rim_8k-ex1001.htm


    Exhibit
      10.1

     

    BRIDGE
      LOAN AGREEMENT

    


    THIS
      BRIDGE LOAN
      AGREEMENT, dated as of July 26, 2007, is entered into by and between
RIM SEMICONDUCTOR COMPANY, a Utah corporation with headquarters
      located at 305 NE 102nd Ave., Suite 105, Portland, OR 97220 (the “Company”), and
      each individual or entity named on an executed counterpart of the signature
      page
      hereto (each such signatory is referred to as a “Lender”) (each agreement with a
      Lender being deemed a separate and independent agreement between the Company
      and
      such Lender, except that each Lender acknowledges and consents to the rights
      granted to each other Lender [each, an “Other Lender”] under such agreement and
      the Transaction Agreements, as defined below, referred to
      therein).


    


    W
      I T N E S S E T H:

    


    WHEREAS,
      the Company
      and the Lender are executing and delivering this Agreement in accordance with
      and in reliance upon the exemption from securities registration for offers
      and
      sales to accredited investors afforded, inter alia, by Rule
      506 under Regulation D (“Regulation D”) as promulgated by the United States
      Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
      as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act;
      and

    


    WHEREAS,
      each Lender
      wishes to lend funds in the amount of the Purchase Price (as defined below)
      to
      the Company, subject to and  upon  the terms and conditions
      of this Agreement and acceptance of this Agreement by the Company, the repayment
      of which  will be represented by a Senior Secured Promissory Note of
      the Company (the “Note”), on the terms and conditions referred to herein;
      and

    


    WHEREAS,
      in connection
      with the loan to be made by the Lender, the Company has agreed to issue the
      Note
      and the Issued Shares (as defined below) to the Lender;

    


    NOW
      THEREFORE, in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the parties agree as follows:

    


    1.           AGREEMENT
      TO PURCHASE; PURCHASE PRICE.

    


    a.           Purchase.

    


    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    (i)           Subject
      to the terms and conditions of this Agreement and the other Transaction
      Agreements (as defined below), the Lender hereby agrees to loan to the Company
      the principal amount specified on the Lender’s signature page of this Agreement
      (the “Purchase Price”), out of the aggregate amount being loaned by all Lenders
      of US $1,000,000 (the “Aggregate Purchase Price”).

    


    (ii)           The
      obligation to repay the loan of the relevant Purchase Price from the Lender
      shall be evidenced by the Company’s issuance of one or more Notes to the Lender
      in the principal amount of one hundred ten percent (110%) of the Purchase Price
      paid by the Lender on or in connection with the Closing Date.  Each
      Note shall be payable on the earlier of (A) the date (the “Stated Maturity
      Date”)  which is one hundred fifty (150) days after the Closing Date
      or (B) the date on which the New Transaction Threshold (as defined in the Note)
      occurs.  Each Note shall be in the form of Annex I
annexed hereto.  Repayment of the Note shall be secured under
      the terms of a Security Interest Agreement between the Company, as debtor,
      and
      the Lender, as secured party (the “Security Interest Agreement”), substantially
      in the form annexed hereto as Annex V.

    


    (iii)           In
      consideration of the loan to be made by each Lender, the Company agrees to
      issue  to each Lender the Issued Shares on the Closing
      Date.  Additional provisions relating to the Issued Shares are
      provided below.

    


    (iv)           The
      loan to be made by the Lender and the issuance of the Note and the Issued Shares
      to the Lender and the other transactions contemplated hereby are sometimes
      referred to herein and in the other Transaction Agreements as the purchase
      and
      sale of the Securities (as defined below), and are referred to collectively
      as
      the “Transactions.”

    


    b.           Certain
      Definitions.   As used herein, each of the following
      terms has the meaning set forth below, unless the context otherwise
      requires:

    


    “Affiliate”
means,
      with respect to a
      specific Person referred to in the relevant provision, another Person who or
      which controls or is controlled by or is under common control with such
      specified Person.

    


    “Certificates”
means
      the ink-signed
      Note and the Issued Share Certificates, each duly executed by the Company and
      issued on the Closing Date in the name of the Lender.

    


    “Closing
      Date” means the date of the
      closing of the Transactions, as provided herein.

    


     “Company
      Control Person”
means  each director, executive officer, promoter, and such other
      Persons as may be deemed in control of the Company pursuant to Rule 405 under
      the 1933 Act or Section 20 of the 1934 Act (as defined below).

    


    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Disclosure
      Annex” means Annex
      IV to this Agreement; provided, however, that the Disclosure Annex
      shall be arranged in sections corresponding to the identified Sections of this
      Agreement, but the disclosure in any such section of the Disclosure Annex shall
      qualify other provisions in this Agreement to the extent that it would be
      readily apparent to an informed reader from a reading of such section of the
      Disclosure Annex that it is also relevant to other provisions of this
      Agreement.

     

    “Escrow
      Agent” means Krieger &
Prager LLP, the escrow agent identified in the Joint Escrow Instructions
      attached hereto as Annex II (the “Joint Escrow
      Instructions”).

    


    “Escrow
      Funds” means the Purchase Price
      delivered to the Escrow Agent as contemplated by Sections 1(c) and (d)
      hereof.

    


    “Escrow
      Property” means the Escrow
      Funds and the Certificates delivered to the Escrow Agent as contemplated by
      Section 1(c) hereof.

    


    “Holder”
means
      the Person holding the
      relevant Securities at the relevant time.

    


    “Issued
      Share Certificates” means one
      or more stock certificates issued by the Company in the name of the Lender
      representing, in the aggregate, the relevant Issued Shares.

    


    “Issued
      Shares” means, for each Lender,
      (i) 10,000,000 shares of Common Stock, multiplied by (ii) the Lender’s Allocable
      Share; the Issued Shares are to be issued on the Closing Date.

    


    “Last
      Audited Date” means October 31,
      2006.

    


    “Lender
      Control Person” means each
      director, executive officer, promoter, and such other Persons as may be deemed
      in control of the Lender pursuant to Rule 405 under the 1933 Act or Section
      20
      of the 1934 Act.

    


    “Lender’s
      Allocable Share” means the
      fraction, of which the numerator is the Lender’s Purchase Price and the
      denominator is the Aggregate Purchase Price.

    


    “Material
      Adverse Effect” means an
      event or combination of events, which individually or in the aggregate, would
      reasonably be expected to (x) adversely affect the legality, validity or
      enforceability of the Securities or any of the Transaction Agreements,
      (y)  have or result in a material adverse effect on the results of
      operations, assets, or financial condition of the Company and its subsidiaries,
      taken as a whole, or (z) adversely impair the Company's ability to perform
      fully
      on a timely basis its material obligations under any of the Transaction
      Agreements or the transactions contemplated thereby.

    


    “New
      Common Stock” means shares of
      Common Stock and/or securities convertible into, and/or other rights exercisable
      for, Common Stock, which are offered or sold in a New Transaction.

    


    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “New
      Investor” means the third party
      investor, purchaser or lender (howsoever denominated) in a New
      Transaction.

    


    “New
      Transaction” means

    


    (i)
      the
      offer or sale of New Common Stock by or on behalf of the Company to a New
      Investor, and/or

    


    (ii)
      the
      grant of a security interest in or pledge of (x) any or all of the Company’s
      assets by the Company and/or (y) shares of the Company’s Common Stock or
      securities convertible into or exercisable for the Company’s Common Stock by any
      other party in connection with a transaction in which the Company borrows or
      is
      otherwise obligated to pay funds to a third party, and/or

    


    (iii)
      the
      offer or sale to existing holders of any Company securities (each, an “Existing
      Securityholder”) of additional New Common Stock or the offer of more beneficial
      terms with respect to any existing securities of the Company held by an Existing
      Securityholder in exchange for the forbearance, modification or relinquishment
      of any rights such Existing Securityholder may have, and/or

    


    (iv)
      the
      offer by the Company to any Existing Securityholder of a reduction in the
      conversion price of any security convertible into Common Stock or a reduction
      in
      the exercise price of any right exercisable for Common Stock

    


    in
      a
      transaction offered or consummated after the date hereof; provided, however,
      that it is specifically understood that the term “New Transaction” (1) includes,
      but is not limited to, a sale of Common Stock or of a security convertible
      into
      Common Stock or an equity or credit line transaction, but (2) does not include
      (a) the issuance of Common Stock upon the exercise or conversion of options,
      warrants or convertible securities outstanding on the date hereof, or in respect
      of any other financing agreements as in effect on the date hereof and identified
      in the Disclosure Annex or the Company SEC Documents (provided the relevant
      instrument or document is not amended after the date hereof), (b) the issuance
      of Common Stock pursuant to an employee stock option plan of the Company, such
      stock option plan having been properly approved by the shareholders of the
      Company, (c) the issuance of Common Stock pursuant to a non-employee director
      or
      consultants’ stock option plan of the Company, (d) the issuance of Common Stock
      upon the exercise of any options or warrants referred to in the preceding
      clauses of this paragraph (provided the relevant instrument is not amended
      after
      the date hereof), or (e) the issuance of shares to a Strategic
      Partner.

    


    “Person”
means
      any living person or any
      entity, such as, but not necessarily limited to,  a corporation,
      partnership or trust.

    


    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    “Principal
      Trading Market” means the
      Over the Counter Bulletin Board or such other market on which the Common Stock
      is principally traded at the relevant time, but shall not included the “pink
      sheets.”

    


    “Securities”
means
      the Note and the
      Issued Shares (provided, however, that the parties acknowledge that the use
      of
      such term is for convenience only, and is not intended to suggest that the
      Note
      is a “security,” as such term is used in the 1933 Act).

    


    “Shares”
means
      the shares of Common
      Stock representing any of the Issued Shares.

    


    “State
      of Incorporation” means
      Utah.

    


    “Strategic
      Partner” means a third
      party, whether or not currently affiliated with the Company, which party (i)
      is
      engaged in a business which is the business in which the Company is engaged
      or a
      similar or related business, and (ii) either (a) (1) subsequently purchases
      equity securities of the Company (or securities convertible into equity
      securities of the Company) or (2) is issued such equity securities (or such
      convertible securities) in consideration of services rendered or to be rendered
      to the Company, or (b) enters into an agreement for one or more of the
      following: the licensing by the Company of all or any portion of its technology
      to such third party, the licensing by such third party of all or any portion
      of
      its technology to the Company, or any other coordination of all or a portion
      of
      their respective business activities or operations by the Company and such
      third
      party.

    


    “Trading
      Day” means any day during
      which the Principal Trading Market shall be open for business.

    


    “Transfer
      Agent” means, at any time,
      the transfer agent for the Company’s Common Stock.

    


    “Transaction
      Agreements” means this
      Bridge Loan Agreement, the Note, the Security Interest Agreement, the Joint
      Escrow Instructions, and the Issued Shares, and includes all ancillary documents
      referred to in those agreements.

    


    c.           Form
      of Payment; Delivery of Certificates.

    


    (i)           The
      Lender shall pay the Purchase Price by delivering immediately available good
      funds in United States Dollars to the Escrow Agent no later than the date prior
      to the Closing Date.

    


    (ii)           No
      later than the Closing Date, but in any event promptly following payment by
      the
      Lender to the Escrow Agent of the Purchase Price,  the Company shall
      deliver the Certificates, each duly executed on behalf of the Company and issued
      in the name of the Lender, to the Escrow Agent.

    


    (iii)           By
      signing this Agreement, each of the Lender and the Company, subject to
      acceptance by the Escrow Agent, agrees to all of the terms and conditions of,
      and becomes a party to, the Joint Escrow Instructions, all of the provisions
      of
      which are incorporated herein by this reference as if set forth in
      full.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    d.           Method
      of Payment.  Payment into escrow of the Purchase Price shall
      be made by wire transfer of funds to:

    


    JP
      Morgan Chase Bank

    350
      Fifth Avenue

    New
      York, New York 10001

    


    ABA#
      021000021

    For
      credit to the account of Krieger
& Prager llp

    Account
      No.:    [To be provided to the Lender by Krieger &
Prager llp]

    Re:   Rim
      7/07
      Bridge/[Insert Name of Lender]

    


    2.  LENDER
      REPRESENTATIONS,
      WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
      INVESTIGATION.

    


    The
      Lender represents and warrants to,
      and covenants and agrees with, the Company as follows:

    


    a.           Without
      limiting Lender's right to sell the Securities pursuant to an effective
      registration statement, if any, or otherwise in compliance with the 1933 Act,
      the Lender is purchasing the Securities for its own account for investment
      only
      and not with a view towards the public sale or distribution thereof and not
      with
      a view to or for sale in connection with any distribution thereof.

    


    b.           The
      Lender is (i) an “accredited investor” as that term is defined in Rule 501 of
      the General Rules and Regulations under the 1933 Act by reason of Rule
      501(a)(3), (ii) experienced in making investments of the kind described in
      this
      Agreement and the related documents, (iii) able, by reason of the business
      and
      financial experience of its officers (if an entity) and professional advisors
      (who are not affiliated with or compensated in any way by the Company or any
      of
      its Affiliates or selling agents), to protect its own interests in connection
      with the transactions described in this Agreement, and the related documents,
      and to evaluate the merits and risks of an investment in the Securities, and
      (iv) able to afford the entire loss of its investment in the
      Securities.

    


    c.           All
      subsequent offers and sales of the Securities by the Lender shall be made either
      pursuant to registration of the relevant Securities under the 1933 Act or
      pursuant to an exemption from registration.

    


    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    d.           The
      Lender understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of the 1933
      Act and state securities laws and that the Company is relying upon the truth
      and
      accuracy of, and the Lender's compliance with, the representations, warranties,
      agreements, acknowledgments and understandings of the Lender set forth herein
      in
      order to determine the availability of such exemptions and the eligibility
      of
      the Lender to acquire the Securities.

     

    e.           The
      Lender and its advisors, if any, have been furnished with or have been given
      access to all materials relating to the business, finances and operations of
      the
      Company and materials relating to the offer and sale of the Securities which
      have been requested by the Lender, including those set forth on any annex
      attached hereto. The Lender and its advisors, if any, have been afforded the
      opportunity to ask questions of the Company and its management and have received
      complete and satisfactory answers to any such inquiries.  Without
      limiting the generality of the foregoing, the Lender has also had the
      opportunity to obtain and to review the Company's filings on EDGAR listed on
      Annex VI hereto (the documents listed on such Annex VI, to the
      extent available on EDGAR or otherwise provided to the Lender as indicated
      on
      said Annex VI, collectively, the “Company's SEC Documents”).

    


    f.           The
      Lender understands that its investment in the Securities involves a high degree
      of risk.

    


    g.           The
      Lender hereby represents that, in connection with its purchase of the
      Securities, it has not relied on any statement or representation by the Company
      or any of its officers, directors and employees or any of its attorneys or
      agents, except as specifically set forth herein.

    


    h.           The
      Lender understands that no United States federal or state agency or any other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities.

    


    i.           This
      Agreement and the other Transaction Agreements to which the Lender is a party,
      and the transactions contemplated thereby, have been duly and validly
      authorized, executed and delivered on behalf of the Lender and are valid and
      binding agreements of the Lender enforceable in accordance with their respective
      terms, subject as to enforceability to general principles of equity and to
      bankruptcy, insolvency, moratorium and other similar laws affecting the
      enforcement of creditors' rights generally.

    


    3.           COMPANY
      REPRESENTATIONS, ETC.   The Company represents and warrants
      to the Lender as of the date hereof and as of the Closing Date that, except
      as
      otherwise provided in the Disclosure Annex or in the Company’s SEC
      Documents:

    


    a.           Rights
      of Others Affecting the Transactions.  There are no
      preemptive rights of any shareholder of the Company, as such, to acquire the
      Note or the Issued Shares.  No party has a currently exercisable right
      of first refusal which would be applicable to any or all of the transactions
      contemplated by the Transaction Agreements.

    


    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    b.           Status.  The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Incorporation and has the requisite corporate
      power to own its properties and to carry on its business as now being
      conducted.  The Company is duly qualified as a foreign corporation to
      do business and is in good standing in each jurisdiction where the nature of
      the
      business conducted or property owned by it makes such qualification necessary,
      other than those jurisdictions in which the failure to so qualify would not
      have
      or result in a Material Adverse Effect.  The Company has registered
      its stock and is obligated to file reports pursuant to Section 12 or Section
      15(d) of the Securities and Exchange Act of 1934, as amended (the “1934
      Act”).  The Common Stock is quoted on the Principal Trading
      Market.  The Company has received no notice, either oral or written,
      with respect to the continued eligibility of the Common Stock for such quotation
      on the Principal Trading Market, and the Company has maintained all requirements
      on its part for the continuation of such quotation.

    


    c.           Authorized
      Shares.

    


    (i)           The
      authorized capital stock of the Company consists of (x) 900,000,000 shares
      of
      Common Stock, $0.001 par value per share, of which approximately 446,030,653
      are
      outstanding as of July 24, 2007, and (y) 15,000,000 shares of preferred stock,
      $0.01 par value per share, none of which are issued or outstanding.

    


    (ii)           There
      are no outstanding securities which are convertible into shares of Common Stock,
      whether such conversion is currently exercisable or exercisable only upon some
      future date or the occurrence of some event in the future.  If any
      such securities are listed on the Disclosure Annex, the number or amount of
      each
      such outstanding convertible security and the conversion terms are set forth
      in
      said Disclosure Annex.

    


    (iii)           All
      issued and outstanding shares of Common Stock have been duly authorized and
      validly issued and are fully paid and non-assessable.  The Company has
      sufficient authorized and unissued shares of Common Stock as would be necessary
      to effect the issuance of the Shares on the Closing Date, were the Issued Shares
      converted on that date (assuming the provisions of Appendix I to the Note were
      then effective).

    


    (iv)           As
      of the Closing Date, the Issued Shares shall have been duly authorized by all
      necessary corporate action on the part of the Company, and, when issued upon
      a
      conversion of the Note in accordance with its terms, will have been duly and
      validly issued, fully paid and non-assessable and will not subject the Holder
      thereof to personal liability by reason of being such Holder.

    


    d.           Transaction
      Agreements and Stock.  This Agreement and each of the other
      Transaction Agreements, and the transactions contemplated thereby, have been
      duly and validly authorized by the Company, this Agreement has been duly
      executed and delivered by the Company and this Agreement is, and the Note and
      each of the other Transaction Agreements, when executed and delivered by the
      Company, will be, valid and binding agreements of the Company enforceable in
      accordance with their respective terms, subject as to enforceability to general
      principles of equity and to bankruptcy, insolvency, moratorium, and other
      similar laws affecting the enforcement of creditors' rights
      generally.

    


    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    e.           Non-contravention.  The
      execution and delivery of this Agreement and each of the other Transaction
      Agreements by the Company, the issuance of the Securities, and the consummation
      by the Company of the other transactions contemplated by this Agreement, the
      Note and the other Transaction Agreements do not and will not conflict with
      or
      result in a breach by the Company of any of the terms or provisions of, or
      constitute a default under (i) the certificate of incorporation or by-laws
      of
      the Company, each as currently in effect, (ii) any indenture, mortgage, deed
      of
      trust, or other material agreement or instrument to which the Company is a
      party
      or by which it or any of its properties or assets are bound, including any
      listing agreement for the Common Stock except as herein set forth, or (iii)
      to
      its knowledge, any existing applicable law, rule, or regulation or any
      applicable decree, judgment, or order of any court, United States federal or
      state regulatory body, administrative agency, or other governmental body having
      jurisdiction over the Company or any of its properties or assets, except such
      conflict, breach or default which would not have or result in a Material Adverse
      Effect.

    


    f.           Approvals.  No
      authorization, approval or consent of any court, governmental body, regulatory
      agency, self-regulatory organization, or stock exchange or market or the
      shareholders of the Company is required to be obtained by the Company for the
      issuance and sale of the Securities to the Lender as contemplated by this
      Agreement, except such authorizations, approvals and consents that have been
      obtained.

    


    g.           Filings.  None
      of the Company’s SEC Documents contained, at the time they were filed, any
      untrue statement of a material fact or omitted to state any material fact
      required to be stated therein or necessary to make the statements made therein
      in light of the circumstances under which they were made, not
      misleading.  Since June 1, 2006, the Company has filed all annual and
      quarterly reports required to be filed by the Company with the SEC under Section
      13(a) or 15(d) of the 1934 Act.

    


    h.           Absence
      of Certain Changes.  Since the Last Audited Date, there has
      been no Material Adverse Effect, except as disclosed in the Company’s SEC
      Documents. Since the Last Audited Date, except as provided in the Company’s SEC
      Documents, the Company has not (i) incurred or become subject to any material
      liabilities (absolute or contingent) except liabilities incurred in the ordinary
      course of business consistent with past practices; (ii) discharged or satisfied
      any material lien or encumbrance or paid any material obligation or liability
      (absolute or contingent), other than current liabilities paid in the ordinary
      course of business consistent with past practices; (iii) declared or made any
      payment or distribution of cash or other property to shareholders with respect
      to its capital stock, or purchased or redeemed, or made any agreements to
      purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
      transferred any other tangible assets, or canceled any debts owed to the Company
      by any third party  or claims of the Company against any third party,
      except in the ordinary course of business consistent with past practices; (v)
      waived any rights of material value, whether or not in the ordinary course
      of
      business, or suffered the loss of any material amount of existing business;
      (vi)
      made any increases in employee compensation, except in the ordinary course
      of
      business consistent with past practices; or (vii) experienced any material
      problems with labor or management in connection with the terms and conditions
      of
      their employment.

    


    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    i.           Full
      Disclosure.  To the best of the Company’s knowledge, there is
      no fact known to the Company (other than general economic conditions known
      to
      the public generally or as disclosed in the Company’s SEC Documents) that has
      not been disclosed in writing to the Lender that would reasonably be expected
      to
      have or result in a Material Adverse Effect.

    


    j.           Absence
      of Litigation.  There is no action, suit, proceeding, inquiry
      or investigation before or by any court, public board or body pending or, to
      the
      knowledge of the Company, threatened against or affecting the Company before
      or
      by any governmental authority or nongovernmental department, commission, board,
      bureau, agency or instrumentality or any other person, wherein an unfavorable
      decision, ruling or finding would have a Material Adverse Effect or which would
      adversely affect the validity or enforceability of, or the authority or ability
      of the Company to perform its obligations under, any of the Transaction
      Agreements.  The Company is not aware of any valid basis for any such
      claim that (either individually or in the aggregate with all other such events
      and circumstances) could reasonably be expected to have a Material Adverse
      Effect. There are no outstanding or unsatisfied judgments, orders, decrees,
      writs, injunctions or stipulations to which the Company is a party or by which
      it or any of its properties is bound, that involve the transaction contemplated
      herein or that, alone or in the aggregate, could reasonably be expect to have
      a
      Material Adverse Effect.

    


    k.           Absence
      of Events of Default.  Except as set forth in Section 3(e)
      hereof, (i) neither the Company nor any of its subsidiaries is in default in
      the
      performance or observance of any material obligation, agreement, covenant or
      condition contained in any material indenture, mortgage, deed of trust or other
      material agreement to which it is a party or by which its property is bound,
      and
      (ii) no Event of Default (or its equivalent term), as defined in the respective
      agreement to which the Company or its subsidiary is a party, and no event which,
      with the giving of notice or the passage of time or both, would become an Event
      of Default (or its equivalent term) (as so defined in such agreement), has
      occurred and is continuing, which would have a Material Adverse
      Effect.

    


    l.           Absence
      of Certain Company Control Person Actions or Events.  To the
      Company’s knowledge, none of the following has occurred during the past five (5)
      years with respect to a Company Control Person:


    


    (1)
      A
      petition under the federal bankruptcy laws or any state insolvency law was
      filed
      by or against, or a receiver, fiscal agent or similar officer was appointed
      by a
      court for the business or property of such Company Control Person, or any
      partnership in which he was a general partner at or within two years before
      the
      time of such filing, or any corporation or business association of which he
      was
      an executive officer at or within two years before the time of such
      filing;

    


    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (2)
      Such
      Company Control Person was convicted in a criminal proceeding or is a named
      subject of a pending criminal proceeding (excluding traffic violations and
      other
      minor offenses);

    


    (3)
      Such
      Company Control Person was the subject of any order, judgment or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining him from, or otherwise
      limiting, the following activities:

    


    (i)
      acting as an investment advisor, underwriter, broker or dealer in securities,
      or
      as an affiliated person, director or employee of any investment company, bank,
      savings and loan association or insurance company, as a futures commission
      merchant, introducing broker, commodity trading advisor, commodity pool
      operator, floor broker, any other Person regulated by the Commodity Futures
      Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice
      in connection with such activity;

    


    (ii)
      engaging in any type of business practice; or

    


    (iii)
      engaging in any activity in connection with the purchase or sale of any security
      or commodity or in connection with any violation of federal or state securities
      laws or federal commodities laws;

    


    (4)
      Such
      Company Control Person was the subject of any order, judgment or decree, not
      subsequently reversed, suspended or vacated, of any federal or state authority
      barring, suspending or otherwise limiting for more than 60 days the right of
      such Company Control Person to engage in any activity described in paragraph
      (3)
      of this item, or to be associated with Persons engaged in any such activity;
      or

    


    (5)
      Such
      Company Control Person was found by a court of competent jurisdiction in a
      civil
      action or by the CFTC or SEC to have violated any federal or state securities
      law, and the judgment in such civil action or finding by the CFTC or SEC has
      not
      been subsequently reversed, suspended, or vacated.


    


    m.           No
      Undisclosed Liabilities or Events.  To the best of the
      Company’s knowledge, the Company has no liabilities or obligations other than
      those disclosed in the Transaction Agreements or the Company's SEC Documents
      or
      those incurred in the ordinary course of the Company's business since the Last
      Audited Date, or which individually or in the aggregate, do not or would not
      have a Material Adverse Effect. No event or circumstance has occurred or exists
      with respect to the Company or its properties, business, operations, condition
      (financial or otherwise), or results of operations, which, under applicable
      law,
      rule or regulation, requires public disclosure or announcement prior to the
      date
      hereof by the Company but which has not been so publicly announced or
      disclosed.  There are no proposals currently under consideration or
      currently anticipated to be under consideration by the Board of Directors or
      the
      executive officers of the Company which proposal would (x) change the articles
      or certificate of incorporation or other charter document or by-laws of the
      Company, each as currently in effect, with or without shareholder approval,
      which change would reduce or otherwise adversely affect the rights and powers
      of
      the shareholders of the Common Stock or (y) materially or substantially change
      the business, assets or capital of the Company, including its interests in
      subsidiaries.

    


    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    n.           No
      Integrated Offering.  Neither the Company nor any of its
      Affiliates nor any Person acting on its or their behalf has, directly or
      indirectly, at any time since January 1, 2007, made any offer or sales of any
      security or solicited any offers to buy any security under circumstances that
      would eliminate the availability of the exemption from registration under
      Regulation D in connection with the offer and sale of the Securities as
      contemplated hereby.

    


    o.           Dilution.  The
      Issued Shares may have a dilutive effect on the ownership interests of the
      other
      shareholders (and Persons having the right to become shareholders) of the
      Company.  The Company's executive officers and directors have studied
      and fully understand the nature of the Securities being sold hereby and
      recognize that they have such a potential dilutive effect.  The board
      of directors of the Company has concluded, in its good faith business judgment,
      that such issuance is in the best interests of the Company.

    


    p.           Fees
      to Brokers, Finders and Others.  The Company has taken no
      action which would give rise to any claim by any Person for brokerage
      commission, finder's fees or similar payments by Lender relating to this
      Agreement or the transactions contemplated hereby.  Notwithstanding
      the foregoing, the Company acknowledges that it has agreed to pay the Due
      Diligence Fees to each Due Diligence Reviewer (as those terms are defined in
      Annex VII hereto) for providing due diligence services to the
      Lenders in connection with the transactions contemplated
      hereby.  Except for such fees arising as a result of any agreement or
      arrangement entered into by the Lender without the knowledge of the Company
      (a  “Lender’s Fee”), Lender shall have no obligation with respect to
      such fees or with respect to any claims made by or on behalf of other Persons
      for fees of a type contemplated in this paragraph that may be due in connection
      with the transactions contemplated hereby.  The Company shall
      indemnify and hold harmless each of the Lender, its employees, officers,
      directors, agents, and partners, and their respective Affiliates, from and
      against all claims, losses, damages, costs (including the costs of preparation
      and attorney's fees) and expenses suffered in respect of any such claimed or
      existing fees (other than a Lender’s Fee).

    


    q.           Confirmation.  The
      Company confirms that all statements of the Company contained herein shall
      survive acceptance of this Agreement by the Lender for a period of three (3)
      years from the Closing Date.  The Company agrees that, if any events
      occur or circumstances exist prior to the release of the Purchase Price to
      the
      Company which would make any of the Company’s representations, warranties,
      agreements or other information set forth herein materially untrue or materially
      inaccurate as of such date, the Company shall immediately notify the Lender
      (directly or through its counsel, if any) and the Escrow Agent in writing prior
      to such date of such fact, specifying which representation, warranty or covenant
      is affected and the reasons therefor.

    


    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    4.           CERTAIN
      COVENANTS AND ACKNOWLEDGMENTS.

    


    a.           Transfer
      Restrictions.  The Lender acknowledges that (1) the
      Securities have not been and are not being registered under the provisions
      of
      the 1933 Act and the Shares have not been and are not being registered under
      the
      1933 Act, and may not be transferred unless (A) subsequently registered
      thereunder or (B) the Lender shall have delivered to the Company an opinion
      of
      counsel, reasonably satisfactory in form, scope and substance to the Company,
      to
      the effect that the Securities to be sold or transferred may be sold or
      transferred pursuant to an exemption from such registration; (2) any sale of
      the
      Securities made in reliance on Rule 144 promulgated under the 1933 Act may
      be
      made only in accordance with the terms of said Rule and further, if said Rule
      is
      not applicable, any resale of such Securities under circumstances in which
      the
      seller, or the Person through whom the sale is made, may be deemed to be an
      underwriter, as that term is used in the 1933 Act, may require compliance with
      some other exemption under the 1933 Act or the rules and regulations of the
      SEC
      thereunder; and (3) neither the Company nor any other Person is under any
      obligation to register the Securities under the 1933 Act or, except as
      specifically contemplated by the Transaction Agreements, to comply with the
      terms and conditions of any exemption thereunder.

    


    b.           Restrictive
      Legend.  The Lender acknowledges and agrees that, until such
      time as the relevant Shares have been registered under the 1933 Act and sold
      in
      accordance with an effective registration statement, the certificates and other
      instruments representing any of the Securities shall bear a restrictive legend
      in substantially the following form (and a stop-transfer order may be placed
      against transfer of any such Securities):

    


    THESE
      SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
      FOR
      SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      OR
      AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
      REGISTRATION IS NOT REQUIRED.

    


    c.           Filings.  The
      Company undertakes and agrees to make all filings required to be made by it
      in
      connection with the sale of the Securities to the Lender under the 1933 Act,
      the
      1934 Act or any United States state securities laws and regulations thereof
      applicable to the Company, or by any domestic securities exchange or trading
      market, and, unless such filing is publicly available on the SEC’s EDGAR system
      (via the SEC’s web site at no additional charge), to provide a copy thereof to
      the Lender promptly after such filing.

    


    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    d.           Reporting
      Status.  So long as the Lender beneficially owns any of the
      Securities and for at least twenty (20) Trading Days thereafter, the Company
      shall file all reports required to be filed  with the SEC pursuant to
      Section 13 or 15(d) of the 1934 Act,  shall take all reasonable action
      under its control to ensure that adequate current public information with
      respect to the Company, as required in accordance with Rule 144(c)(2) of the
      1933 Act, is publicly available, and shall not terminate its status as an issuer
      required to file reports under the 1934 Act even if the 1934 Act or the rules
      and regulations thereunder would permit such termination.  So long as
      the Lender beneficially owns any of the Issued Shares, the Company will take
      all
      reasonable action under its control to maintain the continued listing and
      quotation and trading of its Common Stock (including, without limitation, all
      Shares) on the Principal Trading Market or a listing on the NASDAQ Capital
      or
      National Markets and, to the extent applicable to it, will comply in all
      material respects with the Company’s reporting, filing and other obligations
      under the by-laws or rules of the Principal Trading Market and/or the National
      Association of Securities Dealers, Inc., as the case may be, applicable to
      it.

    


    e.           Use
      of Proceeds.  The Company will use the proceeds received
      hereunder (i) first, as provided in Annex VII attached hereto,
      and (ii) then, for general corporate purposes.

    


    f.           Issued
      Shares.  The Company agrees to issue the Issued Shares to the
      Lender on the Closing Date.

    


    g.           Certain
      Agreements.  Any other provision of this Agreement or any of
      the other Transaction Agreements to the contrary notwithstanding, the Company
      shall not engage in any offers, sales or other transactions of its securities
      which would adversely affect the exemption from registration available for
      the
      transactions contemplated by the Transaction Agreements.

    


    h.           Rule
      144.  With a view to making available to the Holder the
      benefits of Rule 144 promulgated under the 1933 Act or any other similar rule
      or
      regulation of the SEC that may at any time permit Holder to sell securities
      of
      the Company to the public without registration (collectively, “Rule 144"), the
      Company agrees to:

    


    (i)           make
      and keep public information available, as those terms are understood and defined
      in Rule 144;

    


    (ii)           file
      with the SEC in a timely manner all reports and other documents required of
      the
      Company under the 1933 Act and the 1934 Act; and

    


    (iii)           furnish
      to the Holder so long as such party owns Issued Shares, promptly upon request,
      (A) a written statement by the Company that it has complied with the reporting
      requirements of Rule 144, the 1933 Act and the 1934 Act, (B) if not available
      on
      the SEC’s EDGAR system, a copy of the most recent annual or quarterly report of
      the Company and such other reports and documents so filed by the Company and
      (C)
      such other information as may be reasonably requested to permit the Holder
      to
      sell such securities pursuant to Rule 144 without registration; and

    


    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (iv)           at
      the request of any Holder then holding Issued Shares, give the Transfer Agent
      instructions (supported by an opinion of Company counsel, if required or
      requested by the Transfer Agent) to the effect that, upon the Transfer Agent’s
      receipt from such Holder of

    


    (A)
      a
      certificate (a “Rule 144 Certificate”) certifying (1) that the Holder’s holding
      period (as determined in accordance with the provisions of Rule 144) for the
      Shares which the Holder proposes to sell (the “Securities Being Sold”) is not
      less than one (1) year and (2) as to such other matters as may be appropriate
      in
      accordance with Rule 144 under the Securities Act, and

    


    (B)
      an
      opinion of counsel acceptable to the Company (for which purposes it is agreed
      that Krieger & Prager LLP shall be deemed acceptable if not given by Company
      counsel) that, based on the Rule 144 Certificate, Securities Being Sold may
      be
      sold pursuant to the provisions of Rule 144, even in the absence of an effective
      registration statement,

    


    the
      Transfer Agent is to effect the transfer of the Securities Being Sold and issue
      to the buyer(s) or transferee(s) thereof one or more stock certificates
      representing the transferred Securities Being Sold without any restrictive
      legend and without recording any restrictions on the transferability of such
      shares on the Transfer Agent’s  books and records (except to the
      extent any such legend or restriction results from facts other than the identity
      of the relevant Holder, as the seller or transferor thereof, or the status,
      including any relevant legends or restrictions, of the shares of the Securities
      Being Sold while held by the Lender).  If the Transfer Agent
      reasonably requires any additional documentation at the time of the transfer,
      the Company shall deliver or cause to be delivered all such reasonable
      additional documentation as may be necessary to effectuate the issuance of
      an
      unlegended certificate.

    


    i.           Available
      Shares.  The Company shall have at all times authorized and
      reserved for issuance, free from preemptive rights, a number of shares (the
      “Minimum Available Shares”) at least equal to one hundred percent (100%) of the
      number of shares which would be issuable upon conversion of the outstanding
      Notes held by all Holders (in each case, whether such Note were originally
      issued to the Holder, the Lender or to any other party).  For the
      purposes of such calculations, the Company should assume that the Note were
      then
      convertible without regard to any conditions or restrictions which might limit
      any Holder’s right to convert the Note held by any Holder.

    


    j.           Publicity,
      Filings, Releases, Etc.  Each of the parties agrees that it
      will not disseminate any information relating to the Transaction Agreements
      or
      the transactions contemplated thereby, including issuing any press releases,
      holding any press conferences or other forums, or filing any reports
      (collectively, “Publicity”), without giving the other party reasonable advance
      notice and an opportunity to comment on the contents thereof.  Neither
      party will include in any such Publicity any statement or statements or other
      material to which the other party reasonably objects, unless in the reasonable
      opinion of counsel to the party proposing such statement, such statement is
      legally required to be included.  In furtherance of the foregoing, the
      Company will provide to the Lender drafts of the applicable text of the first
      filing of a Current Report on Form 8-K or a Quarterly or Annual Report on Form
      10-Q or 10-K (or equivalent SB forms) intended to be made with the SEC which
      refers to the Transaction Agreements or the transactions contemplated thereby
      as
      soon as practicable (but at least two (2) Trading Days before such filing will
      be made) and will not include in such filing any statement or statements or
      other material to which the other party reasonably objects, unless in the
      reasonable opinion of counsel to the party proposing such statement, such
      statement is legally required to be included.  Notwithstanding the
      foregoing, each of the parties hereby consents to the inclusion of the text
      of
      the Transaction Agreements in filings made with the SEC as well as any
      descriptive text accompanying or part of such filing which is accurate and
      reasonably determined by the Company’s counsel to be legally required.
      Notwithstanding, but subject to, the foregoing provisions of this Section 4(j),
      the Company will, after the Closing Date, promptly issue a press release and
      file a Current Report on Form 8-K or, if appropriate, a quarterly or annual
      report on the appropriate form, referring to the transactions contemplated
      by
      the Transaction Agreements.

    


    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    k.           New
      Equity Transactions; Right to Subscribe; Payment by
      Offset.  Any other provision of this Agreement or any of the
      other Transaction Agreements to the contrary notwithstanding, if prior to the
      payment in full of the Note, the Company offers any New Transaction for the
      issuance of shares of the Company’s Common Stock or securities convertible into
      or exercisable for shares of Common Stock (each such transaction, a “New Equity
      Transaction,” which term includes any such transaction currently anticipated to
      be made by the Company or currently being negotiated by the Company, whether
      or
      not any binding agreements have been entered into in connection therewith)
      to
      any third party (each, a “New Party”), where the aggregate purchase price
      (howsoever denominated) of all New Parties for such securities is $2,000,000
      or
      more, the Company shall give the Lender at least three (3) Trading Days’ notice
      thereof and give the opportunity to subscribe to the New Equity Transaction
      on
      the same terms as any other New Party, except that the Lender may elect to
      make
      all or a portion of the Lender’s payment therefor by an offset against all or a
      portion of the amount due to the Lender from the Company under the Transaction
      Agreements.   The Company agrees that, if the Lender, in the
      Lender’s sole discretion, elects to participate in the New Equity Transaction
      and, in connection with the consummation thereof, the Lender makes the
      representation that the Lender is an accredited investor, the Company will
      accept the subscription of the Lender to the New Equity Transaction and make
      such offset, if any.  Any offset so made shall be deemed the
      equivalent as if the Lender had made the cash payment of such amount in
      connection with the New Equity Transaction and the Company had made the payment
      on account of its obligations to the Lender.  Any provision of any New
      Equity Transaction to the contrary notwithstanding, (X) the Lender shall not
      be
      obligated to convert its Note into any other security of the Company and may
      demand payment of all or a part of amounts due to it from the Company in cash
      and (Y) the Lender shall have a security interest in the Collateral (as defined
      in the Security Interest Agreement) until such time as the such security
      interest shall terminate in accordance with the provisions of the Security
      Interest Agreement.

    


    5.           TRANSFER
      AGENT INSTRUCTIONS.

    


    a.           The
      Company warrants that, with respect to the Securities, other than the stop
      transfer instructions to give effect to Section 4(a) hereof, it will give the
      Transfer Agent no instructions inconsistent with instructions to issue the
      Issued Shares and to issue Common Stock from time to time upon conversion of
      the
      Note in such amounts as specified from time to time by the Company to the
      Transfer Agent, bearing the restrictive legend specified in Section 4(b) of
      this
      Agreement, registered in the name of the Lender or its nominee and in such
      denominations to be specified by the Holder. Except as so provided, the Shares
      shall otherwise be freely transferable on the books and records of the Company
      as and to the extent provided in this Agreement and the other Transaction
      Agreements.  Nothing in this Section shall affect in any way the
      Lender's obligations and agreement to comply with all applicable securities
      laws
      upon resale of the Securities.  If the Lender provides the Company
      with an opinion of counsel reasonably satisfactory to the Company (unless waived
      by the Company) that registration of a resale by the Lender of any of the
      Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement
      is
      not required under the 1933 Act, the Company shall (except as provided in clause
      (2) of Section 4(a) of this Agreement) permit the transfer of the Securities
      and, in the case of the shares issuable on conversion of the Note, promptly
      instruct the Company's Transfer Agent to issue one or more certificates for
      Common Stock without legend in such name and in such denominations as specified
      by the Lender.  The delivery of such certificates shall be effected
      within three (3) Trading Days after the Lender’s request (such third day, a
“Delivery Date”).

    


    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    b.           Subject
      to the provisions of this Agreement, the Company will permit the Lender, if
      relevant, to convert the Note in the manner contemplated by the
      Note.  If the provisions of Appendix I to the Note are applicable,
      then the term “Shares” as used herein shall be deemed to refer to include the
      shares issuable pursuant to such provisions.

    


    c.           (i)           The
      Company understands that a delay in the issuance of the Shares of Common Stock
      beyond the Delivery Date (as defined in the Note, as the case may be) could
      result in economic loss to the Lender.  As compensation to the Lender
      for such loss, the Company agrees to pay late payments to the Lender for late
      issuance of Shares upon exercise or conversion in accordance with the following
      schedule (where “No. Business Days Late” refers to the number of Trading Days
      which is beyond two (2) Trading Days after the Delivery Date):

     

    
      
        	 	 	 Late
                Payment For Each $10,000
	 No.
                Business Days Late	 of
                Principal and Interest of the Note
	 	 	 	 
	 	
                1

              	 	
                $100

              
	 	
                2

              	 	
                $200

              
	 	
                3

              	 	
                $300

              
	 	
                4

              	 	
                $400

              
	 	
                5

              	 	
                $500

              
	 	
                6

              	 	
                $600

              
	 	
                7

              	 	
                $700

              
	 	
                8

              	 	
                $800

              
	 	
                9

              	 	
                $900

              
	 	
                10

              	 	
                $1,000

              
	 	
                >10

              	 	
                $1,000
                  + $200 for each Business Day Late beyond 10
                  days

              


      

    

     

    The
      Company shall pay any payments incurred under this Section in immediately
      available funds upon demand as the Lender’s exclusive remedy (other than the
      following provisions of this Section 5(c)) for such
      delay.  Furthermore, in addition to any other remedies which may be
      available to the Lender, in the event that the Company fails for any reason
      to
      effect delivery of such shares of Common Stock by close of business on the
      tenth
      Trading Day after the Delivery Date, the Lender will be entitled to revoke
      the
      relevant Notice of Conversion by delivering a notice to such effect to the
      Company, whereupon the Company and the Lender shall each be restored to their
      respective positions immediately prior to delivery of such Notice of Conversion;
      provided, however, that an amount equal to any payments contemplated by this
      Section 5(c) which have accrued through the date of such revocation notice
      shall
      remain due and owing to such Exercising Holder (as defined below)
      notwithstanding such revocation.

    


    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (ii)           If,
      by the close of business on the fifth Trading Day after the Delivery Date,
      the
      Company fails for any reason to deliver the Shares to be issued upon conversion
      of the Note, and after such fifth Trading Day, the Holder of the Note being
      converted (each, an “Exercising Holder”) purchases, in an arm’s-length open
      market transaction or otherwise, shares of Common Stock (the “Covering Shares”)
      in order to make delivery in satisfaction of a sale of Common Stock by the
      Exercising Holder (the “Sold Shares”), which delivery such Exercising Holder
      anticipated to make using the Shares to be issued upon such exercise (a
“Buy-In”), the Exercising Holder shall have the right, in addition to and not in
      lieu of all other amounts contemplated in other provisions of the Transaction
      Agreements, including, but not limited to, the provisions of the immediately
      preceding Section 5(c)(i), the Buy-In Adjustment Amount (as defined
      below).  The “Buy-In Adjustment Amount” is the amount equal to the
      number of Sold Shares multiplied by the excess, if any, of (x) the Exercising
      Holder's total purchase price per share (including brokerage commissions, if
      any) for the Covering Shares over (y) the net proceeds per share (after
      brokerage commissions, if any) received by the Exercising Holder from the sale
      of the Sold Shares.  The Company shall pay the Buy-In Adjustment
      Amount to the Exercising Holder in immediately available funds immediately
      upon
      demand by the Exercising Holder.  By way of illustration and not in
      limitation of the foregoing, if the Exercising Holder purchases shares of Common
      Stock having a total purchase price (including brokerage commissions) of $11,000
      to cover a Buy-In with respect to shares of Common Stock it sold for net
      proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
      to pay to the Exercising Holder will be $1,000.

    


    d.           The
      Holder of the Note shall be entitled to exercise its exercise privilege with
      respect to the Note notwithstanding the commencement of any case under 11 U.S.C.
      §101 et seq. (the “Bankruptcy Code”).  In the event
      the Company is a debtor under the Bankruptcy Code, the Company hereby waives,
      to
      the fullest extent permitted, any rights to relief it may have under 11 U.S.C.
      §362 in respect of such holder’s exercise privilege.  The Company
      hereby waives, to the fullest extent permitted, any rights to relief it may
      have
      under 11 U.S.C. §362 in respect of the conversion of the Note. The Company
      agrees, without cost or expense to such Holder, to take or to consent to any
      and
      all action necessary to effectuate relief under 11 U.S.C. §362.

    


    e.           The
      Company will authorize the Transfer Agent to give information relating to the
      Company directly to the Holder or the Holder’s representatives upon the request
      of the Holder or any such representative, to the extent such information relates
      to (i) the status of shares of Common Stock issued or claimed to be issued
      to
      the Holder in connection with a Notice of Conversion, or (ii) the aggregate
      number of outstanding shares of Common Stock of all shareholders (as a group,
      and not individually) as of a current or other specified date.  At the
      request of the Holder, the Company will provide the Holder with a copy of the
      authorization so given to the Transfer Agent.

    


    6.           CLOSING
      DATE.

    


    a.           The
      Closing Date shall occur on the date which is the first Trading Day after each
      of the conditions contemplated by Sections 7 and 8 hereof shall have either
      been
      satisfied or been waived by the party in whose favor such conditions
      run.

    


    b.           The
      closing of the Transactions shall occur on the Closing Date at the offices
      of
      the Escrow Agent and shall take place no later than 3:00 P.M., New York time,
      on
      such day or such other time as is mutually agreed upon by the Company and the
      Lender.

    


    c.           Notwithstanding
      anything to the contrary contained herein, the Escrow Agent will be authorized
      to release the Escrow Funds to the Company and to others and to release the
      other Escrow Property on the Closing Date upon satisfaction of the conditions
      set forth in Sections 7 and 8 hereof and as provided in the Joint Escrow
      Instructions.

    


    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    7.           CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL.

    


    The
      Lender understands that the
      Company's obligation to sell the Note and the Issued Shares to the Lender
      pursuant to this Agreement on the Closing Date is conditioned upon:

    


    a.           The
      execution and delivery of this Agreement by the Lender;

    


    b.           Delivery
      by the Lender to the Escrow Agent of good funds as payment in full of an amount
      equal to the Purchase Price in accordance with this Agreement;

    


    c.           The
      accuracy on such Closing Date of the representations and warranties of the
      Lender contained in this Agreement, each as if made on such date, and the
      performance by the Lender on or before such date of all covenants and agreements
      of the Lender required to be performed on or before such date; and

    


    d.           There
      shall not be in effect any law, rule or regulation prohibiting or restricting
      the transactions contemplated hereby, or requiring any consent or approval
      which
      shall not have been obtained.

    


    8.           CONDITIONS
      TO THE LENDER'S OBLIGATION TO PURCHASE.

    


    The
      Company understands that the
      Lender's obligation to purchase the Note and the Issued Shares on the Closing
      Date is conditioned upon:

    


    a.           The
      execution and delivery of this Agreement and the other Transaction Agreements
      by
      the Company;

    


    b.           Delivery
      by the Company to the Escrow Agent of the Certificates in accordance with this
      Agreement;

    


    c.           The
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained in this Agreement, each as if made on such
      date, and the performance by the Company on or before such date of all covenants
      and agreements of the Company required to be performed on or before such
      date;

    


    d.           On
      the Closing Date, the Lender shall have received an opinion of counsel for
      the
      Company, dated the Closing Date, in form, scope and substance reasonably
      satisfactory to the Lender, substantially to the effect set forth in
Annex III attached hereto;

    


    e.           There
      shall not be in effect any law, rule or regulation prohibiting or restricting
      the transactions contemplated hereby, or requiring any consent or approval
      which
      shall not have been obtained; and

    


    f.           From
      and after the date hereof to and including the Closing Date, each of the
      following conditions will remain in effect: (i) the trading of the Common Stock
      shall not have been suspended by the SEC or on the Principal Trading Market;
      (ii) trading in securities generally on the Principal Trading Market shall
      not
      have been suspended or limited; (iii) no minimum prices shall been established
      for securities traded on the Principal Trading Market; and (iv) there shall
      not
      have been any material adverse change in any financial market.

    


    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    9.           INDEMNIFICATION
      AND REIMBURSEMENT.

    


    a.           (i)  The
      Company agrees to indemnify and hold harmless the Lender and its officers,
      directors, employees, and agents, and each Lender Control Person from and
      against any losses, claims, damages, liabilities or expenses incurred
      (collectively, “Damages”), joint or several, and any action in respect thereof
      to which the Lender, its partners, Affiliates, officers, directors, employees,
      and duly authorized agents, and any such Lender Control Person becomes subject
      to, resulting from, arising out of or relating to any misrepresentation, breach
      of warranty or nonfulfillment of or failure to perform any covenant or agreement
      on the part of Company contained in this Agreement, as such Damages are
      incurred, except to the extent such Damages result primarily from Lender's
      failure to perform any covenant or agreement contained in this Agreement or
      the
      Lender's or its officer’s, director’s, employee’s, agent’s or Lender Control
      Person’s illegal or willful misconduct, gross negligence, recklessness or bad
      faith  (in each case, as determined by a non-appealable judgment to
      such effect) in performing its obligations under this Agreement.

    


    (ii)           The
      Company hereby agrees that, if the Lender, other than by reason of its gross
      negligence, illegal or willful misconduct,, (x) becomes involved in any capacity
      in any action, proceeding or investigation brought by any shareholder of the
      Company, in connection with or as a result of the consummation of the
      transactions contemplated by this Agreement or the other Transaction Agreements,
      or if the Lender is impleaded in any such action, proceeding or investigation
      by
      any Person, or (y) becomes involved in any capacity in any action, proceeding
      or
      investigation brought by the SEC, any self-regulatory organization or other
      body
      having jurisdiction, against or involving the Company or in connection with
      or
      as a result of the consummation of the transactions contemplated by this
      Agreement or the other Transaction Agreements, or (z) is impleaded in any such
      action, proceeding or investigation by any Person, then in any such case, the
      Company shall indemnify, defend and hold harmless the Lender from and against
      and in respect of all losses, claims, liabilities, damages or expenses resulting
      from, imposed upon or incurred by the Lender, directly or indirectly, and
      reimburse such Lender for its reasonable legal and other expenses (including
      the
      cost of any investigation and preparation) incurred in connection therewith,
      as
      such expenses are incurred.  The indemnification and reimbursement
      obligations of the Company under this paragraph shall be in addition to any
      liability which the Company may otherwise have, shall extend upon the same
      terms
      and conditions to any Affiliates of the Lender who are actually named in such
      action, proceeding or investigation, and partners, directors, agents, employees
      and Lender Control Persons (if any), as the case may be, of the Lender and
      any
      such Affiliate, and shall be binding upon and inure to the benefit of any
      successors, assigns, heirs and personal representatives of the Company, the
      Lender, any such Affiliate and any such Person.  The Company also
      agrees that neither the Lender nor any such Affiliate, partner, director, agent,
      employee or Lender Control Person shall have any liability to the Company or
      any
      Person asserting claims on behalf of or in right of the Company in connection
      with or as a result of the consummation of this Agreement or the other
      Transaction Agreements, except as may be expressly and specifically provided
      in
      or contemplated by this Agreement.

    


    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    b.           All
      claims for indemnification by any Indemnified Party (as defined below) under
      this Section shall be asserted and resolved as follows:

    


    (i)           
      In the event any claim or demand in respect of which any Person claiming
      indemnification under any provision of this Section (an “Indemnified Party”)
      might seek indemnity under paragraph (a) of this Section is asserted against
      or
      sought to be collected from such Indemnified Party by a Person other than a
      party hereto or an Affiliate thereof (a “Third Party Claim”), the Indemnified
      Party shall deliver a written notification, enclosing a copy of all papers
      served, if any, and specifying the nature of and basis for such Third Party
      Claim and for the Indemnified Party's claim for indemnification that is being
      asserted under any provision of this Section against any Person (the
“Indemnifying Party”), together with the amount or, if not then reasonably
      ascertainable, the estimated amount, determined in good faith, of such Third
      Party Claim (a “Claim Notice”) with reasonable promptness to the Indemnifying
      Party. If the Indemnified Party fails to provide the Claim Notice with
      reasonable promptness after the Indemnified Party receives notice of such Third
      Party Claim, the Indemnifying Party shall not be obligated to indemnify the
      Indemnified Party with respect to such Third Party Claim to the extent that
      the
      Indemnifying Party's ability to defend has been prejudiced by such failure
      of
      the Indemnified Party. The Indemnifying Party shall notify the Indemnified
      Party
      as soon as practicable within the period ending thirty (30) calendar days
      following receipt by the Indemnifying Party of either a Claim Notice or an
      Indemnity Notice (as defined below) (the “Dispute Period”) whether the
      Indemnifying Party disputes its liability or the amount of its liability to
      the
      Indemnified Party under this Section and whether the Indemnifying Party desires,
      at its sole cost and expense, to defend the Indemnified Party against such
      Third
      Party Claim.  The following provisions shall also apply.

    


    (x)  If
      the Indemnifying Party notifies the Indemnified Party within the Dispute Period
      that the Indemnifying Party desires to defend the Indemnified Party with respect
      to the Third Party Claim pursuant to this paragraph (b) of this Section, then
      the Indemnifying Party shall have the right to defend, with counsel reasonably
      satisfactory to the Indemnified Party, at the sole cost and expense of the
      Indemnifying Party, such Third Party Claim by all appropriate proceedings,
      which
      proceedings shall be vigorously and diligently prosecuted by the Indemnifying
      Party to a final conclusion or will be settled at the discretion of the
      Indemnifying Party (but only with the consent of the Indemnified Party in the
      case of any settlement that provides for any relief other than the payment
      of
      monetary damages or that provides for the payment of monetary damages as to
      which the Indemnified Party shall not be indemnified in full pursuant to
      paragraph (a) of this Section). The Indemnifying Party shall have full control
      of such defense and proceedings, including any compromise or settlement thereof;
      provided, however, that the Indemnified Party may, at the sole cost and expense
      of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
      of the notice referred to in the first sentence of this subparagraph (x), file
      any motion, answer or other pleadings or take any other action that the
      Indemnified Party reasonably believes to be necessary or appropriate protect
      its
      interests; and provided further, that if requested by the Indemnifying Party,
      the Indemnified Party will, at the sole cost and expense of the Indemnifying
      Party, provide reasonable cooperation to the Indemnifying Party in contesting
      any Third Party Claim that the Indemnifying Party elects to contest. The
      Indemnified Party may participate in, but not control, any defense or settlement
      of any Third Party Claim controlled by the Indemnifying Party pursuant to this
      subparagraph (x), and except as provided in the preceding sentence, the
      Indemnified Party shall bear its own costs and expenses with respect to such
      participation. Notwithstanding the foregoing, the Indemnified Party may take
      over the control of the defense or settlement of a Third Party Claim at any
      time
      if it irrevocably waives its right to indemnity under paragraph (a) of this
      Section with respect to such Third Party Claim.

    


    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (y)  If
      the Indemnifying Party fails to notify the Indemnified Party within the Dispute
      Period that the Indemnifying Party desires to defend the Third Party Claim
      pursuant to paragraph (b) of this Section, or if the Indemnifying Party gives
      such notice but fails to prosecute vigorously and diligently or settle the
      Third
      Party Claim, or if the Indemnifying Party fails to give any notice whatsoever
      within the Dispute Period, then the Indemnified Party shall have the right
      to
      defend, at the sole cost and expense of the Indemnifying Party, the Third Party
      Claim by all appropriate proceedings, which proceedings shall be prosecuted
      by
      the Indemnified Party in a reasonable manner and in good faith or will be
      settled at the discretion of the Indemnified Party (with the consent of the
      Indemnifying Party, which consent will not be unreasonably withheld). The
      Indemnified Party will have full control of such defense and proceedings,
      including any compromise or settlement thereof; provided, however, that if
      requested by the Indemnified Party, the Indemnifying Party will, at the sole
      cost and expense of the Indemnifying Party, provide reasonable cooperation to
      the Indemnified Party and its counsel in contesting any Third Party Claim which
      the Indemnified Party is contesting. Notwithstanding the foregoing provisions
      of
      this subparagraph (y), if the Indemnifying Party has notified the Indemnified
      Party within the Dispute Period that the Indemnifying Party disputes its
      liability or the amount of its liability hereunder to the Indemnified Party
      with
      respect to such Third Party Claim and if such dispute is resolved in favor
      of
      the Indemnifying Party in the manner provided in subparagraph(z) below, the
      Indemnifying Party will not be required to bear the costs and expenses of the
      Indemnified Party's defense pursuant to this subparagraph (y) or of the
      Indemnifying Party's participation therein at the Indemnified Party's request,
      and the Indemnified Party shall reimburse the Indemnifying Party in full for
      all
      reasonable costs and expenses incurred by the Indemnifying Party in connection
      with such litigation. The Indemnifying Party may participate in, but not
      control, any defense or settlement controlled by the Indemnified Party pursuant
      to this subparagraph (y), and the Indemnifying Party shall bear its own costs
      and expenses with respect to such participation.

    


    (z)  If
      the Indemnifying Party notifies the Indemnified Party that it does not dispute
      its liability or the amount of its liability to the Indemnified Party with
      respect to the Third Party Claim under paragraph (a) of this Section or fails
      to
      notify the Indemnified Party within the Dispute Period  whether the
      Indemnifying Party disputes its liability or the amount of its liability to
      the
      Indemnified Party with respect to such Third Party Claim, the amount of Damages
      specified in the Claim Notice shall be conclusively deemed a liability of the
      Indemnifying Party under paragraph (a) of this Section and the Indemnifying
      Party shall pay the amount of such Damages to the Indemnified Party on demand.
      If the Indemnifying Party has timely disputed its liability or the amount of
      its
      liability with respect to such claim, the Indemnifying Party and the Indemnified
      Party shall proceed in good faith to negotiate a resolution of such dispute;
      provided, however, that if the dispute is not resolved within thirty (30) days
      after the Claim Notice, the Indemnifying Party shall be entitled to institute
      such legal action as it deems appropriate.

    


    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (ii)           In
      the event any Indemnified Party should have a claim under paragraph (a) of
      this
      Section against the Indemnifying Party that does not involve a Third Party
      Claim, the Indemnified Party shall deliver a written notification of a claim
      for
      indemnity under paragraph (a) of this Section specifying the nature of and
      basis
      for such claim, together with the amount or, if not then reasonably
      ascertainable, the estimated amount, determined in good faith, of such claim
      (an
“Indemnity Notice”) with reasonable promptness to the Indemnifying Party. The
      failure by any Indemnified Party to give the Indemnity Notice shall not impair
      such party's rights hereunder except to the extent that the Indemnifying Party
      demonstrates that it has been irreparably prejudiced thereby. If the
      Indemnifying Party notifies the Indemnified Party that it does not dispute
      the
      claim or the amount of the claim described in such Indemnity Notice or fails
      to
      notify the Indemnified Party within the Dispute Period whether the Indemnifying
      Party disputes the claim or the amount of the claim described in such Indemnity
      Notice, the amount of Damages specified in the Indemnity Notice will be
      conclusively deemed a liability of the Indemnifying Party under paragraph (a)
      of
      this Section and the Indemnifying Party shall pay the amount of such Damages
      to
      the Indemnified Party on demand. If the Indemnifying Party has timely disputed
      its liability or the amount of its liability with respect to such claim, the
      Indemnifying Party and the Indemnified Party shall proceed in good faith to
      negotiate a resolution of such dispute; provided, however, that it the dispute
      is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
      Party shall be entitled to institute such legal action as it deems
      appropriate.

    


    c.           The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar rights of the indemnified party against the indemnifying
      party
      or others, and (ii) any liabilities the indemnifying party may be subject
      to.

    


    10.           JURY
      TRIAL WAIVER.   The Company and the Lender hereby waive a
      trial by jury in any action, proceeding or counterclaim brought by either of
      the
      Parties hereto against the other in respect of any matter arising out or in
      connection with the Transaction Agreements.

    


    11.           GOVERNING
      LAW:  MISCELLANEOUS.

    


    a.           (i)  This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of Delaware for contracts to be wholly performed in such state and
      without giving effect to the principles thereof regarding the conflict of
      laws.  Each of the parties consents to the exclusive jurisdiction of
      the federal courts whose districts encompass any part of the City of Wilmington
      or the state courts of the State of Delaware sitting in the City of Wilmington
      in connection with any dispute arising under this Agreement or any of the other
      Transaction Agreements and hereby waives, to the maximum extent permitted by
      law, any objection, including any objection based on forum non
      conveniens, to the bringing of any such proceeding in such jurisdictions or
      to any claim that such venue of the suit, action or proceeding is improper.
      To
      the extent determined by such court, the Company shall reimburse the Lender
      for
      any reasonable legal fees and disbursements incurred by the Lender in
      enforcement of or protection of any of its rights under any of the Transaction
      Agreements.  Nothing in this Section shall affect or limit any right
      to serve process in any other manner permitted by law.

    


    (ii)  The
      Company and the
      Lender acknowledge and agree that irreparable damage would occur in the event
      that any of the provisions of this Agreement or the other Transaction Agreements
      were not performed in accordance with their specific terms or were otherwise
      breached. It is accordingly agreed that the parties shall be entitled to an
      injunction or injunctions to prevent or cure breaches of the provisions of
      this
      Agreement and the other Transaction Agreements and to enforce specifically
      the
      terms and provisions hereof and thereof, this being in addition to any other
      remedy to which any of them may be entitled by law or equity.

    


    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    b.           Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

    


    c.           This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      assigns of each of the parties hereto.

    


    d.           All
      pronouns and any variations thereof refer to the masculine, feminine or neuter,
      singular or plural, as the context may require.

    


    e.           A
      facsimile transmission of this signed Agreement shall be legal and binding
      on
      all parties hereto.

    


    f.           This
      Agreement may be signed in one or more counterparts, each of which shall be
      deemed an original.

    


    g.           The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

    


    h.           If
      any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement or the validity or
      enforceability of this Agreement in any other jurisdiction.

    


    i.           This
      Agreement may be amended only by an instrument in writing signed by the party
      to
      be charged with enforcement thereof.

    


    j.           This
      Agreement supersedes all prior agreements and understandings among the parties
      hereto with respect to the subject matter hereof.

    


    k.           All
      dollar amounts referred to or contemplated by this Agreement or any other
      Transaction Agreement shall be deemed to refer to US Dollars, unless otherwise
      explicitly stated to the contrary.

    


    12.           NOTICES.  Any
      notice required or permitted hereunder shall be given in writing (unless
      otherwise specified herein) and shall be deemed effectively given on the
      earliest of

    


    (a)
      the date delivered, if delivered by
      personal delivery as against written receipt therefor or by confirmed facsimile
      transmission,

    


    (b)
      the fifth Trading Day after
      deposit, postage prepaid, in the United States Postal Service by registered
      or
      certified mail, or

    


    (c)
      the third Trading Day after mailing
      by domestic or international express courier, with delivery costs and fees
      prepaid,

    


    in
      each
      case, addressed to each of the other parties thereunto entitled at the following
      addresses (or at such other addresses as such party may designate by ten (10)
      days’ advance written notice similarly given to each of the other parties
      hereto):

    


    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    
      	
              COMPANY:

            	
              At
                the address set forth at the head of this
                Agreement.

            


    

    Attn:
      President

    Telephone
      No.: (503)
      257-6700

    Telecopier
      No.: (503)
      257-6622

    


    with
      a copy to:

    


    Munck
      Butrus, P.C.

    Attn:
      Lawrence Mandala,
      Esq.

    900
      Three Galleria Tower

    131555
      Noel Road

    Dallas,
      TX 75240

    Telephone
      No.: (972)
      628-3600

    Telecopier
      No.: (972)
      628-3616

    


    
      	
              LENDER:

            	
              At
                the address set forth on the signature page of this
                Agreement.

            


    

    


    with
      a copy to:

    


    Krieger
      & Prager llp, Esqs.

    39
      Broadway

    Suite
      920

    New
      York, NY 10006

    Attn:
      Ronald J. Nussbaum,
      Esq.

    Telephone
      No.: (212)
      363-2900

    Telecopier
      No.  (212)
      363-2999

    


    
      	
              ESCROW
                AGENT:

            	
              Krieger
                & Prager llp, Esqs.

            


    

    39
      Broadway

    Suite
      920

    New
      York, NY 10006

    Attn:
      Samuel Krieger,
      Esq.

    Telephone
      No.: (212)
      363-2900

    Telecopier
      No.  (212)
      363-2999

    


    13.           SURVIVAL
      OF REPRESENTATIONS AND WARRANTIES. The Company’s and the Lender’s
      representations and warranties herein shall survive the execution and delivery
      of this Agreement and the delivery of the Certificates and the payment of the
      Purchase Price, and shall inure to the benefit of the Lender and the Company
      and
      their respective successors and assigns.

    


    [Balance
      of page intentionally left blank]

    


    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      with respect to the Purchase Price specified below, this Agreement has been
      duly
      executed by the Lender and the Company as of the date set first above
      written.

     

    
      	PURCHASE
              PRICE:   	$500,000.00
	 	 
	 	 
	 	
              LENDER:

            
	 	 
	
              Address

              2nd
                Floor,
                Harbour House

              Waterfront
                Dr., Road Town

              Tortola

            	
              Double
                U Master Fund LP

              Printed
                Name of Lender

            
	 	 
	 	By:
              /s/[illegible] 
	
              Telecopier
                No. (284) 494-6770

            	(Signature
              of Authorized Person)
	 	 
	 	
              Navigator
                Management Ltd.

              Authorized
                Signatory

            
	
              British
                Virgin Islands

              Jurisdiction
                of Incorporation

              or
                Organization

            	Printed
              Name and Title


    

            

    


    COMPANY

    


    RIM
      SEMICONDUCTOR COMPANY

    


    By:
      /s/Brad
      Ketch                                                                

    (Signature
      of Authorized Person)

    


    Brad
      Ketch, President &
CEO                                                                

    Printed
      Name and Title

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      with respect to the Purchase Price specified below, this Agreement has been
      duly
      executed by the Lender and the Company as of the date set first above
      written.

     

    
      	PURCHASE
              PRICE:	$500,000.00
	 	 
	 	 
	 	
              LENDER:

            
	 	 
	
              Address

              1400
                Old Country Road Suite 206

              Westbury,
                New York 11590

            	
              Professional
                Offshore Opportunity Fund, Ltd.

              Printed
                Name of Lender

            
	 	 
	 	
              By:
                /s/Marc K. Swickle

            
	
              Telecopier
                No. (516) 228-8083

            	
              (Signature
                of Authorized Person)

            
	 	 
	 	Marc
              K. Swickle
	
              British
                Virgin Islands

              Jurisdiction
                of Incorporation

              or
                Organization

            	Printed
              Name and Title


    

    

 

    COMPANY

    


    RIM
      SEMICONDUCTOR COMPANY

    


    By:
      /s/Brad
      Ketch                                                                

    (Signature
      of Authorized Person)

    


    Brad
      Ketch, President &
CEO                                                                

    Printed
      Name and Title

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    


    


    
      	
              ANNEX
                I

            	
              FORM
                OF NOTE

            


    

    


    
      	
              ANNEX
                II

            	
              JOINT
                ESCROW INSTRUCTIONS

            


    

    


    
      	
              ANNEX
                III

            	
              OPINION
                OF COUNSEL OF COMPANY

            


    

    


    
      	
              ANNEX
                IV

            	
              COMPANY
                DISCLOSURE

            


    

    


    
      	
              ANNEX
                V

            	
              SECURITY
                INTEREST AGREEMENT

            


    

    


    
      	
              ANNEX
                VI

            	
              COMPANY’S
                SEC DOCUMENTS AVAILABLE ON EDGAR

            


    

    


    
      	
              ANNEX
                VII

            	
              USE
                OF PROCEEDS