SECURITIES PURCHASE AGREEMENT
 
THIS AGREEMENT dated as of the 23rd Day of March, 2009 (the “Agreement”) between
TANGIERS INVESTORS, LP, a limited partnership (the “Investor”), and SKINS, INC.,
a corporation organized and existing under the laws of the State of Nevada (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
Two Million Dollars ($2,000,000) of the Company’s common stock, par value $0.001
per share (the “Common Stock”); and

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, as provided
herein, and the Investor shall purchase (i) a convertible debenture in the
principal amount of Eighty-Five Thousand Dollars ($85,000) (the “Convertible
Debenture”), which shall be convertible into shares of the Company’s common
stock, par value $.001 (the “Common Stock”) (as converted, the “Conversion
Shares”); and

WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D (“Regulation D”) of the Securities Act of 1933, as amended, and the
regulations promulgated thereunder (the “Securities Act”), and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
  
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 (1st) 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 requiring the Investor to advance funds to the Company, subject to the
terms of this Agreement. No Advance Notice Date shall be less than ten (10)
Trading Days after the prior Advance Notice Date.
 
Section 1.5.     “Bid Price” shall mean, on any date, the closing bid price (as
reported by Bloomberg L.P.) 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 National Association of
Securities Dealers, Inc.
 
Section 1.6.     “Closing” shall mean one of the closings of a purchase and sale
of Common Stock pursuant to Section 2.3.

 
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Section 1.7.     “Commitment Amount” shall mean the aggregate amount of up to
Two Million Dollars ($2,000,000) which the Investor has agreed to provide to the
Company in order to purchase the Company’s Common Stock pursuant to the terms
and conditions of this Agreement.
 
Section 1.8.     “Commitment Period” shall mean the period commencing on the
Effective Date, and expiring on the earliest to occur of (x) the date on which
the Investor shall have made payment of Advances pursuant to this Agreement in
the aggregate amount of the Commitment Amount, (y) the date this Agreement is
terminated pursuant to Section 10.2 which in no event shall be more
than  eighteen months after the Effective Date.
 
Section 1.9.     “Common Stock” shall mean the Company’s common stock, par value
$.001 per share.
 
Section 1.10.   “Condition Satisfaction Date” shall have the meaning set forth
in Section 7.2.
 
Section 1.11.   “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 1.12.   “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 1.13.   “Exchange Act” shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
 
Section 1.14.         “Material Adverse Effect” shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this Agreement or the Registration Rights Agreement in any material
respect.
 
Section 1.15.           “Market Price” shall mean the lowest daily volume
weighted average price of the Common Stock during the Pricing Period.
 
Section 1.16.           “Maximum Advance Amount”  The maximum dollar amount of
each Advance will be equal to the average daily trading volume in dollar amount
during the ten (10) trading days preceding the Advance Date. No Advance will be
made in an amount lower than the Minimum Advance Amount (defined below) or
higher than Two Hundred Fifty Thousand Dollars ($250,000).

Section 1.17.           “Minimum Advance Amount” shall be Two Thousand Five
Hundred Dollars Hundred ($2,500) per Advance Notice.
 
Section 1.18.           “NASD” shall mean the National Association of Securities
Dealers, Inc.
 
Section 1.19.           “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 1.20.   “Pricing Period” shall mean the five (5) consecutive Trading
Days after the Advance Notice Date subject to the terms and conditions provided
herein.

 
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Section 1.21.         “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 1.22.          “Purchase Price” shall be set at ninety percent (90%) of
the Market Price during the Pricing Period.
 
Section 1.23.          “Registrable Securities” shall mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration Statement
has not been declared effective by the SEC, (ii) 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 (iii)
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 1.24.          “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.
 
Section 1.25.          “Registration Statement” shall mean a registration
statement on Form S-1 (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.
 
Section 1.26.          “Regulation D” shall have the meaning set forth in the
recitals of this Agreement.
 
Section 1.27.          “SEC” shall mean the United States Securities and
Exchange Commission.
 
Section 1.28.          “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.
 
Section 1.29.          “SEC Documents” shall mean Annual Reports on Form 10-KSB,
10-K, Quarterly Reports on Form 10-QSB, 10-Q, Current Reports on Form 8-K and
Proxy Statements of the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months immediately preceding the
date hereof or the Advance Date, as the case may be, until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
 
Section 1.30.          “Trading Day” shall mean any day during which the New
York Stock Exchange shall be open for business.
 
Section 1.31.          “VWAP” shall mean the volume weighted average price of
the Company’s Common Stock as quoted by Bloomberg, LP.

 
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ARTICLE II.
Advances and Purchase of Convertible Debenture
 
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 Company’s Common Stock by the delivery,
in the Company’s sole discretion, of Advance Notices. The number of shares of
Common Stock that the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the Purchase Price. No
fractional shares shall be issued. Fractional shares shall be rounded to the
next higher whole number of shares. 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 Common Stock by delivering an
Advance Notice to the Investor, subject to the conditions set forth in
Section 7.2; provided, however, the amount for each Advance as designated by the
Company in the applicable Advance Notice shall not be less than the Minimum
Advance Amount, nor more than the Maximum Advance Amount and the aggregate
amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount. The Company acknowledges that the Investor may sell shares of
the Company’s Common Stock corresponding with a particular Advance Notice after
the Advance Notice is received by the Investor. There shall be a minimum of ten
(10) Trading Days between each Advance Notice Date, unless prior written
approval is provided by the Investor to the Company.
 
(b)     Date of Delivery of Advance Notice. An Advance Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 5:00 pm Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by facsimile or otherwise
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.
 
Section 2.3.    Closings. On each Advance Date (i) the Company shall deliver to
the Investor such number of shares of the Common Stock registered in the name of
the Investor as shall equal (x) the amount of the Advance specified in such
Advance Notice pursuant to Section 2.1 herein, divided by (y) the Purchase Price
and (ii) upon receipt of such shares, the Investor shall deliver to the Company
the amount of the Advance specified in the Advance Notice by wire transfer of
immediately available funds. In addition, 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
this Agreement in order to implement and effect the transactions contemplated
herein. To the extent the Company has not paid the fees, expenses, and
disbursements 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 Company’s Common Stock to be delivered
on such Advance Date.
 
(a) Company’s Obligations Upon Closing.
 
On each Advance Date:
(i)             The Company shall deliver to the Investor via DWAC transfer the
shares of Common Stock applicable to the Advance in accordance with Section 2.3.
The certificates evidencing such shares shall be free of restrictive legends,
provided such shares are registered pursuant to an effective registration
statement.

 
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(ii)            the Company’s Registration Statement with respect to the resale
of the shares of Common Stock delivered in connection with the Advance shall
have been declared effective by the SEC;
 
(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 Commission regulations;
 
(v)            the fees as set forth in Section 12.4 below shall have been paid
or can be withheld as provided in Section 2.3; and
 
(vi)           the Company’s transfer agent shall be DWAC eligible.
 
(b)     Investor’s Obligations Upon Closing. Upon receipt of the shares
referenced in Section 2.3(a)(i) above 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.    Hardship.  In the event the Investor sells shares of the
Company’s Common Stock after receipt of an Advance Notice and the Company fails
to deliver to the Investor on the Advance Date the shares of Common Stock
corresponding to the applicable Advance pursuant to Section 2.3(a)(i), the
Company acknowledges that the Investor shall suffer financial hardship and,
provided that the Investor has performed its obligations pursuant to Section
2.3, and therefore the Company shall be liable for any and all losses,
commissions, fees, or financial hardship caused to the Investor. Provided,
however, that the Company shall not be liable for any losses, commissions, fees
or financial hardship caused to the Investor if some act of god has occurred, or
some other event outside of the Company’s control, that would prevent the
Company from delivering the shares of Common Stock to the Investor as required
pursuant to Section 2.3 above.

Section 2.6.            Purchase and Sale of Convertible Debenture

(a)           Subject to the satisfaction (or waiver) of the terms and
conditions of this Agreement, Investor agrees to purchase on the date hereof and
the Company agrees to sell and issue to Investor, a Convertible Debenture in the
amount of Eighty Five Thousand Dollars ($85,000).

(b)           On the date hereof, the Company shall reserve for issuance to the
Investor 1,000,000 shares for issuance upon conversions of the Convertible
Debentures, (the “Share Reserve”). The Company represents that it has sufficient
authorized and unissued shares of Common Stock available to create the Share
Reserve after considering all other commitments that may require the issuance of
Common Stock. The Company shall take all action reasonably necessary to at all
times have authorized, and reserved for the purpose of issuance, such number of
shares of Common Stock as shall be necessary to effect the full conversion of
the Convertible Debenture. If at any time the Share Reserve is insufficient to
effect the full conversion of the Convertible Debenture, the Company shall
increase the Share Reserve accordingly. If the Company does not have sufficient
authorized and unissued shares of Common Stock available to increase the Share
Reserve, the Company shall call and hold a special meeting of the shareholders
within thirty (30) days of such occurrence, for the sole purpose of increasing
the number of shares authorized. The Company’s management shall recommend to the
shareholders to vote in favor of increasing the number of shares of Common Stock
authorized. Management shall also vote all of its shares in favor of increasing
the number of authorized shares of Common Stock.

 
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(c)       The Company acknowledges and agrees to provide its transfer agent any
and all documents required by its transfer agent to assist the Investor with its
conversion of the Convertible Debenture into the Conversion Shares of the
Company, including a legal opinion for the entire amount of the Conversion
Shares underlying the Convertible Debenture and resolutions of the Company
giving Michael Sobeck the authority to convert the Convertible Debenture into
the Conversion Shares of the Company and allowing the transfer agent to issue
the full shares reserved and/or transfer such shares at the direction of Michael
Sobeck.
 
(d)       Investor acknowledges and agrees to provide the Company’s transfer
agent, any and all documents required by the transfer agent in order to convert
the Convertible Debenture into the Conversion Shares, including a medallion
stamp stock power, a seller representation letter/broker representation letter
(if applicable) and a resolution from the Investor authorizing Michael Sobeck to
transfer the Conversion Shares in the name of the Investor.
 
(e)       The Company shall not change its transfer agent without the express
written consent of the Investor, which may be withheld by the Investor in their
sole discretion. If the Investor effects a sale, assignment or transfer of the
Conversion Shares the Company shall within 2 business days instruct its transfer
agent to issue one or more certificates or credit shares to the applicable
balance accounts at DTC in such name and in such denominations as specified by
Michael Sobeck to effect such sale, transfer or assignment and, with respect to
any transfer, shall permit the transfer in accordance with this Section. Nothing
in this Section shall affect in any way the Investor’s obligations and agreement
to comply with all applicable securities laws upon resale of Conversion Shares.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Investor by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Investor shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.

ARTICLE III.
Representations and Warranties of Investor
 
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 such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
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.

 
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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.    Investment Purpose. The securities are being purchased by the
Investor for its own account, and for investment purposes. The Investor agrees
not to assign or in any way transfer the Investor’s rights to the securities or
any interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer except in accordance with applicable Federal
and state securities laws. No other person has or will have a direct or indirect
beneficial interest in the securities. The Investor agrees not to sell,
hypothecate or otherwise transfer the Investor’s securities unless the
securities are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.
 
Section 3.5.    Accredited Investor. The Investor is and shall be on each
Advance Date, an “Accredited Investor” as that term is defined in Rule 501(a)(3)
of Regulation D of the Securities Act.
 
Section 3.6.    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
such 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 has sought such
accounting, legal and tax advice, as it has considered necessary to make an
informed investment decision with respect to this transaction.
 
Section 3.7.    Receipt of Documents. The Investor and its counsel have received
and read in their entirety: (i) this Agreement and the Exhibits annexed hereto;
(ii) all due diligence and other information necessary to verify the accuracy
and completeness of such representations, warranties and covenants; (iii) the
Company’s most recent periodic filings filed with the SEC; and (iv) 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 3.8.    Registration Rights Agreement. The parties have entered into the
Registration Rights Agreement dated the date hereof.
 
Section 3.9.    No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.
 
Section 3.10.    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).

 
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Section 3.11.          Trading Activities. The Investor’s trading activities
with respect to the Company’s 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 Company’s Common
Stock is listed or traded. Neither the Investor nor its affiliates has an open
short position in the Common Stock of the Company, the Investor agrees that it
shall not, and that it will cause its affiliates not to, engage in any short
sales of or hedging transactions with respect to the Common Stock, provided that
the Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be issued to the Investor pursuant
to the Advance Notice during the applicable Pricing Period. 

Section 3.12   Reliance on Exemptions.  The Investor  understands that the
Common Stock is being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Investor’ compliance with, the representations, warranties, agreements,
acknowledgements and understandings of such Investor set forth here in order to
determine the availability of such exemptions and the eligibility of such
Investor to acquire the Common Stock.

Section 3.13   No Governmental Review.  The Investor understands that no United
States, federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Common Stock
issuable pursuant to this Agreement or the fairness or suitability of the
investment in the Common Stock nor have such authorities passed upon or endorsed
the merits of the offering of the Common Stock.
 
ARTICLE IV.
Representations and Warranties of the Company
 
Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents (as defined herein), 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.
(i) 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, (ii) 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 stockholders, (iii) this Agreement, the
Registration Rights Agreement and any related agreements have been duly executed
and delivered by the Company, (iv) 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.

 
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Section 4.3.    Capitalization. The authorized capital stock of the Company
consists of 436,363,650 shares of Common Stock and zero shares of Preferred
Stock, $0.001 par value per share (“Preferred Stock”), of which 70,238,660
shares of Common Stock and no shares of Preferred Stock are issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. Except as disclosed in the SEC Documents and the
options issued by the Company on February 5, 2009 listed on Schedule 4.3
attached hereto, no shares of 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 in the SEC Documents, as of the date hereof,
(i) 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, (ii) there
are no outstanding debt securities (iii) there are no outstanding registration
statements other than on Form S-8 and (iv) 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 as disclosed in the SEC
Documents, 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 Certificate of Incorporation, as amended and as in effect on the date
hereof (the “Certificate 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 Common Stock and the material rights of the
holders thereof in respect thereto.
 
Section 4.4.    No Conflict. Subject to the Company’s Certificate of
Incorporation, the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of Incorporation,
any certificate of designations of any outstanding series of preferred stock of
the Company or By-laws or (ii) conflict with or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument 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. Except as disclosed in the SEC Documents, 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.

 
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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 since the 10-K for the year ended
December 31, 2007. 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 financial statements of the Company disclosed in the SEC
Documents (the “Financial Statements”) 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 (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
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). 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 circumstances under
which they were made, not misleading.

Section 4.6.    10b-5. The SEC Documents do not include any untrue statements of
material fact, nor do they omit to state any material fact required to be stated
therein necessary to make the statements made, in light of the circumstances
under which they were made, not misleading.
 
Section 4.7.    No Default. Except as disclosed in the SEC Documents, 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 (which has not been waived)
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
attachments hereto will conflict with or result in the breach or violation
(which has not been waived)  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 Certificate 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. Except for matters described in
the SEC Documents and/or this Agreement, 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.

 
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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
(i) 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”), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.
 
Section 4.12.         Title. Except as set forth in the SEC Documents, 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.
 
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. Except as disclosed in the
SEC Documents, the Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. Schedule 4.15 discloses the deficiencies that have
been noted in the SEC Documents.

 
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Section 4.16.          No Material Adverse Breaches, etc. Except as set forth in
the SEC Documents, 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. Except as set forth in the SEC
Documents, 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
(i) have a Material Adverse Effect on the transactions contemplated hereby (ii)
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 (iii) except as expressly disclosed in the SEC
Documents, 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. Except as disclosed in the SEC Documents, 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.
 
Section 4.20.          Certain Transactions. Except as set forth in the SEC
Documents 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.          Fees and 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 general corporate purposes, including, without
limitation, the payment of loans incurred by the Company. However, in no event
shall the Company use the net proceeds from this offering for the payment (or
loan to any such person for the payment) of any judgment, or other liability,
incurred by any executive officer, officer, director or employee of the Company,
except for any liability owed to such person for services rendered, expense
reimbursement or if any judgment or other liability is incurred by such person
originating from services rendered to the Company, or the Company has
indemnified such person from liability.

 
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Section 4.23.         Further Representation and Warranties of the Company. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will use its best efforts to maintain the listing of its Common Stock on the
Principal Market.
  
Section 4.25.         Opinion of Counsel. The Company will obtain, subject to
applicable securities laws, 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. If the Company can not or
will not meet this obligation then the investor may provide an independent
opinion and the transfer agent may solely rely upon it.
 
Section 4.26.         Dilution.  The Company is aware and acknowledges that
issuance of shares of the Company’s Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.

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 such 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 (a) 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, (b) 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 (c) any cause of action, suit or claim brought or made against
such 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.

 
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(b)            In consideration of the Company’s execution and delivery of this
Agreement, and in addition to all of the Investor’s other obligations under this
Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, shareholders, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Company
Indemnitees”) from and against any and all Indemnified Liabilities incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Investor in this Agreement, the Registration Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant, agreement or obligation of the
Investor(s) contained in this Agreement, the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or thereby
executed by the Investor, or (c) any cause of action, suit or claim brought or
made against such Company Indemnitee based on misrepresentations or due to a
breach by the Investor 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 Company
Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason, the Investor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
 
(c)             The obligations of the parties to indemnify or make contribution
under this Section 5.1 shall survive termination.

ARTICLE VI.
Covenants of the Company
 
Section 6.1.    RESERVED.
 
Section 6.2.    Listing of Common Stock. During the term of the Commitment
Period, the Company shall maintain the Common Stock’s authorization for
quotation on the Principal Market.
 
Section 6.3.    Exchange Act Registration. During the term of the Commitment
Period, the Company will cause its 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. Upon effectiveness of the
Registration Statement the Company shall deliver instructions to its transfer
agent to issue shares of Common Stock to the Investor free of restrictive
legends before each Advance Date.
 
Section 6.5.    Corporate Existence. During the Commitment period, 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: (i) receipt of any request for additional material
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; (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 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; (iv) 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 (v) 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.

 
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Section 6.7.    Restriction on Sale of Capital Stock. The Company shall not, for
a period of at least 10 trading days after the Company has issued an Advance
Notice to the Investor, without the Investor’s prior written consent , (i) issue
or sell any Common Stock or Preferred Stock without consideration or for a
consideration per share less than the Bid Price of the Common Stock determined
immediately prior to its issuance, or (ii) issue or sell any Preferred Stock
warrant, option, right, contract, call, or other security or instrument granting
the holder thereof the right to acquire Common Stock without consideration or
for a consideration per share less than the Bid Price of the Common Stock
determined immediately prior to its issuance. Notwithstanding the foregoing this
Section shall not apply in respect of an Exempt Issuance or an underwritten
public offering of Common Stock.  For purposes of this Agreement “Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers, directors or consultants of the Company pursuant to any
stock or option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the members of a
committee of non-employee directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities or to decrease the
exercise, exchange or conversion price of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that any such issuance
shall only be to a Person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company and
in which the Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.
 
Section 6.8.    Consolidation; Merger. During the Commitment Period, the Company
shall not, at any time after the date hereof, 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 Company’s Common Stock. The sale of the shares
of Common Stock shall be made in accordance with the provisions and requirements
of Regulation D 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
Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, 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.
 
Section 6.11.         Market Activities. The Company will not, directly or
indirectly, (i) 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 (ii) sell, bid for or purchase the Common
Stock, or pay anyone any compensation for soliciting purchases of the Common
Stock.

 
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Section 6.12           Other Equity Line Financings. The Company will not,
without the prior written consent of the Investor, enter into any other equity
line of credit financing similar to the type of financing that is contemplated
by this Agreement. The Investors consent shall not be unreasonably withheld.

ARTICLE VII.
Conditions Precedent
 
Section 7.1.    Conditions Precedent to the Obligations of the Company. The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the Investor incident to each Closing is subject to the satisfaction, or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.
 
(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 (a “Condition
Satisfaction Date”), of each of the following conditions:
 
(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 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 Common Stock, or shall have
the availability of exemptions therefrom. The sale and issuance of the shares of
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.

 
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(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 Common Stock. The trading of
the Common Stock is not suspended by the SEC or the Principal Market (if the
Common Stock is traded on a Principal Market). The issuance of shares of Common
Stock with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market (if the Common Stock
is traded on a Principal Market). The Company shall not have received any notice
threatening the continued listing of the Common Stock on the Principal Market
(if the Common Stock is traded on a Principal Market).
 
(g)    Maximum Advance Amount. The amount of an Advance requested by the Company
shall not exceed the Maximum Advance Amount. In addition, in no event shall the
number of shares issuable to the Investor pursuant to an Advance cause the
aggregate number of shares of Common Stock beneficially owned by the Investor
and its affiliates to exceed nine and 9/10 percent (9.9%) of the then
outstanding Common Stock of the Company. 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.

(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.

Section 7.3 Conditions Precedent to the Company’s Obligation to Sell.
 
The obligation of the Company hereunder to issue and sell the Convertible
Debenture to the Investor is subject to the satisfaction of each of the
following conditions, provided that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion:
 
(a)  The Investor shall have executed each of the documents required to complete
the transactions contemplated by this Agreement (the “Transaction Documents”)
and delivered them to the Company. The Investor shall have delivered to the
Company the $85,000 cash for the Convertible Debenture, minus $20,000 to be paid
to Christopher K. Davies for preparation of the Company’s S-1 Registration
Statement related to this Securities Purchase Agreement and for preparing any
and all responses to the SEC on behalf of the Company. Mr. Davies shall provide
legal service until such time as the Company’s Registration Statement has been
declared effective by the SEC.  services The proceeds as set forth herein shall
be delivered by wire transfer of immediately available U.S. funds pursuant to
the wire instructions provided by the Company.(b)  The representations and
warranties of the Investor shall be true and correct in all material respects as
of the date when made.

 
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Section 7.4 Conditions to Investor’s Obligations to the Investor’s Obligation to
Purchase.
 
The obligation of the Investor(s) hereunder to purchase the Convertible
Debentures at the First Closing is subject to the satisfaction, at or before the
First Closing Date, of each of the following conditions:

 
(a)
The Company shall have executed the Transaction Documents and  delivered the
same to the Buyers.

 
(b)
The Common Stock shall be authorized for quotation or trading on the Primary
Market, trading in the Common Stock shall not have been suspended for any
reason.

 
(c)
The representations and warranties of the Company shall be true and correct in
all material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the First Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the First Closing Date.

 
(d)
The Company shall have executed and delivered to the Investor the Convertible
Debentures in the respective amounts set forth opposite each Buyer’s name on
Schedule I attached hereto.

 
(e)
The Company shall have provided to the Buyers a true copy of a certificate of
good standing evidencing the formation and good standing of the Company from the
secretary of state (or comparable office) from the jurisdiction in which the
Company is incorporated, as of a date within 10 days of the First Closing Date.

 
(f)
The Company shall have delivered to the Investor a certificate, executed by the
Secretary of the Company and dated as of the First Closing Date, as to (i) the
resolutions consistent with Section 3(c) as adopted by the Company's Board of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the First Closing.

 
(g)
The Company shall have created the Share Reserve.

ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information
 
Section 8.1.    Non-Disclosure of Non-Public Information.
 
(a)    The Company covenants and agrees that it shall refrain 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, unless prior to disclosure of such
information the Company identifies such information as being material non-public
information and provides the Investor with the opportunity to accept or refuse
to accept such material non-public information for review.

 
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(b)    Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, 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
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 8.2 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 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 9.1.    Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in the State of California, and expressly
consent to the jurisdiction and venue of the courts, sitting in California and
the United States District Court of California for the adjudication of any civil
action asserted pursuant to this paragraph.
 
ARTICLE X.
Assignment; Termination
 
Section 10.1.   Assignment. Neither this Agreement nor any rights of the Company
hereunder may be assigned to any other Person.
 
Section 10.2.   Termination.
 
(a)    The obligations of the Investor to make Advances under Article II hereof
shall terminate eighteen (18) months after the Effective Date. The Company’s
obligations under this Agreement shall terminate on the date that the Investor
is no longer obligated to make Advances.
 
(b)    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 fifty (50) Trading Days, other than due to the acts of the
Investor, 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 termination provision 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.

(c)           The Company shall have the right, but not the obligation, to
terminate this Agreement if at anytime during the Commitment Period the Investor
is unable to provide the Company Advances for a period of at least seven (7)
consecutive business days.

 
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ARTICLE XI.
Notices
 
Section 11.1.         Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

If to the Company, to:
Skins, Inc.
 
1 Newark Street
Suite 25A
Hoboken New Jersey  07030
     
Attention: Mark Klein
 
Telephone: (201) 377-5502
Facsimile: (212) 656-1788
   
If to the Investor(s):
Tangiers Capital, LLC
1446 Front St. Suite 400
San Diego, CA 92101
Telephone: (424) 832-3213
Facsimile: (619) 566-2011

Each party shall provide five (5) days’ prior written notice to the other party
of any change in address or facsimile number.
 
ARTICLE XII.
Miscellaneous
 
Section 12.1.          Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.
 
Section 12.2.          Entire Agreement; Amendments. This Agreement supersedes
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 and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except 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.

 
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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.          Commitment Fee. The Company hereby agrees to pay the
following fees:

Upon the execution of this Agreement the Company shall issue to the Investor
shares of  stock in an amount equal to One Hundred Thousand Dollars ($100,000)
divided by the lowest VWAP of the Company’s Common Stock during the ten (10)
business days immediately following the date hereof, as quoted by Bloomberg, LP
(the “Investor’s Shares”). Such Investor Shares shall not be registered on the
Company’s Registration Statement.

The Company shall pay to Christopher K. Davies an amount equal to $20,000 for
legal services (the “Legal Fees”).  The Legal Fees shall be deducted from the
Convertible Debenture and issued simultaneously with the Investor distributing
the funds under the Convertible Debenture to the Company.

The Investor’s Shares shall be deemed fully earned as of the date hereof.

Section 12.5.          Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other
party.  The Company on the one hand, and the Investor, on the other hand, agree
to indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder’s fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
 
Section 12.6.          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 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.
 
[SIGNATURE PAGE TO FOLLOW]
 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
 
COMPANY:
Skins, Inc.
 
 
Name:
 Mark Klein
Title:
Chief Executive Officer
   
INVESTOR:
Tangiers Investors, LP
     
 
By:
Tangiers Capital, LLC
Its:
General Partner

 
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EXHIBIT A
 
ADVANCE NOTICE
 
SKINS, INC.
 
The undersigned, _______________________ hereby certifies, with respect to the
sale of shares of Common Stock of SKINS, INC. (the “Company”) issuable in
connection with this Advance Notice, delivered pursuant to the Securities
Purchase Agreement (the “Agreement”), as follows:
 
1.      The undersigned is the duly elected ______________ of the Company.
 
2.      There are no 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.
 
3.      The Company has performed in all material respects all covenants and
agreements to be performed by the Company and has complied in all material
respects with all obligations and conditions contained in the Agreement on or
prior to the Advance Notice Date, and shall continue to perform in all material
respects all covenants and agreements to be performed by the Company through the
applicable Advance Date. All conditions to the delivery of this Advance Notice
are satisfied as of the date hereof.
 
4.      The undersigned hereby represents, warrants and covenants that it has
made all filings (“SEC Filings”) required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings required
under the Securities Exchange Act of 1934, which include Forms 10-Q or 10-QSB,
10-K or 10-KSB, 8-K, etc.). All SEC Filings and other public disclosures made by
the Company, including, without limitation, all press releases, analysts
meetings and calls, etc. (collectively, the “Public Disclosures”), have been
reviewed and approved for release by the Company’s attorneys and, if containing
financial information, the Company’s independent certified public accountants.
None of the Company’s Public Disclosures 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.
 
5.      The Advance requested is _____________________.
 
The undersigned has executed this Certificate this ____ day of
_________________.
 
SKINS, INC.
   
By:
 
Name:
 
Title:
 

 
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SCHEDULE 4.3
 
Options Issued

 
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