Unassociated Document


    SECURITIES
      PURCHASE AGREEMENT

    


    SECURITIES
      PURCHASE AGREEMENT (this "AGREEMENT," “PURCHASE AGREEMENT,” or “SECURITIES
      PURCHASE AGREEMENT”), dated as of December 28, 2006, by and among bioMETRX,
      Inc.,
      a
      Delaware corporation, ("COMPANY"), and __________
      (the
      "BUYER").

    


    WHEREAS:
      

    


    A.
      The
      Company and the Buyer are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded 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" or the “Securities Act”);

    


    B.
      Buyer
      and other buyers desire to purchase and the Company desires to issue and sell,
      upon the terms and conditions set forth in this Agreement, (i) senior
      convertible debentures (the “Debentures”) of the Company and (ii) Warrants (as
      defined in Section 1(b)(iv) in the form described in this Agreement, to purchase
      shares of Common Stock of the Company in a private offering. This offering
      of
      the Debentures to the Buyers shall be in the principal amount of up to One
      Million Five Hundred Thousand Dollars (U.S. $1,500,000) (the “Offering”);


     

    C. The
      terms
      of the Debentures, including the terms on which the Debentures may be converted
      into common stock, $0.001
      par
      value, of the Company (the "Common Stock"), are set forth in Debenture, in
      the
      form attached hereto as EXHIBIT
      A;

     

    D.
      Contemporaneous with the execution and delivery of this Agreement, the parties
      hereto are executing and delivering a Registration Rights Agreement, in the
      form
      attached hereto as EXHIBIT
      B
      (the
      "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed
      to
      provide certain registration rights under the 1933 Act and the rules and
      regulations promulgated thereunder, and applicable state securities laws.


    


    


    NOW
      THEREFORE,
      the
      Company and the Buyer hereby agree as follows:

    


    1.
      PURCHASE AND SALE OF DEBENTURES AND WARRANTS.

    


    (a)
      CERTAIN DEFINITIONS. This Securities Purchase Agreement, the Debenture, the
      Registration Rights Agreement, the Warrants, and any other agreements delivered
      together with this Agreement or in connection herewith shall be referred to
      herein as the “Transaction Documents.” The Company and the Buyer mutually agree
      to the terms of each of the Transaction Documents. For purposes
      hereof:

    


    “Buyers”
      means the Buyer, and other buyers of Debentures pursuant to the
      Offering.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Common
      Stock Equivalents” means any securities of the Company or the Subsidiaries which
      would entitle the holder thereof to acquire, directly or indirectly, at any
      time
      Common Stock, including without limitation, any debt, preferred stock, rights,
      options, warrants or other instrument that is at any time convertible into
      or
      exercisable or exchangeable for, or otherwise entitles the holder thereof to
      receive, Common Stock.

    


    “Exempt
      Issuance” means the issuance of (a) shares of restricted Common Stock or options
      to employees, officers, directors or consultants (provided that such issuances
      to consultants, if at a price per share of less than $2.00, shall not exceed
      350,000 shares, subject to adjustment for reverse and forward stock splits
      and
      the like of the Company, in the six (6) month period immediately following
      the
      Closing Date and, if at a price per share of less than $2.00, shall not exceed
      200,000 shares, subject to adjustment for reverse and forward stock splits
      and
      the like of the Company in any rolling 12 month period thereafter), provided
      that such issuance of shares of Common Stock or options to employees, officers,
      directors or consultants either (i) occurs pursuant to any stock or option
      plan
      duly adopted by a majority of the non-employee members of the Board of Directors
      of the Company or a majority of the members of a committee of non-employee
      directors established for such purpose, or (ii) is authorized by a majority
      of
      the non-employee members of the board of directors of the Company, and (b)
      securities upon the exercise, exchange of, conversion or redemption of, or
      payment of interest or liquidated or similar damages on, any Securities issued
      hereunder and/or other securities exercisable, exchangeable for, convertible
      into, or redeemable for shares of Common Stock issued and outstanding on the
      date of this Agreement, provided that such securities have not been amended
      since the date of this Agreement to increase the number of such securities
      or to
      decrease the exercise, exchange or conversion price of such securities (and
      including any issuances of securities pursuant to the anti-dilution provisions
      of any such securities). The Company shall provide the Buyer with prompt written
      notice of any Exempt Issuance.

    


    “Person”
      shall mean an individual, a limited liability company, a partnership, a joint
      venture, an exempted company, a corporation, a trust, an unincorporated
      organization and a government or any department or agency thereof.

    


    “Payment
      Shares” shall mean (i) Default Shares (as defined in the Debenture), (ii)
      Interest Payment Shares (as defined in the Debenture) and (iii) shares issuable
      upon conversion of Failure Payments and other Required Cash Payments (as each
      is
      defined in the Debenture) into Common Stock of the Company. The Payment Shares
      shall be treated as Common Stock issuable upon conversion of the Debentures
      for
      all purposes hereof and thereof and shall be subject to all of the limitations
      and afforded all of the rights of the other shares of Common Stock issuable
      hereunder, including without limitation, the right to be included in the
      Registration Statement filed pursuant to the Registration Rights Agreement.
      

    


    (b)
      PURCHASE OF DEBENTURES AND WARRANTS.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      the Closing Date (as defined below), the Company shall issue and sell to Buyer
      and Buyer agrees to purchase from the Company the Debenture in a principal
      amount equal to the Subscription Amount (as defined in Section 10) and an
      accompanying number of Warrants (as described below) to purchase a number of
      shares equal to the Warrant Amount (as defined below). 

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (i)
      Form
      of Debenture.
      The
      Debenture shall be in the form annexed hereto as EXHIBIT
      “A.”

    


    (ii)
      Form
      Of Payment.
      On or
      before the Closing Date (as defined below), (i) Buyer shall pay the purchase
      price for the Debenture and the Warrants to be issued and sold to it at the
      Closing (as defined below) (the "PURCHASE PRICE") by wire transfer of
      immediately available funds to the Company, in accordance with the Company's
      written wiring instructions, against delivery of duly executed certificates
      representing the Debenture (“Debenture Certificate”) having an aggregate initial
      principal amount (the “Original Principal Amount”) equal to the Purchase Price
      and the number of Warrants equal to the Warrant Amount, and (ii) the Company
      shall deliver such Debenture Certificates and Warrants duly executed on behalf
      of the Company, to such Buyer, against delivery of such Purchase Price.


    


    (iii)
      Closing
      Date.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      the
      "Closing" shall occur when subscriber funds representing the aggregate Original
      Principal Amount of the Debenture being purchased by the Buyer are transmitted
      by wire transfer of immediately available funds by the Buyer to the Company,
      assuming that the Transaction Documents are signed by both parties prior to
      or
      within three (3) business days following such transmission. The date of the
      Closing shall be referred to herein as the “Closing Date.” Unless otherwise
      mutually agreed by the parties, the Closing shall occur not later than January
      5, 2007. The Closing contemplated by this Agreement shall occur on the
      applicable Closing Date at the offices of the Buyer, or at such other location
      as may be agreed to by the parties.

    


    (iv)
      Warrants.
      The
      Debenture shall be accompanied by a number of Series A Warrants (the “SERIES A
      WARRANTS”) equal to the Original Principal Amount of the Debenture being
      purchased by the Buyer, divided by the Initial Conversion Price (as defined
      in
      the Debenture) (the “SERIES A WARRANT AMOUNT”). The Series A Warrants shall be
      in the form of the Series A Warrant annexed hereto as EXHIBIT
      “C-1,”
except
      that the “Initial Exercise Price,” as defined therein, shall equal $1.00,
      subject to adjustment therein. 

    


    The
      Debenture shall be accompanied by a number of Series B Warrants (the “SERIES B
      WARRANTS”) equal to the Original Principal Amount of the Debenture being
      purchased by the Buyer, divided by twice the Initial Conversion Price (as
      defined in the Debenture) (the “SERIES B WARRANT AMOUNT”). The Series B Warrants
      shall be in the form of the Series B Warrant annexed hereto as EXHIBIT
      “C-2,”
except
      that the “Initial Exercise Price,” as defined therein, shall equal $0.10,
      subject to adjustment therein. The Series A Warrants together with the Series
      B
      Warrants are collectively referred to herein as the “WARRANTS.”

    


    The
      Warrants shall contain Exercise Price adjustment provisions that are consistent
      with the adjustment provisions afforded to the Conversion Price of the Debenture
      in the Debenture and shall have a five (5) year term.

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    


    "MARKET
      PRICE," for any security as of any date, shall have the meaning ascribed to
      it
      in the applicable security.

    


    (v)
      Closing
      Deliveries.
      On the
      Closing Date, the Company will deliver certificates representing the applicable
      Debenture and Warrants to the Buyer and the Buyer will deliver the Purchase
      Price to the Company. On the Closing Date, the Company will deliver a
      certificate ("Closing Certificate") signed by its chief executive officer or
      chief financial officer (i) representing the truth and accuracy of all the
      representations and warranties made by the Company contained in this Agreement,
      as of the applicable Closing Date, as if such representations and warranties
      were made and given on all such dates, (ii) adopting the covenants and
      conditions set forth in this Agreement in relation to the applicable Debenture
      and Warrants, (iii) representing the timely compliance by the Company with
      the
      Company's registration requirements set forth in the Registration Rights
      Agreement, and (iv) certifying that an Event of Default has not occurred. A
      legal opinion in substantially the form of EXHIBIT
      D
      attached
      hereto shall be delivered to Buyer at the Closing in relation to the Company,
      the applicable Debenture, and the applicable Warrants ("Closing Legal Opinion").
      

    


     2.
      BUYER’S REPRESENTATIONS AND WARRANTIES.
      Buyer
      represents and warrants to the Company solely as to such Buyer
      that:

    


    (a)
      INVESTMENT PURPOSE.
      As of
      the date hereof, the Buyer is purchasing the Debenture and the shares of Common
      Stock issuable upon conversion of the Debenture or otherwise pursuant to the
      Debenture and the other Transaction Documents (including, without limitation,
      the Payment Shares) (such shares of Common Stock being collectively referred
      to
      herein as the “CONVERSION SHARES") and the Warrants and the shares of Common
      Stock issuable upon exercise thereof (the "WARRANT SHARES" and, collectively
      with the Debenture, Warrants and Conversion Shares, the "SECURITIES") for its
      own account and not with a present view towards the public sale or distribution
      thereof, except pursuant to sales registered or exempted from registration
      under
      the 1933 Act; PROVIDED, HOWEVER, that by making the representations herein,
      the
      Buyer does not agree to hold any of the Securities for any minimum or other
      specific term and reserves the right to dispose of the Securities at any time
      in
      accordance with or pursuant to a registration statement or an exemption under
      the 1933 Act and applicable state securities laws. 

    


    (b)
      ACCREDITED INVESTOR STATUS.
      The
      Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
      Regulation D (an "ACCREDITED INVESTOR"). 

    


    (c)
      RELIANCE ON EXEMPTIONS.
      The
      Buyer understands that the Securities are being offered and sold to it in
      reliance upon specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying upon
      the truth and accuracy of, and the Buyer's compliance with, the representations,
      warranties, agreements, acknowledgments and understandings of the Buyer set
      forth herein in order to determine the availability of such exemptions and
      the
      eligibility of the Buyer to acquire the Securities.

    


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (d)
      INFORMATION.
      The
      Buyer and its advisors, if any, have been furnished with 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 Buyer
      or its advisors. The Buyer and its advisors, if any, have been afforded the
      opportunity to ask questions of the Company. Neither such inquiries nor any
      other due diligence investigation conducted by Buyer or any of its advisors
      or
      representatives shall modify, amend or affect Buyer's right to rely on the
      Company's representations and warranties contained in Section 3 below. The
      Buyer
      understands that its investment in the Securities involves a significant degree
      of risk.

     

    (e)
      GOVERNMENTAL REVIEW.
      The
      Buyer understands that no United States federal or state agency or any other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Securities.

     

    (f)
      TRANSFER OR RE-SALE.
      The
      Buyer understands that (i) except as provided in the Registration Rights
      Agreement, the sale or re-sale of the Securities has not been and is not being
      registered under the 1933 Act or any applicable state securities laws, and
      the
      Securities may not be transferred or resold unless (a) the Securities are sold
      pursuant to an effective registration statement under the 1933 Act, (b) the
      Buyer shall have delivered to the Company an opinion of counsel (which opinion
      shall be in form, substance and scope reasonably satisfactory to counsel 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, (c) the
      Securities are sold or transferred to an "affiliate" (as defined in Rule 144
      promulgated under the 1933 Act (or a successor rule) ("RULE 144") of the Buyer
      who agrees to sell or otherwise transfer the Securities only in accordance
      with
      this Section 2(f) and who is an Accredited Investor, or (d) the Securities
      are
      sold pursuant to Rule 144 or Rule 144(k); and (ii) any sale of such Securities
      made in reliance on Rule 144 or Rule 144(k) may be made only in accordance
      with
      the terms of said Rule. Notwithstanding the foregoing or anything else contained
      herein to the contrary, the Securities may be pledged as collateral in
      connection with a BONA FIDE margin account or other lending
      arrangement.

     

    (g)
      ORGANIZATION; AUTHORIZATION; ENFORCEMENT.
      Buyer is
      a _________duly organized, validly existing and in good standing under the
      laws
      of the jurisdiction in which it is organized. Buyer has all requisite power
      and
      authority to enter into and perform this Agreement and the Registration Rights
      Agreement and to consummate the transactions contemplated hereby and thereby
      in
      accordance with the terms hereof and thereof. The execution and delivery of
      this
      Agreement and the Registration Rights Agreement have been duly and validly
      authorized and no further consent or authorization of Buyer, its manager or
      members is required. This Agreement has been duly executed and delivered on
      behalf of the Buyer, and this Agreement constitutes, and upon execution and
      delivery by the Buyer of the Registration Rights Agreement, such agreement
      will
      constitute, legal, valid and binding agreements of the Buyer enforceable in
      accordance with their terms.

    


    (h)
      RESIDENCY. The
      Buyer
      is a _____________.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (i)
      KNOWLEDGE AND EXPERIENCE.
      Buyer
      has such knowledge and experience in financial and business matters that it
      is
      capable of evaluating the merits and risks of the investment in the
      Securities.

    


    (j)
      CERTAIN TRADING ACTIVITIES.
      As of
      the Closing Date the Buyer and its Affiliates have not entered into or effected
      any "short sales" (as such term is defined in Rule 3b-3 of the 1934 Act) of
      the
      Common Stock or hedging transaction which established a net short position
      with
      respect to the Common Stock. For the purposes of this Agreement, an
      "Affiliate"
      of any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate includes each subsidiary of the
      Company.

    


    3.
      REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
      The
      Company represents and warrants to Buyer that, except as set forth on the
      Company’s disclosure schedules or any update thereto prior to the Closing
      Date:

    


    (a)
      ORGANIZATION AND QUALIFICATION.
      The
      Company and each of its Subsidiaries (as defined below), if any, is a
      corporation duly organized, validly existing and in good standing under the
      laws
      of the jurisdiction in which it is incorporated, with full power and authority
      (corporate and other) to own, lease, use and operate its properties and to
      carry
      on its business as and where now owned, leased, used, operated and conducted.
      SCHEDULE 3(A) sets forth a list of all of the Subsidiaries of the Company and
      the jurisdiction in which each is incorporated. The Company and each of its
      Subsidiaries is duly qualified as a foreign corporation to do business and
      is in
      good standing in every jurisdiction in which its ownership or use of property
      or
      the nature of the business conducted by it makes such qualification necessary
      except where the failure to be so qualified or in good standing would not have
      a
      Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
      effect on (i) the Securities, (ii) the business, operations, assets, financial
      condition or prospects of the Company and its Subsidiaries, if any, taken as
      a
      whole, (iii) on the transactions contemplated hereby or by the agreements or
      instruments to be entered into in connection herewith or (iv) the authority
      or
      the ability of the Company to perform its obligation under this Agreement,
      the
      Registration Rights Agreement, the Debenture or the Warrants. "SUBSIDIARIES"
      means any corporation or other organization, whether incorporated or
      unincorporated, in which the Company owns, directly or indirectly, any equity
      or
      other ownership interest.

     

    (b)
      AUTHORIZATION; ENFORCEMENT.
      (i) The
      Company has all requisite corporate power and authority to enter into and
      perform this Agreement, the Registration Rights Agreement, the Debenture and
      the
      Warrants and to consummate the transactions contemplated hereby and thereby
      and
      to issue the Securities, in accordance with the terms hereof and thereof, (ii)
      except as otherwise set forth in SCHEDULE 3(B), the execution and delivery
      of
      this Agreement, the Registration Rights Agreement, the Debenture and the
      Warrants by the Company and the consummation by it of the transactions
      contemplated hereby and thereby (including without limitation, the issuance
      of
      the Debenture and the Warrants and the issuance and reservation for issuance
      of
      the Conversion Shares issuable upon conversion of or otherwise pursuant to
      the
      Debenture and the Warrant Shares issuable upon exercise of or otherwise pursuant
      to the Warrants) have been duly authorized by the Company's Board of Directors
      and no further consent or authorization of the Company, its Board of Directors,
      or its stockholders is required, (iii) this Agreement has been duly executed
      and
      delivered by the Company, and (iv) this Agreement constitutes, and upon
      execution and delivery by the Company of the Registration Rights Agreement,
      the
      Debenture and the Warrants, each of such agreements and instruments will
      constitute, a legal, valid and binding obligation of the Company enforceable
      against the Company in accordance with its terms. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (c)
      CAPITALIZATION.  As
      of the
      date hereof, the authorized capital stock of the Company is as set forth on
      SCHEDULE 3(C). The authorized capital stock of the Company consists of
      25,000,000 shares of Common Stock, of which approximately 9,114,157 shares
      are
      outstanding as of the date hereof and 10,000,000 shares of preferred stock,
      par
      value $.01 per share, of which none are outstanding as of the date hereof.
      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, except as disclosed
      on SCHEDULE 3(C). If any such securities are listed on the SCHEDULE 3(C), the
      number or amount of each such outstanding convertible security and the
      conversion terms are set forth in said SCHEDULE (3C). All of such outstanding
      shares of capital stock set forth in SCHEDULE 3(C) are, or upon issuance will
      be, duly authorized, validly issued, fully paid and nonassessable.

    


    No
      shares
      of capital stock of the Company are subject to preemptive rights or any other
      similar rights of the stockholders of the Company or any liens or encumbrances
      imposed through the actions or failure to act of the Company. Except as
      disclosed in SCHEDULE 3(C), as of the effective date of this Agreement, (i)
      there are no outstanding options, warrants, scrip, rights to subscribe for,
      puts, calls, rights of first refusal, agreements, understandings, claims or
      other commitments or rights of any character whatsoever relating to, or
      securities or rights convertible into or exchangeable for any shares of capital
      stock of the Company or any of its Subsidiaries, or arrangements by which the
      Company or any of its Subsidiaries is or may become bound to issue additional
      shares of capital stock of the Company or any of its Subsidiaries, (ii) there
      are no agreements or arrangements under which the Company or any of its
      Subsidiaries is obligated to register the sale of any of its or their securities
      under the 1933 Act (except the Registration Rights Agreement) and (iii) there
      are no anti-dilution or price adjustment provisions contained in any security
      issued by the Company (or in any agreement providing rights to security holders)
      that will be triggered by the issuance of the Debenture, the Warrants, the
      Conversion Shares or Warrant Shares. The Company has furnished to the Buyer
      true
      and correct copies of the Company's Articles of Incorporation as in effect
      on
      the date hereof ("ARTICLES OF INCORPORATION"), the Company's By-laws, as in
      effect on the date hereof (the "BY-LAWS"), and the terms of all securities
      convertible into or exercisable for Common Stock of the Company and the material
      rights of the holders thereof in respect thereto. In the event that the date
      of
      execution of this Agreement is not the Closing Date, the Company shall provide
      the Buyer with a written update of this representation signed by the Company's
      President and Chief Executive or Chief Financial Officer on behalf of the
      Company as of the Closing Date. The issuance and sale of the Securities will
      not
      obligate the Company to issue shares of Common Stock or other securities to
      any
      Person (other than the Buyers) and will not result in a right of any holder
      of
      Company securities to adjust the exercise, conversion, exchange or reset price
      under any of such securities. No further approval or authorization of any
      stockholder, the Board of Directors of the Company or others is required for
      the
      issuance and sale of the Securities. There are no stockholders agreements,
      voting agreements or other similar agreements with respect to the Company’s
      capital stock to which the Company is a party or, to the knowledge of the
      Company, between or among any of the Company’s stockholders.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (d)
      ISSUANCE OF SHARES.
      Upon
      issuance upon conversion of the Debenture and upon exercise of the Warrants
      in
      accordance with their respective terms, and receipt of the exercise price
      therefor, the Conversion Shares and Warrant Shares, along with any Payment
      Shares or any other shares issued pursuant to the terms of the Transaction
      Documents, will be validly issued, fully paid and non-assessable, and free
      from
      all taxes, liens, claims and encumbrances and shall not be subject to preemptive
      rights or other similar rights of stockholders of the Company and will not
      impose personal liability upon the holder thereof.

    


    (e)
      ACKNOWLEDGMENT OF DILUTION.
      The
      Company understands and acknowledges the potentially dilutive effect to the
      Common Stock upon the issuance of the Conversion Shares upon conversion of
      or
      otherwise pursuant to the Debenture or upon issuance of the Warrant Shares
      upon
      exercise of or otherwise pursuant to the Warrants. The Company's directors
      and
      executive officers have studied and fully understand the nature of the
      Securities being sold hereunder. The Company further acknowledges that its
      obligation to issue Conversion Shares upon conversion of or otherwise pursuant
      to the Debenture and to issue Warrant Shares upon exercise of or otherwise
      pursuant to the Warrants in accordance with this Agreement, the Debenture and
      the Warrants is absolute and unconditional regardless of the dilutive effect
      that such issuance may have on the ownership interests of other stockholders
      of
      the Company. Taking the foregoing into account, the Company's Board of Directors
      has determined, in its good faith business judgment, that the issuance of the
      Securities hereunder and under the Debenture and the Warrants and the
      consummation of the transactions contemplated hereby and thereby are in the
      best
      interest of the Company and its stockholders.

     

    (f)
      NO CONFLICTS.
      The
      execution, delivery and performance of each of the Transaction Documents by
      the
      Company and the consummation by the Company of the transactions contemplated
      hereby and thereby (including, without limitation, the issuance and reservation
      for issuance of the Conversion Shares and Warrant Shares) will not (i) except
      as
      otherwise set forth in SCHEDULE 3(F), conflict with or result in a violation
      of
      any provision of the Certificate of Incorporation or By-laws, (ii) trigger
      any
      resets of conversion or exercise prices in other outstanding convertible
      securities, warrants or options of the Company, (iii) trigger the issuance
      of
      securities by the Company to any third party, (iv) violate or conflict with,
      or
      result in a breach of any provision of, or constitute a default (or an event
      which with notice or lapse of time or both would become a default) under, or
      give to others any rights of termination, amendment, acceleration or
      cancellation of, any agreement, indenture, patent, patent license or instrument
      to which the Company or any of its Subsidiaries is a party, or (v) result in
      a
      violation of any law, rule, regulation, order, judgment or decree (including
      federal and state securities laws and regulations and regulations of any
      self-regulatory organizations to which the Company or its securities are
      subject) applicable to the Company or any of its Subsidiaries or by which any
      property or asset of the Company or any of its Subsidiaries is bound or affected
      (except, in the case of clauses (i), (iv) and (v) above, for such conflicts,
      defaults, terminations, amendments, accelerations, cancellations and violations
      as would not, individually or in the aggregate, have a Material Adverse Effect).
      Neither the Company nor any of its Subsidiaries is in violation of its
      Certificate of Incorporation, By-laws or other organizational documents and
      neither the Company nor any of its Subsidiaries is in default (and no event
      has
      occurred which with notice or lapse of time or both could put the Company or
      any
      of its Subsidiaries in default) under, and neither the Company nor any of its
      Subsidiaries has taken any action or failed to take any action that would give
      to others any rights of termination, amendment, acceleration or cancellation
      of,
      any agreement, indenture or instrument to which the Company or any of its
      Subsidiaries is a party or by which any property or assets of the Company or
      any
      of its Subsidiaries is bound or affected, except for possible defaults as would
      not, individually or in the aggregate, have a Material Adverse Effect. The
      businesses of the Company and its Subsidiaries, if any, are not being conducted,
      and shall not be conducted so long as a Buyer owns any of the Securities, in
      violation of any law, ordinance or regulation of any governmental entity the
      violation of which would have a Material Adverse Effect. Except as disclosed
      in
      SCHEDULE 3(F) or as specifically contemplated by this Agreement or as required
      under the 1933 Act and any applicable state securities laws, the Company is
      not
      required to obtain any consent, authorization or order of, or make any filing
      or
      registration with, any court, governmental agency, regulatory agency, self
      regulatory organization or stock market or any third party in order for it
      to
      execute, deliver or perform any of its obligations under this Agreement, the
      Registration Rights Agreement, the Debenture or the Warrants in accordance
      with
      the terms hereof or thereof or to issue and sell the Debenture and Warrants
      in
      accordance with the terms hereof and to issue the Conversion Shares upon
      conversion of or otherwise pursuant to the Debenture and the Warrant Shares
      upon
      exercise of or otherwise pursuant to the Warrants. Except as disclosed in
      SCHEDULE 3(F), all consents, authorizations, orders, filings and registrations
      which the Company is required to obtain pursuant to the preceding sentence
      have
      been obtained or effected on or prior to the date hereof. The Company is not
      in
      violation of the listing requirements of the Principal Market (as defined
      herein) and does not reasonably anticipate that the Common Stock will be
      delisted by the Principal Market in the foreseeable future. The Company and
      its
      Subsidiaries are unaware of any facts or circumstances which might give rise
      to
      any of the foregoing.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (g)
      SEC DOCUMENTS; FINANCIAL STATEMENTS.
      Except
      as set forth on SCHEDULE 3(G), since at least December
      31, 2005 the
      Company has timely filed all reports, schedules, forms, statements and other
      documents required to be filed by it with the SEC pursuant to the reporting
      requirements of the Securities Exchange Act of 1934, as amended (the "1934
      ACT")
      (all of the foregoing filed prior to the date hereof and since at least December
      31, 2005, and all exhibits included therein and financial statements and
      schedules thereto and documents (other than exhibits to such documents)
      incorporated by reference therein, being hereinafter referred to herein as
      the
      "SEC DOCUMENTS"). For purposes of this agreement, “timely filed” shall mean that
      the applicable document was filed (i) by its original due date under the 1934
      Act, or, if a request for an extension was timely filed, (ii) by such extended
      due date. The Company has delivered to Buyer true and complete copies of the
      SEC
      Documents, except for such exhibits and incorporated documents. As of their
      respective dates, the SEC Documents complied in all material respects with
      the
      requirements of the 1934 Act and the rules and regulations of the SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in light
      of
      the circumstances under which they were made, not misleading. None of the
      statements made in any such SEC Documents is, or has been, required to be
      amended or updated under applicable law (except for such statements as have
      been
      amended or updated in subsequent filings prior to the date hereof). As of their
      respective dates, the financial statements of the Company included in the SEC
      Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the SEC
      with
      respect thereto. Such financial statements have been prepared in accordance
      with
      United States generally accepted accounting principles, consistently applied,
      during the periods involved (except (i) as may be otherwise indicated in such
      financial statements or the notes thereto, or (ii) in the case of unaudited
      interim statements, to the extent they may not include footnotes or may be
      condensed or summary statements) and fairly present in all material respects
      the
      consolidated financial position of the Company and its consolidated Subsidiaries
      as of the dates thereof and the consolidated results of their operations and
      cash flows for the periods then ended (subject, in the case of unaudited
      statements, to normal year-end audit adjustments). Except as set forth in the
      financial statements of the Company included in the SEC Documents, the Company
      has no liabilities, contingent or otherwise, other than (i) liabilities incurred
      in the ordinary course of business subsequent to the date of the Company’s most
      recent 10-QSB or 10-KSB and (ii) obligations under contracts and commitments
      incurred in the ordinary course of business and not required under generally
      accepted accounting principles to be reflected in such financial statements,
      which, individually or in the aggregate, are not material to the financial
      condition or operating results of the Company.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (h)
      ABSENCE OF CERTAIN CHANGES.
      Except
      for losses incurred in the ordinary course of business that have been publicly
      disclosed prior to the date hereof or as set forth on SCHEDULE 3(H) hereof,
      since the date of the Company’s most recent 10-QSB or 10-KSB, there has been no
      material adverse change and no material adverse development in the assets,
      liabilities, business, properties, operations, financial condition, results
      of
      operations or prospects of the Company or any of its Subsidiaries. For purposes
      of this Section 3(h), the terms "material adverse change" and "material adverse
      development" shall exclude continuing losses that are consistent with the
      Company's historical losses.

     

    (i)
      ABSENCE OF LITIGATION.
      Except
      as disclosed in SCHEDULE 3(I), to the knowledge of the Company or any of its
      subsidiaries, there is no action, suit, claim, proceeding, inquiry or
      investigation before or by any court, public board, government agency,
      self-regulatory organization or body pending or, to the knowledge of the Company
      or any of its Subsidiaries, threatened against or affecting the Company or
      any
      of its Subsidiaries, or their officers or directors in their capacity as such.
      SCHEDULE 3(I) contains a complete list and summary description of any known
      pending or threatened proceeding against or affecting the Company or any of
      its
      Subsidiaries, without regard to whether it, if adversely decided, would have
      a
      Material Adverse Effect. The Company and its Subsidiaries are unaware of any
      facts or circumstances which might give rise to any of the
      foregoing.

     

    (j)
      PATENTS, COPYRIGHTS, ETC. The
      Company owns all right and title to the patents on SCHEDULE 3(J) hereof (the
      “PATENTS”), free and clear of any liens or encumbrances. The Company has not
      granted any licenses or rights to use any of the Patents to any third party.
      

    


    All
      of
      the Company’s material patents, patent applications, patent rights, inventions,
      know-how, trade secrets, trademarks, trademark applications, service marks,
      service names, trade names and copyrights ("INTELLECTUAL PROPERTY") are set
      forth in SCHEDULE 3(J) hereof. The
      Company and each of its Subsidiaries owns or possesses the requisite licenses
      or
      rights to use all Intellectual Property necessary to enable it to conduct its
      business as now operated, including but not limited to the intellectual property
      set forth in SCHEDULE 3(J) hereof (and, except as otherwise set forth in
      SCHEDULE 3(J) hereof, to the best of the Company's knowledge, as presently
      contemplated to be operated in the future), except for such licenses or rights
      the failure of which to own or possess would not, individually or in the
      aggregate, have a Material Adverse Effect; there is no claim or action by any
      person pertaining to, or proceeding pending, or to the Company's knowledge
      threatened, which challenges the right of the Company or of a Subsidiary with
      respect to any Intellectual Property necessary to enable it to conduct its
      business as now operated (and, except as otherwise set forth in SCHEDULE 3(J)
      hereof, to the best of the Company's knowledge, as presently contemplated to
      be
      operated in the future), except for actions or claims which, if adversely
      decided, would not have a Material Adverse Effect; to the best of the Company's
      knowledge, the Company's or its Subsidiaries' current and intended products,
      services and processes do not infringe on any Intellectual Property or other
      rights held by any person, and the Company is unaware of any facts or
      circumstances which might give rise to any of the foregoing. The Company and
      each of its Subsidiaries have taken reasonable security measures to protect
      the
      secrecy, confidentiality and value of their Intellectual Property. The Company
      has Existing Liens on its Intellectual Property as detailed in SCHEDULE 3(J)
      hereof. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (k)
      NO MATERIALLY ADVERSE CONTRACTS, ETC.
      Neither
      the Company nor any of its Subsidiaries is subject to any charter, corporate
      or
      other legal restriction, or any judgment, decree, order, rule or regulation
      which in the judgment of the Company's officers has or is reasonably likely
      in
      the future to have a Material Adverse Effect. Neither the Company nor any of
      its
      Subsidiaries is a party to any contract or agreement which in the judgment
      of
      the Company's officers has or is reasonably likely to have a Material Adverse
      Effect.

     

    (l)
      TAX STATUS.
      Except
      as set forth on SCHEDULE 3(L), the Company and each of its Subsidiaries has
      made
      or filed all federal, state and foreign income and all other tax returns,
      reports and declarations required by any jurisdiction to which it is subject
      (unless and only to the extent that the Company and each of its Subsidiaries
      has
      set aside on its books provisions reasonably adequate for the payment of all
      unpaid and unreported taxes) and has paid all taxes and other governmental
      assessments and charges that are material in amount, shown or determined to
      be
      due on such returns, reports and declarations, except those being contested
      in
      good faith and has set aside on its books provisions reasonably adequate for
      the
      payment of all taxes for periods subsequent to the periods to which such
      returns, reports or declarations apply. There are no unpaid taxes in any
      material amount claimed to be due by the taxing authority of any jurisdiction,
      and the officers of the Company know of no basis for any such claim. The Company
      has not executed a waiver with respect to the statute of limitations relating
      to
      the assessment or collection of any foreign, federal, state or local tax. Except
      as set forth on SCHEDULE 3(L), none of the Company's tax returns is presently
      being audited by any taxing authority.

     

    (m)
      CERTAIN TRANSACTIONS.
      Except
      as set forth on SCHEDULE 3(M) and except for arm's length transactions pursuant
      to which the Company or any of its Subsidiaries makes payments in the ordinary
      course of business upon terms no less favorable than the Company or any of
      its
      Subsidiaries could obtain from third parties and other than the grant of stock
      options disclosed on SCHEDULE 3(C), none of the officers, directors, or
      employees of the Company is presently a party to any transaction with the
      Company or any of its Subsidiaries (other than for services as employees,
      officers and directors), including any contract, agreement or other arrangement
      providing for the furnishing of services to or by, providing for rental of
      real
      or personal property to or from, or otherwise requiring payments to or from
      any
      officer, director or such employee or, to the knowledge of the Company, any
      corporation, partnership, trust or other entity in which any officer, director,
      or any such employee has a substantial interest or is an officer, director,
      trustee or partner.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (n)
      DISCLOSURE.
      To the
      best of the Company’s knowledge, all information relating to or concerning the
      Company or any of its Subsidiaries set forth in this Agreement and provided
      to
      the Buyer pursuant to Section 2(d) hereof and otherwise in connection with
      the
      transactions contemplated hereby is true and correct in all material respects
      and the Company has not omitted to state any material fact necessary in order
      to
      make the statements made herein or therein, in light of the circumstances under
      which they were made, not misleading. No event or circumstance has occurred
      or
      exists with respect to the Company or any of its Subsidiaries or its or their
      business, properties, prospects, operations or financial conditions, which
      has
      not been publicly announced or disclosed but under applicable law, rule or
      regulation, requires public disclosure or announcement by the Company (assuming
      for this purpose that the Company's reports filed under the 1934 Act are being
      incorporated into an effective registration statement filed by the Company
      under
      the 1933 Act).

     

    (o)
      ACKNOWLEDGMENT REGARDING BUYER’S PURCHASE OF SECURITIES.
      The
      Company acknowledges and agrees that the Buyer is acting solely in the capacity
      of arm's length purchaser with respect to this Agreement and the transactions
      contemplated hereby. The Company further acknowledges that Buyer is not acting
      as a financial advisor or fiduciary of the Company (or in any similar capacity)
      with respect to this Agreement and the transactions contemplated hereby and
      that
      any statement made by Buyer or any of its respective representatives or agents
      in connection with this Agreement and the transactions contemplated hereby
      is
      not advice or a recommendation and is merely incidental to the Buyer’s purchase
      of the Securities and has not been relied upon by the Company, its officers
      or
      directors in any way. The Company further represents to Buyer that the Company's
      decision to enter into this Agreement has been based solely on the independent
      evaluation of the Company and its representatives.

     

    (p)
      NO INTEGRATED OFFERING.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would require
      registration under the 1933 Act of the issuance of the Securities to the Buyer.
      The issuance of the Securities to the Buyer will not be integrated with any
      other issuance of the Company's securities (past, current or future) for
      purposes of any stockholder approval provisions applicable to the Company or
      its
      securities.

     

    (q) NO
      BROKERS.
      Other
      than as set forth on SCHEDULE 3(Q), the Company has taken no action which would
      give rise to any claim by any person for brokerage commissions, finder's fees
      or
      similar payments relating to this Agreement or the transactions contemplated
      hereby. The
      Company shall indemnify and hold harmless each of Buyer, 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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (r) PERMITS;
      COMPLIANCE.
      The
      Company and each of its Subsidiaries is in possession of all franchises, grants,
      authorizations, licenses, permits, easements, variances, exemptions, consents,
      certificates, approvals and orders necessary to own, lease and operate its
      properties and to carry on its business as it is now being conducted
      (collectively, the "COMPANY PERMITS"), except where the failure to so possess
      any such Company Permits would not have a Material Adverse Effect, and there
      is
      no action pending or, to the knowledge of the Company, threatened regarding
      suspension or cancellation of any of the Company Permits. To the best of the
      Company's knowledge, neither the Company nor any of its Subsidiaries is in
      conflict with, or in default or violation of, any of the Company Permits, except
      for any such conflicts, defaults or violations which, individually or in the
      aggregate, would not reasonably be expected to have a Material Adverse Effect.
      Since December 31, 2005, neither the Company nor any of its Subsidiaries has
      received any notification with respect to possible conflicts, defaults or
      violations of applicable laws, except for notices relating to possible
      conflicts, defaults or violations, which conflicts, defaults or violations
      would
      not have a Material Adverse Effect.

     

    (s) ENVIRONMENTAL
      MATTERS.

    


    (i)
      Except as set forth in SCHEDULE 3(S), there are, to the Company's knowledge,
      with respect to the Company or any of its Subsidiaries or any predecessor of
      the
      Company, no past or present violations of Environmental Laws (as defined below),
      releases of any material into the environment, actions, activities,
      circumstances, conditions, events, incidents, or contractual obligations which
      may give rise to any common law environmental liability or any liability under
      the Comprehensive Environmental Response, Compensation and Liability Act of
      1980
      or similar federal, state, local or foreign laws and neither the Company nor
      any
      of its Subsidiaries has received any notice with respect to any of the
      foregoing, nor is any action pending or, to the Company's knowledge, threatened
      in connection with any of the foregoing. The term "ENVIRONMENTAL LAWS" means
      all
      federal, state, local or foreign laws relating to pollution or protection of
      human health or the environment (including, without limitation, ambient air,
      surface water, groundwater, land surface or subsurface strata), including,
      without limitation, laws relating to emissions, discharges, releases or
      threatened releases of chemicals, pollutants contaminants, or toxic or hazardous
      substances or wastes (collectively, "HAZARDOUS MATERIALS") into the environment,
      or otherwise relating to the manufacture, processing, distribution, use,
      treatment, storage, disposal, transport or handling of Hazardous Materials,
      as
      well as all authorizations, codes, decrees, demands or demand letters,
      injunctions, judgments, licenses, notices or notice letters, orders, permits,
      plans or regulations issued, entered, promulgated or approved
      thereunder.

     

    (ii)
      Other than those that are or were stored, used or disposed of in compliance
      with
      applicable law, no Hazardous Materials are contained on or about any real
      property currently owned, leased or used by the Company or any of its
      Subsidiaries, and no Hazardous Materials were released on or about any real
      property previously owned, leased or used by the Company or any of its
      Subsidiaries during the period the property was owned, leased or used by the
      Company or any of its Subsidiaries, except in the normal course of the Company's
      or any of its Subsidiaries' business.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (iii)
      Except as set forth in SCHEDULE 3(S), there are no underground storage tanks
      on
      or under any real property owned, leased or used by the Company or any of its
      Subsidiaries that are not in compliance with applicable law.

    


    (t) TITLE
      TO PROPERTY.
      The
      Company and its Subsidiaries have good and marketable title in fee simple to
      all
      real property and good and marketable title to all personal property owned
      by
      them which is material to the business of the Company and its Subsidiaries,
      in
      each case free and clear of all liens, encumbrances and defects except such
      as
      are described in SCHEDULE 3(T) or such as would not have a Material Adverse
      Effect. Any real property and facilities held under lease by the Company and
      its
      Subsidiaries are held by them under valid, subsisting and enforceable leases
      with such exceptions as would not have a Material Adverse Effect.

     

    (u) INSURANCE.
      The
      Company and each of its Subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its Subsidiaries are engaged. Neither the Company
      nor
      any such Subsidiary has any reason to believe that it will not be able to renew
      its existing insurance coverage as and when such coverage expires or to obtain
      similar coverage from similar insurers as may be necessary to continue its
      business at a cost that would not have a Material Adverse Effect.

     

    (v) INTERNAL
      ACCOUNTING CONTROLS.
      The
      Company and each of its Subsidiaries maintain a system of internal accounting
      controls sufficient, in the judgment of the Company's board of directors, to
      provide reasonable assurance that (i) transactions are executed in accordance
      with management's general or specific authorizations, (ii) transactions are
      recorded as necessary to permit preparation of financial statements in
      conformity with generally accepted accounting principles and to maintain asset
      accountability, (iii) access to assets is permitted only in accordance with
      management's general or specific authorization and (iv) the recorded
      accountability for assets is compared with the existing assets at reasonable
      intervals and appropriate action is taken with respect to any
      differences.

     

    (w) FOREIGN
      CORRUPT PRACTICES.
      Neither
      the Company, nor any of its Subsidiaries, nor any director, officer, agent,
      employee or other person acting on behalf of the Company or any Subsidiary
      has,
      in the course of his actions for, or on behalf of, the Company, used any
      corporate funds for any unlawful contribution, gift, entertainment or other
      unlawful expenses relating to political activity; made any direct or indirect
      unlawful payment to any foreign or domestic government official or employee
      from
      corporate funds; violated or is in violation of any provision of the U.S.
      Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
      influence payment, kickback or other unlawful payment to any foreign or domestic
      government official or employee.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (x) SOLVENCY.
      The
      Company, after giving effect to the transactions contemplated by this Agreement,
      is solvent (except as of September 30, 2006 the Company’s liabilities exceeded
      its assets and after the Closing the Company’s liabilities will continue to
      exceed its assets) and currently the Company has no information that would
      lead
      it to reasonably conclude that the Company would not have the ability to, nor
      does it intend to take any action that would impair its ability to, pay its
      debts from time to time incurred in connection therewith as such debts mature.
      Except as disclosed in SCHEDULE 3(X), the Company did not receive a qualified
      opinion from its auditors with respect to its most recent fiscal year end and
      does not anticipate or know of any basis upon which its auditors might issue
      a
      qualified opinion in respect of its current fiscal year. 

     

    (y) NO
      INVESTMENT COMPANY.
      The
      Company is not, and upon the issuance and sale of the Securities as contemplated
      by this Agreement will not be an "investment company" required to be registered
      under the Investment Company Act of 1940 (an "INVESTMENT COMPANY"). The Company
      is not controlled by an Investment Company.

     

    (z) NO
      MARKET MANIPULATION.
      The
      Company has not taken, and will not take, directly or indirectly, any action
      designed to, or that might reasonably be expected to, cause or result in
      stabilization or manipulation of the price of the Common Stock of the Company
      to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold. 

     

    (aa)  STOP
      TRANSFER.
      The
      Securities, when issued, will be restricted securities. The Company will not
      issue any stop transfer order or other order impeding the sale, resale or
      delivery of any of the Securities, except as may be required by any applicable
      federal or state securities laws and unless contemporaneous notice of such
      instruction is given to the Buyer.

     

    (bb)
       NO
      UNDISCLOSED LIABILITIES.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, other than those incurred in the ordinary course of the Company's
      businesses which have been disclosed in the Company’s public filings and which,
      individually or in the aggregate, would reasonably be expected to have a
      Material Adverse Effect other than as set forth in SCHEDULE 3(BB).

     

    (cc)
       NO
      UNDISCLOSED EVENTS OR CIRCUMSTANCES.
      Other
      than events or circumstances which have been disclosed in the Company’s public
      filings, no event or circumstance has occurred or exists with respect to the
      Company or its businesses, properties, operations or financial condition, that,
      under applicable law, rule or regulation, requires public disclosure or
      announcement prior to the date hereof by the Company but which has not been
      so
      publicly announced or disclosed in the Reports.

     

    (dd)
      NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.
      There
      are no disagreements of any kind presently existing, or reasonably anticipated
      by the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company, including but not limited to
      disputes or conflicts over payment owed to such accountants and lawyers.
      Attached hereto as SCHEDULE DD are signed letters from the Company’s current
      accounting firm (the “Accountant Letter”) and outside law firm (the “Law Firm
      Letter”) attesting to the facts in the immediately preceding sentence.


    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    (ee)
      COMPANY ACKNOWLEDGMENT.
      The
      Company hereby acknowledges that the Buyer may elect to hold the Debenture
      and
      the Warrants for various periods of time, as permitted by the terms of the
      Transaction Documents and the Company further acknowledges that Investor has
      made no representations or warranties, either written or oral, as to how long
      the Securities will be held by Buyer or regarding Investor’s trading history or
      investment strategies.

    


    (ff)  DISCLOSURE.
      The
      Company confirms that neither it nor any other Person acting on its behalf
      has
      provided any of the Buyers or their agents or counsel with any information
      that
      constitutes material, nonpublic information concerning the Company or its
      Subsidiaries other than the existence of the transactions contemplated by this
      Agreement or the other Transaction Documents. The Company understands and
      confirms that each of the Buyers will rely on the foregoing representations
      in
      effecting transactions in securities of the Company. All disclosure provided
      to
      the Buyers regarding the Company, its business and the transactions contemplated
      hereby, including the Schedules to this Agreement, furnished by or on behalf
      of
      the Company is true and correct and does not contain any untrue statement of
      a
      material fact or omit to state any material fact necessary in order to make
      the
      statements made therein, in the light of the circumstances under which they
      were
      made, not misleading. Each press release issued by the Company or any of its
      Subsidiaries during the twelve (12) months preceding the date of this Agreement
      did not at the time of release contain any untrue statement of a material fact
      or omit to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in the light of the circumstances under
      which they were made, not misleading. No event or circumstance has occurred
      or
      information exists with respect to the Company or any of its Subsidiaries or
      its
      or their business, properties, prospects, operations or financial conditions,
      which, under applicable law, rule or regulation, requires public disclosure
      or
      announcement by the Company but which has not been so publicly announced or
      disclosed.

    


    (gg)
      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 (as defined below):

    


    (i)
      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;

    


    (ii)
      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);

    


    (iii)
      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:

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (A)
      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;

    


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

    


    (C)
      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;

    


    (iv)
      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

    


    (v)
      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.

    


    For
      purposes hereof, “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.

     

                        (hh)  DTC
      STATUS.
      The
      Company's transfer agent is a participant in and the Common Stock is eligible
      for transfer pursuant to the Depository Trust Company Automated Securities
      Transfer Program. The name, address, telephone number, fax number, contact
      person and email address of the Company transfer agent is set forth on SCHEDULE
      3(HH) hereto.

     

    (ii) SARBANES-OXLEY;
      INTERNAL ACCOUNTING CONTROLS.
      The
      Company is in material compliance with all provisions of the Sarbanes-Oxley
      Act
      of 2002 which are applicable to it as of the Closing Date.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (jj) SENIORITY.
      Except
      as set forth on SCHEDULE 3(JJ), as of the Closing Date, no indebtedness or
      other
      equity of the Company is senior to the Debenture in right of payment, whether
      with respect to interest or upon liquidation or dissolution, or otherwise,
      other
      than indebtedness secured by purchase money security interests (which is senior
      only as to underlying assets covered thereby) and capital lease obligations
      (which is senior only as to the property covered thereby).

     

    (kk) REGISTRATION
      RIGHTS. Except
      as
      set forth in the SEC Reports and on SCHEDULE 3(KK) hereto, other than each
      of
      the Buyers,
      no
      Person has any right to cause the Company to effect the registration under
      the
      Securities Act of any securities of the Company.

     

    (ll)  TRANSACTIONS
      WITH AFFILIATES.   Except
      as
      set forth in the SEC Documents filed at least ten days prior to the date hereof
      and other than the grant of stock options disclosed on SCHEDULE 3(LL), none
      of
      the officers, directors or employees of the Company or any of its Subsidiaries
      is presently a party to any transaction with the Company or any of its
      Subsidiaries (other than for ordinary course services as employees, officers
      or
      directors), including any contract, agreement or other arrangement providing
      for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any such
      officer, director or employee or, to the knowledge of the Company or any of
      its
      Subsidiaries, any corporation, partnership, trust or other entity in which
      any
      such officer, director, or employee has a substantial interest or is an officer,
      director, trustee or partner.

     

    (mm) INDEBTEDNESS
      AND OTHER CONTRACTS.  Except
      as
      disclosed in SCHEDULE
      3(MM),
      neither
      the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
      (as
      defined below), (ii) is a party to any contract, agreement or instrument, the
      violation of which, or default under which, by the other party(ies) to such
      contract, agreement or instrument would result in a Material Adverse Effect,
      (iii) is in violation of any term of or in default under any contract, agreement
      or instrument relating to any Indebtedness, except where such violations and
      defaults would not result, individually or in the aggregate, in a Material
      Adverse Effect, or (iv) is a party to any contract, agreement or instrument
      relating to any Indebtedness, the performance of which, in the judgment of
      the
      Company's officers, has or is expected to have a Material Adverse Effect.
SCHEDULE
      3(MM)
      provides
      a detailed description of the material terms of any such outstanding
      Indebtedness.  For purposes of this Agreement:  (x) "Indebtedness" of
      any
      Person
      means, without duplication (A) all indebtedness for borrowed money, (B) all
      obligations issued, undertaken or assumed as the deferred purchase price of
      property or services including (without limitation) “Capital Leases” in
      accordance with generally accepted accounting principles (other than trade
      payables entered into in the ordinary course of business), (C) all reimbursement
      or payment obligations with respect to letters of credit, surety bonds and
      other
      similar instruments, (D) all obligations evidenced by notes, bonds, debentures
      or similar instruments, including obligations so evidenced incurred in
      connection with the acquisition of property, assets or businesses, (E) all
      indebtedness created or arising under any conditional sale or other title
      retention agreement, or incurred as financing, in either case with respect
      to
      any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (F)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (G) all
      indebtedness referred to in clauses (A) through (F) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
      or obligations of others of the kinds referred to in clauses (A) through (G)
      above; (y) "Contingent Obligation" means, as to any Person, any direct or
      indirect liability, contingent or otherwise, of that Person with respect to
      any
      indebtedness, lease, dividend or other obligation of another Person if the
      primary purpose or intent of the Person incurring such liability, or the primary
      effect thereof, is to provide assurance to the obligee of such liability that
      such liability will be paid or discharged, or that any agreements relating
      thereto will be complied with, or that the holders of such liability will be
      protected (in whole or in part) against loss with respect thereto; and (z)
      "Person" means an individual, a limited liability company, a partnership, a
      joint venture, a corporation, a trust, an unincorporated organization and a
      government or any department or agency thereof.

    


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    4. COVENANTS.

    


    (a) BEST
      EFFORTS.
      The
      parties shall use their best efforts to satisfy timely each of the conditions
      described in Sections 7 and 8 of this Agreement.

     

    (b) FORM
      D; BLUE SKY LAWS.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to Buyer promptly after such filing.
      The Company shall, on or before the Closing Date, take such action as the
      Company shall reasonably determine is necessary to qualify the Securities for
      sale to the Buyer at the Closing pursuant to this Agreement under applicable
      securities or "blue sky" laws of the states of the United States (or to obtain
      an exemption from such qualification), and shall provide evidence of any such
      action so taken to Buyer on or prior to the Closing Date.

     

    (c) REPORTING
      STATUS.
      The
      Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
      long as any Buyer beneficially owns any of the Securities, the Company shall
      timely file all reports required to be filed with the SEC pursuant to the 1934
      Act (“1934 Act Filings”), and the Company 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. 

     

    (d) USE
      OF PROCEEDS.
      The
      Company shall use the proceeds from the sale of the Debenture and the Warrants
      in the manner set forth in SCHEDULE 4(D) attached hereto and made a part hereof
      and shall not use such proceeds to pay down its corporate debt, except for
      trade
      payables and normal business expenses in the ordinary course of business. None
      of the proceeds of the offering shall be used to repay any debt or obligation
      to
      any officer, director or manager of the Company, or any of their affiliates,
      for
      a period of at least one year from the Closing Date. The
      Company shall use $450,000 of the proceeds of the Offering to partially repay,
      by not later than by January 12, 2007, the 10% Promissory Notes of Jane M.
      Petri
      and Joseph Panico originally due March 15, 2007, to the extent of $450,000.
      

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (e) REGISTRATION
      LIMITATIONS; RIGHT OF PARTICIPATION. 

     

    (i)
       Lock
      up of Registration.
      Except
      for the registration statements required in the Registration Rights Agreement,
      from the date hereof until 180 days after the Effective Date (as that term
      is
      defined in the Registration Rights Agreement), neither the Company nor any
      Subsidiary shall file a registration statement registering the sale or resale
      of
      shares of Common Stock, including but not limited to shares of Common Stock
      issuable upon the conversion or exercise of Common Stock Equivalents;
provided,
      however,
      the 180
      day period set forth in this Section 4(e)(i) shall be extended for the number
      of
      Trading Days during such period in which (i) trading in the Common Stock is
      suspended by any Trading Market, or (ii) following the Effective Date, the
      Registration Statement is not effective or the prospectus included in the
      Registration Statement may not be used by the Purchasers for the resale of
      the
      Underlying Shares. 

    


    (ii) Capital
      Raising Limitations.
      During
      the period that any Debenture remains outstanding (the “Limitation Period”), the
      Company shall not issue or sell, or agree to issue or sell Variable Equity
      Securities (as defined below), or any securities of the Company pursuant to
      an
      Equity Line (as defined below) structure or format or any securities of the
      Company in exchange for goods or services, without obtaining the prior written
      approval of the Buyer, with the exception of any such agreements, transactions
      or Equity Lines existing as of the date hereof. 
      For
      purposes hereof, an “Equity Line” shall mean a transaction involving a written
      agreement between the Company and an investor or underwriter whereby the Company
      has the right to “put” its securities to the investor or underwriter over an
      agreed period of time and at an agreed price or price formula. For purposes
      hereof, the following shall be collectively referred to herein as, the “Variable
      Equity Securities”: (A) any debt or equity securities which are convertible
      into, exercisable or exchangeable for, or carry the right to receive additional
      shares of Common Stock either (1) at any conversion, exercise or exchange rate
      or other price that is based upon and/or varies with the trading prices of
      or
      quotations for Common Stock at any time after the initial issuance of such
      debt
      or equity security, or (2) with a fixed conversion, exercise or exchange price
      that is subject to being reset at some future date at any time after the initial
      issuance of such debt or equity security due to a change in the market price
      of
      the Company’s Common Stock since date of initial issuance, or (B) any debenture
      or preferred stock that is accompanied by a number of warrants greater than
      the
      original principal amount, divided by the Market Price at the time of closing
      of
      such debenture or preferred stock, or (C) any common stock that is sold at
      a
      discount to the market price at the time of closing that is greater than 30%,
      or
      (D) any common stock that is accompanied by a number of warrants greater than
      the number of shares of common stock sold by the Company. For purposes of the
      above, the “Market Price” at time of closing shall mean the Market Price, as
      defined in the Debenture.

     

    (iii) Buyer’s
      Right of Participation in Future Financings. 

    


    (A)
      From
      the date hereof and during the period that any portion of the Debenture is
      outstanding, upon any financing by the Company or any of its subsidiaries (each,
      a “Subsequent
      Financing”)
      of
      Common Stock or Common Stock Equivalents (as defined in Section 1(a)), excluding
      any securities issued pursuant to the Offering described in this Agreement,
      each
      Buyer shall have the right, subject to Section 4(e)(iii)(E), to participate
      in
      up to the Buyer’s Participation Maximum (as defined below) of the Subsequent
      Financing.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    (B)
      At
      least five (5) Trading Days prior to the closing of the Subsequent Financing,
      the Company shall deliver to each Buyer a written notice of its intention to
      effect a Subsequent Financing (an “Advance Notice of Financing”), which Advance
      Notice of Financing shall ask such Buyer if it wants to review the details
      of
      such financing (such additional notice, a “Subsequent
      Financing Notice”).
      Upon
      the request of a Buyer, and only upon a request by such Buyer, for a Subsequent
      Financing Notice, the Company shall promptly, but no later than one (1) Trading
      Day after such request, deliver a Subsequent Financing Notice to such Buyer.
      The
      Subsequent Financing Notice shall describe in reasonable detail the proposed
      terms of such Subsequent Financing, the amount of proceeds intended to be raised
      thereunder, the Person with whom such Subsequent Financing is proposed to be
      effected, and attached to which shall be a term sheet or similar document
      relating thereto. 

    


    (C)
      Any
      Buyer desiring to participate in such Subsequent Financing must provide written
      notice to the Company by not later than 5:30 p.m. (New York City time) on the
      fifth (5th)
      Trading
      Day after such Buyer has received the Advance Notice of Financing that the
      Buyer
      is willing to participate in the Subsequent Financing, the amount of the Buyer’s
      participation, and that the Buyer has such funds ready, willing, and available
      for investment on the terms set forth in the Subsequent Financing Notice. If
      the
      Company receives no notice from a Buyer as of such fifth (5th)
      Trading
      Day, such Buyer shall be deemed to have notified the Company that it does not
      elect to participate. 

    


    (D)
      If by
      5:30 p.m. (New York City time) on the fifth (5th) Trading
      Day after all of the requesting Buyers have received the Advance Notice of
      Financing, notifications by the Buyers of their willingness to participate
      in
      the Subsequent Financing (or to cause their designees to participate) is, in
      the
      aggregate, less than the total amount of the Subsequent Financing, then the
      Company may effect the remaining portion of such Subsequent Financing on the
      terms and to the Persons set forth in the Subsequent Financing Notice.


    


    (E)
      If by
      5:30 p.m. (New York City time) on the fifth (5th)
      Trading
      Day after all of the Buyers have received the Advance Notice of Financing,
      the
      Company receives responses to a Subsequent Financing Notice from Buyers seeking
      to purchase more than the aggregate amount of the Subsequent Financing, each
      such Buyer shall have the right to purchase up to (the “Buyer’s Participation
      Maximum”) (a) their Pro Rata Portion (as defined below) of the Subsequent
      Financing, plus (b) a pro rata amount (based upon the relative amount of the
      participating Buyers’ respective Pro Rata Portions) of the aggregate of the
      unused Pro Rata Portions of the other Buyers. For purposes hereof, “Pro
      Rata Portion”
shall
      mean the ratio of (x) the Subscription Amount of Securities purchased on the
      Closing Date by a Buyer participating under this Section 4(e)(iii)(E) and (y)
      the sum of the aggregate Subscription Amounts of Securities purchased on the
      Closing Date by all Buyers participating under this Section
      4(e)(iii)(E).

    


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (F)
      The
      Company must provide the Buyers with a second Subsequent Financing Notice,
      and
      the Buyers will again have the right of participation set forth above in this
      Section 4(e)(iii)(E), if the Subsequent Financing subject to the initial
      Subsequent Financing Notice is not consummated for any reason on the terms
      set
      forth in such Subsequent Financing Notice within 60 Trading Days after the
      date
      of the initial Subsequent Financing Notice.

    (G)
      Notwithstanding the foregoing, Section 4(e) shall not apply in respect of an
      Exempt Issuance or (ii) an underwritten public offering of Common
      Stock. 

    


    (iv)
      Injunctive Relief. The
      Company acknowledges that a breach by it of its obligations under this
      Subsection 4(e) will cause irreparable harm to Buyer, by vitiating the intent
      and purpose of the transactions contemplated hereby. Accordingly, the Company
      acknowledges that the remedy at law for a breach of its obligations under this
      Subsecton 4(e) will be inadequate and agrees, in the event of a breach or
      threatened breach by the Company of the provisions of this Agreement, that
      Buyer
      shall be entitled, in addition to all other available remedies in law or in
      equity, to an injunction or injunctions to prevent or cure any breaches of
      the
      provisions of this Subsection 4(e) and to enforce specifically the terms and
      provisions of this Agreement, without the necessity of showing economic loss
      and
      without any bond or other security being required. Specifically, the Buyer
      shall
      be entitled to injunctive relief to cause the court to rescind any financing
      or
      financings between the Company and a third party that are in violation of this
      Subsection 4(e).

    


    (v) Most
      Favored Nation (MFN) Securities Exchange Provision. From
      the
      date hereof until the date when such Buyer holds less than 20% in principal
      amount of Debentures originally purchased by such Buyer hereunder, if the
      Company effects a Subsequent Financing, each Buyer may elect, in its sole
      discretion, to exchange all or some of the Debentures then held by such Buyer
      for any securities or units issued in a Subsequent Financing on a $1.00 for
      $1.00 basis based on the outstanding principal amount of such Debentures, along
      with any accrued but unpaid interest, liquidated damages and other amounts
      owing
      thereon, and the effective price at which such securities were sold in such
      Subsequent Financing; provided,
      however,
      that
      this Section 4(e)(v) shall not apply with respect to (i) an Exempt Issuance
      or
      (ii) an underwritten public offering of Common Stock. The Company shall provide
      each Buyer with notice of any such Subsequent Financing in the manner set forth
      in Section 4(e)(v), provided that following such an exchange, the Holder shall
      retain all of its Warrants.

    


    (f)
      SECURITIES
      LAWS DISCLOSURE; PUBLICITY. The
      Company shall, by 8:30 a.m. New York City time on December 27, 2006, issue
      a
      Current Report on Form 8-K, disclosing the material terms of the transactions
      contemplated hereby and including the Transaction Documents as exhibits thereto.
      The Company and each Buyer shall consult with each other in issuing any other
      press releases with respect to the transactions contemplated hereby, and neither
      the Company nor any Buyer shall issue any such press release or otherwise make
      any such public statement without the prior consent of the Company, with respect
      to any press release of any Buyer, or without the prior consent of each Buyer,
      with respect to any press release of the Company, which consent shall not
      unreasonably be withheld or delayed, except if such disclosure is required
      by
      law, in which case the disclosing party shall promptly provide the other party
      with prior notice of such public statement or communication. Notwithstanding
      the
      foregoing, the Company shall not publicly disclose the name of any Buyer, or
      include the name of any Buyer in any filing with the Commission or any
      regulatory agency or any market or exchange, without the prior written consent
      of such Buyer, except (i) as required by federal securities law in connection
      with (A) any registration statement contemplated by the Registration Rights
      Agreement and (B) the filing of final Transaction Documents (including signature
      pages thereto) with the SEC and
      (ii)
      to the extent such disclosure is required by law or regulations of the Principal
      Market, in which case the Company shall provide the Buyers with prior notice
      of
      such disclosure permitted under this subclause (ii).

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     (g) FINANCIAL
      INFORMATION.
      The
      Company agrees to send, or make available via public filings on the internet,
      the following reports to Buyer until Buyer transfers, assigns, or sells all
      of
      the Securities: (i) within ten (10) days after the filing with the SEC, a copy
      of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any
      Current Reports on Form 8-K; (ii) within one (1) day after release, copies
      of
      all press releases issued by the Company or any of its Subsidiaries; and (iii)
      contemporaneously with the making available or giving to the stockholders of
      the
      Company, copies of any notices or other information the Company makes available
      or gives to such stockholders.

     

    (h) AUTHORIZATION
      AND RESERVATION OF SHARES. 

    


    (i)
      Authorization
      and Reservation Requirements.
      The
      Company represents that it has 25,000,000 authorized shares and covenants that
      it will initially reserve (the “INITIAL SHARE RESERVATION”) from its authorized
      and unissued Common Stock a number of shares of Common Stock equal to at least
      one and one-half (1.5) times the Original Principal Amount of the Debenture,
      divided by the Conversion Price in effect on the date of the Initial Share
      Reservation, free from preemptive rights, to provide for the issuance of Common
      Stock upon the conversion of the Debenture and shall initially reserve an
      additional number of shares equal to the Warrant Amount, free from preemptive
      rights, to provide for the issuance of Common Stock upon the exercise of the
      Warrants. The Company further covenants that, beginning on the date hereof,
      and
      continuing throughout the period the conversion right exists, the Company shall
      at all times have authorized, and reserved (the “ONGOING SHARE RESERVATION
      REQUIREMENT”) for the purpose of issuance, a sufficient number of shares of
      Common Stock to provide for the full conversion or exercise of the outstanding
      portion of the Debenture and Warrants and issuance of the Conversion Shares
      and
      Warrant Shares in connection therewith (based on the Conversion Price (as
      defined in the Debenture) in effect from time to time and the Exercise Price
      of
      the Warrants in effect from time to time). The Company shall not reduce the
      number of shares of Common Stock reserved for issuance upon conversion of or
      otherwise pursuant to the Debenture and exercise of or otherwise pursuant to
      the
      Warrants without the consent of Buyer. The Company shall use its best efforts
      at
      all times to maintain the number of shares of Common Stock so reserved for
      issuance at no less than 100% of the number that is then actually issuable
      upon
      full conversion of the Debenture (based on the Conversion Price (as defined
      in
      the Debenture) in effect from time to time) and full exercise of the Warrants
      (based on the Exercise Price of the Warrants in effect from time to time).
      

    


    (ii)
      Stockholder
      Approval.
      If at
      any time the number of shares of Common Stock authorized and reserved for
      issuance is below the number of Conversion Shares issued and issuable upon
      conversion of or otherwise pursuant to the Debenture (based on the Conversion
      Price (as defined in the Debenture) in effect from time to time) and Warrant
      Shares issued or issuable upon exercise of or otherwise pursuant to the Warrants
      (based on the Exercise Price of the Warrants in effect from time to time),
      together with the Payment Shares and any other shares of Common Stock issued
      or
      issuable pursuant to the terms of the Transaction Documents, the Company will
      promptly take all corporate action necessary to authorize and reserve a
      sufficient number of shares, including, without limitation, calling a special
      meeting of stockholders to authorize additional shares to meet the Company's
      obligations under this Section 4(h), in the case of an insufficient number
      of
      authorized shares, and using its best efforts to obtain stockholder approval
      of
      an increase in such authorized number of shares.

    


    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (i)   
       REGISTRATION
      OF TITLE TO PATENTS.
      Within
      fifteen (15) days of Closing, the Company shall have filed all necessary
      documents with the United States Patent and Trademark Office (the “PTO”) in
      order to reflect the Company as the sole duly registered owner of its Patents
      (as defined herein) on the PTO’s public records. 

     

    (j) LISTING.
      The
      Company shall use its best efforts to promptly secure the listing of the
      Conversion Shares and Warrant Shares upon each national securities exchange
      or
      automated quotation system, if any, upon which shares of Common Stock are then
      listed (subject to official notice of issuance) and, so long as any Buyer owns
      any of the Securities, shall maintain, so long as any other shares of Common
      Stock shall be so listed, such listing of all Conversion Shares from time to
      time issuable upon conversion of or otherwise pursuant to the Debenture and
      all
      Warrant Shares from time to time issuable upon exercise of or otherwise pursuant
      to the Warrants. The Company will use its best efforts to obtain and, so long
      as
      any Buyer owns any of the Securities, maintain the listing and trading of its
      Common Stock on the over the counter Bulletin Board (“OTC-BB”), the Nasdaq
      National Market (the "NNM"), the Nasdaq SmallCap Market (the "NASDAQ SMALLCAP"),
      the New York Stock Exchange ("NYSE"), or the American Stock Exchange
      ("AMEX")(whichever of the foregoing is at the time the principal trading
      exchange or market for the Common Stock is referred to herein as the "PRINCIPAL
      MARKET"), and will comply in all respects with the Company's reporting, filing
      and other obligations under the bylaws or rules of the National Association
      of
      Securities Dealers ("NASD") and such exchanges, as applicable. The Company
      shall
      promptly provide to Buyer copies of any notices it receives from the PRINCIPAL
      MARKET and any other exchanges or quotation systems on which the Common Stock
      is
      then listed regarding the continued eligibility of the Common Stock for listing
      on such exchanges and quotation systems.

     

    (k) CORPORATE
      EXISTENCE.
      So long
      as a Buyer beneficially owns any portion of the Debenture or Warrants, the
      Company shall maintain its corporate existence in good standing and remain
      a
“Reporting Issuer” (defined as a Company which files periodic reports under the
      Exchange Act)..

     

    (l) NO
      INTEGRATION.
      The
      Company shall not make any offers or sales of any security (other than the
      Securities) under circumstances that would require registration of the
      Securities being offered or sold hereunder under the 1933 Act or cause the
      offering of the Securities to be integrated with any other offering of
      securities by the Company for the purpose of any stockholder approval provision
      applicable to the Company or its securities.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    (m) LIMITATION
      ON SALE OR DISPOSITION OF INTELLECTUAL PROPERTY.
      So long
      as any Debenture remain outstanding, the Company shall have any obligation
      under
      the Debenture or so long as any of the Warrants remain outstanding, the
      Corporation shall not sell, convey, dispose of, spin off or assign any or all
      of
      its Intellectual Property (including but not limited to the Intellectual
      Property set forth in SCHEDULE 3(J) hereof), or the rights to receive proceeds
      from patent licensing agreements, patent infringement litigation or other
      litigation related to such intellectual property (collectively, the
“INTELLECTUAL PROPERTY RIGHTS”), in each case without Buyer’s written consent,
      provided that the Company may, without the Buyer’s Written Consent, enter into
      one or more licensing agreements with respect to its Intellectual Property
      so
      long as such agreements are not with any affiliate (as such term is defined
      in
      Rule 501(b) of Regulation D) of the Company or with any relative of, or entity
      controlled by, or any entity 10% or more of which is owned by, any officer,
      director, employee or former employee of the Company so long as such licensing
      agreements exceed $5 million per calendar year, provided, further, that the
      Company shall not be subject to the restrictions of this Section 4(m) if the
      cash consideration received by the Company in exchange for such Intellectual
      Property Rights exceeds $50 million. 

     

    (n) LIMITATION
      ON RATE OF ISSUANCE OF SHARES. The
      parties agree that, if by virtue of this AGREEMENT, or by virtue of any other
      agreement between the parties, Holder becomes entitled to receive from the
      Company a number of shares of common stock of the Company (collectively,
“Issuable Securities”), such that the sum of (1) the number of shares of Common
      Stock of the Company beneficially owned by HOLDER and any applicable affiliates
      (other than shares of Common Stock which may be deemed beneficially owned
      through the ownership of the unconverted portion of the Debenture, the
      unexercised Warrants or the unexercised or unconverted portion of any other
      security of HOLDER subject to a limitation on conversion or exercise analogous
      to the limitations contained herein)(collectively, the “Beneficially Owned
      Shares”) and (2) the number Issuable Securities described above, with respect to
      which the determination of this proviso is being made, would result in
      beneficial ownership by the Holder and its affiliates of more than 4.99% of
      the
      outstanding shares of Common Stock (the “4.99% BENEFICIAL OWNERSHIP
      LIMITATION”), then the Company shall immediately deliver to Holder the number of
      shares of Common Stock of the Company, that can be issued without exceeding
      the
      4.99% Beneficial Ownership Limitation.

    


    For
      purposes of the proviso to the immediately preceding sentence, (i) beneficial
      ownership shall be determined by the Holder in accordance with Section 13(d)
      of
      the Exchange Act and Regulations 13D-G thereunder, except as otherwise provided
      in clause (1) of such proviso to the immediately preceding sentence, and
      PROVIDED THAT the 4.99% Beneficial Ownership Limitation shall be conclusively
      satisfied if the applicable notice from Holder includes a signed representation
      by the Holder that the issuance of the shares in such notice will not violate
      the 4.99% Beneficial Ownership Limitation, and the Company shall not be entitled
      to require additional documentation of such satisfaction. 

    


    The
      parties agree that, in the event that the Company receives any tender offer
      or
      any offer to enter into a merger with another entity whereby the Company shall
      not be the surviving entity (an “Offer”), or in the event the Company is issuing
      Default Shares (as defined in the Debenture) to the Buyer, then “4.99%” shall be
      automatically revised immediately after such offer to read “9.99%” each place it
      occurs in the first two paragraphs of this Section 4(n) above. Notwithstanding
      the above, Holder shall retain the option to either exercise or not exercise
      its
      option(s) to acquire Common Stock pursuant to the terms hereof after an Offer.
      In addition, the 4.99% Beneficial Ownership Limitation provisions of this
      Section 7(a)(ii) may be waived by such Holder, at the election of such Holder,
      upon not less than 61 days’ prior notice to the Company, to change the 4.99%
      Beneficial Ownership Limitation to 9.99% of the number of shares of the Common
      Stock outstanding immediately after giving effect to the issuance of shares
      of
      Common Stock upon conversion of the Debenture held by the Holder or upon
      exercise of a Warrant held by the Holder, as applicable, and the provisions
      of
      this Section 4(n) shall continue to apply. The limitations on conversion set
      forth in this subsection are referred to as the “Beneficial Ownership
      Limitation.” Upon such a change by a Holder of the Beneficial Ownership
      Limitation from such 4.99% Beneficial Ownership Limitation to such 9.99%
      limitation, the Beneficial Ownership Limitation may not be further waived by
      such Holder. 

    


    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    The
      provisions of this paragraph shall be construed and implemented in a manner
      otherwise than in strict conformity with the terms of this Section 4(c) to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Beneficial Ownership Limitation herein contained
      or to make changes or supplements necessary or desirable to properly give effect
      to such limitation.

    


    Maximum
      Exercise of Rights. In the event the Buyer notifies the Company that the
      exercise of the rights described herein or in the Warrants, or the issuance
      of
      Payment Shares or other shares of Common Stock issuable to the Holder under
      the
      terms of the Transaction Documents (collectively, “Issuable Shares”) would
      result in the issuance of an amount of common stock of the Company that would
      exceed the maximum amount that may be issued to a Buyer calculated in the manner
      described in Section 4(n) of this Agreement, then the issuance of such
      additional shares of common stock of the Company to such Buyer will be deferred
      in whole or in part until such time as such Buyer is able to beneficially own
      such common stock without exceeding the maximum amount set forth calculated
      in
      the manner described in herein. The determination of when such common stock
      may
      be issued shall be made by each Buyer as to only such Buyer. 

    


    (o) APPOINTMENT
      OF DIRECTORS. 

    


    (In
      the
      event that the Company has not added two independent board members (in addition
      to the number of members on the board as of the Closing Date, and not including
      any board member nominated by the Buyer) by September 30, 2007 (the “Company
      Added Board Members”), then the Buyer, at its option, may recommend a number of
      additional nominees for the Company’s Board of Directors anytime thereafter
      equal to two (2) minus the number of Company Added Board Members that were
      added
      before September 30, 2007. In addition, if any Event of Default (as defined
      in
      the Debenture) remains uncured for an aggregate of thirty (30) days or more,
      the
      Buyer, at its option, may recommend one nominee for the Company’s Board of
      Directors, if any Event of Default remains uncured for an aggregate of sixty
      (60) days or more, the Buyer, at its option, may recommend a second nominee
      for
      the Company’s Board of Directors, and if any Event of Default remains uncured
      for an aggregate of ninety (90) days or more, the Buyer, at its option, may
      recommend an additional number of nominees to the Company’s Board of Directors,
      such that the Buyer’s nominees shall constitute a majority of the Company’s
      Board of Directors (each nominee nominated by the Buyer pursuant to this
      Subsection shall be referred to singularly as a “Buyer’s Nominee” and
      collectively as the “Buyer’s Nominees”). The Company agrees that its Board of
      Directors, or the Nominating Committee of the Board, as applicable, shall
      appoint as members of the Company’s Board of Directors the Buyer’s Nominee’s
      required pursuant to the this subsection. After such appointment, the Company
      and its Board of Directors shall use their best efforts to obtain shareholder
      ratification of the appointment of the Buyer’s Nominees at the next shareholder
      meeting.

    


    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    (p) EQUAL
      TREATMENT OF BUYERS.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Agreements
      unless the same consideration is also offered to all of the parties to the
      Transaction Agreements.

     

    (q) LEGAL
      AND DUE DILIGENCE FEES.
      The
      Company shall pay to BridgePointe Master Fund Ltd. (the “Lead Investor”) a cash
      fee of $10,000 at closing as reimbursement for legal services rendered by its
      attorneys in connection with this Agreement and the purchase and sale of the
      Debentures and Warrants and as reimbursement for due diligence expenses. The
      Lead Investor may withhold such amount out of the Purchase Price for its
      Debenture.

    


    (r)  [INTENTIONALLY
      LEFT BLANK].

     

    (s)         LIMITED
      STANDSTILL.
      The
      Company will deliver to the Buyers on or before the Closing Date and enforce
      the
      provisions of irrevocable standstill agreements ("Limited Standstill
      Agreements") in the form annexed hereto as EXHIBIT
      E
      with the
      parties identified on SCHEDULE 4(s) hereto.

    


    (t)  NON-PUBLIC
      INFORMATION. The
      Company covenants and agrees that from and after the date hereof, neither it
      nor
      any other Person acting on its behalf will provide any Buyer or its agents
      or
      counsel with any information that the Company believes constitutes material
      non-public information, unless prior thereto such Buyer shall have executed
      a
      written agreement regarding the confidentiality and use of such information.
      The
      Company understands and confirms that each Buyer shall be relying on the
      foregoing representations in effecting transactions in securities of the
      Company.

    


    (u)
       ADDITIONAL
      REGISTRATION STATEMENTS. Until
      the Effective Date (as defined in the Registration Rights Agreement), the
      Company will not file a registration statement under the 1933 Act relating
      to
      securities that are not the Securities.  

    


    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    (v) TRANSACTIONS
      WITH AFFILIATES. So
      long
      as any Debenture or Warrant is outstanding, the Company shall not, and shall
      cause each of its Subsidiaries not to, enter into, amend, modify or supplement,
      or permit any Subsidiary to enter into, amend, modify or supplement any
      agreement, transaction, commitment, or arrangement with any of its or any
      Subsidiary’s officers, directors, person who were officers or directors at any
      time during the previous two (2) years, stockholders who beneficially own five
      percent (5%) or more of the Common Stock, or Affiliates (as defined below)
      or
      with any individual related by blood, marriage, or adoption to any such
      individual or with any entity in which any such entity or individual owns a
      five
      percent (5%) or more beneficial interest (each a “Related Party”), except for
      customary employment arrangements and benefit programs on reasonable terms.
      “Affiliate” for purposes hereof means, with respect to any person or entity,
      another person or entity that, directly or indirectly, (i) has a ten percent
      (10%) or more equity interest in that person or entity, (ii) has ten percent
      (10%) or more common ownership with that person or entity, (iii) controls that
      person or entity, or (iv) shares common control with that person or entity.
“Control” or “controls” for purposes hereof means that a person or entity has
      the power, direct or indirect, to conduct or govern the policies of another
      person or entity.

     

    (w) [INTENTIONALLY
      LEFT BLANK].

    


    5.
      SENIOR DEBT; LIMITATIONS
      ON ENCUMBRANCE OF PATENTS.
      The
      Borrower hereby represents that there are no liens or encumbrances on the
      Patents (as defined below). The
      Company agrees that from the Issue Date of the Debentures through the date
      that
      all of the Debentures have been paid in full or converted in full (the “Covered
      Period”), the Company shall not enter
      into, create, incur, assume or suffer to exist any
      mortgage, lien, pledge, charge, security interest or other encumbrance
      (collectively, “Liens”) upon or in the Patents (as defined below) owned by the
      Company or any of its Subsidiaries and shall not assign or transfer any interest
      in the Patents owned by the Company or any of its Subsidiaries.
      In the
      event that the Company attempts to place any Lien or Liens on the Patents or
      attempts to assign or transfer any interest in the Patents during the Covered
      Period, the Buyer shall have the right to apply for an injunction in the U.S.
      District Court for the Northern District of Georgia to prevent such Lien or
      transfer. Before
      entering into any future debt with a third party, the Company shall first obtain
      a subordination agreement, satisfactory to Buyer, from the proposed debt holder.
      

    


    For
      purposes hereof, "Patents"
      means
      all domestic and foreign letters patent, design patents, utility patents,
      industrial designs, inventions, trade secrets, ideas, concepts, methods,
      techniques, processes, proprietary information, technology, know-how, formulae,
      rights of publicity and other general intangibles of like nature, now existing
      or hereafter acquired (including, without limitation, all domestic and foreign
      letters patent, design patents, utility patents, industrial designs, inventions,
      trade secrets, ideas, concepts, methods, techniques, processes, proprietary
      information, technology, know-how and formulae described in Schedule
      3(J)
      hereof),
      all applications, registrations and recordings thereof (including, without
      limitation, applications, registrations and recordings in the United States
      Patent and Trademark Office, or in any similar office or agency of the United
      States or any other country or any political subdivision thereof), and all
      reissues, divisions, continuations, continuations in part and extensions or
      renewals thereof, in each case owned by the Company or an of its
      Subsidiaries.

    


    6.
      LEGENDS. 

    


    (a)
      The
      Conversion Shares and the Warrant Shares, together with any other shares of
      Common Stock that are issued or issuable pursuant to the Transaction Documents
      shall be referred to herein as the “Issued Common Shares.” Certificates
      evidencing the Issued Common Shares shall not contain any legend restricting
      the
      transfer thereof (including the legend set forth in Section 2(e) of the
      Debenture): (i) while a registration statement (including the Registration
      Statement) covering the resale of such security is effective under the
      Securities Act, or (ii) following any sale of such Issued Common Shares pursuant
      to Rule 144, or (iii) if such Issued Common Shares are eligible for sale under
      Rule 144(k), or (iv) if such legend is not required under applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements issued by the staff of the Commission) (collectively, the
“Unrestricted Conditions”). The Company shall cause its counsel to issue a legal
      opinion to the Company’s transfer agent promptly after the Effective Date if
      required by the Company’s transfer agent to effect the issuance of Issued Common
      Shares without a restrictive legend or removal of the legend hereunder. If
      the
      Unrestricted Conditions are met at the time of issuance of Issued Common Shares,
      then such Issued Common Shares shall be issued free of all legends. The Company
      agrees that following the Effective Date or at such time as the Unrestricted
      Conditions are met or such legend is otherwise no longer required under this
      Section 6(b), it will, no later than three Trading Days following the delivery
      by a Buyer to the Company or the Company’s transfer agent of a certificate
      representing Issued Common Shares, as applicable, issued with a restrictive
      legend (such third Trading Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Buyer a certificate representing such
      shares that is free from all restrictive and other legends. 

    


    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    (b) 
      Each
      Buyer, severally and not jointly with the other Buyers, agrees that the removal
      of the restrictive legend from certificates representing Securities as set
      forth
      in this Section 6 is predicated upon the Company’s reliance that the Buyer will
      sell any Securities pursuant to either the registration requirements of the
      Securities Act, including any applicable prospectus delivery requirements,
      or an
      exemption therefrom, and that if Securities are sold pursuant to a Registration
      Statement, they will be sold in compliance with the plan of distribution set
      forth therein. 

    


    7. CONDITIONS
      TO THE COMPANY'S OBLIGATION TO SELL.
      The
      obligation of the Company hereunder to issue and sell the Debenture and Warrants
      to a Buyer at the Closing is subject to the satisfaction, at or before the
      Closing Date, of each of the following conditions thereto, provided that these
      conditions are for the Company's sole benefit and may be waived by the Company
      at any time in its sole discretion:

    


    (a)
      The
      Buyer shall have executed each of the Transaction Documents, and delivered
      the
      same to the Company.

     

    (b)
      The
      Buyer shall have delivered the applicable Purchase Price in accordance with
      Section 1(b) above.

     

    (c)
      The
      representations and warranties of the Buyer shall be true and correct in all
      material respects as of the date when made and as of the applicable Closing
      Date
      as though made at that time (except for representations and warranties that
      speak as of a specific date, which representations and warranties shall be
      true
      and correct as of such date), and the Buyer shall have performed, satisfied
      and
      complied in all material respects with the covenants, agreements and conditions
      required by this Agreement to be performed, satisfied or complied with by the
      Buyer at or prior to the Closing Date.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    (d)
      No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

    


    8. CONDITIONS
      TO BUYER'S OBLIGATION TO PURCHASE.
      The
      obligation of Buyer hereunder to purchase the Debenture and Warrants at each
      Closing is subject to the satisfaction, at or before the Closing Date, of each
      of the following conditions, provided that these conditions are for such Buyer's
      sole benefit and may be waived by such Buyer at any time in its sole
      discretion:

    


    (a)
      The
      Company shall have executed this Agreement and the Registration Rights
      Agreement, and delivered the same to the Buyer.

     

    (b)
      The
      Company shall have delivered to such Buyer the duly executed Debenture and
      Warrants in accordance with Section 1 above.

     

    (c)
      The
      representations and warranties of the Company contained in this Agreement,
      as
      modified by the Exhibits and Schedules hereto, shall be true and correct in
      all
      material respects as of the date when made and as of the Closing Date as though
      made at such time (except for representations and warranties that speak as
      of a
      specific date, which representations and warranties shall be true and correct
      as
      of such date) and the Company shall have performed, satisfied and complied
      in
      all material respects with the covenants, agreements and conditions required
      by
      this Agreement to be performed, satisfied or complied with by the Company at
      or
      prior to the Closing Date. The Buyer shall have received a certificate or
      certificates, executed by the President and Chief Executive Officer of the
      Company, dated as of the applicable Closing Date, to the foregoing effect and
      as
      to such other matters as may be reasonably requested by such Buyer including,
      but not limited to certificates with respect to the Company's Certificate of
      Incorporation, By-laws and Board of Directors' resolutions relating to the
      transactions contemplated hereby.

     

    (d)
      No
      litigation, statute, rule, regulation, executive order, decree, ruling or
      injunction shall have been enacted, entered, promulgated or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    (e)
      Trading in the Common Stock on the PRINCIPAL MARKET shall not have been
      suspended by the SEC or the Nasdaq and, within two (2) business days of the
      Closing, the Company will make application to the PRINCIPAL MARKET, if legally
      required by Nasdaq, to have the Conversion Shares and the Warrant Shares
      authorized for quotation.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    (f)
      The
      Buyer shall have received an opinion of the Company's counsel, dated as of
      the
      Closing Date, in form, scope and substance reasonably satisfactory to the Buyer
      and in substantially the same form as EXHIBIT
      D
      attached
      hereto.

     

    (g)
      The
      Buyer shall have received a Closing Certificate described in Section 1(b)(v)
      above, dated as of the Closing Date.

     

    (h) 
      The
      Company shall have delivered to the Buyer an executed Accountant Letter and
      an
      executed Law Firm Letter, as described in Section 3(dd) hereof.

     

    (i)
      Within
      one (1) Business Day prior to the Closing, the Company shall have delivered
      or
      caused to be delivered to each Buyer (A) true copies of UCC search results,
      listing all effective financing statements which name as debtor the Company
      or
      any of its Subsidiaries filed in the prior five years to perfect an interest
      in
      any assets thereof, together with copies of such financing statements, and
      the
      results of searches for any tax lien and judgment lien filed against such Person
      or its property.

     

    (j)
      The
      Buyer shall have received a fully executed waiver letter, in the form attached
      hereto as EXHIBIT_F,
      from
      Jane M. Petri and Joseph Panico, as holders of promissory notes in the amount
      of
      $700,000, more or less, due from Biometrx, Inc. on or about March 15, 2007
      (such
      notes, together with any other notes from Biometrx held by either such holder,
      are referred to herein as the “Petri-Panico Notes”).

     

    (k)
      The
      Buyer shall have received a fully executed Consent and Waiver, in substantially
      the form of EXHIBIT
      G
      hereto,
      from the holders of $1,600,000 principal amount of Convertible Notes (the
“$1,600,000 Notes”) of the Company issued on or about June 29, 2006 and due 24
      months thereafter, issued to the individuals/entities listed on Schedule A
      to
      such Consent and Waiver.

     

    (l)
      The
      Buyer shall have received a fully executed Assignment of U.S. Patent evidencing
      the assignment of U.S. Patent # 6,042,005 from Incredible Card Corp. to
      bioMETRX, Inc., and documentation evidencing Incredible Card Corp. as the
      rightful owner of said patent at the time of such assignment.

    


     

    9. GOVERNING
      LAW; MISCELLANEOUS.

    


    (a)
      GOVERNING LAW; ARBITRATION. This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of New York. Any controversy or claim arising out of or
      related to the Debenture or the breach thereof, shall be settled by binding
      arbitration in New York, New York in accordance with the Expedited Procedures
      (Rules 53-57) of the Commercial Arbitration Rules of the American Arbitration
      Association (“AAA”). A proceeding shall be commenced upon written demand by the
      Company or Buyer to the other. The arbitrator(s) shall enter a judgment by
      default against any party, which fails or refuses to appear in any properly
      noticed arbitration proceeding. The proceeding shall be conducted by one (1)
      arbitrator, unless the amount alleged to be in dispute exceeds two hundred
      fifty
      thousand dollars ($250,000), in which case three (3) arbitrators shall preside.
      The arbitrator(s) will be chosen by the parties from a list provided by the
      AAA,
      and if the parties are unable to agree within ten (10) days, the AAA shall
      select the arbitrator(s). The arbitrators must be experts in securities law
      and
      financial transactions. The arbitrators shall assess costs and expenses of
      the
      arbitration, including all attorneys’ and experts’ fees, as the arbitrators
      believe is appropriate in light of the merits of the parties’ respective
      positions in the issues in dispute. Each party submits irrevocably to the
      jurisdiction of any state court sitting in New York, New York or to the United
      States District Court sitting in New York, New York for purposes of enforcement
      of any discovery order, judgment or award in connection with such arbitration.
      The award of the arbitrator(s) shall be final and binding upon the parties
      and
      may be enforced in any court having jurisdiction. The arbitration shall be
      held
      in such place as set by the arbitrator(s) in accordance with Rule 55. With
      respect to any arbitration proceeding in accordance with this section, the
      prevailing party’s reasonable attorney’s fees and expenses shall be borne by the
      non-prevailing party.

    


    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    Although
      the parties, as expressed above, agree that all claims, including claims that
      are equitable in nature, for example specific performance, shall initially
      be
      prosecuted in the binding arbitration procedure outlined above, if the
      arbitration panel dismisses or otherwise fails to entertain any or all of the
      equitable claims asserted by reason of the fact that it lacks jurisdiction,
      power and/or authority to consider such claims and/or direct the remedy
      requested, then, in only that event, will the parties have the right to initiate
      litigation respecting such equitable claims or remedies. The forum for such
      equitable relief shall be in either a state or federal court sitting in New
      York, New York. Each party waives any right to a trial by jury, assuming such
      right exists in an equitable proceeding, and irrevocably submits to the
      jurisdiction of said New York court. New York law shall govern both the
      proceeding as well as the interpretation and construction of this Agreement
      and
      the transaction as a whole.

    


    (b) COUNTERPARTS;
      SIGNATURES BY FACSIMILE.
      This
      Agreement may be executed in one or more counterparts, all of which shall be
      considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

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

     

    (d) SEVERABILITY.
      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.

     

    (e) ENTIRE
      AGREEMENT; AMENDMENTS.
      This
      Agreement and the instruments referenced herein contain the entire understanding
      of the parties with respect to the matters covered herein and therein and
      supersede all previous communication, representation, or Agreements whether
      oral
      or written, between the parties with respect to the matters covered herein.
      Except as specifically set forth herein or therein, neither the Company nor
      the
      Buyer makes any representation, warranty, covenant or undertaking with respect
      to such matters. The Agreement may not be orally modified. Only a modification
      in writing, signed authorized representatives of both parties will be
      enforceable. The parties waive the right to rely on any oral representations
      made by the other party, whether in the past or in the future, regarding the
      subject matter of the Agreement, the instruments referenced herein or any other
      dealings between the parties related to investments or potential investments
      into the Company or any securities transactions or potential securities
      transactions with the Company.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    (f) Independent
      Nature of Buyers’ Obligations and Rights. The
      obligations of each Buyer under any Transaction Document are several and not
      joint with the obligations of any other Buyer, and no Buyer shall be responsible
      in any way for the performance of the obligations of any other Buyer under
      any
      Transaction Document. Nothing contained herein or in any Transaction Document,
      and no action taken by any Buyer pursuant thereto, shall be deemed to constitute
      the Buyers as a partnership, an association, a joint venture or any other kind
      of entity, or create a presumption that the Buyers are in any way acting in
      concert or as a group with respect to such obligations or the transactions
      contemplated by the Transaction Documents. Each Buyer shall be entitled to
      independently protect and enforce its rights, including without limitation,
      the
      rights arising out of this Agreement or out of the other Transaction Documents,
      and it shall not be necessary for any other Buyer to be joined as an additional
      party in any proceeding for such purpose. Each Buyer has been represented by
      its
      own separate legal counsel in their review and negotiation of the Transaction
      Documents. 

     

    (g) NOTICES.
      Any
      notices required or permitted to be given under the terms of this Agreement
      shall be sent by certified or registered mail (return receipt requested) or
      delivered personally or by courier (including a recognized overnight delivery
      service) or by facsimile and shall be effective five days after being placed
      in
      the mail, if mailed by regular United States mail, or upon receipt, if delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile, in each case addressed to a party. The addresses for such
      communications shall be:

    


    If
      to the
      Company, to:

    


    Attn:
      Mark Basile

    bioMETRX,
      Inc.

    500
      North
      Broadway

    Suite
      204

    Jericho,
      NY 11753

    Phone:
      516-937-2828

    Fax:
      516-937-2880 

    


    With
      copy
      to:

    Joel
      C.
      Schneider, Esq.

    Sommer
      & Schneider LLP

    595
      Stewart Avenue, Suite 710

    Garden
      City, NY 11530

    Phone:
      (516) 228-8181 

    Fax:
      (516) 228-8211

    


    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    If
      to a
      Buyer: To the address set forth immediately below such

    Buyer's
      name on the signature pages hereto.

    


    Each
      party shall provide notice to the other party of any change in
      address.

    


    (h) SUCCESSORS
      AND ASSIGNS.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and assigns. Neither the Company nor any Buyer shall assign
      this Agreement or any rights or obligations hereunder without the prior written
      consent of the other. Notwithstanding the foregoing, subject to Section 2(f),
      Buyer may assign its rights hereunder to any person that purchases Securities
      in
      a private transaction from a Buyer or to any of its "affiliates," as that term
      is defined under the 1934 Act, without the consent of the Company; PROVIDED,
      HOWEVER, that prior to any assignment of its rights hereunder to a person (other
      than an affiliate) that purchases any Debenture or Warrants from such Buyer
      in a
      private transaction such Buyer shall provide the Company with written notice
      of
      its intention to sell some or all of the Debenture or Warrants, which notice
      shall disclose the proposed purchase price for such Debenture or Warrants,
      and
      the Company shall have the option, during the ten (10) business day period
      following such notice, to purchase all, but not less than all, of such Debenture
      and/or Warrants at the proposed purchase price, after which period the Buyer
      shall be free to sell the Debenture and/or Warrants to a third party at such
      proposed purchase price.

     

    (i) THIRD
      PARTY BENEFICIARIES.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person.

     

    (j) SURVIVAL.
      The
      representations and warranties of the parties hereto contained in this Agreement
      shall survive the Closing hereunder for a period of one (1) year after each
      Closing contemplated by this Agreement notwithstanding any due diligence
      investigation conducted by or on behalf of the Buyer. 

     

    (k) INDEMNIFICATION.
      The
      Company (the “INDEMNIFYING PARTY”) agrees to indemnify and hold harmless the
      Buyer and all its officers, directors, employees, agents, members and managers
      (the “INDEMNIFIED PARTY”) for loss or damage arising as a result of or related
      to any breach or alleged breach by the Company of any of its representations,
      warranties and covenants set forth in Sections 3 and 4 hereof or any of its
      covenants and obligations under this Agreement or the Registration Rights
      Agreement, including advancement of expenses as they are incurred with respect
      to claims by third parties.

    


    Promptly
      after receipt of notice of the commencement of any action against an Indemnified
      Party, such Indemnified Party shall notify the Indemnifying Party in writing
      of
      the commencement thereof and the basis hereunder upon which a claim for
      indemnification is asserted, but the failure to do so shall not relieve the
      Indemnifying Party of its obligations hereunder except to the extent the
      Indemnifying Party is materially prejudiced by such failure. In the event of
      the
      commencement of any such action, the Indemnifying Party shall be entitled to
      participate therein and to assume the defense thereof with counsel satisfactory
      to the Indemnified Party, and, after notice from the Indemnifying Party to
      the
      Indemnified Party of its election so to assume the defense thereof, the
      Indemnifying Party shall not be liable to the Indemnified Party hereunder for
      any legal expenses (including attorneys' fees) subsequently incurred by such
      Indemnified Party in connection with the defense thereof other than reasonable
      costs of investigation and of liaison with counsel so selected, provided,
      however, that, if the defendants in any such action include both the Indemnified
      Party and the Indemnifying Party and the Indemnified Party shall have reasonably
      concluded that there may be reasonable defenses available to it which are
      different from or additional to those available to the Indemnifying Party or
      if
      the interests of the Indemnified Party reasonably may be deemed to conflict
      with
      the interests of the Indemnifying Party, the Indemnified Party shall have the
      right to select one separate counsel and to assume such legal defenses and
      otherwise to participate in the defense of such action, with the reasonable
      expenses and fees of such separate counsel and other expenses related to such
      participation to be reimbursed by the Indemnifying Party as incurred.


     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    As
      to
      cases in which the Indemnifying Party has assumed and is providing the defense
      for the Indemnified Party, the control of such defense shall be vested in the
      Indemnifying Party; provided that the consent of the Indemnified Party shall
      be
      required prior to any settlement of such case or action, which consent shall
      not
      be unreasonably withheld. As to any action, the party which is controlling
      such
      action shall provide to the other party reasonable information (including
      reasonable advance notice of all proceedings and depositions in respect thereto)
      regarding the conduct of the action and the right to attend all proceedings
      and
      depositions in respect thereto through its agents and attorneys, and the right
      to discuss the action with counsel for the party controlling such action.


     

    (l)
      PUBLICITY.
      The
      Company and the Buyer shall have the right to review a reasonable period of
      time
      before issuance of any press releases, filings with the SEC, NASD or any stock
      exchange or interdealer quotation system, or any other public statements with
      respect to the transactions contemplated hereby; PROVIDED, HOWEVER, that the
      Company shall be entitled, without the prior approval of the Buyer, to make
      any
      press release or public filings with respect to such transactions as is required
      by applicable law and regulations (although the Buyer shall be consulted by
      the
      Company in connection with any such press release prior to its release and
      shall
      be provided with a copy thereof and be given an opportunity to comment
      thereon).

     

    (m) FURTHER
      ASSURANCES.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (n) NO
      STRICT CONSTRUCTION.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

    


    (o)
      LIQUIDATED DAMAGES. The
      Company’s obligations to pay any partial liquidated damages or other amounts
      owing under the Transaction Documents is a continuing obligation of the Company
      and shall not terminate until all unpaid partial liquidated damages and other
      amounts have been paid notwithstanding the fact that the instrument or security
      pursuant to which such partial liquidated damages or other amounts are due
      and
      payable shall have been canceled.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    (p) REMEDIES.
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to Buyer, by vitiating the intent and purpose of the
      transactions contemplated hereby. Accordingly, the Company acknowledges that
      the
      remedy at law for a breach of its obligations under this Agreement will be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Agreement, that Buyer shall be entitled,
      in
      addition to all other available remedies in law or in equity, to an injunction
      or injunctions to prevent or cure any breaches of the provisions of this
      Agreement and to enforce specifically the terms and provisions of this
      Agreement, without the necessity of showing economic loss and without any bond
      or other security being required.

    


    Section
      10. Number
      of Shares and Purchase Price.
      Buyer
      subscribes for a Debenture in the Original Principal Amount of $ 
      ("Subscription Amount") against payment by wire transfer in the amount of the
      Subscription Amount.

     

    The
      undersigned acknowledges that this Agreement and the subscription represented
      hereby shall not be effective unless accepted by the Company as indicated
      below.

     

    


    [INTENTIONALLY
      LEFT BLANK]

    


    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the undersigned Buyer does represent and certify under penalty
      of perjury that the foregoing statements are true and correct and that Buyer
      by
      the following signature(s) executed this Agreement. 

     

    


    Dated
      this 28th
      day of
      December, 2006. 

    


    
      	 	 	 
	 	 	 
	
               Your
                Signature

            	 	
              PRINT
                EXACT NAME IN WHICH YOU WANT

            
	 	 	
              THE
                SECURITIES TO BE REGISTERED

            


    

     

    
      	 	 	
               DELIVERY
                INSTRUCTIONS:

            
	
              Name:
                Please Print

            	 	
               Please
                type or print address where your security is to be
                delivered

            
	 	 	 
	 	 	
               ATTN.:___________________________________________

            
	
              Title/Representative
                Capacity (if applicable)

            	 	 
	
               

            	 	 
	
              Name
                of Company You Represent (if applicable)

            	 	Street
              Address 
	
               

            	 	
               

            
	
              Place
                of Execution of this Agreement

            	 	City, State
              or
              Province, Country, Offshore Postal Code 
	
               

            	 	
               

            


    

    


    __________________________________________________
      

    Phone
      Number (For Federal Express) and Fax Number (re: Notice)

    


    WITH
      A
      COPY TO: 

    Please
      type or print address where copies are to be delivered

     

    ATTN.:____________________________________________

     

    __________________________________________________

    Street
      Address 

     

    __________________________________________________

    City,
      State or Province, Country, Offshore Postal Code 

     

    __________________________________________________
      

    Phone
      Number (For Federal Express) and Fax Number (re: Notice)

     

    
      THIS
        AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF $_________ 
        ON
        THE ___DAY
        OF
        DECEMBER, 2006.



     

     

    
      	 	 	
               bioMETRX,
                INC.

            
	 	 	
               By:________________________________

            
	 	 	
               Print
                Name: Mark Basile

            
	 	 	
               Title:
                Chief Executive Officer

            


    

     

    
      
        
        

      

      37