Exhibit 10.2

RESERVE EQUITY FINANCING AGREEMENT

THIS AGREEMENT dated as of the 5th day of October 2010 (the “Agreement”) between
AGS Capital Group, LLC (the “Investor”), and Global Earth Energy, Inc. (the
“Company”).

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time to
time as provided herein, and the Investor shall purchase from the Company up to
Ten Million Dollars ($10,000,000) of the Company’s fully registered, freely
tradable common stock, par value $0.001 per share (the “the Common Stock”)
pursuant to the Securities Act of 1933, as amended (the “Securities Act”);

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.  Certain Definitions

Section 1.1.

“Advance” shall mean the portion of the Commitment Amount requested by the
Company in the Advance Notice.

Section 1.2.

“Advance Date” shall mean the first Trading Day after expiration of the
applicable Pricing Period for each Advance.

Section 1.3.

“Advance Notice” shall mean a written notice in the form of Exhibit A attached
hereto to the Investor executed by an officer of the Company and setting forth
the Advance amount that the Company requests from the Investor.

Section 1.4.

“Advance Notice Date” shall mean each date the Company delivers (in accordance
with Section 2.2(b) of this Agreement) to the Investor an Advance Notice.  No
Advance Notice Date shall be less than five (5) Trading Days after the prior
Advance Notice Date.

Section 1.5.

“Average Daily Trading Volume” means the average trading volume of the ten (10)
Trading Days prior to the date of delivery of the Advance Notice that results
from excluding the three (3) highest trading volume days and three (3) lowest
trading volume Trading Days during such ten (10) Trading Day period.

Section 1.6.

“Bid Price” shall mean, on any date, the closing bid price (as reported by
Bloomberg L.P.  or other comparable reporting service) of the Common Stock on
the Principal Market or if the Common Stock is not traded on a Principal Market,
the highest reported bid price for the Common Stock, as furnished by the
Financial Industry Regulatory Authority.

Section 1.7.

“Closing” shall mean one of the closings of a purchase and sale of the Common
Stock pursuant to Section 2.3.

Section 1.8.

“Commitment Amount” shall mean the aggregate amount of up to Ten Million Dollars
($10,000,000) which the Investor has agreed to provide to the Company in order
to purchase the Common Stock pursuant to the terms and conditions of this
Agreement.

Section 1.9.

“Commitment Period” shall mean the period commencing on the Effective Date, and
expiring upon the termination of this Agreement in accordance with Section 10.2.

Section 1.10.

“Common Stock” shall mean the Company’s freely tradable, fully registered and
unencumbered common stock.

Section 1.11.

“Condition Satisfaction Date” shall have the meaning set forth in Section 7.2.

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Section 1.12.

“Damages” shall mean any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorney’s fees and disbursements and
costs and expenses of expert witnesses and investigation).

Section 1.13.

“Effective Date” shall mean the date on which the SEC first declares effective a
Registration Statement registering the resale of the Registrable Securities as
set forth in Section 7.2(a).

Section 1.14.

Intentionally Omitted.

Section 1.15.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

Section 1.16.

“Material Adverse Effect” shall mean any condition, circumstance, or situation
that may result in, or reasonably be expected to result in (a) a material
adverse effect on the legality, validity or enforceability of the Agreement, (b)
a material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company, taken as a whole, or (c) a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under the Agreement.

Section 1.17.

“Market Price” shall mean the highest closing bid price of the Common Stock
during the Pricing Period.

Section 1.18.

“Maximum Advance Amount” shall be equal to a maximum of Three Hundred Thousand
Dollars ($300,000).

Section 1.19.

“FINRA” shall mean the Financial Industry Regulatory Authority.

Section 1.20.

“Person” shall mean an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

Section 1.21.

“Pricing Period” shall mean the five (5) consecutive Trading Days after the
Advance Notice Date.

Section 1.22.

“Principal Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market, the American Stock Exchange, the OTC Bulletin
Board, or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.

Section 1.23.

“Purchase Price” shall mean ninety three percent (93%) of the Market Price
during the Pricing Period.

Section 1.24.

“Registrable Securities” shall mean Registrable Securities (a) in respect of
which the Registration Statement has not been declared effective by the SEC, (b)
which have not been sold under circumstances meeting all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act (“Rule 144”) or (c) which have not been otherwise transferred to
a holder who may trade such shares without restriction under the Securities Act,
and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend.

Section 1.25.

“Registration Rights Agreement” shall mean the Registration Rights Agreement
dated the date hereof, regarding the filing of the Registration Statement for
the resale of the Registrable Securities, entered into between the Company and
the Investor, a copy of which is attached hereto as Exhibit B.

Section 1.26.

“Registration Statement” shall mean a registration statement on Form S-1 or Form
S-3 (if use of such form is then available to the Company pursuant to the rules
of the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate,
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement, and in accordance with the intended
method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.

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Section 1.27.

“Regulation D” shall mean that regulation issued by the SEC pursuant to the
Securities Act.

Section 1.28.

“SEC” shall mean the United States Securities and Exchange Commission.

Section 1.29.

“Securities Act” shall have the meaning set forth in the recitals of this
Agreement.

Section 1.30.

“Trading Cushion” Unless the parties agree in writing otherwise, there shall be
a minimum of three (3) Trading Days between the expiration of any Pricing Period
and the beginning of the next succeeding Pricing Period.

Section 1.31.

“Trading Day” shall mean any day during which the New York Stock Exchange shall
be open for business.

Section 1.32.

“VWAP” means, as of any date, the daily dollar volume-weighted average price for
such security as reported by Bloomberg, LP through its “Historical Price Table
Screen (HP)” with Market: Weighted Ave function selected (or comparable
financial news service (U.S market only), or, if no dollar volume-weighted
average price is reported for such security by Bloomberg, LP (or comparable
financial news service (U.S market only), the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC.

ARTICLE II.  Advances

Section 2.1.

Advances.  Subject to the terms and conditions of this Agreement (including,
without limitation, the provisions of Article VII hereof), the Company, at its
sole and exclusive option, may issue and sell to the Investor, and the Investor
shall purchase from the Company, shares of the Common Stock by the delivery, in
the Company’s sole discretion, of Advance Notices.  The aggregate maximum amount
of all Advances that the Investor shall be obligated to make under this
Agreement shall not exceed the Commitment Amount.

Section 2.2.

Mechanics.

(a)

Advance Notice.  At any time during the Commitment Period, the Company may
require the Investor to purchase shares of the Common Stock by delivering an
Advance Notice to the Investor, subject to the conditions set forth in Article
VII; provided, however, that (i) the amount for each Advance in the Advance
Notice shall not be more than the Maximum Advance Amount, (ii) the aggregate
amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount, (iii) in no event shall the number of shares of the Common
Stock issuable to the Investor pursuant to an Advance cause the aggregate number
of shares of the Common Stock beneficially owned (as calculated pursuant to
Section 13(d) of the Exchange Act) by the Investor and its affiliates to equal
or exceed five (5) percent of then outstanding the Common Stock (the “Ownership
Limitation”) (as of the date of this Agreement, Investor and its affiliates held
no shares of the outstanding the Common Stock), (iv) under no circumstances
shall the aggregate offering price or number of Shares, as the case may be,
exceed the aggregate offering price or number of Shares available for issuance
under the Registration Statement (the “Registration Limitation”), and (v) the
Common Stock must be DWAC eligible and sent to Investor in electronic form,
instead of certificate form.  There shall be a minimum of five (5) Trading Days
between each Advance Notice Date.  Notwithstanding any other provision in this
Agreement, the Company acknowledges and agrees that upon receipt of an Advance
Notice, the Investor may sell shares that it is unconditionally obligated to
purchase under such Advance Notice prior to taking possession of such shares.

(b)

Date of Delivery of Advance Notice.  An Advance Notice shall be deemed delivered
on (i) the Trading Day it is received by email (to the address set forth in
Section 11.1 herein) by the Investor if such notice is received prior

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to 5:00 pm Eastern Time, or (ii) the immediately succeeding Trading Day if it is
received by email after 5:00 pm Eastern Time on a Trading Day or at any time on
a day which is not a Trading Day.  No Advance Notice may be deemed delivered on
a day that is not a Trading Day.  The Company acknowledges and agrees that the
Investor shall be entitled to treat any email it receives from officers whose
email addresses are identified by the Company purporting to be an Advance Notice
as a duly executed and authorized Advance Notice from the Company.

Section 2.3.

Closings.

(a)

On the day of the Advance Notice, the Company shall deliver to the Investor in
electronic form, such number of shares of the DWAC eligible the Common Stock
registered in the name of the Investor as shall equal the number of shares
specified in the Advance Notice.  On the later of the Advance Date or one
Trading Day following receipt of the shares of the Common Stock corresponding to
the Advance Notice, the Investor shall deliver to the Company the amount of the
Advance by wire transfer of immediately available funds.  On or prior to the
Advance Date, each of the Company and the Investor shall deliver to the other
all documents, instruments and writings required to be delivered by either of
them pursuant to Section 2.3(b) below in order to implement and effect the
transactions contemplated herein.  To the extent the Company has not paid the
fees, expenses, and disbursements of the Investor in accordance with Section
12.4, the amount of such fees, expenses, and disbursements may be deducted by
the Investor (and shall be paid to the relevant party) directly out of the
proceeds of the Advance with no reduction in the amount of shares of the Common
Stock to be delivered on such Advance Date.

(b)

Obligations Upon Closing.  The Investor agrees to advance the amount
corresponding to the Advance Notice to the Company upon completion of each of
the following conditions:

(i)

The Company shall deliver to the Investor the shares of the Common Stock
applicable to the Advance in accordance with Section 2.3(a).  The certificates
evidencing such shares shall be free of restrictive legends.

(ii)

The Registration Statement filed pursuant to the Registration Rights Agreement
shall be effective and available for the resale of all applicable shares of the
Common Stock to be issued in connection with the Advance and certificates
evidencing such shares shall be free of restrictive legends.

(iii)

The Company shall have obtained all material permits and qualifications required
by any applicable state for the offer and sale of the Registrable Securities, or
shall have the availability of exemptions therefrom.  The sale and issuance of
the Registrable Securities shall be legally permitted by all laws and
regulations to which the Company is subject.

(iv)

The Company shall have filed with the SEC in a timely manner all reports,
notices and other documents required of a “reporting company” under the Exchange
Act and applicable SEC regulations.

(v)

The Company shall pay any unpaid fees as set forth in Section 12.4 below or
withhold such amounts as provided in Section 2.3.

(vi)

The Company’s transfer agent shall be DWAC eligible.

(vii)

If the conditions in Section 7.2.(a)(i) below are satisfied and provided the
Company is in compliance with its obligations in Section 2.3, the Investor shall
deliver to the Company the amount of the Advance specified in the Advance Notice
by wire transfer of immediately available funds.

Section 2.4.

Lock Up Period.  On the date hereof, the Company shall obtain from each officer
and director a lock-up agreement, as defined below, in the form annexed hereto
as Schedule 2.4.  The Company shall cause its officers and directors to refrain
from selling the Common Stock during each Pricing Period.

Section 2.5.

Hardship.  In the event the Investor sells shares of the Common Stock after
receipt of an Advance Notice and the Company fails to perform its obligations as
mandated in Section 2.3, the Company agrees that in addition to and in no

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way limiting the rights and obligations set forth in Article V hereto and in
addition to any other remedy to which the Investor is entitled at law or in
equity, including, without limitation, specific performance, it will hold the
Investor harmless against any loss, claim, damage, or expense (including
reasonable legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company and acknowledges that irreparable
damage would occur in the event of any such default.  It is accordingly agreed
that the Investor shall be entitled to an injunction or injunctions to prevent
such breaches of this Agreement and to specifically enforce, without the posting
of a bond or other security, the terms and provisions of this Agreement.

Section 2.6.

Removal of Restricted Legends.  If the Company is fully reporting six months
after the issuance of any restricted stock to the Investor, and fails to remove
the restricted legend from the Investor’s stock certificate three days after the
Investor’s request to remove such restricted legend, then the Company shall pay
the Investor USD1,000.00 for each day the company fails to remove such
restricted legend.  The Company covenants that there shall be no justifiable
reason not to remove the restricted legend from the stock certificates and in
the event that the Company attempts to offer such justification, the Company
shall pay the Investor USD$2,000.00 for each day the company fails to remove
such restricted legend.

Section 2.7.

Increase in Commitment Amount.  At any time prior to the first anniversary of
the Effective Date (the “Commitment Increase Date”) the Company may notify the
Investor in writing that it wishes to increase the Commitment Amount (provided
that the Company has the ability to register the additional Commitment Amount on
the Registration Statement) effective upon the Commitment Increase Date and the
Commitment Amount shall automatically be deemed increased.

Section 2.8.

Promissory Notes.  On a monthly basis, after the completion of the first Advance
under this Agreement and thereafter during the Commitment Period, the Company
may request the Investor to purchase promissory notes (each a “Note”) issued by
the Company with a principal amount of up to One Million Dollars ($1,000,000).
 The Investor may decide in its sole discretion whether or not to purchase any
Note requested by the Company.  Any Notes purchased by the Investor will be on
terms mutually acceptable to both the Company and the Investor and will be
subject to certain conditions precedent, including without limitation, the
completion of due diligence by the Investor to its satisfaction.  The aggregate
amount of the Notes issued shall not exceed one half of then current Commitment
Amount.  The interest rate for such note shall be LIBOR plus two percent, may be
payable in kind at the option of the Company subject to a two percent premium,
will have a maturity of one year, and will not be subject to prepayment penalty.
 The Notes will not be convertible and there will be not additional equity
accompanying the issuance of Notes.

Section 2.9.

Reimbursement.  If (a) the Investor becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by this Agreement, or if the Investor is impleaded in any such
action, proceeding or investigation by any person (other than as a result of a
breach of the Investor’s representations and warranties set forth in this
Agreement), or (b) the Investor becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by this Agreement (other than as a result of a breach of the
Investor’s representations and warranties set forth in this Agreement), or if
this Investor is impleaded in any such action, proceeding or investigation by
any person, then in any such case, the Company will reimburse the Investor for
its reasonable legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith, as such expenses are
incurred.  In addition, other than with respect to any matter in which the
Investor is a named party, the Company will pay to the Investor the charges, as
reasonably determined by the Investor, for the time of any officers or employees
of the Investor devoted to appearing and preparing to appear as witnesses,
assisting in preparation for hearings, trials or pretrial matters, or otherwise
with respect to inquiries, hearing, trials, and other proceedings relating to
the subject matter of this Agreement.  The reimbursement obligations of the
Company under this Section shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliates of the Investor that are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees,
attorneys, accountants, auditors and controlling persons (if any), as the case
may be, of Investor and any such affiliate, and shall be binding upon and inure
to the benefit of any successors of the Company, the Investor and any such
affiliate and any such person.

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ARTICLE III.  Representations of the Investor

The Investor hereby represents and warrants to, and agrees with, the Company
that the following are true and correct as of the date hereof and as of each
Advance Date:

Section 3.1.

Organization and Authorization.  The Investor is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or organization
and has all requisite power and authority to purchase and hold the securities
issuable hereunder.  The decision to invest and the execution and delivery of
this Agreement by the Investor, the performance by the Investor of its
obligations hereunder and the consummation by the Investor of the transactions
contemplated hereby have been duly authorized and requires no other proceedings
on the part of the Investor.  The undersigned has the right, power and authority
to execute and deliver this Agreement and all other instruments (including,
without limitations, the Registration Rights Agreement), on behalf of the
Investor.  This Agreement has been duly executed and delivered by the Investor
and, assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the
Investor, enforceable against the Investor in accordance with its terms.

Section 3.2.

Evaluation of Risks.  The Investor has such knowledge and experience in
financial, tax and business matters as to be capable of evaluating the merits
and risks of, and bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this transaction.  It
recognizes that its investment in the Company involves a high degree of risk.

Section 3.3.

No Legal Advice from the Company.  The Investor acknowledges that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax advisors.
 The Investor is relying solely on such counsel and advisors and not on any
statements or representations of the Company or any of its representatives or
agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.

Section 3.4.

Intentionally Omitted.

Section 3.5.

Information.  The Investor and its advisors (and its counsel), if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and information it deemed material to making an informed
investment decision.  The Investor and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and its management.  Neither
such inquiries nor any other due diligence investigations conducted by the
Investor or its advisors, if any, or its representatives shall modify, amend or
affect the Investor’s right to rely on the Company’s representations and
warranties contained in this Agreement.  The Investor understands that its
investment involves a high degree of risk.  The Investor is in a position
regarding the Company, which, based upon employment, family relationship or
economic bargaining power, enabled and enables the Investor to obtain
information from the Company in order to evaluate the merits and risks of this
investment.

Section 3.6.

Receipt of Documents.  The Investor has received and read in their entirety (a)
this Agreement and the Exhibits annexed hereto; (b) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (c) all of the Company’s SEC filings;
and (d) answers to all questions the Investor submitted to the Company regarding
an investment in the Company; and the Investor has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.

Section 3.7.

Not an Affiliate.  The Investor is not an officer, director or a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the Company or any “Affiliate” of
the Company (as that term is defined in Rule 405 of the Securities Act).

Section 3.8.

Trading Activities.  The Investor’s trading activities with respect to the
Common Stock shall be in compliance with all applicable federal and state
securities laws, rules and regulations and the rules and regulations of the
Principal Market on which the Common Stock is listed or traded.

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The Investor makes no representations or covenants that it will not engage in
trading in the securities of the Company, other than the Investor will not
engage in any Short Sales of the Common Stock at any time during the Agreement.
 The Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be purchased by the Investor
pursuant to the Advance Notice prior to taking possession of such shares.

ARTICLE IV.  Representations and Warranties of the Company

Except as stated below, on the disclosure schedules which have been previously
furnished by the Company to the Investor, the Company hereby represents and
warrants to, and covenants with, the Investor that the following are true and
correct as of the date hereof:

Section 4.1.

Organization and Qualification.  The Company is duly incorporated or organized
and validly existing in the jurisdiction of its incorporation or organization
and has all requisite corporate power to own its properties and to carry on its
business as now being conducted.  Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole.

Section 4.2.

Authorization, Enforcement, Compliance with Other Instruments.  (a) The Company
has the requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and any related agreements, in
accordance with the terms hereof and thereof, (b) the execution and delivery of
this Agreement, the Registration Rights Agreement and any related agreements by
the Company and the consummation by it of the transactions contemplated hereby
and thereby, have been duly authorized by the Company’s Board of Directors and
no further consent or authorization is required by the Company, its Board of
Directors or its shareholders, (c) this Agreement, the Registration Rights
Agreement and any related agreements have been duly executed and delivered by
the Company, and (d) this Agreement, the Registration Rights Agreement, and
assuming the execution and delivery thereof and acceptance by the Investor and
any related agreements constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies.

Section 4.3.

Capitalization.  The authorized capital stock of the Company consists of
800,000,000 shares of the Common Stock, of which 138,936,748 shares of the
Common Stock are issued and outstanding, and 100,000,000 shares of preferred
stock, of which _________ shares are issued and outstanding.  All of such
outstanding shares have been validly issued and are fully paid and
nonassessable.  No shares of the Common Stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or permitted
by the Company.  Except as disclosed on Schedule 4.3 attached hereto, as of the
date hereof, (a) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (b) there are no outstanding debt securities (c) there are no
outstanding registration statements; and (d) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement), except pursuant to the terms of
an agreement between the Company and the Investor.  There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of the
transactions described herein or therein.  The Company has furnished to the
Investor true and correct copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and
the terms of all securities convertible into or exercisable for the Common Stock
and the material rights of the holders thereof in respect thereto.

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Section 4.4.

No Conflict.  The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby will not (a) result in a violation of the Articles of Incorporation, any
certificate of designations of any outstanding series of preferred stock of the
Company or By-laws, or (b) conflict with or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market on
which the Common Stock is quoted) applicable to the Company or any of its
subsidiaries or by which any material property or asset of the Company or any of
its subsidiaries is bound or affected and which would cause a Material Adverse
Effect.  Neither the Company nor its subsidiaries is in violation of any term of
or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries.  The business of the Company and its subsidiaries is not being
conducted in violation of any material law, ordinance, regulation, of any
governmental entity.  Except as specifically contemplated by this Agreement and
as required under the Securities Act and any applicable state securities laws,
the Company 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 or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof.  All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof.  The Company and its subsidiaries are unaware of any fact or
circumstance which might give rise to any of the foregoing.

Section 4.5.

SEC Documents; Financial Statements.  The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC under the Exchange Act for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (all of the foregoing filed prior to the date hereof or amended
after the date hereof and all exhibits include therein and financial statements
and schedules thereto and documents incorporated by reference therein, being
hereinafter referred to as the “SEC Documents”) on timely basis or has received
a valid extension of such time of filing and has filed any such SEC Document
prior to the expiration of any such extension.  The Company has delivered to the
Investor or its representatives, or made available through the SEC’s website at
http://www.sec.gov., true and complete copies of the SEC Documents.  As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto.  Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (a) as may be otherwise indicated in such financial
statements or the notes thereto, or (b) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).  Such financial
statements have been prepared in accordance with generally accepted accounting
principles.  No other information provided by or on behalf of the Company to the
Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made and not misleading.

Section 4.6.

No Misstatement or Omission.  Each part of the Registration Statement, when such
part became or becomes effective, and the prospectus, on the date of filing
thereof with the SEC and at each Advance Notice Date and the date of each
Closing hereunder (the “Closing Date”), conformed or will conform in all
material respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder; each part of the Registration Statement,
when such part became or

- 8 -

 

becomes effective, did not or will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and the prospectus, on the date
of filing thereof with the SEC and at each Advance Notice Date and the date of
the issuance of shares of the Common Stock, did not or will not include an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; except that the foregoing shall not apply to
statements or omissions in any such document made in reliance on information
furnished in writing to the Company by the Investor expressly stating that such
information is intended for use in the Registration Statement, the prospectus,
or any amendment or supplement thereto.

Section 4.7.

No Default.  The Company is not in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it is or its property is bound and neither the
execution, nor the delivery by the Company, nor the performance by the Company
of its obligations under this Agreement or any of the exhibits or schedules
hereto will conflict with or result in the breach or violation of any of the
terms or provisions of, or constitute a default or result in the creation or
imposition of any lien or charge on any assets or properties of the Company
under its Articles of Incorporation, By-Laws, any material indenture, mortgage,
deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound, or any
statute, or any decree, judgment, order, rules or regulation of any court or
governmental agency or body having jurisdiction over the Company or its
properties, in each case which default, lien or charge is likely to cause a
Material Adverse Effect on the Company’s business or financial condition.

Section 4.8.

Absence of Events of Default.  No Event of Default, as defined in the respective
agreement to which the Company is a party, and no event which, with the giving
of notice or the passage of time or both, would become an Event of Default (as
so defined), has occurred and is continuing, which would have a Material Adverse
Effect on the Company’s business, properties, prospects, financial condition or
results of operations.

Section 4.9.

Intellectual Property Rights.  The Company and its subsidiaries own or possess
adequate rights or licenses to use all material trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted.  The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of
others, and, to the knowledge of the Company, there is no claim, action or
proceeding being made or brought against, or to the Company’s knowledge, being
threatened against, the Company or its subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license, service names,
service marks, service mark registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.

Section 4.10.

Employee Relations.  Neither the Company nor any of its subsidiaries is involved
in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened.  None of the Company’s or its
subsidiaries’ employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.

Section 4.11.

Environmental Laws.  The Company and its subsidiaries are (a) in compliance with
any and all applicable material foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (b) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses, and (c) are in compliance with all terms and
conditions of any such permit, license or approval.

Section 4.12.

Title.  The Company has good and marketable title to its properties and material
assets owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material to
the business of the Company.  Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.

- 9-

Section 4.13.

Insurance.  The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are engaged.  Neither the
Company nor any such subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.

Section 4.14.

Regulatory Permits.  The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

Section 4.15.

Internal Accounting Controls.  The Company and each of its subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management’s
general or specific authorizations, (b) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and the rules and regulations as promulgated by
the SEC to maintain asset accountability, (c) access to assets is permitted only
in accordance with management’s general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

Section 4.16.

No Material Adverse Breaches, etc.  Neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse
Effect on the business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries.  Except as set forth
in the SEC Documents, neither the Company nor any of its subsidiaries is in
breach of any contract or agreement which breach, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect on the
business, properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries.

Section 4.17.

Absence of Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable
decision, ruling or finding would (a) have a Material Adverse Effect on the
transactions contemplated hereby, (b) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (c) have a Material Adverse Effect on the business, operations, properties,
financial condition or results of operation of the Company and its subsidiaries
taken as a whole.

Section 4.18.

Subsidiaries.  Except as disclosed in the SEC Documents, the Company does not
presently own or control, directly or indirectly, any interest in any other
corporation, partnership, association or other business entity.

Section 4.19.

Tax Status.  The Company and each of its subsidiaries has made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.

- 10-

Section 4.20.

Certain Transactions.  None of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

Section 4.21.

Rights of First Refusal.  The Company is not obligated to offer the securities
offered hereunder on a right of first refusal basis or otherwise to any third
parties including, but not limited to, current or former shareholders of the
Company, underwriters, brokers, agents or other third parties.

Section 4.22.

Use of Proceeds.  The Company shall use the net proceeds from this offering for
working capital and other general corporate purposes including paying relevant
fees and commissions incurred from this transaction.

Section 4.23.

Maintenance of Listing or Quotation on Principal Market.  For so long as any
securities issuable hereunder held by the Investor remain outstanding, the
Company acknowledges, represents, warrants and agrees that it will maintain the
listing or quotation, as applicable, of the Common Stock on the Principal
Market.

Section 4.24.

Opinion of Counsel.  The Investor shall receive an opinion letter from counsel
to the Company on the date hereof in the form attached hereto as Exhibit C.

Section 4.25.

Additional Opinions of Counsel.  The Company will obtain for the Investor, at
the Company’s expense, any and all opinions of counsel which may be reasonably
required in order to sell the securities issuable hereunder without restriction.

Section 4.26.

Dilutive Effect.  The Company understands and acknowledges that the number of
shares of the Common Stock issuable upon purchases pursuant to this Agreement
will increase in certain circumstances including, but not necessarily limited
to, the circumstance wherein the trading price of the Common Stock declines
during the period between the Effective Date and the end of the period during
which the shares of the Common Stock are issuable upon purchases pursuant to
this Agreement.  The Company’s executive officers and directors have studied and
fully understand the nature of the transactions contemplated by this Agreement
and recognize that they have a potential dilutive effect on the shareholders of
the Company.  The Board of Directors of the Company has concluded, in its good
faith business judgment, and with full understanding of the implications, that
such issuance is in the best interests of the Company.  The Company specifically
acknowledges that, subject to such limitations as are expressly set forth in the
Agreement, its obligation to issue shares of the Common Stock upon purchases
pursuant to this Agreement is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.

Section 4.27.

Acknowledgment Regarding the Investor’s Purchase of Shares.  The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm’s length investor with respect to this Agreement and the transactions
contemplated hereunder.  The Company further acknowledges that the Investor is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Investor or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Investor’s purchase of the Common Stock
hereunder.  The Company is aware and acknowledges that it may not be able to
request Advances under this Agreement if it cannot obtain an effective
Registration Statement or if any issuances of the Common Stock pursuant to any
Advances would violate any rules of the Principal Market.  The Company further
is aware and acknowledges that any fees paid pursuant to Section 12.4 hereunder
or shares issued pursuant to Section 12.4 hereunder shall be earned on the date
hereof and not refundable or returnable under any circumstances.

Section 4.28.

No Legal Advice From the Investor.  The Company acknowledges that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax

- 11-

advisors.  The Company is relying solely on such counsel and advisors and not on
any statements or representations of the Investor or any of its representatives
or agents for legal, tax or investment advice with respect to this investment,
the transactions contemplated by this Agreement or the securities laws of any
jurisdiction.  The Company is not relying on any representation except for the
representations of the Investor contained in this Agreement.

Section 4.29.

No Similar Transactions.  Except as disclosed in the SEC Documents, the Company
has not entered into any transaction similar in nature to the one described in
this Agreement.

Section 4.30.

Sarbanes-Oxley; Internal Accounting Controls.  The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are
applicable to it as of a Closing Date.  The Company and its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (a) transactions are executed in accordance with
management’s general or specific authorizations, (b) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (c) access to assets is permitted
only in accordance with management’s general or specific authorization, and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s
most recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”).  The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as
such term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.

Section 4.32.

Other Transactions.  During the term of this Agreement, the Company will be
prohibited from effecting or entering into (a) an agreement to effect any
financing involving the sale of debt or equity securities that are convertible
into, exchangeable or exercisable for, or include the right to receive
additional shares of the Common Stock at a price that is based upon and/or
varies with the trading prices of the Common Stock at any time after the initial
issuance of such securities or is subject to reset upon the occurrence of
specified or contingent events, and (b) any agreement, including but not limited
to an Equity Line of Credit, whereby the Issuer may sell securities at a future
determined price.

Section 4.33.

Internal Accounting Controls.  The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management’s general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (c) access to assets is
permitted only in accordance with management’s general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

Section 4.34.

Shares of the Common Stock.  The shares of the Common Stock to be issued
hereunder have been duly authorized, and when issued, delivered and paid for
pursuant to this Agreement, will be validly issued and fully paid and
non-assessable, free and clear of all encumbrances and will be issued in
compliance with all applicable United States federal and state securities laws;
the capital stock of the Company, including the Common Stock, conforms in all
material respects to the description thereof contained in the Registration
Statement and the Common Stock, including the shares of the Common Stock, will
conform to the description thereof contained in the prospectus as amended or
supplemented.  Neither the shareholders of the Company, nor any other Person
have any preemptive rights or rights of first refusal with respect to the shares
of the Common Stock or other rights to purchase or receive any of the shares of
the Common Stock or any other securities or assets of the Company, and no Person
has the right, contractual or otherwise, to cause the Company to issue to it, or
register pursuant to the Securities Act, any shares of capital stock or other
securities or assets of the Company upon the issuance or sale of the shares of
the Common Stock.  The Company is not obligated to offer the shares of the
Common Stock on a right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.

- 12 -

 

Section 4.35.

Broker Fees.  No brokers, finders or financial advisory fees or commissions will
be payable by the Company, its agents or subsidiaries, with respect to the
transactions contemplated by this Agreement, except as otherwise disclosed in
this Agreement.

Section 4.35.

Blue Sky Laws.  The Company shall, at its sole cost and expense, on or before
each of the Closing Dates, take such action as the Company shall reasonably
determine is necessary to qualify the Registrable Securities for, or obtain
exemption for Registrable Securities for, sale to the Investor at each of the
Closings pursuant to this Agreement under applicable securities or “Blue Sky”
laws of such states of the United States, as reasonably specified by the
Investor, and shall provide evidence of any such action so taken to the Investor
on or prior to the Closing Date.

Section 4.35.

Reservation of shares of the Common Stock.  The Company shall reserve
333,333,333 shares of Stock for the issuance of Registrable Securities to the
Investor as required hereunder.  In the event that the Company determines that
it does not have a sufficient number of authorized shares of the Common Stock to
reserve and keep available for issuance as described in this Section, the
Company shall use all commercially reasonable efforts to increase the number of
authorized shares of the Common Stock by seeking shareholder approval for the
authorization of such additional shares.

Section 4.36.

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

ARTICLE V.  Indemnification

The Investor and the Company represent to the other the following with respect
to itself:

Section 5.1.

Indemnification.

(a)

In consideration of the Investor’s execution and delivery of this Agreement, and
in addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Investor, and all
of its officers, directors, partners, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Investor Indemnitees”) from and against any
and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any Investor Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”), incurred by the Investor
Indemnitees or any of them as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (iii) any cause of
action, suit or claim brought or made against the Investor Indemnitee not
arising out of any action or inaction of an Investor Indemnitee, and arising out
of or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Investor Indemnitees.  To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.

- 13 -

 

(b)

In the event that the indemnity provided in Section 5.1(a) is unavailable to or
insufficient to hold harmless an indemnified party for any reason, the Company
severally agrees to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively “Losses”) to which the
Company may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand from transactions
contemplated by this Agreement.  If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the Investor
severally shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and of the Investor on the other in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations.  Benefits received by the Company shall be deemed to be equal to
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by it, and benefits received
by the Investor shall be deemed to be equal to the total discounts received by
the Investor.  Relative fault shall be determined by reference to, among other
things, whether any untrue or any alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to information
provided by the Company on the one hand or the Investor on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.  The
Company and the Investor agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above.  The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
 Notwithstanding the provisions of this Section, the Investor shall not be
required to contribute any amount in excess of the amount by which the Purchase
Price for shares of the Common Stock actually purchased pursuant to this
Agreement exceeds the amount of any damages which the Investor has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.  For purposes of this Article V, each person who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act and each director, officer, employee and agent of the Investor
shall have the same rights to contribution as the Investor, and each person who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this Section.

(c)

The remedies provided for in this Article V are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
person at law or in equity.  The obligations of the parties to indemnify or make
contribution under this Article V shall survive termination.

Section 5.2.

Notification of Claims for Indemnification.  Each party entitled to
indemnification under this Article V (an “Indemnified Party”) shall, promptly
after the receipt of notice of the commencement of any claim against such
Indemnified Party in respect of which indemnity may be sought from the party
obligated to indemnify such Indemnified Party under this Article V (the
“Indemnifying Party”), notify the Indemnifying Party in writing of the
commencement thereof.  Any such notice shall describe the claim in reasonable
detail.  The failure of any Indemnified Party to so notify the Indemnifying
Party of any such action shall not relieve the Indemnifying Party from any
liability which it may have to such Indemnified Party (a) other than pursuant to
this Article V, or (b) under this Article V unless, and only to the extent that,
such failure results in the Indemnifying Party’s forfeiture of substantive
rights or defenses or the Indemnifying Party is prejudiced by such delay.  The
procedures listed below shall govern the procedures for the handling of
indemnification claims.

(a)

Any claim for indemnification for Indemnified Liabilities that do not result
from a Third Party Claim as defined in the following paragraph, shall be
asserted by written notice given by the Indemnified Party to the Indemnifying
Party.  Such Indemnifying Party shall have a period of thirty (30) days after
the receipt of such notice within which to respond thereto.  If such
Indemnifying Party does not respond within such thirty (30) day period, such
Indemnifying Party shall be deemed to

- 14 -

have refused to accept responsibility to make payment as set forth in Section
5.1.  If such Indemnifying Party does not respond within such thirty (30) day
period or rejects such claim in whole or in part, the Indemnified Party shall be
free to pursue such remedies as specified in this Agreement.

(b)

If an Indemnified Party shall receive notice or otherwise learn of the assertion
by a person or entity not a party to this Agreement of any threatened legal
action or claim (collectively a “Third Party Claim”), with respect to which an
Indemnifying Party may be obligated to provide indemnification, the Indemnified
Party shall give such Indemnifying Party written notice thereof within twenty
(20) days after becoming aware of such Third Party Claim.

(c)

An Indemnifying Party may elect to defend (and, unless the Indemnifying Party
has specified any reservations or exceptions, to seek to settle or compromise)
at such Indemnifying Party’s own expense and by such Indemnifying Party’s own
counsel, any Third Party Claim.  Within thirty (30) days after the receipt of
notice from an Indemnified Party (or sooner if the nature of such Third Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Party
whether the Indemnifying Party will assume responsibility for defending such
Third Party Claim, which election shall specify any reservations or exceptions.
 If such Indemnifying Party does not respond within such thirty (30) day period
or rejects such claim in whole or in part, the Indemnified Party shall be free
to pursue such remedies as specified in this Agreement.  In case any such Third
Party Claim 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 assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense at its own expense.  Notwithstanding the
foregoing, in any Third Party Claim in which both the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel and to control its own defense of such claim if, in the
reasonable opinion of counsel to such Indemnified Party, either (i) one or more
significant defenses are available to the Indemnified Party that are not
available to the Indemnifying Party, or (ii) a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided, however, that in such circumstances the Indemnifying Party
(A) shall not be liable for the fees and expenses of more than one counsel to
all Indemnified Parties, and (B) shall reimburse the Indemnified Parties for
such reasonable fees and expenses of such counsel incurred in any such Third
Party Claim, as such expenses are incurred, provided that the Indemnified
Parties agree to repay such amounts if it is ultimately determined that the
Indemnifying Party was not obligated to provide indemnification under this
Article V.  The Indemnifying Party agrees that it shall not, without the prior
written consent of the Indemnified Party, settle, compromise or consent to the
entry of any judgment in any pending or threatened claim relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Party from all liability arising or that may arise out of such claim.  The
Indemnifying Party shall not be liable for any settlement of any claim effected
against an Indemnified Party without the Indemnifying Party’s written consent,
which consent shall not be unreasonably withheld, conditioned or delayed.  The
rights accorded to an Indemnified Party hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise; provided, however, that notwithstanding the foregoing or anything
to the contrary contained in this Agreement, nothing in this Article V shall
restrict or limit any rights that any Indemnified Party may have to seek
equitable relief.

- 15 -

 

ARTICLE VI.  Covenants of the Company

Section 6.1.

Registration Rights.  The Company shall cause the Registration Rights Agreement
to remain in full force and effect and the Company shall comply in all material
respects with the terms thereof.  During the Commitment Period, the Company
shall notify the Investor promptly if (a) the Registration Statement shall cease
to be effective under the Securities Act, (b) the Common Stock shall cease to be
authorized for listing on the Principal Market, (c) the Common Stock ceases to
be registered under Section 12(g) of the Exchange Act, or (d) the Company fails
to file in a timely manner all reports and other documents required of it as a
reporting company under the Exchange Act.

Section 6.2.

Quotation of the Common Stock.  The Company shall maintain the Common Stock’s
authorization for quotation on the Principal Market.

Section 6.3.

Exchange Act Registration.  The Company will cause the Common Stock to continue
to be registered under Section 12(g) of the Exchange Act, will file in a timely
manner all reports and other documents required of it as a reporting company
under the Exchange Act and will not take any action or file any document
(whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said Exchange Act.

Section 6.4.

Transfer Agent Instructions.  On the Advance Notice Date, the Company shall
deliver instructions to its transfer agent to issue shares of the Common Stock
to the Investor free of restrictive legends on the Advance Notice Date .

Section 6.5.

Corporate Existence.  The Company will take all steps necessary to preserve and
continue the corporate existence of the Company.

Section 6.6.

Notice of Certain Events Affecting Registration; Suspension of Right to Make an
Advance.  The Company will immediately notify the Investor upon its becoming
aware of the occurrence of any of the following events in respect of a
registration statement or related prospectus relating to an offering of
Registrable Securities: (a) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the registration statement or related prospectus; (b) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (c) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (d) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus of any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (e) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.  The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.

Section 6.7.

Prohibited Transactions.  During the term of this Agreement, the Company shall
not enter into any Prohibited Transaction without the prior written consent of
the Investor, which consent may be withheld at the sole discretion of the
Investor.  For the purposes of this Agreement, the term “Prohibited Transaction”
shall refer to the issuance by the Company of any “future priced securities,”
which shall mean the issuance of shares of the Common Stock or securities of any
type whatsoever that are, or may become, convertible or exchangeable into shares
of the Common Stock where the purchase, conversion or exchange price for such
the Common Stock is determined using any floating discount or other
post-issuance adjustable discount to the

- 16 -

market price of the Common Stock, including, without limitation, pursuant to any
equity line financing that is substantially similar to the financing provided
for under this Agreement, provided that any future issuance by the Company of
(a) a convertible security (“Convertible Security”) that (i) contains provisions
that adjust the conversion price of such Convertible Security in the event of
stock splits, dividends, distributions, reclassifications or similar events or
pursuant to anti-dilution provisions, or (ii) is issued in connection with the
Company obtaining debt financing for research and development purposes where the
issuance of Convertible Securities is conditioned upon the Company meeting
certain defined clinical milestones, (b) securities in a registered direct
public offering or an unregistered private placement where the price per share
of such securities is fixed concurrently with the execution of definitive
documentation relating to the offering or placement, as applicable, and (c)
securities issued in connection with a secured debt financing, shall not be a
Prohibited Transaction.

Section 6.8.

Consolidation; Merger.  The Company shall not, at any time after the delivery of
an Advance Notice and before the Advance Date applicable to such Advance Notice,
effect any merger or consolidation of the Company with or into, or a transfer of
all or substantially all the assets of the Company to another entity (a
“Consolidation Event”) unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver to the
Investor such shares of stock and/or securities as the Investor is entitled to
receive pursuant to this Agreement.

Section 6.9.

Issuance of the Common Stock.  The sale of the shares of the Common Stock shall
be made in accordance with the provisions and requirements of the Securities Act
and any applicable state securities law.

Section 6.10.

Review of Public Disclosures.  All SEC filings (including, without limitation,
all filings required under the Exchange Act, which include Form 10-Ks, 10-Qs,
8-Ks, etc.) and other public disclosures made by the Company, including, without
limitation, all press releases, investor relations materials, and scripts of
analysts meetings and calls, shall be reviewed and approved for release by the
Company’s attorneys, and if containing financial information, the Company’s
independent certified public accountants.  All press releases referencing the
Investor shall first be approved by Investor prior to release.

Section 6.11.

Market Activities.  The Company will not (a) directly or indirectly take any
action designed to cause or result in, or that constitutes or might reasonably
be expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Common Stock, or
(b) sell, bid for, or purchase the Common Stock, or pay anyone any compensation
for soliciting purchases of the Common Stock.

Section 6.12.

Listing of shares of the Common Stock.  The Company will use commercially
reasonable efforts to cause the shares of the Common Stock to be listed on the
Principal Market and to qualify the shares of the Common Stock for sale under
the securities laws of such jurisdictions as the Investor designates; provided
that the Company shall not be required in connection therewith to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction.

Section 6.13.

Comfort Letters.  At the reasonable request of the Investor, the Company will
request that its independent accountants furnish to the Investor a letter, in
form and substance reasonably satisfactory to the Investor, containing
statements and information of the type ordinarily included in accountants’
“comfort letters” to underwriters with respect to the financial statements of
the Company dated the date of and provided within a reasonable period of time
after (a) the date hereof, (b) the date the Registration Statement or the
prospectus shall be amended (other than (i) in connection with the filing of a
prospectus supplement that contains solely the information required, (ii) in
connection with the filing of any report or other document under Section 13, 14
or 15(d) of the Exchange Act by the Company, or (iii) by a prospectus supplement
relating to the offering of other securities (including, without limitation,
other shares of the Common Stock)) and (c) the date of filing or amending each
Annual Report on Form 10-K and Quarterly Report on Form 10-Q for a period in
which an Advance was delivered pursuant to this Agreement and which are
incorporated by reference in the Registration Statement.

ARTICLE VII.  Conditions for Advance and Conditions to Closing

Section 7.1.

Conditions Precedent to the Obligations of the Company.  The obligation
hereunder of the Company to issue and sell the shares of the Common Stock to the
Investor incident to each Closing is subject to the satisfaction, or waiver by
the Investor in writing, at or before each such Closing, of each of the
conditions set forth below.

- 17 -

 

(a)

Accuracy of the Investor’s Representations and Warranties.  The representations
and warranties of the Investor shall be true and correct in all material
respects.

(b)

Performance by the Investor.  The Investor shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement and the Registration Rights Agreement to be performed,
satisfied or complied with by the Investor at or prior to such Closing.

Section 7.2.

Conditions Precedent to the Right of the Company to Deliver an Advance Notice.
 The right of the Company to deliver an Advance Notice is subject to the
fulfillment by the Company, on such Advance Notice Date (a “Condition
Satisfaction Date”), of each of the following conditions, any of which may be
waived in writing by the Investor:

(a)

Registration of the Common Stock with the SEC.  The Company shall have filed
with the SEC a Registration Statement with respect to the resale of the
Registrable Securities in accordance with and subject to the terms of the
Registration Rights Agreement.  As set forth in the Registration Rights
Agreement, the Registration Statement shall have previously become effective and
shall remain effective on each Condition Satisfaction Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC’s concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist.  The Registration Statement must have been declared
effective by the SEC prior to the first Advance Notice Date.

(b)

Authority.  The Company shall have obtained all permits and qualifications
required by any applicable state in accordance with the Registration Rights
Agreement for the offer and sale of the shares of the Common Stock, or shall
have the availability of exemptions therefrom.  The sale and issuance of the
shares of the Common Stock shall be legally permitted by all laws and
regulations to which the Company is subject.

(c)

Fundamental Changes.  There shall not exist any fundamental changes to the
information set forth in the Registration Statement which would require the
Company to file a post-effective amendment to the Registration Statement.

(d)

Performance by the Company.  The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement and the Registration Rights Agreement to be
performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.

(e)

No Injunction.  No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits or
directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
this Agreement.

(f)

No Suspension of Trading in or Delisting of the Common Stock.  The Common Stock
is trading on a Principal Market.  The trading of the Common Stock is not
suspended by the SEC or the Principal Market.  The issuance of shares of the
Common Stock with respect to the applicable Closing will not violate the
shareholder approval requirements of the Principal Market.  The Company shall
not have received any notice threatening the continued quotation of the Common
Stock on the Principal Market and the Company shall have no knowledge of any
event which would be more likely than not to have the effect of causing the
Common Stock to not be trading or quoted on a Principal Market.

- 18-

 

(g)

Maximum Advance Amount.  The amount of an Advance corresponding to the Advance
Notice shall not exceed the Maximum Advance Amount.  If trading in the Common
Stock is suspended for any reason during trading hours on the Principal Market
on any Trading Day during a Pricing Period or for each day there is public
holiday during the Pricing Period, the Advance Amount in respect of such Pricing
Period shall be reduced by one fifth of the initial Advance Amount specified in
the Advance Notice.  The Floor Price shall be The Floor Price shall be 98
percent of the average closing price of the Common Stock for the 10 Trading Days
prior to the Advance Notice Date.  If on any day during the Pricing Period, the
bid price of the Common Stock falls below the Floor Price, the Maximum Advance
Amount will be changed to 50 percent of the average daily trading volume of the
Common Stock for the 10 days preceding the Advance Notice Date.  If any of the
Company’s representations in this Agreement are false or if the Common Stock’s
bid price is less than $0.10 cents, then no Advances shall be permitted.  Any
portion of an Advance that would cause the Investor to exceed the Ownership
Limitation shall automatically be withdrawn.  For the purposes of this Section,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act.

(h)

No Knowledge.  The Company has no knowledge of any event which would be more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective at Closing.

(i)

Executed Advance Notice.  The Investor shall have received the Advance Notice
executed by an officer of the Company and the representations contained in such
Advance Notice shall be true and correct as of each Condition Satisfaction Date.

(j)

Failure to Deliver shares of the Common Stock.  The Company understands that a
delay in the issuance of the Common Stock could result in economic damage to the
Investor.  If the Company fails to cause the delivery of the shares of the
Common Stock when due, the Company shall pay to the Investor on demand in cash
by wire transfer of immediately available funds to an account designated by the
Investor as liquidated damages for such failure and not as a penalty, an amount
equal to five (5) percent of the payment required to be paid by the Investor on
such Settlement Date (i.e., the Advance Amount) for the initial thirty (30) days
following such date until the shares of the Common Stock have been delivered,
and an additional five (5) percent for each additional 30-day period thereafter
until the shares of the Common Stock have been delivered.  If, by the third
(3rd) business day after the Closing Date, the Company fails to deliver any
portion of the shares of the Put to the Investor (the “Put shares of the Common
Stock Due”) and the Investor purchases, in an open market transaction or
otherwise, shares of the Common Stock necessary to make delivery of shares which
would have been delivered if the full amount of the shares to be delivered to
the Investor by the Company (the “Open Market Share Purchase”), then the Company
shall pay to the Investor, in addition to any other amounts due to Investor
pursuant to the Put, and not in lieu thereof, the Open Market Adjustment Amount
(as defined below).  The “Open Market Adjustment Amount” is the amount equal to
the excess, if any, of (i) the Investor’s total purchase price (including
brokerage commissions, if any) for the Open Market Share Purchase minus (ii) the
net proceeds (after brokerage commissions, if any) received by the Investor from
the sale of the Put shares of the Common Stock Due.  The Company shall pay the
Open Market Adjustment Amount to the Investor in immediately available funds
within two business days of written demand by the Investor.  By way of
illustration and not in limitation of the foregoing, if the Investor purchases
shares of the Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover an Open Market Purchase with respect to shares
of the Common Stock it sold for net proceeds of $10,000, the Open Market
Purchase Adjustment Amount which the Company will be required to pay to the
Investor will be $1,000.

(k)

Fees Paid.  The Company has paid to the Investor all fees, expenses and shares
due under this Agreement.

(l)

No Material Notices.  None of the following events shall have occurred and be
continuing: (i) receipt by the Company of any request for additional information
from the SEC or any other federal or state governmental, administrative or self
regulatory authority during the period of effectiveness of the Registration
Statement, the response to which would require any amendments or supplements to
the Registration Statement or prospectus; (ii) the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt by the Company of any notification with respect
to the suspension of the

- 19 -

qualification or exemption from qualification of any of the shares of the Common
Stock for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the occurrence of any event that makes any
statement made in the Registration Statement or the prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the prospectus,
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company’s reasonable determination that a post-effective
amendment to the Registration Statement would be required.  There shall not
exist any fundamental changes to the information set forth in the Registration
Statement which would require the Company to file a post-effective amendment to
the Registration Statement.

ARTICLE VIII.  Due Diligence Review; Non-Disclosure of Non-Public Information

Section 8.1.

Non-Disclosure of Non-Public Information.

(a)

Subject to Section 6.6 and except as otherwise provided in this Agreement or the
Registration Rights Agreement, the Company covenants and agrees that it has not
in the past and will refrain in the future from disclosing, and shall cause its
officers, directors, employees and agents to refrain from disclosing, any
material non-public information to the Investor without also disseminating such
information to the public.

(b)

Nothing herein shall require the Company to disclose material, non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate material, non-public information to any
investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts in violation of Regulation FD of the Exchange
Act, provided, however, that notwithstanding anything herein to the contrary,
the Company will, as hereinabove provided and subject to compliance with
Regulation FD, immediately notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material, non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading.  Nothing contained
in this Section 8.1 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain material, non-public information
in the course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of material fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.

ARTICLE IX.  Choice of Law; Jurisdiction

Section 9.

Governing Law.  This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws.  Any dispute arising out of or in connection
with this Agreement or otherwise relating to the parties relationship shall be
settled by litigation in the State of New York, City of New York.  The Company
and the Investor further agree that no demand for punitive or exemplary damages
shall be made.  No party to this Agreement will challenge the jurisdiction or
venue provisions as provided in this Section.

ARTICLE X.  Assignment; Termination

Section 10.1.

Assignment.  Neither this Agreement nor any rights or obligations of the Company
or the Investor hereunder may be assigned to any other Person.

- 20 -

 

Section 10.2.

Termination.

(a)

Unless earlier terminated as provided hereunder, this Agreement shall terminate
automatically on the earliest of (i) the first day of the month next following
the second anniversary of the Effective Date, or (ii) the date on which the
Investor shall have made payment of Advances pursuant to this Agreement in the
aggregate amount of the Commitment Amount.

(b)

The Company may terminate this Agreement effective upon 15 Trading Days’ prior
written notice to the Investor; provided that (i) there are no Advances
outstanding, and (ii) the Company has paid all amounts owed to the Investor
pursuant to this Agreement.  This Agreement may be terminated at any time by the
mutual written consent of the parties, effective as of the date of such mutual
written consent unless otherwise provided in such written consent.  In the event
of any termination of this Agreement by the Company hereunder, so long as the
Investor owns any shares of the Common Stock issued hereunder, unless all of
such shares of the Common Stock may be resold by the Investor without
registration and without any time, volume or manner of sale limitations pursuant
to Rule 144, the Company shall not (i) cancel the common stock issued to
Investor or suspend (except as provided for in the Registration Rights
Agreement) or withdraw the Registration Statement or otherwise cause the
Registration Statement to become ineffective, or voluntarily delist the Common
Stock from, the Principal Market without listing the Common Stock on another
Principal Market.

(c)

The obligation of the Investor to make an Advance to the Company pursuant to
this Agreement shall terminate permanently (including with respect to an Advance
Date that has not yet occurred) in the event that (i) there shall occur any stop
order or suspension of the effectiveness of the Registration Statement for an
aggregate of 50 Trading Days, during the Commitment Period, or (ii) the Company
shall at any time fail materially to comply with the requirements of Article VI
and such failure is not cured within thirty (30) days after receipt of written
notice from the Investor, provided, however, that this paragraph (c) shall not
apply to any period commencing upon the filing of a post-effective amendment to
such Registration Statement and ending upon the date on which such post
effective amendment is declared effective by the SEC.

(d)

Nothing in this Section 10.2 shall be deemed to release the Company or the
Investor from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Investor to compel specific performance by the
other party of its obligations under this Agreement.  The indemnification
provisions contained in Sections 5.1 and 5.2 shall survive termination
hereunder.

ARTICLE XI.  Notices

Section 11.1.

Notices.  All notices, requests, demands, and other communications hereunder
shall be in writing and delivered personally or sent by registered or certified
United States mail, return receipt requested with postage prepaid, or by
telecopy or e-mail, if to the Investor, addressed to Mr. Allen Silberstein at 2
Water Street, Suite 17G, New York, New York 10004, telephone (212) 217-9139 and
email asilberstein@agscapitalgroup.com; and if to the Company, addressed to Mr.
Sydney A. Harland at 1213 Culbreth Drive, New York City, New York 28405,
telephone (910) 270-7749, telecopier (910) 270-6640, and e-mail harmuir.com.
 Any party hereto may change its address upon five (5) days’ written notice to
any other party hereto.

ARTICLE XII. Miscellaneous

Section 12.1.

Counterparts.  This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  A facsimile transmission or PDF copy of this
signed Agreement shall be legal and binding on all parties hereto.

Section 12.2.

Entire Agreement; Amendments.  This Agreement and the Registration Rights
Agreement supersede all other prior oral or written agreements between the
Investor, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the Registration
Rights Agreement and the instruments referenced herein and therein contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except

- 21-

as specifically set forth herein or therein, neither the Company nor the
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters.  No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged
with enforcement.

Section 12.3.

Reporting Entity for the Common Stock. The reporting entity relied upon for the
determination of the trading price or trading volume of the Common Stock on any
given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or
any successor thereto.  The written mutual consent of the Investor and the
Company shall be required to employ any other reporting entity.

Section 12.4.

Fees and Expenses.  Each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby.  Pursuant to Regulation D, the Company shall transfer to
the Investor restricted shares of the Common Stock equal to one percent of the
Commitment Amount upon signing this Agreement (“Commitment shares of the Common
Stock”).  The pricing for the Commitment shares of the Common Stock will be
based off of the Purchase Price.  The Commitment shares of the Common Stock
shall be included as part of the Registrable Securities and included in the
Registration Statement.  Provided, however, until such time as the Commitment
shares of the Common Stock are registered pursuant to the Registration
Statement, such shares shall be restricted in their resale as provided in the
Securities Act, and shall contain a legend as required by Rule 144 promulgated
under the Securities Act which shall read as follows:

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.

Section 12.5.

Confidentiality.  If for any reason the transactions contemplated by this
Agreement are not consummated, each of the parties hereto shall keep
confidential any information obtained from any other party (except information
publicly available or in such party’s domain prior to the date hereof, and
except as required by SEC regulations or court order) and shall promptly return
to the other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

Section 12.6.

Publicity.  The Company and the Investor shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior consent of
the other party, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other party with
prior notice of such public statement.  Notwithstanding the foregoing, the
Company shall not publicly disclose the name of the Investor without the prior
consent of the Investor, except to the extent required by law.  The Investor
acknowledges that this Agreement and all or part of this Agreement may be deemed
to be “material contracts” as that term is defined by Item 601(b)(10) of
Regulation S-K, and that the Company may therefore be required to file such
documents as exhibits to reports or registration statements filed under the
Securities Act or the Exchange Act.  The Investor further agrees that the status
of such documents and materials as material contracts shall be determined solely
by the Company, in consultation with its counsel.

Section 12.7.

Placement Agent.  If so required by the SEC, the Company agrees to pay a
registered broker dealer, to act as placement agent, a percentage of the Put
Amount on each draw toward the fee.  The Investor shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
persons or entities for fees of a type contemplated in this Section that may be
due in connection with the transactions contemplated by this Agreement.  The
Company shall indemnify and hold harmless the Investor, their employees,
officers, directors, agents, and partners, and their respective affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney’s fees) and expenses incurred in respect of any such
claimed or existing fees, as such fees and expenses are incurred.

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Section 12.8.

No Third Party Beneficiaries.  Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto any rights,
remedies, obligations or liabilities under or by reason of this Agreement, and
no Person that is not a party to this Agreement (including without limitation
any partner, member, shareholder, director, officer, employee or other
beneficial owner of any party hereto, in its own capacity as such or in bringing
a derivative action on behalf of a party hereto) shall have any standing as
third party beneficiary with respect to this Agreement or the transactions
contemplated hereby.

Section 12.9.

No Personal Liability of Directors, Officers, Owners, etc.  No director,
officer, employee, incorporator, shareholder, managing member, member, general
partner, limited partner, principal or other agent of any of the Investor or the
Company shall have any liability for any obligations of the Investor or the
Company under this Agreement or for any claim based on, in respect of, or by
reason of, the respective obligations of the Investor or the Company hereunder.
 Each party hereto hereby waives and releases all such liability.  This waiver
and release is a material inducement to each party’s entry into this Agreement.

Section 12.11.

Benefit.  All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto, and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns.

Section 12.12.

Construction.  Words of any gender used in this Agreement shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, and vice versa, unless the context requires
otherwise.

Section 12.13.

Waiver.  No course of dealing on the part of any party hereto or its agents, or
any failure or delay by any such party with respect to exercising any right,
power or privilege of such party under this Agreement or any instrument referred
to herein shall operate as a waiver thereof, and any single or partial exercise
of any such right, power or privilege shall not preclude any later exercise
thereof or any exercise of any other right, power or privilege hereunder or
thereunder.

Section 12.14.

Cumulative Rights.  The rights and remedies of any party under this Agreement
and the instruments executed or to be executed in connection herewith, or any of
them, shall be cumulative and the exercise or partial exercise of any such right
or remedy shall not preclude the exercise of any other right or remedy.

Section 12.15.

Invalidity.  In the event any one or more of the provisions contained in this
Agreement or in any instrument referred to herein or executed in connection
herewith shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect the other provisions of this Agreement or any such other instrument.

Section 12.16.

Headings.  The headings used in this Agreement are for convenience and reference
only and in no way define, limit, amplify or describe the scope or intent of
this Agreement, and do not affect or constitute a part of this Agreement.

Section 12.17.

Excusable Delay.  The parties shall not be obligated to perform and shall not be
deemed to be in default hereunder, if the performance of a non-monetary
obligation required hereunder is prevented by the occurrence of any of the
following, other than as the result of the financial inability of the party
obligated to perform: acts of God, strikes, lock-outs, other industrial
disturbances, acts of a public enemy, war or war-like action (whether actual,
impending or expected and whether de jure or de facto), acts of terrorists,
arrest or other restraint of government (civil or military), blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
hurricanes, storms, floods, washouts, sink holes, civil disturbances,
explosions, breakage or accident to equipment or machinery, confiscation or
seizure by any government or public authority, nuclear reaction or radiation,
radioactive contamination or other causes, whether of the kind herein enumerated
or otherwise, that are not reasonably within the control of the party claiming
the right to delay performance on account of such occurrence.

Section 12.18.

Time of the Essence.  Time is of the essence of this Agreement.

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Section 12.19.

Incorporation by Reference.  The exhibits and schedules to this Agreement
referred to or included herein constitute integral parts to this Agreement and
are incorporated into this Agreement by this reference.

Section 12.20.

Controlling Agreement.  In the event of any conflict between the terms of this
Agreement or any of the other agreements or exhibits referred to herein, the
terms of this Agreement shall control.

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

AGS CAPITAL GROUP, LLC

By

    Allen Silberstein, Chief Executive Officer

GLOBAL EARTH ENERGY, INC.

By

    Sydney A. Harland, Chief Executive Officer

 

Attachments:

 

Exhibit A

Form of Advance Notice

Exhibit B

Registration Rights Agreement

Exhibit C

Form of Opinion of Counsel

Schedules:

 

Schedule 2.4

Form of Lock Up Agreement

Schedule 4.3

Outstanding Options, Warrants, etc.

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