriter, all publicly available, non-confidential
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company’s officers, directors and employees to supply all
publicly available, non-confidential information reasonably requested by the
seller, attorney, accountant or agent in connection with such registration
statement at such requesting Seller’s expense; and
 
(h)           provide to the Sellers copies of the Registration Statement and
amendments thereto three (3) business days prior to the filing thereof with the
Commission.  Any Subscriber’s failure to comment on any Registration Statement
or other document provided to a Subscriber or its counsel shall not be construed
to constitute approval thereof nor the accuracy thereof.
 
11.3.           Provision of Documents.  In connection with each registration
described in this Section 11, each Seller will furnish to the Company in writing
such information and representation letters with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
 
11.4.           Non-Registration Events.  The Company agrees that the Sellers
will suffer damages if the Registration Statement is not filed by the Filing
Date and not declared effective by the Commission by the Effective Date, and any
registration statement required under Section 11.1(i) or 11.1(ii) is not filed
within sixty (60) days after written request and declared effective by the
Commission within one hundred twenty (120) days after such request, and
maintained in the manner and within the time periods contemplated by Section 11
hereof, and it would not be feasible to ascertain the extent of such damages
with precision.  Accordingly, if (A) the Registration Statement is not filed on
or before the Filing Date, (B) the Registration Statement is not declared
effective on or before the required Effective Date, (C) due to the action or
inaction of the Company the Registration Statement is not declared effective
within three (3) business days after receipt by the Company or its attorneys of
a written or oral communication from the Commission that the Registration
Statement will not be reviewed or that the Commission has no further comments,
(D) if the registration statement described in Sections 11.1(i) or 11.1(ii) is
not filed within sixty (60) days after such written request, or is not declared
effective within one hundred twenty (120) days after such written request, or
(E) any registration statement described in Sections 11.1(i), 11.1(ii) or
11.1(iv) is filed and declared effective but shall thereafter cease to be
effective without being succeeded within twenty-five (25) business days by an
effective replacement or amended registration statement or for a period of time
which shall exceed forty-five (45) days in the aggregate per year (defined as
every rolling period of three hundred sixty-five (365) consecutive days
commencing on the Actual Effective Date (each such event referred to in clauses
A through E of this Section 11.4 is referred to herein as a “Non-Registration
Event”), then the Company shall deliver, pari passu, to the holder of
Registrable Securities, as Liquidated Damages, an amount equal to 2% for each
thirty (30) days (or such lesser pro-rata amount for any period of less than
thirty (30) days) of the principal amount of the outstanding Notes and purchase
price of Shares and Warrant Shares issued upon conversion of Notes and exercise
of Warrants held by Subscriber which are subject to such Non-Registration
Event. The Company may pay the Liquidated Damages in cash, or in registered
shares of Common Stock valued at 75% of the average of the closing bid prices of
the Common Stock for the five (5) trading days preceding such payment.  The
Liquidated Damages must be paid within ten (10) days after the end of each
thirty (30) day period or shorter part thereof for which Liquidated Damages are
payable. In the event a Registration Statement is filed by the Filing Date but
is withdrawn prior to being declared effective by the Commission, then such
Registration Statement will be deemed to have not been filed and Liquidated
Damages will be calculated accordingly.  All oral or written comments received
from the Commission relating to the Registration Statement must be
satisfactorily responded to within fifteen (15) business days after receipt of
comments from the Commission.  Failure to timely respond to Commission comments
is a Non-Registration Event for which Liquidated Damages shall accrue and be
payable by the Company to the holders of Registrable Securities at the same rate
and amounts set forth above calculated from the date the response was required
to have been made.

23

--------------------------------------------------------------------------------

 
11.5.           Expenses.  All expenses incurred by the Company in complying
with Section 11, including, without limitation, all registration and filing
fees, printing expenses (if required), fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of
transfer agents and registrars, are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities are called “Selling Expenses.”  The Company will pay all
Registration Expenses in connection with the registration statement under
Section 11.  Selling Expenses in connection with each registration statement
under Section 11 shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of shares sold by the Seller relative to the
number of shares sold under such registration statement or as all Sellers
thereunder may agree.
 
11.6.           Indemnification and Contribution.
 
(a)           In the event of a registration of any Registrable Securities under
the 1933 Act pursuant to Section 11, the Company will, to the extent permitted
by law, indemnify and hold harmless the Seller, each of the officers, directors,
agents, Affiliates, members, managers, control persons, and principal
shareholders of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller in
writing specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of the Seller hereunder shall be
limited to the net proceeds actually received by the Seller from the sale of
Registrable Securities pursuant to such registration statement.

24

--------------------------------------------------------------------------------

 
(b)           In the event of a registration of any of the Registrable
Securities under the 1933 Act pursuant to Section 11, each Seller severally but
not jointly will, to the extent permitted by law, indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the 1933 Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the 1933 Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 11, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus.
 
(c)           Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 11.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 11.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 11.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnifying party shall have reasonably concluded that there may be reasonable
defenses available to indemnified party which are different from or additional
to those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified parties, as a group, shall have the right to
select one separate counsel, reasonably satisfactory to the indemnified and
indemnifying party, and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.

25

--------------------------------------------------------------------------------

 
(d)           In order to provide for just and equitable contribution in the
event of joint liability under the 1933 Act in any case in which either (i) a
Seller, or any controlling person of a Seller, makes a claim for indemnification
pursuant to this Section 11.6 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 11.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities sold by it pursuant
to such registration statement; and (z) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation and provided, further, however, that the liability
of the Seller hereunder shall be limited to the net proceeds actually received
by the Seller from the sale of Registrable Securities pursuant to such
Registration Statement.
 
11.7.       Delivery of Unlegended Shares.
 
(a)           Within three (3) business days (such third business day being the
“Unlegended Shares Delivery Date”) after the business day on which the Company
has received (i) a notice that Shares or Warrant Shares or any other Common
Stock held by a Subscriber have been sold pursuant to the Registration Statement
or Rule 144 under the 1933 Act, (ii) a representation that the prospectus
delivery requirements, or the requirements of Rule 144, as applicable and if
required, have been satisfied, and (iii) the original share certificates
representing the shares of Common Stock that have been sold, and (iv) in the
case of sales under Rule 144, customary representation letters of the Subscriber
and/or a Subscriber’s broker regarding compliance with the requirements of Rule
144, the Company at its expense, (y) shall deliver, and shall cause legal
counsel selected by the Company to deliver to its transfer agent (with copies to
Subscriber) an appropriate instruction and opinion of such counsel, directing
the delivery of shares of Common Stock without any legends including the legend
set forth in Section 4(i) above (the “Unlegended Shares”); and (z) cause the
transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the submitted
certificate, if any, to the Subscriber at the address specified in the notice of
sale, via express courier, by electronic transfer or otherwise on or before the
Unlegended Shares Delivery Date.
 
(b)           In lieu of delivering physical certificates representing the
Unlegended Shares, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company shall cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account of Subscriber’s prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission system, if such transfer agent
participates in such DWAC system.  Such delivery must be made on or before the
Unlegended Shares Delivery Date.

26

--------------------------------------------------------------------------------

 
(c)           The Company understands that a delay in the delivery of the
Unlegended Shares pursuant to Section 11 hereof later than two (2) business days
after the Unlegended Shares Delivery Date could result in economic loss to a
Subscriber.  As compensation to a Subscriber for such loss, the Company agrees
to pay late payment fees (as liquidated damages and not as a penalty) to the
Subscriber for late delivery of Unlegended Shares in the amount of $100 per
business day after the Delivery Date for each $10,000 of purchase price of the
Unlegended Shares subject to the delivery default.  If during any three hundred
sixty (360) day period, the Company fails to deliver Unlegended Shares as
required by this Section 11.7 for an aggregate of thirty (30) days, then each
Subscriber or assignee holding Securities subject to such default may, at its
option, require the Company to redeem all or any portion of the Shares and
Warrant Shares subject to such default at a price per share equal to the greater
of (i) 120%, or (ii) a fraction in which the numerator is the highest closing
price of the Common Stock during the aforedescribed thirty (30) day period and
the denominator of which is the lowest conversion price during such thirty (30)
day period, multiplied by the Purchase Price of such Common Stock and exercise
price of such Warrant Shares (“Unlegended Redemption Amount”).  The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand.

(d)           In addition to any other rights available to a Subscriber, if the
Company fails to deliver to a Subscriber Unlegended Shares as required pursuant
to this Agreement, within seven (7) business days after the Unlegended Shares
Delivery Date and the Subscriber or a broker on the Subscriber’s behalf,
purchases (in an open market transaction or otherwise) shares of common stock to
deliver in satisfaction of a sale by such Subscriber of the shares of Common
Stock which the Subscriber was entitled to receive from the Company (a
“Buy-In”), then the Company shall pay in cash to the Subscriber (in addition to
any remedies available to or elected by the Subscriber) the amount by which (A)
the Subscriber’s total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (B) the aggregate purchase
price of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per annum
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty).  For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest.  The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In.

(e)           In the event a Subscriber shall request delivery of Unlegended
Shares as described in Section 11.7 or Warrant Shares upon exercise of Warrants
and the Company is required to deliver such Unlegended Shares pursuant to
Section 11.7 or the Warrant Shares pursuant to the Warrants, the Company may not
refuse to deliver Unlegended Shares or Warrant Shares based on any claim that
such Subscriber or any one associated or affiliated with such Subscriber has
been engaged in any violation of law, or for any other reason, unless, an
injunction or temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such Unlegended Shares or exercise of all or part
of said Warrant shall have been sought and obtained by the Company or at the
Company’s request or with the Company’s assistance, and the Company has posted a
surety bond for the benefit of such Subscriber in the amount of 120% of the
amount of the aggregate purchase price of the Common Stock and Warrant Shares
which are subject to the injunction or temporary restraining order, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such Subscriber to the
extent Subscriber obtains judgment in Subscriber’s favor.

27

--------------------------------------------------------------------------------

12.           (a)           Right of First Refusal.  Until the later of (i) one
year after the Effective Date of the Registration Statement, and (ii) such time
as less than 25% of the principal amount of the Notes are outstanding, the
Subscribers shall be given not less than ten (10) business days prior written
notice of any proposed sale by the Company of its Common Stock or other
securities or equity linked debt obligations, except in connection with (i) full
or partial consideration in connection with a strategic merger, acquisition,
consolidation or purchase of substantially all of the securities or assets of
corporation or other entity which holders of such securities or debt are not at
any time granted registration rights, (ii) the Company’s issuance of securities
in connection with strategic license agreements and other partnering
arrangements so long as such issuances are not for the purpose of raising
capital and which holders of such securities or debt are not at any time granted
registration rights, (iii) the Company’s issuance of Common Stock or the
issuances or grants of options to purchase Common Stock to employees, directors,
and consultants, pursuant to plans described on Schedule 5(d), (iv) as a result
of the exercise of Warrants or conversion of Notes which are granted or issued
pursuant to this Agreement on the terms described in the Transaction Documents
as of the Closing Date, and (v) the payment of any interest on the Notes and
Liquidated Damages pursuant to the Transaction Documents (collectively the
foregoing are “Excepted Issuances”).  The Subscribers who exercise their rights
pursuant to this Section 12(a) shall have the right during the ten (10) business
days following receipt of the notice to purchase in cash or by using the
outstanding balance including principal, interest, liquidated damages and any
other amount then owing to such Subscriber by the Company, in the aggregate up
to all of such offered Common Stock, debt or other securities in accordance with
the terms and conditions set forth in the notice of sale in the same proportion
to each other as their purchase of Notes in the Offering.  In the event such
terms and conditions are modified during the notice period, the Subscribers
shall be given prompt notice of such modification and shall have the right
during the ten (10) business days following the notice of modification to
exercise such right.  The Subscribers who exercise their rights pursuant to this
Section 12(a) shall have the right during the ten (10) business days following
receipt of the notice to participate in such offered Common Stock, debt or other
securities in accordance with the terms and conditions set forth in the notice
of sale by using the outstanding balance including principal, interest,
liquidated damages and any other amount then owing to such Subscriber by the
Company, to pay for such participation.
 
(b)           Favored Nations Provision.   Other than in connection with the
Excepted Issuances, if at any time the Notes or Warrants are outstanding, the
Company shall agree to or issue (the “Lower Price Issuance”) any Common Stock or
securities convertible into or exercisable for shares of Common Stock (or modify
any of the foregoing which may be outstanding) to any person or entity at a
price per share or conversion or exercise price per share which shall be less
than the Conversion Price in respect of the Shares, or if less than the Warrant
exercise price in respect of the Warrant Shares, without the consent of each
Subscriber, then the Company shall issue, for each such occasion, additional
shares of Common Stock to each Subscriber respecting those Notes, Warrants and
Shares that remain outstanding at the time of the Lower Price Issuance so that
the average per share purchase price of the shares of Common Stock issued to
each Subscriber (of only the Common Stock or Warrant Shares still owned by a
Subscriber) is equal to such other lower price per share and the Conversion
Price and Warrant exercise price shall automatically be reduced to such other
lower price.  The average Purchase Price of the Shares and average exercise
price in relation to the Warrant Shares shall be calculated separately for the
Shares and Warrant Shares.  The foregoing calculation and issuance shall be made
separately for Shares received upon conversion of the Notes and separately for
Warrant Shares.  The delivery to a Subscriber of the additional shares of Common
Stock shall be not later than the closing date of the transaction giving rise to
the requirement to issue additional shares of Common Stock.  Each Subscriber is
granted the registration rights described in Section 11 hereof in relation to
such additional shares of Common Stock.  For purposes of the issuance and
adjustment described in this paragraph, the issuance of any security of the
Company carrying the right to convert such security into shares of Common Stock
or of any warrant, right or option to purchase Common Stock shall result in the
issuance of the additional shares of Common Stock upon the sooner of the
agreement to or actual issuance of such convertible security, warrant, right or
option and again at any time upon any subsequent issuances of shares of Common
Stock upon exercise of such conversion or purchase rights if such issuance is at
a price lower than the Conversion Price or Warrant exercise price in effect upon
such issuance.  The rights of each Subscriber set forth in this Section 12 are
in addition to any other rights the Subscriber has pursuant to this Agreement,
the Note, any Transaction Document, and any other agreement referred to or
entered into in connection herewith or to which such Subscriber and Company are
parties.  Each Subscriber is also given the right to elect to substitute any
term or terms of any other offering in connection with which such Subscriber has
rights as described in Section 12(a), for any term or terms of the Offering in
connection with Securities owned by such Subscriber as of the date the notice
described in Section 12(a) is required to be given to such Subscriber.

28

--------------------------------------------------------------------------------

 
           (c)           Maximum Exercise of Rights.   In the event the exercise
of the rights described in Sections 12(a) and 12(b) would or could result in the
issuance of an amount of Common Stock of the Company that would exceed the
maximum amount that may be issued to a Subscriber calculated in the manner
described in Section 7.3 of this Agreement, then the issuance of such additional
shares of Common Stock of the Company to such Subscriber will be deferred in
whole or in part until such time as such Subscriber is able to beneficially own
such Common Stock without exceeding the applicable maximum amount set forth
calculated in the manner described in Section 7.3 of this Agreement.  The
determination of when such Common Stock may be issued shall be made by each
Subscriber as to only such Subscriber.
 
13.           Miscellaneous.
 
(a)           Notices.  All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The addresses for
such communications shall be: (i) if to the Company, to: Rim Semiconductor
Company, 305 NE 102nd Avenue, Suite 350, Portland, Oregon 97220, Attn: Brad
Ketch, CEO, telecopier: (503) 257-6700, with a copy, which shall not constitute
notice, by telecopier only to: Lawrence B. Mandala, Esq., Munck Butrus Carter,
P.C., 600 Banner Place, 12770 Coit Road, Dallas, Texas 75251, telecopier: (972)
628-3616, (ii) if to the Subscriber, to: the one or more addresses and
telecopier numbers indicated on the signature pages hereto, with an additional
copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
1601, New York, New York 10176, telecopier: (212) 697-3575, and (iii) if to the
Finder, to: the address and telecopier number set forth on Schedule 8 hereto.
 
(b)           Entire Agreement; Assignment.  This Agreement and other documents
delivered in connection herewith represent the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by both parties.  Neither the Company nor the Subscribers
have relied on any representations not contained or referred to in this
Agreement and the documents delivered herewith.  No right or obligation of the
Company shall be assigned without prior notice to and the written consent of the
Subscribers.
 
(c)           Counterparts/Execution.  This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.  This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.

29

--------------------------------------------------------------------------------

 
(d)           Law Governing this Agreement.  This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the state and county of New York.  The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens.  The parties executing
this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the in personam
jurisdiction of such courts and hereby irrevocably waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs.  In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law.  Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.  Each party hereby irrevocably waives personal service of process and
consents to process being served in any suit, action or proceeding in connection
with this Agreement or any other Transaction Document 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 other manner permitted by
law.
 
(e)           Specific Enforcement, Consent to Jurisdiction.  The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.  Subject to Section 13(d) hereof, the Company hereby irrevocably waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper.  Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
 
(f)           Independent Nature of Subscribers.  The Company acknowledges that
the obligations of each Subscriber under the Transaction Documents are several
and not joint with the obligations of any other Subscriber, and no Subscriber
shall be responsible in any way for the performance of the obligations of any
other Subscriber under the Transaction Documents.  The Company acknowledges that
each Subscriber has represented that the decision of each Subscriber to purchase
Securities has been made by such Subscriber independently of any other
Subscriber and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions.  The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in the Registration Statement and (ii) review by, and
consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  The Company
acknowledges that each Subscriber shall be entitled to independently protect and
enforce its rights, including without limitation, the rights arising out of the
Transaction Documents, and it shall not be necessary for any other Subscriber to
be joined as an additional party in any proceeding for such purpose.  The
Company acknowledges that it has elected to provide all Subscribers with the
same terms and Transaction Documents for the convenience of the Company and not
because Company was required or requested to do so by the Subscribers.  The
Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Subscribers are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.

30

--------------------------------------------------------------------------------

 
(g)           Damages.  In the event the Subscriber is entitled to receive any
liquidated damages pursuant to the Transactions, the Subscriber may elect to
receive the greater of actual damages or such liquidated damages.
 
(h)           Consent.  As used in the Agreement, “consent of the Subscribers”
or similar language means the consent of holders of not less than 75% of the
total of the Shares issued and issuable upon conversion of outstanding Notes
owned by Subscribers on the date consent is requested.
 
(i)           Equal Treatment.  No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of the
Transaction Documents unless the same consideration is also offered and paid to
all the Subscribers and their permitted successors and assigns.
 
(j)           Maximum Payments.  Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that the rate
of interest or dividends required to be paid or other charges hereunder exceed
the maximum permitted by such law, any payments in excess of such maximum shall
be credited against amounts owed by the Company to the Subscriber and thus
refunded to the Company.
 
(k)           Calendar Days.  All references to “days” in the Transaction
Documents shall mean calendar days unless otherwise stated.  The terms “business
days” and “trading days” shall mean days that the New York Stock Exchange is
open for trading for three or more hours.  Time periods shall be determined as
if the relevant action, calculation or time period were occurring in New York
City.  Any deadline that falls on a non-business day in any of the Transaction
Documents shall be automatically extended to the next business day and interest,
if any, shall be calculated and payable through such extended period.
 
(l)           Acts Prohibited.  Notwithstanding anything to the contrary in this
Agreement or the Transaction Documents, nothing in the Transaction Documents
will require the Company to take, and the Company will not be liable hereunder
for failing to take, any action prohibited by law, applicable securities
regulation or any governmental authority.
 

 
[THIS SPACE INTENTIONALLY LEFT BLANK]

31

--------------------------------------------------------------------------------

 
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT
 

Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

RIM SEMICONDUCTOR COMPANY
a Utah corporation

By: _______________________________________________
Name:
Title:

Dated: December 5, 2007

SUBSCRIBER
PURCHASE PRICE
PRINCIPAL
AMOUNT OF NOTE
CLASS A WARRANTS
Name of Subscriber:
 
_____________________________________________________
 
Address:
 
_____________________________________________________
 
_____________________________________________________
 
Fax No.:
_____________________________________________________
 
 
Taxpayer ID# (if applicable): 
_____________________________________________________
 
 
_____________________________________________________
(Signature)
By: __________________________________________________
 
     

32

--------------------------------------------------------------------------------

LIST OF EXHIBITS AND SCHEDULES
 
Exhibit A
Form of Note
   
Exhibit B
Form of Class A Warrant
   
Exhibit C
Escrow Agreement
   
Exhibit D
Form of Security Agreement
   
Exhibit E
Form of Subsidiary Guaranty
   
Exhibit F
Form of Collateral Agent Agreement
   
Exhibit G
Form of Legal Opinion
   
Exhibit H
Form of Lockup Agreement
   
Schedule 5(a)
Subsidiaries
   
Schedule 5(d)
Additional Issuances / Capitalization / Reset Rights
   
Schedule 5(f)
Outstanding Registration Rights
   
Schedule 5(o)
Undisclosed Liabilities
   
Schedule 5(x)
Transfer Agent
   
Schedule 8
Finder/Due Diligence Fee
   
Schedule 9(e)
Use of Proceeds
   
Schedule 9(p)
Permitted Payments
   
Schedule 9(t)
Lockup Agreement Providers
   
Schedule 11.1
Other Registrable Shares

 

33

--------------------------------------------------------------------------------

EXHIBIT I

LOCKUP AGREEMENT

This AGREEMENT (the “Agreement”) is made as of the 5th day of December, 2007, by
______ (“Holder”), maintaining an address at c/o Rim Semiconductor Company, 305
NE 102nd Avenue, Suite 350, Portland, Oregon 97220, telecopier: (503) 257-6700,
in connection with his ownership of shares of Rim Semiconductor Company, a Utah
corporation (the “Company”).

NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt
of which consideration are hereby acknowledged, Holder agrees as follows:

1.           Background.

a.           Holder is the beneficial owner of the amount of shares of the
Common Stock, $.001 par value, of the Company (“Common Stock”) designated on the
signature page hereto.

b.           Holder acknowledges that the Company has entered into or will enter
into at or about the date hereof agreements with subscribers to the Company’s
Notes, convertible into Common Stock and Warrants (the “Subscribers”).  Holder
understands that, as a condition to proceeding with the Offering, the
Subscribers have required, and the Company has agreed to obtain on behalf of the
Subscribers an agreement from the Holder to refrain from selling any securities
of the Company from the date of the Subscription Agreement until one year after
the Actual Effective Date (as defined in the Subscription Agreement) (the
“Restriction Period”).

2.           Sale Restriction.

a.           Holder hereby agrees that during the Restriction Period, the Holder
will not sell, transfer or otherwise dispose of any shares of Common Stock or
any options, warrants or other rights to purchase shares of Common Stock or any
other security of the Company which Holder owns or has a right to acquire as of
the date hereof, other than in connection with an offer made to all shareholders
of the Company in connection with merger, consolidation or similar transaction
involving the Company.  Holder further agrees that the Company is authorized to
and the Company agrees to place “stop orders” on its books to prevent any
transfer of shares of Common Stock or other securities of the Company held by
Holder in violation of this Agreement.  The Company agrees not to allow to occur
any transaction inconsistent with this Agreement.

b.           Any subsequent issuance to and/or acquisition by Holder of Common
Stock or options or instruments convertible into Common Stock will be subject to
the provisions of this Agreement.

c.           Notwithstanding the foregoing restrictions on transfer, the Holder
may, at any time and from time to time during the Restriction Period, exercise
options, warrants or other rights to purchase securities of the Company, and may
transfer the Common Stock (i) as bona fide gifts or transfers by will or
intestacy, (ii) to any trust for the direct or indirect benefit of the
undersigned or the immediate family of the Holder, provided that any such
transfer shall not involve a disposition for value, (iii) to a partnership which
is the general partner of a partnership of which the Holder is a general
partner, provided, that, in the case of any gift or transfer described in
clauses (i), (ii) or (iii), each donee or transferee agrees in writing to be
bound by the terms and conditions contained herein in the same manner as such
terms and conditions apply to the undersigned. For purposes hereof, “immediate
family” means any relationship by blood, marriage or adoption, not more remote
than first cousin.

34

--------------------------------------------------------------------------------

3.           Miscellaneous.

a.           At any time, and from time to time, after the signing of this
Agreement Holder will execute such additional instruments and take such action
as may be reasonably requested by the Subscribers to carry out the intent and
purposes of this Agreement.

b.           This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflicts
of laws.  Any action brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state of New
York.  The parties to this Agreement hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens.  The parties executing this Agreement and other agreements referred
to herein or delivered in connection herewith agree to submit to the in personam
jurisdiction of such courts and hereby irrevocably waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs.  In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law.  Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.  Notices hereunder shall be given in the same manner as set forth in
the Subscription Agreement.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any suit, action or
proceeding in connection with this Agreement or any other Transaction Document
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 other
manner permitted by law.  Holder irrevocably appoints Rim Semiconductor Company
its true and lawful agent for service of process upon whom all processes of law
and notices may be served and given in the manner described above; and such
service and notice shall be deemed valid personal service and notice upon Holder
with the same force and validity as if served upon Holder.

c.           The restrictions on transfer described in this Agreement are in
addition to and cumulative with any other restrictions on transfer otherwise
agreed to by the Holder or to which the Holder is subject to by applicable law.

d.           This Agreement shall be binding upon Holder, its legal
representatives, successors and assigns.

e.           This Agreement may be signed and delivered by facsimile and such
facsimile signed and delivered shall be enforceable.

f.           The Company agrees not to take any action or allow any act to be
taken which would be inconsistent with this Agreement.

g.           The Holder acknowledges that this Lockup Agreement is being entered
into for the benefit of the Subscribers identified in the Subscription Agreement
dated December 5, 2007 among the Company and the Subscribers, may be enforced by
the Subscribers and may not be amended without the consent of the Subscribers
(as the term “consent of the Subscribers” is defined in the Subscription
Agreement), which may be withheld for any reason.

35

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, and intending to be legally bound hereby, Holder has
executed this Agreement as of the day and year first above written.

   
HOLDER:

___________________________________________
  (Signature of Holder)

___________________________________________
  (Print Name of Holder)

___________________________________________
Number of Shares of Common Stock
Beneficially Owned

COMPANY:

RIM SEMICONDUCTOR COMPANY

By: ________________________________________
Name: ______________________________________
Title: _______________________________________

36

--------------------------------------------------------------------------------

 

SCHEDULES TO
 
SUBSCRIPTION AGREEMENT
 
by and among
 
RIM SEMICONDUCTOR COMPANY
 
and
 

THE SUBSCRIBERS IDENTIFIED THEREIN
 
 

37

--------------------------------------------------------------------------------

Schedule 5(a)

Subsidiaries

The following companies are wholly-owned subsidiaries of Rim Semiconductor
Company:

Impact Multimedia, Inc., a Nevada corporation

NV Entertainment, Inc., a California corporation

Infinity Vision Entertainment, Inc., a California corporation

Siliwood Entertainment, Inc., a California corporation

Intelecon Acquisition Corporation, a Delaware corporation

3D2Net.com, Inc., a Nevada corporation

Astounding.com, Inc. a Delaware corporation

NV Entertainment, Inc. owns a 50% interest in Top Secret Productions, LLC, a
California limited liability company.

NV Entertainment, Inc. is the only active subsidiary listed above. None of the
other subsidiaries listed above have any assets or engage in active business
operations. No representations are made by or with respect to any above listed
subsidiary other than NV Entertainment, Inc. With respect to representations set
forth in Section 5(z) in the Subscription Agreement (and specifically its
reference to the representations in Section 5(a) as they pertain to the
Subsidiary), Rim Semiconductor Company makes no representations as to the valid
existence or good standing of NV Entertainment, Inc. under the laws of the
jurisdiction of its incorporation.

38

--------------------------------------------------------------------------------

 
Schedule 5(d)
 
Purchase Rights, Options, Warrants and Convertible Debt

As of December 5, 2007, the Company had outstanding warrants (“Warrants”) for
the purchase of up to 127,712,937 shares of the Company’s Common Stock, par
value $.001 per share (“Common Stock”). The Warrants are exercisable at prices
ranging from $0.05 to $0.3094 per share. Additional information regarding the
Warrant agreements is available in the Company’s Reports (as defined in the
Subscription Agreement).

As of December 5, 2007, the Company had outstanding options (“Options”) for the
purchase of up to 39,043,750 shares of the Company’s Common Stock. The Options
are exercisable at prices ranging from $0.027 to $3.920 per share. Additional
information regarding the Option agreements is available in the Company’s
Reports.

The Company currently has $75,000 of three-year 7% Convertible Debentures (the
“2003 Debentures”) outstanding. Under the agreements with the purchasers of the
2003 Debentures the Company is obligated to pay to the 2003 Debenture holders
liquidated damages associated with the late filing of the Registration Statement
and a missed Registration Statement required effective date. At their option,
the 2003 Debenture holders are entitled to be paid such amount in cash or shares
of Common Stock at a per share rate equal to the effective conversion price of
the 2003 Debentures. The 2003 Debentures are convertible into shares of Common
Stock at a conversion rate equal to $0.15 per share. This conversion price is
subject to adjustment if there are certain capital adjustments or similar
transactions, such as a stock split or merger. Additional information regarding
the 2003 Debentures is available in the Company’s Reports.
 
The Company currently has $4,280 of three-year 7% Senior Secured Convertible
Debentures (the “2005 Debentures”) outstanding. Interest on the 2005 Debentures
is payable at the option of the Company, either in cash or in shares of Common
Stock. The 2005 Debentures are convertible into shares of Common Stock at a
conversion price equal to 70% of the 5 day volume weighted average price of the
Company’s Common Stock immediately prior to conversion. Additional information
regarding the 2005 Debentures is available in the Company’s Reports.

The Company currently has $652,000 of two-year 7% Senior Secured Convertible
Debentures (the "2006 Debentures") outstanding. Interest is payable, at the
option of the Company, either in cash, or in shares of Common Stock at the then
applicable conversion price. The 2006 Debentures are convertible into shares of
Common Stock at the conversion price for any such conversion equal to 70% of the
volume weighted average price ("VWAP") of the Common Stock for the twenty days
ending on the trading day immediately preceding the conversion date. Additional
information regarding the 2006 Debentures is available in the Company’s Reports.

Pursuant to the terms of a Bridge Loan Agreement dated as of July 26, 2007, if
prior to the payment in full of certain Senior Secured Promissory Notes issued
pursuant thereto, the Company offers any new transaction for the issuance of
shares of the Company’s Common Stock or securities convertible into or
exercisable for shares of Common Stock (each such transaction, a “New Equity
Transaction,”) to any third party (each, a “New Party”), where the aggregate
purchase price of all New Parties for such securities is $2,000,000 or more, the
Company is obligated to provide three (3) trading days’ notice thereof and give
the opportunity to subscribe to the New Equity Transaction on the same terms as
any other New Party, except that the holders of the Senior Secured Promissory
Notes (the  “Lenders”) may elect to make all or a portion of the Lender’s
payment therefor by an offset against all or a portion of the amount due to the
Lender from the Company under the Transaction Agreements. Additional information
regarding this bridge loan and the related agreements is available in the
Company’s Reports.
 
Common Stock Outstanding On a Fully Diluted Basis

The number of shares of the Company’s Common Stock, par value $.001 per share,
outstanding on a fully diluted basis as of December 5, 2007, was
663,220,710.  The foregoing includes 127,712,937 shares issuable upon exercise
of outstanding warrants, 39,043,750 shares issuable upon exercise of outstanding
options, 27,577,833 shares issuable upon conversion of convertible debt
principal and interest, and 468,886,190 currently issued and outstanding shares.

39

--------------------------------------------------------------------------------

Authorized and Outstanding Capital Stock of the Company

As of December 5, 2007:
Common stock - $0.001 par value; Authorized - 900,000,000 shares; Outstanding –
468,886,190 shares
Preferred stock - $0.01 par value; Authorized - 15,000,000 shares; Issued - 0
shares; Outstanding - 0 shares

Authorized and Outstanding Capital Stock of NV Entertainment, Inc.

As of December 5, 2007:
Common stock - no par value; Authorized – 1,000 shares; Outstanding – 1,000
shares

Outstanding Equity and Rights to Receive Equity of Subsidiaries Not Held 100% By
the Company

NV Entertainment, Inc. only owns a 50% interest in Top Secret Productions, LLC,
a California limited liability company.

Stock Option or Stock Incentive Plans
 
The Company currently has four compensation plans (excluding individual stock
option grants outside of such plans) under which equity securities are
authorized for issuance to employees, directors and consultants in exchange for
services:
 
 
·
The 2000 Omnibus Securities Plan (the “2000 Plan”);

 
 
·
The 2001 Stock Incentive Plan (the “2001 Plan”);

 
 
·
The 2003 Consultant Stock Plan (the “Consultant Plan”); and

 
 
·
The 2006 Stock Incentive Plan (the “2006 Plan”).

The 2000 Plan was adopted on April 20, 2000 by the Company’s Board of Directors,
and subsequently approved by the shareholders of the Company on May 31, 2000.
The 2000 Plan authorizes the granting of incentive stock options, non-qualified
stock options or stock awards. A total of 2,500,000 shares of common stock are
reserved for issuance under the 2000 Plan.

The 2001 Plan was adopted August 30, 2001, and subsequently approved by the
shareholders of the Company on July 2, 2002. The 2001 Plan authorizes the
issuance of incentive stock options, non-qualified stock options, stock awards,
dividend equivalent rights, and stock appreciation rights to directors,
officers, employees and certain consultants to the Company. A total of 2,500,000
shares of common stock were initially reserved for issuance under the 2001 Plan.

The Consultant Plan was adopted in January 2003 and subsequently approved by the
shareholders of the Company on May 2, 2007. The Consultant Plan authorizes the
issuance of up to 6,000,000 non-qualified stock options or stock awards to
consultants to the Company.  Directors, officers and employees are not eligible
to participate in the Consultant Plan. 
 

The 2006 Plan was adopted in November 2006 and subsequently approved by the
shareholders of the Company on May 2, 2007. The 2006 Plan authorizes the
issuance of up to 30,000,000 incentive stock options, non-qualified stock
options or stock awards to directors, officers, employees and certain
consultants to the Company.

40

--------------------------------------------------------------------------------

Schedule 5(f)
 

Potential Violations, Conflicts, Breaches, or Defaults

Except to the extent that any of the Company’s outstanding convertible
securities, or convertible securities to be issued under the Transaction
Documents (as defined in the Subscription Agreement) may require reservation or
issuance of shares in excess of the 900,000,000 shares of common stock currently
authorized, no violation, conflict, breach, default (or any event which with the
giving of notice or the lapse of time or both would reasonably likely constitute
a default) would be caused by the proposed transaction documentation under (A)
the articles or certificate of incorporation, charter or bylaws of the Company,
(B) any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company or any of its Affiliates (as defined in the Subscription
Agreement), (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any “lock up” or similar provision of any
underwriting or similar agreement to which the Company, or any of its Affiliates
is a party except the violation, conflict, breach, or default of which would not
have a Material Adverse Effect (as defined in the Subscription Agreement).

Potential Anti-dilution, Reset, Repricing or Acceleration Rights

Common Stock Purchase Warrants issued in connection with the Company’s Bridge
Loan agreement dated March 26, 2007 are subject to exercise price adjustment in
the event that the (1) purchase price, (2) conversion price, (3) put or call
price, or (4) exercise price applicable to warrants, option or similar
instruments for of shares of Common Stock in a new transaction is lower than the
effective Exercise Price of such warrants, which was $0.10 per share upon
issuance of such warrants.

Piggy-Back Registration Rights

No person or entity holding securities of the Company or having the right to
receive securities of the Company has any piggy-back registration rights that
would be triggered by the transaction.

41

--------------------------------------------------------------------------------

 
Schedule 5(l)
 

 
Defaults

The Company is currently in default on its Convertible Promissory Note dated May
24, 2007 made in favor of The Charles R. Cono Trust (the “Cono Note”). The
Company plans to pay all outstanding obligations due on the Cono Note from the
proceeds of the Notes, as described on Schedule 9(e).

42

--------------------------------------------------------------------------------

 
Schedule 5(o)
 

 
Certain Material Liabilities and Obligations of the Company
 

 
None

43

--------------------------------------------------------------------------------

Schedule 8

FINDER:  BLUMFIELD INVESTMENTS

 
Cash Fee.   The Company agrees that it will pay the Finder, on the Closing Date
a fee of ten percent (10%) of the Purchase Price (“Finder’s Cash Fee”).  The
Company represents that there are no other parties entitled to receive fees,
commissions, or similar payments in connection with the Offering except the
Finder.

Warrant Exercise Compensation.   The Finder will also be paid by the Company ten
percent (10%) of the cash proceeds received by the Company from exercise of the
Warrants (“Warrant Exercise Compensation”).  The Warrant Exercise Compensation
must be paid by the Company to the Finder within five (5) days after each
receipt by the Company of Warrant Exercise cash proceeds.

Finder’s Warrants.  On the Closing Date, the Company will issue to the Finder,
ten (10) Warrants for each one hundred (100) Shares and Warrants issuable on the
Closing Date to the Subscribers (“Finder’s Warrants”) similar to and carrying
the same rights as the Class A Warrants issuable to the Subscribers except that
Warrant Exercise Compensation will not be payable in connection with such
Finder’s Warrants.

All the representations, covenants, warranties, undertakings, remedies,
liquidated damages, indemnification, and other rights including but not limited
to reservation requirements and registration rights made or granted to or for
the benefit of the Subscribers are hereby also made and granted to and for the
benefit of the Finder in respect of the Finder’s Warrants and the Warrant Shares
issuable upon exercise of the Finder’s Warrants.

44

--------------------------------------------------------------------------------

 
Schedule 9(e)
 
 
Use of Proceeds

The proceeds of the Offering will be employed by the Company as follows:

1.           To satisfy the following payment obligations under the Transaction
Documents:

a.           Payment of ten percent (10%) of the Purchase Price to the Finder(s)
(as defined in the Subscription Agreement) on the Closing Date;
 
b.
Payment of $25,000 to Grushko & Mittman, P.C., as reimbursement for services
rendered to the Subscribers on the Closing Date;

 
2.           Payment of all outstanding obligations in the amount of $421,480
under that certain Convertible Promissory Note dated May 24, 2007 made by the
Company in favor of The Charles R. Cono Trust;
 
3.           Payment of all outstanding obligations in the amount of
$1,100,000 under those certain Senior Secured Promissory Notes issued pursuant
to a Bridge Loan Agreement dated as of July 26, 2007 by and between Rim
Semiconductor Company and the Lenders parties thereto;
 
4.           Payment of accrued and unpaid Officer and Director Salaries in the
aggregate amount of $81,625.02.

5.           For working capital and general corporate purposes, including
liabilities reflected in the Company’s most recent balance sheet included in its
Reports or incurred in the ordinary course of business (other than accrued and
unpaid Officer and Director salaries not specifically listed in this Schedule
9(e)) .

45

--------------------------------------------------------------------------------

 
Schedule 9(t)
 

Lockup Agreements

The Company will deliver to the Subscribers on or before the Closing Date an
irrevocable lockup agreement in the form annexed to the Subscription Agreement
as Exhibit H, with Brad Ketch and Ray Willenberg, Jr.
 

46

--------------------------------------------------------------------------------

 
Schedule 11.1
 

Registration of Additional Common Stock

None

 
47

--------------------------------------------------------------------------------