EXHIBIT 10.41
 
 
SUBSCRIPTION AGREEMENT
 
 
THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of February 13, 2006,
by and among Dalrada Financial Corp. (formerly Imaging Technologies
Corporation), a Delaware 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 up to
Five Million Dollars ($5,000,000) and an additional amount that may be issued on
the Closing Date as set forth on the signature pages hereto in exchange for
outstanding obligations of the Company, subject to the approval of the
Subscribers (the "Purchase Price") 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, $0.005 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. 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. The aggregate amount of the Notes to be purchased
by the Subscribers on the Closing Date shall, in the aggregate, be equal to the
Closing Purchase Price. The “Closing Date” shall be the date that subscriber
funds representing the net amount due the Company from the Closing Purchase
Price of the Offering [as defined in Section 8(b)] is transmitted by wire
transfer or otherwise to or for the benefit of the Company. The consummation of
the transactions contemplated herein for all Closings shall take place at the
offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New
York 10176, upon the satisfaction of all conditions to Closing set forth in this
Agreement.
 
2. Warrants. On the Closing Date, the Company will issue and deliver Class A
Warrants to the Subscribers. Class A Warrants representing the right of all
Subscribers to purchase, in the aggregate, and in proportion to the Notes
purchased hereunder, Warrant Shares, equal to 65% of the Fully-Diluted
Outstanding Common Stock of the Company as of the Closing Date. “Fully-Diluted
Outstanding Common Stock” means the sum of (i) the total number of then issued
and outstanding shares of Common stock and all other classes of capital stock of
the Company, plus (ii) the total number of shares of all Common Stock and all
other classes of capital stock of the Company into which all then issued and
outstanding and fully-vested Common Stock Equivalents and other securities are
convertible, exchangeable or otherwise into other classes of capital stock of
the Company may be converted, exchangeable or otherwise. The per Warrant Share
exercise price to acquire a Warrant Share upon exercise of the Class A Warrant
shall be $0.005 until the Approval [as defined in Section 9(s)] is obtained, and
$0.105 thereafter. The Class A Warrants shall be exercisable until seven (7)
years after the Actual Effective Date [as defined in Section 11.1(iv)].
 
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3. Security Interest. The Subscribers will be granted a security interest in all
the assets of the Company, including ownership of Subsidiaries, as defined in
Section 5(a) of this Agreement, and in the assets of the Subsidiaries to be
memorialized in a “Security Agreement”, a form of which is annexed hereto as
Exhibit D. Each Subsidiary will execute and deliver to the Subscribers a form of
“Guaranty” annexed hereto as Exhibit E. The Company will execute such other
agreements, documents and financing statements reasonably requested by
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
Subscriber 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 interest to be granted to the
Subscribers. The appointment will be pursuant to a “Collateral Agent Agreement”,
a form of which is annexed hereto as Exhibit F.

4. Subscriber's 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 the 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. Each Subscriber has the requisite power and
authority to enter into and perform this Agreement and to purchase the Notes and
Warrants being sold to it hereunder. The execution, delivery and performance of
this Agreement 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 has been duly authorized, executed and
delivered by such Subscriber and constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of the Subscriber enforceable
against the Subscriber in accordance with the terms thereof.
 
(c) No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by such Subscriber of the transactions contemplated hereby 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 or to
purchase the Notes or acquire the Warrants 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.
 
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(d) Information on Company. The Subscriber has been furnished with or has had
access at the EDGAR Website of the Commission to the Company's Form 10-KSB for
the year ended June 30, 2006 and all periodic reports filed with the Commission
thereafter (hereinafter referred to as the "Reports"). In addition, the
Subscriber has received in writing from the Company such other information
concerning its operations, financial condition and other matters as the
Subscriber has requested in writing (such other information is collectively, the
"Other Written Information"), and considered all factors the Subscriber deems
material in deciding on the advisability of investing in the Securities.
(e) Information on Subscriber. The 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 the 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. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The 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 the Subscriber is accurate.
(f) Purchase of Notes and Warrants. On the Closing Date, the 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. The 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 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.
 
 (h) Shares Legend. The Shares and the Warrant Shares shall bear the following
or similar legend:
 
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO DALRADA FINANCIAL CORP. THAT SUCH
REGISTRATION IS NOT REQUIRED."
 
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(i) Warrants Legend. The Warrants shall bear the following
 
or similar legend:
 
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE
SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO DALRADA
FINANCIAL CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."

(j) Note Legend. The Note shall bear the following legend:
 
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO DALRADA FINANCIAL CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."
 
(k) Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber by the Company. At no time was the 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 the 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 Subscriber has full corporate 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 the Subscriber relating hereto.

(m) Restricted Securities. 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.
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 and such
Affiliate agrees to be bound by the terms and conditions of this Agreement. 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
when employed in connection with the Company includes each Subsidiary [as
defined in Section 5(a)] 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.
 
                                                                                
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(n) No Governmental Review. Each 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.

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

(p) Survival. The foregoing representations and warranties shall survive the
Closing Date until three years after the Closing Date.
 
5. Company Representations and Warranties. The Company represents and warrants
to and agrees with each Subscriber that except as set forth in the Reports and
as otherwise qualified in the Transaction Documents:
 
(a) Due Incorporation. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties and to
carry on its business is disclosed in the Reports. 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 purpose of
this Agreement, a “Material Adverse Effect” shall mean a material adverse effect
on the financial condition, results of operations, properties or business of the
Company 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 50% 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. All
the Company’s Subsidiaries as of the Closing Date are set forth on Schedule 5(a)
hereto.
 
(b) Outstanding Stock. All issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable.
 
(c) Authority; Enforceability. This Agreement, the Note, the Warrants, the
Escrow Agreement, Security Agreement, Guaranty, and Collateral Agent 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 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. The Company has full corporate power and authority
necessary to enter into and deliver the Transaction Documents and to perform its
obligations thereunder.
 
(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 other equity
interest in any of the Subsidiaries of 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 trading day preceding the Closing Date is set forth
on Schedule 5(d).
 
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(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, any Principal Market (as defined in Section 9(b) of
this Agreement), nor 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.
 
(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) 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 in any material respect) of a material
nature 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; or
 
(iii) 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) result in the activation of any piggy-back registration rights of any
person or entity holding securities or debt of the Company or having the right
to receive or purchase 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;

(ii) have been, or will be, duly and validly authorized and on the date of
issuance of the Shares and upon exercise of the Warrants, the Shares and Warrant
Shares will be duly and validly issued, fully paid and nonassessable or 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;
 
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(iv) will not subject the holders thereof to personal liability by reason of
being such holders provided Subscriber’s representations herein are true and
accurate and Subscribers take no actions or fail to take any actions required
for their purchase of the Securities to be in compliance with all applicable
laws and regulations; and
 
(v) will have been issued in reliance upon an exemption from the registration
requirements of and 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 on Schedule 5(h), 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) Reporting Company. The Company is a publicly-held company subject to
reporting obligations pursuant to Section 13 of the Securities Exchange Act of
1934 (the “1934 Act”) and has a class of common shares registered pursuant to
Section 12(g) of the 1934 Act. Pursuant to the provisions of the 1934 Act, the
Company has timely filed all reports and other materials required to be filed
thereunder with the Commission during the preceding twelve months.
 
(j) No Market Manipulation. The Company and its Affiliates have not taken, and
will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Securities
or affect the price at which the Securities may be issued or resold, provided,
however, that this provision shall not prevent the Company from engaging in
investor relations/public relations activities consistent with past practices.
 
(k) Information Concerning Company. The Reports contain all material information
relating to the Company and its operations and financial condition as of their
respective dates and all the information required to be disclosed therein. Since
the last day of the fiscal year of the most recent audited financial statements
included in the Reports (“Latest Financial Date”), 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 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 not misleading in light of the
circumstances when made.
 
(l) 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.
 
(m) Defaults. The Company is not in violation of its articles of incorporation
or bylaws. 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) to the
Company’s knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a Material Adverse Effect.
 
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(n) Not an 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 OTC Bulletin Board
(“Bulletin Board”) which would impair the exemptions relied upon in this
Offering or the Company’s ability to timely comply with its obligations
hereunder including the filing and obtaining the effectiveness of any
registration statement. Nor will the Company or any of its Affiliates 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 including the filing and obtaining the effectiveness of any
registration statement. 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, which would impair the exemptions relied upon in
this Offering or the Company’s ability to timely comply with its obligations
hereunder including the filing and obtaining the effectiveness of any
registration statement.
 
(o) 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.
 
(p) Listing. The Company's common stock is quoted on the Bulletin Board. 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.
 
(q) Liabilities. The Company has no liabilities or obligations which are
material, individually or in the aggregate, except as disclosed on Schedule
5(q). Schedule 5(q) contains a complete and accurate list of all liabilities of
the Company by category including taxes and assessments, vendor charges,
settlement payouts, and regulatory required payments.
 
(r) No Undisclosed Events or Circumstances. Since the Latest Financial Date, 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.
 
(s)  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 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. All of the outstanding shares of Common Stock of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable.
 
(t)  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.
 
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(u)  No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company, including but not limited to disputes or conflicts over
payment owed to such accountants and lawyers.

(v) DTC Status. The Company’s transfer agent is a participant in and the Common
Stock is eligible for transfer pursuant to the Depository Trust Company
Automated Securities Transfer Program. The name, address, telephone number, fax
number, contact person and email address of the transfer agent of the Common
Stock is set forth on Schedule 5(v) hereto.

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

(x) Subsidiary Representations. The Company makes each of the representations
contained in Sections 5(a), (b), (d), (e), (f), (h), (k), (m), (q), (r), (s),
(u) and (w) of this Agreement, as same relate to each Subsidiary of the Company.

(y) Company Predecessor. 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, its
predecessors, and the Subsidiaries.

(z) Employment Agreement. A true and correct copy of the employment agreement
effective as of the Closing Date between the Company and Brian Bonar has been
delivered to Subscribers. Such employment agreement will not be amended without
the consent of the Subscribers.

(AA) Officers and Directors. Schedule AA hereto sets forth the officers and
directors of the Company and each Subsidiary as of the Closing Date and the
remaining term of their positions as officers and directors.

(BB) 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.
 
(CC) Survival. The foregoing representations and warranties shall survive until
three years after the Closing Date.
 
6. Regulation D Offering. 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 Subscriber 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 in the future as are reasonably
necessary 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. Subscriber agrees that any legal opinions required
hereunder or under any other Transaction Documents may be supplied by the
Company’s in house General Counsel.
 
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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 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, unless waived by the Subscriber, the Shares will be
free-trading, and freely transferable, and will not contain a legend restricting
the resale or transferability of the Shares provided the Shares are being sold
pursuant to an effective registration statement covering the Shares or are
otherwise exempt from registration.

(b) Subscriber will give notice of its decision to exercise its right to convert
the Note, interest, any sum due to the Subscriber under the Transaction
Documents including Liquidated Damages, or part thereof by telecopying an
executed and 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 14(a) of this Agreement. The 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 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 the 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 and the Subscriber has complied with all applicable
securities laws in connection with the sale of the Common Stock, including,
without limitation, the prospectus delivery requirements. A Note representing
the balance of the Note not so converted will be provided by the Company to the
Subscriber if requested by Subscriber, provided the 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, the
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. “Business day” and “trading day” as employed in the
Transaction Documents is a day that the New York Stock Exchange is open for
trading for three or more hours.
 
         (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 after the Delivery Date or
the Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay (as liquidated damages and not as a penalty) to
the 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
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 by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Subscriber may 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 the 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.
 
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(d) 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.

7.2. Mandatory Redemption at Subscriber’s Election. In the event (i) the Company
is prohibited from issuing Shares, (ii) the Company fails to timely deliver
Shares on a Delivery Date, (iii) upon the occurrence of any other Event of
Default (as defined in the Note or in this Agreement), (iv) of the liquidation,
dissolution or winding up of the Company, or (v) a Change of Control (as defined
below) any of which that continues for more than ten days, then at the
Subscriber's election, the Company must pay to the Subscriber ten (10) business
days after request by the Subscriber, a sum of money determined by multiplying
up to the outstanding principal amount of the Note designated by the Subscriber
by 120%, together with accrued but unpaid interest thereon ("Mandatory
Redemption Payment"). The Mandatory Redemption Payment must be received by the
Subscriber on the same date as the Company 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 twenty day period prior to the actual
receipt of the Mandatory Redemption Payment by the 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, (iii) a majority of the board of
directors of the Company as of the Closing Date no longer serving as directors
of the Company except due to natural causes, (iv) if the holders of the
Company’s Common Stock as of the Closing Date beneficially own at any time after
the Closing Date less than forty percent of the Common stock owned by them on
the Closing Date, not including any reduction attributable to conversion of the
Notes or exercise of any Class A Warrants issued to the Subscriber or Consultant
[as defined in Section 9(v)].

7.3. Maximum Conversion. The Subscriber shall not 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 the 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 the Subscriber and its Affiliates of more than 9.99% of the outstanding
shares of common stock of the Company on such Conversion Date. Beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Subscriber shall not be limited to aggregate conversions of
only 9.99% and aggregate conversions by the Subscriber may exceed 9.99%. The
Subscriber may waive the conversion limitation described in this Section 7.3, in
whole or in part, upon and effective after 61 days prior written notice to the
Company. The Subscriber may decide whether to convert a Note or exercise
Warrants to achieve an actual 9.99% ownership position.

7.4. Injunction Posting of Bond. In the event a Subscriber shall elect to
convert a Note or part thereof or exercise the Warrant in whole or in part, 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 or exercise of all or part of such Warrant shall have been sought
and obtained by the Company 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 Warrant 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. Notwithstanding the foregoing, if the Company receives an
order restraining it from converting from a court or administration agency of
competent jurisdiction, it shall comply without a bond requirement.

7.5. Buy-In. In addition to any other rights available to the Subscriber, if the
Company fails to deliver to the Subscriber such shares issuable upon conversion
of a Note by the Delivery Date and if after seven (7) business days after the
Delivery Date the Subscriber 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 the Subscriber was entitled to receive upon
such conversion (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 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, 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 the 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 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.

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 adjusted as described in this Agreement, the Notes and Warrants.
 
7.7. Redemption. The Note and Warrants shall not be redeemable or mandatorily
convertible except as described in the Note and Warrants.

8. Finder/Legal Fees.

(a)  Finder’s Commission. 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
brokerage commissions or similar fees 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.
 
(b)  Due Diligence Fee. The Company will pay a due diligence fee equal to
$300,000 (“Due Diligence Fee”) to the party identified on Schedule 8 hereto. The
Due Diligence Fee will be payable out of funds held pursuant to the Escrow
Agreement.
 
(c) Legal Fees. The Company shall pay to Grushko & Mittman, P.C. (“Subscriber’s
counsel”) the fees described on Schedule 8 (“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 Legal Fees and
reimbursement for estimated UCC searches and filing fees (less any amounts paid
prior to a Closing Date) will be payable on the Closing Date out of funds held
pursuant to the Escrow Agreement.
 
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9. Covenants of the Company. The Company covenants and agrees with the
Subscribers as follows:
 
(a) Stop Orders. The Company will advise the Subscribers, within two hours after
the Company 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. The Company shall promptly secure the listing of the shares of
Common Stock and the Warrant Shares upon each national securities exchange, or
electronic or automated quotation system upon which they are or become eligible
for listing and shall maintain such listing so long as any Notes or Warrants are
outstanding. The Company will maintain the listing of its Common Stock on the
American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market System,
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, the Bulletin Board is 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 Subscriber.
 
(d) Filing Requirements. From the date of this Agreement and until the sooner of
(i) two (2) years after the Closing Date, or (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, the Company will (A) cause its Common Stock to continue 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 two (2)
years after the Closing Date. Until the earlier of the resale of the Common
Stock and the Warrant Shares by each Subscriber or two (2) years after the
Warrants have been exercised, the Company will use its best efforts to 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 for the purposes set forth on Schedule 9(e) hereto. 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, litigation
related expenses or settlements, brokerage fees, nor non-trade obligations
outstanding on a Closing Date. For so long as any Notes are outstanding, the
Company will not prepay any financing related debt obligations nor redeem any
equity instruments of the Company.
 
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(f) Reservation. Prior to the Closing Date, the Company undertakes to reserve,
pro rata, on behalf of the Subscribers from its authorized but unissued common
stock not less than 300,000,000 shares of Common Stock for issuance upon
conversion of the Notes and exercise of the Warrants. After the Approval is
obtained, the Company will reserve pro rata on behalf of the Subscribers, a
number of common shares equal to 200% of the amount of Common Stock necessary to
allow each Subscriber to be able to convert all Notes issuable pursuant to this
Agreement and interest thereon and reserve 100% of the amount of Warrant Shares
issuable upon exercise of the Warrants. The Company will reserve, from time to
time, additional shares of Common Stock to maintain the aforedescribed
percentages. The Company will not remove the “reserved” status of any shares of
Common Stock reserved on behalf of the Subscribers until the Notes are fully
paid or converted or until the Warrants are fully exercised or expired. Failure
to have sufficient shares reserved pursuant to this Section 9(f) for five (5)
consecutive business days or fifteen (15) days in the aggregate shall be a
material default of the Company’s obligations under this Agreement and an Event
of Default under the Note.
 
(g) Taxes. From the date of this Agreement and until the sooner of (i) two (2)
years after the Closing Date, or (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, 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. Schedule 5(q) contains an
accurate and complete description of all of the items described in this Section
9(g) as of the Closing Date.
 
(h) Insurance. From the date of this Agreement and until the sooner of (i) two
(2) years after the Closing Date, or (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, 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 one
hundred percent (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.
 
(i) Books and Records. From the date of this Agreement and until the sooner of
(i) two (2) years after the Closing Date, or (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, 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.
 
(j) Governmental Authorities. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (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, 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.
 
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(k) Intellectual Property. From the date of this Agreement and until the sooner
of (i) two (2) years after the Closing Date, or (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, 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.
 
(l) Properties. From the date of this Agreement and until the sooner of (i) two
(2) years after the Closing Date, or (ii) until all the Shares and Warrant
Shares have been resold or transferred by all the Subscribers pursuant to the
Registration Statement (as defined in Section 11.1(iv) hereof) or pursuant to
Rule 144, without regard to volume limitations, 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.
 
(m) Confidentiality/Public Announcement. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (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, the Company agrees that except in
connection with a Form 8-K or the Registration Statement or as otherwise
required in any other Commission filing, it will not disclose publicly or
privately the identity of the Subscribers unless expressly agreed to in writing
by a Subscriber, only to the extent required by law and then only upon five days
prior notice to Subscriber. In any event and subject to the foregoing, the
Company shall file a Form 8-K or make a public announcement describing the
Offering not later than the first business day after each Closing Date. In the
Form 8-K or public announcement, the Company will specifically disclose the
amount of common stock outstanding immediately after the Closing. A form of the
proposed Form 8-K or public announcement to be employed in connection with the
Closing is annexed hereto as Exhibit H.
 
(n) 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 file any registration
statements or amend any registration statement filed with the Commission or with
state regulatory authorities including but not limited to Forms S-8 without the
consent of the Subscriber until the expiration of the “Exclusion Period”, which
shall be defined as the sooner of (i) the Registration Statement shall have been
current and available for use in connection with the resale of the Registrable
Securities (as defined in Section 11.1(i) for a period of 365 days, or (ii)
until all the Notes are no longer outstanding and 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 during the pendency of an Event of Default as defined in
the Note.
 
(o) 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 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.
 
(p) Non-Public Information. The Company covenants and agrees that neither it nor
any other person acting on its behalf will 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 receive such information. The Company understands and confirms
that each Subscriber shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
 
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(q) Limited Standstill. The Company will deliver to the Subscribers on or before
the Closing Date and enforce the provisions of irrevocable standstill agreements
(“Limited Standstill Agreements”) in the form annexed hereto as Exhibit I, with
the parties identified on Schedule 9(q) hereto.
 
(r) Offering Restrictions. Until the expiration of the Exclusion Period and
during the pendency of an Event of Default, except for the Excepted Issuances,
the Company will not enter into an agreement to 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. For so long as not less than five percent of the
initial principal amount of the Notes is 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.
 
(s) Approval. The Company undertakes to file a preliminary proxy report with the
Commission not later than fifteen (15) days after the Closing Date (“Proxy
Filing Date”) for a meeting of the Company’s shareholders. The Company covenants
to use its best efforts to solicit the approval of the Company’s shareholders in
the Proxy Statement to decrease the par value of the Common Stock to zero and
for a reverse split of the Common Stock of 100 for 1 (the “Resolutions”) and
thereafter effectuate the Resolutions (such effectuation the “Approval”). The
Company will hold a meeting of its shareholders to obtain their consent and
approval of the Resolutions upon the soonest to occur of (i) 60 days after the
Closing Date if the Proxy is not reviewed by the Commission, (ii) 95 days after
the Closing Date if the Proxy is reviewed by the Commission, or (iii) 60 days
after the Commission indicates orally or in writing that it has no further
comments on the Proxy Statement or that all comments have been responded to
satisfactorily (the earliest of which is the “Required Meeting Date”). Each of
(x) failure to file the proxy by the Proxy Filing Date, (y) conduct the meeting
of shareholders by the Required Meeting Date, or (z) if the Resolutions are
approved by the shareholders but not effectuated within three (3) days after the
meeting of shareholders (each of which is an “Approval Default”) is an Event of
Default under the Note for which liquidated damages will accrue at the rate of
two percent (2%) for each thirty (30) days, or pro rata portion thereof during
the pendency of such default. Liquidated damages for an Approval Default that
accrue at the same time as liquidated damages for a Non-Registration Event (as
defined in Section 11.4 hereof) shall be limited to the greater of the amount of
such damages which may accrue. In the event the meeting of shareholders
(“Initial Meeting”) is held and the shareholders do not approve the Resolutions,
then within five (5) days after such meeting, the Company will file a proxy
statement to solicit approval of the Company’s shareholders to increase the
authorized Common stock to not less than Nine Billion shares of Common Stock.
Failure to timely file such proxy statement or effectuate the above described
increase in the authorized Common Stock or reserve the maximum amount of shares
of Common Stock as described in Section 9(f) within sixty days after the Initial
Meeting is a default, after the occurrence of which each Holder of a Note may
accelerate the Maturity Date (as defined in the Note) to one year after the
Closing Date. Not later than five business days prior to filing any proxy
statement described in this Section 9(s), the Company must submit the proxy
statement to the Subscribers for their approval.
 
(t) Board Approval. Anything to the contrary notwithstanding in the Company’s
Articles of Incorporation or Bylaws, the Company agrees that the approval of not
less than seventy-five percent (75%) of the directors is required for the
expenditure of more than $100,000 for a single or related purpose.
 
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(u) Negative Pledge. Until the expiration of the Exclusion Period, the Company
shall not, and shall cause each of its Subsidiaries not to, 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 other than (i) for the Excepted Issuances (as defined in
Section 12(a) hereof), (ii) (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 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, or (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”) and (iii) indebtedness
for borrowed money which is not senior or pari passu in right of payment to the
Notes.
 
(v) Consulting Agreement. As of the Closing Date, the Company will have entered
into a consulting agreement with Ghillie Finanz, S.A. in the form of Exhibit J
hereto.
 
10. Covenants of the Company and Subscriber Regarding Indemnification.
 
(a) The Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates, 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 material breach of any 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 material
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) Each Subscriber agrees to indemnify, hold harmless, reimburse and defend the
Company and each of the Company’s officers, directors, agents, Affiliates,
control persons against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company or any such person which results, arises out of or is based
upon (i) any material misrepresentation by such Subscriber 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
material breach or default in performance by such Subscriber of any covenant or
undertaking to be performed by such Subscriber hereunder, or any other agreement
entered into by the Company and Subscribers, relating hereto.
 
(c) In no event shall the liability of any Subscriber or permitted successor
hereunder or under any Transaction Document or other agreement delivered in
connection herewith be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of Registrable
Securities (as defined herein).
 
(d) The procedures set forth in Section 11.6 shall apply to the indemnification
set forth in Sections 10(a) and 10(b) above.
 
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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 and fifty-six (156)
days after the Closing Date, but not later than two (2) 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, or (C) which have been issued without further transfer restrictions
after a sale or transfer pursuant to Rule 144 under the 1933 Act. 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 fifteen (15) 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.
 
(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).
 
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(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 thirty (30) calendar days after the
Required Meeting Date (the “Filing Date”), and cause to be declared effective
not later than ninety (90) 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 200% of the
Shares issuable upon conversion of all of the Notes issuable to the Subscribers,
and 100% of the Warrant Shares issuable pursuant to this Agreement upon exercise
of the Warrants and Finder’s Warrants (collectively the “Registrable
Securities”). The Registrable Securities shall be reserved and set aside
exclusively for the benefit of each Subscriber and Warrant holder, pro rata, and
not issued, employed or reserved for anyone other than each such Subscriber and
Warrantholders. The Registration Statement will 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 Subscriber, or as described
on Schedule 11.1 hereto, 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
150% of the amount of Common Shares issuable upon full conversion of all sums
due under the Notes and 100% of the Warrant Shares issuable upon exercise of the
Warrants.
 
11.2. Registration Procedures. If and whenever the Company is required by the
provisions of Section 11.1(i), 11.1(ii), or (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 Subscribers (by telecopier and by e-mail addresses provided by
Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to
Counslers@aol.com) on or before 6:00 PM EST on the same business day 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 commercially 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;
 
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(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 two 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 Shares; and
 
(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, 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.
 
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 and the Subscribers agree 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 60 days after written request and declared effective by the
Commission within 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) is
not declared effective on or before the 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 60 days after such written request, or is not declared
effective within 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 fifteen (15) business days by an effective replacement or
amended registration statement or for a period of time which shall exceed 30
days in the aggregate per year (defined as a period of 365 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 to the holder of Registrable Securities, as Liquidated
Damages, an amount equal to two percent (2%) for each thirty (30) days or part
thereof of the Purchase Price of the Notes remaining unconverted and purchase
price of Shares issued upon conversion of the Notes owned of record by such
holder which are subject to such Non-Registration Event. The Company must pay
the Liquidated Damages in cash or at the Company’s election with registered
shares of Common stock valued at one-half of the Conversion Price in effect on
the first trading day of each thirty day or shorter period for which liquidated
damages are payable. 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. All oral or written comments received from the Commission relating to the
Registration Statement must be satisfactorily responded to within ten (10)
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 set forth above. Notwithstanding the foregoing, the
Company shall not be liable to the Subscriber under this Section 11.4 for any
events or delays occurring as a consequence of the acts or omissions of the
Subscribers contrary to the obligations undertaken by Subscribers in this
Agreement. Liquidated Damages will not accrue nor be payable pursuant to this
Section 11.4 nor will a Non-Registration Event be deemed to have occurred for
times during which Registrable Securities are transferable by the holder of
Registrable Securities pursuant to Rule 144(k) under the 1933 Act. The Company
acknowledges that it is a Non-Registration Event if the Company does not have
sufficient shares as required by this Agreement included in a Registration
Statement prior to or after effectiveness of the Registration Statement.
 
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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 the National Association of Securities Dealers, Inc., 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 officer of the Seller, each
director 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, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
 
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(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, 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 covered by such
registration statement.
 
(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
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it 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 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.
 
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(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.
 
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 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(h) above, reissuable pursuant to any effective and
current Registration Statement described in Section 11 of this Agreement or
pursuant to Rule 144 under the 1933 Act (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 Shares
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, if the Company’s transfer agent is participating in the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer program, 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 DTC through its Deposit Withdrawal Agent Commission system. Such
delivery must be made on or before the Unlegended Shares Delivery Date.

(c) The Company understands that a delay in the delivery of the Unlegended
Shares pursuant to Section 11 hereof later than two 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 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 120% of the Purchase Price of such Common Stock and Warrant
Shares (“Unlegended Redemption Amount”). The amount of the aforedescribed
liquidated damages that have accrued or been paid for the twenty day period
prior to the receipt by the Subscriber of the Unlegended Redemption Amount shall
be credited against the Unlegended Redemption Amount. The Company shall pay any
payments incurred under this Section in immediately available funds upon demand.
 
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(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 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 and the Company is required to deliver such Unlegended
Shares pursuant to Section 11.7, the Company may not refuse to deliver
Unlegended 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 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.

12. (a) Right of First Refusal. Until the end of the Exclusion Period, the
Subscribers shall be given not less than fourteen (14) business days prior
written notice of any proposed sale by the Company of its common stock or other
securities or 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 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 pursuant to stock option plans and employee
stock purchase plans described on Schedule 5(d) hereto, (iv) as a result of the
exercise of Warrants or conversion of Notes which are granted or issued pursuant
to this Agreement, (v) the payment of any interest on the Notes and liquidated
damages or other damages pursuant to the Transaction Documents, (vi) as has been
described in the Reports or Other Written Information filed with the Commission
not later than three Business Days before the Closing Date, and (vii) up to
$1,500,000 of Notes on substantially the same terms as the Offering, provided
the Subscribers to such other Notes are the Subscribers to the cash portion of
the Offering (collectively the foregoing are “Excepted Issuances”). Issuance of
the Excepted Issuances are subject to the Subscribers’ prior written approval,
which will not be unreasonably withheld. The Subscribers who exercise their
rights pursuant to this Section 12(a) shall have the right during the fourteen
(14) business days following receipt of the notice to purchase 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 fourteen
(14) business days following the notice of modification to exercise such right.
Payment to be made upon exercise of the rights described in this Section 12(a)
may be made by tender of amounts due on outstanding Notes.
 
24
 
 

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(b) Favored Nations Provision. Other than in connection with the Excepted
Issuances, if at any time Notes or Warrants are outstanding the Company shall
offer, issue or agree to issue 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 holding Notes,
Shares, Warrants, or Warrant Shares, then the Company shall issue, for each such
occasion, additional shares of Common Stock to each Subscriber so that the
average per share purchase price of the shares of Common Stock issued to the
Subscriber (of only the Common Stock or Warrant Shares still owned by the
Subscriber) is equal to such other lower price per share and the Conversion
Price and Warrant exercise price shall automatically be adjusted as provided in
the Notes and the Warrants. 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 and separately for
Warrant Shares. The delivery to the 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. The
Subscriber is granted the registration rights described in Section 11 hereof in
relation to such additional shares of Common Stock except that the Filing Date
and Effective Date vis-à-vis such additional common shares shall be,
respectively, the thirtieth (30th) and sixtieth (60th) date after the closing
date giving rise to the requirement to issue the 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 the
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.
 
(c) Paid In Kind. The Subscriber may demand that some or all of the sums payable
to the Subscriber pursuant to Sections 7.1(c), 7.2, 7.5, 11.4, 11.7(c), 11.7(d)
and 11.7(e) that are not paid within ten business days of the required payment
date be paid in shares of Common Stock valued at the Conversion Price in effect
at the time Subscriber makes such demand or, at the Subscriber’s election, at
such other valuation described in the Transaction Documents. In addition to any
other rights granted to the Subscriber herein, the Subscriber is also granted
the registration rights set forth in Section 11.1(ii) hereof in relation to the
aforedescribed shares of Common Stock.
 
(d) Maximum Exercise of Rights. In the event the exercise of the rights
described in Sections 12(a), 12(b) and 12(c) would 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 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.
 
25
 
 

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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: Dalrada Financial Corp.,
9449 Balboa Avenue, Suite 211, San Diego, CA 92123, Attn: Brian Bonar, CEO,
telecopier: (858) 613-1311, with a copy by telecopier only to: Owen M.
Naccarato, Esq., Naccarato & Associates, 18301 Von Karman Avenue, Suite 430,
Irvine, CA 92612, telecopier: (949) 851-9262, and (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 number:
(212) 697-3575.
 
(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.
 
(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
conflicts of laws principles that would result in the application of the
substantive laws of another jurisdiction. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the civil or state courts of New York or in the federal
courts located in New York County. The parties and the individuals executing
this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the jurisdiction
of such courts and 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.
 
26
 
 

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(e) Specific Enforcement, Consent to Jurisdiction. To the extent permitted by
law, 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 one or more
preliminary and final 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, each of the Company,
Subscriber and any signator hereto in his personal capacity hereby 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) 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.
 
(g) 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.
 
(h) Consent. As used in the Agreement, “consent of the Subscribers” or similar
language means the consent of holders of not less than 80% of the total of the
Shares issued and issuable upon conversion of outstanding Notes owned by
Subscribers on the date consent is requested.
 
(i) Inducements. 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
parties to the Transaction Documents.

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(j) Pre-Split. All of the figures employed in the Transaction documents in
connection with Common Stock and par value, unless otherwise indicated, do not
reflect the impact of the Approval, which, unless otherwise indicated will be
applied on an equitable basis after the Approval is obtained.
 
(k) Business/Calendar Day. All references to “days” in the Transaction Documents
shall mean calendar days unless indicated otherwise.
 

 

 
[THIS SPACE INTENTIONALLY LEFT BLANK]
 

 

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
 

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.

DALRADA FINANCIAL CORP.
a Delaware corporation

/s/ Brian Bonar

By:_________________________________
Name: Brian Bonar
Title: CEO

Dated: February 13, 2006

SUBSCRIBER
NOTE PRINCIPAL *
PERCENT OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A WARRANT
LONGVIEW FUND, LP
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5301
 
 
 
 
 
/s/ P. Benz
________________________________________
(Signature)
By:
$3,871,707.00
51.35% representing 693,768,501 Warrant Shares

* The Purchase Price payable by Longview fund, L.P. is payable by delivery of a
General Release relating in part to the exchange of outstanding obligations of
the Company owed to Longview Fund; and the cancellation of a Promissory Note
issued by the Company to Longview Fund L.P. on December 22, 2005, in the
principal amount of $600,000 and $15,200 interest accrued thereon through
February 13, 2006 and the cash payment of $$2,884,800.00.

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
 

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.

DALRADA FINANCIAL CORP.
a Delaware corporation

/s/ Brian Bonar

By:_________________________________
Name: Brian Bonar
Title: CEO

Dated: February 13, 2006

SUBSCRIBER
NOTE PRINCIPAL
PERCENT OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A WARRANT
LONGVIEW EQUITY FUND, LP
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5301
 
 
 
 
 
/s/ P. Benz
________________________________________
(Signature)
By:
$1,005,000.00
13.72% representing 180,085,255 Warrant Shares

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)
 

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.

DALRADA FINANCIAL CORP.
a Delaware corporation

/s/ Brian Bonar

By:_________________________________
Name: Brian Bonar
Title: CEO

Dated: February 13, 2006

SUBSCRIBER
NOTE PRINCIPAL
PERCENT OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A WARRANT
LONGVIEW INTERNATIONAL EQUITY FUND, LP
600 Montgomery Street, 44th Floor
San Francisco, CA 94111
Fax: (415) 981-5301
 
 
 
 
 
/s/ P. Benz
________________________________________
(Signature)
By:
$495,000.00
6.76% representing 88,698,708 Warrant Shares

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)
 

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.

DALRADA FINANCIAL CORP.
a Delaware corporation

/s/ Brian Bonar

By:_________________________________
Name: Brian Bonar
Title: CEO

Dated: February 13, 2006

SUBSCRIBER
NOTE PRINCIPAL *
PERCENT OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A WARRANT
ALPHA CAPITAL AKTIENGESELLSCHAFT
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196
 
 
 
 
/s/ C. Ackerman
________________________________________
(Signature)
By:
$492,426.00
5.22% representing 88,237,475 Warrant Shares

* The Purchase Price payable by the above Subscriber is payable by delivery of a
General Release relating in part to the exchange of outstanding obligations owed
by the Company to the above Subscriber.

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SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)
 

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.

DALRADA FINANCIAL CORP.
a Delaware corporation

/s/ Brian Bonar

By:_________________________________
Name: Brian Bonar
Title: CEO

Dated: February 13, 2006

SUBSCRIBER
NOTE PRINCIPAL *
PERCENT OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A WARRANT
BALMORE, S.A.
P.O. Box 146, Road Town
Tortola, BVI
Fax:
 
 
 
/s/ F. Morax
________________________________________
(Signature)
By:
$1,380,960.00
18.85% representing 247,453,268 Warrant Shares

* The Purchase Price payable by the above Subscriber is payable by delivery of a
General Release relating in part to the exchange of outstanding obligations owed
by the Company to the above Subscriber.
 
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--------------------------------------------------------------------------------

 

 
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (F)
 

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.

DALRADA FINANCIAL CORP.
a Delaware corporation

/s/ Brian Bonar
 
By:_________________________________
Name: Brian Bonar
Title: CEO

Dated: February 13, 2006

SUBSCRIBER
NOTE PRINCIPAL *
PERCENT OF WARRANT SHARES PURCHASEABLE PURSUANT TO THE CLASS A WARRANT
HOWARD SCHRAUB
c/o G. Howard Associates
525 East 72nd Street
New York, NY 10021
Fax: (212) 737-7467
 
 
 
/s/ H. Schraub
________________________________________
(Signature)
By:
$300,000.00
4.1% representing 53,756,793 Warrant Shares

* The Purchase Price payable by the above Subscriber is payable by delivery of a
General Release relating in part to the exchange of outstanding obligations owed
by the Company to the above Subscriber.

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