Exhibit 10.115 - Form of Subscription Agreement





	



FORM OF SUBSCRIPTION
AGREEMENT 



        This
Subscription Agreement (this “Agreement”) is entered into as of the date
set forth on the signature page hereof by and between Eos International, Inc., a Delaware
corporation (together with its successors and permitted assigns, the
“Issuer”), and the undersigned investor (together with its successors and
permitted assigns, the “Investor”). Capitalized terms used but not
otherwise defined herein shall have the meanings set forth in Section 9.1. 



RECITALS 



        Subject
to the terms and conditions of this Agreement, the Investor desires to subscribe for and
purchase, and the Issuer desires to issue and sell to the Investor, certain shares of the
Issuer’s common stock, par value $0.01 per share (the “Common
Stock”). The Issuer is offering an aggregate of 15,000,000 shares of Common Stock
in a private placement to the Investor and other investors at a purchase price of $0.50
per share and on the other terms and conditions contained in this Agreement (the
“Offering”), provided that the Issuer reserves the right to sell a
lesser number of shares. 



TERMS OF AGREEMENT 



        In
consideration of the mutual representations and warranties, covenants and agreements
contained herein, the parties hereto agree as follows: 



ARTICLE 1 

SUBSCRIPTION AND ISSUANCE OF COMMON STOCK 



    1.1      
  Subscription
and Issuance of Common Stock.  













		    (a)                            Subject
     to the terms and  conditions of this  Agreement,  the Issuer will issue and
sell to the Investor and the Investor  subscribes for and will purchase from the
Issuer  the  number of shares of Common  Stock set forth on the  signature  page
hereof (the  “Shares”)  for the  aggregate  purchase  price set
forth on the signature  page hereof,  which shall be equal to the product of the
number of Shares  subscribed  for by the Investor  times the per share  purchase
price  specified in the above Recitals to this Agreement (the  “Purchase
Price”). 



     







		    (b)                     All
     funds  received by the Issuer in connection  with the  subscription  offers
will be held in escrow with JP Morgan  Chase Bank, a New York  corporation.  If,
for any  reason,  the Issuer  does not  complete  the  Offering  or if funds are
otherwise returned to the Investor, all of the cash paid by the Investor for the
Shares  subscribed  for will be returned to the Investor with  interest.  If the
Issuer does close the Offering, all subscription payments will be distributed to
the Issuer. 








	




















		    1.2       
 Legend.   Any certificate or certificates representing the Shares shall bear the following legend: 







	  	
THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED
OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF
ANY STATE WITH RESPECT THERETO OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION. 






ARTICLE 2 

CLOSING 



		    
2.1        Closing.   The
closing of the transactions contemplated herein (the “Closing”) shall
take place on a date designated by the Issuer, which date shall be on or before January
8, 2003. The Closing shall take place at the offices of at the offices of Pitney, Hardin,
Kipp & Szuch, LLP, 200 Campus Drive, Florham Park, New Jersey commencing at 10:00
a.m. local time (the “Closing”) or at such other time and place as the
parties may otherwise agree. At the Closing, unless the Investor and the Issuer otherwise
agree (i) the Investor shall pay the Purchase Price to the Issuer, by wire transfer of
immediately available funds to an account designated in writing by the Issuer; (ii) the
Issuer shall issue to the Investor the Shares, and deliver to the Investor certificates
for the Shares duly registered in the name of the Investor; and (iii) all other
agreements and other documents referred to in this Agreement which are required for the
Closing shall be executed and delivered (if that is not done prior to the Closing).  







		    
2.2        Termination.   This Agreement
may be terminated at any time prior to the Closing: 







		    
(a)           
by mutual written consent of the Issuer and the Investor; 







		    (b)                     by
     the Investor,  upon a material breach of any  representation  and warranty,
covenant or agreement on the part of the Issuer set forth in this Agreement,  or
if any  material  representation  and  warranty of the Issuer  shall have become
untrue in any  material  respect,  in either  case such that the  conditions  in
Section  8.1  would be  incapable  of being  satisfied by the date of the
Closing; or 







		    (c)                     by
     the Issuer,  upon a material  breach of any  representation  and  warranty,
covenant or agreement  on the part of the Investor set forth in this  Agreement,
or if any material representation and warranty of the Investor shall have become
untrue in any  material  respect,  in either  case such that the  conditions  in
Section  8.2  would be  incapable  of being  satisfied by the date of the
Closing. 








	


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2.3        Effect of  Termination.  
  In the  event of  termination  of this  Agreement pursuant to Section  2.2,  this Agreement  shall  forthwith  become void,
there shall be no  liability  on the part of the Issuer or the  Investor to each
other  and  all  rights  and  obligations  of  any  party  hereto  shall  cease;
provided,  however,  that, nothing herein shall relieve any
party from  liability for the willful breach of any of its  representations  and
warranties,   covenants   or   agreements   set   forth   in   this   Agreement.








ARTICLE 3 

REPRESENTATIONS AND WARRANTIES OF THE ISSUER 



        As
a material inducement to the Investor entering into this Agreement and subscribing for the
Shares, the Issuer represents and warrants to the Investor as follows: 



		    
3.1        Corporate Status.   The Issuer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Each Subsidiary of the Issuer
is a corporation duly organized, validly existing and in good standing under the laws of
its state or province of incorporation. Except as set forth on Schedule 3.1, the
Issuer and each Subsidiary of the Issuer are each duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in which such
qualification is required by reason of its ownership or leasing of real property, the
maintenance of offices, the warehousing of goods, the conduct of its business activities,
the nature of its business or otherwise. The Company possesses all requisite corporate
power and authority and all material licenses, permits and authorizations necessary to
own and operate its properties, to carry on its businesses as now conducted and presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement.  







		    
3.2        Corporate Power and Authority.   The Issuer and each Subsidiary of the Issuer has all
necessary power and authority and all material licenses, permits, and authorizations
necessary to own or to lease, and to operate all of its properties and assets, and to
carry on its business as it is now being conducted and presently proposed to be conducted
and to carry out the transactions contemplated by this Agreement. The Issuer has the
corporate power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. Copies of the
certificate of incorporation and by-laws of the Issuer and each of its Subsidiaries have
been furnished to Investor’s special counsel and reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete and no
actions have been taken or proposals made to modify or amend such certificates of
incorporation or by-laws other than the creation of the Issuer’s Series D Preferred
Stock and the Issuer’s Series E Junior Convertible Preferred Stock. At the time of
the closing, the Issuer will have taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.  







		    
3.3        Enforceability.  This
Agreement has been duly executed and delivered by the Issuer and constitutes a legal,
valid and binding obligation of the Issuer, enforceable against the Issuer in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and general equitable principles, regardless of whether
such enforceability is considered in a proceeding at law or in equity.  








	


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3.4        No Violation.    







		    (a)                     The
     execution and delivery by the Issuer of this Agreement, the consummation of
the transactions  contemplated hereby, and the compliance by the Issuer with the
terms and provisions hereof (including,  without  limitation,  the Issuer’s
issuance to the Investor of the Shares as contemplated by and in accordance with
this Agreement), will not violate the certificate of incorporation or by-laws of
the Issuer. 







		    (b)                     The
     execution and delivery by the Issuer of this Agreement, the consummation of
the transactions  contemplated hereby, and the compliance by the Issuer with the
terms and provisions hereof (including,  without  limitation,  the Issuer’s
issuance to the Investor of the Shares as contemplated by and in accordance with
this Agreement), will not result in a default under (or give any other party the
right,  with the giving of notice or the passage of time (or both), to declare a
default or accelerate any obligation under) or violate any Contract to which the
Issuer is a party (except to the extent such a default would not, in the case of
a Contract,  have an Issuer Material Adverse Effect),  or any Requirement of Law
applicable  to the Issuer,  or result in the creation or  imposition of any Lien
upon any of the capital stock,  properties or assets of the Issuer or any of its
Subsidiaries  (except where such Lien would not have an Issuer Material  Adverse
Effect). 







		    
3.5        Consents/Approvals.  Except
for the filing of a registration statement in accordance with Article 6 hereof,
filings under Regulation D and applicable blue sky filings which Issuer warrants will be
properly filed prior to applicable deadlines under federal and state securities laws, no
consents, filings, authorizations or other actions of any Governmental Authority are
required to be obtained or made by the Issuer for the Issuer’s execution, delivery
and performance of this Agreement which have not already been obtained or made. Except as
set forth on Schedule 3.5, no consent, approval, waiver or other action by any
Person under any Contract to which the Issuer is a party or by which the Issuer or any of
its properties or assets are bound is required or necessary for the execution, delivery
or performance by the Issuer of this Agreement and the consummation of the transactions
contemplated hereby, except where the failure to obtain such consents would not have an
Issuer Material Adverse Effect. Except as set forth on Schedule 3.5, the
execution, delivery and performance by the Issuer of this Agreement and all other
agreements contemplated hereby to which the Issuer is a party and the offering, sale and
issuance of the Shares, do not and shall not:  







     	(i) 	  	
          conflict with or result in a breach of the terms, conditions or provision of, 



          



     	(ii) 	  	
          constitute default under, 



          



     	(iii) 	  	
          result in the creation of any lien, security interest, charge or encumbrance
          upon the Issuer’s capital stock or assets pursuant to, 



          




	


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     	(iv) 	  	
          give any third party the right to modify, terminate or accelerate any obligation
          under, 



          



     	(v) 	  	
          result in a violation of, or 



          



     	(vi) 	  	
          require any authorization consent, approval, exemption or other action by or
          notice or declaration to or filing (except those filings to be timely made as
          set forth in the first sentence of this section) with, any court or
          administrative or governmental body or agency pursuant to 



          



the certificate of incorporation or
by-laws of the Issuer, or any law, statute, rule or regulation, Contract, instrument,
order, judgment or decree to which the Issuer or its assets are subject or bound. 



3.6 Valid Issuance.  
Upon payment of the Purchase Price by the Investor and delivery to the Investor of the
certificates for the Shares, such Shares will be validly issued, fully paid and
non-assessable. 



		    3.7        SEC
Filings, Other Filings.   Except as set forth on Schedule 3.7, since January 1,
2002 the Issuer has timely made all filings required to be made by it under the Exchange
Act. The Issuer has delivered or made accessible to the Investor true, accurate and
complete copies of Issuer’s (a) Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, (b) Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2002, June 30, 2002, and September 30, 2002, respectively, and (c) all Current
Reports on Form 8-K filed with, or furnished to, the SEC since January 1, 2002 (the “SEC
Reports”). The SEC Reports, when filed, complied in all material respects with
all applicable requirements of the Exchange Act. Each SEC Report, at the time of filing,
did not contain 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
not misleading in light of the circumstances in which they were made. Each balance sheet
included in the SEC Reports (including any related notes and schedules) is in accordance
with GAAP consistently applied during the periods involved and fairly presents in all
material respects the consolidated financial position of the Issuer as of its date, and
each of the other financial statements included in the SEC Reports (including any related
notes and Schedules) is in accordance with GAAP consistently applied during the periods
involved and fairly presents in all material respects the consolidated results of
operations of the Issuer for the periods or as of the dates therein set forth.  







		    
3.8        Commissions.   The
Issuer has not incurred any other obligation for any finder’s or broker’s or
agent’s fees or commissions in connection with the transactions contemplated hereby,
except that the Issuer will issue 900,000 shares of Common Stock to Allen & Company
LLC (“Allen”), the placement agent for the Offering, as commission.  








	


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3.9        Capitalization.   The
authorized capital stock of the Issuer consists of 100,000,000 shares of Common Stock and
1,000,000 shares of Preferred Stock. All issued and outstanding shares of capital stock
of the Issuer have been, and as of the Closing Date will be, duly authorized and validly
issued and are fully paid and non-assessable. As of the date of this Agreement, the
Issuer has issued and outstanding 56,132,098 shares of Common Stock and no shares of
Preferred Stock. Except as described in this Section 3.9 and on Schedule 3.9,
there are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal and similar rights) or agreements, orally or in
writing, for the purchase or acquisition from the Issuer of any shares of capital stock
of the Issuer. Except as described in this Section 3.9 and on Schedule 3.9,
the Issuer is not a party to or subject to any agreement or understanding, and there is
no agreement or understanding between any person and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security of the
Issuer or by any director of the Issuer. Except as disclosed on Schedule 3.9, the
Issuer has no obligation, contingent or otherwise, to redeem or repurchase any equity
security or any security that is a combination of debt and equity. All of the Issuer’s
outstanding shares of Common Stock have been issued either under a valid exemption from
registration under the Securities Act or pursuant to an effective registration statement
under the Securities Act.  







		    
3.10        Absence
of Undisclosed Liabilities.   Except as set forth in Schedule 3.10,
the Issuer and its Subsidiaries do not have any material obligation or liability (ether
accrued, absolute, contingent, unliquidated or otherwise) arising out of any transaction
entered into at or prior to the Closing, or any action or inaction at or prior to the
Closing, or any state of facts existing at or prior to the Closing other than: (i)
liabilities set forth on the Latest Balance Sheet, (ii) liabilities and obligations which
have arisen after the date of the Latest Balance Sheet in the ordinary course of business
(none of which is a material liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or lawsuit) and (iii) other liabilities and
obligations expressly disclosed in the other Schedules to this Agreement.  







		    
3.11        Material
Changes.  Except as a result of the Contemplated Transactions and except as set
forth in the SEC Reports, since December 31, 2001, the Issuer and each of its
Subsidiaries have not experienced any change that, on a consolidated basis, has had or
would reasonably be expected to have an Issuer Material Adverse Effect. Except as set
forth in the SEC Reports, since September 30, 2002, there has not been (i) any direct or
indirect redemption, purchase or other acquisition by the Issuer of any shares of the
Common Stock or (ii) declaration, setting aside or payment of any dividend or other
distribution by the Issuer with respect to the Common Stock.  







		    
3.12        Absence
of Certain Developments.   Except as a result of or with respect to the
Contemplated Transactions and except as set forth on Schedule 3.12, since the date
of the Latest Balance Sheet, the Issuer and each of its Subsidiaries have not:  







		    (a)                        issued
     any notes,  bonds or other debt  securities  or any capital  stock or other
equity  securities or any securities  convertible,  exchangeable  or exercisable
into any capital stock or other equity securities; 







		    (b)                        borrowed
     any  amount or  incurred  or become  subject to any  material  liabilities,
except  current  liabilities  incurred in the  ordinary  course of business  and
liabilities  under  contracts  entered into in the ordinary  course of business;








		    (c)                        paid
     any material  obligation or liability,  other than current liabilities paid
in the ordinary course of business; 








	


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		    (d)                        declared
     or made  any  payment  or  distribution  of cash or other  property  to its
stockholders  with respect to its capital  stock or other equity  securities  or
purchased or redeemed any share of its capital stock or other equity  securities
(including, without limitation, any warrants, options or other rights to acquire
its capital stock or other equity securities) 







		    (e)                        sold,
     assigned or transferred any of its tangible assets,  except in the ordinary
course of business consistent with past practice, or canceled any material debts
or claims; 







		    (f)                        sold,
     assigned or  transferred  any patents or patent  applications,  trademarks,
service  marks,   trade  names,   corporate   names,   copyrights  or  copyright
registrations, trade secrets or other intangible assets. 







		    (g)                        suffered
     any extraordinary losses or waived any rights of material value, whether or
not in the  ordinary  course of  business  or  consistent  with  past  practice;








		    (h)                        made
     capital  expenditures or commitments  therefore that aggregate in excess of
$100,000 (other than in the ordinary course of business); 







		    (i)                        made
     any loans or advances to, guarantees for the benefit of, or any Investments
in, any Persons in excess of $100,000 in the aggregate; 







		    (j)                        suffered
     any  damage,  destruction  or  casualty  loss  exceeding  in the  aggregate
$100,000, whether or not covered by insurance; 







		    (k)                        entered
     into any other material transaction,  whether or not in the ordinary course
of business; or 







		    (l)                        entered
     into any oral or written  agreement,  commitment or understanding to do any
of the foregoing. 







		    
3.13        Litigation..  
Except as disclosed on Schedule 3.13, there is no action, suit, proceeding,
investigation, claim, or dispute pending or, to the Issuer’s knowledge, currently
threatened against the Issuer or any of its Subsidiaries that questions the validity of
this Agreement or the right of the Issuer to enter into it, or to consummate the
transactions contemplated hereby, or that might result, either individually or in the
aggregate, in a judgment against the Issuer of $100,000 or more or any change in the
current equity ownership of the Issuer. The foregoing includes, without limitation,
actions pending or, to the Issuer’s knowledge, threatened involving the prior
employment of any of the Issuer’s employees or their use in connection with the
Issuer’s business of any information or techniques allegedly proprietary to any of
their former employers. Neither the Issuer nor any of its Subsidiaries is a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. Neither the Issuer nor any of its Subsidiaries
is subject to any arbitration proceeding under collective bargaining agreements or
otherwise or, to the best of the Company’s knowledge, any governmental
investigations or inquiries and, to the best of the Company’s knowledge, there is no
valid basis for any of the foregoing. There is no action, suit, proceeding or
investigation by the Issuer or any of its Subsidiaries currently pending or which the
Issuer or any of its Subsidiaries currently intends to initiate.  








	


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		    3.14        Rights
of Registration and Voting Rights.   Except as contemplated in this
Agreement and as disclosed on Schedule 3.14, the Issuer has not granted or agreed
to grant any registration rights, including piggyback rights, to any person or entity (“Registration
Rights”), and no stockholder of the Issuer has entered into any agreements known
to the Issuer with respect to the voting of capital shares of the Issuer.  







		    
3.15        Offerings.  
Subject in part to the truth and accuracy of Investor’s representations and
warranties set forth in this Agreement, the offer, sale and issuance of the Shares as
contemplated by this Agreement are exempt from the registration requirements of the
Securities Act and any applicable state securities laws, and neither the Issuer nor any
authorized agent acting on its behalf will take any action hereafter that would cause the
loss of such exemption.  







		    
3.16        Assets.  
Except as set forth on Schedule 3.16, the Issuer and its Subsidiaries have good
and marketable title to, or a valid leasehold interest in, the material properties and
assets used by the Issuer and its Subsidiaries, located on their premises or shown on the
Latest Balance Sheet or acquired thereafter, free and clear of all Liens, except for
properties and assets disposed of in the ordinary course of business since the date of
the Latest Balance Sheet and except for Liens disclosed on the Latest Balance Sheet
(including any notes thereto), Liens for current property taxes not yet due and payable
and Liens which are not material in the aggregate and which do not materially interfere
with the use or marketability of the assets by the Issuer.  







		    
3.17        Tax Matters.   Except as set forth on Schedule 3.17, all federal, state,
local and foreign Tax Returns required to be filed by the Issuer and each of its
Subsidiaries have been filed, or, if not yet filed, the Issuer or Subsidiary has been
granted extensions with respect to the filing dates thereof which extensions have not yet
expired; all such Tax Returns are complete and correct in all material respects; all
Taxes payable by the Issuer or its Subsidiaries, or upon any of its properties, income or
franchises, shown in such Tax Returns and on assessments received by the Issuer and its
Subsidiaries to be due and payable have been paid, or adequate reserves therefore have
been established and have been disclosed in the Issuers’ financial statements if any
of such taxes are being contested in good faith, or if any of such Tax Returns have not
been filed or if any such Taxes have not been paid or so reserved for, the failure so to
file or to pay would not in the aggregate result in liability in excess of $100,000.
Except as set forth on Schedule 3.17, the Issuer knows of no proposed additional
Tax assessment that is not provided for in the Company’s financial statements and
the Issuer has no pending Tax audit.  







		    
3.18        Insurance.  
Each of the Issuer and its Subsidiaries is not in default with respect to obligations
under any insurance policy maintained by the Issuer or Subsidiary respectively, and the
Issuer and its Subsidiaries have not been denied insurance coverage. To the Issuer’s
knowledge, its insurance coverage is customary for corporations of similar size engaged
in similar lines of business. The Issuer and its Subsidiaries do not have any
self-insurance or co-insurance programs.  








	


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3.19        Disclosure.  This
Agreement and the documents listed on Exhibit A, which have been received by
Investor as part of an informational packet of materials from the Issuer (the “Disclosure
Documents”), as of their respective dates, did not contain any untrue statement
of a material fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading; provided,
that, with respect to any projections or other forward looking statements set
forth in any of the Disclosure Documents the Issuer represents and warrants only that
such projections were based upon assumptions reasonably believed by the Issuer to be
reasonable and fair as of the date the projections were prepared. Except as set forth in
the schedules to this Agreement, the Issuer is not aware of any fact that the Issuer has
not disclosed to the Investor which has had, or would reasonably be expected to have, an
Issuer Material Adverse Effect.  









	



ARTICLE 4 

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 



        As
a material inducement to the Issuer entering into this Agreement and issuing the Shares,
the Investor represents and warrants to the Issuer as follows: 











		    4.1
       Power and Authority.   The Investor, if other than a natural person, is an
entity duly organized, validly existing and in good standing under the laws of the state
of its incorporation or formation. The Investor has the corporate, partnership or other
power and authority under applicable law to execute and deliver this Agreement and
consummate the transactions contemplated hereby, and has all necessary authority to
execute, deliver and perform its obligations under this Agreement and consummate the
transactions contemplated hereby. The Investor has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the transactions
contemplated hereby.  







		    4.2
       No Violation.   The execution and delivery by the Investor of this
Agreement, the consummation of the transactions contemplated hereby, and the compliance
by the Investor with the terms and provisions hereof, will not result in a default under
(or give any other party the right, with the giving of notice or the passage of time (or
both), to declare a default or accelerate any obligation under) or violate any charter or
similar documents of the Investor, if other than a natural person, or any Contract to
which the Investor is a party or by which it or its properties or assets are bound, or
violate any Requirement of Law applicable to the Investor, other than such violations or
defaults which, individually and in the aggregate, do not and will not have an Investor
Material Adverse Effect. The Investor will comply with any Requirements of Law applicable
to it in connection with the Offering.  







		    4.3
       Consents/Approvals.  No
consents, filings, authorizations or actions of any Governmental Authority are required
for the Investor’s execution, delivery and performance of this Agreement. No
consent, approval, waiver or other actions by any Person under any Contract to which the
Investor is a party or by which the Investor or any of its properties or assets are bound
is required or necessary for the execution, delivery and performance by the Investor of
this Agreement and the consummation of the transactions contemplated hereby, except where
the failure to obtain such consents would not have an Investor Material Adverse Effect or
would not restrict the Investor’s ability to consummate the transactions
contemplated hereby.  









	


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		    4.4        Enforceability.
  This
Agreement has been duly executed and delivered by the Investor and constitutes a legal,
valid and binding obligation of the Investor, enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditor’s rights generally and general equitable principles,
regardless of whether enforceability is considered in a proceeding at law or in equity.  







		    4.5        Investment
Intent.  The Investor is acquiring the Shares hereunder for its own account and
with no present intention of distributing or selling such Shares and further agrees not
to transfer such Shares in violation of the Securities Act or any applicable state
securities law, and no one other than the Investor has any beneficial interest in the
Shares. The Investor agrees that it will not sell or otherwise dispose of any of the
Shares unless such sale or other disposition has been registered under the Securities Act
or, in the opinion of counsel reasonably acceptable to the Issuer, which consent shall
not be unreasonably withheld or delayed, is exempt from registration under the Securities
Act and has been registered or qualified or, in the opinion of such counsel reasonably
acceptable to the Issuer, which consent shall not be unreasonably withheld or delayed, is
exempt from registration or qualification under applicable state securities laws. The
Investor understands that the offer and sale by the Issuer of the Shares being acquired
by the Investor hereunder has not been registered under the Securities Act by reason of
their contemplated issuance in transactions exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) thereof, and that
the reliance of the Issuer on such exemption from registration is predicated in part on
these representations and warranties of the Investor. The Investor acknowledges that
pursuant to Section 1.2 of this Agreement a restrictive legend consistent with the
foregoing has been or will be placed on the certificates for the Shares.  







		    4.6        Accredited
Investor.   The Investor is an “accredited investor” as such term
is defined in Rule 501(a) of Regulation D under the Securities Act and has such knowledge
and experience in financial and business matters that it is capable of evaluating the
merits and risks of the investment to be made by it hereunder.  







		    4.7        Adequate
Information.   The Investor has received from the Issuer, and has reviewed, such
information which the Investor considers necessary or appropriate to evaluate the risks
and merits of an investment in the Shares, including without limitation, the Disclosure
Documents. The Investor acknowledges that the SEC Reports are specifically incorporated
herein by reference and forms an integral part of this Agreement. The Investor also
acknowledges that the additional risk factors set forth on Exhibit B and contained
in the Disclosure Documents are specifically incorporated herein by reference and form an
integral part of this Agreement.  







		    4.8        Opportunity
to Question.   The Investor has had the opportunity to discuss the Issuer’s
business, management and financial affairs with the Issuer’s management. The
Investor has also had an opportunity to ask questions of the executive officers of the
Issuer. The foregoing, however, does not limit or modify the representations, warranties,
and covenants of the Issuer contained in this Agreement or the right of such Investor to
rely thereon.  









	


10

















		    4.9        No
Other Representations.   The Investor acknowledges that no representations or
warranties of any type or description have been made to it by any Person with regard to
the Issuer, any of its Subsidiaries, any of their respective businesses, properties or
prospects or the investment contemplated herein, other than the representations and
warranties set forth herein.  







		    4.10        Knowledge
and Experience.   The Investor has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an investment
in the Shares and to make an informed investment decision with respect thereto.  







		    4.11        Commissions.   The
Investor has not incurred any obligation for any finder’s or broker’s or agent’s
fees or commissions in connection with the transactions contemplated hereby.  







ARTICLE 5 
COVENANTS 



		    5.1        Public
Announcements.   Except with respect to the Contemplated Transactions,
neither party to this Agreement shall make or cause to be made any public disclosure
prior to the Closing with respect to the transactions contemplated hereby or this
Agreement without the prior agreement of the other party, except as required by
applicable law or any listing agreement with a national securities exchange. After the
Closing, the Issuer shall have the right to make such public announcements and shall
control, in its sole and absolute discretion, the timing, form and content of all press
releases or other public communications of any sort relating to the subject matter of
this Agreement, and the method of their release, or publication thereof, provided that,
except as may be required by applicable law, the Issuer may not use the Investor’s
name in any public announcement without the Investor’s prior consent.  







		    5.2        Further
Assurances.  Each party shall execute and deliver such additional instruments and
other documents and shall take such further actions as may be necessary or appropriate to
effectuate, carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby.  







		    5.3        Notification
of Certain Matters.   Each party hereto shall give prompt notice to the other party
of the occurrence, or non-occurrence, of any event which would be likely to cause any
representation and warranty herein to be untrue or inaccurate, or any covenant, condition
or agreement herein not to be complied with or satisfied.  







		    5.4        Confidential
Information.   The Investor agrees that no portion of the Confidential Information
(as defined below) shall be disclosed to third parties, except as may be required by law,
without the prior express consent of the Issuer provided that the Investor may share such
information with such of its officers and professional advisors as may need to know such
information to assist the Investor in its evaluation thereof on the condition that such
parties agree to be bound by the terms hereof. All Confidential Information received by
the Investor shall be promptly returned or destroyed, as directed by the Issuer. “Confidential
Information” means all oral or written data, reports, records or materials and
any and all other confidential or disclosure information or materials obtained from the
Issuer or its professional advisors, which are not yet publicly available. Confidential
Information excludes information that is publicly available or already known to the
Investor through a source not bound by any confidentiality obligation.  









	


11

















		    5.5        
Use of Proceeds.    The Issuer shall use the proceeds of this offering as described on Exhibit
C. 







		    
5.6        Board  Representation.  [THIS SECTION 5.6 IS EXCLUSIVE TO THE  SUBSCRIPTION  AGREEMENT  BETWEEN
THE ISSUER AND DRAUPNIR, LLC]  







		    (a)                        The
     Issuer shall use commercially reasonable efforts to cause the election of a
person  designated by the Investor,  who must be reasonably  satisfactory to the
Issuer  and  who  shall  agree  to  serve  as a  director  of  the  Issuer  (the
“Investor  Representative”),  as  a  member  of  the  Board  of
Directors, including without limitation recommending the Investor Representative
for election at a meeting of the  Issuer’s  stockholders.  Thereafter,  the
Issuer  shall  use  commercially   reasonable  efforts  to  cause  the  Investor
Representative  to continue in office until such time as the Investor  ceases to
beneficially  own in the aggregate,  directly or  indirectly,  4,500,000 or more
Shares of Common  Stock  (subject  to  appropriate  adjustments  by the Board of
Directors in the event of  recapitalizations  of the Issuer  including,  but not
limited to, share splits and combinations). 







		    (b)                        Unless
     Investor shall no longer  beneficially  own in the  aggregate,  directly or
indirectly,  4,500,000  or more Shares of Common Stock  (subject to  appropriate
adjustments by the Board of Directors in the event of  recapitalizations  of the
Issuer including, but not limited to, share splits and combinations), the Issuer
shall  use  commercially   reasonable   efforts  to  fill  any  vacancy  in  the
directorship to be occupied by the Investor  Representative  solely by a nominee
of the Investor reasonably satisfactory to the Issuer. 







		    (c)                        The
     Investor  Representative  shall be  entitled  to  attend  in  person  or by
telephone conference call any and all meetings of the Board of Directors and all
committees thereof to the extent the Investor Representative is a member of such
committee or is designated by the Board of Directors as an observer thereof.








		    (d)                        In
     the event  that  Investor  ceases  to  beneficially  own in the  aggregate,
directly or  indirectly,  4,500,000 or more Shares of Common  Stock  (subject to
appropriate   adjustments   by  the   Board  of   Directors   in  the  event  of
recapitalizations of the Issuer including,  but not limited to, share splits and
combinations),  the  Investor  Representative  shall  resign  from the  Board of
Directors,  and either (i) such vacancy may be filled by a nominee of the Issuer
appointed  by the Board of  Directors  in  accordance  with the  By-laws  of the
Issuer;  or (ii)  the size of the  Board of  Directors  may be  reduced  and the
Investor  shall no longer be entitled to designate for election or appointment a
representative to the Board of Directors. 









	


12



















ARTICLE 6 

REGISTRATION RIGHTS 



        The
Investor shall have the following registration rights with respect to the Registrable
Securities owned by it: 



		    
6.1        Transfer
of Registration Rights.   The Investor may assign the registration rights with
respect to the Registrable Securities to any party or parties to which it may from time
to time transfer the Registrable Securities, provided that the transferee agrees in
writing with the Issuer to be bound by the applicable provisions of this Agreement
regarding such registration rights and indemnification relating thereto. Upon assignment
of any registration rights pursuant to this Section 6.1, the Investor shall
deliver to the Issuer a notice of such assignment which includes the identity and address
of any assignee and such other information reasonably requested by the Issuer in
connection with effecting any such registration (collectively, the Investor and each such
subsequent holder is referred to as a “Holder”).  







		    
6.2        Required Registration.  







		    (a)                     The
     Issuer and the Investor  acknowledge  that the Issuer is  ineligible to use
Form S-3 under the  Securities  Act until April 10,  2003.  The Issuer shall use
commercially  reasonable  efforts to file  within 180 days after the date of the
Closing  a   registration   statement   on  Form  S-3  or  a  similar   form  of
“evergreen”  registration statement which covers the resale of all the
Registrable  Securities  under  an  appropriate  form  under  Rule  415  of  the
Securities  Act,  or any  similar  rule that may be adopted  by the SEC.  If the
Issuer is not S-3  Eligible on or after  April 10,  2003,  the Issuer  shall use
commercially  reasonable  efforts to file  within 180 days after the date of the
Closing, a registration statement on Form S-1 which covers the resale of all the
Registrable Securities.  Furthermore,  if the Issuer is ineligible to use a Form
S-3 at any time after April 10, 2003, each reference to a Form S-3  Registration
Statement  contained  in this  section  shall  apply to a Form S-1  Registration
Statement  (the  “Shelf  Registration  Statement”).  The Issuer
shall use best  efforts  to cause  the SEC to  declare  the  Shelf  Registration
Statement  effective  as soon as  practicable  after  filing  and to  thereafter
maintain the effectiveness of the Shelf  Registration  Statement until such time
as the Issuer reasonably determines, based on a written opinion of counsel, that
the Holders, acting separately,  will be eligible to sell all of the Registrable
Securities then respectively owned by the Holders without the need for continued
registration of the Registrable Securities in the three month period immediately
following  the  termination  of  the  effectiveness  of the  Shelf  Registration
Statement  pursuant  to Rule 144  promulgated  under  the  Securities  Act.  The
Issuer’s   obligations   contained  in  this  Section  6.2(a)  shall
terminate  on the  earlier of the  expiration  period of Rule  144(k)  under the
Securities Act with respect to the Registrable Securities or two years after the
issue date of the Shares or such shorter  period that will terminate when all of
the Registrable Securities covered by the Shelf Registration Statement have been
sold. 









	


13

















		    (b)                     The
     Shelf Registration Statement filed pursuant to Section 6.2(a) hereof
will not be deemed to be effective unless it has been declared  effective by the
SEC; provided, however, that, if after it has been declared
effective,  the  offering of the  Registrable  Securities  pursuant to the Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other  governmental  agency or court, the
Shelf Registration  Statement will be deemed not to be effective and the Holders
shall be  prohibited  from  making  offers and sales of  Registrable  Securities
pursuant  to  the  Shelf  Registration  Statement  during  the  period  of  such
interference.  To the extent that the Issuer  grants to any other  individual or
entity rights to register  securities  under the Securities Act that are greater
than the  Registration  Rights granted to the Investor  herein,  the Issuer will
grant to the Investor such greater Registration Rights. 







		    
6.3        Right of Suspension.  







		    (a)                            Notwithstanding
     any other provision of this Agreement or any related agreement,  the Issuer shall
have the right at any time to prohibit or suspend  offers and sales of the Registrable
 Securities covered by the Shelf Registration Statement whenever, in the sole  reasonable
 judgment  of the  Issuer (i) the  Issuer  determines  that effecting such a registration
or continuing such  disposition at such time would have an adverse effect upon a proposed
sale of all (or substantially all) of the assets of the Issuer or a merger, acquisition,
reorganization,  recapitalization or similar current transaction  materially  affecting
the capital,  structure or equity  ownership of the Issuer,  (ii) there exists a material
 development or a potential material  development with respect to or involving the Issuer
that the Issuer  would be obligated to disclose in the  prospectus  or offering  circular
used in connection with the Shelf Registration Statement, which disclosure would in the
 judgment of the Issuer be premature  or  otherwise  inadvisable  at such time, or (iii)
an event has occurred that makes any statement  made in the Shelf Registration  Statement
 or  related  prospectus  or  offering  circular  or any document  incorporated or deemed
to be incorporated  therein by reference untrue in any material respect or which requires
the making of any changes in the Shelf Registration  Statement,  prospectus  or  offering
 circular so that it will not contain any untrue statement of a material fact required to
be stated therein or necessary to make the  statements  therein not  misleading  or omit
to state any material fact  required to be stated  therein or necessary to make the
statement therein, not misleading (a  “Suspension  Event”).  In the
event that the Issuer shall determine to so prohibit or suspend offers and sales,  the
Issuer shall,  in addition to performing  those acts required to be performed by the
Securities Act and/or the Exchange Act, or as may be deemed advisable by the Issuer,
 deliver notice in writing to each Holder signed by the Chief  Financial Officer  or
Chief  Executive  Officer of the Issuer  and,  upon  receipt of such notice, the use of
the Shelf  Registration  Statement and prospectus or offering circular,  as the case may
be, will be suspended and will not recommence  until, in addition to those acts required
to be performed by the  Securities Act and/or the Exchange Act  (including,  but not
limited to the  preparation and filing of any post-effective  amendments to the Shelf
 Registration  Statement and the SEC review and declaration of effectiveness  thereof),
or as may be deemed advisable by the  Issuer,  including  (x) such  Holders’  receipt
 from the Issuer of copies of the supplemented or amended prospectus or offering circular
or (y) the Holders  are advised in writing by the Issuer  that the  prospectus  or
offering circular may be used. The Issuer will exercise reasonable  commercial efforts to
ensure that the use of the  Registration  Statement  and  prospectus or offering circular
 may be  resumed as quickly as  practicable,  and will  provide  prompt notice to Holders
when such use may be resumed. 








		      (b)        The
     Issuer’s  right  to  prohibit  or  suspend  offers  and  sales  of the
Registrable  Securities  covered by the Shelf Registration  Statement  described
above  shall  be for a  period  of time  (“Suspension  Period”)
beginning on the date of the occurrence of the Suspension  Event and expiring on
the earlier to occur of (i) the date on which the  Suspension  Event ceases,  or
(ii) 60 days after the occurrence of the  Suspension  Event;  provided  however,
that there shall not be more than two Suspension Periods in any 12 month period.










	


14


















		    
6.4        Registration Procedures.  







		    (a)                     The
     Issuer  shall  keep the  Investor,  on  behalf of each  Holder,  (or if the
Investor has  transferred  all  Registrable  Securities  to a single  Holder who
continues to hold all such  Registrable  Securities,  then the Issuer shall keep
the Holder) advised in writing as to the initiation of a registration statement,
and as to the completion  thereof.  In addition,  subject to Sections 6.2
and 6.3  above,  the Issuer shall, to the extent  applicable to the Shelf
Registration Statement: 







		    (i)                        prepare
     and  file  with  the SEC  such  amendments  and  supplements  to the  Shelf
Registration Statement as may be necessary to keep such registration,  effective
and comply with provisions of the Securities Act with respect to the disposition
of  all  securities   covered   thereby   during  the  period   referred  to  in
Section 6.2; 







		    (ii)                        update,
     correct,   amend  and  supplement  the  Shelf  Registration   Statement  as necessary;








		    (iii)                        notify
     Holder when the Shelf  Registration  Statement is declared effective by the
SEC,   and  furnish   such  number  of   prospectuses,   including   preliminary
prospectuses,  and other  documents  incident  thereto as Holder may  reasonably
request from time to time; 







		    (iv)                        use
     its commercially reasonable efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions of
the  United  States  where an  exemption  is not  available  and as  Holder  may
reasonably   request  to  enable  it  to  consummate  the  disposition  in  such
jurisdiction of the Registrable Securities (provided that the Issuer will not be
required to (i) qualify  generally to do business in any  jurisdiction  where it
would  not  otherwise  be  required  to  qualify  but  for  this  provision,  or
(ii) consent  to general  service of process in any such  jurisdiction,  or
(iii)  subject  itself to taxation in any  jurisdiction  where it is not already
subject to taxation); 







		    (v)                        notify
     Holder at any time when a prospectus relating to the Registrable Securities
is required to be delivered  under the  Securities  Act, of the happening of any
event as a result of which the  prospectus  included  in the Shelf  Registration
Statement  contains  an untrue  statement  of a material  fact or omits any fact
necessary to make the statements therein not misleading; 







		    (vi)                        cause
     all such Registrable Securities to be listed on each securities exchange on
which  similar  securities  issued by the Issuer are then  listed and obtain all
necessary  approvals from the Nasdaq Stock Market for trading thereon if similar
securities issued by the Issuer are then traded thereon; 









	


15
















		    (vii)                        provide
     a transfer  agent and registrar  for all such  Registrable  Securities  not
later  than  the  effective  date  of  the  Shelf  Registration  Statement;  and








		    (viii)                   upon
     the sale of any Registrable  Securities  pursuant to the Shelf Registration
Statement,  direct the transfer agent to remove all restrictive legends from all
certificates  or  other  instruments  evidencing  the  Registrable   Securities.








		    (b)                     Notwithstanding
     anything stated or implied to the contrary in Section  6.4(a) above,
the Issuer shall not be required to consent to any underwritten  offering of the
Registrable  Securities  or to any  specific  underwriter  participating  in any
underwritten public offering of the Registrable Securities. 







		    (c)                     Each
     Holder  agrees  that upon  receipt  of any  notice  from the  Issuer of the
happening of any event of the kind described in Section  6.4(a)(v),  such
Holder will forthwith discontinue such Holder’s  disposition of Registrable
Securities  pursuant to the registration  statement relating to such Registrable
Securities until such Holder’s receipt of the copies of the supplemented or
amended prospectus and, if so directed by the Issuer, will deliver to the Issuer
at the Issuer’s  expense all copies, other than permanent file copies, then
in such Holder’s possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. 







		    (d)                     Except
     as required by law, all expenses  incurred by the Issuer in complying  with
this  Article  6,   including  but  not  limited  to,  all  registration,
qualification  and filing fees,  printing  expenses,  fees and  disbursements of
counsel and  accountants for the Issuer,  blue sky fees and expenses  (including
fees and  disbursements  of  counsel  related to all blue sky  matters)  and the
reasonable  fees and  expenses of one special  counsel for the  Investor and all
Holders participating in the offering (“Registration Expenses”)
incurred  in  connection  with any  registration,  qualification  or  compliance
pursuant to this Article 6 shall be borne by the Issuer. All underwriting
discounts  and selling  commissions  applicable to a sale incurred in connection
with any  registration  of  Registrable  Securities and the legal fees and other
expenses of a Holder shall be borne by such Holder. 







		    6.5        Conditions
to Registration Obligations. The Issuer shall not be obligated to effect
the registration of the Registrable Securities pursuant to Section 6.2 unless the
Holders of Registrable Securities being included in the Shelf Registration Statement
consent to customary conditions of a reasonable nature that are imposed by the Issuer,
including, but not limited to, the following:  







		    (a)                        conditions
     prohibiting  the sale of  Registrable  Securities  by each Holder until the
registration  shall have been declared effective by the SEC, except for sales of
Registrable Securities pursuant to a valid exemption from registration under the
Securities Act; and 







		    (b)                        conditions
     requiring  each  Holder to comply  with all  applicable  provisions  of the
Securities  Act  and  the  Exchange  Act  including,  but not  limited  to,  the
prospectus delivery requirements of the Securities Act. 









	


16

















		    6.6        Terms
and Conditions of Registration.   In connection with the registration
pursuant to this Article 6, and subject to the other terms and conditions of this
Agreement, the Issuer shall in its sole discretion determine the terms and conditions of
such registration, including, without limitation, the timing thereof; the scope of the
offering contemplated thereby (i.e., whether the offering shall be a combined primary
offering and a secondary offering or limited only to a secondary offering); the manner of
distribution of Registrable Securities consistent with the plan of distribution agreed
upon by the Issuer and the Holders; the period of effectiveness of registration for
permissible sales of Registrable Securities thereunder subject to the provisions of Section
6.2hereof; and all other material aspects of the registration and the registration
process to the extent consistent herewith.  







		    6.7        Further
Information.   The Issuer may require each Holder of Registrable Securities to
promptly furnish to the Issuer such information regarding the Holders and the proposed
distribution by such Holder as the Issuer may from time to time reasonably request in
writing. Notwithstanding anything herein to the contrary, no Holder of Registrable
Securities may include any of its Registrable Securities in an Shelf Registration
Statement pursuant to this Article 6 unless and until such Holder (i) furnishes to
the Issuer within 20 days after receipt of a request therefor, the information specified
in Items 507 and 508 of Regulation S-K, as applicable, of the Securities Act for use in
connection with the Shelf Registration Statement or prospectus included therein and (ii)
agrees to promptly furnish additional information regarding the Holder required to be
disclosed in order to make the information previously furnished to the Issuer not
materially misleading. Each Holder shall indemnify the Issuer with respect to such
information in accordance with Article 7 hereof. The Investor hereby represents
and warrants to the Issuer that it has accurately and completely provided the requested
information and answered the questions numbered (a) through (d) on the signature pages of
this Agreement which the Investor has completed and returned to the Issuer, and the
Investor agrees and acknowledges that the Issuer may rely on such information as being
true and correct as of the date hereof for purposes of preparing and filing the Shelf
Registration Statement at the time of filing thereof and at the time it is declared
effective, unless the Investor has notified the Issuer in writing to the contrary prior
to such time.  







ARTICLE 7 

INDEMNIFICATION 



		    7.1        Indemnification
Generally.   The Issuer, on the one hand, and the Investor, on the other hand,
shall indemnify the other from and against any and all losses, damages, liabilities,
claims, charges, actions, proceedings, demands, judgments, settlement costs and expenses
of any nature whatsoever (including, without limitation, reasonable attorneys’ fees
and expenses) or deficiencies resulting from any breach of a representation and warranty,
covenant or agreement by the other and all claims, charges, actions or proceedings
incident to or arising out of the foregoing.  









	


17
















		    
7.2        Indemnification Relating to Registration Rights.  







		    (a)                     With
     respect  to  any  registration,  effected  or to be  effected  pursuant  to
Article  6 of this  Agreement,  the Issuer shall indemnify each Holder of
Registrable  Securities  whose  securities  are  included  or are to be included
therein, each of such Holder’s directors and officers, each underwriter (as
defined in the Securities  Act) of the securities  sold by such Holder (if any),
and each Person who controls (within the meaning of the Securities Act) any such
Holder or underwriter (a “Controlling Person”) from and against
all  losses,  damages,  liabilities,   claims,  charges,  actions,  proceedings,
demands,  judgments,  settlement  costs and  expenses  of any nature  whatsoever
(including, without limitation, reasonable attorneys’ fees and expenses) or
deficiencies  of any such Holder or any such  underwriter or Controlling  Person
concerning: 







		    (i)                        any
     untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus,  offering  circular or other document  (including any related
registration  statement,   notification  or  the  like)  incident  to  any  such
registration; 







		    (ii)                        any
     omission (or alleged omission) to state therein a material fact required to
be stated  therein or necessary to make the statement  therein,  in the light of
the circumstances under which it was made, not misleading; or 







		    (iii)                        any
     violation  by the Issuer of the  Securities  Act or any rule or  regulation
promulgated  thereunder  applicable  to the Issuer,  or of any blue sky or other
state  securities  laws  or  any  rule  or  regulation   promulgated  thereunder
applicable to the Issuer, 








	



and subject to Section 7.3
below will reimburse each such Person entitled to indemnity under this Section 7.2
for all legal and other expenses reasonably incurred in connection with investigating or
defending any such loss, damage, liability, claim, charge, action, proceeding, demand,
judgment, settlement or deficiency; provided, however, that, the
foregoing indemnity and reimbursement obligation shall not be applicable to the extent
that any such matter arises directly out of or is based directly on any untrue statement
or omission made in reliance upon and in conformity with written information furnished to
the Issuer by or on behalf of such Holder or by or on behalf of such an underwriter
specifically for use in such prospectus, offering circular or other document. 



     (b)    
          With respect to any registration, qualification or compliance effected or to be
          effected pursuant to this Agreement, each Holder of Registrable Securities whose
          securities are included or are to be included therein, shall indemnify the
          Issuer from and against all losses, damages, liabilities, claims, charges,
          actions, proceedings, demands, judgments, settlement costs and expenses of any
          nature whatsoever (including, without limitation, reasonable attorneys’
          fees and expenses) or deficiencies of the Issuer concerning: 












		    (i)                        any
     untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus,  offering  circular or other document  (including any related
registration  statement,   notification  or  the  like)  incident  to  any  such
registration, qualification or compliance; 









	


18

















		    (ii)                        any
     omission (or alleged omission) to state therein a material fact required to
be stated  therein or necessary to make the statement  therein,  in the light of
the circumstances under which it was made, not misleading; or 







		    (iii)                        any
     violation by such Holder of the  Securities  Act or any rule or  regulation
promulgated  thereunder  applicable  to the Issuer or such Holder or of any blue
sky or  other  state  securities  laws  or any  rule or  regulation  promulgated
thereunder applicable to the Issuer or such Holder, 







in each case, relating to any action
or inaction required of such Holder in connection with any such registration,
qualification or compliance, and subject to Section 7.3 below will reimburse the
Issuer for all legal and other expenses reasonably incurred in connection with
investigating or defending any such loss, damage, liability, claim, charge, action,
proceeding, demand, judgment, settlement or deficiency; provided, however,
that, the foregoing indemnity and reimbursement obligation shall only be applicable to the
extent that any such matter arises directly out of or is based directly on any untrue
statement or omission made in reliance upon and in conformity with written information
furnished to the Issuer by or on behalf of the Holder specifically for use in such
prospectus, offering circular or other document; provided, however,
that, the obligation of the Holder hereunder shall be limited to an amount equal to
the proceeds to the Holder of Registrable Securities sold as contemplated hereunder. 



7.3 Indemnification
Procedures.   Each Person entitled to indemnification under this section (an
“Indemnified Party”) shall give notice as promptly as reasonably
practicable to each party required to provide indemnification under this section (an
“Indemnifying Party”) of any action commenced against or by it in respect
of which indemnity may be sought hereunder, but failure to so notify an Indemnifying Party
shall not relieve such Indemnifying Party from any liability that it may have otherwise
than on account of this indemnity agreement so long as such failure shall not have
materially prejudiced the position of the Indemnifying Party. Upon such notification, the
Indemnifying Party shall assume the defense of such action if it is a claim brought by a
third party, if and after such assumption the Indemnifying Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action except as
described below. In any such action, any Indemnified Party shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the contrary or (ii) the parties in any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate due to actual or
potential differing or conflicting interests between them. The Indemnifying Party shall
not be liable for any settlement of any proceeding effected without its written consent
(which shall not be unreasonably withheld or delayed by such Indemnifying Party), but if
settled with such consent or if there be final judgment for the plaintiff, the
Indemnifying Party shall indemnify the Indemnified Party from and against any loss, damage
or liability by reason of such settlement or judgment. 




	


19

















ARTICLE 8 

CONDITIONS TO CLOSING 



		    8.1    
    Conditions
to the Obligations of the Investor.   The obligations of the Investor to proceed
with the Closing is subject to the following conditions any and all of which may be
waived, in whole or in part, to the extent permitted by applicable law:  







		    
(a)           Representations
     and  Warranties.    Each of the  representations  and  warranties  of the
Issuer  contained  in this  Agreement  shall be true and correct in all material
respects as of the Closing as though made on and as of the  Closing,  except (i)
for changes  occurring as a result of the  Contemplated  Transactions,  and (ii)
that those  representations  and warranties  which address  matters only as of a
particular  date shall  remain true and  correct as of such date,  except in any
case for such failures to be true and correct which would not,  individually  or
in the aggregate,  have an Issuer Material  Adverse Effect.  Unless the Investor
receives  written  notice to the  contrary  at the  Closing,  Investor  shall be
entitled  to assume  that the  preceding  is  accurate  in all  respects  at the
Closing. 







		    
(b)           Agreement
     and  Covenants.    The Issuer  shall have  performed  or  complied in all
material  respects with all agreements and covenants  required by this Agreement
to be  performed or complied  with by it on or prior to the Closing.  Unless the
Investor receives written notice to the contrary at the Closing,  Investor shall
be  entitled  to assume that the  preceding  is accurate in all  respects at the
Closing. 







		    
(c)           No
     Order.    No  governmental  authority  or other agency or  commission  or
federal or state court of competent  jurisdiction  shall have  enacted,  issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary or permanent)
which is in  effect  and  which  materially  restricts,  prevents  or  prohibits
consummation of the Closing or any  transaction  contemplated by this Agreement.








		    
(d)           Opinion
of Issuer’s  Counsel.    The Investor shall have received an opinion
of Issuer’s  counsel, dated the Closing Date, with respect to legal matters
customary for private offerings of this type. 







		    
(e)           
Consummation of Contemplated Transactions.    The Issuer shall have closed, or
shall close  simultaneously  with or immediately  following the Closing  hereof,
each of the Contemplated Transactions. 







		    8.2        Conditions
     to the Obligations of the  Issuer.   The obligations of the Issuer to
proceed with the Closing is subject to the following  conditions  any and all of
which may be waived,  in whole or in part, to the extent permitted by applicable
law: 







		    
(a)           Representations
     and  Warranties.    Each of the  representations  and  warranties  of the
Investor contained in this Agreement shall be true and correct as of the Closing
as though made on and as of the Closing,  except (i) for changes  occurring as a
result of the Contemplated Transactions, and (ii) that those representations and
warranties  which address matters only as of a particular date shall remain true
and correct as of such date. Unless the Issuer receives written  notification to
the  contrary at the  Closing,  the Issuer  shall be entitled to assume that the
preceding is accurate in all respects at the Closing. 









	


20

















		    
(b)           Agreement
     and  Covenants.    The Investor  shall have  performed or complied in all
material  respects with all agreements and covenants  required by this Agreement
to be  performed or complied  with by it on or prior to the Closing.  Unless the
Issuer receives written  notification to the contrary at the Closing, the Issuer
shall be entitled to assume that the  preceding  is accurate in all  respects at
the Closing. 







		    
(c)           No
     Order.    No  governmental  authority  or other agency or  commission  or
federal or state court of competent  jurisdiction  shall have  enacted,  issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction, or other order (whether temporary, preliminary or permanent)
which is in  effect  and  which  materially  restricts,  prevents  or  prohibits
consummation of the Closing or any  transaction  contemplated by this Agreement.








ARTICLE 9 

MISCELLANEOUS 



		    
9.1        Defined
Terms.    As used herein the following terms shall have the following meanings: 







        
                “Affiliate”
shall have the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act, as in effect on the date hereof. 



        
                “Closing”
has the meaning in Article 2 of this Agreement. 



        
                “Common
Stock” has the meaning specified in the Recitals to this Agreement. 



        
                “Contemplated
Transactions” means the consummation by the Issuer of each of the following
transactions: 



     	(i) 	  	
          the restructure of the Discovery Toys, Inc.‘s promissory note made to Avon
          Products, Inc., originally dated January 15, 1999, and amended on June 21, 2001
          substantially in accordance with the draft documents provided to the Investor; 



          



     	(ii) 	  	
          the satisfaction by the Issuer of its short-term bridge loans though a
          combination of cash payment and the issuance to the Issuer’s short-term
          bridge lenders of Series D Preferred Stock with a liquidation preference not to
          exceed $2.5 million plus the accrued interest on the Issuer’s short-term
          bridge loans to the date of issuance of such Series D Preferred Stock plus an
          accrued interest factor of 13% per annum; 



          





	


21


















     	(iii) 	  	
          The Issuer’s proposed merger with I.F.S. of New Jersey, Inc., a New Jersey
          corporation (“IFS”), pursuant to the Agreement and Plan of
          Merger by and among the Issuer, Eos Acquisition Corp., a wholly-owned New Jersey
          subsidiary of the Issuer formed solely for the purpose of consummating the
          merger, and IFS, dated as of December 10, 2002; and 



          



     	(iv) 	  	
          The Issuer’s agreement with members of the management of Regal Greetings
          and Gifts (“Regal Management”) regarding equity compensation
          arrangements for Regal Management. 



          



	



        
                “Contract”
means any indenture, lease, sublease, loan agreement, mortgage, note, restriction,
commitment, obligation, understanding, or other contract, agreement or instrument, whether
or not in writing. 



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



        
                “GAAP”
means generally accepted accounting principles in effect in the United States of America
from time to time. 



        
                “Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any entity or official exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government. 



        
                “Investor”
has the meaning specified in the Recitals to this Agreement. 



        
                “Investor
Material Adverse Effect” means a material and adverse change in (or effect on)
the financial condition, properties, assets, liabilities, rights, obligations, operations
or business, of an Investor and its Subsidiaries taken as a whole. 



        
                “Issuer”
means Eos International, Inc., a Delaware corporation. 



        
                “Issuer
Material Adverse Effect” means any change, effect, event, occurrence or state of
facts that would reasonably be expected to (a) be materially adverse to the financial
condition, operating results, business, properties, assets, liabilities, rights,
obligations, operations, business prospects, employee relations or customer or supplier
relations, of the Issuer and its Subsidiaries, on a consolidated basis, or (b) materially
adversely affect the ability of Issuer to consummate the transactions contemplated by this
Agreement in a timely manner. 



        
                “Latest
Balance Sheet” means the consolidated balance sheet of Eos International, Inc., a
Delaware corporation, dated as of September 30, 2002, including any notes thereto. 



        
                “Lien”
means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
(including any conditional sale or other title retention agreement, any lease in the
nature thereof, and the filing of or agreement to give any financing statement under the
Uniform Commercial Code or comparable law or any jurisdiction in connection with such
mortgage, pledge, security interest, encumbrance, lien or charge). 




22


















	



        
                “Person”
means an individual, partnership, corporation, business trust, joint stock company,
estate, trust, unincorporated association, joint venture, Governmental Authority or other
entity, of whatever nature. 



        
                “Purchase
Price” has the meaning specified in Section 1.1 of this Agreement. 



        
                “Register,”
“registered,” and “registration” refer to a registration
of the offering and sale or resale of Common Stock effected by preparing and filing a
registration statement in compliance with the Securities Act and the declaration or
ordering of the effectiveness of such registration statement. 



        
                “Registrable
Securities” means all Shares of Common Stock acquired by the Investor pursuant to
this Agreement and any other shares of Common Stock or other securities issued in respect
of such Shares by way of a stock dividend or stock split or in connection with a
combination or subdivision of the Issuer’s Common Stock or by way of a
recapitalization, merger or consolidation or reorganization of the Issuer;
provided, however, that, as to any particular securities, such securities
will cease to be Registrable Securities when they have been sold pursuant to registration
or in a transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of such sale
and the purchaser and seller receive an opinion of counsel for the Issuer, which shall be
in form and substance reasonably satisfactory to the purchaser and seller and their
respective counsel, to the effect that such stock in the hands of the purchaser is freely
transferable without restriction or registration under the Securities Act in any public or
private transaction. 



        
                “Requirements
of Law” means as to any Person, the certificate of incorporation, by-laws or
other organizational or governing documents of such person, and any domestic or foreign
and federal, state or local law, rule, regulation, statute or ordinance or determination
of any arbitrator or a court or other Governmental Authority, in each case applicable to
or binding upon such Person or any of its properties or to which such Person or any of its
property is subject. 



        
                “SEC”
means the Securities and Exchange Commission. 



        
                “SEC
Reports” has the meaning specified in Section 3.7 of this Agreement. 



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



        
                “Shares”
has the meaning specified in Section 1.1 of this Agreement. 



        
                “Subsidiary”
means as to any Person, a corporation or limited partnership of which more than 50% of the
outstanding capital stock or partnership interests having full voting power is at the time
directly or indirectly owned or controlled by such Person. 





23


















	




        
                “Tax”
or “Taxes” means federal, state, county, local, foreign or other income,
gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration,
excise, utility, environment, communications, real or personal property, capital stock,
license, payroll, wage or other withholding, employment, social security, severance, stamp
occupation, alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation, deficiencies, penalties, additions to tax and
interest attributable thereto) whether disputed or not. 



        
                “Tax
Return” means any return, information report or filing with respect to Taxes,
including any schedules attached thereto and including any amendment thereof. 











		    9.2        Other
Definitional Provisions.  










		    (a)                     All
     terms defined in this Agreement  shall have the defined  meanings when used
in any  certificates,  reports or other  documents  made or  delivered  pursuant
hereto or thereto, unless the context otherwise requires. 







		    (b)                     Terms
     defined in the singular  shall have a  comparable  meaning when used in the
plural, and vice versa. 







		    (c)                     All
     accounting  terms shall have a meaning  determined in accordance with GAAP.








		    (d)                     As
     used  herein,  the neuter  gender  shall  also  denote  the  masculine  and
feminine,  and the  masculine  gender shall also denote the neuter and feminine,
where the context so permits. 







		    (e)                     The
     words     “hereof,”     “herein,”     and
“hereunder,”  and words of  similar  import,  when used in this
Agreement  shall refer to this  Agreement  as a whole  (including  any  Exhibits
hereto) and not to any particular provision of this Agreement. 







		    
9.3        Notices.   All
notices, requests, demands, claims, and other communications hereunder shall be in
writing and shall be delivered by certified or registered mail (first class postage
pre-paid), guaranteed overnight delivery, or facsimile transmission if such transmission
is confirmed by delivery by certified or registered mail (first class postage pre-paid)
or guaranteed overnight delivery, to the following addresses and telecopy numbers (or to
such other addresses or telecopy numbers which such party shall subsequently designate in
writing to the other party):  











	


24



















		
	         
         (a)  
if to the Issuer to:	
	                           
	                           Eos International, Inc.
	                           888 Seventh Avenue, 13th Floor
	                           New York, New York 10106
	                           Attention:  Peter A. Lund, Chairman
	                           Fax:  (212) 554-9873
	                           
	                  
	                  with a copy, which shall not alone constitute notice, to:
	                  
	                           Pitney, Hardin, Kipp & Szuch LLP
	                           Delivery Address:
	                           200 Campus Drive

                           Florham Park, New Jersey 07932
	                           Mail Address:
	                           P.O. Box 1945

                           Morristown, New Jersey 07962-1945	
	                           Attention:   Frank E. Lawatsch

                           Fax:  (973) 966-1550
	                  
	        
          (b)   if to the Investor to the address set forth next to its name on the signature page hereo.







	


Each such notice or other
communication shall for all purposes of this Agreement be treated as effective or having
been given when delivered if delivered by hand, by messenger or by courier, or if sent by
facsimile, upon confirmation of receipt. 











		    9.4        Entire
Agreement.  This Agreement (including the Exhibits attached hereto) and other
documents delivered at the Closing pursuant hereto, contain the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements and
understandings between or among the parties with respect to such subject matter. The
Exhibits constitute a part hereof as though set forth in full above.  







		    9.5        Expenses;
Taxes.  Except as otherwise provided in this Agreement, the parties shall pay their
own fees and expenses, including their own counsel fees, incurred in connection with this
Agreement or any transaction contemplated hereby. Any sales tax, stamp duty, deed
transfer or other tax (except taxes based on the income of the Investor) arising out of
the issuance of the Shares by the Issuer to the Investor and consummation of the
transactions contemplated by this Agreement shall be paid by the Issuer.  







		    9.6        Amendment;
Waiver.  This Agreement may not be modified, amended, supplemented,
canceled or discharged, except by written instrument executed by both parties. No failure
to exercise, and no delay in exercising, any right, power or privilege under this
Agreement shall operate as a waiver, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision, nor shall any waiver
be implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other agreement shall
be deemed to be an extension of the time for performance of any other obligations or any
other acts. The rights and remedies of the parties under this Agreement are in addition
to all other rights and remedies, at law or equity, that they may have against each
other.  









	


25
















		    9.7        Binding
Effect; Assignment.   The rights and obligations of this Agreement shall bind and
inure to the benefit of the parties and their respective successors and legal assigns.
The rights and obligations of this Agreement may not be assigned by any party without the
prior written consent of the other party.  







		    
9.8        Counterparts.   This
Agreement may be executed in any number of counterparts, each of which shall be an
original but all of which together shall constitute one and the same instrument.  







		    9.9        Headings.   The
headings contained in this Agreement are for convenience of reference only and are not to
be given any legal effect and shall not affect the meaning or interpretation of this
Agreement.  







		    
9.10        Governing
Law; Interpretation.   This Agreement shall be construed in accordance with and
governed for all purposes by the laws of the State of New York applicable to contracts
executed and to be wholly performed within such State.  







		    
9.11        Severability.   The
parties stipulate that the terms and provisions of this Agreement are fair and reasonable
as of the date of this Agreement. However, any provision of this Agreement shall be
determined by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or invalidated.
If, moreover, any of those provisions shall for any reason be determined by a court of
competent jurisdiction to be unenforceable because excessively broad or vague as to
duration, activity or subject, it shall be construed by limiting, reducing or defining
it, so as to be enforceable.  







[SIGNATURES AND OTHER
INFORMATION ON NEXT THREE PAGES] 






	


26


















	



        IN
WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement to be duly
executed and delivered as of the date set forth below. 












		
	NAME OF INVESTOR:

	ADDRESS FOR NOTICES (Please Print)


	________________________________	________________________________
		________________________________
		________________________________
	SIGNATURE:	 
	 	Attention:________________________
	By:_____________________________	Telecopy:________________________
	     Name:
	     Title:	Tax Identification #:_________________
	 	 
	Exact Name to appear on Stock Certificate:	________________________________
	 	 
	Number of Shares Subscribed For:	_______________________
	 	 
	Aggregate Purchase Price (see Section 1.1):	$______________________







	



The Investor hereby provides the
following additional information: 











         (a)       
          Excluding the shares of Common Stock subscribed for above, set forth below is
          the number of shares of Common Stock and options rights or warrants of Eos
          International, Inc. (“Options” and together with the Common Stock,
          “Securities”) which the Investor beneficially owns or of which
          the Investor is the record owner on the date hereof. Please refer to the
          definition of beneficial ownership on Exhibit D attached hereto.
          If none, please so state. 




Number of Shares:     __________________ (excluding the Shares subscribed for above)



Number of Options:   
__________________ 



Please indicate by an asterisk (*)
above if the Investor disclaims “beneficial ownership” of any of the
above listed Securities, and indicate in response to question (b) below who has beneficial
ownership. 



         (b)       
          If the Investor disclaims “beneficial ownership” in question
          (a), please furnish the following information with respect to the person(s)
          other than the Investor who is the beneficial owner(s) of the Securities in
          question. If not applicable, please check box: |_| 



         
Name of Beneficial Owner: ____________________________________
         
Relationship to the Investor: __________________________________
         
Number of Securities Beneficially Owned: ________________________ 




	


27


















	


     NAME OF INVESTOR:____________________________



         (c)       
          Are any of the Securities listed in response to question (a) the subject of a
          voting agreement, contract or other arrangement whereby others have voting
          control over, or any other interest in, any of the Investor’s Securities? 











		
		|_|  Yes          
          |_| No






	


If the answer is “Yes”,
please give details: 



_____________________________ 



         (d)       
          Please describe each position, office or other material relationship which the
          Investor has had with the Issuer or any of its affiliates, including any
          Subsidiary of the Issuer, within the past three years. Please include a
          description of any loans or other indebtedness, and any contracts or other
          arrangements or transactions involving a material amount, payable by the
          Investor to the Issuer or any of its affiliates, including its Subsidiaries, or
          by the Issuer or any of its affiliates, including its Subsidiaries, to the
          Investor. “Affiliates” of the Issuer include its directors and
          executive officers, and any other person controlling or controlled by the
          Issuer. If none, please so state. 



Answer: 



         (e)       
          Please provide the name and address of other person(s), if any, to whom any
          proxy statements, registration statements (including notice of effectiveness
          thereof), prospectuses or similar documents and information should be delivered
          by the Issuer on behalf of the Investor in the future, with respect to the
          Investor’s shares: 











				
	
		

	
		

	
		

	
		







	



         (f)       
          Please advise of special stock certificate delivery requirements for closing, if
          any: 



         (g)       
          Please advise if a NASD member has placed with you the Shares being purchased
          hereunder: (Name of Member:) __________________________________________ 



28

















	ACCEPTED:   EOS INTERNATIONAL, INC.



          
          
               By:  

                         
—————————————

          
                 Name:

          
                 Title:
       		


Dated: _____________________, 200__











	



29


















	



Exhibit A 



DISCLOSURE DOCUMENTS 



THE INVESTOR IS URGED TO REVIEW
THE FOLLOWING DOCUMENTS WHICH ARE DELIVERED HEREWITH AND INCORPORATED BY REFERENCE HEREIN
AS IF RESTATED HEREIN: 












               	1. 	       
                        Form 10-K for  fiscal  year ended  December  31,  2001,  Forms 10-Q for the
quarters 
       
ended March 31, 2002,  June 30, 2002, and September 30, 2002, Form 8-Ks
filed
        with, or furnished to, the SEC since January 1, 2002. 


                    



	2.  	       
Recent Press Releases 






	3.  	       
Promotional Materials 






	4.  	       
Agreement  and Plan of Merger with I.F.S.  of New Jersey,  Inc. and related

       agreements 






	5.  	       
     Disclosure  document mailed to  shareholders of I.F.S. of New Jersey,  Inc.







	6.  	       
     Forms  of  agreements   with  short-term   bridge  lenders   providing  for
restructure of 
       short-term bridge loans 






	7.  	       
     Risk Factors (attached as Exhibit B hereto) 







	





















	




Exhibit B 



RISK FACTORS 



We urge you to carefully
consider these “Risk Factors” and discuss them with your legal counsel andother

professional advisors. 



        You
should carefully consider the Risk Factors set forth below, and the risk factors set forth
under the heading entitled “Risk Factors” in our Annual Report on Form 10-K for
the year ended December 31, 2001 and subsequent filings that we have made with the
Securities and Exchange Commission, as well as the other information contained in or which
may be made available to you in connection with this Agreement, along with your own
operational and financial due diligence in evaluating whether to invest in the Shares. 



        This
exhibit contains certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The forward-looking statements are made on
numerous occasions and may be identified by use of forward-looking terminology, such as
“expect,” “plan,” “anticipate,” “intend,”
“project,” “have in mind,” “perceive,” “propose,”
“believe,” “estimate,” “approximate,” “may,”
“is likely to,” “contemplate,” “calculate,”
“hope,” “forecast,” “foresee,” “envision,”
“will” or similar terms or phrases or variations thereof. Such forward-looking
statements involve certain risks and uncertainties and, in each case, actual results may
differ materially from those reflected in the forward-looking statements. Certain
important risk factors that may cause actual results to differ materially from those
reflected in the forward-looking statements are set forth below. We assume no obligation
for updating or supplementing any forward-looking statement. 



        Investment
in the shares of our common stock offered hereby is speculative and involves a high degree
of risk. Investors must be prepared to bear the economic risk of their investment for an
indefinite period and be able to withstand a total loss of their investment. 



BUSINESS RISKS 



As a holding company, our ability
to pay dividends and meet our other obligations depends on the ability of our subsidiaries
to pay dividends to us. 



We are a holding company with no
business operations. Our only significant asset is the outstanding capital stock of
our operating subsidiaries. As a result, we are totally dependent on dividends and other
distributions, such as management fees, from those subsidiaries to pay dividends on our
common stock or on any preferred stock we may issue, and to meet our other obligations.
The ability of our subsidiaries to pay dividends to us or otherwise make distributions to
us could be restricted as a result of their capital structure, decisions of their boards,
availability of funds, contractual restrictions to which such subsidiaries may be subject
and any applicable legal restrictions. Our subsidiaries have agreements with lenders that
prohibit cash being advanced to us to meet our corporate overhead cash requirements. 




2


















	





If we were to seek the listing of
our common stock on Nasdaq, we may be required to significantly alter the composition of
its board of directors to comply with listing requirements. 



Subsequent to the consummation of the
transactions contemplated by this offering and related agreements, we intend to apply for
listing of our common stock on a national securities exchange or association such as
Nasdaq. Under the Sarbanes-Oxley Act of 2002, listed companies will be subject to
stringent corporate governance requirements including the obligation to have their boards
of directors comprised of a majority of independent directors and to have fully
independent audit committees. 



Our current board of directors is not
comprised of a majority of independent directors and our audit committee is not entirely
independent. To meet these listing requirements, we will be required to significantly
alter the composition of our board of directors. 



We are highly leveraged. We may be
unable to meet our future capital requirements and we may not have sufficient liquidity to
continue to meet our obligations. 



Our operating subsidiaries have a
highly seasonal business and follow a pattern of increased sales concentration in the
fourth quarter of the year common to many consumer product companies. Our subsidiaries use
significant amounts of working capital to fund operating expenses for the first three
quarters of each year and to acquire inventory to meet sales demand in the fourth quarter
of each year. Our subsidiaries have revolving lines of credit established with lenders to
provide seasonal financing for their working capital requirements and may require from
time to time a relaxation of their borrowing base restrictions from their lenders. There
can be no assurance that our subsidiaries will not require a relaxation of their borrowing
requirements from their lenders or that, if requested, the lenders will agree to a
relaxation of the borrowing requirements. 



We have to operate at certain
performance levels to maintain our financing arrangements to provide adequate liquidity
for our operations to continue. There are no guarantees that we will be able to operate at
these performance levels. 



We have issued an aggregate of
$6.5 million in short term notes which were originally due on April 13, 2002 and
for which we have recently received a repayment extension through December 31, 2002. We
will be in default on these notes on their new repayment date unless we can raise
additional capital or new financing sufficient to repay them or negotiate a further
extension of the notes. 



We will require additional financing
before December 31, 2002. We may not be able to obtain the financing or obtain it on terms
acceptable to us. Without additional financing, we may be forced to cease operations. In
addition, the success of our business strategy is dependent on our ability to complete
acquisitions. These acquisitions may require additional financing. There is no assurance
that we will be able to obtain additional financing. Our independent auditors indicated
that substantial doubt exists as to our ability to continue to operate as a going concern
in their report included in the 2001 Annual Report on Form 10-K, filed with the SEC on
April 10, 2002. 



2


















	





Our noteholders have warrants to
purchase our common stock and have the right to obtain additional warrants under certain
circumstances. 



In connection with our borrowing
under the short-term notes referred to above, we issued warrants to the noteholders,
giving them the right to purchase up to 2,600,000 shares of our common stock at an
exercise price of $2.95 per share which exercise price shall be reset based upon
the weighted average cash price paid for each share of Common Stock sold in the Offering
(without reduction for fees or expenses in connection with the Offering), and is
thereafter subject to adjustment in certain events. Although we have negotiated amendments
to our agreements with our short-term note holders to eliminate certain “put”
and “call” provisions granted to the warantholders under the agreements, we
cannot guarantee that we will be able to finalize these amendments with our warrant
holders. In the event that we do not finalize these amendments, at any time after the
notes are paid in full, the warrant holders will have a “put” by which they can
require us to repurchase the warrants for $0.90 per share, though the Company cannot be
required to make any such repurchase prior to the earlier of (x) the date on which the
Notes are paid in full, and (y) January 1, 2003. There is no assurance that we will have
sufficient capital to meet these repurchase obligations. If we do not pay the repurchase
price when due, interest on the unpaid amount will accrue at the rate of 15% per
annum. 



If we do not pay all amounts owing
under the notes by December 31, 2002, the notes will be subject to an increased interest
rate and we will be obligated to deliver to the noteholders on that date, and on each
30th day thereafter, warrants to purchase an aggregate of 16,667 shares of our
common stock per day at an per share exercise price equal to our par value per share
(currently $0.01). These additional warrants will also be subject to the “put”
described above, except that the repurchase price under the additional warrants will be
$0.50 per share. 



The exercise price of the warrants
and the number of shares subject to the warrants are subject to adjustment as a result of,
among other things, changes in our capital. In addition, the exercise price in each of the
warrants is subject to downward adjustment and the number of shares for which the warrant
is exercisable is subject to upward adjustment if we issue common stock or common stock
equivalents at a price below their fair market value or the exercise price of the
warrants. Any such adjustment and subsequent exercise of the warrants could result in
dilution of your holdings of our common stock. The noteholders have agreed that, if we pay
the notes in full by December 31, 2002, this adjustment provision will be
eliminated retroactively so that it will have no effect. 



The warrant holders have the right to
require us to register the common stock underlying their warrants, and to bear the
expenses of such registration. There is no assurance that we will have sufficient capital
to meet the cost of such registration, which is likely to be substantial. 



On December 10, 2002, we entered into
an agreement with our short-term bridge lenders to amend the terms of the notes and
warrants we issued to them on December 14, 2001 and the registration rights agreement we
entered into with them on the same date. Under the terms of the agreement, the short-term
bridge lenders will exchange the notes for $4 million in cash and 1,000 shares of Eos
Series D Preferred Stock. The transactions contemplated by the agreement are contingent
upon us effecting (i) the merger with IFS, and (ii) this offering. If the transactions
contemplated by the agreement are not effected by January 8, 2003, any party to the
agreement may terminate it without any liability to any other party. However, such
termination would not relieve us from any liability under the notes, warrants, or
registration rights agreement. 



3
















	





Our governing documents contain
certain exculpatory and indemnification provisions relating to our directors and officers. 



Our certificate of incorporation
contains provisions that exculpate or limit the liability of our directors and
officers for monetary damages for breach of fiduciary duty in certain circumstances. In
addition, our by-laws contain provisions which obligate us in most circumstances to
indemnify each of our directors and officers against liabilities and expenses incurred in
defending any actual or threatened lawsuit arising out of the performance of an
officer’s or director’s duties. The protections afforded to the directors and
officers will make it more difficult to obtain damages from a director or officer if that
person breaches his fiduciary duties to us. 



INVESTMENT AND OTHER
RISKS 



Because our common stock is thinly
traded, we determined the offering price based on factors other than market price. 



We established the offering price of
the common stock based on such factors as our capital requirements, financial conditions
and prospects, percentage of ownership to be held by investors following this offering,
management and the general condition of securities markets at the time of the offering.
The offering price does not necessarily bear any relationship to our assets, book value,
earnings history or other established criteria of value. 



Your registration rights will be
subject to timing uncertainties. 



As you are aware, shares being issued
in the merger may not be resold absent the effectiveness of the registration statement or
pursuant to an applicable exemption from registration. Although the we have undertaken to
register the Common Stock for resale by you, we are unable to determine with certainty
when the registration statement to be filed with the SEC will become effective. The
disclosures to be contained in the registration statement concerning our business may
become subject to review by the SEC. The period necessary to achieve effectiveness with
the SEC will be affected by our ability to provide disclosures concerning our business or
businesses that may be acquired by us, such as I.F.S. of New Jersey Inc., which are
satisfactory to the SEC. The length of the SEC review process is uncertain and may extend
to a number of months. 



We will have broad discretion in
the application of proceeds from the offering. 



We will have broad discretion in the
application of proceeds from this offering. A significant portion of the balance of the
proceeds will be used to satisfy the short term notes we issued the holders thereof in
December 2001. In addition, we may attempt to expand our business into other new areas
using a portion of the proceeds of this offering which has been earmarked for working
capital. There can be no assurance that we will be able to acquire any desirable
businesses or that, if acquired, such businesses will be successfully developed or that
any expansion into new business areas will be successful. 




4


















	





We are unlikely to pay
dividends. 



We do not intend to declare or pay
any cash or other dividends to the holders of our Common Stock in the foreseeable future. 



Allen & Company will
receive commissions in the offering. 



Allen & Company Incorporated, the
beneficial holder of our outstanding common stock, is acting as placement agent in
connection with the offering of the Common Stock and will be receiving a commission
payable in shares of Common Stock. 



You should use caution in
evaluating our forward-looking statements. 



Statements in the Subscription
Agreement, including its exhibits, other than statements of historical information, are
forward-looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements are inherently uncertain. Actual performance and results may
differ materially from the projected or suggested herein due to certain risks and
uncertainties including, without limitation, the risks set forth above. These risk factors
are not necessarily all of the important factors that could cause actual results to differ
materially from those expressed in any of our forward-looking statements. Other unknown
and unpredictable factors could also have a material adverse effect on our future results. 



5
















	





Exhibit C 



ANTICIPATED USE OF
PROCEEDS 



        The
Company seeks to raise aggregate gross proceeds of $7,500,000 and intends to use
proceeds from the Offering to repay a portion of the notes entered into in December 2001
in connection with the acquisition of Regal and for general working capital purposes. 



        The
Company intends to use the proceeds of this offering for: 









	Use	Amount*
	
		
	
	Repayment of Bridge Loans	$4,000,000 
	Restricted Expenditures	$1,200,000+
	Working Capital and IFS Acquisition Costs	$2,300,000 
	             TOTAL	$7,500,000 







	* 	  	Amounts in U.S. Dollars







	† 	  	
Includes, without limitation, compensation (including any “moving
allowances,” or other one-time or sign on bonuses or payments) for a Chief
Executive Officer of the Issuer, for a Chief Financial Officer of the Issuer, or for
accounting staff or consultants, (b) recruiting fees for the foregoing positions, (c)
up-front fees and out-of-pocket costs of acquisitions of businesses by the Issuer or any
Subsidiary, (d) up-front fees and out-of-pocket costs of refinancing of the bank debt
of Subsidiaries of the Issuer, (e) investment banking fees and costs incurred by the
Issuer to raise or attempt to raise additional funds or for strategic initiatives or
acquisitions or proposed acquisitions of businesses, (f) payments required to be made to
avoid an event of default by the Issuer or any Subsidiary on the debt of the Issuer or any
Subsidiary, (g) redemption of Series D Preferred Stock as provided in the Agreement
between the Company, DL Holdings, LLC and Weichert Enterprise LLC, dated as of the date of
Closing, or (h) certain other expenditures agreed upon between the Issuer and the holders
of the Issuer’s Series D Preferred Stock. 







	




        The
use of proceeds set forth above represents the Company’s current estimate of the
allocation of proceeds of the offering contemplated by the Company based upon the current
status of the Company’s operations. 



        Future
events may make it necessary or desirable to reallocate the proceeds and the Company shall
reallocate proceeds to the extent the Board of Directors determines it is necessary or
desirable to do so from time to time. 




















	



Exhibit D 



BENEFICIAL OWNERSHIP 



Explanation of
“BENEFICIAL OWNERSHIP” 



        Securities
that are subject to a power to vote or dispose are deemed beneficially owned by the person
who holds such power, directly or indirectly. This means that the same securities may be
deemed beneficially owned by more than one person, if such power is shared. In addition,
the beneficial ownership rules provide that shares which may be acquired upon exercise of
an option or warrant, or which may be acquired upon the termination of a trust,
discretionary account or similar arrangement, which can be effected within a period of 60
days from the date of determination, are deemed to be “beneficially” owned.
Furthermore, shares that are subject to rights or powers even though such rights or powers
to acquire are not exercisable within the 60-day period may also be deemed to be
beneficially owned if the rights or powers were acquired “with the purpose or effect
of changing or influencing the control of the Issuer or in connection with or as a
participant in any transaction having such purpose or effect.” 



        In
determining whether securities are “beneficially owned,” benefits which are
substantially equivalent to those of ownership by virtue of any contract, understanding,
relationship, agreement or other arrangement should cause the securities to be listed as
“beneficially owned.” 



        Thus,
for example, securities held for a person’s benefit in the name of others or in the
name of any estate or trust in which such person may be interested should also be listed.
Securities held by a person’s spouse, children or other members of such person’s
family who are such person’s dependents or who live in such person’s household
should be listed as “beneficially owned” unless such person does not enjoy
benefits equivalent to those of ownership with respect to such securities. 



        If
a person has a proprietary or beneficial interest in a controlled corporation,
partnership, personal holding company, trust or estate which owns of record or
beneficially any securities, such person should state the amount of such securities owned
by such controlled corporation, partnership, personal holding company, trust or estate in
lieu of allocating such person’s proprietary interest, and by note or otherwise,
please indicate that. In any case, the name of the controlled corporation, partnership,
personal holding company, or estate must be stated. 



        In
all cases the nature of the beneficial ownership should be stated.